"Investing in 123" On patience and a multibagger in litigation?
#2 2024
1 question to reflect on
Here’s the result of last week’s question. I need to check my data, but I think I did 4-6 trades this year.
The question this week:
At the start of each year, I tell myself: “This year, I’m going to do less, leave my portfolio be, and let the companies do their work. “
The fact that I have the same goal every year is telling. I would like to be more patient each year. A quality investor like Dev Kantesaria goes for several years without doing anything.
He says: I love our quality investing approach.
It’s like watching paint dry
Do you manage to hold on to your winners?
2 quotes, do you agree?
He that can have patience, can have what he will
Benjamin Franklin, writer, statesman, inventor,...
In life and investing, one can benefit from slowing down. Notice the world looks different when you drive your car or you take a walk down the same street.
Take another look before acting. Do not rush into things. Focus long-term. Good things come from patience (and compounding).
Tip: When you get excited about a stock, leave your analysis for a week or two and come back to it. In my experience, I’m a lot less excited the second time (and more rational).
Not convinced? ⬇️
The Big Money is not in the buying or selling but in the waiting.
Charlie Munger, wise investor
I rest my case.
What do you think?
3 ideas to dive in
1. Nike (Ticker: NKE)
Category: Quality Compounder
What does it do? You know.
Why should you care?
Still looks expensive, but might warrant putting on a “Buy the Dip” list. The term “Nike” always trends in the month of December. Holiday shopping? New Year's resolutions? Even if performance is down, the mind share of the brand is still strong. At 70 USD/share, it was trading at an FCF yield of 6%. May be a bit too big of a company for my taste. Do you see the company double or triple in size in the future?
2. Stellantis (Ticker: STLA)
Category: Cyclical
What does it do? The Conglomerate was founded in 2021 through the merger of the Fiat Chrysler Group and PSA Group (Peugeot, Citroën). Production and sale of cars and car parts.
Why should you care?
Funny how the new car company (TSLA) and the old car company (STLA) have similar tickers. Has been trading “optically cheap” since 2022. ROIC of 14-15% over the last 3 years is not bad for an automotive company. But FCF took a hit in the first half of 2024. If the reduction in FCF is only temporary, and if you can get in near the bottom of the cycle. As Peter Lynch says, you make money when the company goes from bad to better.
3. Litigation Capital Management (Ticker: LTI)
Category: Underfollowed (Quality) Microcap (illiquid)
What does it do? Similar to Burford (BUR), but much smaller in size. They fund cases (like class action lawsuits) aiming for a big payout. Imagine instead of buying a company with your capital, you would fund a lawsuit, and receive part of the payout if they win. (if you want to learn about litigation Finance, check out this article by
Why should you care?
This has kept popping up on my radar for the past year. The financial metrics look solid and on quantitative numbers, pops up as one of the highest-quality companies in the world. However one needs to dig deeper and understand the business model and the actual earnings power of the company. Low institutional ownership. Check out this write-up to dig a bit deeper. Ever heard of it?
That’s it for this week.
May the markets be with you, always!
Kevin
Thank you for the mention Kevin! Litigation Capital Management does indeed look like an interesting business. A curious fact is that they're much older than Burford, like 10 years older. Another curious fact is that it's from Australia, wherein litigation finance originated. Lastly, as far as I saw, they have a great track record, though have struggled in scaling the business (perhaps they didn't want to?).