Invest at your own risk; this is not financial advice! This is not a recommendation to buy or sell any securities discussed in the article.
I hope you are having a fantastic week and you are looking forward to learning something!
In case you want to re-read the previous weekly notes, here is the link
Without further ado, let’s start:
SBC and the effect on the stock price
There is a general connection between the amount of dilution of outstanding shares through SBC and the medium-term stock price. As I wrote in last week’s edition, I am not a fan (to say the least) of excessive SBC.
Talking about SBC: Snap might be one of the worst examples when it comes to SBC. The executive team is getting rich while the company does not earn any money. This is modern-day robbery.
Some thoughts on drones
I remember flying a drone for the first time about 10 years ago and it was quite some fun. Jumping ahead, drones have become a major tool in modern warfare as seen in Ukraine. It’s not just about reconnaissance but also suicide drones, which can eliminate a tank worth millions with a 500$ drone. As a side note: A Russian T90 costs between 2.5m to 3.5m and a German Leopard somewhere between 12-30m USD.
Then again technology can be also used for beautiful things like drone shows. Expect to see more of these in the future as a replacement or addition to fireworks.
Here is a video of shows made of 8000 (yes you read that correctly) drones:
https://x.com/41investments/status/1840828532974632972
Hedge Funds are just copying ETFs
Most hedge funds charge you high fees and most of them tend to underperform the broad markets for that very reason. Interestingly the most common shares held by hedge funds are exactly those with the highest weighting in the S&P500/Nasdaq. To be fair most of these companies are also fantastic businesses.
While we are on the topic of funds: Cathie Woods is one of the most popular fund managers due to her performance during the Covid bubble. Gravity eventually did its work and a lot of the holdings she had turned out to be flukes. Berkshire on the other hand is walking to a steady beat. Apart from beating Cathie by a mile, the investors of Warren could also sleep tighter.
This is the modern story of the fable the tortoise and the hare.
Ray Dalio’s hedge fund Bridgewater hasn’t been doing great either. One of the main reason are the high fees that the fund charges investors. Someone has to pay the 2000-man-strong team.
AI - yet again
The Accenture CEO shared some numbers on the accelerating AI bookings. As one of the prime consulting companies, this shows how much interest there is for AI in the industry.
“For the full fiscal year, we had $3B in new GenAI bookings, including $1B in Q4...The magnitude of this achievement is seen in the comparison to FY '23, where we had approximately $300Min sales and roughly $100M in revenue from GenAI”
I came across this nice picture explaining why Nvdia is doing so well. I would adjust it by putting a stand behind Nvidia which is owned by ASML and Taiwan Semiconductor. Without these two, Nvidia would not be able to sell any GPUs.
ASML is at the moment also valued at an attractive price when considering the expected growth. We are looking at an EV/net income of 21 in two years. I believe this is very attractive for the monopoly on modern chip manufacturing technology.
One more thing on AI: The Nobel Prize for physics was awarded to the researchers John Hopfield and Geoffrey Hinton "for foundational discoveries and inventions that enable machine learning with artificial neural networks."
How to get rich - and then lose it all
If you want to read the full article and learn about the management, the composition of the segments, takeovers, risks, fundamental analysis, and a conclusion please subscribe and support my work. To all existing subscribers: Thank you for your support and enjoy the rest of the article!
I found this wild story of a man who managed to turn a small account into a $415m portfolio and then lose it all. To be fair gambling it all on Tesla was a bold move and then losing it all (on margin!) again was plain out crazy. Always keep in mind that the bank is not your friend. I hope the poor fellow spends at least some of the money on some fun things.
Car industry
Last week about how much Western car manufacturers are struggling. Now Tesla is offering 2500$ discount in the US and also offers 0% financing. Moves like these happen rarely so early in the quarter and are yet another indicator of how dreary the situation is.
On the bright side, McLaren released its new supercar, the W1 and I can’t wait to see what the next Porsche and Ferrari supercar looks like (hopefully better)
This is the next inning of the supercar battle. These 3 are the previous generation which were shown to the public in 2013 and still look great today.
Microsoft is a cat
Why would I state that Microsoft is a cat? Well similar to a cat Microsoft has 9 lives. Microsoft is an old company in relation to many of its peers and keeps innovating. Turning from an operating system provider toa software juggernaut while being the only company to stay in the top 10 in terms of index weight for the last 3 decades.
The cloud business (Azure) is doing great and became the largest segment of Microsoft in 2020. Let’s see where Microsoft is going next, AI with the partial ownership of OpenAI (the company behind Chat GPT) seems to be the next logical step.
Fun fact: Microsoft’s logo in the 1980s looked like the one from a metal band
Who owns your time?
The answer can be found (at least partially) by checking the most popular social media platforms. I am a happy owner of both Alphabet and Meta which together own the top 3 in this list. I also believe that WhatsApp has a long runway left in becoming a major player in the US.
Some wise words from Naval
Let’s close with some wisdom from Naval. Naval Ravikant is one of the clearest thinkers out there. I really enjoyed the book about his takes on several topics by Eric Jorgenson.
To get an idea why I like him so much, watch this short 50 seconds clip about the important things in life: https://x.com/41investments/status/1842606142113083575
Enjoy your week and keep investing in great companies.
If you haven’t done so already, please follow me on twitter/x and reshare this post so it can reach more people.
Please subscribe to my substack and follow me on twitter/x if you like my work: https://twitter.com/41investments
Invest at your own risk, this is not financial advice! This is not a recommendation to buy or sell any securities discussed in the article.
41