Key Takeaways
- The Intrinsic Value Portfolio returned approximately 9% in its first year, despite significant cash drag.
- Google and Reddit were key portfolio winners, with Google up over 50% and Reddit nearly 120%.
- New positions were initiated in Crocs and Uber, with Adobe allocation increased.
- Ulta Beauty was sold from the portfolio to reallocate capital to more compelling opportunities.
- The portfolio strategy includes small, asymmetric positions for significant upside potential.
Deep Dive
- The Intrinsic Value Portfolio achieved an approximate 9% return in its first year.
- This return occurred despite starting with 50% cash, now at approximately 25%.
- Google, the largest position, was up over 50%.
- Reddit significantly outperformed, becoming a nearly 120% gain on its initial 2% portfolio allocation.
- An alternative strategy to invest in Ferrari is through Exor, an Italian holding company.
- Exor holds a significant stake in Ferrari, alongside assets like CNH, Stellantis, and Philips.
- Stellantis is noted as a potentially favorable entry point during a cyclical downturn.
- Exor's significant buyback program provides a margin of safety and can help close valuation discounts.
- Crocs stock decreased significantly, prompting a re-evaluation after Q2 earnings.
- The company features attractive metrics, including an 18% free cash flow yield and 16% buyback yield.
- A valuation model suggests a fair value of $78 per share, close to current trading prices.
- Despite declining sales, core Crocs brand volumes are increasing, with pullbacks attributed to promotional activity and HeyDude brand weakness.
- Nu Bank, a current portfolio holding, has increased approximately 30% since its purchase.
- The bank's non-performing loans are slightly higher than competitors but balanced by significantly faster growth.
- Nu Bank is diversifying into safer lending and expanding into higher-income markets, with rapid growth in Mexico since 2019.
- The company has applied for a US bank charter, potentially targeting the Latin population for remittances.
- Uber is a core holding, representing 4.8% of the portfolio, with an average purchase price around $75.
- The company is seen as a potential dominant aggregator of autonomous vehicle demand.
- Uber's forward price-to-free-cash-flow is approximately 18 times, with a forward P/E around 27.
- Profitability and margins are increasing, illustrating operating leverage with linear earnings growth.
- Nike, an early portfolio addition, is up 10% from its entry price of $56.
- An opportunity to sell at $80 for a 40% gain was missed.
- The hosts plan to sell if the stock reaches $80 again without significant fundamental improvement.
- Mid-$50s is seen as a margin of safety for a turnaround bet.
- PayPal's pitch has not performed as expected, with the position down significantly.
- Sentiment remains low despite new partnerships and a recent stock increase after earnings.
- Venmo and Bino Pay Later are scaling successfully, and share buybacks are a possibility.
- The company's current valuation is considered attractive relative to its fundamental strength.
- Salesforce is affected by the AI narrative but could potentially benefit from it, despite AI not being an immediate threat to its core business.
- The company is deeply integrated into corporate America, providing high switching costs.
- Salesforce trades at a forward PE of 20 and a forward price to free cash flow per share of 15.
- A base case valuation with typical margins suggests a fair value of $280, falling short of a 12% hurdle rate.
- Adobe's stock price declined nearly 30% year-to-date due to concerns that AI may diminish the need for its creative tools.
- Major corporations rely on Adobe for creative and marketing analytics, solidifying its market position.
- The company is currently trading at a forward Price-to-Earnings and Price-to-Cash Flow ratio under 14, an all-time low.
- A conservative model suggests an 18% annualized return over five years with a 25x exit multiple, exceeding the 12% hurdle rate.