SOMETHING INTERESTING

If you want to know what is more important than a company’s ability to “generate cash,” there is one simple answer: capital allocation.

This monster thread should be required reading if you’re an investor of any kind. (Click to read.)

MARKET MOVERS

  • Intuit to buy Mailchimp for $12 billion in cash and stock in a surprising and unexpected announcement. Intuit said it will leverage the acquisition to accelerate growth among small business clients. It marks the company’s largest acquisition to date. Last year, the company purchased Credit Karma for more than $8 billion. Read more here.

  • We may have finally hit a floor on finished new home inventory. See this chart.

  • Amazon has further monopolized on speed, should boost stock. Amazon is making moves to ensure their Prime membership program is even more valuable. Their new distribution facilities should allow them to significantly expand the number of Prime members who can get same-day delivery, which should lead to more purchases and increased customer loyalty. As we mentioned in this digest, efficiency and convenience are consumer market drivers. Read more here.

  • Built-for-rent single-family communities are going to be popping up everywhere. The potential for growth - HUGE. Investors are pouring in millions and it’s fueling a land rush to find open land. The rental yields are even allowing built-for-rent investors to start outbidding home builders for land. Extremely promising REI opportunity. Single-family rents have climbed 7% to 10% over the past 12 months in many areas. Drivers of growth: high demand, rising household formation, and skyrocketing home prices. This will lead to a long-lasting desire for built-for-rent single-family homes. Read more here.

  • Rent capping is a thing and can affect landlords and investors. Be{a}ware. On the commercial side, rent control caps rent increases (currently under discussion in SF & NYC, though not that seriously) and would transform the expected value on restaurants & bars (not in investors' favor). On the residential side, depending on the dynamics of representative government, the higher the percentage of tenants (vs. homeowners) in a given city, the higher the chance of rent control being enacted. A good way to invest might be to target smaller cities in large metros where homeowners are a decisive majority, or just realize it just changes the time horizon on the return. Two interesting Twitter threads on this here and here.

WHAT TO WATCH

  • We like to pay attention to investors who are big on disruptive innovation. Ark Invest’s Cathie Wood provides a very compelling perspective on Tesla, Bitcoin, Ethereum, and more in this article. She is bullish on Crypto and Tesla (as are we), saying that if she is right, the returns are enormous. The investor believes that deflation, instead of inflation, is going to be a big investing theme going forward (refreshing since everyone has been screaming “inflation”). She said costs will come down drastically as new technology changes the world order.

  • Low fidelity virtual jobs are here. Eventually, there will be more job opportunities in the virtual world than in the physical world. According to Nasdaq, it is estimated that up to 95% of all shopping will be done via e-commerce by 2040. Technology creates infinite opportunities for scale. Low-fidelity virtual jobs like podcasters, Instagram models, people that run Amazon and Shopify stores, gamers, and streamers on twitch show us the world is moving towards the virtual reality promise. Read more here.

  • If you compare the price of housing to Gold, Bitcoin, Oil, and the S&P index, the price of housing is still considerably cheap, Jason Hartman explains. Basically, real estate is always a good idea. Smart approach - if you want to accurately measure real estate, do not compare it to the dollar, compare it against other assets and commodities. Listen here (11:50). Gold and Bitcoin are insurance against FOMO and a hedge for inflation. It's good to own some of these commodities in your portfolio as insurance, even if you don’t understand it that much, Listen here (19:51).). We say - learn to understand AND knowing how much to invest in each area is key. Check out this digest if you want to know how we diversify our own portfolio.

  • The cryptocurrency market is now a $2 trillion asset class. However, we are still in the early stages of institutional adoption. VERY exciting and promising for the future. Read more here.

FINAL THOUGHTS

"If you go to work at a visionary company, you will either fit and flourish—probably couldn’t be happier—or you will likely be expunged like a virus. It’s binary. There’s no middle ground. It’s almost cult-like. Visionary companies are so clear about what they stand for and what they’re trying to achieve that they simply don’t have room for those unwilling or unable to fit their exacting standards." (Jim Collins, Jerry I. Porras, Built to Last)

People used to say, on national television no-less, “Tesla isn’t going to make it, and here is why…” then they’d point to how people were quitting the company. While the management team is an extremely viable place to look when making investment decisions, you must respect the nature of high-growth / fast-scaling cultures…

Not everyone is cut out for them, but the ones that tend to be cult-like and fanatical. That is partly responsible for Tesla’s success, and Tesla isn’t the only one.

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