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To mark the launch of the Quality-Growth Investor Conference we have launched Quality-Growth Quarterly. We also publish “Value Investor Digest” which was started in 2011 and is now in its 50th issue. In the third issue of QGQ we feature our interview with Martin Hermann from Berenberg, a Money Maze Podcast interview with financial historian Niall Ferguson, a Lindsell Train article titled “Lost in the Supermarket” plus 15 other articles below, including those on Bill Ackmann, John Malone, Rajiv Jain, Benedict Evans, Michael Burry plus from speakers at the rescheduled London Quality-Growth Investor Conference in 2021.
The latest Outstanding Investors Online interview with Martin Hermann from the Global Focus Fund at Berenberg includes a discussion of valuations and analysing the moats for big tech companies, including Alphabet and Facebook – plus stock ideas on Wix, Netcompany, Xero and Ryman Healthcare.
“The impact of the internet, particularly the rise of the network platforms like Facebook and Google and so forth, posed as big a challenge to our societies because of their impact on the public sphere as the printing press when it began to spread through Europe in the late 15th century…the printing press was the vector of the spread of religious conflict all over Europe and indeed beyond Europe to the new world. I think we are in a much more 17th century world than we realise.” (These comments at 28.30)
“Although aware of the potential for permanent loss of value within certain types of consumer packaged goods, at Lindsell Train we do of course own a number of companies in this space – Mondelez, PepsiCo, and Unilever being the most significant holdings. So we wanted to deepen our knowledge of the challenges facing certain branded packaged products, and find out whether or not the “centre store” – the aisles of shelf-stable packaged foods found in the middle of supermarkets – is really a lost zone in terminal decline.”
“Intangibles as a portion of total assets in the S&P 500 have reached unprecedented levels. As of 2020, 90% of all assets in the S&P 500 are now intangible.”
“GQG Partners’ is not one of value nor growth, we’re simply focused on compounding and teasing out a process that works. Having said that, we do believe a company needs to be growing in order to be worth the work as we believe avoiding value traps is critical to long term returns. But we also think that areas of the market, particularly in the high growth camp, those that have directly benefited from the current virtual revolution or those that are perceived as “revolutionizing the planet” in some other way have gotten a bit ahead of themselves.”
“It’s probably the single greatest time in history to open a restaurant. You’ve got low rates, you’ve got likely stimulus, you could see infrastructure spending, you’ve got still very well capitalized banks, you’ve got access to capital. So I think 2021 could be a very, very good year in markets, so go long I would say.”
“Intel co-founder Gordon Moore’s eponymous law about growth in computing power has been hurtling toward a technological boundary for years, with major implications for the economy if chip makers can’t revolutionize production…The technology powering modern computers is getting closer to an unbreakable physical limit. That has already been responsible for a big chunk of the slowdown in economic growth since 2000, but the situation is poised to get much worse unless the world’s chip manufacturers invent an entirely new way to crunch numbers.”
“I’d rather be the US in this situation than anybody else…I think ultimately the US has more room for manoeuvre than anybody else and I think the US can sustain a debt to GDP ratio of 200% relatively comfortably – although the lesson from British history is that after a certain point that constrains you. Britain’s problem in the 20th century was that the debt burden after 1918 was such that it was really hard to maintain British Imperial defence at the levels that would have been necessary to deter Germany. The American problem will be that the defence budget will get squeezed because the interest payments will eat such a large chunk of the Federal budget. That’s going to be the weakness that ultimately gets exposed by the Chinese challenge.”
“Nine thousand years ago, in a small village along a tributary to the Yellow River; early Neolithic people fermented a mixture of rice, honey, hawthorn fruit and/or native wild grapes into wine. In terms of value, culture and complexity of production, baijiu has few equals. Kweichow Moutai is by far and away the world’s most valuable liquor brand. It’s not even close. Yet in terms of internationalization, the story of baijiu is just beginning.”
“I think these global platforms will be enormously powerful…The consumer’s not going to want to buy from a broad number of subscription services. They’re going to tend to want to go to one convenient supplier. It looks increasingly like that’s going to be, you know, Amazon…or it’s going to be Apple, or it’s going to be Roku. Or it could still be a Google effort.”
“Consumers at all income levels flock to these stores, pawing through racks in search of marked-down treasure…When the economy is poor, a glut of unsold merchandise from department stores and brands ends up in off-pricers’ supply chains. More recently, e-commerce growth, with its surge in returns, has padded and diversified off-price assortments…TJX (whose major banners are Marshalls and T.J. Maxx) runs 3,309 in the U.S. alone. Ross Stores has opened 100 new stores annually lately (scaling back somewhat this year) and now runs 1,869. Burlington operates 739. Nordstrom runs comparatively few at 248 off-price Rack stores, but that’s more than twice as many as its full-line fleet (which it is shrinking).”
“COVID Derangement Syndrome (CDS) is a nasty affliction that causes investors to misprice stocks. Some sufferers have it so bad they will buy or sell without regard to price. Symptoms include selling low, buying high, regret and FOMO. Even mild cases can result in sleepless nights.”
“Apple is crazy, right? The Mac just had its best year of sales ever, and Cupertino is hitting the platform with a shock like it hasn’t had in nearly 15 years—back in a time when the Mac was not having such a good year. Apple is beginning the process of replacing industry-standard Intel chips with its own, custom-designed silicon…The M1 is amazingly fast. More importantly, it’s a compatibility slam dunk.”
“There is a theory that when a shark bites a surfer, this is because they look like a seal, especially from 50 feet underwater…What does it mean to look like a ‘seal’, in this analogy, or indeed to be one? Well, a trillion dollar company with tens of thousands of engineers runs lots of projects and experiments, and there are lots of things that theoretically they could do, and that they might explore. But you have to ask not ‘would it be a problem for me if they got into my industry?’ but rather ‘would it make any sense for them to get into my industry?’ How do you tell if it would make sense for them? I’d suggest a few overlapping questions.”
“The growth of ecommerce has always fit the old line about a frog in boiling water…In the UK, where we have monthly data that makes the picture clearer, penetration was already 20%, spiked to over 30% and now seems to be stabilising in the high 20s.”
“The FTC thinks that WhatsApp and Instagram could have been competitors. If so, they are just two among thousands. There are countless services that allow people to share, connect and communicate, from Twitter and YouTube to WeChat, TikTok, and Zoom. Each one of these are competing for our attention, along with many more dorm room startups – for which the internet has very few barriers to entry. If anything we are living in a golden era of online competition.”
The new law “requires Google to negotiate with publishers and news agencies the remuneration due to them under the law regarding related rights for the re-use of their protected contents…In practice, the vast majority of press publishers have granted Google licenses to use and display their protected content, without possible negotiation and without receiving any remuneration from Google.”
“So far this year, customers have canceled orders for 448 Max jets and Boeing has raised doubt about another 782 orders because of the airlines’ pandemic-weakened financial health…Michael O’Leary said ‘The one issue that’s going to come up here today is safety, so let’s get it out front…This is the most scrutinized, most audited aircraft in history. It’s also going to be one of the safest.’”
“I think there might be too many M.B.A.s running companies…There’s the M.B.A.-ization of America, which I think is maybe not that great. There should be more focus on the product or service itself, less time on board meetings, less time on financials.”
“You know how many committees we have at Apple? Zero – there are no committees. We are organized like a startup. One person is in charge of iPhone OS, one person is in charge of Mac hardware, one person is in charge of iPhone hardware engineering…we are the biggest startup on the planet. We all meet for 3 hours once a week and we talk about everything we are doing – the whole business.”
“So, @elonmusk, yes, I’m short Tesla, but some free advice for a good guy … Seriously, issue 25-50% of your shares at the current ridiculous price. That’s not dilution. You’d be cementing permanence and untold optionality.”
© Quality Growth 2021