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00:00:00 – 00:56:20
The video discusses "The Forgotten 40," a publication featuring 40 stock ideas for the coming year, emphasizing long-term investments and detailed research. The portfolio includes small-cap stocks with potential catalysts for value growth. Discussions cover acquisitions, catalysts for company growth, the success of Uber, the energy sector, Interactive Brokers, stock valuations, investment strategies like Compounders, and the potential of sports teams for shareholder value. Key themes include individual stock selection, identifying catalysts, the importance of quality businesses, and the role of long-term perspective in investing for substantial gains.
00:00:00
In this segment of the video, the speaker discusses “The Forgotten 40,” a publication highlighting 40 best stock ideas for the upcoming year. The selection process involves profiling in full-length reports and identifying catalysts for capital appreciation. The speaker’s firm emphasizes long-term investments and thorough research. The one-page snapshots of the chosen stocks are distributed as a reference guide, aiding portfolio managers in decision-making. The previous year’s Forgotten 40 performance was successful, outperforming benchmarks like the Russell 2000 value index and the S&P 500.
00:05:00
In this segment, the speaker discusses The Forgotten 40 stock portfolio, emphasizing a long-term approach and the importance of equal weighting in investing. They highlight the need for diversification, mentioning that the balance of the portfolio is crucial for success. The portfolio includes mainly small-cap stocks and focuses on finding potential catalysts to unlock value, such as acquisitions or market events. The turnover rate in the portfolio is about 50%, with an emphasis on selecting the best 40 stocks across various industries and market caps. The speaker suggests that small-cap stocks may experience a resurgence in the market, and they stress the significance of identifying catalysts in stock selection for value realization.
00:10:00
In this segment of the video, the speaker discusses how they assess companies as potential acquisition targets based on value and reasons for owning them. They highlight examples of companies like Univar and Hostess Brands that were acquired. The speaker emphasizes the importance of finding a catalyst for a company’s growth and mentions various potential catalysts such as buybacks, spin-offs, or acquisitions. They also touch on the role of private equity in acquiring companies and the need for premiums in such transactions. The speaker suggests that understanding catalysts is crucial for predicting stock price movements and mentions examples like interactive brokers and index inclusion affecting stock prices.
00:15:00
In this part of the video, the speaker discusses Uber, which was the biggest winner of the previous year with a stock rise of over 130%. They highlight Uber’s growth in a winner-takes-all industry, with a market cap of $119 billion. Despite being on this year’s list again, the speaker emphasizes Uber’s strong performance, profitability, and long-term growth potential. Additionally, they mention thematic investing strategies involving macroeconomic factors and small cap stocks underperforming the S&P 500 since 2015, attributing this to various reasons like the rise in interest rates and historical market trends.
00:20:00
In this segment of the video, the speaker discusses the performance of different asset classes after the dot-com bust, emphasizing the potential for stock pickers focusing on smaller cap names to do well. They highlight the historical performance of the S&P during presidential election years, noting that markets tend to be more accommodative to a sitting president running for re-election. The speaker mentions patterns in the market post-election cycle and notes that the approaching 2024 does not seem like a typical election year based on historical trends. They caution against relying too heavily on macro outlooks and strategic calls, advocating for a focus on individual stock selection. The speaker also mentions discrepancies between market predictions and actual market performance in recent years.
00:25:00
In this part of the video, the speaker discusses the energy sector, highlighting that historically, energy names have been avoided due to being capital destroying and cyclical. They mention the challenges of trading energy stocks, which are tax-inefficient and require frequent decision-making. The focus then shifts to Interactive Brokers, a company in the Forgotten 40 list, with impressive growth and differentiated service in the digital platform for stock trading. Interactive Brokers’ success is attributed to factors like low-cost margin lending, technology automation, and expansion in the hedge fund space. The company’s PE ratio is mentioned to be just under 15, showing growth in fiscal year revenues from 3.3 billion to 4.3 billion in 2023.
00:30:00
In this segment, the focus is on Interactive Brokers, highlighting its profitability, history of profitability, pristine balance sheet, potential for increased dividends or share buybacks. The founder, aged 79, owns a significant portion of shares, and the company has grown through word of mouth rather than aggressive marketing. Interactive Brokers has a high switching cost for customers, providing stickiness once acquired. The company is expanding globally outside the US, positioning itself as a low-cost provider with strong infrastructure and technology. The competitive landscape outside the US favors Interactive Brokers due to its cost-efficiency and advanced platform. Compared to peers like Fidelity and Charles Schwab, Interactive Brokers has a lower number of accounts but is growing rapidly with high single-digit growth outside the US.
00:35:00
In this part of the video, it is discussed that Pershing Square had a $1.2 billion stake in the company and accumulated over half of their shares during the drop in March 2020. The focus is on Howard Hughes Corporation’s chairman and his strategic share purchases during the COVID period. Details about the company’s operations in favorable areas such as Texas and Nevada are highlighted, and the potential for the company to go private or merge with a publicly traded fund is suggested. The company’s substantial amount of raw land for development and plans to spin off assets into a separate publicly traded company in 2024 are also mentioned, along with the limited coverage by Wall Street analysts.
00:40:00
In this segment of the video, the speaker discusses the importance of accurately valuing a company by examining its assets, particularly land holdings. The company invests its capital back into development, which is a competitive advantage. They carefully control the supply of land within their communities, enhancing their value. The company is not a REIT, allowing them to reinvest without distributing dividends. Near-term catalysts include spinning out assets and owning parts of a minor league baseball team. The discussion also touches on investing in undervalued companies, conglomerate discounts, and the importance of good capital stewards for long-term investment success.
00:45:00
In this segment of the video, the discussion revolves around investment strategies, focusing on Compounders and long-term growth prospects. The importance of selectively investing in quality businesses, rather than solely based on valuation metrics, is emphasized. The example of different approaches to investing, such as a concentrated portfolio versus a broader one, is highlighted. Specific companies like Interactive Brokers and Marel are mentioned for their diversified revenue streams and strategic positioning in the current market conditions. Additionally, the potential investment opportunity in Madison Square Garden Sports Corporation is addressed, noting the Dolan family’s control and the unique position of the Knicks and Rangers within the sports industry.
00:50:00
In this segment of the video, the speaker discusses the potential for the Rangers to increase shareholder value through various means, including potentially selling one of the teams or a stake in a team. There is also mention of the scarcity and increasing value of sports teams, with reference to potential NBA expansion. The discussion touches upon the negative reputation of James Dolan and the possibility of a sale based on historical precedents. The importance of a longer-term perspective is emphasized. The speaker also mentions resources for further information about investing strategies related to the stock market and sports teams.
00:55:00
In this segment of the video, the speaker expresses gratitude to the guest for sharing their research and discusses the importance of looking for companies with substantial research behind them. The guest emphasizes the need to break away from the crowd and invest in assets that may be discounted or unloved, requiring self-control and discipline. He highlights the challenge of going against consensus but mentions the potential for significant gains in such investments.