"I think you can predict the future in a few places best if you understand a few basic ideas that come from a good general education"

I love Munger's speech "Practical Thought About Practical Thought?" where he breaks down his $KO analysis.

https://t.co/1Hmzryb3vl

Rivian ($0 revenue, -$1.6 billion net income) now has a higher market cap than Starbucks ($29 billion revenue, $4.2 billion net income) and Target ($100 billion revenue, $6.3 billion net income).

$RIVN $SBUX $TGT

Data via @ycharts

Good time to buy is when a theme or segment is ignored by the market and not when it is popular.

When you buy what is popular when it is popular, need to forego returns for few years.

Paying 50-100x earnings for 'blue ocean' sectors has become normalized with promise of changing trends and immense future opportunity. Stock markets look forward, if the future opportunity is great, in most cases that 100x valuation already factors a 30x valuation in 3 years.

For investors, the question of where the buck stops is difficult to answer, because the goal post keeps changing. 30x is reasonable for one business, for another 70x is acceptable. So why not everything in between too?

Not every business captures the opportunity available. There is many a slip between the cup and the lip, as my English teacher used to say. When investors have seen valuations creep from 20x to 100x in a matter of a year or two, it is easy to to keep dancing to the same music.

But like we used to play musical chairs in childhood, someone will be left standing too. And here the rules aren't that 1 person gets eliminated at a time, hundreds get crushed at the same time. In childhood, we had a 1/X chance of being caught standing when the music stopped.

The margin of safety was high till you got down to the last 3-4 people playing the game. Similarly, your margin of safety reduces dramatically when valuation becomes irrelevant. A few months of underperformance and suddenly things don't look so rosy any more.

Fresh out of the @mjmauboussin oven is a paper titled "The Impact of Intangibles on Base Rates"

Key finding: Companies with higher intangibles asset intensity tend to have higher growth rates. The dispersion in growth rates is also higher for them.

Link: https://t.co/0u1dk0h0UK

"The good news is that intangible-intensive companies can grow faster than their tangible counterparts. The bad news is they can also become irrelevant and shrink fast. As a consequence, we should see two effects in the data: higher growth and more dispersion in the outcomes."

It’s perfectly possible for a company to generate rising EPS at the same time it is employing increasing amounts of capital at falling & inadequate rates of return

In laymen’s terms, a company can be busy destroying shareholder value even as it increases earnings

Terry Smith