14. Financial statements are usually the outputs of a company’s value drivers, not the value drivers themselves. Learning adjacent skill sets, such as direct response marketing, can open up opportunities to you that others can’t yet see. I recommend Tested Advertising Methods.
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24. Economic moats are cool but aren’t the only thing. Commoditized businesses can be great investments despite low AVERAGE returns if the range of possible outcomes is wide enough.
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25. For example, industries with relatively low short term price elasticity of supply occasionally experience jackpot economics when the service they’re supplying is mission critical. See: shipping.
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26. In highly reflexive businesses, short sellers are kind of like economic terrorists by reducing the range of possible intrinsic value outcomes.
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27. The pink sheets are one of the last Wild West markets in, well, the West. The SEC’s new proposed rule may make trading many of the stocks there much more difficult in the next few months. Looking forward to major dislocations, if so. Do the homework now to be ready.
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28. Businesses that don’t have economic moats yet but are developing them can be better investments than businesses that already do.
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29. Social hierarchies come natural to humans, so entities that sell perceived access to higher tiers of those hierarchies will always be in demand. Social signaling never dies and neither will lux goods and services.
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30. The economy is creating more wealthy people and more poor people. The middle gets eaten by the economic meat grinder. The same is true for businesses. Midline is usually the worst place to be. High end and low end are key to the American Carnage portfolio.
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31. You can run your own John Malone home game. Dividend stocks are for tax deferred accounts and geezers who want an extra $20 per month in income to supplement their SSI. Compounders are for taxable, just gotta hold them til you die so your heirs get a cost basis step-up.
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32. LTV/CAC analysis can really screw you up if you don’t consider cohorts and scale of spend. Often, your earliest adopters are your biggest fans. If you don’t have an internal growth engine, there’s a good chance you’ll run into diseconomies of scale in customer acquisition.
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33. Real estate leases serve as a hedge against Wholesale Transfer Pricing. Advertising may be the new rent, but the rent is month-to-month so if you don’t expect to get squeezed it’s your own fault.
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34. Insurance tends to be an awful business, but a fun way to check the trend in reserving adequacy is converting calendar year loss development triangles into accident year ones. Insurance has goofy accounting so sometimes you can gain insight from the granularity.
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35. Insurance float is one of the worst kinds of float because what you can do with it is heavily regulated. If someone is starting an insurer for float, run away. There’s a good chance they’re either living decades in the past, planning a scheme, or lacking in creativity.
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36. Anti-prestige businesses are often not appreciated on the market. There’s often value in companies that cater to non-coastal regions and rural communities.
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37. Having a list of businesses that should do well in alternate economic environments can be useful to help you move quickly if things change.
$FMBL will make a killing if interest rates rise, for example, because of its huge base of non-interest bearing deposits.Show this thread -
38. Get on the mailing lists of the major investment newsletter publishers. Sometimes they’ll pitch a small cap stock for months at a time in their advertising, if the return on ad spend is high enough. Between a small float and a million Boomers, interesting things can happen.
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39. Alternatively, just check out Stock Gumshoe and avoid the spam. There’s a guy there who analyzes the advertisements and outs the stocks they’re pitching. Sometimes the momentum from a repeated pitch alone is enough to be worth a small wager. http://www.stockgumshoe.com
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40. Who knows how long it will last with the new proposed SEC rule, but there is an opportunity to create catalysts with Pink Sheet stocks that don’t post their financials publicly. Using shareholder rights laws to get and share them, you can sometimes help market efficiency.
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41. Structural subordination sounds like a BDSM theme but unfortunately it’s just a credit term mostly relevant in distress scenarios. Well, I guess it’s not that different.
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43. Stock ownership doesn’t necessarily represent partial business ownership in any realistic sense. He who has the gold makes the rules.
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44. Not every company is even trying to become more competitive over time. Many exist only to provide sinecures to their agent operators. There’s money to be made in companies that bother to care.
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45. Massive presentations about a new position are massive not because that much information is relevant, but because it looks more convincing and shows people you “did your homework” Using research as marketing. Very smart.
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46. The best players in bad industries are worth investigating. If economics are so poor most companies can’t make money, you MAY not have to deal with new players boosting industry capacity. Top dog’s scale can let it wring out profits surrounded by a moat of broken glass.
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47. Real estate has some unique advantages in terms of leverage and taxes, but also has unique problems. If you don’t manage it yourself, you’re subject to an agency problem with expense pass throughs. If you do manage it yourself, you’ve bought a part time job.
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48. The Greater Fool Theory is something to be cherished, not maligned. Playing it opens up a whole new world of opportunities where psychology is a competitive advantage. But if you never try, you’ll never get better.
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50. There is a misunderstanding that advertising returns could not be measured before big tech came along and provided a treasure trove of data. This is false. Keyed ads have been a thing in direct response advertising since before Silicon Valley was even an idea.
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Halfway there. Even fifty is hard without relying on basic bitch truisms! Time for a lunch break! Thanks to everyone who has enjoyed and shared my thread so far.
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Thread continues here. https://twitter.com/laforeverhall/status/1207377927966355456?s=21 …https://twitter.com/LAForeverHall/status/1207377927966355456 …
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