To mark the launch of the inaugural Quality-Growth Investor Conference we have launched a similar publication to “Value Investor Digest” which is now in its 48th issue. In the second issue we feature a Lindsell Train article titled “Quantifying Quality” plus 18 other articles below, including those from speakers at the rescheduled London Quality-Growth Investor Conference in March 2021.
“I want to conclude then by suggesting that our performance is the result of a qualitative process that seemingly can’t easily be factorised…Look at the top-five leading contributors to performance since inception – LSE, Shiseido, Nintendo, Intuit and Kao. Three of these (all Japanese as it happens); Shiseido, Nintendo and Kao, were not obviously textbook quality companies when we first bought them. The business vitals were ok with mid-single digit returns and margins, but certainly nothing that would jump out at you from a screen. All though have improved dramatically in the eight or nine years that we’ve held them.
“The industrial engineer has turned Steve Jobs’s creation into a corporate colossus, delivering one of the most lucrative business successions in history…Transitions from dominant leader to successor are seldom successful. Microsoft Corp. stumbled when Bill Gates ceded the reins and General Electric Co. sank after Jack Welch passed the baton.”
“Government doesn’t need to be heavy handed and arbitrarily break up companies in some vindictive, random way. As the book argues, there are dozens of mergers that have reduced competition. The government can reverse those mergers. In fact, that is what the antitrust laws explicitly allow and call for…There are loads and loads of mergers that could be reversed, for example Google’s acquisition of DoubleClick or Admob.”
“The COVID-19 disruption to stock markets caused a shock the world over. But how does the present market crash compare to previous crises we’re familiar with? Here, we examine how long major market crashes have lasted, and the percentage losses in the S&P 500.”
“Imagine you are at a cocktail party in May 2012. The conversation turns to the stock market, and your friend mentions that she bought Facebook at its initial public offering that month. You tell everyone that you just invested in a trucking business. While your friend instantly becomes the life of the party, you spend the rest of the evening staring into your drink.”
“In the short-term, colleges and even homeless shelters may lease hotel rooms to facilitate social distancing for their populations. But, over time, we expect hotel supply to shrink in some markets. The networking benefits of large conferences suggest those are likely to return post-pandemic. But run of the mill business travel – the one-day sales meeting in an airport hotel conference room – is not likely to come roaring back.”
“Approval of a vaccine could ‘challenge market assumptions both about cyclicality and about eternally negative real rates,’ the team wrote, adding such a scenario may support steeper yield curves, traditional cyclicals and banks, while challenging the leadership of technology stocks.”
“It is now ten years since the Times launched its online subscription model, putting all of its content behind a hard paywall. Times head of digital Alan Hunter noted on Twitter that in 2010 the consensus was that ‘nobody would pay’ for general interest news. ‘Now more than 300,000 do – and paid v free is no longer a debate.'”
“As of 10th January 2020, before the coronavirus was seriously troubling western markets, the FAAMG group (Facebook, Apple, Amazon, Microsoft, Google) made up 17.4% of the total market capitalisation of the S&P 500 index. This level of market concentration was already equivalent to the market concentration just prior to the dotcom crash in 2000. Since then, the market fortunes of the mega five have improved further, so that they now make up 21.7% of the S&P 500. Their market share has increased by 25% in the first six months of this year. While this is striking in itself, consider that the market share of these giants, as at 31st March, 2017, was 13%. The market share of the big 5 has increased by 67% in just over three years.”
“We’re seeing this rapid emergence of a connected and intelligent world where all the physical objects are becoming instrumented and connected and digitized. 5G is about connecting things. 4G was about connecting people. And if you think you have lots of data now, you’ll have a thousand times more in a few years. And so, the combination of 5G, AI, IoT all reinforce each other and I think are going to enable us to do more than we’ve ever imagined.”
“Easy money and constant stimulus have undermined the basic dynamics of the free market. We’ve paid the price in low growth and productivity, falling entrepreneurship and rising inequality.”
“The next time you hear “snail mail,” think about this: every day, the United States Postal Service (USPS) processes and delivers 181.9 million pieces of mail (5,464 a second) and manages an army of 82,000 mail carriers while processing about 118,000 address changes.”
“TWE is well known to American Scotch whisky enthusiasts. It’s the go to place to source rare and limited editions bottlings of Scotch whisky. It’s London office also hosts one of the world’s largest collection of Scotch whiskies. Recently, I sat down with Sukhinder Singh, co-founder, along with his brother Rajbir Singh, and CEO of The Whiskey Exchange to discuss the business of being the world’s largest online retailer of whisky as well as his fabled personal whisky collection.”
“Polen Capital’s track record of outperformance over three decades stems from their ownership of high quality businesses. I’d put them in the class of investor with the likes of Chuck Akre, Nick Train, Terry Smith, Francois Rochon, Paul Black and Nicholas Sleep, who’ve earned their returns from the compounding power of the underlying businesses they’ve chosen to own. These ‘compounding machines’ are often large well-known businesses, each with enduring competitive advantages that support high returns on capital, defying capitalism’s reversion to the mean.”
“The robotics surgery area of the market has been harmed in the short term because many health centres simply are not open or at full capacity…But in five years’ time, do we think the number of robotic surgery procedures is going to increase? Yes, because it will reduce the strain and costs on healthcare systems and will mean patients are treated more efficiently. It is a nice structural trend.”
“Apple likely knew of Intel’s delay a few months ago, and likely catalyzed them to move even faster with their transition. More importantly, it creates a big problem for Intel in the data center, which is their largest profit driver. Server customers want the best performance. Cloud scale providers – who consume something like 70% of Intel’s data center products – make purchases based on performance per dollar per watt.”
“The four workers are actually 260-pound industrial robot arms. Manufactured by Waukegan, Ill.-based Yaskawa America, they are equipped with computer vision and artificial intelligence from San Antonio-based Plus One Robotics. They work only about half as fast as skilled humans in the same roles, but they are quickly becoming an important part of the chain of machines and people that keep packages flowing through the world’s largest air freight facility.”
This monthly report of the top viewed equity products by institutional investors on eVestment is well worth keeping track of.
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