by Travis Johnson, Stock Gumshoe | May 5, 2023 4:49 pm
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I have never touched and probably won’t ever touch banking. It consistently underperforms as a sector. Sure there may be some hidden gems but you’re swimming in a sea of sharks to find them. Not sure why people think they have to own a little bit of everything. Diversification? You’re always going to be better off (long term) holding fewer high quality stocks than many low quality ones. Both in total returns AND risk adjusted. When I say “high quality” I’m referring to high levels of FCF growth, FCF ROC, low debt, etc. Stuff like MSCI, SPGI, GOOG, MSFT, V, MA… Try to find companies with low volatility in their free cash flow growth over long stretches of time and avoid the rest.
I recently read David Poppe’s most recent letter from his joint venture with Francois Rochon (Giverny Capital Asset Management/GCAM). He was/is a holder of SCHW, FRC and MTB, which hurt the portfolio in a big way and I just have to wonder why? This guy is pretty smart, right? Those three companies combined are less diverse in their revenue streams than if you were to just hold MSFT (and they’re all much lower quality).
Interesting, Rochon was one of the presenters at the conference I attended today. Definitely aims for “middle of the road” as a way to outperform by avoiding big mistakes, but I’ll see what other notes I have from that talk.
Thanks
Fine work on IEP Travis, a magic carpet that flies above the clouds of realistic NAV vs. EV with market valuations, supported by big dividend payments, out of any earnings relationships that makes sense. If it looks like a Madoff clone and survives like a Madoff clone, maybe it will deliver returns like a true Madoff company eventually did. Time will tell. My take: stay away from this hot potato.
FYI, Porter Stansberry had an interesting take on the IEP fight that he posted publicly (apparently he recommended the stock a few months ago): https://website.porterandcompanyresearch.com/is-icahn-enterprises-a-ponzi-scheme/
I sold IEP in Apr of last year. However prior to that for a number of quarters, the default for dividends was payment in shares. It would require a quarterly call to my broker to get cash. My analysis was that cash dividends would reduce the value of my holding. So, too much trouble and not in line with investment goals.
Correct me if I’m wrong (please) but doesn’t that mean you tax rate is far higher than a cash dividend?