🧠Our Favorite Metric
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, If we were forced to pick our favorite business metric, it would be gross margin. If you run a lemonade stand, your gross profit would be your total sales minus what it costs you to buy the lemons, sugar, cups, and water. Your gross margin would express gross profit as a percentage of sales. A steady or expanding gross margin is a great sign for investors. It signals that a business has at least one of these three positive …
🧠Can Numbers Reveal a Moat?
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, Last week, we made a YouTube video on UiPath's earnings. At the end of the video, we mentioned our upcoming webinar on Warren Buffett's Financial Statements Rules of Thumb for detecting a moat. One of our subscribers pushed back with an important critique: While we agree with the spirit of this statement, we still believe that financial statement rules of thumb can be incredibly helpful. That's because there are more than 8,600 stocks listed on major... …
🧠Buffett’s Rules of Thumb
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, Beyond Meat went public on May 2nd, 2019. It was valued at $1.5 billion. While we applauded the company's mission, we didn't buy its stock. Why? We didn't believe Beyond Meat had a moat -- or a sustainable competitive advantage. We couldn't identify anything that Beyond Meat was doing that Tyson Foods or Kroger couldn't also do at a lower price. That decision looked dumb at first. Beyond Meat shot up to a $14 billion valuation in just two …
🧠Shut Up And Wait
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, Morgan Housel -- author of The Psychology of Money -- has long been one of our favorite writers in finance. Back in 2017, he sent out one of our favorite tweets of all time: This tweet reminds us of a (perhaps apocryphal) story from Fidelity. The broker pored through accounts to see which investors had the best returns from 2003 to 2013. They noticed something odd about the two highest-performing groups: The account holder had died The account holder... …
🧠The Most Powerful Investing Tool
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, In 1994, a few employees at NeXT were in the cafeteria when Steve Jobs walked in. "Who is the most powerful person in the world?" Jobs asked. The employees mentioned a few big names of the day, like Alan Greenspan, Nelson Mandela, and Bill Clinton. But Jobs vehemently disagreed. "The most powerful person in the world is the storyteller. The storyteller sets the vision, values, and agenda of an entire generation that is to come." (Shortly thereafter,... …
🧠How To Decode Management’s Jargon
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, If you invest in individual stocks, we highly recommend you listen to the company's conference calls. Hearing management's tone, reaction to questions, and overall demeanor is invaluable. But there is one part of these calls that we can't stand: the jargon. Lots of management teams use innuendos and acronyms when discussing their company's results. Understanding what's actually being said can be challenging. For instance, DataDog reported earnings... …
🧠Ask These 3 Questions First
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, Best-selling author Sebastian Junger (The Perfect Storm, Tribes, Freedom) recently sat down with a man getting out of prison after 25 years. He asked a simple question: "Is it possible to be freer in prison than out?" It seems like a stupid question, but his answer was surprising: "Of course it is. There are almost no distractions in prison — no phones, no internet, almost no drugs — and eventually, you will have an honest conversation with yourself... …
🧠Why Buffett Bought Apple
Reading Time: 5 minutes View Online | Sign Up | Advertise Friends, Last week, we talked about how the stock market -- before the Great Depression -- was like the Wild West. There was no SEC, no conference calls, no mandatory filings, nothing. Investors were in the dark about how their companies were performing. The only way a business proved that it was generating profits was by sending its investors a dividend. So long as your broker received a payment every quarter, the company was (most likely) generating real... …
🧠Is The Market 60% Overvalued?
Reading Time: 5 minutes View Online | Sign Up | Advertise Friends, While humans have been around for almost 300,000 years, we only have stock market data going back 152 years. That said, it provides what appears to be a robust track record. According to the data (back to 1871), today's S&P 500 is very overvalued. Consider: The historical average P/E for the S&P 500 is roughly 16. Today, the S&P 500 trades for 26 times trailing earnings. That means the S&P 500 is 60% overvalued compared to its historical average.... …
🧠Change Your Perspective
Reading Time: 4 minutes View Online | Sign Up | Advertise Friends, Rewind the clock to June 2020. This was at the height of "social-distancing" mandates. COVID was still new, and the world was still freaking out. Back then, a few less-than-reputable newspapers posted pictures of crowded public spaces to show that some people weren't following "the rules." Here's an example: Pictures like this drove a wedge between two groups equally motivated by fear (either of the virus or losing their freedoms). The intent was... …
