AI, Oil and Gas: Misadventures in Capital Allocation
Our recent pieces, How to Value Tech Companies and External Obsolescence: Tech Investors’ Newest Nightmare?, discussed how AI algorithms, big data, and machine learning could be undermining the moats of tech stocks that now sport multiples last seen during the dot.com mania. We noted that our empirically
How to Value Tech Companies Everyone Loves?
“Disturbing research warns AI may be the ‘Great Filter’ that wipes out human civilization” -The Independent “…artificial general intelligence or AGI is AI’s ‘big brass ring’ and will become a trillion-dollar industry by the 2030s…it will also do good in the world.” -Business Insider “What is certain is that creating [artificial general intelligence] AGI is the explicit aim of the leading AI companies, and they are moving towards it far more swiftly than anyone expected...
External Obsolescence: Tech Investors’ Newest Nightmare?
The definition of external obsolescence principally applies to real estate. One real-estate firm explains that “...external obsolescence is something outside of a property, off-site, that negatively affects its value. Definitions of external obsolescence often include the chilling term “incurable,” and examples are trains, traffic, commercial properties, institutional properties, geologic conditions, and industrial installations.”
Mega Cap Stocks: Making Money in Large Cap Growth
“Didn’t we just learn that pouring trillions of dollars into technologies with uncertain profit profiles we didn’t fully understand was a bad idea? Tech investors seem to be most aggressive when they have the least visibility on the IP and valuation provides them with no margin of safety.” -Zac M., KCR Subscriber...
Warren Buffett, Apple, E. Coli & the Big Burrito Beat Down
Mr. Buffett recently extolled the powerful economic moat of one of the world’s most iconic companies: Apple. Berkshire spent a bit over $30bn to acquire their Apple stake, which now sits at 936 million shares.
Alternative Assets & the 60/40 Portfolio Crisis
This paper will demonstrate the following: 1. 60/40 Asset Allocation models have come under crushing stress over the last several months 2. Combined, popular alternatives like private equity, private credit & venture capital strategies are often merely leveraged, high-cost variants of “60/40” with lagged reporting, in our view
The Death of the Dollar: Bitcoin, Gold & their Miners
“The Fed has shown some mettle over the last year but historically I would not say [Federal Reserve chair] Jay Powell is a profile in courage … one area I’m comfortable is I’m short the US Dollar” -Stanley Druckenmiller “Bitcoin is a store of inflation and a hedge against value.” -Anon
Earnings Quality and Stock Returns with Value as a Tailwind
In April last year, KCR penned What is Accounting Quality and Why it Matters. The work discussed the abysmal state of financial reporting and used our earnings quality score to demonstrate that high-quality firms trounced low-quality firms’ performance.
Rank Speculation Returns: A Crisis of Concentration
At the start of the year, KCR penned ARKK vs. QQQ in the Dot.Com Bust and Specious vs. Spurious Correlation. The point of both papers was to warn readers that after speculative peaks, stock prices drop swiftly but then rally violently. Post-bubble price patterns were impossible to predict but precise in their message: speculative counter-rallies among the “fallen generals” of speculative cycles were the rule, not the exception...
Equity Valuation Methods Matter
Happy Friday everyone! This piece is going to be brief, brutal, and to the point. Over the past two years, some readers have complained that the cheapest stocks that dotted our top-ranked companies “were at the peak” and destined to collapse. Counter to intuition, some have come to believe expensive stocks are safer than cheap stocks. For many of these names, earnings did not peak, the world did not end, and many of these stocks ran higher...
Common Stocks and Uncommon Profits
In 1958 Philip A. Fisher published Common Stocks and Uncommon Profits in the hope of giving investors a systematic process to follow when seeking out great companies. Widely respected and admired, the book creates a process for an investing philosophy focused on growth. Our team shares some variant of Buffett’s quip that Berkshire Hathaway is “85% Graham and 15% Fisher.” 85% of Buffett’s investment process comes from...
The Art of Stock Picking Returns
“We’ve had 40+ years where all the money went into broadband, or internet, or Netflix or the cloud and no money went into basic productive capacity…” -Robert Friedland, CEO, Ivanhoe group of companies “During the latter stage of the bull market in 1929, the public acquired a completely different attitude towards
