Hi Multis
The US and Belgium are out of the World Cup. The Iran war is back (again), oil is expected to spike again and Senator Lindsey Graham suddenly passed away at the age of 71. People got killed by fires in Spain and the situation in Ukraine is still awful. And there was much more to be sad about this week.
But if you look at the history of our species, things have only improved. The short term often looks dire, but over the long term, it’s simple: Optimism wins. There are horrible episodes in our history (think of the wars, famine, diseases and so much more), but over the long term, life gets better. If you have not read the book Factfulness by Hans Rosling, I can only recommend it wholeheartedly.
Many things went really well this week. People got married, got children, got a new job, or heard they were cured. But there’s a huge filter that eliminates all those things. It’s called the dramatic attention filter. If it’s not dramatic, it just doesn’t reach you.
That’s also how the stock market is. You often hear about the bad things, or the things that have the potential to be bad. But you don’t hear how so many thousands of companies do outstanding things to serve their customers, to improve their products, yes, even to make this world a better place. As investors, that’s what we bank on, and it’s this that sets us apart from traders. Traders need the drama to profit. We want the quiet performance over the long term.
Articles In The Past Week
This is the third article this week.
In the first one, I analyzed Chapters Group’s results in more detail.
The second one was not really an article but a webinar of 35 minutes in which I talked about Mercado Libre, my biggest position. You can find it here.
Memes Of The Week
This is the first meme this week.
No comment, haha.
Our Multi Meme King Flo posted this one.
When cab drivers play with leveraged positions, we are usually much closer to the top than to the bottom.
Then there was the Terry Smith situation. He has a big fund, Fundsmith, and he changed his approach dramatically. More about it later in this OOTW. First, the memes.
I made this meme myself.
Interesting Podcasts Or Books
Every now and then, I feel a bit tired or drained, and when I want to listen to a podcast at such a moment, or I do it when I have to pay too much attention to what I’m actually doing (like cooking something I haven’t cooked before), I listen to a light podcast episode.
For me, the Market Cap Game Show, a quarterly returning game show on David Gardner’s Rule Breaker Investing podcast, is the ideal combination of light entertainment and still learning something.
The concept is simple: two contestants guess the market cap of a company. You can listen to the most recent Market Cap Game Show here:
The markets in the past week
During the summer, I always check my portfolio less frequently, which I actually think is a good thing. So, what have the indexes done this week?
As you can see, the pattern we have already observed a few times in the last few weeks was back: the big difference between the Nasdaq and the S&P on the one side and the Russell 2000 on the other side.
The Russell 2000 dropped 0.61%, while the S&P 500 was up 1.23% and the Nasdaq 1.74%.
The Greed & Fear Index is based on the S&P 500. Therefore, it was not unexpected to see it climb to NEUTRAL from FEAR.
Quick Facts
This week, there was a lot to do about Terry Smith’s letter to shareholders, in which he changed his approach. Multi Gorki summarized it very well on our platform for paying Multis:
The reason is simple: Terry Smith lost a lot of his AUM (assets under management). AUM is now £12.3B, down from £29B in 2021. That’s down 58%. Ouch. But the fund has underperformed the index in the last 5 years, so that’s not really surprising.
This is also the reason why funds often underperform the index. At the moment they want to buy more, when their stocks are undervalued, they have to sell because people are asking for their money back. And reverse as well: when there’s a ton of money available to invest (like in 2021), a big majority of stocks are overvalued.
This is what Smith changed. From ‘do nothing’ to a turnover of 52% in a single quarter, that’s wild.
Now, don’t get me wrong. I think it was time Smith did something. More, even, he should have done something earlier already. I think he forgot a bit that the market prices stocks for growth and forward potential.
Take Zoetis, for example. In the last 5 years, it grew its revenue by 3% per year on average. That’s just not a company that will outperform.
With some price hikes, EPS growth averaged 6% per year over the last 5 years, which is still below the S&P 500 average (8.3%).
If you want a Fiscal subscription to get these insights as well, you get a 15% discount through this link.
Below: the Cloudflare deal with OpenAI that just changed the AI search game.
One Potential Multibagger up 34% in the last month and one up 56% in the last two weeks before this one.
Why Nubank's just-announced Mexican banking license is important.
The two stocks in the PM Forever Portfolio that report in the upcoming week.
Much, much more.
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