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The Security Analysis Podcast

Tyler Moody: The Enterprising Investor

Wed Jun 05 2024
InvestingValue InvestingStock SelectionPortfolio Management

Description

Tyler Moody, an electrical engineer and DIY investor, shares his journey from quantitative to qualitative analysis in stock selection. He discusses the challenges of balancing investing with a full-time engineering career and family responsibilities. Moody emphasizes the importance of understanding why a stock is out of favor before investing and shares insights on value investing strategies, specific stocks in his portfolio, and content creation for investors. He has outperformed the S&P 500 and is evaluating his investment strategy.

Insights

Key Insight 1

Money-losing net nets tend to perform well when bought at a trough in earnings.

Key Insight 2

Understanding why a company has sold off is crucial to avoid value traps.

Key Insight 3

Performing evaluation involves considering companies with competitive advantages, bad businesses, and mediocre businesses.

Key Insight 4

Valuation methods include earnings yield, asset-based valuation, and earnings power evaluation.

Key Insight 5

Reading the annual report helps in understanding the business before making investment decisions.

Key Insight 6

Ideas for investments are generated by monitoring news articles, industry sentiment, and conducting deep dives into specific situations.

Key Insight 7

One of the stocks in Moody's portfolio is Capital One, which was purchased during the March 2020 sell-off based on its hybrid nature as a bank and credit card company.

Chapters

  1. Transitioning to Qualitative Analysis
  2. Balancing Investing with Career and Family
  3. Value Investing Strategies
  4. Investment Portfolio and Stock Selection
  5. Insights on Specific Stocks
  6. Content Creation and Performance
Summary
Transcript

Transitioning to Qualitative Analysis

00:04 - 08:10

  • Tyler Moody, an electrical engineer and DIY investor, discusses his transition from quantitative to qualitative analysis in stock selection.
  • He emphasizes the importance of understanding why a stock is out of favor before investing.

Balancing Investing with Career and Family

07:52 - 16:04

  • Moody shares the challenges of balancing investing as a serious hobby with a full-time engineering career and family responsibilities.

Value Investing Strategies

23:21 - 30:55

  • Moody discusses his approach to value investing, focusing on traditional, undervalued businesses like British American Tobacco.
  • He follows a checklist process for evaluating companies and looks for red flags during due diligence.
  • Ideas for investments are generated by monitoring news articles, industry sentiment, and conducting deep dives into specific situations.

Investment Portfolio and Stock Selection

30:27 - 38:33

  • Moody typically holds stocks for about a year but may sell earlier if the stock reaches fair value or to deploy money elsewhere.
  • He does not strictly adhere to a 'never sell' strategy and considers selling when reaching fair value or finding better opportunities.
  • One of the stocks in Moody's portfolio is Capital One, which was purchased during the March 2020 sell-off based on its hybrid nature as a bank and credit card company.

Insights on Specific Stocks

38:09 - 45:36

  • Capital One has surpassed 2019 levels and grown assets and deposits.
  • The acquisition of Discover by Capital One is seen as a strategic move in the credit card business.
  • There are concerns about the potential success of big acquisitions like the one with Discover.
  • Capital One is considered fairly valued, but there are thoughts on possibly selling to redeploy elsewhere.
  • There are reservations about large banks like Capital One, but it's noted that they have good reserves and manage risks well.
  • Seneca Foods was bought based on being undervalued below its net current asset value and potential market share growth.
  • Del Monte is struggling, potentially allowing Seneca to gain market share and shift focus from asset value to earnings.
  • British American Tobacco faces challenges with declining cigarette volumes but aims for growth through new products like vapes and heated tobacco.
  • Despite declining cigarette volumes, British American Tobacco relies on pricing power to maintain profits and manage inflationary periods.
  • In a merger arbitrage situation with Spirit Airlines, the acquisition did not go through as expected, impacting the portfolio performance.
  • Verizon's investment case lies in its oligopoly position in the phone industry, potential pricing power during inflation, despite recent sell-off due to industry flux and debt concerns.

Content Creation and Performance

45:16 - 52:35

  • Moody started a Substack as a more efficient platform for publishing stock ideas and portfolio updates.
  • Initially struggled with content creation on the blog but found success with bite-sized content like Capital Allocation Snapshots and Idea List series.
  • Focused on deep value investing and tracking US listed net nets for potential investment opportunities.
  • The speaker has outperformed the S&P 500 with an 18% return compared to the market's 13-14%.
  • They acknowledge the challenge of beating the market and are evaluating their five-year track record to decide on their investment strategy.
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