Nevstar Links 11 October 2024
Welcome back to the Nevstar Links, your guide to some of the best articles on markets and investing available on the internet.
Today is the 11th October and it was on this day in 1971 that the immortal John Lennon released a single called "Imagine". Arguably his finest ever song (although there is a LOT of competition), 'Imagine' is Lennon's iconic anthem of peace and hope amidst a world in turmoil.
R.I.P John, you are sorely missed.
Onto the links for this week which has articles on renaissance, recipes and returns.
Only 2.4% of Companies Deliver All Net Shareholder Wealth
Fascinating piece from our friends at Morningstar looking at the asymmetry of returns provided by the stock market. 'Time in the market' and 'Stocks for the long run' are axiomatic principles of investing - but the reality is that only a very small proportion of companies provide all the net increase in shareholder wealth over time. I can't decide if this is an argument for or against passive investing. Discuss.
"Only about 1,000 stocks out of 26,000 accounted for all the US$35 trillion of wealth created (above the Treasury Bill rate). This is far from a coin toss as 96% of companies did not contribute to growing net shareholder wealth."
Be The 'Barry Sanders' of Investing
For those who are not NFL football fans, Barry Sanders was one of the greatest running backs of all time. But his exceptional aptitude at his chosen craft was combined with a selfless attitude epitomised by his lack of flashy celebrations after scoring a touchdown. As this article suggests, that's not a bad template for investment success primarily via a passive approach.
"It's elegantly simple and effective. But don't mistake its simplicity as being unsophisticated. As Warren Buffett is fond of saying, it's 'simple, but not easy'. Staying invested to be able to fully participate in the market's returns during stressful events can be challenging - this election season being a great example."
Maximizing Returns on Mental Capital
This is thoughtful blogpost considering the concept of mental capital. We frequently excoriate companies which waste their financial capital on ill-considered corporate ventures. But we should also apply the same criteria with respect to expending our mental capital. Our time is limited and we perhaps shouldn't waste it on what are likely to be low return endeavours.
"Keeping up with analyst upgrades and downgrades, modelling metrics that had little impact on firm value, and scrolling through Twitter mentions of my companies had low return on mental capital. Some days, I would power off my laptop drained but unsure of what I actually accomplished. It was due to high turnover, but low-margin productivity."
The Best Recipes In the World Only Have A Few Ingredients
Great article for all you 'foodies' out there on creating great enduring recipes using only a few high quality ingredients. But the message also has some compelling investing parallels. Doing something simple, consistently, for long periods is a pretty good recipe for success in the investment world.
"I spent the first half of my career on Wall Street, where I watched more and more artificial flavours added to a conveyor belt of new packaged products. The best investors in the world need NONE of them. It only takes a few organic ingredients, obsessively worked together by people who are on fire for their craft."
A Nuclear Renaissance: Uranium Could Be The Commodity That Powers A.I.
One of the most surprising business stories recently was the announcement by Microsoft of their partnership with Constellation Energy which will result in the reopening of infamous Three Mile Island nuclear power plant. The power will be used exclusively to power it's A.I. data centres over the next 20 years. Nuclear energy seems to be the default 'green' option for the ever-expanding energy requirements of big tech.
"This marks the first time Microsoft has committed to a dedicated nuclear facility; earlier in March, Amazon made headlines by purchasing a 960-megawatt data centre campus from Talen Energy for US$650 million. Mark Zuckerberg has also emphasised the crucial importance of energy for Meta's business, and has previously pointed out that energy constraints are the biggest hurdle in expanding AI data centres."
Quote of the Week
"You may say I'm a dreamer. But I'm not the only one."
John Lennon
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Have a great weekend.
The Nevstar
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Neville Giles
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