The next Moody’s (5-bagger in 10 years) and Brad Pitt’s investing wisdom

Investing in 123 #3/2024

1 question to reflect on

The results of last week’s question:

The question this week (pick one)

Me?

I’m in the quarterly camp. I check my holdings when I’m going through the earnings updates. I come from far checking my holdings multiple times a day. I did not sleep well because of it.

What if the stock market did not exist and Mr. Market is not bidding a new price for your holdings daily?

2 quotes, do you agree?

Make the best use of what is in your power, and take the rest as it happens

Epictetus Greek Stoic Philosopher who lived 2000 years ago

You cannot control the price. 

You cannot control the business fundamentals. 

What do you control?

• The information you consume

• The investment decisions you make

Make sure your investment decision is based on business fundamentals, not price movements.

Volatility is there to serve you.

I've been banging away at this for 30 years. I think the simple math is, some projects work, others don't. There's no reason to belaber one. Just go on the next - 

Brad Pitt after winning a Screen Actor’s Guild (SAG) award in 2020 for his role as Cliff Booth in Once Upon a Time in Hollywood.

Did you suffer losses on some of your investments? It’s part of the game. We can’t pick winners every time.

Beware of those who say you can!

Just, make sure you stay in the game. Do the work. On to the next opportunity. Remember, time is your friend. Keep at it.

3 ideas of the week

Credit Bureau Asia (Ticker: TCU.SI)

Category: Small Cap Quality Cash Machine

What does it do?

I’ve always been intrigued with companies like Moody’s. Think about it. The company gives a credit rating to bonds or other securities. If you choose not to use Moody’s, and go for some of the lesser-known rating agencies, the rate you’ll have to pay will be higher. That’s the power of trust. Moody never trades cheaply. So we need to go look elsewhere, a company in a similar business in South East Asia for example: The Credit Bureau of Asia.

Why should you care?

TCU has seen its price slip over the last 12 months. Gross margins above 75% and rock solid growth at a 10-year EBIT CAGR of 15%. Call me intrigued. Time to dive in?

Find the best write-up on the company here by David Katunarić.

Monarch Cement (Ticker: MCEM)

Category: Illiquid Monopolist in a cyclical market

It has the coolest logo for any company I have ever seen:

What does it do?

Monarch Cement is a Kansas-based producer of Portland and masonry cement. In business for about 110 years, it has locations in Kansas, Iowa, Missouri, and Arkansas. 

Why should you care?

Due to its local monopoly and growth in the surrounding region, it has been able to increase prices, sales, and margins over the last few years. Not the cheapest at the moment, but might be interesting for a watchlist.

Find the best write-up on the company here by @Govro12 WinterGems Stocks.

Silvano Fashion Group (Ticker: SFG1T)

This one, surprisingly, came on my radar by applying the guard rails by Polen Capital.

Category: Optically Cheap Estonian nanocap (< 50 M USD)

What does it do?

It’s a lingerie producer and distributor in Eastern Europe. The problem: It showed up on the screen due to the growth after the COVID dip, but revenue has been pretty flat over the decade. It took a first hit due to COVID-19 and a second one due to the war between Ukraine and Russia. 

Why should you care?

Margins have increased. The company has never traded this cheaply on an EV/EBIT = 0.5 but we’ll need to dig deeper into the financial statements.  I’m guessing the bet would be: that an end to the war could lead to a recovery in the business. The market cap sits below their current cash level. However, the audit of the financial statements can only be done partially because 7 of its 11 subsidiaries are located in Russia and Belarus. Estonian audit companies have terminated relations with Russian and Belarus audit companies for the time being. There is risk involved.

That’s it for this week.

May the markets be with you, always!

Kevin