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Quick Sidebar If investing really isn’t your thing
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Back to Basics - Narrow the Focus, Increase the Quality
Let’s visit how the Tuttle Ventures Fundamental Portfolio has performed so far:
Positive Contributors:
Since I wrote about $MAXR Technologies here, the stock is up +9.77%.
We are excited about the recent boost and long term opportunities for this company.
Negative Contributors:
Campbell Soup Co , $CPB, is down -5% since its last reported earnings. A concern is that 15%+ of the cost of goods sold is tied to the price of oil. These costs have not been passed on to the consumer in the form of higher prices. Our long term view is that under an inflationary period, the demand for soup products will act as an inferior good - (demand increases when real incomes fall). This has yet to be accepted by the broader market.
Let’s Keep it Real
Aggressive bull markets:
Reward undisciplined businessmen, substandard businesses, aggressive investors, and greedy investment bankers - Richard Lawrence from “The Model”
Price discovery was buried due to free money. The bull market has turned.
How are you positioned for the most widely predicted, written about, analyzed, and forecasted recession in history?
If you huddle for cash - you will slowly learn that inflation is a tax.
It’s time to get serious about what to expect over the next year.
How it started:
Low interest rates → Low discount rates → High price multiples.
How its going:
High interest rates → High discount rates → Low price multiples.
A combination of allocations to commodities, real estate, infrastructure and value equities, could help reduce the risk of another 60/40 'lost decade' and improve the real risk/reward for multi-asset investors.
We believe it is ultimately Free Cash Flow (FCF) generation, that drives an effective capital allocation, providing company management with a cushion and flexibility to return capital to shareholders, reinvest for growth or pay down debt.
The Weighted Average Cost of Capital (WACC) for a median company under our coverage has increased to 9.1% vs. 7.3% one year ago.
We are overweighting companies that have a Cash Return on Invested Capital (CROIC) greater than their Weighted Average Cost of Capital (WACC).
CROIC = EBITDA/(equity capital + preferred shares)
There are two companies that we believe have a good position for the road ahead:
$AVGO, Broadcom- This may be the semiconductor company I have finally been waiting for. Strong competitive position across many semiconductor franchises, resilient gross margin profile (+63% TTM) and healthy FCF generation ($13.7B TTM) underpin the bullish view on the company.
$PM, Phillip Morris- Solid product innovation in reduced-risk products (like iQOS) should drive profitable growth ahead, with the company on track to become a majority smoke-free company by 2025. Management's plan to introduce innovation at a wider variety of price points over the next few years should also help to address affordability issues, drive accelerated growth and capture more share.
Boring, high barrier to entry, slow-growing businesses that pile free cash flow into dividends & buybacks earn shareholders higher compound annual growth rates than you would think.
That’s a wrap
Thank you for reading and I am grateful and humbled to be able to learn, grow and invest alongside you at Tuttle Ventures.
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Check out the website or some other work here.
Best,
