Newsletter X - September Issue
Recapping a Month in the Markets: September
A quick and fun issue for this week’s newsletter folks - I’m going to recap all of the weekly watchlist stocks, investor spotlights, investing tidbits, and weekly reads from the September issues of my newsletter. From now on, I’ll aim to do this for the last week of every month - it allows me another opportunity to more succinctly highlight some of the cool things I’ve found/recommended over the course of the month in a singular, compact issue, and then if reader’s are interested in getting deeper into any of the specific items, they can check out the corresponding week’s newsletter!
Red Notice - Bill Browder
The story of a hedge fund manager turned human rights activist advocating justice for the imprisonment and murder of his lawyer at the hands of the Russian government. Finance meets crime & suspense in this thrilling, inspiring, and at times tragic tale that reads like a fiction.
Deep Economy - Bill McKibben
Looking beyond the simplistic and often shallow ideals of capitalism, McKibben argues for the benefits of implementing a more localized economic system that encourages living within our environmental means, fostering community, and producing goods locally to bring producers & consumers face-to-face with their impacts on the world.
The Mauboussin Almanack - Michael Mauboussin
Mauboussin is a masterclass in the behavioural approach to investing - something I believe every investor should be well versed in, and also something that I still have a lot to learn about. Luckily, there are fantastic resources like The Mauboussin Almanack to teach any investor, completely free, all about behavioural approaches to the markets and and how the human psyche can impact investing.
The Laws of Human Nature - Robert Greene
Another mindset book, The Laws of Human Nature set out a large list of laws and how they help to govern people’s actions, mindsets, and thinking. Understanding these laws, as Greene points out, is crucial to not only governing yourself rationally (a key to being a successful investor!), but also to understanding others and building meaningful connections in both personal and professional environments.
Build Your Own Foundation of Why & How You’re Investing
The internet makes it all too easy to become overloaded with information. I believe it’s a valuable practice to set out your goals, your “why’s and how’s” for investing before you begin so that this overload of information doesn’t come to impact your bank account. This can evolve over time, certainly - in fact, it should. But understanding what you’re doing and why you’re doing it can keep you from getting roped into silly schemes and sham stock recommendations, as well as from making rushed decisions that aren’t aligned with your personal goals.
How to Research
Deep and thorough research is the foundation of everything I do as an individual, as an investor, and at Hourglass. Research is probably about 50% of my life, through a variety of topics. So it shouldn’t come as a surprise that I advocate doing a TON of research into every company you invest in - here are some of the best resources I’ve found for it.
Annual & Quarterly Presentations
Investing Blogs (take these with a grain of salt if they’re recommending unequivocally to buy or sell a stock)
Annual Shareholder Letters (for more general investing outlooks)
Go to Bed Wiser - Everyday
Read. Listen. Learn. Write. Do it some more. Do it everyday. Your brain is not going to explode, you’re not going to hurt yourself. You will likely thank yourself, in fact. Going to bed everyday a little wiser than when you woke up is a key to developing not only as investors, but also as individuals, as friends, fathers, colleagues. This sentiment is mirrored by some of the greatest thinkers of the ages - da Vinci, Theodore Roosevelt, and many of our modern tech giants are all advocates of this life strategy, so you don’t have to hear this just from me. In the age of information, this is easier than ever before. Take advantage of it - listen to podcasts, read books, fill your brain, and write down what you learn and what you think about it to really help digest it.
Return on Invested Capital is one of the greatest metrics for measuring a company’s ability to allocate capital and realize returns. It’s also a great figure for measuring similar companies up against each other to analyze which business may have the better business model, management team, or execution. Businesses with higher ROIC than their direct comps will generate outsized returns over the long-term, so long as they can be sustained. However, ROIC is a limited metric - it’s better for analyzing established or late-phase businesses, and is almost entirely useless for analyzing growth stage companies.
From 0 to 1 in the Stock Market - Giuliano
Investing for Beginners Podcast - Andrew Sather & Dave Ahern
Idea Hive & the Value Investor’s Club
Sleep Well Investments - Trung Nguyen @ DTF Capital
Weekly Watchlist Stocks
Supremex - Ticker: SXP
One of North America’s leaders in eCommerce packaging, envelopes, and custom labels. Trades at a market cap ~$120m with high returns on capital, a strong yield (3%) on a low payout ratio and still ramping revenues. As boring a business as you could find, but one very much up my alley as both a fast grower and microcap.
Sterling Infrastructure - Ticker: STRL
An established player hitting a second wind after the installment of a new CEO, this $2.5bn company provides E-infrastructure solutions for high-tech manufacturers, data centers, e-commerce distribution centers, commercial, warehousing, and energy. Ramping revenue growth and growing capital efficiency metrics, this one looks set for some good times ahead, but is trading near all-time highs.
dentalcorp - Ticker: DNTL
A boring co. that doesn’t seem to get enough love from the markets. A ridiculously undervalued leading consolidator of dental practices in Canada that trades well-below its book value and sales figures, dentalcorp is continuing to acquire practices and ramp revenues while maintaining an attractive net debt/EBITDA compared to its peers south of the border. The company seemed to be gearing up for an acquisition, but even with that seemingly off the table for now, the company seems like a solid long-term hold with a share buyback program and a de-leveraging strategy now in place.
Xylem - Ticker: XYL
Water. Everything water. We’re talking water software, water testing, water infrastructure, water pipes, water… well, you get it. An investment in Xylem is an investment in a leading water services and solutions provider that recently acquired a fast-growing asset in Evoqua - not necessarily cheap, but a quality name doing some steady compounding with some dividend yield.
What’s New at Hourglass
Here’s what went down this week:
Episode X - Dividends vs. Growth
Bit more of a fun episode this week, pitting two very different investment styles against each other. I discuss when dividends are a great investment strategy and when the echo chamber of dividend-loving investors can be dangerous (hint: for young investors!). Then I get into growth, a realm I’m much more familiar with, and discuss the pros and cons of this approach as well.
I myself land more on the growth side of the equation, given where I’m at in my investment journey and the long runway I have ahead of me, and I think listeners can probably pick that up throughout the episode. That said, I try and stay relatively objective about where each investing strategy belongs and the types of investors that each is most applicable to.
Research - Aritzia Deep Dive
I switched up the release time on my more recent article so that I could release on the same day Aritzia released their Q2 earnings. I also, to be quite honest, needed the extra time; this was a doozy and one of longest and most detailed articles yet. It’s much easier to analyze companies that are doing great and kind of killing the game all-around - like my last article on WSP. Much harder, however, are articles into companies that are struggling.
Analyzing a turnaround story is especially difficult - there’s an extra layer of the business you have to peel back to try and understand whether recent struggles are long-term thesis breakers or just slight hiccups for what is otherwise still a strong business. That’s what I had to do for Aritzia, a company that, like many retailers, has struggled over the last several quarters from macro-economic pressures. Check it out if you’re interested in Aritzia and/or looking for a potential low-value, turnaround-story investment opportunity.
And here’s what went down over the rest of September at Hourglass:
That’s all for the first of the monthly recaps! Have a good weekend folks, and happy investing next week!
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