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Old School Value Nugget Fest (August 22nd Edition)


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I’m on vacation this week, and I’m really enjoying not paying as much attention to the daily market gyrations as usual. It gives me a chance to read more and deeper into different subjects, which is really valuable for me as an investor.

Along those lines, I read more than my usual number of takes on the WeWork S-1, some of which I’ve included in the links. Even if you don’t care about this IPO, it’s interesting to read how different smart people analyze the same report. Aside from your normal perspectives on the company’s profitability, how markets will develop, what will happen in a recession, etc., you’ve got a ton of governance issues that are extremely important for investing but often get less attention.

Enjoy!

-Mike

Gurus

Tracking Seth Klarman’s Baupost Group Holdings – Q2 2019 Update (Seeking Alpha)

Seth Klarman’s 13F portfolio value decreased from $11.90B to $11.05B this quarter. Baupost Group increased Liberty Global and CBS Corp, while dropping Pioneer Natural Resources.

Company/Strategy

The WeWork IPO (Stratechery)

“AWS, broadly speaking, is the WeWork bull case. Consider the phrase, ‘fixed cost.’ There is nothing more fixed than real estate, yet WeWork’s offering transforms real estate into a variable cost for all kinds of companies…”

What is We!? Understanding the WeWork IPO (Medium)

“Thesis: it’s a tech company that happens to have some real estate on the balance sheet, and thus deserves a premium multiple. Antithesis: it’s a real estate company that’s trading high overhead for a high multiple in order to gull VCs with more cash than ideas, real estate investors with tech company FOMO, and RobinHood investors with margin accounts.”

WeWork IPO Shows It’s the Most Magical Unicorn (Bloomberg)

“Everything about the company is over-the-top: its growth, losses, potential conflicts of interest and financial gymnastics.”

Thread by @pegobry on the GE Fraud Report (Twitter)

“By contrast, the strongest allegation in the report, by far, is not any specific fact, but the picture it paints of a company that has a deeply embedded culture of fraud or, at least, of doing everything to make the numbers look good.”

Ecommerce as Video’s Killer App (Andreesen Horrowitz)

“Various platforms from China show us how this can be done. Take TikTok, the AI-first short video app (now with 1.1B+ total installs) that’s known for its funny videos, memes, and challenges.”

How Costco gained a cult following — by breaking every rule of retail (The Hustle)

“Costco has found immense success by prioritizing the interests of its customers and employees over those of its shareholders.”

Markets & Investing

Is The United States Turning Japanese? (A Wealth of Common Sense)

“Japan is fascinating to me from a markets perspective. Some are worried the U.S. is heading down a similar route. Is this the case?”

Using PMI to Trade Cyclicals vs Defensives (Flirting with Models)

“The strategy outlined is simple: when the prior month change in manufacturing PMI is positive, the strategy is long Cyclicals and short Defensives; when the change is negative, the strategy is long Defensives and short Cyclicals. The intuition behind this signal is that PMIs provide a guide to hard economic activity.”

Podcast of the Week

How Spotify Saved the Music Industry (But Not Necessarily Musicians) (Ep. 374) (Freakonomics)

A wide-ranging interview about music, podcasts, etc.

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