“Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.” — Charlie Munger 2023 saw many of the pandemic-era’s most hyped sectors come crashing down to Earth. Take EVs, for instance.
I'd say with Alibaba the main thing that has disappointed me is they haven't been as aggressive with share repurchases as I'd like them to be given their current valuation and the fact that they have something like 60 billion USD in net cash on their balance sheet right now combined with the large equity portfolio. I do think sentiment around China is rather cyclical and could see multiples going through a period of expansion something in the next 10-20 years.
I'm still surprised Tesla's valuation hasn't come down even more than it has in that the growth requirements underpinning their current valuation are quite ambitious and potentially not reflective of reality unless they make massive strides in autonomous vehicles and building a robotaxi service. It's crazy seeing companies like Bumble that raised about 2 billion at their IPO and now their current market capitalization is around 2 billion dollars.
Dec 30, 2023·edited Dec 30, 2023Liked by Matt Franz
My goal for 2024 is to focus primarily outside of the United States with a focus on infrastructure assets with a combination of more GDP sensitive assets like toll roads or airports combined with a sizable portion of assets with long-term contractual cash-flow bases with built-in inflation escalators like transmission lines, pipelines, and cell phone tower portfolios.
The valuations on many of these assets outside the United States is quite compelling, but I'm going to be leveraging a higher expected cost of capital of 12% to 15% for emerging markets assets versus 8% to 10% which I might be more happy with in more developed economies.
The goal is to expand my circle of competence outside the United States and also build a framework for managing currency risk and other factors that you might not run into as many issues with in developed markets. Anyway, part of this is my new rule, and a lesson I learned from Alibaba is to never invest in a business in a country I've never visited before. You can learn a lot even just being in a place for a week to better understand the culture and attitudes of a country and how they differ from the United States.
Part of me feels like there may be culture aspects of how business is done in China which could explain why Alibaba hasn't been as aggressive with buybacks as an American company in a similar position with a similar balance sheet would be. This goes into another lesson I've learned which is that a business with readily available levers for shareholder value creation is only relevant in scenarios where the management is willing and able to execute on those value creation strategies.
I'd say with Alibaba the main thing that has disappointed me is they haven't been as aggressive with share repurchases as I'd like them to be given their current valuation and the fact that they have something like 60 billion USD in net cash on their balance sheet right now combined with the large equity portfolio. I do think sentiment around China is rather cyclical and could see multiples going through a period of expansion something in the next 10-20 years.
I'm still surprised Tesla's valuation hasn't come down even more than it has in that the growth requirements underpinning their current valuation are quite ambitious and potentially not reflective of reality unless they make massive strides in autonomous vehicles and building a robotaxi service. It's crazy seeing companies like Bumble that raised about 2 billion at their IPO and now their current market capitalization is around 2 billion dollars.
My goal for 2024 is to focus primarily outside of the United States with a focus on infrastructure assets with a combination of more GDP sensitive assets like toll roads or airports combined with a sizable portion of assets with long-term contractual cash-flow bases with built-in inflation escalators like transmission lines, pipelines, and cell phone tower portfolios.
The valuations on many of these assets outside the United States is quite compelling, but I'm going to be leveraging a higher expected cost of capital of 12% to 15% for emerging markets assets versus 8% to 10% which I might be more happy with in more developed economies.
The goal is to expand my circle of competence outside the United States and also build a framework for managing currency risk and other factors that you might not run into as many issues with in developed markets. Anyway, part of this is my new rule, and a lesson I learned from Alibaba is to never invest in a business in a country I've never visited before. You can learn a lot even just being in a place for a week to better understand the culture and attitudes of a country and how they differ from the United States.
Part of me feels like there may be culture aspects of how business is done in China which could explain why Alibaba hasn't been as aggressive with buybacks as an American company in a similar position with a similar balance sheet would be. This goes into another lesson I've learned which is that a business with readily available levers for shareholder value creation is only relevant in scenarios where the management is willing and able to execute on those value creation strategies.
damn fine piece. I remember reading back in the old days even Gutenberg and 8 other firms went bankrupt after the invention of printing press.
Only 2-3 survived. How? They teamed up with the Church to produce pamphlets to 'pardon your sins'.