Newsletter II
Discover more from Hourglass Investing
Week Recap
News
A Slew of Earnings
It’s one of my 5 favourite times of the year! 4 being earnings season, and the fifth being Easter (for the chocolate).
Earnings were released from some of the companies in the Hourglass portfolio this week, including Canadian Pacific Kansas City, GFL Environmental, Mastercard, Meta, Spotify, Visa, Microsoft, and Google.
I also took advantage of a post-earnings drop in S&P Global to initiate a position.
Results have mostly been good - SPOT 0.00%↑ took an absolute hammering on the announcement that gross margins had retracted slightly, as well as some costs incurred as a result of making their operations more efficient.
V 0.00%↑ saw a decrease as well, after reporting transaction volumes had seen a significant decrease.
Meanwhile, GOOG 0.00%↑ did quite well for itself, as did CFO Ruth Porat - the company announced her promotion to President and CIO, in addition to her role as CFO.
Another Move to U.S. Production
First Solar ( FSLR 0.00%↑ ) announced it’s planning to invest over $1bn in a new manufacturing facility in the U.S.
This comes on the heels of several other companies choosing to domicile their operations, most notably among them Intel ( INTC 0.00%↑ ). With current geopolitical tensions around the world, I see this as the beginning of what could be a major trend as the U.S. looks to encourage efforts to move business’ operations either to the U.S. or favourably allied countries.
Macro-Economic Data
What’s the news if we don’t talk big macro?
Positive economic data came pouring in this week, including a healthy growth in GDP, indicators of lower inflation, and a subsequent decrease in the expectation that the Fed will hike rates again in September.
Does all of this point to Powell & Co. actually being able to navigate a soft landing for the economy?
Weekly Read
I, Pencil - Leonard E. Read
The definition of an oldie but a goldie, Read’s ‘I, Pencil’ is a foundational piece on economics, globalism, and the inter-dependent nature of society’s economic machine. The piece makes a crucial point, told from the perspective of a pencil;
The pencil posits that not one being in existence could make a pencil from scratch - between the wood handle, the graphite writing tip, and the rubber eraser, the independent components that go into even a simple pencil require an immensely complex chain of events. Materials must be gathered, transported, processed, transported again, and finally assembled by a series of separate individuals across various industries - and that is just for something as simple as a pencil.
The driving force behind its miraculous existence, according to the pencil, is human cooperation and the division of labour across the economy - underpinned at every step in the process by the foundational tenets of the free market.
Read uses his essay, ‘I, Pencil’ to argue his case for leaving the free market, well, free. By allowing the economy to operate independently and free of government intervention, the ‘invisible hand’ of the market guides the global economy to allow for more complex creations that can ultimately only serve to advance human society.
‘I, Pencil’ was one of the first essays I ever read on the broader economy; it describes beautifully how the market operates, especially in a more-complex global society, and the advantages garnered from leaving it right alone. The best part? It’s a pretty short read. If you’re interested in learning more about a globalist economy, you can’t do much better than this essay by Leonard E. Read.
Investor Spotlight
Sonny at Secret Sauce Investing
Secret Sauce Investing, firstly, has one of the most brilliant names I’ve seen in the financial space so far. Most people pick boring titles, like ‘Hourglass’ and such. Secondly, Sonny delivers some highly succinct deep dive research with a focus on mostly large-cap companies and compounding opportunities.
Secret Sauce has produced some fantastic pieces, and has been delivering them consistently since late 2021, including research on Nvidia, Google, Adobe, and more recently Disney. The articles cover the business model, products, and bull & bear cases in a short and easily-digestible format.
I’d highly recommend Secret Sauce Investing for anyone that wants a quick but thorough look into the companies Sonny is covering over there! I personally really enjoyed his piece on Games Workshop, and he divulged to me that his upcoming piece is on Nike - if you’re interested, you can find Secret Sauce Investing on Twitter, Commonstock, and of course right here on Substack!
This Week’s Watchlist
Often, I write about highly exciting companies doing highly exciting things. However, with the current run-up in prices, I’m seeing much more value in the realm of boring, plain-Jane companies. So that’s where I’m looking this week;
RBC Bearings (Ticker - RBC 0.00%↑)
This is about as boring as a company gets - RBC Bearings was came public in 2005 and manufactures, you guessed it, bearings. Bearings help to reduce friction and wear & tear on moving parts while keeping them moving smoothly and precisely in the direction they are intended to. Your car, for example, has bearings that help to rotate the wheels, ultimately increasing the mileage on various parts of the wheel and giving you a smoother ride.
RBC manufactures bearing solutions across the globe for;
Aerospace and Defense: This includes aircraft controls, helicopters, engine systems, guided weaponry, and military ground vehicles. RBC Bearings are found in flight control systems, engine systems, airframes, landing gear, and rotor systems.
Industrial: This covers a wide range of applications in areas such as robotics, semiconductors, material handling, automation, oil and gas, wind energy, mining, and construction.
Automotive: Bearings used in vehicles help reduce friction and ensure smoother operation of parts. They can be found in engines, transmissions, and wheel hubs, among other components
The company also has a recurring service segment, which includes repairs or conditioning for clients’ bearings, as well as design services. Here’s a quick snapshot of the company;
There are some pretty attractive metrics here, and I’m officially tossing RBC Bearings on the Hourglass watchlist for a future deep dive!
What’s New at Hourglass
Hourglass Podcast - Stem, Inc.
Episode II of the Hourglass Podcast got released on Wednesday - if you want a brief overview of Stem, Inc. and what they do, please check it out! You can find it right here on my Substack page or on most major streaming platforms.
If you listen and are interested in more, I also have a deep dive article available on Stem to supplement and dig deeper into some of the finer points on the investment opportunity.
Research - Duolingo
The bi-weekly research article was released on Monday, this time diving deep into Duolingo!
Duolingo likely needs no introduction - through stellar marketing campaigns and strategic partnerships, as well as a gamified product that has hooked millions of learners across the world, Duolingo has certainly made a name for itself.
In the article, I look at Duolingo’s business model, the investment opportunity, and the visionary at the helm of the company - find it below!
