🧠 The Timeless Lesson From NVIDIA

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There are 32 analysts covering NVIDIA. All of them are intelligent, experienced, connected, and highly-compensated.

Their key responsibility: make predictions about how much revenue and earnings NVIDIA will generate in the quarters ahead.

Each individual analysts doesn’t even have to be that accurate, either. All of their estimates are averaged together to come up with the “consensus” numbers that the company will be judged against.

Last week, NVIDIA’s cadre of analysts predicted the company would generate about $7 billion in sales in the second quarter of 2023.

Yet, when management issued guidance for the quarter, they said it’d be closer to $11 billion.

That’s a difference of $4 billion, or 57%!

It was one of the biggest positive guidance surprises we’ve ever seen.

The market was taken completely by surprise. NVIDIA’s stock skyrocketed 30% in response to the upbeat numbers. That in of itself was incredible to see when considering that NVIDIA’s stock had already more than doubled since the start of the year.

The lesson here isn’t that these analysts should all be fired. In truth, consensus estimates are often pretty good at predicting results.

The lesson is that even if 99% of the future is knowable, at least 1% of it isn’t.

And oftentimes, what happens in that 1% of the time dictates everything else.

Pearl Harbor. Enron. September 11th. COVID. JFK assassination. All of these were 1% events that took the world completely by surprise.

Yet, think about how much those 1% events impacted the world. It’s not stretch to say they changed the world by as much as the 99% of days did combined.

This simple math showcases why we are such big believers in making your financial life as “anti-fragile” as possible.

How can you do that? Pay off yours debts. Keep a big cash cushion. Develop multiple sources of income. Invest in high-quality businesses. Diversify.

These actions can be viewed as overly conservative 99% of the time.

Yet, they allow you not only survive the 1% of surprising days; they enable you to thrive when they eventually appear.

That’s what enables long-term out-performance.

Which, of course, is the only time frame that really matters.

Wishing you investing success,

– Brian Feroldi, Brian Stoffel, & Brian Withers

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One Simple Graphic:

The importance of recurring revenue, visualized:

One Piece of Timeless Content:

Last week, our link to Paul Graham’s excellent blog post How to Lose Time and Money didn’t work. This one does.

Ever wonder how analysts are usually so accurate with their estimates? This epic blog post by Ilan Moscovitz dives deep into the craziness of the quarterly earnings game.

One Twitter Thread:

30,000 shareholders/fans attended Berkshire Hathaway’s annual meeting earlier this May. Here’s the key takeaways from Vitaliy Katsenelson, who has attended the annual meetings for more than a decade

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Vitaliy Katsenelson πŸ‡ΊπŸ‡¦

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May 9th 2023

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