Most recently, I speculated a few more, one with the intension of arbitrage (Reddit$HCP– HashiCorp is weighing up a potential sale – Bloomberg Business); another one I just stepped on it purely by accident ($BSY). I know in many days, I stepped on the wrong thing (or stock), but this time with #BentleySystems, things are looking good 🙂
My year 2020 post on Terraform, note TF is probably Hashicorp cash cow, and also important for cloud infrastructure life cycle management
Note in the years since 2015, essentially since year 2019, I thought about learning the #golang myself and apply for a job (likely dev) at Hashicorp. That didn’t materialize like many initiatives I had over the years. Also note in year 2020/21 while at Ascension health I did use the Terraform quite a bit for the GCP infrastructure automation. My main motivations to join them are two folds: 1) I was interested in Dev Ops and cloud infrastructure; 2) I recall if I join a startup when they have 200 people (or engineers), potentially I would make enough money from stocks so that I can retire early.
For $BSY, I heard about them for a while, but until recently I didn’t have chance to look at their financials (until they came to the public market a dew years ago)
Last but not least, as the old Chinese saying goes, 胜不骄败不馁，what I need to do: is continue this battle on the stocks, and hopefully I will come away with more winners compared to losers (recently losers include $DT, $LEG Leggett & Platt which I talked about here, and $RIVN).
PS (04-27-2024) I sold all my $HCP long position at $33 on Thursday 4/25, and now I think if it drops to $31.50 ($10% discount of IBM $35 offer price), I can make some money there – assume the deal doesn’t collapse, and I think almost risk free arbitrage from $31.50 to about $34. Along those thinking, I placed a limited “good until cancel” buy order of $31.50 🙂
This is a continuation of my personal reflection on investing in stocks. I recall most recently I talked about patienceover frequent short term trading here. Patience is import during power (electricity) outage too: which btw, in St. Louis due to the unpredictable weather, it happens once a while (such as this one in year 2006. And in summer 2021. Both the Jan 2007 and the July 2021 outages lasted multiple days. Also keep thing in perspective, I recall in July 2006 an electrician died when working to restore the electricity.
Today (this morning to be exact) I just noticed 2 stocks in my portfolio. And one is much bigger than the other in terms of portfolio size: 20 to 1. The big one barely went up 1%, the small one went up 10%. If you are curious, the large holding is $KO Cocacola, and the smaller one is $VERX Vertex software inc (tax software).
This reminded me of something Charlie Munger said quite a few times.
Charlie Munger: “And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.” (reddit self.investing)
Stocks that I hold on for too long: RIVN, “hold on the loser, sell the winner” is the opposite of what I wanted to do.
Some of the things I am going to try
Delete the mobile apps (so far, deleted TD Ameritrade and Vanguard app)
Consider using less Robinhood and ThinkOrSwim (kept the latter as TD Ameritrade accounts are transferring to Schwab post the acquisition)
Do more reading and have a more focused as well as longer term portfolio – companies such as BRK, or companies that have some dividends that can potentially drop less or have less volatility during a bear market
The shareholder letter and 2023 annual report PDF file here. Quote the letter, page 5
Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen.
====== At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies – and simply sitting tight – can deliver wealth almost beyond measure. Even heirs to such a holding can – ugh! – sometimes live a lifetime of leisure.
====== We also hope these favored businesses are run by able and trustworthy managers, though that is a more difficult judgment to make, however, and Berkshire has had its share of disappointments.
Warren did not use the word enduring here. I think he meant companies that have enduring competitive edge 竞争优势 when he said “……rare enterprise……”, or the “moat” 护城河 which was frequently talked about/used in the past shareholder meetings. By the same token, in investing we are looking for an enduring company.
Warren’s grades for the subsidiaries and companies that BRK has Equity Stakes
If I could summarize what Warren said about the subsidiaries and the companies that Berkshire Hathaway equity stakes. He is what he said basically insurance is doing good, BNSF is doing okay and will probably be okay in the future. He was not that sure about the Berkshire Hathaway Energy BHE, mainly due to the unknown regulatory risks such as the capped rate. As a capitalist, he expected to recoup the investments and then some. But for the BHE (electricity utility co.), because the regulators limit the rate they can charge, he was not sure BHE can get the money back from all the investments in green energy (wind, solar) and power transmission.
For companies BRK has equity stakes, he basically “praised by names”: they are American Express and Coca-Cola. Both are companies born in 1800s. They have enduring competitive edge. I guess this is true even after the recent Capital One /Discover merge. Amex is in a such a unique position in the market, and they are not afraid of Visa and Mastercard either.
American Express Rose Gold card
Warrren praised the OXY, its CEO Vicki and the US oil industry as well.
Companies that has long history or decent history
I noticed in the US there are companies that has long history or decent history. Many of them are family controlled or started by a family (or two, in the case of Leggett and Platt, Wikipedia entry here). In a way Anheuser-Busch the beer giant was like that too. But now AB is a part of AB InBev. Over the time as companies go public (traded in the stock exchanges), the families will gradually sell off the stakes, and eventually they don’t have the control or majority ownership. I think the few companies that families still have control included Ford. Also Berkshire Hathaway will selectively provide a home for those families owned business too, include the one in recent news – Pilot Travel Centers.
Below some of them have STL connection (HQ).
ADM: they had an accounting scandal recently. That’s bad.
I traded the stock around that day. I sold it on the 2nd day though.
Bunge: first saw their North America HQ at west port, probably in year 2008. On its Wikipedia entry, – I noticed this company have long history. They are in similar business as ADM (food processing, some call them agri business). Note Monsabto is in that business too. STL has quite some agri business.
Founded 1818; 206 years ago; Amsterdam, Netherlands
Founder Johann P. G. Bunge
Somewhat related to John Deere, I noticed #Bunge moved its HQ to St. Louis in the last few years – https://t.co/H1s6Fq7xgG (they are also in the agriculture business, more on the processing side). I noticed their old North America (or USA) HQ near westport, about 16 years ago /6
Noticed the company HQ and company history of John Deere, Bunge and BRK
Berkshire Hathaway: nothing to add (this is a common phrase Charlie Munger used to say in the annual shareholder meeting).
Emerson Electric: this is St. Louis based company, and they recently sold the climate control business (White Rodgers and Sensi brands) to private equity, and the PE firm rebranded it as Copeland. Meanwhile Emerson continues to focus on industrial automation (compete against Rockwell Automation, Siemens etc) , and other business.
GE: 100+ years, in the progress of breaking up. The healthcare unit GE Healthcare is already being spun off, and its stock has done well so far.
IBM: 100+ years, sold or spun off some low margin business, still going strong recently.
Jack Henry and Associates: blog post (same blog post below for Leggett and Platt). The only tech public company HQ’ed in Missouri. Found in 1976, same year Microsoft was found.
Leggett and Platt: It seems they will have some tough time this year due to the consumer slowdown of beeding products (their main products). The company has a long history and is based in Missouri. I sold the stock recently, btw. My Blog post – Dividend Based Investing.
Twitter thread below. I have quite a few threads on this actually. But I am posting the last one here only. It seems the US consumers are tapped from year 2023 (and until now Feb 2024). I do expect some sort of recession for those consumers. This will impact consumer products companies such as Polaris too $PII (no position at this time).
Found one #dividendYield chart for $LEG: https://t.co/mNXqNcnKKU || For the dip at each quarter, it seems was caused by #exDividend. From visual the average dividend for $LEG is about 4%, and right now 6.95% yield seems juicy: obviously, the potential risk is the stock price drop
Btw, I sold the Rivian stock $RIVN on the same day I sold all the remaining shares of $LEG too. EV seems like the traditional car business, and similar to the airline business. They are both very hard to survive, and almost impossible to thrive in those businesses.
A related note is in the large commercial air planes space, there are only two players AirBus and Boeing $BA. And yours truly has a few shares of $BA at this time. And we cannot say that for EV. Tesla is obviously big in the USA, but in China BYD has just beat Tesla. And then there are also the legacy car makers, including the all mighty Toyota Motors, whose hybrid is taking the wind from the EVs now.
Macys: May Department store (Famous Barr). I heard they rejected PE’s take private offer. Long term I don’t see they survive. I recall we played with our soon to be 14 year old at Macy’s (hide and seek, when she was probably 2 years old). She could no longer remember. She shops at Aerie (American Eagle Outfitter), Hollister (a brand under ANF), and H&M instead.
Monsanto: bought by Bayer, operate as a part of Bayer Agri Science, and involved in lots of lawsuits on roundup (the lawsuit existed before the acquisition).
Sara Lee: Wikipedia. Came across it today as I saw people talked about its former subsidiary Hanesbrand. It looks like Sara Lee itself is broken up now: it split into the US business and European business, and the companies names also changed. They still kept the Sara Lee brand for bread. I used to have a roommate worked for Sara Lee in year 2007.
A side story: my 9 year old didn’t remember the brand name because of their font.
PS: in this year’s annual shareholder letter, Warren used his own little sister Bertie quite extensively, which is a good thing because he wanted non financial/accounting professionals to understand the business. He always paid tribute to Charlie Munger, who has the best 30 seconds brain in investing. Charlie does have other good attribute and skills too, e.g., he is a real architect (designing his own house, for example). And he did steer Warren towards the value investing in companies such as See’s candies and Coca Cola.
Coca-Cola can and drink (exaggerated)
Last but not least, I wrote a X thread yesterday on similar topic.
#BerkshireHathaway 2023 annual report (and #WarrenBuffett 's letter to shareholder) is out – https://t.co/VobyFbo5ML || I am reading it now, before reading others' comments. It seems I won't go to #BRK2024 at Omaha this year. Hope next year I can go. /1
Reading Time: 5minutesA tweet I saw yesterday 02-20-2024 regarding the $COF $DFS merger
Writing from my experience on credit card both from consumer (outside) and business (inside) perspective: meaning encourage more usage of the card via loyalty and rewards, make sure the card is on the top of the deck etc. I also understand Americans are addicted to the credit card to a large extent. Full disclosure: between 2015 and 2019 yours truly worked for the Mastercard loyalty and rewards department on Biz Ops (production support, Site Reliability Engineering, and product support), and Application Development (software engineering).
Note I call them merger instead of outright acquisition, because it’s essentially a 60/40 all stock transaction. Meaning the Capital One shareholders will get 60% of the combined company, the Discover shareholder will get 40%. While it’s not 50% to 50%, I think it’s close enough for merger.
CNBC (Hugh Son) – Here’s why Capital One is buying Discover in the biggest proposed merger of 2024
The deal, if approved, enables Capital One to leapfrog JPMorgan as the biggest credit card company by loans, and solidifies its position as the third largest by purchase volume. — Personally I am not ready to give up my CSP card for the Capital One Venture card.
‘Holy Grail’ But it’s Discover’s payments network — the “rails” that shuffle digital dollars between consumers and merchants, collecting tolls along the way — that Fairbank repeatedly praised Tuesday when analysts queried him on the strategic merits of the deal. There are only four major card networks: giants Visa and Mastercard , then American Express and finally the smallest of the group, Discover. (I agree 100%. Credit card network is just like a financial highway. Not toll free. Most everyone has to pay. 信用卡网络就像一个收费的金融高速公路。)
NBCNews – Capital One-Discover merger could put a bigger squeeze on credit card users, experts warn – Many of the largest credit card issuers already charge steeper rates than smaller ones.
The average credit card interest rate in the U.S. is 24.61%, according to LendingTree, the highest since the credit marketplace began tracking monthly rates in 2019. I felt for those cardholders who pay 24.61% or more 🙁 I don’t think even Warren Buffett can easily earn this kind of return in his investments (even with a smaller sum).
USAToday – Discover’s merger with Capital One may mean luxe lounges, better service, plus more perks
The acquisition would give Capital One access to Discover’s high-credit-quality customers and its network of payment processing services, an area dominated by Visa and Mastercard. (Both are not very accurate in my opinion. I will explain them below.)
The deal will create the largest U.S. card issuer with around $250 billion in card balances and a market share of 22%, according to TD Cowen. (This may be true)
FAQs on credit card
What is credit card network?How does it work?
I just saw Stripe has a good text explanation. A picture is worth a thousand words sometimes. For that in ByteByteGo (my friend Alex Xu) I trust. See below. Discover is similar to Visa, Mastercard and American Express when we talk about credit card network (card swiping in the old days, now it’s tapping or digital wallet pay).
How credit card works, from Alex Xu/ByteByteGo
How does credit card companies make money?
In simple words, they collect network usage fees from the user of the credit card, initially from the merchant (via the merchant bank). For example, a consumer paid $100 at grocery store using a Chase Visa credit card. Typically the grocery store will eventually get about $97 from the merchant bank. Visa (the credit card network) will receive about 20 to 30 cents. The Chase bank will receive about $2.00 and the rest may go to the people (companies) who setup the payment terminal, merchant bank and so on. One may wonder why Chase bank (the credit card) issuer gets $2.00 which seems like a lot: note that money is not risk free. For example, if the consumer (the Chase credit card customer) didn’t pay her/his credit card bill, in theory Chase will take the loss. But banks usually are not that nice: they will pursue collection, hike interest rate etc. If someone is living on credit cards, basically he/she will be the “slaves” of the bank. 这里是一个具体的例子，下面是引用。
Visa accounted for just over half of the purchase volume on general purpose credit cards in 2022: Visa credit: 52%, $2.84 trillion. Mastercard credit: 24%, $1.32 trillion. American Express credit: 20%, $1.08 trillion. Discover credit: 4%, $211 billion.
Credit card issuers are the banks, or credit unions. Note American Express and Discover Financial are also credit card issuers, in addition to providing their respective credit card network.
Trivia Questionor bonus question: do you know the history of Discover Financial?
They actually started as a credit card division of the now defunct Sears corp., at one time the powerful department store that is based in Chicago (have you ever heard the Sears tower).
Will regulators approve the deal?
This is mostly a US only deal. Both companies mainly operate in the US. Not a lot of International exposure. I think the regulators will likely approve it, because together they are still not the most dominant credit card issuer or network. Here is a Bloomberg report on the deal (YouTube).
A word on digital wallet
I noticed digital wallet such as Paypal can automatically update the expiration date of the card on the file. This is a neat feature.
中文简译
Translate those two companies into Chinese. They don’t have heavy presence in China, Discover was there, in my vague memory.
Capital One Financial Corp. – 美国第一资本投资国际集团: 美国第一资本投资国际集团（Capital One Financial Corp.，下“Capital One公司”）是一家以投融资及基金管理为基础,集国际贸易、项目开发、投资银行业务为一体的多元化国际企业集团，总部位于美国特拉华州。
Discover Financial Service – 发现金融服务公司: 发现卡（Discover Card）是一种在美国广泛使用的信用卡。1985年到2007年，由美国金融寡头摩根士丹利等金融机构控股，零售商公司Sears推广发行。(Wikipedia)
Amtrak is enticing me with a new credit card offer
I saw a bunch of videos on YT after watching the original YouTube video. See below. There are similar quality complaints videos on other builders too. I guess because $DHI is the national biggest builder (in terms of revenue or number of homes being built): it’s not too surprising they have the most complaints (just looking statistically).
I don’t have any positions. Note IPO usually stands for “it’s probably overpriced” – this is Warren Buffett’s words, not mine. Last but not least, in the general sports apparel/shoes category, not specialized sports, Nike is the king. And I don’t see any one even Amer Sports‘s parent Anta Sports to shake things up. Adidas tried, and was not successful so far. Btw, Jim Cramer of CNBC also just bashed the stock $AS in this evening (02-01-2024) Mad Money show.
(Original) Some people may know I worked at CAD industry for a while: I actually explained a bit here (search for “my 1st employer”).
I heard about Bentley Systems many years ago, but until fairly recently, to be precise in year 2020, it came to public market. Here is their IPO prospectus filed in Sept 22, 2020. In last year or so, I traded and still own some of their stocks $BSY (note this class of stocks has less voting power compared to the Bentley families, and this is quote common in tech stocks, btw. More explanation in the next paragraph). And in last few days, the stock dropped quite a bit and I added a bit more in the last few days too.
Their main competitor includes another former employer of mine: AutoDesk $ADSK. I didn’t stay at AutoDesk as long as the 1st employer of mine. Unlike AutoDesk and many medium sized software companies, Bentley has a small quarterly dividend: 5 cent per share. Note the Bentley families still has the voting power. It’s probably one of the few family controlled software companies in the world. Many software companies are public and has no controlling shareholder: with the exception of Alphabet (Google), Meta Platform, and Hashicorp $HCP etc. Founders usually have control of the company via Dual Class Stock. In a way Berkshire Hathaway has a similar structure too: A share has way more voting power than B share, and Warren Buffett and his family has the control.
It seems they just exceeded $1 b annual revenue in year 2022 (here are the link to their annual reports in recent years).
Future and risk factors
Family control. No check and balance from outside shareholders. Note this is true for many companies. The exception is usually when a stock underperforms the market for a long time, an activist shareholder may emerge, e.g. Nelson Peltz vs. Disney at this time.
Likely lower growth or even negative growth in China, both in terms of R&D and end market. This is similar to many west/US tech companies. APAC (Asia Pacific made up about 18% of the revenue, so this is still manageable).
US recession, or no growth. Possible, but software companies usually sell products in multiple years, eventually the growth will come back, even with the economy cycle.
The famous investor Charlie Munger used to say unfiltered* and he commented: every time you hear EBITA (Investopedia definition, note sometimes it’s also called EBITDA, where the D stands for depreciation), which stands for Earning before Interest, Taxation and Amortization (and depreciation), you replaced it with Bullshit earnings.
More cheats, liars and lies
I have received unsolicited calls from Timeshare, Hilton Grand Vacations to be specific. I politely declined. But those phone calls are relentless sometimes, and eventually I hand up or blocked the calls. Looking back I felt good that I did the right thing.
By the same token, I think we can do the following replacement. All creative suggestions are welcome.
我的理财理念是天上不会掉馅饼: if something is too good to be true – it’s a lie。
I do like her attitude of “solider on“: which by the way, is also another Charlie Munger life motto.
*Unfiltered: I think Warren Buffett is more diplomatic than Charlie Munger on criticizing. Warren said this many times: criticize by the category; praise by the name. I believe nobody likes to be criticized. Criticize others is much easier than blame/criticize self: e.g., I just saw this gem “The current situation with my classmates are that I am undoubtedly the only one that has morals…” from a google review (James Lai). And Bill Ackman is not too far behind here too.
Accurate? Ackman: Claudine Gay plagiarized! Gay Defenders: It’s not really plagiarism, just missing quote marks and boilerplate ideas.
BI: Ackman’s wife also plagiarized! Ackman: It’s not plagiarism, just missing quote marks and boilerplate ideas & I’ll show all of MIT does it.
So after proudly leading the charge to oust Claudine Gay over alleged plagiarism, @BillAckman finds himself defending his academic wife against the same charges. Below, I’ve compiled a short thread of examples of Ackman invoking his natural right to hypocrisy. Enjoy! 🧵 https://t.co/vZ74gSZjSN
