"Investing in 123" On trading and living in the moment
#1 2024
This is the first edition of a shorter style article: “Investing in 123”. It’s a summary of topics I’m thinking about, and investing ideas that got on my radar, but I haven’t been able to develop fully. Read about its origin store here.
The structure is the following:
1 question on investing to reflect on (+ results of previous week's question)
2 quotes, do you agree?
3 investing ideas
Enjoy!
1 question to reflect on
There is no right answer here. There are 2 extremities when it comes to investing:
The day trader: daily trades
The buy and hold investor: 1 trade per year?
Both styles can lead to winning in the market. You need to find the style that fits your personality. There is no end goal. It’s a journey, a process. I am steering away more and more from the buy 1 position size and holding it forever. I believe the better approach to be:
By an initial position
Add to a half position if the company performs
Add to a full position if the company keeps performing
Trim position if long-term prospects start to deteriorate
Sell if you have lost confidence in the thesis
2 quotes, do you agree?
It is not Death that a man should fear, but he should fear never beginning to live
Marcus Aurelius, emperor of Rome
Are you 100% focused on building capital or spending it?
The most extreme FIRE (Financially Independent Retire Early) follower aims to live like a monk and gather wealth as quickly as possible. Or do you look for more balance and ensure you live in the moment?
If You Spend 13 Minutes A Year On Economics, You’ve Wasted 10 Minutes.
Peter Lynch
When all is said and done, an investor wants to buy something below its intrinsic value, buying 50 cents on the dollar. Macroeconomics and correct future forecasting are near impossible and should not be the main focus.
3 ideas to dive into
1. Gaming Innovation Group (Ticker: G2M + )
What does it do?
A B2B iGaming company that provides affiliate marketing (media) and platform tech services to iGaming operators.
Category: Quality microcap/spin-off
Why should you care?
Gaming Innovation Group has grown over the past year into a “conglomerate”. A conglomerate discount was applied to its market multiple when compared to competitors. Splitting the business may allow the reveal of the value and increase focus for the 2 management teams. The 2 new companies: Gentoo Media (G2M) and Gig Software (GIG-SDB) are now trading separately. The spin-off has been concluded 2 weeks ago. The media business has been split from the technology platform. The software business screens badly at the moment.
2. Ulta Beauty (Ticker: ULTA)
What does it do?
Retailer for beauty products in the United States. It provides both branded and private labels in its stores. It has 1300+ stores and an online presence.
Category: Quality compounder
Why should you care?
Ulta Beauty could be in a short-term downturn. It shows great historical quality metrics. Is this a temporary or permanent downturn? Will it be able to fend off competition from the likes of LVMH (Sephora)? The answer to these questions will define if it’s an opportunity or a quality trap.
3. XTB (Ticker: XTB)
What does it do?
A central and eastern European broker for stocks, commodities, etc. It has a retail and institutional business. It has grown revenue at a 50% CAGR over the last 5 years.
Category: Quality Cash Generator (not a compounder, it has low reinvestment possibilities)
Why should you care?
This came up on my screen while applying the quality guardrails by Polen Capital. Checks all the quality historical metrics, but the price has increased a lot over the past year. Might be interesting to analyze and put on a “Buy the Dip list”. Trades at a current P/E of 9, an FCF yield of 10%, and a dividend yield of 7.8%
That’s it for this first 123 article.
May the markets be with you, always!
Kevin
For me, quality requires growth and I feel that Ulta is lacking that. Hence for me, I don’t consider it to be quality. However, one can also make money with non-quality companies. Nevertheless, I sold my part a few months ago.