Here's my 1-page mental model for understanding the semiconductor ecosystem👇 Covering: - design software $Cadence Design(CDNS)$ $Synopsys(SNPS)$ - equipment $ASML Holding NV(ASML)$ $Lam Research(LRCX)$ $KLA-Tencor(KLAC)$ - chip designers $NVIDIA Corp(NVDA)$ $Advanced Micro Devices(AMD)$ - chip manufacturers $Taiwan Semiconductor Manufacturing(TSM)$ $Texas Instruments(TXN)$ $Mi
Long_Equity
Concentrated Global Equity Fund | ROC + FCF | Linear Compounders | Value Creation + Pricing Power | “There’s never a bad time to buy a compounding machine.”
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What influences share prices?
What influences share prices? Here’s how I see it.ImageFour of the most important ratios in investing:1. FCF / Invested capital2. FCF / Historic FCF3. FCF / Revenue4. FCF / Market capitalisationIf you had to add one, what would it be?Here's a mental model for thinking about a company's growth:• Is the growth rate high?• Is the growth predictable?High + Predictable = InvestableAnything else = Perhaps best to avoidWhere do you invest?ImageHigh growth companies normally have high multiples.I created this table to show the relationship between growth and multiples👇In short, a PE ratio of 50 requires a 20% earnings growth over 5 years to turn that multiple from 50 -> 20.FYI, I use FCF yield - not P/E.Image
What influences share prices?
Here's my 1-page mental model for understanding the semiconductor ecosystem
Here's my 1-page mental model for understanding the semiconductor ecosystem
My best performing stocks this year have been NVIDIA, FICO and Cadence
Portfolio at the end of December and the end of 2023. No new positions.2023 performance: 31.1%5yr FCF per share CAGR = 20% FCF ROC = 32% FCF Margin = 34% FCF Yield = 3.34% Share price linearity (5yr) = 0.87ImageThere were no outright sales or purchases. The top contributors to performance were $Alphabet(GOOG)$ $Alphabet(GOOGL)$ and $ASML Holding NV(ASML)$ . $Microsoft(MSFT)$ was the only detractor from performance.My best performing stocks this year have been $NVIDIA Corp(NVDA)$ $Fair Isaac(FICO)$
My best performing stocks this year have been NVIDIA, FICO and Cadence
US-Listed Companies: Global Revenue Distribution
10 of the 12 companies I invest in are listed in the US.But only 44% of their revenue is derived from North America. $Fair Isaac(FICO)$ has the most US exposure, while $KLA-Tencor(KLAC)$ has the least (27% China, 24% Taiwan, 18% Korea).You can be globally diversified just by owning US stocks. $Fair Isaac(FICO)$ $Novo-Nordisk A/S(NVO)$ $Constellation Software, Inc.(CONSF)$ $Microsoft(MSFT)$ $Cadence Design(CDNS)$ $MSCI Inc(MSCI)$
US-Listed Companies: Global Revenue Distribution
Why very few companies are capable of sustaining a high return on capital？
Three reasons why very few companies are capable of sustaining a high return on capital over a long period of time:1. Economic downturns - few companies are resilient to these due to exposure to commodities and interest rates (eg banks and energy companies).2. Reinvestment opportunities - companies lacking reinvestment oppportunities typically pay out a large chunk of their earnings as a dividend, rather than reinvest (eg consumer staples).3. Pricing power - few companies are capable of raising prices without losing sales to their competition.ImageValuation reflects both future growth and current multiple. I personally focus on future growth. I see a lot of value currently in $Applied Materials(AMAT)$ and $Fo
Why very few companies are capable of sustaining a high return on capital？
Which companies are you most excited for in 2025?
Which company in your portfolio are you most excited for in 2025? $ASML Holding NV(ASML)$ $Alphabet(GOOG)$ $Alphabet(GOOGL)$ - Where would the world be without them $AppFolio(APPF)$ - It has a lot of positive sentiment at the moment $ASML Holding NV(ASML)$ $Amazon.com(AMZN)$ - Sometimes CAPEX takes a while to return FCF, I see all the semiconductor equipment manufacturers ( $Applied Materials(AMAT)$ $KLA-Tencor(KLAC)$
Fundsmith 13F Digest| Are these stocks worth buying?
Fundsmith’s factsheet says no sales or purchases this month.We know from their 13F that they bought Edwards Lifescience Could this be for their Smithson fund instead?$Sabre(SABR)$ $VeriSign(VRSN)$ $Fortinet(FTNT)$ $Masimo(MASI)$ $Qualys(QLYS)$ $Verisk Analytics(VRSK)$ $MSCI Inc(MSCI)$ $Cognex(CGNX)$
Fundsmith 13F Digest| Are these stocks worth buying?
Here's a snapshot of the my portfolio's valuation
Here's our factsheet for November.FCF ROC = 27%FCF Growth = 17%FCF Margin = 25%FCF Yield = 2.53%November return = 2.3%YTD = -17.4%Sartorius Stedim Biotech was sold due to valuation concerns (FCF yield = 0.4%) and was replaced with the Italian immunodiagnostics company Diasorin.Adobe$Adobe(ADBE)$ and Nemetschek$Nemetschek AG(NEMTF)$ were replaced with Paychex$Paychex(PAYX)$ and TechnologyOne$Technology One, Ltd.(THNOF)$ . This maintains our SAAS exposure, but increases the predicability and stickiness of their FCF.Here's a snapshot of the portfolio's valuation.$Visa(V)$
Here's a snapshot of the my portfolio's valuation
Long_Equity Investment strategy in Feb 2023
We began a new position in Cerillion$CERILLION(CER.UK)$ . The top contributors to performance were NVIDIA$NVIDIA Corp(NVDA)$ and Cadence Design Systems$Cadence Design(CDNS)$ . The top detractors from performance were Moody’s$Moody's(MCO)$ and S&P Global$S&P Global(SPGI)$ .$Microsoft(MSFT)$ $Visa(V)$ $MSCI Inc(MSCI)$ $L'Oreal Co.(LRLCY)$ $MasterCard(MA)$
The highest quality companies in the Fundsmith/Smithson investable universe
What are the highest quality companies in the Fundsmith/Smithson investable universe?I took the complete set of holdings from both funds and ran it through one of my custom quality filters.Here are the ones that rise to the top 👇🏼👇🏼 $Nemetschek AG(NEMTF)$ $MSCI Inc(MSCI)$ $Qualys(QLYS)$ $IDEXX Laboratories(IDXX)$ $Mettler-Toledo(MTD)$ $Microsoft(MSFT)$ $Novo-Nordisk A/S(NVO)$ $HMS Networks AB(HMNKF)$ $Technology
The highest quality companies in the Fundsmith/Smithson investable universe
Top performers in November 2024: $FTNT $FICO
Portfolio at the end of November 2024November performance: +8.8%YTD: 27.6%We began a new position in ATOSS Software. The top contributors to performance were $Fortinet(FTNT)$ and $Fair Isaac(FICO)$ . The top detractors from performance were $KLA-Tencor(KLAC)$ and $Applied Materials(AMAT)$ .FCF ROC = 38%FCF per share CAGR (5yr) = 24%FCF Linearity (5yr) = 0.94FCF Margin Expansion (5yr) = 6%FCF Yield = 2.73%ImageTake a look at the below table. AMAT and KLA have higher and more consistent FCF per share growth. $ASML Holding NV(ASML)$ generally has lower returns on capital and higher
Top performers in November 2024: $FTNT $FICO
What influences share prices?
What influences share prices?Here’s my mental model for understanding equity markets.In corporate finance there are three rules for maximising value: 1. Buy high return assets 2. Finance assets with low cost debt 3. Only return capital to investors if there are no suitable investments These principles should guide both how managers run their businesses and how investors find and manage investments. Maximise the highest possible return by investing in the highest returning assets.What would you add?https://twitter.com/long_equity/status/1634308890622849030
What influences share prices?
Investing in High, Predictable Growth: S&P 500 Insights
Here's how the constituents of the S&P 500 $.SPX(.SPX)$ differ based on their growth rate and the linearity of that growth.I invest in the top right, where growth is high and predictable.ImageWhen analysing a company, consider where its product/service fits in its customer’s income statement. I personally target essential spending, ideally related to OPEX and maintenance CAPEX.ImageTwo things you can do to become a better investor: 1. Limit the number of companies you own 2. Limit how frequently you trade This forces you to: 1. Only own your best ideas 2. Accept there will always opportunities you miss out on
Investing in High, Predictable Growth: S&P 500 Insights
NOV was the only contributor to performance
Portfolio at the end of April 2024.April performance: -5.7% YTD performance: 11.0%FCF ROC = 35%FCF per share CAGR (5yr) = 22% FCF linearity (5yr) = 0.90FCF Margin Expansion (5yr) = 5%FCF Yield = 2.95%Interest expense = 6% of operating profit Change in share count (5yr) = -9%If FCF per share keeps growing in the high teens, then it’s a fair price to pay for quality.There were no outright sales or purchases. $Novo-Nordisk A/S(NVO)$ was the only contributor to performance. The top detractors from performance were $MSCI Inc(MSCI)$ and $Cadence Design(CDNS)$ .Imagehttps://twitter.com/long_equity/status/1785424822237106511
NOV was the only contributor to performance
Four of the most important ratios in investing
Four of the most important ratios in investing: $.SPX(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $.IXIC(.IXIC)$ $Invesco QQQ(QQQ)$ $NASDAQ 100(NDX)$ $.DJI(.DJI)$ $GLOBAL X DOW 30® COVERED CALL ETF(DJIA)$ 1. FCF / Invested capital2. FCF / Historic FCF3. FCF / Revenue4. FCF / Market capitalisationIf you had to add one, what would it be?High growth companies normally have high multiples.I created this table to show the relationship between growth and multiples👇In short, a PE ratio of 50 requires a 20%
Four of the most important ratios in investing
The companies that I own and would invest in
Here are the holdings of the BlackRock Unconstrained portfolio.I’ve highlighted the companies that I own and would invest in.Any thoughts on the portfolio? $Novo-Nordisk A/S(NVO)$ $ASML Holding NV(ASML)$ $Alphabet(GOOG)$ $Alphabet(GOOGL)$ $Ansys(ANSS)$ $Cadence Design(CDNS)$ $Intuit(INTU)$ $MasterCard(MA)$ $Microsoft(MSFT)$ $S&P Global(SPGI)$
The companies that I own and would invest in
S&P 500 Growth & Linearity Differences
Here's how the constituents of the $.SPX(.SPX)$ differ based on their growth rate and the linearity of that growth.I use RSq, so the closer to 1.00 the better the correlation and therefore the less the volatility. And yes, it's against years.ImageHere are some of the financial metrics I optimise my portfolio for:What would you add?ImageInterestingly I rarely see FCF yield as a predictor of future share price gains. But I absolutely keep my eye on it!The three most important qualities of a quality business:1. Predictable growth2. Capital efficiency3. Pricing powerWhat would you add?
S&P 500 Growth & Linearity Differences
High growth companies normally have high multiples
High growth companies normally have high multiples.I created this table to show the relationship between growth and multiples👇In short, a PE ratio of 50 requires a 20% earnings growth over 5 years to turn that multiple from 50 -> 20.FYI, I use FCF yield - not P/E. $.SPX(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $.IXIC(.IXIC)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $.DJI(.DJI)$ $FT Vest U.S. Equity Deep Buffer ETF - January(DJAN)$ ImageTwo things you can do to become a better investor: 1. Limit th
High growth companies normally have high multiples
Which Japanese companies are you bullish on?
Here are the Japanese companies currently featuring in MSCI's World Quality index.Which Japanese companies are you bullish on?I'm currently researching:• Tokyo Electron $Tokyo Electron Ltd.(TOELF)$ • Advantest $Advantest Corp.(ADTTF)$ • Lasertec (my favourite) $Lasertec Corp.(LSRCF)$ • Disco Corp $Disco Corp.(DISPF)$ • Maruwa (not on the MSCI list) $MARUWA CO LTD.(MAWAF)$ Imagehttps://twitter.com/long_equity/status/1785265758877933774
Which Japanese companies are you bullish on?
Why I don’t invest in the S&P 500?
Why I don’t invest in the $.SPX(.SPX)$ :- only 25% of the index has a FCF/share growth greater than 15%- only 26% of the index has a return on capital greater than 12%- only 12% of the index has both of the above- I don’t want to own banks, airlines and energy companies- I don’t want to own anything discretionary- I don’t want to own alcohol, tobacco or gambling stocks- I don’t want to own anything highly leveraged or highly cyclicalWhat would you add? $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2412(ESmain)$ Personally, I've always been wary of the S&P 500's emphasis on mega-cap stocks. I think there are better growth opportunities in sm
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