Hayden Capital had a pretty good year – 101.2% back in the first half, according to its second-quarter share letter.
Fred Liu, her management partner, discussed two of her so-called ’10 dredgers, ‘that is, investments that returned 10 times the original investment.
One was a company that everyone knows, Amazon.com AMZN,
that was achieved in six years, and another was Sea Ltd. SE,
the company in Singapore for digital services, in just two years.
Amazon, he noted, has not only grown sales, but has done so in its higher-margin companies, Amazon Web Services and the third-party market. Sea Ltd., meanwhile, has successfully invested in its Shopee e-commerce platform, which it could do because its Garena gaming company provided the cash flow.
‘It really was a’ farm bet ‘for Sea Ltd – but one I thought was the right decision given the sheer volume of the price as it worked, and the ability to value Garena’s site retrenching and still not saving did not happen, ”he wrote. “Recently, I saw a massive opportunity while the market saw a gaming company burning cash on an e-commerce company that it had no right to be in. This allowed us to buy the shares at a very low entry multiple.”
What do the two have in common? “The lessons learned from these two case studies show that in order to achieve 10x-type returns, you are likely to need a combination of rapid value creation, along with the growing market appreciation of the company’s trajectory demonstrated through multiple expansions. , “he said.
Finding a fast growing company is not that difficult – but the nuance, he said, is that the growth in sales should come from adding value to activities, as by strengthening the networking effect of the company with each new customer added. The third and critical point is the price.
“But the problem is that all too often investors pay too much for these companies because the market is too excited about them and offering the prices,” he said. “The stock is constantly fighting against wind, seeking intrinsic value growth to exceed the degree of multiple compression.” A company that grows three times more valuable over five years – but with a multiple compression of 50% – will return 8.5% annually, or more or less in line with the market.
He said he is looking for companies that are priced for a low-growth scenario, where the extra realized growth is then obtained for free.
The buzz
Presumptive Democratic presidential candidate Joe Biden, after markets closed on Tuesday, named Sen. Kamala Harris as his running mate. The couple will appear on Wednesday in Wilmington, Del., To provide joint comments. Meanwhile, talks are not yet scheduled between Congress leaders, and the White House, on a fifth incentive package.
News on the front of coronavirus took a turn for the worse, with new cases, the positive test rate, and deaths rising on Tuesday, according to the tracking project COVID-19.
The UK reported a 20.4% decline in quarterly gross domestic product in the period April-June, the worst performance of any major economy in that period. The U.S. economic calendar has data on consumer prices for July.
Tesla TSLA,
said it has approved a 5-for-1 stock split following the rise in the value of the electric car maker’s stock.
Modern MRNA,
said it has reached an agreement to sell 100 million doses of its COVID-19 research vaccine to the U.S. government for more than $ 1.5 billion.
Telecommunications company Liberty Global LBTYA,
launches $ 5.5 billion bid for Switzerland’s Sunrise Communications SRCG,
The brands
After a decline of 104 points in the DIA industrials DJIA,
on Tuesday, US futures ES00,
YM00,
NQ00,
were higher.
Oil CL.1,
Futures rose, while Gold Futures GC00,
stayed back.
Proceeds from the 10-year Treasury TMUBMUSD10Y,
margin to 0.67%.
Random reads
Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases for the last three decades, expressed skepticism against the Russian coronavirus vaccine.
FiveThirtyEight has released its election model – and it gives Biden the same chances of winning as Hillary Clinton did in 2016.
A new dinosaur related to T. rex has been discovered.
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