1. Core long-only performance and portfolio

2. Quant portfolio experiment

3. Some thoughts

Core Long-Only

~0% vs ~-4% for the S&P:

Since inception is sitting at just over 17% CAGR, which I’m very happy with:

Since inception vs S&P 500 Total Return:

I’ve officially crossed the 3-year mark of tracking performance vs a benchmark, so that’s cool.

Here is the full portfolio (as of 2025-05-02):

It’s too bad IBKR doesn’t let you sort by % of net liquid.

I’m still quite happy with holdings. I think INTC is quite undervalued here, but I could be very wrong. RBLX is doing great, so is MSFT. I could go on, but you get the idea. I’m thinking about axing NVDA and NET. There is ~2.5% of liq sitting in something I don’t have a lot of conviction in. Not good.

Quant Experiment

I mentioned a while ago that I started a long-term experiment with some of my own capital. The idea is “unforgiving”. The target market is someone like me, who is intent on growing their capital. It’s quite risky in terms of volatility, but not risky in terms of permanent capital loss.

The rules:

1. Annual rebalancing to specific weights

2. Capital contribution goes to most underweight position, attempting to bring the portfolio back to target weights. (This quickly becomes impossible with a growing overall portfolio).

Since inception (time weighted) against SPXTR:

We’ll see how this shapes up.

What I’ve been up to

Nothing new on my end, other than continual studying for the CFA level 1, training people, and training myself.

📈 Stock Reaction

Intel appointed a new CEO, Lip-Bu Tan. Investors loved the news. Stock price is up ~29% in the last 5 days:

📝 The Letter

Tan recently released a letter to employees. You can read it here https://www.intc.com/news-events/press-releases/detail/1732/remaking-our-company-for-the-future

Some things that stood out to me:

1. Hitting the ground running

The first words out of your mouth as a leaders should set the tone for what is to come, what is expected, and what is intended. Tan is doing that very well here.

I am joining because I believe with every fiber of my being that we have what it takes to win.

I hear Tan comes from a sports background, which is great. I hope he brings the heat to win.

2. Focusing on moving the needle

Intel has had a lull in focusing on engineering first. Gelsinger brought the emphasis on engineering back to Intel, but he may have been a little overzealous about plans and overemphasis on foundry before products.

Tan has a slightly different take, retaining the engineering focus, but putting products at the forefront:

Under my leadership, Intel will be an engineering-focused company. We will push ourselves to develop the best products, listen intently to our customers and hold ourselves accountable to the commitments we make so that we build trust.

The last touch on commitments and trust is essential right now for Intel. They are on the brink of losing trust with all major potential customers.

3. Core Beliefs

I love how Tan is putting his philosophy out there right away:

I subscribe to a simple philosophy:

• Stay humble.

• Work hard.

• Delight our customers.

When you anchor yourself in those three core beliefs, good things happen.

Intel got complacent and suffered from “king syndrome” in the past. King syndrome is what happens when a company rises to the top, stops taking risks, and loses their edge. All the while retaining the belief that “we are the best and cannot possibly fail. Look how good we are!” Then ultimately lose market share to competitors. Intel started to turn things around with Gelsinger and the culture, and Tan hopes to continue this trend by leading with “stay humble.” Let’s hope it works.

If they’re going to work hard, they need to cut the fat and trim positions. I guarantee Intel has bloated departments. I expect cost-cutting measures soon.

If they hope to delight customers, they need to focus on eliminating execution risk.

4. Number One Priority

If you can’t deliver for customers, you won’t make it. Good to get that out there:

Now more than ever, our customers are counting on us to pull together as a team and deliver for them. Above all else, that is and will remain our number one priority. And as your CEO, I will empower leaders to take ownership and actions to move our business forward.

Lastly:

5. Big Three

Re-emphasis on products first, then foundry:

Together, we will work hard to restore Intel’s position as a world-class products company, establish ourselves as a world-class foundry and delight our customers like never before.

💼 Portfolio

INTC is now ~23% of the portfolio, and still undervalued IMO. My window is the next 5 years with this position, and I think it might take that much time to realize INTC potential.

The reason for such a heavy weighting is

1. The (seemingly) obvious geopolitical necessity for Intel to succeed for the United States of America, combined with

2. The severe discount INTC stock resides right now.

Targets

I’ll be watching for execution in 18A, 14A, and beyond:

I’ll also be watching for increasing customer base with Mag7 and other larger players.

Pre-Mortem

Between the general undervalued state of the stock, and the underplayed role of Intel in geopolitical arena, I think INTC has a shot at triple or more in 5 years from here.

For the sake of timestamp, I’ll strongly consider trimming my position of INTC reaches forward p/e of 50.

Conversely, if Intel and team can’t do what they say, I’ll be trimming the position accordingly.

🥳 Conclusion

Overall, I love the letter and where Intel sits on both quality and price. Lip Bu Tan wrote a solid letter. It’s a small window into how Tan thinks, and I appreciate that. “If you listen to a man talk long enough, he’ll tell you exactly what’s on his mind.”

I hope Tan is one to do what he says. I’ll be watching and rooting for Intel.

Disclaimer

The information provided herein is for informational and educational purposes only and should not be construed as financial or investment advice. I am not a licensed financial advisor nor am I acting in any fiduciary capacity. The opinions, assumptions, and estimates expressed represent my judgment as of the publication date and are subject to change without notice. I make no representations, warranties, or undertakings—express or implied—regarding the accuracy, reliability, completeness, or reasonableness of the content. Projections are based on various assumptions, and there is no guarantee that these outcomes will be achieved. Please conduct your own due diligence, consider your own risk tolerance, and consult with a professional before making any financial decisions. Past performance is not indicative of future results.

I created this model to:

1. 👷‍♂️ Build initial modeling skills

2. 🤔 Understand Intel more

3. 🔬 Refine my investment thesis with real data

4. 🤝 Share insights with others interested in Intel’s valuation

5. 🧪 Test different valuation scenarios over time

Below is the download link—please note that it’s a work-in-progress, and your feedback is welcome. You can comment on this post, DM me on X, or reply to this email.

Here is the download for the model:

Intel (INTC) DCF Model 2025-01-31

187KB ∙ XLSX file

Download

All cells and sheets are unlocked so you can play with it, make it your own, or do whatever you want with it.

Download

Note: This model is a living document—I will continue refining and updating it as new information becomes available. If you notice any errors, room for improvement, or have thoughts on the assumptions, I welcome your feedback.

Summary

Highlights

• 🗺️ Geopolitical Tensions

  • USA preference for USA chips has Intel positioned as extremely misunderstood

  • TSMC 100b investment is for show

  • China has mentioned extreme interest in Taiwan

• 🚀 Return to product leadership

  • Intel recently completed 4 nodes in 5 years, kicking off a new confidence in Intel products. Although external customers are keeping quiet, Intel is getting more interest.

• 💸 INTC stock is below 1 P/B

  • Given the history and flops, Intel deserves to be cheap, but not this cheap. Even when considering P/TBV, INTC is extremely low.

Key Concerns

• 🧭 Trump is a wildcard

  • There is no guarantee that Trump will actually enforce on Taiwan, but the incentives are still there for companies to buy from Intel.

• 👹 Yeary and the board are incompetent

  • Firing Pat Gelsinger may have been a terrible mistake.

  • Intel is going on 96 days without a CEO as of today.

  • Yeary needs to go. Gelsinger needs to come back.

• 💩 Execution Risk & Manufacturing Delays

  • Intel keeps pushing back products and fabs. While pushing back fabs makes sense, product delays are an unwelcome development.

Room for improvement

A few things I want to improve over time:

• I got stuck with comparables in the WACC calculation, specifically in market value of debt. I’ll have to tackle this another time.

• I’m very interested in modeling out the company specific data, learning about standard practices, and minimizing errors.

• It’s abundantly clear why some analysts spend their entire careers in one industry or sub-industry. There’s a mountain of never-ending information waiting to be sifted through, analyzed, and synthesized for tangible investment outcomes. I hope to learn more about this amazing industry.

• There are some simple calculations that I did not prepare (yet). One of those is IRR on the summary page that should tie to the current price of INTC stock. The second is the “score” on the summary page. The goal over time is to tie each of those value to a tangible metric in the filings on the company.

• I’d like to calculate SBC into the equation but haven’t gotten there yet.

What’s working well so far:

• I love the summary page design, and I think having a radar chart sums up the thesis nicely.

• I learned some more sweet excel skills (yes I know🤓) like a dropdown selector for scenarios:

  

• The granularity of assumptions within segments has me delighted. I’m not quite sure how to tie in lengthy commentary without using a ton of cell notes, however. That just feels tacky.

• The model is a great place to update assumptions as I keep learning about Intel, semiconductors, and the semiconductor industry. I hope to do this at least quarterly on earnings.

Conclusion

Overall, I believe Intel is significantly undervalued given the current geopolitical landscape, despite ongoing manufacturing challenges and board instability. I plan to update this model quarterly, so stay tuned!

📑 Little Bits

• Performance — Q4 was 3.87% vs 2.41% for the benchmark (SPXTR). For 2024 the portfolio returned 18.9% while the benchmark returned 25.02%. Annualized since inception is still 21.02% vs 13.27% for the benchmark. Not bad for an old man in the middle of nowhere in Oregon. All charts below.

• Morning Coffee☕— I’m writing a short daily email. Check it out. This is a great way to hear more from me more often. 95% of posts only go out to email. Most emails are less than 150 words. Subscribers are not automatically subscribed. Topics are extremely wide-ranging from investing to fitness to philosophy.

• New Portfolio — I’m launching a new portfolio. It’s quantitative in nature. I’ll share more on this later. Because of this I’m renaming the current portfolio to “Core Long-Only” and the new one will be called something metal like “Unforgiving” or something because, well, it’s unforgiving.

📊 2024 Performance

Historical performance 2022-04-18 to 2025-01-10:

Since inception chart:

For those of you who want monthly details, here you go:

Cumulative 2024 performance:

Contribution by sector. Obviously given my preference for tech, this will almost always be dominated by those sectors.

Sector composition and contribution heat map for the year:

Holding for the year really brought performance down. Yikes.

💻

In 2023 I made a big bet on and bought near the lows to bring the average price down to $133.43. I remember where I was sitting, what the weather was like outside, and the overwhelming feeling of anxiety and nauseousness. Wall Street all had the same message: META was dying. I disagreed. It paid off. But I’ll always remember that monumental feeling of nauseousness and wondering “Did I just throw everything away? What am I missing?” My tendency is safety.

But it paid off. It was more luck than skill. The dangerous part here is the common mistake to regard luck as skill. My brother in-law has a saying: the worst thing that can happen in gambling is win big the first time. This feels like that, and the repercussions are lingering: now I look for overly hated large/mega-cap companies. It seems like Mr. Market is routinely hating on one big business or another, setting up the thoughtful investor with a great setup. I thought this was this year. Now either I’m wrong or I’m early (indistinguishable at times), but if the position dragged the portfolio a whopping 8% this year, then I’m most likely wrong.

I remember looking briefly at and near the lows in 2022-2023 and thinking “This is the end for those loser companies” and consequently missed out on amazing setups. I simply did not understand the thesis. Combine the extreme lows with Mr. Market’s latest over-enthusiasm and you get some amazing returns since late 2022:

In hindsight, these companies were probably a better setup than was at the time. It’s been a great lesson in always keeping an eye open for over-hated companies and not just watching the companies I think are interesting.1

I remember watching Alex at (check him out here) writing about Netflix and thinking “Oh boy, this guy is so wrong” 🥲 but that man was as right as it gets.

Anyway, is trading close to tangible book value (TBV) and the trend has shown this isn’t the norm. Given the geopolitical risk of and the need for US chip production well into the future, it seems to me that is the only option. I’m talking more about the foundry side than the products side, but you get the idea. x86 is a small point in this game while foundry is such a huge deal.

To me it seems that INTC is priced like it’s just about dead. The future is uncertain, but I like the current probabilities.

🧐 Goodbye

Thank you for reading. If you have any questions, you had better ask.

PS — My daughter is fascinated by AI and how I can describe something then watch it appear. She wanted to share this with all of you: a lion eating spaghetti:

Until next month 🫡

Michael

Short and sweet. Here you go:

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. Walsh Investment Strategy and Michael Walsh are not acting as your advisor or in any fiduciary capacity. All contents are thoughts and opinions of the author and subject to change without notice.

PS: I’m still working on 2024 letter. Stand by.

Here is the current portfolio:

As of tomorrow morning:

I'm doing this as a sort of snapshot and timestamp for myself. I'm screenshotting and foregoing any fancy HTML tables for the sake of simplicity and transparency.

I took these screenshots moments ago on IBKR.

I chose the SPXTR benchmark as I think it most closely resembles what I’m trying to do here: get an attractive return with minimal risk. I define risk as a permanent loss of capital, not downside volatility. This is why I welcome the periodic underperformance of the market and/or benchmark.

Holdings sorted by ticker:

In the future I’ll write my own thoughts on these companies and make it all public for free.

I’m also looking to update the portfolio here soon. Subscribe to get it sent to your email:

Summary

• Business Is Booming: Revenue is up $30b, 15% sequentially and 122% YoY. “For the quarter, GAAP earnings per diluted share was $0.67, up 12% from the previous quarter and up 168% from a year ago.”

• Happy Customers: “The people who are investing in NVIDIA infrastructure are getting returns on it right away. It’s the best ROI infrastructure, computing infrastructure investment you can make today.”

• Demand Exceeds Supply: NVIDIA has customers chomping at the bit for product, which is great.

• The Prettiest Semiconductor Company At The Dance: NVIDIA has all the attention and demand right now. Wonderful company.

Financial Results

From the Q2’25 earnings call:

Revenue of $30 billion was up 15% sequentially and up 122% year-on-year, and well above our outlook of $28 billion.

Starting with Data Center. Data Center revenue of $26.3 billion was a record, up 16% sequentially and up 154% year-on-year, driven by strong demand for NVIDIA Hopper, GPU computing and our networking platforms. Compute revenue grew more than 2.5x. Networking revenue grew more than 2x from the last year.

Overall it was a great quarter. Quarter-over-quarter growth slowed to 15.3%, which seems small compared to the recent run-up, but still healthy numbers:

While sequential QoQ growth seems small, YoY numbers are still amazing. Compute & Networking is up 154% YoY. Click to enlarge:

Compute & Networking are now by far the dominant segment:

Of course, this leads us to pay attention to product leadership in compute & networking.

Product Updates

It looks like NVIDIA is well-positioned as the AI boom continues:

Key workloads driving our Data Center growth include generative AI model training and inferencing; video, image and text data pre- and post-processing with CUDA and AI workloads; synthetic data generation; AI-powered recommender systems; SQL and Vector database processing as well. Next-generation models will require 10 to 20x more compute to train with significantly more data. The trend is expected to continue.

Compute and networking are both growing quite a bit, but compute still makes up the majority of the revenue:

Market Demand

Demand is still strong and with Blackwell rolling out:

Hopper demand is strong and Blackwell is widely sampling. We executed a change to the Blackwell GPU mass to improve production yields. Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year ’26. In Q4, we expect to get several billion dollars in Blackwell revenue. Hopper shipments are expected to increase in the second half of fiscal 2025.

Hopper supply and availability have improved. Demand for Blackwell platforms is well above supply, and we expect this to continue into next year.

Pretty cool what they’re doing:

With the NVIDIA MGX modular reference architecture, our OEMs and ODM partners are building more than 100 Blackwell-based systems designed quickly and cost effectively. The NVIDIA Blackwell platform brings together multiple GPU, CPU, DPU, NVLink and Link Switch and the networking chips, systems and NVIDIA CUDA software to power the next generation of AI across the cases, industries, and countries. The NVIDIA GB200 NVL72 system with the fifth-generation NVLink enables all 72 GPUs to act as a single GPU and deliver up to 30x faster inference for LLM’s workloads and unlocking the ability to run trillion-parameter models in real time. 

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Outlook

Expecting continued demand, revenue growth, high margins, and nothing scary under the hood.

Valuation

With all of this, NVIDIA is still reasonably priced, even after the extraordinary YTD performance:

NVIDIA NTM multiple looks healthy and not unreasonable, but not a bargain either:

Closing Thoughts

One of the main concerns I have with NVIDIA is their ability to stay at the forefront of technology. Demand is high right now, but that is not guaranteed in the future. I don’t think it’s likely that NVIDIA gets surpassed in the long-term. They are improving at a phenomenal rate. I think this speaks to the quality of the company and leadership of Jensen Huang.

One of the main signposts I’m watching for here is a change in technology leadership. This seems to be a simple (but not easy) game of best product wins.

Every time I read about NVIDIA I come away with more questions than answers, but these help:

If you want to check out the latest earnings material from NVIDIA, you can go here: NVIDIA Corporation – Financial Reports

My other NVIDIA posts: NVDA Archives

Thank you for reading the recap of NVIDIA Q2’25 earnings.

In the spirit of continuous improvement, if you identify any mistakes or areas for refinement, please don’t hesitate to reach out. I am committed to maintaining the highest level of professionalism and will publicly address and correct any errors brought to my attention.

The post NVIDIA Corporation (NVDA) Q2’25 Earnings Update appeared first on Walsh Investment Strategy.

This week's edition is free for Basic members and up.

Table of contents

• Summary

• Quote Of The Week

• Markets

• Sectors

• Economy

• Portfolio

• Member Resources

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 48: Core CPI appeared first on Walsh Investment Strategy.

Here’s what I found interesting and some notes.

Table of contents

• TLDR

• Paying Creators

• Bringing People Together

• Scale

• Build Your Business

• Revenue

• Net Income

• Conclusion

TLDR

• Roblox is to traditional gaming studios what YouTube is to Hollywood.

• Roblox is becoming a content mega-platform, expanding beyond gaming into music, education, virtual commerce, and social connections.

• The company’s continued investments in developer tools, monetization options, and social features aim to attract more creators and foster a vibrant, diverse ecosystem.

Paying Creators

Smaller creators are growing quicker than the bigger creators. Top 10 creators averaged $30M per year, up 5.0x since 2019, vs the top 1,000 creators who averaged $753K per year, up 6.2x since 2019:

The conference highlighted a key insight: the growth in earnings for smaller creators is leading to greater diversity and more experimental game development on Roblox. This trend is pivotal for the platform’s future. If larger creators were growing disproportionately faster, it could stifle innovation within the Roblox developer community. Instead, the expansion of the top 1,000 creators is fostering a wider variety of games, use cases, and experiences. This environment encourages developers to take more risks and explore novel concepts, ultimately benefiting the entire Roblox ecosystem.

Here’s what else caught my eye:

Roblox is focusing on accelerating three areas in order to reach 1 billion Daily Active Users (DAUs):

Bringing People Together

So for our next steppingstone on our way together to 1 billion daily active users, we believe 10% of all gaming content worldwide will flow through the Roblox ecosystem. And we’ll do it with our partners. We’ll do it with all of you. We’ll do it with Apple, Google, Microsoft, Sony, Meta and Tencent. And we believe we’ll hit this 10% of the global gaming market at about 300 million daily active users.

David Baszucki, CEO

A few things:

• David is keeping and reiterating bigger goal of 1 billion DAUs.

• A tangible Total Addressable Market (TAM) of 3 billion.

• Does Roblox think they can really dominate the market with 33% market share, 1billion out of 3 billion users? I think so.

In Q2 of this year, there were 25 experiences on Roblox with over 1 million daily active players or DAU, that’s mind boggling. This puts these experiences on par or better, things we’re very familiar with, Sonic Dash, Marvel Contest of Champions.

Some of the titles though, are bigger than things you would not imagine.

We have experiences on Roblox, bigger than Angry Birds, bigger than Among Us, bigger than Elden Reach (sic) [ Elden Ring ], bigger than Overwatch, some of the experiences on our platform have more daily actives than any one of these.

While this is amazing, these games are flash-in-the-pan types that never stay long in the minds of gamers. The next goal that I have for Roblox is to outpace AAA rated games like Call Of Duty.

The fact that Roblox experiences are rivaling these major titles also speaks to the potential for even greater growth ahead. As more developers flock to the platform and existing creators continue to refine their craft, we can expect to see even more high-quality, engaging experiences emerging on Roblox. This flywheel effect, combined with Roblox’s expanding global reach, positions the platform for sustained growth in the coming years.

Furthermore, surpassing traditional gaming benchmarks suggests that Roblox is transcending its roots as a “kids’ platform” and gaining traction with older demographics. As the platform matures and offers a wider variety of high-quality experiences, it could increasingly appeal to a broader swath of gamers, expanding its total addressable market.

Here’s how they plan to bring even more people together:

1. Roblox Party: This upcoming feature, set to release next month, will allow friends 9 and older to group up and easily join experiences together. Later this year, Roblox plans to enable voice and text chat for friends within a Party, both inside and outside of experiences. This is a significant step in making it easier for friends to connect and play together on the platform.

2. Party Application Programming Interface (API): Developers will have access to an API to expand the Party experience. This will allow them to do things like teleporting Party members to the same starting point, dropping them into a private lobby, or organizing them into teams. This API gives developers the tools to enhance the social experience in their games.

3. Roblox Communities: The existing Roblox Groups feature is being rebranded to Roblox Communities and expanded with new community-building tools. A key addition is “Forums”, dedicated spaces for users to share feedback and discuss gameplay, set to launch later this year.

4. Voice Chat Expansion: Roblox has been working on expanding voice chat globally while maintaining safety and civility. Voice is now available in over 32 countries worldwide, with over 3 million users engaging in voice chat every day (doubled from last year).

5. Increasing Social Interactions: The presentation highlighted the scale of social connections on Roblox, with 579 million friendships formed every month (translating to 10,000 friendships per minute), 36 million daily active users communicating through text or voice chat, and users spending 1.5 billion hours with friends on the platform monthly.

This is great for on-platform users, but what about bringing in off-platform users?

We are starting to think about off-platform users finding content as well as on-platform users. To support this, we are announcing today a Creator Affiliate Program that is going to reward you for new users you bring to Roblox.

During the beta phase, some developers can earn up to 50% of a user’s purchases. This program provides developers a new revenue stream and aligns their success with Roblox’s growth by incentivizing user acquisition.

Scale

Removing friction is key as gaming becomes higher and higher quality and more embedded in the new worldwide culture. Roblox is doing that:

We’ve increased streaming adoption, which speeds up join times, reduce crashes. We’ve really been focusing on getting to the point where Roblox never crashes.

This is essential though. It’s a standard that must be reached.

Another standard that Roblox is reaching for:

So I want to share now a little hint of an overall vision that is driving our creator engine and user teams on our platform efforts. We know this is one thing we need to do.

We are going to make it possible for you to host a high-performance, 100-player open world, sports or battle royale type game on Roblox, have it run great on 2-giga RAM devices anywhere in the world at good frame rate. We’re going to do it.

This is exciting. The very thing that holds back so many others, platform dependency, is what will help separate Roblox. IOS, Xbox, PS, and many others are able to interact.

Build Your Business

A couple other things I thought were cool:

. . . we did some research recently, and the Roblox economy has generated 18,000 full-time job equivalents in the U.S. over the past 7 years.

Note: these 18,000 are not working for Roblox but in the Roblox economy. That’s just about the coolest thing I could think of a company doing: supporting the livelihoods of its creators. Such a win-win ecosystem is thriving very well.

If that wasn’t enough:

Early next year, we’re going to allow creators to sell physical merchandise directly from within your experiences, and we plan to integrate with various e-commerce platforms. We’re thrilled to announce our first partnership today with Shopify.

Creators will be able to sell physical merchandise in-game.

The last big kick is an increase in revenue share:

You’ll be able to price your paid-access experience in real currency value, and we’re going to support a higher rev share for paid-access games. Experiences selling at $9.99 will receive a 50% revenue share. Experiences selling at $29.99, will receive a 60% revenue share. And yes, if your experience is priced at $49.99, the rev share is going to be 70%. This will all be paid in real fiat currency. We’re going to start rolling this out for users on desktop this year.

As I said earlier:

Putting their developers first is a great strategy. It’s a win-win for everyone. The entire engine is built on the dual role that users and developers play. Each user a developer, each developer a user. By shortcircuting the traditional “middleman” of a platform, Roblox has created a platform that is more efficient and more profitable.

Revenue

Just an overall snapshot, but I think Roblox is doing just fine with their top line. I expect to see a continuing growth in DAUs, which means a growing revenue stream:

On the next earnings update I’ll dive into segments and key growth stats with a little more granularity.

Net Income

Net income looks terrible, but that’s ok for a new company that’s setting up shop. What I find interesting is the uptick since Q1’24. Net income growth is positive (although NI is still negative):

Roblox is spending quite a bit and issuing stock, but it’s still the early days for such a grand vision. I’ll get into the NI line items a little more detail at the next earnings update.

Conclusion

I think the bottom is in. We’ll see. Roblox is an amazing company doing amazing things judging by their own user numbers. When this becomes a profitable investment is hard to say, but IMO the probability of Roblox becoming a wonderful company are solid, while the profitability is forthcoming. I’m a happy shareholder.

You can watch the keynote here: Opening Keynotes | RDC 2024 (youtube.com)

The post Roblox (RBLX) Developer Conference 2024 appeared first on Walsh Investment Strategy.

This week's edition is for Basic Members and up only.

Table of contents

• Summary

• Quote Of the Week

• Markets

• Sectors

• Economy

• Internet Finds

• Portfolio

• Behind The Scenes

• Member Resources

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 47: Unemployment, Greed and Fear appeared first on Walsh Investment Strategy.

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Table of contents

• Summary

• Quote Of the Week

• Markets

• Sectors

• Economy

• Portfolio

• Member Resources

Summary

• What's New: I recently published a model on Alphabet (GOOG). For basic members and higher, you can check out the model here: Alphabet (GOOG) Discounted Cash Flow Model: 2024-08-26

• The S&P 500 is up 0.3% while the Nasdaq is down 0.8%.

• Core PCE is up slightly, showing a slow-down in the fight against inflation.

Quote Of the Week

Trust your common sense to figure out what you need to know, and don’t be afraid to ask a dumb question. If the expert thinks you’re dumb, that’s his problem.

William Zinsser, On Writing Well

This quote, while coming from a book about writing, is one of the best quotes about being a real expert. Real experts ask "dumb" questions, because they are focused on the common sense of the thing they're interested in.

This translates to investing perfectly: practitioners ask dumb questions in order to understand. This helps avoid disaster in the portfolio. "Experts" aim to seem intelligent, and oftentimes do not have a track record. (Economists come to mind here).

A great reminder to ask more dumb questions.

Markets

The S&P 500 is up 0.3% while the Nasdaq is down 0.8%. Gold is at a 20% in 6 months, which is amazing.

The S&P 500 is still rallying quite a bit since 2023:

Sectors

Financials took the win this week with 2.6% while information technology is down -1.0%.

Economy

Core PCE up slightly, but not surprisingly after such a decline in 2023 and first half of 2024. The trend still remains the same, and the current ~2.6% is a pretty healthy range.

Portfolio

Portfolio is well YTD:

QTD % YTD % 1 Year % Since Inception Annualized S&P 500* 3.7 19.5 27.1 33.6 14.1 Portfolio 3.1 13.6 28.6 57.6 24.2

Performance data is indicative and should not be considered as advice. *S&P500 includes dividends reinvested. Inception date: 2022-04-18.

Here is the current portfolio:

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 46: Core PCE Uptick appeared first on Walsh Investment Strategy.

Alphabet (GOOG) Discounted Cash Flow Financial Model (DCF) 2024-08-28

In the spirit of continuous improvement, if you identify any mistakes or areas for refinement within the model, please don’t hesitate to reach out. I am committed to maintaining the highest level of professionalism and will publicly address and correct any errors brought to my attention.

The post Alphabet (GOOG) Discounted Cash Flow Model: 2024-08-26 appeared first on Walsh Investment Strategy.

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Table of contents

• Summary

• Quote Of the Week

• Markets: Don't Freak Out

• Sectors: S&P FTW

• Economy: A Focus on Housing

• Portfolio: Performance

• Portfolio: Holdings

• Member Resources

Summary

• Housing sales are up both in new and existing houses

• 30-year average fixed mortgage is down slightly

• Real estate popped this week with 3.8% uptick

Quote Of the Week

The possibilities that lie in the future are infinite. When I say ‘It is our duty to remain optimists,’ this includes not only the openness of the future but also that which all of us contribute to it by everything we do: we are all responsible for what the future holds in store. Thus it is our duty, not to prophesy evil but, rather, to fight for a better world.

(Karl Popper, The Myth of the Framework)

Markets: Don't Freak Out

The S&P 500 is up 1.4% this week, outperforming the Nasdaq which returned 1.0%. CBOE Vol (VIX) popped 3.3% this week, while Oil (UOL) tanked -1.0%, signifying increased market uncertainty. Bond yields rose moderately, with the 7-10 Year (VGIT) up 0.6% and the broader Bond Market (BND) gaining 0.7%. Commodities showed mixed performance, as Copper (CPER) rallied 1.5% while Gold (GLD) remained flat. This diverse market movement suggests investors are balancing optimism in equities with caution in other sectors, potentially positioning for economic shifts ahead.

The S&P 500 is trading above both moving averages, showing a positive trend:

In the ever-changing landscape of financial markets, it's common to encounter waves of fear and uncertainty. This apprehension, while often unsettling, is a natural part of the investment cycle. It's crucial to remember that market volatility is not just normal, but an inherent characteristic of healthy markets.

No one, not even the most seasoned experts, can predict with absolute certainty what the markets will do tomorrow. This unpredictability is both a challenge and an opportunity. While it may breed anxiety, it also creates potential for those who are prepared and informed.

The key lies not in trying to foresee the future, but in staying vigilant and adaptable. By paying close attention to market trends, economic indicators, and global events, investors can position themselves to make more informed decisions. Remember, successful investing is often about managing risks rather than avoiding them entirely.

In times of market turbulence, it's wise to stay focused on your long-term financial goals rather than getting swayed by short-term fluctuations. Embrace the uncertainty as a reminder to diversify your portfolio and to continuously educate yourself about the markets.

Sectors: S&P FTW

Real estate popped 3.8% this week while the energy sector was the only negative change with -0.1%. The S&P 500 shows a whopping ~28% 1-year change, bringing the 3-year CAGR to 7.8%. Information tech still at the top with 22.5% CAGR over the last 5 years.

Economy: A Focus on Housing

Existing home sales and new home sales are up:

Notice how the average 30-year mortgage in the U.S. is now down to just under 6.5% from almost 8% in 2023:

It's nice seeing the housing market cool down a little bit, but we still have a long way to go. As I've stated before, I think it'll take quite a bit more to make long-lasting change in the housing market.

Portfolio: Performance

The S&P 500 performance has been unreal the last year, however, there's zero FOMO (Fear Of Missing Out) on my end. I'm sitting at 30.5% 1-year performance.

QTD % YTD % 1 Year % Since Inception Annualized S&P 500* 3.4 19.2 30.7 33.2 14.1 Portfolio 1.6 12.0 30.5 55.4 23.5

Performance data is indicative and should not be considered as advice. *S&P500 includes dividends reinvested. Inception date: 2022-04-18.

Here is the current portfolio:

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 45: Housing Sales Up, Market Up, Are We Good? appeared first on Walsh Investment Strategy.

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Table of contents

• Summary

• Quote of the week

• Markets

• Sectors

• Economy

• Internet Finds

• Portfolio

Summary

• Equity markets rallied strongly this week, largely erasing losses from the previous week's turmoil related to the Bank of Japan's policy shift.

• Core Consumer Price Index (CPI) declined to 3.21% from 3.27% in the previous month, continuing the downward trend in inflation observed since mid-2022.

• New housing construction continues to slow, with total new units dropping to 1,238, significantly below the 2022 peak of over 1,800 units.

Quote of the week

"Hesitation Creates Gaps, Boldness Obliterates Them."

Robert Greene, The 48 Laws of Power

Markets

S&P 500 is up 4.0% this week alone, largely recovering from last week's fiasco:

Last week more than a few notable "experts" called for emergency rate cuts due to the rapid market decline which has now almost completely been reversed.

Always remember to zoom out when the everyone seems to lose their minds. From the above chart we see that last week was nothing to worry about.

Sectors

As expected, volatile sectors which lost the most last week also gained the most this week. Consumer discretionary and information technology take the lead with 4.8 and 6.9 percent gained respectively. The S&P 500 is at a whopping 13.8% 5-year CAGR.

Economy

Inflation

Core CPI is showing a significant downward trend, indicating a cooling of inflation pressures. This is positive economic news, as the graph illustrates a sharp decline from the peak levels seen in 2022. The current trajectory suggests a gradual return towards the more stable inflation rates observed in the years prior to 2020, which is encouraging for economic stability and policy makers.

Housing

Housing starts are exhibiting a downward trend. The housing market is experiencing a significant slowdown, primarily due to a combination of factors:

1. Inflationary pressures

2. Elevated interest rates

3. Demographic shifts

A large segment of homeowners find themselves in a "rate lock" situation, reluctant to sell their current homes financed at historically low interest rates. This reluctance to move is contributing to reduced market activity and new construction.

The graph of New Privately-Owned Housing Units Started clearly illustrates this trend. After reaching a peak in early 2022 of over 1.8 million units, there has been a notable decline. The most recent data points show housing starts hovering around 1.3 million units, representing a significant drop from the recent highs.

This decline in housing starts reflects broader economic challenges and changing dynamics in the real estate market, potentially impacting housing affordability and availability for prospective buyers.

Internet Finds

It turns out that sports betting is detrimental to vulnerable households. Link to the full paper: Gambling Away Stability: Sports Betting's Impact on Vulnerable Households by Scott R. Baker, Justin Balthrop, Mark J. Johnson, Jason D. Kotter, Kevin Pisciotta :: SSRN

From the abstract (emphasis my own):

"We estimate the causal effect of online sports betting on households’ investment, spending, and debt management decisions. Employing household-level transaction data and a staggered difference-in-differences framework, we find sharp increases in sports betting following legalization. This increase does not displace other gambling activity or consumption but significantly reduces households’ savings allocations, as negative expected value risky bets crowd out positive expected value investments. These effects concentrate among financially constrained households, who become further constrained as credit card debt increases, available credit decreases, and overdraft frequency rises. My findings highlight the potential adverse effects of online sports betting on vulnerable households."

Here we have deposits/income. This graph shows sports betting hits low-income households significantly harder than any other group:

Portfolio

As we approach the end of the quarter, the S&P 500 has demonstrated impressive growth, delivering a YTD return of 17.5%. This reflects the resilience and strength of the broader market, driven by a combination of robust corporate earnings, economic recovery, and investor sentiment.

However, it's important to recognize that the portfolio has its own unique strengths. Despite a slight dip of -0.4% in the current quarter, the portfolio has still managed a respectable YTD return of 9.7%. Over the past year, the portfolio has delivered a solid 27.2% return, closely trailing the S&P 500's 29.0% return.

Where the portfolio truly shines is in its performance since inception. Since the portfolio's inception on April 18, 2022, it has outperformed the S&P 500, with a cumulative return of 52.2% compared to the S&P 500's 31.3%. This translates into an annualized return of 22.4% for the portfolio, significantly higher than the S&P 500's annualized return of 13.4%.

This performance underscores the strategy of disciplined investing, focused on long-term growth while managing risk effectively. This approach continues to demonstrate its value, even in a challenging and dynamic market environment.

QTD % YTD % 1 Year % Since Inception Annualized S&P 500* 1.9 17.5 29.0 31.3 13.4 Portfolio -0.4 9.7 27.2 52.2 22.4

Performance data is indicative and should not be considered as advice. *S&P500 includes dividends reinvested. Inception date: 2022-04-18.

Here is a table of my portfolio, sorted by weight:

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 44: Housing Starts, Core CPI, and Sports Gambling appeared first on Walsh Investment Strategy.

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Table of contents

• Summary

• Quote of the week

• Markets

• Sectors

• Economy

• Market Sentiment

• Portfolio

Summary

• Initial claims are down from 250k to 233k.

• The S&P 500 is unchanged this week with wild fluctuations.

• New section "Market Sentiment" with a simple gauge graph. See below.

Quote of the week

"Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group … then to hell with them."

(Charles T. Munger, Poor Charlie’s Almanack)

Markets

Lots of movement this week with the S&P 500 flat and the Nasdaq still in the 5y lead at 144%.

Quite a bit of volatility lately, but the 50-day moving average (DMA) is still above the 200-day moving average:

Sectors

Communication services wins this week at 1.1% and Materials falls 1.6%. Information technology still in the 5y lead at 20.7% CAGR.

Economy

Not many big economic releases this week other than Initial Claims. While Initial Claims is down, the 13-week moving average is still trending up, signifying an increasing amount of people filing for unemployment on the average. This is a small sign of increasing stress on the economy.

Market Sentiment

New section! I borrowed the idea from CNN's fear and greed index. I like my version more:

This week's number of value of 59 is derived from vibes and nothing more. The market has been rocky lately with big moves in both directions. In my opinion, it's still showing that the market is still acting greedily. Everything feels top-heavy. (Just to be clear, I know nothing. We could experience 5 years of amazing performance in the market starting now, or we could enter WWIII and the second great depression. The truth is probably somewhere in the middle.)

In the future I may create my own formula that draws from market data. If I go this route, it'll focus more on long-term trends, not day-to-day market swings.

Notice the colors of the graph. People usually associate numbers and colors with "good" and "bad" but in reality, it's more nuanced than this. Extreme greed means the portfolio is probably growing quite a bit, but it also signifies overblown valuations. Extreme fear means the portfolio might not be doing great, but more opportunities to buy undervalued wonderful businesses are more frequent. Yin and Yang.

Portfolio

Oof. Another week of getting hit. The index is now outperforming me on a one-year basis. As always, the annualized number is what matters most. Pain in the short term, gains in the long term. Hopefully I'll get some quarter wins under the belt to help further improve things, but that comes only from investing in long-term winners. The score takes care of itself.

QTD % YTD % 1 Year % Since Inception Annualized S&P 500* -2.0 13.0 21.4 26.2 11.3 Portfolio -3.7 6.2 20.4 47.3 20.4

Performance data is indicative and should not be considered as advice. *S&P500 includes dividends reinvested. Inception date: 2022-04-18.

Here's what I'm invested in right now:

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 43: Market Sentiment, Moving Averages, and Charlie Munger appeared first on Walsh Investment Strategy.

Table of contents

• Quote of the week

• Markets

• Sectors

• Monetary Policy

• Economy

• Yield Curve

• Economic Outlook

• Internet Finds

• Portfolio

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Quote of the week

"Each of us tends to think we see things as they are, that we are objective. But this is not the case. We see the world, not as it is, but as we are—or, as we are conditioned to see it. When we open our mouths to describe what we see, we in effect describe ourselves, our perceptions, our paradigms."

(Stephen R. Covey, The 7 Habits of Highly Effective People)

Markets

Whew! Markets took a hit this week with the S&P 500 down 2.1% while the VIX is up 42.7%. The Nasdaq is still up 145% in the past 5 years:

It always looks dire until we zoom out a little and see that we are re-visiting levels we haven't seen since—May. Things may be a little more serious, however, as I'll explain later.

I think it's important to keep showing the long-term market trends when we are constantly bombarded with negativity and fear in the media. Remember: the goal is to think and see clearly, so our quality of decisions is as high as possible. This directly affects our long-term investing success.

Sectors

Information tech took a 4.9% hit while utilities gained 4.0%. Information tech still reigns supreme on a 5y basis of ~20% CAGR.

Let's dig a little deeper.

Monetary Policy

The Federal Reserve has maintained its target federal funds rate at 5.25-5.50%, citing solid economic expansion and moderating job gains. While inflation has eased over the past year, it remains above the 2% target. The Fed sees improving balance in economic risks but remains cautious, stating it won't reduce rates until more confident about sustainable progress toward the 2% inflation goal. The committee continues to monitor various economic indicators and stands ready to adjust policy if needed to support maximum employment and price stability.

These elevated funds are still pressuring the economy and the market (which we've seen this week). Let's look at unemployment:

Economy

Unemployment

The unemployment rate has increased from 4.1% to 4.3%. This is significant because:

1. Previously, the rate slowly increased between 3.8% and 4.0%, changing by only 0.1 percentage points at a time.

2. The current increase of 0.2 percentage points is larger than these previous increases.

3. This larger increase suggests that unemployment is not only rising but rising at a faster rate than before.

4. This acceleration in the unemployment rate is concerning, as it could indicate a weakening job market.

The combination of the rising unemployment rate and poor market performance this past week has me somewhat concerned. Let's see if the yield curve helps alleviate some of these worries:

Yield Curve

The yield curve has historically been an accurate predictor of upcoming recessions. However, it's generally not advisable to liquidate all assets when the yield curve inverts (dips below zero). The following graph depicts the last 40 years, with grey areas representing recessions. Note how each time the line drops below zero, a recession follows shortly after:

When we zoom in, we see that we are overdue for a recession:

Here's my personal outlook.

Economic Outlook

Here's the thing: nobody knows what tomorrow brings. It would be stupid of me sell everything, but it would also be stupid of me to buy a bunch of low-quality growth stocks. Since my portfolio is geared towards quality and stability, I'm going to ride the wave. The probability of a recession is higher, in my opinion, but nobody knows.

Internet Finds

I thought this was awesome:

The pyramid of success by John Wooden who is considered one of the greatest coaches of all time.

His teams won a remarkable 80% of the time that they took the floor over his 40-year coaching career, including 16 conference championships, an 88-game winning streak, and 10 NCAA men’s basketball championships at UCLA, 4 of which featured undefeated teams.

Kpaxs on X

(click to expand)

Portfolio

Performance took a hit this past week but overall CAGR remains intact:

QTD % YTD % 1 Year % Since Inception Annualized S&P 500* -2.0 13.0 20.5 26.3 11.4 Portfolio -3.7 6.1 18.7 47.2 20.5

Performance data is indicative and should not be considered as advice. *S&P500 includes dividends reinvested. Inception date: 2022-04-18.

Here's what I'm invested in right now:

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 42: Markets, Fed Rates, Unemployment, and Yield Curve appeared first on Walsh Investment Strategy.

NVIDIA Model — 2024-07-29 v1.0

The post NVIDIA Discounted Cash Flow Model 2024-07-29 appeared first on Walsh Investment Strategy.

If you're not a subscriber you can sign up here to get the Sunday Edition delivered right to your inbox:

Subscribe

✓ Get smarter
✓ Invest wisely
✓ Never miss a thing

SUBSCRIBE!

Check your inbox to confirm your subscription. Thank you! (Your info is private and will never be sold to anyone else, ever.)

Table of contents

• Quote of the week

• Markets

• Sectors

• Monetary Policy

• Economy

• The Dollar

• Housing Market

• Internet Finds

• Mike's Corner

• Portfolio

Quote of the week

Whether you’re mending a chair, sewing a dress, or sharpening a kitchen knife, he writes that there is “an ugly way of doing it” and “a high-quality, beautiful way of doing it."

William Green, Richer, Wiser, Happier

I like this way of thinking, of bringing a craftsman mentality to everything we do.

Markets

I think it's important to keep showing the long term market trends when we are constantly bombarded with negativity and fear in the media.

Sectors

Financials and health care take the cake this week with 1.7% gain while communication services sector declines 2.1%. Information technology still reigns supreme on the 5-year basis with a 20.3% CAGR.

Monetary Policy

The federal funds effective rate is still at 5.33%. This will definitely change, but blathering on about what might happen is a fools errand. Will rates come down? Almost definitely. When? Nobody knows.

What's important is understanding these charts in relation to each other. These higher rates set by the FOMC make money supply a little tighter across the economy. Let's take a look.

Economy

Core PCE is still trending down. It's great to see inflation cooling like this.

Core PCE is the FOMC preferred metric for gauging inflation. The below chart shows that prices are still increasing, but at a much slower rate than 2022 and 2023.

Prices are still high for a lot of products and services, but they are not likely to go up a lot more moving forward.

The Dollar

One beneficial thing about decreasing inflation is an increase in the dollar strength. A value of 100 signifies a good relative strength for the dollar. Right now the dollar relative strength is well above 115. This is a stark contrast to what media keeps telling us about the devaluation of the dollar.

Housing Market

Existing home sales are also declining, thanks to decreasing inflation, higher rates, and limited supply. While this is neither good nor bad, it's simply another data point in our lens of the world. The data only goes back to mid 2023, but it still shows a good history and trend of what's happening.

Internet Finds

I came up with this idea then a simple search found that Sanjay Bakshi already wrote about it. Returns Per Unit of Stress – Fundoo Professor

Once you start incorporating return per unit of stress in your investment thinking, the trade-offs become obvious. You would start settling for investment situations which offer a satisfactory return per unit of risk and stress over those which offer high returns per unit of financial risk but low returns per unit of stress. You will slow down and start appreciating the slow process of long-term, stress-free compounding as opposed to nerve-wracking, adrenalin laden high frequency operations in the stock market.

Sanjay Bakshi

I love this because it encapsulates so much of what I love about investing. Chasing returns is worth nothing if you don't have health, so why drive health into the ground to chase a higher return? Health is the real wealth, so trading health for money is moving backward so fast. It's the worst trade any of us can make. Time is all we really have, and money can't buy any of it back. That's why I choose to use money to buy freedom—the end goal. Money is just a tool. Don't let it wreck you.

Mike's Corner

Investing During Elections

The election is everywhere. If you're like me—focused on generating financial freedom—then you don't care. This chart is for those of you who insist on investing based on who gets elected.

TLDR: The election, and most politics, is noise. This doesn't mean "don't vote" but it means you can vote and not let it detract from your daily lives.

Cigars

I love cigars. I have one a week on the back deck and take the time to read, engage on twitter, or just sit and think. It's a great time to reflect and do nothing.

Lately I've been fond of the Undercrown marduro double corona from Drew Estate. If you like cigars or have a favorite, let me know.

Portfolio

Subscribe to Walsh Investment Strategy to unlock.

Become a paying member of Walsh Investment Strategy to gain access.

Get 30-day free access →

A membership gets you:

• ✓ Premium Research

• ✓ Sunday Edition Email

• ✓ Real-Time Portfolio Updates

• ✓ Community Access

• ✓ Inner Circle

The post 📰 Sunday Edition 41: Rates, The Dollar, Housing, Fundoo Professor, and Cigars appeared first on Walsh Investment Strategy.

Return-to-Stress Ratio

A fundamental long-only portfolio of 10 to 15 names will underperform sometimes. That’s normal. The cost to try to always outperform is higher stress and a higher likelihood of behavioral errors. I am not in the business of being stressed or increasing likelihood of errors, I gladly accept periods of underperformance.

I have a new metric. It’s the return-to-stress ratio. Right now, I’m hovering at ~21% Compound Annual Growth Rate (CAGR) with a stress level of 1 out of 10. A R/S ratio of 21! I attribute this to low turnover, understanding the holdings, trying to get smarter every day, and trying not to make stupid mistakes. It’s a high return relative to the amount of stress, especially for Q2’24.

I’m 75% sure I could raise the CAGR to 22% or even as high as 25% but with a stress level of 4-7 that’s not worth it. This scenario of 25/5 = 5, vs the current results of 21/1 = 21. As stated above, reaching for a higher absolute performance would also likely increase turnover and thus increase likelihood of behavioral errors.

For proprietary investors (and maybe for all investors), stress should figure in one’s investment strategy, much more than it does, perhaps, even more than financial risk, because stress is a killer and high stress situations – whether they carry high or low investment risk – will always carry a high risk to one’s health. In fact, one can now measure how many years of one’s life is cut short by being exposed to a high stress life.

Returns Per Unit of Stress – Fundoo Professor

My strength is I know I’m not smart, and I know I can make some of the stupidest mistakes on the planet. Another reason why time is better spent finding, researching, and analyzing wonderful businesses rather than focusing on CAGR.

Closing Thought

I’m very grateful to the members and supporters who have helped me grow so much as an investor and as a human. You know who you are.

Q2’24 was solid. On to the next quarter!

Mike

PS—You can read other quarterly letters here: Quarterly Letters

PPS—I made some portfolio changes recently. Here they are: Portfolio Change: New Strategic Position.

The post Q2’24 — Quarterly Letter appeared first on Walsh Investment Strategy.