Here's my 1-page mental model for understanding the semiconductor ecosystem👇 Covering: - design software $Cadence Design(CDNS)$ $Synopsys(SNPS)$ - equipment $ASML Holding NV(ASML)$ $Lam Research(LRCX)$ $KLA-Tencor(KLAC)$ - chip designers $NVIDIA Corp(NVDA)$ $Advanced Micro Devices(AMD)$ - chip manufacturers $Taiwan Semiconductor Manufacturing(TSM)$ $Texas Instruments(TXN)$ $Mi

Here are the holdings of the BlackRock Unconstrained portfolio.I’ve highlighted the companies that I own and would invest in.Any thoughts on the portfolio? $Novo-Nordisk A/S(NVO)$ $ASML Holding NV(ASML)$ $Alphabet(GOOG)$ $Alphabet(GOOGL)$ $Ansys(ANSS)$ $Cadence Design(CDNS)$ $Intuit(INTU)$ $MasterCard(MA)$ $Microsoft(MSFT)$ $S&P Global(SPGI)$

Portfolio at the end of April 2024.April performance: -5.7% YTD performance: 11.0%FCF ROC = 35%FCF per share CAGR (5yr) = 22% FCF linearity (5yr) = 0.90FCF Margin Expansion (5yr) = 5%FCF Yield = 2.95%Interest expense = 6% of operating profit Change in share count (5yr) = -9%If FCF per share keeps growing in the high teens, then it’s a fair price to pay for quality.There were no outright sales or purchases. $Novo-Nordisk A/S(NVO)$ was the only contributor to performance. The top detractors from performance were $MSCI Inc(MSCI)$ and $Cadence Design(CDNS)$ .Imagehttps://twitter.com/long_equity/status/1785424822237106511

Here are the Japanese companies currently featuring in MSCI's World Quality index.Which Japanese companies are you bullish on?I'm currently researching:• Tokyo Electron $Tokyo Electron Ltd.(TOELF)$ • Advantest $Advantest Corp.(ADTTF)$ • Lasertec (my favourite) $Lasertec Corp.(LSRCF)$ • Disco Corp $Disco Corp.(DISPF)$ • Maruwa (not on the MSCI list) $MARUWA CO LTD.(MAWAF)$ Imagehttps://twitter.com/long_equity/status/1785265758877933774

Three reasons why very few companies are capable of sustaining a high return on capital over a long period of time:1. Economic downturns - few companies are resilient to these due to exposure to commodities and interest rates (eg banks and energy companies).2. Reinvestment opportunities - companies lacking reinvestment oppportunities typically pay out a large chunk of their earnings as a dividend, rather than reinvest (eg consumer staples).3. Pricing power - few companies are capable of raising prices without losing sales to their competition. $S&P 500(.SPX)$ $NASDAQ(.IXIC)$ $DJIA(.DJI)$ Imagehttps://twitter.com/long_equity/status/1782150582662320419

There are multiple ways to consider valuation. Here's one approach I find helpful.This table compares free cash flow growth to share price growth (last 5 years). $Technology One, Ltd.(THNOF)$ and $NEMETSCHEK SE(NEMKY)$ have seen their FCF grow faster than their share price - suggesting that the market may have overlooked their growth. $NVIDIA Corp(NVDA)$ and $ASML Holding NV(ASML)$ have seen share price overtake FCF, suggesting that the market is pricing in higher future growth than historic growth.ImageIt’s due to their buy back programme. If they sold the shares they previously bought, then they would have a huge ca

It's been a while since I posted one of these. Here's the latest share price linearity data for the S&P 500, 400 and 600. Great to see one of my largest and longest held positions (Cadence) topping the list.Which of these companies are you bullish on? $Cadence Design(CDNS)$ $Old Dominion Freight Lines(ODFL)$ $Synopsys(SNPS)$ $Cintas(CTAS)$ $Molina Healthcare(MOH)$ $Microsoft(MSFT)$ $Apple(AAPL)$ $Copart(CPRT)$ $

Here are the Japanese companies currently featuring in MSCI's World Quality index.Which Japanese companies are you bullish on?I'm currently researching:• Tokyo Electron $Tokyo Electron Ltd.(TOELF)$ • Advantest $Advantest Corp.(ADTTF)$ • Lasertec $Lasertec Corp.(LSRCF)$ • Disco Corp $Disco Corp.(DISPF)$ • Maruwa $MARUWA CO LTD.(MAWAF)$ (not on the MSCI list)Lasertec ranks the highest for me of the companies on this list.Imagehttps://twitter.com/long_equity/status/1780597812369170571

This morning's analysis - more work on my FCF accelerators screen.Below are a list of companies that have high exponential FCF per share growth. I've also applied a secondary filter where I remove companies where share price growth has outpaced FCF growth. The theory being that the market has somehow missed the high FCF per share growth of the companies on this list and will one day catch up.What are your views on the companies on this list? $Fidelity National(FNF)$ $TopBuild(BLD)$ $Kinsale Capital(KNSL)$ $Installed Building(IBP)$ $Arch Capital(ACGL)$

Here are the US companies in my FCF accelerators screen.This is looking for companies where the FCF per share growth rate has an upwards trend. The following screen was of the S&P 500, 400 and 600. $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $Arch Capital(ACGL)$ $Brown & Brown(BRO)$ $Cadence Design(CDNS)$ $Fortinet(FTNT)$ $Intuit(INTU)$ $MSCI Inc(MSCI)$ $ServiceNow(NOW)$

I've just calculated the average 10 year return on capital and 10 year share price growth for every company in the $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ .Here's how each sector performs. Interesting to see some correlation between ROC and price growth.Not all sectors produce winners.ImageI completely agree:Scalability (tech) and network effects (consumer) tend to produce greater operating leverage and higher returns on capital.The price is often near-term volatility, but the long-term payoff can be stellar.https://twitter.com/long_equity/status/1777699037753327651

I've just calculated the 10 year average return on capital and 10 year share price growth for every company in the $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ .Here's how each sector performs. Interesting to see some correlation between ROC and price growth.Not all sectors produce winners.图像S&P500: here's each sector sorted by the linearity of the 10yr share price growth.Conclusion: Tech and healthcare have the least volatile share prices, energy and real estate have the highest volatility.https://twitter.com/long_equity/status/1775472316299788349

What’s your view on the Blue Whale Growth fund?Here’s their portfolio. I see from their 13F that they also hold Roblox $Roblox Corporation(RBLX)$ .ImageTo an extent. I personally wouldn’t own energy stocks, railways and gambling which they do.I only own companies that improve their client’s profitability, efficiency or health. Gambling isn’t adding anything to society, if anything it is predatory.It’s always surprising to see funds that hold tobacco and healthcare in the same fund.https://twitter.com/long_equity/status/1775151933067502080

Here are the 60 companies currently in VanEck’s wide moat ETF.Which do you own? $Intercontinental Exchange(ICE)$ $Walt Disney(DIS)$ $Autodesk(ADSK)$ $Alphabet(GOOG)$ $Alphabet(GOOGL)$ $Costco(COST)$ $Cisco(CSCO)$ $Intuit(INTU)$ $Applied Materials(AMAT)$ $Fortinet(FTNT)$ $ServiceNow(NOW)$ $

Portfolio at the end of March 2024. March performance: 2.1%YTD performance: 17.8%FCF ROC = 35%FCF per share CAGR (5yr) = 22% FCF linearity (5yr) = 0.88FCF Margin Expansion (5yr) = 4% FCF Yield = 2.80%Interest expense = 6% of operating profitChange in share count (5yr) = -9%We exited our position in $Alphabet(GOOG)$ $Alphabet(GOOGL)$ . The top contributors to performance were $NVIDIA Corp(NVDA)$ and $Novo-Nordisk A/S(NVO)$ . The top detractors from performance were $Fortinet(FTNT)$ and $Fair Isaac(FICO)$ .Imagehttps://twitter.com/long_eq

Here's a list of US companies where free cash flow per share has grown faster than share price.In other words their FCF has gone up, but their FCF yield has gone down. Perhaps they now represent good value.Which of these companies is most likely to re-rate to reflect their high free cash flow growth? $Hub(HUBG)$ $UFP Industries(UFPI)$ $Quanta(PWR)$ $Rush Enterprises(RUSHA)$ $Encore Wire(WIRE)$ $Elevance Health(ELV)$ $Mueller(MLI)$ $Aon PLC(AON)$

I scored the S&P 500 based on 10 metrics for quality and growth. Here's how they rank.And here are the thresholds:• 5yr FCF CAGR: >15%• 5yr FCF RSq: >0.90• 5yr FCF margin expansion: >0%• FCF ROC: >15%• 5yr min. FCF ROC: >15%• Current ROC - 5yr min ROC: >0%• Capex / OCF: <10%• SBC / OCF: <10%• 5yr change in share count: <0%• Interest expense / Op. profit: <5% $MasterCard(MA)$ $NVR Inc(NVR)$ $Apple(AAPL)$ $Cadence Design(CDNS)$ $Expeditors(EXPD)$ $Future FinTech Group Inc.(FTFT)$

Three reasons why very few companies are capable of sustaining a high return on capital over a long period of time:1. Economic downturns - few companies are resilient to these due to exposure to commodities and interest rates (eg banks and energy companies).2. Reinvestment opportunities - companies lacking reinvestment oppportunities typically pay out a large chunk of their earnings as a dividend, rather than reinvest (eg consumer staples).3. Pricing power - few companies are capable of raising prices without losing sales to their competition.ImageValuation reflects both future growth and current multiple. I personally focus on future growth. I see a lot of value currently in $Applied Materials(AMAT)$ and $Fo