Geoff Gannon May 26, 2017 Idea Exchange

Reflections on the Newsletter: Why Quan and Geoff Wrote Those 27 Stock Reports

Focused Compounding includes a “Library” with 27 stock reports. I co-wrote those stock reports with Quan Hoang between 2013 and 2016. Although Quan and I no longer work together, he agreed to put his thoughts on that experience in writing for our community members to read. I think reading Quan’s “Reflections” will help you put each of those 27 reports in better context.   Quan’s Reflections Geoff asked me to write a reflection on my experience writing The Avid Hog (a newsletter we later renamed...

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Andrew Kuhn May 25, 2017 Mental Models

The Punch Card Mindset

“I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches–representing all the investments that you got to make in a lifetime.  And once you’d punched through the card, you couldn’t make any more investments at all.  Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about.  So you would do so much better.”- Warren Buffett Many Buffett...

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Andrew Kuhn May 21, 2017 Mental Models

“Go Where There Are Network Effects”

“Go Where There Are Network Effects” – Zero to One book, Peter Thiel A business that has a strong and enduring Network Effect can be a great business to invest in. It is one of my favorite tools in my mental-model toolbox, and is one that I look for and think about often. The best part about a business that has a strong network effect is just like compound interest, it only gets better as the numbers get bigger. The simplest way to describe a...

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Geoff Gannon May 18, 2017 Stock Ideas

Car-Mart (CRMT): Like the Company, Hate the Industry

Car-Mart (CRMT) now trades for $35 a share. I picked the stock for my old newsletter, The Avid Hog (you can read all 27 past issues of that newsletter here), when it was trading at $38 a share back in June of 2014. So, it’s now three years later. And the stock is now 8% cheaper. Do I like Car-Mart more today than I did in 2014? No. Ideally, a stock should be: Cheap Good Safe I’m not sure Car-Mart meets all 3 of those...

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Geoff Gannon May 10, 2017 Stock Ideas

Grainger (GWW): Lower Prices, Higher Volumes

The Original Pick I picked Grainger (GWW) for a newsletter I used to write. The pick was made in April of 2016. Grainger traded at $229 a share when I picked it. Today, the stock trades for $188 a share. That’s one reason to look at the stock now. Reason #1 for considering GWW: I picked the stock when the price was 22% higher than it is now. There’s another. Over the last twelve months, here’s how Grainger’s stock performed versus the shares of is...

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Andrew Kuhn May 10, 2017 Mental Models

It’s All About the Long Term: Amazon’s 1997 Shareholder Letter

“Jeff Bezos is the most remarkable business person of our age, I’ve never seen a guy succeed in two businesses almost simultaneously that are really quite divergent in terms of customers and all the operations.” – Warren Buffett I really do agree with Warren in the statement above. Anyone who knows me, knows I am a complete Amazon advocate. Not only does my firm own Amazon stock, but I am a frequent user of the website and really have developed into some sort of fanboy....

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Geoff Gannon May 10, 2017 Mental Models

Geoff’s Mental Model #1: “Market Power”

“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” – Warren Buffett A business with market power is a good business. A business without market power is a bad business. In that quote, Buffett gives a clear definition of market power...

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Geoff Gannon May 10, 2017 Idea Exchange

EBITDA and Gross Profits: Learn to Move Up the Income Statement

“In lieu of (earnings per share), Malone emphasized cash flow…and in the process, invented a new vocabulary…EBITDA in particular was a radically new concept, going further up the income statement than anyone had gone before to arrive at a pure definition of the cash generating ability of a business…” William Thorndike, “The Outsiders”   “I think that, every time you (see) the word EBITDA you should substitute the word bullshit earnings.” Charlie Munger   The acronym “EBITDA” stands for Earnings Before Interest, Taxes, Depreciation, and Amortization....

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