Article 1: A path to better returns by Lauren Templeton
https://mailchi.mp/ltfunds/the-boring-path-to-better-returns
In our previous commentary (Are You Different this Time?) we discussed the speculative valuations in certain technology shares (i.e., 718 shares trading over 20x sales), and how they reminded us of the dotcom mania of the late 1990s. At first blush, the potential risk in these shares should sound alarms, but that analysis is incomplete. It is important to recall that the crowding of investor interests into a narrow section of the market means there should be neglected shares, and potentially bargains, elsewhere. We discussed this phenomenon in the context of the dotcom mania in a chapter from Investing the Templeton Way titled “When Bonds Are Not Boring.” In 2000, Sir John reasoned that the NASDAQ could potentially fall 50% or more from its high, and that 30 Year Treasury Strips with an implied yield of 6.3% were far more attractive. As many observers will concur in the twenty years since, opting for 30 Year Strips in lieu of NASDAQ stocks in 2000 was a shrewd move, even if they had not funded the purchases through borrowed Yen (as Sir John had). Fast forward to today, we look towards the 30 Year Treasury yield of 2.29% and are left unconvinced one is not moving from the frying pan into the fire. However, we believe there are suitable alternatives.
There are relatively straight-forward financial comparisons to be made between dividend yielding stocks and long-term bonds. In our view though, a growing dividend is far more valuable than a bond coupon, especially if the underlying company has a disciplined nature towards capital allocation, and even better—long-term, under-appreciated growth opportunities. We would even take it a step further and argue that the dividend yields available on certain shares fitting the description above, are significantly undervalued relative to the Ten Year Treasury Yield. Could you imagine though if we took our enthusiasm for current dividend yields to the infamous “wallstreetbets” board on Reddit, and started talking up Unilever’s dividend? We suspect there would not be much of an audience, and if there were it would include a fair amount of heckling. Coincidentally, we think that is a good way to confirm you may have found a bargain. The simple fact is that in today’s world of Roaring Kitty, Archegos, Tesla, Dogecoin, and ARK Funds, dividends are far too boring to compete for attention. For the rational investor, this is a good thing.
For example, let us return for a quick look at Unilever, a company we also highlighted in our prior commentary as a potential bargain. From a dividend yield perspective, Unilever’s 3.7% forward dividend yield is 2.3x higher than the current 10 Year Treasury Yield. Interestingly, Unilever’s dividend yield has only traded at more than 2x the 10 Year Treasury at one other time (July 2012) in the past twenty years. For anyone who feels their eyes beginning to roll with talk of a boring dividend payer such as Unilever, first, stop and consider that over the past thirty-years, the growth rate on Unilever’s dividend per share has been 13.2% annualized. Of course, no one can be sure that the company will sustain that growth rate going forward (but we like its chances with +60% of its business in the emerging markets). At the same time though, we are even less sure that many of today’s darling share issues changing hands at over 100x earnings and 20x sales will even exist in 30 years’ time. Last, we would argue that Unilever is not an outlier in the dividend space, and that it has several boring potentially double-digit annualizing friends worth a look too.
Summary: Be boring. Make money.
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Article 2: Ashton Kutcher invested early in Uber and Airbnb and turned a US$30 million fund into US$250 million – these are the top investment tips from Hollywood’s most active Silicon Valley investor
Kutcher told The Telegraph in 2013 that he was particularly drawn to consumer technologies. “The companies that will ultimately do well are the companies that chase happiness,” he said. “If you find a way to help people find love, or health, or friendship, the dollar will chase that.”
The first rule is that entrepreneurs must intimately understand both their product and their industry, he told A-plus. They must also have a personality that will allow them to withstand failure and setbacks, he said.
Kutcher continued: “You can have the best idea in the world and absolute domain expertise and know how to do everything right, but if you want to do something great in the world, there are going to be obstacles; and you have to be a person who has ingenuity and sheer willpower to get through those times.”
The third rule, he added, is that the entrepreneur must get along well with him.
My take: Investing which is most businesslike is the best way to go, and understanding the founders and what drives them (what they are doing) is one of the best way to drive alpha for your portfolio.
While it is true that we all want to find exciting investments. Just as Microsoft goal was to put a desktop on each household desk. Is coinbase goal to put a cryptocurrency in each person asset space?
My take: Definitely an interesting space that is developing outside of wallstreet. My bet is that Binance (and not coinbase) with its development and ecosystem has created a platform worthy of the biggest, brightest customer base which is technology or financially savvy individuals.
