Sunday Finds + 3 Thoughts From Last Week
SiriusXM + FIGS
Welcome to Chit Chat Money’s Sunday Finds + 3 Thoughts From Last Week. In this newsletter you will find three topics I thought about last week, links to shows we’ve recently released, and links to some interesting articles, podcasts, and tweets. Check out the archive here.
1. Feeling superior vs. trying to make money
There’s an attitude among investors that has rubbed me the wrong way, but I couldn’t figure out exactly how to say it until recently. It can be summed up to this: most investors would rather feel superior to other investors as opposed to make money.
This is prevalent across all investing styles, from crypto to gold bugs to deep value investors. The need to feel superior comes from an insecurity that someone else feels comfortable investing in a style that is different from yours.
Who cares if someone makes money in a way that you think is dumb? If they consistently put up good returns, maybe it isn’t so dumb after all. And if it truly is a dumb idea, the chickens will come home to roost eventually. You don’t need to constantly wish for their demise.
Maybe there are some benefits to becoming entrenched in your ways, condescendingly looking for your “contra indicators”, or publicly bashing people for poor recent performance. But I can’t think of any.
We would all be better off by trying to ignore what other people are doing and focus on our own investing goals, whatever they may be.
2. What makes a stock easy to hold? What makes it hard to hold?
There were a lot of good responses to this tweet:
Off the top of my head, here are some characteristics of a stock that is easy to hold:
Trades at a high current or next year's free cash flow yield
The company operates as a monopoly, duopoly, or oligopoly in an industry with durable customer demand
Management is trustworthy and has shown to be a rational capital allocator (i.e. will they/can they accelerate buybacks during a drawdown)
Conservative balance sheet
You are not relying on the outcome of one event (example: FDA approval for a drug)
It is never discussed on financial news networks
It is rarely discussed among online investing communities
A stock that is easy to own will likely not have all of these qualities, but it will definitely have some.
To find a stock that is hard to hold, I would just invert these bullet points. If the stock trades at a low FCF yield or is unprofitable, operates in a hyper-competitive market, and has sketchy management, I doubt it will be fun to hold in your portfolio.
Why does this even matter? Because if a stock is easy to own, then you as an investor will be less likely to make stupid decisions during stressful periods.
3. Zuck still seems as dedicated as ever
Mark Zuckerberg went on the Joe Rogan Experience and discussed Meta’s future plans (among other things) for three hours. If you are invested in any FANMAG stocks I think this is probably worth the listen as he discusses at length how he is trying to compete with their core services. Rogan also asks good questions, unlike a lot of people who have interviewed Zuck.
Here were some takeaways:
Zuck is as dedicated as ever, and is still really young (only 38 years old). Since he started Facebook when he was so young, he has a lot more experience than other founders in their 30s.
He is thinking about these “metaverse” or new computing projects on a 10 - 15 year timeframe. He consistently mentioned this in the episode. That means Meta could be set to burn $100 billion in cash this decade if they keep up the current $10 billion annual burn rate.
From how he framed his workday, it looks like almost all of his time is spent on these metaverse projects right now.
No company outside of Apple, Google, and (maybe?) Microsoft has legitimate odds to succeed as a hardware provider for these next-gen computing platforms. The technological and financial hurdles seem too high for a start-up or smaller company to overcome.
Zuck had minimal interest in discussing new developments at WhatsApp or Instagram.
Does Zuck’s dedication mean Meta will be a good investment from here? I have no idea. Building these research projects and investing this amount of money is kind of insane in the public markets.
But if they do succeed in building the next computing platform that kills the smartphone, Meta will probably become the largest company in the world.
This is definitely not an easy stock to own.
See you next week,
Brett
***Our fund, Arch Capital, may own securities discussed in this newsletter. Check our holdings page and read our full disclosure to learn more.***
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3 Good Reads
On Meaningless Careers - Jack Raines
For hundreds of years, there was a direct cause-and-effect relationship between your labor inputs and the resulting outputs. A farmer toiled in the field, and land would produce crops. A mechanic would fix machinery, a carpenter would build furniture, and a captain would navigate his ship.
But today? Today we have millions of high-paying jobs that rely on our abilities to manipulate numbers, send emails, and report to seven levels of superiors.
To understand why, look at a wind resource map of the United States. Most of the West is rendered in pale shades of green and light blue, meaning average wind speeds of 10 to 15 mph at best. But this part of southern Wyoming — where the Rocky Mountains drop down in elevation, creating a funnel-like effect — is streaked with thick veins of dark blue.
For wind energy developers, that’s the really good stuff: speeds of 20 mph and above.
Buffett isn’t the only ultra-wealthy investor looking to cash in.
Not far from the Oracle of Omaha’s clean energy kingdom, the reclusive billionaire Phil Anschutz — who owns the Coachella music festival, the Los Angeles Kings hockey team and L.A.'s Crypto.com Arena — is preparing to build the nation’s largest wind farm.
After nearly 15 years of planning, crews are constructing gravel roads. Pads are being cleared for roughly 600 turbines.
The Great Consolidation of the Video Game Industry - The Ringer
Taken as a whole, these transactions represent a consolidation of the biggest developers and publishers in the world, and point toward an industry not just in financial flux but also undergoing deeper shifts in power, consumption, labor practices, and even the form of the video game itself. However, game consultant and Hit Points newsletter author Nathan Brown (whom I wrote for while he was editor of U.K. video game magazine Edge) cautions against treating these deals as one homogenous block. “Microsoft is being expansionist … [and] trying to build out an irresistible subscription service,” he explains over Zoom, referring to Game Pass. Sony, by contrast, is playing things slightly differently. Until the Bungie deal, its acquisition strategy had been “protectionist.” Its purchases of other studios such as Finnish developer Housemarque and remake specialist Bluepoint were driven by an effort to maintain its market-leading position.
1 Good Listen
Atlas Copco, Sweden’s Best Kept Secret - Business Breakdowns
With a market cap hovering around $50 billion US dollars, Atlas Copco is a dominant player in the air compressor and vacuum pump markets. It has returned 40x over the past 20 years for its shareholders and to break down the business I’m joined by Stephen Paice, Head of European equities at Baillie Gifford. Baillie Gifford has owned this business for 4 decades and Stephen still has the handwritten research notes from the mid-80s so we thought it was a proper fit.
