April 2022 Wrap - Music 🎵 & Markets 📈📉, Basketball 🏀, Jay Z ft Buffett and the (almost) perfect crime
The monthly wrap
I’ve been toying with the idea a monthly wrap up post for the last couple of weeks and decided to put this one together at the last minute. Every month I will share a summary of what I’ve read, seen or heard that I’ve found interesting. Expect the format to evolve over time, as well as what’s included. If you have any feedback, please hit me up!
First an update on how The Long Game is going
I actually started The Long Game in January where in my first post I laid out the vision for this site. It took me until April to publish my first post, my investment notes on Spotify, a company I had been researching on and off for about 12 months. In that post I wanted to distil the key elements of my thesis in a concise way. I actually wrote two other company deep dives in this time but I decided against publishing these as I didn’t think they were well researched enough. I expect I will revisit and publish them in the future but I want to keep the quality bar high. From a post perspective, April was a productive month. I published 3 other posts: Anchoring Bias, my investment notes on GoPro and my notes on Charlie Munger at the Sohn Hearts and Minds Conference. Overall my investment notes on Spotify has been the most popular post, having been viewed almost 1000 times. I don’t expect this cadence of posting to continue. Going forward, my goal is to publish one longer piece relating to a company or topic I am researching / following per month plus the monthly wrap. Every now and then I will also have shorter posts on various topics that I find interesting or important.
From a subscriber perspective, I have been blown away at how well the first active month has gone. In April, The Long Game welcomed over 200 new subscribers, well above my goal of 30 (or 1 new sub a day). I anticipate that future growth won’t be at this level. Thank you to everyone who has subscribed, I find it extremely humbling. If you think there is someone who would enjoy this, I’d be grateful if you could share it. I’m also grateful to the number folks who have already shared this on my behalf. 🙏
Finally, I am now on Twitter – you can follow me here (@tlginvestor).
The pseudo hedge fund?
For now despite having two investment notes published, I have not added any new positions. I expect over the next few months “the fund” will start to make some investments and I will publish a quarterly letter to investors (me and my family). While I don’t attempt to time markets, I think the reasonably likely upcoming interest rate hikes and continued geopolitic tensions will present some compelling buying opportunities.
What I have been reading, watching and listening to
Every month I will share a selection of things that I’ve found interesting. While most of these will be company or investment related, in some cases it may include other things I’ve read (fair warning, I love investigative journalism, s you can expect well researched long form journalism to pop up). Here’s what caught my attention in April (as a side note, I’d say I read far less than usual this month as I was hit pretty hard with COVID and work was pretty busy). Expect a longer list for May.
Blackwells goes at Peloton again – Blackwells the activist investor agitating for change at Pelaton released a second presentation, A Further Call to Action – Pelaton Presentation (you can also read Part 1 here), reiterating its views the board of directors should put the company up for sale. Blackwells fired a number of shots at Pelaton including at the board and new CEO Barry McCarthy. I’d suggest reading Part 1 first if you haven’t already.
The Sure Thing– this is a super interesting podcast from Australia. This six part podcast is the story of two university friends who almost pulled off Australia’s biggest insider trading job. Chris Hill and Lukas Kamay used inside information on Australian labor force statistics to trade the Australian dollar. While the two friends agreed to cap their gains to $200k, unbeknownst to Hill, Kamay betrayed his friend and set up a separate account and made millions. This is the story about how they almost pulled off the perfect crime before they were caught. If you want a bit more background, I suggest reading this article before listening to the pod.
When People Listen to Happy Songs, the Market Outperforms (Harvard Business Review) – According to this study the stock market outperforms when people listen to happier songs. I’ll leave you with one question, how efficient is the market really if its driven by emotions not facts?
Sam Hinkie’s Resignation Letter - this is an oldie but one which I continue to come back to. Hinkie was the General Manager (GM) of Philadelphia 76ers before he abruptly resigned (there were other signs that he was about to be pushed out) via a 13 page resignation letter to the board. Prior to sports management Hinkie worked at Bain Consulting and at Bain Capital. He then went to Stanford Business School where he earned his MBA before transitioning into sports management. Hinkie was known for his data driven approach to sports management. As a GM, Hinkie decided it was best not to publicly share the reasons for his decisions. His thesis was that by not sharing the rationale for his decisions (publicly and to his competition), it would give him a competitive advantage. This resulted in him making decisions (often unorthodox) without any explaination. Essentially Hinkie was comfortable damaging his relationship with and image in the media and fans instead of giving away any of the Sixers secrets, even while the team continued to record losses. It takes a special personality to turn away from the expectations of society to ensure the greater good (even if it results in personal criticism). Ironically, his resignation letter (which became public), did what Hinkie was unwilling to do, and share why his plan for the Sixers was the right thing to do. Sports fan or not, his resignation letter is a must read. While there are a number of quotes which stood out, these are two were to which resonated with me.
Call me old-fashioned, but sometimes the optimal place for your light is hiding directly under a bushel.” (Hinkie is saying that sometimes it’s better not to widely call out your successes or plans, but to build them in stealth).
“Jeff Bezos says it this way: ‘There are a few prerequisites to inventing…You have to be willing to fail. You have to be willing to think long-term. You have to be willing to be misunderstood for long periods of time.’”
In fact, Hinkie quoted 14 non basketball people his letter.
It’s the Berkshire AGM and a number of shareholders have the annual pilgrimage to Omaha to watch the great man Warren Buffett share his thoughts (jealous, enjoy the trip if you’re one of the lucky ones that made it this year!). This video from 10 years ago of Warren Buffet and Jay Z speaking to Steve Forbes came up in my YouTube feed. Despite coming from different worlds, I found it striking as to how similar both were in the way in which they thought about business, life and philanthropy. One part of the interview that resonated with me was the power of luck. Warren has widely spoken about how he won the ovarian lottery (born in America as white male who had a gift in capital allocation), but I had never heard the story that Jay shared on how being in the right place at the right time meant he avoided a lengthy period of incarceration. Powerful stuff.
Chart of the week
I found this chart from Jamin Ball of Clouded Judgment quite telling. It basically reminds us that public market comparables are always at a point in time. As investors when markets get crazy hot (like they did last year) we point to comp sets which justify investing in a company at a high valuation (“it’s in line with comps”). It’s amazing to think that just 12 months later our view on what a fair value for the same company has changed so dramatically. For me it reinforces the importance of patience when the market presents a valuation which is unjustified (with median NTM revenue multiples hitting 40x+, though not shown on this chart the peak median for the top 5 was almost 80x!) . As an FYI, in the buckets below Jamin considers high growth >30% projected NTM growth, mid growth 15%-30% and low growth <15%.
Tweet of the Month
Every month I will share a Tweet I came across that resonated with me. For April, it was this thread by Mostly Borrowed Ideas, which reminds that in good times and bad, its important to keep your emotions in check and also as an investor not overestimate your ability.
Stay patient, focussed and rational.
TLG
Correlation doesn’t equal causation, but that study about happy music and market returns was a cool read!