554: Swinging the Machete vs Sprinting Up the Trail, Guy Gottfried & Terravest, TSMC + Intel JV with Nvidia, AMD, Broadcom, Qualcomm, Sonos, BYD, Texas Goes Nuclear, and Korean Fertility

"operating leverage cuts both ways"

Winning a bad game is no victory.

—Stoic Emperor

🔌📲💻 I bought a couple of these things 👆

Maybe I’m late to the party and you’ve already got a bunch, but if you don’t, I recommend them.

They’re much nicer than traditional power bars, and the built-in USB ports (one USB-A and two USB-C) mean you don’t need wall chargers that take up outlets and stick out like sore thumbs — I haven’t heard this expression in a while, but the old AC/DC adapters were commonly called wall warts 😬

✂️🇯🇵🎌 Well, I guess this is the Wirecutter Edition where I recommend random items ¯\_(ツ)_/¯

(and to be clear, none of this is sponsored: I will always flag that stuff clearly!)

I got a Seki nail clipper after John Gruber recommended it on his podcast. Knowing how much he cares about good design, I had to check it out.

I never cared much about nail clippers, but it’s a frequently used tool, so why not have a nice one and make my day a little bit more pleasant? Quality matters, even in small things.

The Seki is gloriously over-engineered! Japanese precision manufacturing combined with old timey craftsmanship. Double-hardened stainless steel, edges sharpened by hand by master blacksmiths, etc. They’ve been making these precision instruments for 45+ years.

I got mine last week, and I gotta say, it *is* nice! Cuts clean, feels solid. Worth the premium for something I’ll be using a ton over many years.

A small investment in daily satisfaction.

💾 🍽️🤔💭 It’s strange how my brain has perfectly preserved the exact color of the floppy disks from Sierra game from the early 1990s, but I don’t remember what I ate yesterday.

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🏦 💰 Business & Investing 💳 💴

📊 Guy Gottfried’s Long-Term Investing Approach, Illustrated by Terravest (2019 and 2021) 🕵💵

I really enjoyed this presentation by Guy Gottfried. It’s a bit older, so the numbers are outdated, but there’s a lot to learn from *how* he thinks about business and investing, and how he does his diligence on a company.

If you want to follow along, here are the slides of his 2019 presentation. The second half is a Q&A, not covered in the slides, where he talks some more about his investment process and how he started his fund.

I particularly like his meticulous work to unpack every acquisition that company has ever made and estimate, as best as he could, what kind of returns on invested capital were generated (including everything that was added into the business, not just the purchase price).

It’s also interesting to go back and listen to what he was saying over the years. It’s a perfect example of long-term investing and the business owner mentality. He first pitched Terravest publicly in 2014, then spent years researching the company, management, and building his position in what used to be a pretty illiquid micro cap.

As a fan of Henry Singleton, it was nice to see how Terravest did large tender offers when they felt their stock was undervalued:

In 2012, TerraVest conducted a tender offer for its shares at $2.75 per share

• Bought back 36% of the company at a nearly 80% discount to the current stock price and an even greater discount to intrinsic value

Last year, launched two tender offers within six months of each other for its shares and in-the-money convertible debentures

• Repurchased 10% of its diluted shares outstanding at $10.41; just 6.5x estimated fiscal 2019 FC

This was particularly aggressive since there was no cap on the tender — they just took everything that shareholders sent their way!

I’m sure that in 2019, anyone who saw this presentation looked at the stock chart, saw that TVK had gone up a lot (25-28% CAGR between 2014 and 2019, depending on which starting and ending points you pick), and thought “Oh well, I missed it”.

But then after 2019, the stock went on to perform even better, delivering a 45-50% CAGR to today. Funny how that works sometimes. The classic investing dilemma of "too late" rarely being too late for truly excellent businesses (but most businesses that get hyped as “truly excellent” very rarely are…).

If you want more, there’s a follow-up presentation about the same company in 2021.

h/t to friend-of-the-show C.J. Oppel (💚 🥃)

🐜🇹🇼🏗️🇺🇸 U.S. Asks TSMC to Create Intel Joint-Venture with Nvidia, AMD, Broadcom, and Qualcomm 🤔

Not quite my Big Tech USSMC JV proposal, but very intriguing, and it could potentially significantly reshape the whole semiconductor industry’s dynamics nonetheless: