Some of the most interesting discourse making its way onto the TL (timeline) lately has been about the long term returns of various industries. When I say “long term”, I mean about 100 years. The results might surprise you (appreciation to Twitter-user Vik Pansare [@pansareV]):
It’s important to fish where the fish are - and even more important to remember how significant small differences in long term industry returns are. A 2% annual delta in returns is worth a tremendous amount over an investing lifetime. If anyone out there is a real data-science wizard, I’d love to see this data set overlayed with industry FCFPS/EPS/EBIT cyclicality assigning the lowest score for earnings streams highly leveraged to the business cycle. A girl can dream.
In the same light, below is a thread by Twitter-user Turtle Bay (@72types) on characteristics of the credit reporting industry. Turtle Bay takes a shorter term horizon - a mere 40 years instead of 100.
It shouldn’t be a surprise to any value/quality/growth orientated investor that credit reporting is a good business - but it’s remarkable that credit bureau Equifax Inc. has posted the same annual returns as Berkshire Hathaway since 1980. Repeat the mantra: “durable, capital light, volume growth, pricing power, defend the moat, return the capital.”
Well known investor Rob Vinall of RV Capital (The Business Owner Fund) hosted his fund’s annual meeting last weekend in Engelberg, Switzerland. Luckily enough, Rob-live streams the major discussions. Below were the two I found most interesting:
Annual fund Q&A (investors ask Rob, and now business partner Andreas Lechner, about the fund and investments Berskshire Hathaway-style),
Front of mind was the tough year of performance that the Business Owner Fund experienced in 2022. Investments such as Meta, Credit Acceptance, Wix, Carvana, and Salesforce all experienced significantly worse performance than almost all broad based global indexes.
Rob also released his annual letter, broadly addressing the above issues.
On a personal note, I give Rob a lot props for not retreating from public view after a period of disappointing performance. Some other high profile investors (they shall remain nameless) who until recently were doing the podcast, interviewing, and PR rounds have since removed their investor letters from public view and locked their Twitter accounts. Jesus on the way up, the Holy Ghost on the way down.
My latest blog post was inspired by a wonderful piece by Investment Talk on a hard to find periodical about a 48 year-old Buffett. A veritable treasure trove of information on Conor’s substack - which receives a rare Buyback’s Tick-of-Approval (TM).
As well as discussing Buffett’s Gross Profit Royalties - I also referenced Peter Thiel’s ideas on generally successful business modalities. See the link for the entire Zero to One Stanford Lecture.
This week I have been going to Church. By that, I mean listening to the Berkshire Hathaway Annual Meetings. The 90’s meetings have hours of folksy wisdom and good humour from Buffett (and Munger) still in his intellectual prime:
At some point I will write a blog post on the nuggets from these meetings. A substantial amount of time is spent on explaining peripheral details specific to BRK in any given year. The issuance of BRK preferred securities in 1995 and the Class B issuance in 1996 stand out.
As per Twitter-user Willis Cap (@willis_cap):
I define excellent as having a leverage profile that makes sense, reinvesting into the core, only very accretive M&A, and paying out the remainder.
I thought this was a particularly good (simple but no simpler) primer on what drives good capital allocation. Bravo.
Enjoy another week in markets - and subscribe to keep up to date with the blog:
I've been to RV meeting and really enjoyed Rob's openness to talk about mistakes.
Great article and great mantra!
nice take, thank you!