Newsletter XII - 5 AM Club, $DECK, & Unity

Recapping a Week in the Markets: Oct.9 - Oct.13

Week Recap

---

“Clarity of writing usually follows clarity of thought.”

The Economist

News

Tragedy In Israel

Firstly, I wanted to take a moment outside of the usual financial news that I focus on in these newsletters. Some things go beyond markets, returns, or the joys of investing, and last weekend exemplifies that in the most heart-breaking way possible. What’s going on in Israel is a tragedy - that is not a political statement, it’s a fact. I won’t use this space to dive into the deeply nuanced politics and wrongdoings, I only want to express my condolences for the violence.

People are dying, families are being torn apart, and already-heightened tensions in the Middle East are set to become considerably worse. It is also yet one more global geopolitical conflict to add to the list: Ukraine/Russia, China & Taiwan concerns, and now the world waits with held breath to see the scope, scale, and method of Israel’s response in Gaza.

My heart goes to the people of Israel and Palestine.

Peace, John Riccitiello

In happier news, Unity Software U 0.00%↑ announced on Monday that John Riccitiello, now-former CEO, would be stepping down, effective immediately. What a great way to start the week for Unity shareholders.

I’ve been hoping and praying on this one for a hot minute - I was even on the verge of selling my shares, something I will now be holding off on while my prayers instead turn to hoping for a good replacement. I wasn’t alone in this mentality either - the executive team has been a thorny point up the investment’s bum over the last number of years.

As I discussed in my article on Unity, the overall business model and industry for Unity is incredibly attractive - but an inept management team that seems to land itself in embarrassment after embarrassment, hasn’t been aligned with shareholders or its customer base, and is often talked about as being responsible for a toxic work environment at Unity has always dragged the investment potential down.

Let’s hope the incoming CEO can turn this ship around and fully leverage the awesome business model and potential of Unity.

Birkenstock IPO

As I mentioned last week, Birkenstock was ready to undergo its IPO - well, this week they did it! And the results were…

Underwhelming. Since opening at a price of $41.37/share on Wednesday, the stock has been on a steady 9% plus change decline. Welcome to the public markets, Birkenstock.

---

Weekly Read

The 5 AM Club - Robin Sharma

Someone recently recommended the 5 AM Club to me as a potential book recommendation for this weekly newsletter - I have to say, my first impression was not favourable. The title makes it sound a bit like a gimmicky self-help book that was designed by the author more to show off their amazing attributes than teach anything useful.

After I started reading it though, I warmed up to the book. I’m currently about two-thirds of the way through it, but so far it’s made for a good read, and I can definitely recommend it for anyone that wants to become a morning person but struggles with actually doing it. The book has not only provided some solid reasons for me to get my arse out of bed in the morning, but also frameworks for doing so in a meaningful and sustainable way.

It’s also helped me to become much more productive, something I’m constantly striving for as someone with a very busy schedule. Using the 20-20-20 routine - 20 minutes of exercise, 20 minutes of reflection, and 20 minutes of learning - I’ve had a very easy time waking up and getting things done that I normally kick myself for not having done early, usually right as I head to bed and have no more time in the day.

I’ve also added on another segment of my own - the 20-20-20-30, if you will. This last 30-minute segment I’ve dedicated to managing my personal portfolio, something I’ve had less and less time for recently. Going deeper into quarterly reports and earnings calls, catching up on news, digging into some watchlist stocks, etc. It’s made for a highly productive start to the day, and I’ve found that the rest of my day is more productive since I’ve already started it by getting those nice bonus quest items off my daily to-do list.

There’s a ton more to this book that provides helpful and productive ways (& reasons) to start the day, and I’m super stoked to finish it off - something I now have time for during the peaceful morning hours.

---

Investing Tidbit

Personal Finance & Investing

Something I’ve come to appreciate more and more as time goes on is the importance of my personal finances - while I have always been oriented towards personal finance, as I’m sure many of you who read this newsletter are, to some degree this has stopped at putting most of my energy towards investing, I’m sure a sentiment that again at least some of you can agree with.

As I get older, though, I realize more how important it is to manage the other aspects of personal finance as well. In fact, it was the knowledge that poor planning of my personal finances had the potential to wipe out all my investments, a prospect I’m sure would break my heart alongside my portfolio, that finally brought this point home.

So I’ve spent the last few months studying up on how to better manage my personal finances, and I thought I’d share some of the efforts I’ve been undertaking, in case these are handy tips for any readers (if you are more organized than I, kudos to you and please move on!).

• GET INSURANCE! Getting insurance while you’re younger can save you a lot of money (it only gets more expensive as you age), and if anything major happens to you and you suddenly need a lot of money, then insurance is there for you. If you don’t get insurance, it may be your only option is to withdraw your portfolio, destroying all your built up compounding effects, wiping out any dividend income you may have, and potentially delaying your retirement planning.

  • I put insurance off for a long time because I have no dependents - trust me, once you lay out the math, you’ll realize you want life insurance even if you’re going to be single for the rest of your life. But if you do have dependents, definitely, 100%, life insurance is a good idea.

• Build your budget - saving is as important as investing. This was, thankfully, one that I had already been doing so as to maximize the dollars I could invest - but building a budget based off your income, short-term needs, spending, etc. is invaluable to making sure you can comfortably cruise through life while also putting money aside for future you.

  • Also on this note, while you’re building a budget make sure to also build a contingency fund! It’s always a great idea to have a little money put aside for a rainy day, and it can help you avoid costly credit card debts or the need to take out loans.

    • Also also, putting aside special pots of money for specific purchases you may need to make throughout the year - tire replacements, new washing machines, engagement rings, perhaps - will help you avoid having to break your fresh budget early and throwing a wrench in all your plans!

• Plan for retirement - it’s never too early! Figure out what you’re going to need and by when, the age you plan to retire at, and make a few different projections - conservative, moderate, optimistic - to model out your retirement options. This is a great one because it can also help to inform your investing strategies!

These are all things I’ve been putting my efforts towards over the last few months. And while setting aside money for these things has meant a short-term dip in the amount of money I’m able to deposit into my investment accounts, I feel comfortable knowing that in the long-term this will save me from ever having to withdraw money from my portfolio before the time I intended.

There’s obviously a ton of time and individual considerations that go into each of these items - building a really thorough budget with an ample rainy day fund and pots put aside for potential emergency purchases took a ton of time. So did insurance - I think that was about a 6 day process of comparing different options and going through the research on what I’d need. So I do recommend going and doing a ton of research into all of these things yourself before making any decisions. But it’s all worth it when you get there, because in the end personal finance is equally important to investing - even if it’s super lame, and nowhere near as fun.

---

Investor Spotlight

I’m switching up the format on this segment a little bit this week because I’m running out of different authors to highlight for the investor spotlight - so consider this a Call to Action! If you know of any other investment newsletters or authors that are delivering quality investment research, please drop them down below in the comments! I’m always keen to talk to some new authors and showcase their work.

For this week though, I’m highlighting a recent article from former investor spotlight all-star,

Secret Sauce Investing

- a write up on Greggs Company, a British bakery with an intriguing growth story more shops in the UK than McDonalds (what?!), and some very solid financials. As always, Sonny gives an excellent and in-depth overview of both the business and the investment. Find the article below.

My only concern with this business, after reading Sonny’s write-up, is that the global expansion story may be a bit sketchy, as I’m not sure the British could be trusted to know good food even if it jumped up and bit them in the arse - if they think it’s good, the rest of the world probably won’t (kidding, sorry to my 5 UK readers - couldn’t resist).

Greggs Company Write Up £GRG / $GGGSF

---

Weekly Watchlist Stock

Deckers Outdoor - DECK 0.00%↑

Deckers is here to remind you not to overthink investing too much. Like many investors, sometimes I get caught up trying to find the next huge trend, the fast-growing industry, the new and exciting AI application. But sometimes all you have to do is dump your money into a quality shoe brand, let it sit for 30 years, and handily outperform the market over that time - stress free.

Deckers is a vertically integrated fashion designer and distributor of well-known shoe and apparel brands like Teva, Ugg, and Sanuk. That’s about all there is to the company, it’s dead simple - but the business is a machine, with huge returns on capital, a >15% CAGR over the last 30 years (~33% over the last 5 years), some very attractive revenue growth (20% CAGR in the last 3 years), and across-the-board margin expansion.

Fashion stocks always scare me a little bit, and yet this is the second I’ve taken a look at over the last month, with my Aritzia deep dive coming out at the end of September. Though they’re always at risk of falling victim to changing trends, Deckers long-term success within this industry should do a lot to alleviate concerns on this front, especially with growing returns over the last 5 years. There’s a lot to like about the business, despite the fashion risk, and I think it’s worth taking a closer look to see about the future growth potential.

---

What’s New at Hourglass

Structure

I’m rejigging the structure at Hourglass a wee bit - while weekly newsletters will remain on Fridays, as of this week I’ve started to release podcasts on Tuesdays (as opposed to Wednesdays) and deep dive articles every second Thursday, rather than every second Monday - this is mostly out of an effort to release my articles, the main value prop of Hourglass, at a time when readers will want to read them (that is, not Monday mornings), and also to space out the release of the podcasts from the research articles.

Episode XII - Cybersecurity

A quick audio dive into an exciting, fast-growing, and immensely important industry, as well as some of the different players operating in this space.

Deep Dive Article - SupremeX

I released a deep dive yesterday into SupremeX (SXP), a leader in the North American envelope industry. Due to the digitization of bill paying, marketing, and communication, the market for envelopes is in secular decline - but that also means less competition. SupremeX is taking advantage of this empty competitive landscape to consolidate the fragmented envelope market and leveraging the stable cash flows from their leadership position to fund a pivot into longer-term growth in the packaging industry.

This two-pronged growth strategy has huge potential to reward shareholders if management is able to execute - especially at the current valuations, which reflect more SupremeX’s position as an unloved Canadian microcap in a dying industry than their impressive growth and improving underlying metrics. Read on to find out everything you need to know about SupremeX’s investment potential.

---

Have a great weekend folks!