Author Topic: Compounder ideas please  (Read 13355 times)

petec

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Re: Compounder ideas please
« Reply #70 on: December 04, 2019, 02:26:58 PM »
80% $TQQQ, 20% $TMF and no really ugly bear markets. Could do 20%-25% CAGR.

Less the rollover cost...!
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A


petec

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Re: Compounder ideas please
« Reply #71 on: December 04, 2019, 02:28:13 PM »

What are your best EM and retail ideas?

I'm more of a funds person to be honest.

But going back to the earlier idea of contrarianism, I was reminded of Russia recently.  Cheap and hated (if not quite as much as a couple of years ago).  I've never felt too comfortable with the governance.

While it's the 'one that everyone owns', I'd have thought that Sberbank would have a pretty decent chance of doing well over time.

If you want retail, then I suppose X5 would be one to look at.

At the more obvious end, I find FEET (Fundsmith EM IT) becoming gradually more interesting, whether for owning or inspiration.  The portfolio's been tightened up, and is full of super impressive EM consumer companies.  They've just been too crazily expensive I think, even for their impressive stats.  They seem to be slowly getting a bit cheaper.  I wouldn't expect them ever to be 'cheap' (except in a 2008 situation) as they're just too high quality and profitable, but if they become semi-reasonably priced, they should be no-brainers for the long-term.

Will revisit FEET, thanks.

I also discovered SEDY this week - emerging markets dividend ETF, but what it really opened my eyes to is some optically very cheap Russian companies. Tempted by a small position.
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sleepydragon

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Re: Compounder ideas please
« Reply #72 on: December 04, 2019, 02:50:59 PM »

I didn't mention MO.


Indeed not. Sorry!

I mentioned MO.
Itís a compounder because they almost need no capital to run the business and they have the ability to keep raising prices. The cigarettes prices in USA are still very affordable compared to other countries.
They have some debts but those debts were issued due to investments which could be sold.
Although Berkshire wonít invest in tobacco stocks, Buffett had said they are great businesses.
The stock is also ignored by institutions because itís a sin stock.

no_free_lunch

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Re: Compounder ideas please
« Reply #73 on: December 04, 2019, 06:29:04 PM »
I own MO but am already thinking of selling. I don't remember specifics but they made some really poor acquisitions which causes me to question management capital allocation. Didn't they invest in e cigarettes and marijuana at some really high multiples.  Great business not great management.
« Last Edit: December 04, 2019, 06:30:54 PM by no_free_lunch »

sleepydragon

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Re: Compounder ideas please
« Reply #74 on: December 04, 2019, 07:01:44 PM »
I own MO but am already thinking of selling. I don't remember specifics but they made some really poor acquisitions which causes me to question management capital allocation. Didn't they invest in e cigarettes and marijuana at some really high multiples.  Great business not great management.

True. But I think the earlier PM/MO failed merger put them on the ďplay tableĒ. Someone, maybe PM, will eventually buy MO and fire the management.
The current stock price is already pricing their investments in JULL to 0.

BG2008

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Re: Compounder ideas please
« Reply #75 on: December 05, 2019, 08:04:06 AM »
I think DuPont falls into this category.  The Dow/DuPont tie up and subsequent separation is playing out.  Specialty chemicals stock prices in general has been very weak this year with volume down 1-3% across the board.  This is a 35% return on capital business trading at 10.5x 2020 P/FCF after adjusting for $3bn of share buybacks in 2019 and 2020.  This is DuPont's specialty business, think almost 30% EBITDA margin businesses that should grow GDP plus 2 once we get back on growth again.  In growth years, they can trade to 20-25x P/FCF.  If we go out 2-3 years and they keep buying back shares or start divesting units.  DD starts to trend down to 9x P/FCF.

lnofeisone

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Re: Compounder ideas please
« Reply #76 on: December 05, 2019, 10:36:01 AM »

What are your best EM and retail ideas?

I'm more of a funds person to be honest.

But going back to the earlier idea of contrarianism, I was reminded of Russia recently.  Cheap and hated (if not quite as much as a couple of years ago).  I've never felt too comfortable with the governance.

While it's the 'one that everyone owns', I'd have thought that Sberbank would have a pretty decent chance of doing well over time.

If you want retail, then I suppose X5 would be one to look at.

At the more obvious end, I find FEET (Fundsmith EM IT) becoming gradually more interesting, whether for owning or inspiration.  The portfolio's been tightened up, and is full of super impressive EM consumer companies.  They've just been too crazily expensive I think, even for their impressive stats.  They seem to be slowly getting a bit cheaper.  I wouldn't expect them ever to be 'cheap' (except in a 2008 situation) as they're just too high quality and profitable, but if they become semi-reasonably priced, they should be no-brainers for the long-term.

Will revisit FEET, thanks.

I also discovered SEDY this week - emerging markets dividend ETF, but what it really opened my eyes to is some optically very cheap Russian companies. Tempted by a small position.

I've had DVYE (the US version of SEDY) on my radar for a while. In my notes I scribbled "no Sberbank?" and curious if anyone knows why wouldn't they hold it given the other holdings. Also, VTB (another russian bank) has (small) exposure to Africa.

jondoug

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Re: Compounder ideas please
« Reply #77 on: December 05, 2019, 04:28:16 PM »
What about the elephant in the room, BRK? Given the under performance in the past few years, the cash drag etc., there is a good chance it could get back to returning 15% plus in the next decade.

ValuePadawan

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Re: Compounder ideas please
« Reply #78 on: December 07, 2019, 08:52:13 PM »
And this is a little off-thread because these don't have a history of compounding and fit more into the value/rerating category, but Atlas Mara is about to take control of Union Bank of Nigeria, which should be a compounder, and is demonstrably cheap vs the listed assets it holds.

If you consider Greece an EM then Eurobank still has a long way to run too.

You also get 6.27% of Equity Group Holdings which operates in eastern and central Africa and 79.5% of BancABC Botswana. Just following demographic trends you get the mental models of population growth, plus increased banking penetration as a lower % of people have bank accounts than most developing countries, plus gdp per capita growth. If they can have competent sober management through Fairfax Africa they should be able to ride that wave for 50 years.

Indeed. Do you own it?

A tiny position, African banking is not something I would ever bet the farm on as the possibility for loss is there due to political and economic upheaval being ever-present but as the spectrum of possible outcomes skews also extremely high due to the growth potential I believe for me it is worth it. Its going to be stratospheric in 20 years or be dead and buried, time will tell but buying at half of NAV gives me margin of safety to take this thin gamble.

ValuePadawan

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Re: Compounder ideas please
« Reply #79 on: December 07, 2019, 08:57:47 PM »
In addition a company which absolutely mints money and has an enormous moat is Chr Hansen.

Growth will be slower for sure but in my opinion it is safe like a bond but has equity returns.

Only issue is when I discovered the company it seems everyone else already knew this and its selling at 9x revenue so I think I'll wait for a panic when its selling closer to 3x because its a business I just want to own someday.