The hottest Investing Substack posts right now

And their main takeaways
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Top Finance Topics

January 2019 Data Update 8: Dividends and Buybacks - Fact and Fiction

Musings on Markets • 0 implied HN points • 08 Feb 19
💰 Finance Investing
  1. Companies are spending a lot more on stock buybacks compared to dividends. This trend has been growing since the 1980s, with more than 60% of cash returned to shareholders coming from buybacks in recent years.
  2. There's a debate about whether buybacks are good for the economy. Some say they help shareholders while others believe the money should be reinvested in businesses or used to increase wages for workers.
  3. Not all companies use buybacks in the same way. Larger, mature companies tend to buy back more stocks, but many smaller or high-growth companies are still focused on building their businesses instead.

January 2019 Data Update 6: Profitability and Value Creation!

Musings on Markets • 0 implied HN points • 27 Jan 19
💼 Business Investing
  1. The lowest standard for a business's success is just making money, but that's not enough to ensure long-term survival. Companies need a clear path to profitability to stay in business.
  2. It's important to compare profits relative to the size of a company to get a clearer picture of its financial health. Looking at profit margins helps us see how well a business performs against its competitors.
  3. Creating value goes beyond just making profits; companies should earn more than what could be made by investing capital elsewhere. Many companies struggle to meet this higher standard, making value creation challenging.

High and higher: The Money in Marijuana!

Musings on Markets • 0 implied HN points • 16 Oct 18
💼 Business Investing
  1. The marijuana market is growing quickly, with many people using it and spending significant money on it. Legal cannabis sales in places like Canada and California are generating billions in revenue.
  2. Even with legalization, the illegal marijuana market will likely continue because legal options are more expensive due to taxes and regulations. This makes it harder for legal businesses to compete.
  3. Investors should be cautious as not all cannabis companies are profitable yet. Choices include investing in specific companies, buying a variety of stocks, or looking at established businesses already involved in the cannabis market.

Apple and Amazon at a Trillion $: Looking Back and Looking Forward!

Musings on Markets • 0 implied HN points • 19 Sep 18
💼 Business Investing
  1. Apple and Amazon both faced tough times on their way to becoming trillion-dollar companies. They dealt with challenges and used those experiences to grow stronger.
  2. Apple's success mainly comes from the iPhone, but it's now a mature company with slower growth. In contrast, Amazon continues to aim for high growth, even if it means waiting for profits.
  3. Apple generates lots of cash flow and returns it to shareholders, while Amazon focuses on reinvesting for growth. This difference shapes how investors see and value each company.

Trillion Dollar Toppers: Market Triggers, Value Drivers and Pricing Catalysts!

Musings on Markets • 0 implied HN points • 10 Sep 18
💰 Finance Investing
  1. Market capitalization milestones, like reaching a trillion dollars, don't change a company's fundamentals, but they can affect investor emotions and behavior. These numbers can create buzz and might influence decisions, even if nothing actually changes in the company.
  2. Investors often react differently to market triggers. Some focus on long-term value based on earnings while others rely on technical indicators. Understanding both perspectives can help investors navigate the market more effectively.
  3. The distinction between value drivers and pricing effects is important. Value is based on a company's fundamentals, while pricing can be influenced by market mood. Recognizing this difference can guide investors in making more informed decisions.
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Twists and Turns in the Tesla Story : A Boring, Boneheaded Update!

Musings on Markets • 0 implied HN points • 28 Jun 18
💼 Business Investing
  1. Tesla is a very interesting company because its CEO, Elon Musk, often makes headlines for both good and bad reasons. This creates a lot of excitement and debate among investors about the company's future.
  2. Tesla has faced criticism for poor financial management, including a questionable acquisition of Solar City and taking on a lot of debt. This raises concerns about its long-term financial health.
  3. The future of Tesla depends on achieving aggressive growth targets, improving profit margins, and managing its debt wisely. Investors need to stay cautious about Musk's promises that might not be realistic.

User and Subscriber Businesses: The Good, the Bad and the Ugly!

Musings on Markets • 0 implied HN points • 29 May 18
💼 Business Investing
  1. User-based businesses can be valuable, but not all users create value. It's important to understand which user bases are real assets and which are just liabilities.
  2. The way a company manages costs, especially between servicing existing users and acquiring new ones, can indicate its long-term success. Spending on new users is usually seen as a better investment than spending too much on current users.
  3. Not all user-focused companies are well-run. If a company's strategy is only about getting users without a solid plan to make money, that's a red flag for investors.

Alphabet Soup: Google is Alpha, but where are the Bets?

Musings on Markets • 0 implied HN points • 19 Apr 18
💼 Business Investing
  1. Google's main strength comes from its ability to grow revenue while keeping good profit margins. This has helped the company stay strong in the advertising market.
  2. The digital advertising space is mostly controlled by Google and Facebook, leading to a two-company competition. Google's reach and data collection make it a major player, especially in services like YouTube and Gmail.
  3. Alphabet's other business ventures are still developing. While some see them as risky investments, they may offer future growth opportunities if they succeed.

Netflix: The Future of Entertainment or House of Cards?

Musings on Markets • 0 implied HN points • 16 Apr 18
💼 Business Investing
  1. Netflix has really changed how we watch TV and movies. It's now a big player not just in entertainment, but also in how other companies make content.
  2. The company spends a lot on creating original content to keep its subscribers happy. This helps it avoid rising costs from other content providers and makes viewers want to stick around.
  3. Netflix is focusing more on global subscribers, especially in Asia. This means they're not just staying local but trying to reach viewers all over the world.

The Facebook Feeding Frenzy: Time for a Pause!

Musings on Markets • 0 implied HN points • 10 Apr 18
💼 Business Investing
  1. Facebook has a huge user base, with over 2.1 billion users worldwide, but concerns about privacy and data use are rising. While some users might think of leaving, many seem likely to stay.
  2. Even with the scandal, advertisers are expected to stick around due to Facebook's strong user engagement and targeting abilities. Companies are still finding value in advertising on the platform.
  3. New data privacy laws and regulations will likely increase costs for Facebook. This means the company will have to spend more on protecting user data, which may affect their profits going forward.

Come easy, go easy: The Tech Takedown!

Musings on Markets • 0 implied HN points • 07 Apr 18
💼 Business Investing
  1. Tech companies like Facebook, Amazon, Netflix, and Google have seen huge success but are also facing serious challenges. Recent troubles highlight how quickly things can change in the market.
  2. These companies have grown rapidly by scaling their success and tapping into big data, allowing them to dominate their industries. Keeping users engaged has been key to their growth.
  3. Recent issues have sparked concerns about privacy and data use, which could lead to new regulations. Investors need to consider how these changes might impact the future of these companies.

January 2018 Data Update 9: Dividends, Stock Buybacks and Cash Holdings

Musings on Markets • 0 implied HN points • 04 Feb 18
💰 Finance Investing
  1. Dividends and cash returns are important for businesses, but many believe they signify failure instead of success. It's better for companies to return cash to shareholders rather than forcing it into poor investments.
  2. In reality, capital markets aren't always accessible, making it risky for companies to pay large dividends. If they overcommit to dividends, they could miss out on great investment opportunities.
  3. Many companies pay dividends out of habit, even when it may not be wise. This can lead to inefficiencies where they prioritize dividends over solid investment strategies.

January 2018 Data Update 7: Growth and Value

Musings on Markets • 0 implied HN points • 27 Jan 18
💰 Finance Investing
  1. Profitability is measured using various profit margins, which help assess how well a company is doing. It’s important to choose the right measure based on what you're analyzing, like gross margin for efficiency or net margin for overall profitability.
  2. Excess returns show how much a company earns above its cost of capital, and most companies struggle to achieve this. Many firms aren't making enough money to cover their investments, highlighting a risk in company performance.
  3. Regional, sector, and size factors influence company profits. For instance, smaller companies often perform worse than larger ones, and certain industries, like technology, can produce high returns while others, like retail, may struggle.

January 2018 Data Update 2: The Buoyancy of US Equities

Musings on Markets • 0 implied HN points • 09 Jan 18
💰 Finance Investing
  1. US stocks had a strong performance in 2017, achieving a 21.65% return, which surprised many experts. This shows that the equity market can thrive even with various economic and political concerns.
  2. Despite a good year for stocks, the fundamentals improved, with earnings and dividends rising. This suggests that the stock prices are supported by healthier financials.
  3. Looking ahead, there's potential for Treasury bond rates to rise, which could impact equity performance. Investors need to watch changes in tax laws and overall economic conditions as these factors may influence the market.

The Bitcoin Boom: Asset, Currency, Commodity or Collectible?

Musings on Markets • 0 implied HN points • 24 Oct 17
🔮 Crypto Investing
  1. Bitcoin is a currency, not an asset. This means you can't determine its value the same way you would for things like stocks or real estate.
  2. You should focus on trading Bitcoin rather than investing in it. Trading is about predicting price changes, while investing requires valuing an asset.
  3. The future of Bitcoin can go in different directions: it could become a global currency, a gold alternative for the younger generation, or even a trend that fades away like the tulip bubble.

A Tesla 2017 Update: A Disruptive Force and a Debt Puzzle!

Musings on Markets • 0 implied HN points • 11 Aug 17
💼 Business Investing
  1. Tesla has ambitious goals to produce a lot of cars, but it faces tough competition from other automakers who are now paying attention to the electric market. To succeed, Tesla needs to sell millions of cars within the next few years.
  2. The company struggles with manufacturing costs and production timelines. Meeting these goals is essential for Tesla to build its reputation and financial success, given its history of production issues.
  3. Tesla relies heavily on debt to fund its operations and growth, which may not be the best choice at this stage. Using debt can create financial pressure, and it might be wiser for Tesla to consider raising equity instead.

A Valeant Update: Damaged Goods or Deeply Discounted Drug Company?

Musings on Markets • 0 implied HN points • 23 Mar 17
💰 Finance Investing
  1. Valeant's past business model involved heavy debt and questionable pricing tactics, which damaged its reputation and led to significant financial losses. This shows how a company's ethics can affect its long-term success.
  2. The future of Valeant may lead to three outcomes: it can continue as a struggling company, become an acquisition target, or be sold off in parts to recover value. Each option has its challenges.
  3. It's important for investors to recognize their mistakes and make informed decisions. Holding onto bad investments out of fear can lead to bigger losses, so it's crucial to evaluate whether to continue investing or to cut losses.

January 2017 Data Update 10: The Pricing Game!

Musings on Markets • 0 implied HN points • 10 Mar 17
💰 Finance Investing
  1. When comparing stock prices, it's better to use price multiples like PE or EV to EBITDA instead of looking at share prices alone. Share prices can be misleading and don't tell the whole story.
  2. Different regions and sectors have their own pricing trends, which means some stocks may be cheap in one market but overvalued in another. Always check the broader picture before investing.
  3. Don’t blindly rely on common rules for finding cheap stocks. It's important to understand the reasons behind a stock's price rather than just focusing on numbers.

Explaining a Paradox: Why Good (Bad) Companies can be Bad (Good) Investments!

Musings on Markets • 0 implied HN points • 09 Mar 17
💰 Finance Investing
  1. Good companies can be bad investments if they are overpriced. It's important to consider both the company's quality and its market price when investing.
  2. Management quality doesn't always reflect how well a company performs. A poorly managed company might make good investment decisions at the right price.
  3. Investing successfully means looking for mismatches between what a company is worth and what it costs. This helps identify opportunities to buy undervalued stocks.

My Snap Story: Valuing Snap ahead of it's IPO!

Musings on Markets • 0 implied HN points • 17 Feb 17
💰 Finance Investing
  1. Snap focuses on online advertising, which means most of its money will come from ads rather than selling products. They aim to keep users engaged to boost ad revenue.
  2. The main audience for Snap is younger users who like visual content. They plan to continue tailoring their app to be attractive for this demographic.
  3. Snap wants users to spend more time on their platform instead of just growing their user numbers. They believe that keeping users engaged is more valuable than simply having a lot of users.

Apple: The Greatest Cash Machine in History?

Musings on Markets • 0 implied HN points • 09 Feb 17
💼 Business Investing
  1. Apple has built a huge cash reserve, nearly $250 billion, mostly because it earns more than it distributes to shareholders. This makes it one of the best cash-generating companies ever.
  2. Despite giving back a lot of cash to its investors through dividends and buybacks, Apple's cash balance keeps growing. This shows how strong its business is, even during tougher market conditions.
  3. Investors should adjust their expectations for Apple because it may not come up with big new products as it did in the past. It is now a massive company facing more competition, which can lead to mood swings in its stock price.

January 2017 Data Update 9: Dividends and Buybacks

Musings on Markets • 0 implied HN points • 06 Feb 17
💰 Finance Investing
  1. Companies often decide on dividends based on what cash is left over after making other investments. Ideally, they should focus on their overall financial health first before determining how much to return to shareholders.
  2. Many companies are shifting from paying dividends to doing stock buybacks, meaning they are buying their own shares back instead of distributing cash directly to shareholders. This is becoming common in many markets around the world.
  3. The cash that companies hold can be a sign of either financial prudence or poor management. While having cash can protect a company during tough times, too much cash held back might mean that managers are not returning wealth to shareholders effectively.

January 2017 Data Update 2: The Resilience of US Equities!

Musings on Markets • 0 implied HN points • 13 Jan 17
💰 Finance Investing
  1. US stocks showed resilience in 2016 despite initial fears of a market bubble due to economic concerns. Investors were surprised by the market's recovery after significant drops early in the year.
  2. The expected return on stocks for 2017 is estimated at around 8.14%, which is higher than the historical average. However, there are concerns about companies paying out more cash than they're earning, which isn't sustainable in the long term.
  3. Interest rates are likely to rise in 2017 due to economic growth and inflation. This could impact stock prices if earnings don't keep pace, but there's also a chance that rising earnings will support the market.

Narrative and Numbers: How a number cruncher learned to tell stories!

Musings on Markets • 0 implied HN points • 11 Jan 17
💼 Business Investing
  1. Both storytelling and number crunching are important in business. It's good to balance both skills for better decision-making.
  2. A story can help make sense of numbers in valuation. Starting with a strong story can guide how you look at financial data.
  3. Valuation isn't a one-time thing; it's an ongoing process. Being open to feedback and willing to update your stories and valuations is key.

Active Investing: Seeking the Elusive Edge!

Musings on Markets • 0 implied HN points • 28 Dec 16
💰 Finance Investing
  1. Active investing is struggling because most active investors don't perform better than passive options. This is mainly due to high fees and transaction costs that eat into returns.
  2. Many active investors lack a clear investment philosophy, causing them to jump between strategies instead of sticking to one approach. This inconsistency leads to poor performance.
  3. To succeed in active investing, it's important to have a strong investment philosophy and find a unique edge that sets you apart from others in the market.

Active Investing: Rest in Peace or Resurgent Force?

Musings on Markets • 0 implied HN points • 14 Dec 16
💰 Finance Investing
  1. Passive investing is growing quickly and becoming more popular than active investing. Many people now prefer index funds and ETFs because they are easier and usually cheaper than actively managed funds.
  2. Active investors are struggling because, on average, they don't perform better than passive investors. Most active money managers end up losing money for their clients after costs are considered.
  3. There aren't many consistent winners among active investors. Even famous investors have a hard time staying at the top over time, which makes it tough for regular investors to rely on them for good returns.

Myth 5.5: The Terminal Value ate my DCF!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Investing
  1. A high terminal value in a DCF isn't a flaw; it's typical for stock valuations. Most investor returns come from price appreciation, making terminal value a large part of the overall valuation.
  2. Just because the terminal value is prominent doesn't mean your growth assumptions are unimportant. In fact, those assumptions critically impact your terminal value.
  3. When evaluating a company, especially a high growth one, don't ignore the early cash flows or growth period. They're essential in calculating a reliable terminal value.

Myth 5.3: Growth is good, more growth is better!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Investing
  1. Growth isn't always good. It often comes with costs and needs to be carefully managed.
  2. The value of a company is more about how efficiently it can grow, not just how much it grows.
  3. When estimating future value, it's important to consider reinvestment and returns on investment, as they affect both cash flow and growth potential.

Faith, Feedback and Fear: Ready for the Valeant Test?

Musings on Markets • 0 implied HN points • 22 Nov 16
💼 Business Investing
  1. It's important to learn from your mistakes, especially when dealing with investments that didn't go well. Reflecting on losers can teach valuable lessons and prevent holding onto bad investments too long.
  2. Investing often requires balancing faith in your strategy with being open to new information. You need to trust your value assessment while also being ready to adapt when the market tells a different story.
  3. The case of Valeant shows that tough financial times can create both danger and opportunity. With risks present, understanding when to hold or sell is a crucial part of investing.

Myth 4.4: The D(discount) rate is a receptacle for your hopes and fears

Musings on Markets • 0 implied HN points • 04 Nov 16
💼 Business Investing
  1. The discount rate in cash flow valuation shouldn't be used to reflect personal hopes or fears. It's meant to account for business risks, not management quality or competitive advantages.
  2. Risks like nationalization or distress risks are better handled with decision trees or other tools instead of altering the discount rate. This helps provide a clearer picture of an asset's value.
  3. Using a margin of safety or doing more homework won't eliminate risk in valuations. It's important to recognize that some risks are inherent and cannot be fully mitigated.

Myth 4.3: The D cannot change (over time) in a DCF

Musings on Markets • 0 implied HN points • 04 Nov 16
💰 Finance Investing
  1. Discount rates in a DCF can change over time, so don't think you need to stick with one forever. It's important to adjust them based on the company's growth and risks.
  2. Adjusting discount rates makes valuations more accurate, especially for young or transitioning companies. Big changes in these firms mean their risk should be reflected in the discount rate.
  3. To estimate changing costs of capital, begin with the current rate and make adjustments based on planned changes in the company's debt and business mix, moving towards stable growth if the company matures.

Myth 4.1: If you don't like betas (or modern portfolio theory),you cannot do a DCF!

Musings on Markets • 0 implied HN points • 04 Nov 16
💰 Finance Investing
  1. Discounted cash flow (DCF) analysis needs a discount rate, typically estimated using beta to assess risk, but not everyone agrees on using this method.
  2. Investors can use alternative risk measures if they don't like betas or modern portfolio theory, such as based on historical earnings or other company characteristics.
  3. It's important to recognize that while betas can help estimate costs of equity, there are other ways to evaluate risk that might better fit different viewpoints on investing.

Venture Capital: It is a pricing, not a value, game!

Musings on Markets • 0 implied HN points • 02 Oct 16
💼 Business Investing
  1. Venture capitalists focus on pricing companies rather than determining their actual value. This means they often set prices based on what similar companies are fetching rather than deep financial analysis.
  2. The process of pricing in venture capital relies on small data samples and infrequent updates. This can lead to pricing errors and a greater amount of subjectivity in their valuations.
  3. Successful venture capitalists tend to be better at pricing and timing their investments. They can influence the companies they invest in and ensure they're well-positioned for profitable exits.

Mean Reversion: Gravitational Super Force or Dangerous Delusion?

Musings on Markets • 0 implied HN points • 31 Aug 16
💰 Finance Investing
  1. Mean reversion is the idea that extreme results will return to the average over time. This is seen in sports and investing, but it can lead us to make wrong assumptions about future performance.
  2. There are two types of mean reversion: time series mean reversion, which looks at past average values over time, and cross-sectional mean reversion, which compares values against the average of similar items. Both have their own risks and assumptions.
  3. Structural changes in the economy or companies can disrupt mean reversion, meaning trusting it too much could lead to poor investment decisions. It's important to stay aware of these changes and not just rely on historical data.

Superman and Stocks: It's not the Cape (CAPE), it's the Kryptonite(Cash flow)!

Musings on Markets • 0 implied HN points • 24 Aug 16
💰 Finance Investing
  1. CAPE might not be the best way to judge if stocks are too expensive. It doesn’t give a clear picture of market value or future performance when compared to simpler earnings measures.
  2. Investment success relies on what alternatives you have, like comparing stocks to bonds. With bond rates low, stocks might look tempting even at higher CAPE values.
  3. Cash flow is key to stock value. Companies returning more cash to shareholders than they earn could face trouble, which affects stock prices.

Investing and Valuation Lessons from the Renaissance

Musings on Markets • 0 implied HN points • 15 Aug 16
💰 Finance Investing
  1. Investing requires faith, much like the builders of the Duomo had patience. You often need to trust your judgment and stick to your valuations, even when the market seems unpredictable.
  2. Many investment lessons are not new; they are just being forgotten and rediscovered. It's important to learn from past mistakes instead of assuming we're better than earlier investors.
  3. Combining storytelling and data is key in investing. Just as art and science can work together, being skilled in both narrative and numbers can lead to better investment decisions.

May you live in "exciting" times! An Updated Picture of Country Risk

Musings on Markets • 0 implied HN points • 22 Jul 16
💰 Finance Investing
  1. Investing in different countries has varying levels of risk. Factors like political stability, legal systems, and violence affect how risky a country is.
  2. There's a difference between market measures and non-market measures when assessing risk. Market measures can change quickly, while non-market measures can be slower and less clear.
  3. Understanding country risk is important for businesses operating globally. The risk isn't just based on where a company is located, but also on where it does its business.

Tesla: It's a story stock, but what's the story?

Musings on Markets • 0 implied HN points • 14 Jul 16
💼 Business Investing
  1. Tesla is a 'story stock', which means its value is more about its narrative and less about numbers. People invest based on the exciting story of Tesla rather than current profits.
  2. Shifts in the company's story can cause big changes in its stock price. Even small news can move the stock a lot if it affects how people view Tesla's future.
  3. Elon Musk plays a huge role in Tesla's identity. Supporters see him as a visionary, while others view him as reckless. How investors feel about Musk can heavily influence their opinions on Tesla's value.

Icahn exits, Buffett enters, Whither Apple? Value and Price Effects of Big Name Investing

Musings on Markets • 0 implied HN points • 06 Jun 16
💰 Finance Investing
  1. The entry or exit of famous investors, like Carl Icahn or Warren Buffett, can influence how people perceive the value of a stock. Their actions might suggest they have special insights about the company’s future.
  2. There are different types of investors, such as insiders, activists, traders, and value investors, and each one can impact stock prices and perceptions in different ways. Knowing who is buying or selling can help you understand the market dynamics better.
  3. It's important to trust your own investment judgment rather than just following what big name investors do. Confirmation bias can lead you to only see evidence that supports your beliefs, so staying true to your analysis is key.

DCF Myth 3.2: If you don't look, its not there!

Musings on Markets • 0 implied HN points • 23 May 16
💰 Finance Investing
  1. Using simulations for financial valuations helps capture uncertainty. Instead of just using one guess for numbers, you can use a range to see different possible outcomes.
  2. Probability distributions are important in understanding risks and making better financial decisions. They can show how likely different outcomes are, which is essential for planning.
  3. Modern tools like Excel add-ons make simulations easier to run. You can use programs that help visualize the potential values of an investment based on various inputs.