The most recent “Invest Like The Best” podcast featured “Modest Proposal” a fellow managing a private pool of money mostly in equities. Some takeaways:
1. Small cap threshold was 1B ten years ago and now begins at 10B.

2. While most international markets average a markedly lower average PE compared to US equities, he says the best companies in those non-US markets often have as high or higher PE ratios than the average comparable “best” companies in the US markets.

3. Says Japan’s government efforts to shame companies to increase measures of profitability & investor outcomes via comparisons to other Japanese companies is starting to take hold.

4. Says the Swenson alternative investments model was the ticket back then but maybe not now because:
a. Valuation of PE owned companies has to parallel valuation of similar or otherwise comparable publicly traded companies.
b. PE investors are now $300B behind on receiving their monies for investments running behind their original exit dates. He says this is preventing those monies from being reinvested and this jams the works (my words)for institutional and other PE investors.

5. Says the return on available cash via interest that was not available during the ZIRP era is a factor these days and is changing some of the incentives for putting funds to work in small and mid cap so(my words).

6. He gave some interesting examples of companies still working through Covid era dynamics. Examples are trucking companies and aluminum drink can manufacturers. In the case of the aluminum can manufacturers, they are a three (3) company oligopoly historically growing at 2.5 - 3.0% annually and an industry average annual capital investment of $500 - 600M. During the COVID era the big drink companies put the screws to the can companies to meet stay at home drink demand, they in turn plowed $1.5B into additional capacity. Now that folks are getting out to bars, ballgames, etc. demand has dropped back to historical levels and depressing profits of the can companies. He says there are other related companies/industries continuing to deal with Covid era aspects.

7. Says existing homes selling at 4.0 million annual rate when it should be 5.5 million because folks not selling their homes (We are an example as we are downsizing candidates but nothing to buy).

There was more and I’ve already forgotten it.

Good stuff to ponder.

Uwharrie

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.