Hourglass Journal - $ULTA, $ISRG, & Gift Guides for Investors
Issue XXI. Recapping a Week in the Markets: Dec. 11 - Dec. 15
Welcome to Issue 21 of the Hourglass Journal, recapping the second week in December and quickly closing in on Christmas! Let’s hop in.
“I don’t believe all this nonsense about market timing.”
Weekly Watchlist Stock
Ulta Beauty - ULTA 0.00%↑
Ulta Beauty is a retail company focused on cosmetics, fragrances, and other beauty products. It acts as a third-party seller of beauty products from other brands, as a well as a distributor of their own private label products. The company has a huge presence in the United States, with over 1300 retail locations across 50 states.
Ulta has been an incredible growth story since a 2007 IPO, delivering a nearly 19% CAGR to early shareholders. This growth doesn’t seem to be slowing down by any means - revenues have grown at a 20% CAGR over the last 3 years, including 12% on TTM figures. Margins are very strong for a retailer as well, and a 42% ROE and 25.5% ROIC are great signs of a high-quality company.
As a final great indicator, Ulta has been repurchasing shares, bringing their total share count down from 56.6m in 2020 to 48.7m today, which has definitely been a factor in being able to grow EPS at a 21% CAGR since 2021.
I want to do some more research on the valuation, though at a surface glance it seems very reasonable for such a high quality company - 2.5x EV/S and 20x earnings is a bit below the historical average, and seems very reasonable for such a high quality company. The current macro-economic headwinds, which have not been kind to consumer discretionary retailers, are likely a contributor to this - they also may offer an attractive opportunity to get in on the name, so it’s going high up on my watchlist.
Intuitive Surgical (ISRG)
Stumbled upon a bit of an older article here by Finding Moats, and was reminded of why oldies make goldies. Of course, the stock’s returned a clean 10% gain for since this research came out, so I do also wish I’d found it sooner.
Regardless of the date, this dive into Intuitive Surgical is a great one. Finding Moats gets into Intuitive’s business model, growth potential, and some of the potential risk from competitors in the robotic surgical space, plus some great industry research.
I’ve been interested in Intuitive since I got into investing and just have never pulled the trigger (something I’ve been kicking myself for since the shares briefly dropped below the $200 mark in September ‘22). Intuitive is one of the more interesting names in both the healthcare and quality growth spaces, and a company that seems well worth the effort to really dig into. It sports really strong capital efficiency metrics, a fantastic margin profile, and is definitely the leader in the still relatively under-penetrated market of robotic surgery.
This deep dive is one of the best I’ve read on the business and is going to save me a ton of time when I finally get around to researching this business myself. So check it out! The article for a succinct and fantastic deep dive into a great business that seems poised for plenty of growth ahead. And be sure to givea follow while you’re at it.
Lump Sum vs. Dollar Cost Averaging (DCA)
Charles Schwab put out some great research on the results of perfectly timing the market vs. consistent contributions through dollar cost averaging. The results were pretty definitive.
Peter perfectly timed the bottom - contributing his money at the lowest price that year.
Ashley invests her allotted amount as soon as she gets it.
Matthew splits his allotted amount into twelve and contributes a chunk in every month.
Rosie perfectly times the peak - contributing her money at the highest price that year.
Larry is a silly guy and doesn’t invest in stocks at all. We won’t worry about him.
While perfect timing on the bottom unsurprisingly yielded higher returns, the difference between Peter and Ashley, who doesn’t worry about pricing and maximizes time in the market instead, is fairly small.
This also doesn’t account for the fact that timing the market perfectly is nearly impossible - it’s a fruitless and unfulfilling exercise that saps all the joy from investing and often leads to poorer results. Due to how difficult it is, it’s very likely that the extra ~$10k that an investor may eek out of trying to time the market isn’t worth it, and that they would actually do worse than Ashley by trying it.
Ashley wins out. Invest your money, don’t worry about the timing, and focus instead on finding great businesses and maximizing the amount of time your dollars can compound with those businesses - one of the main advantages we have as individual investors. The best part? It means higher returns from less effort. How many interests do you have in life that literally pay to be lethargic?
This research from Charles Schwab supports the winning strategy of simply dropping your money in and riding the wave, rather than trying (and failing) to time the market. You can find that full research article here.
Christmas Gift Guide
For the Self-Directed Investor
I’m going to keep it up with this week’s Christmas theme and do a one-off segment in this newsletter. Gift guides are getting a little overdone (I can’t believe some of the ridiculous ones that I’ve seen this year), but I haven’t seen a ton of good ones for investors that aren’t just bear & bull statues. So here goes.
*Note: these aren’t affiliate links - just presents I wish people would get me!*
Spreadsheets are fun, but there’s nothing like marking down your thoughts and trades, making notes on research, and keeping track of your portfolio with a nice pen and paper. I treated myself earlier this year to a leather journal from Jenni Bick, and was not disappointed. High quality leather always makes a big difference, especially if the investor in your life is carrying it around everywhere to jot down notes on the fly (as I do).
Check out a huge range of beautiful leather journals here.
Give the gift of knowledge this Christmas. There’s no better present an investor could ask for than a hardcover copy of a book from one of the investing greats. Here’s a few ideas for books every investor can learn something from.
Poor Charlie’s Almanack - Charlie Munger
The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success - William Thorndike Jr.
Super Forecasting: The Art and Science of Prediction - Dan Gardner & Philip Tetlock
Beating the Street - Peter Lynch
Patient Capital - Victoria Ivashina & Josh Lerner
Stratosphere is the number one tool I use during my research process. I know a lot of other writers are partial to Koyfin, but I find Stratosphere to be a great and intuitive tool for doing research on. It’s got all the data (incl. historical) you’d ever need on all the companies you could possibly want to research - and then some. It’s also got an incredibly helpful ChatGPT-like tool built specifically for financial data, which works great for delving into aspects of a company you may be confused about and for pulling information from management calls, analyst questions, etc.
A Stratosphere subscription is the most expensive gift on this list, as the Pro plan will clean you out USD $290/yr, but believe me - it’s money well spent. Snag a Stratosphere premium subscription here.
This doesn’t even have to be exclusively for investors - this is a great purchase for just about anyone that enjoys learning, especially if they like to stray outside the boundaries of just one subject. It also has some great content specifically for investors and people with business interests - for $13/month, it has a lot of value for the amount of learning that one can do on the platform.
The best part - it strays away from bland classroom videos or long written paragraphs, and teaches instead with engaging video and easily digestible lessons that are split up into many parts.
Check out MasterClass plans here.
What’s New at Hourglass
The Trade Desk ($TTD) Part 2 - An Expensive Opportunity
I wrapped up the first mini-series on the Hourglass Investing podcast this week with Part 2 of The Trade Desk. Part 1 dived into the business model, what programmatic advertising is, and CEO Jeff Green. Part 2 focused on the industry and some of the risks & competition that The Trade Desk faces from walled gardens, as well as from smaller demand-side platforms following the open internet thesis.
Finally, I managed to find a few minutes to sneak in a very brief dive into the balance sheet, growth potential and moat, as well as the valuation (without turning it into a trilogy). Check it out below, and let me know what you think about the episode / The Trade Desk in the comments on the episode.
Deck the Halls with Investment Ideas
I collaborated with some amazing investors to put out a special issue for Christmas - seven one-pager company dives by seven investors, all in one article. Companies covered include Zoetis, Medistim, Meta, Diageo, Onfolio Holdings, Texas Instruments, and Well Health (by yours truly!).
It was super great to work with other investors (especially such a fantastic list of great researchers) and refine an interesting company dive into <1000 words. Check out the full article below, and be sure to give all the other investors on the list a follow if you don’t already!
Upcoming - Global-e Online Deep Dive
Next Thursday I’ll be dropping a deep dive into Global-e Online, an ecommerce play with an interesting value proposition for its customers. I’m super excited to share that one with you all, so be sure to subscribe below and get that sent straight to your inbox when I release it!
That’s all for this week’s issue! If you’re not already subscribed, be sure to follow along for weekly newsletters like these, bi-weekly deep dives into growth companies, and podcast episodes every Tuesday!