This guy is just about to take over the world or already took over.
He is the strongest disrupter of entire world of business at this time.
What a badass! Yes. I am talking about Jeff Bezos.
I often forget my dad name but I would not forget Jeff Bezos’ name.
I just finished reading The Everything Store: Jeff Bezos and the Age of Amazon.
and I realized that the more I read about Jeff Bezos, the more I found that Jeff Bezos is very similar to the sexy old man Warren Buffett.
Both are fundamentalist that do not give a shit about what other people think.
Both care greatly about their customers and shareholders.
Both are extremely patient.
Both are not afraid of making mistakes and try to learn from them.
Both write one of the greatest annual reports and letters to shareholders.
and lastly both represent my definition of sexiness. Look at that faces.
How 50 something and 80 something years old man can be this sexy?
Anyway, the point of today’s blog post isn’t about how sexy Bezos and Buffetts are but wanted to share with you what Jeff Bezos taught me. One of the most important fundamental investing philosophy to be successful at finding great companies that I try very hard to keep in mind at all time but keep forgetting… “What’s not going to change in the next 10 years?”
Here is what Jeff Bezos said,
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … In our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ or ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.”
It teaches you to focus on what’s really important and think long term. Resilient companies that have extremely strong brand power and competitive advantages won’t get easily threatened by technological advancement of competitions.
So I had to ask myself… what are my top 10 holdings and why am I holding them? Do they have competitive advantages? Are the companies focus on long term? Who is managing the company?
I remember reading about stock picking contest by seventh graders at St. Agnes School from Peter Lynch’s book. The students picked a portfolio of stocks that grew by 70% while S&P grew by 25%. The portfolio included Disney, Pepsi, Nike… and they had to say one great thing about the company before picking companies into their portfolio
Nike (everyone loves Nike. So cool)
Pepsi (KFC, Pizzahut, PepsiCola, Frito-Lay)
A great quote from the book.
“Never invest in any idea you can’t illustrate with a crayon”
Let’s play the game that seventh grader played
BSR’s let’s illustrate with a crayon time
First of all, all of my top holdings are fundamentally strong companies that grow top and bottom lines and free cash flows year after year and have quite high ROEs with solid balance sheet (reasonable debt) so we can skip talking about quantitative fundamentals but let’s focus more on qualitative advantages. If you want to know how I quantitatively pick stocks, check out this post.
1. Linamar– Auto parts supplier with family names in the name of the company with high insider ownership. Consistent grower of revenue, net income and free cash flows while minimizing share dilution. Cyclical and also could be in trouble if electric vehicles dominates quickly.
2. Stella Jones– Top 3 railway ties provider in North America with years of operation. Technology advancement will actually help the company. Again two founders family names are in the company name with high insider ownership.
3. CGI group– One of the top IT service providers in the world that will benefit from more reliant of higher utilization of IT software by the world. High insider ownership with very minimal share issuance.
4. Lassonde industries– Private label juice maker. Top 3 in North America. High insider ownership with no share issuance for at least last 10 years. The founder is still the CEO and his name is in the company name.
5. Enghouse– Software and services company that has been growing at double digits for a decade. High insider ownership. Very strong operator. Software could be disrupted however due to stickiness nature of business relationship and strong history of acquisitions it will do alright.
6. MTY foodgroup– Food court King of Canada and the company just reached United states. Stanley Ma is one of the most frugal serial acquirer with tones of patience. Crazy badass that may take over entire food court. No matter where I go, I see MTY foodgroup’s franchise. Huge insider ownership.
7. Couchetard- Convenience store king that is all about acquiring convenience stores, create synergy through branding. Circle K is threatening Seven Eleven. If the pace of acquisitions is maintained, Couchetard will eventually become no 1 convenience operator in the world in terms of number of stores. High insider ownership.
8. Constellation Software- Another extremely sexy dude Mark Leonard. Small software king. Do not even know how many small companies it had acquired so far. Probably several hundred by now. Crazily insane valuation but that kinda makes sense as long as Mark is around. High insider ownership. Mark’s annual letter is pretty awesome to read.
9. Dollar Tree- Top 2 dollar store in North America. Recession proof business. Not quite think Amazon can disrupt the dollar stores but may have some negative impact. Not so much of insider ownership but strong business fundamentals. I think I need to think seriously about holding this company. Need to closely monitor it.
10. Exco Technologies- A cash cow and great acquirer of automotive parts. High insider ownership. Cyclical.
I realized that I do not have companies with extremely strong brand power such as Coke, Mcdonald, Nike etc… but I think I have fairly solid holdings in terms of its fundamentals, strong insider ownership and resilient nature of its business… Just need to make sure to keep asking myself
‘What’s not going to change in the next 10 years?’
Check out books about Jeff Bezos. Super fun book that you can finish reading in 3-4 sittings.
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