Jason Del Vicario

That's right. The simple reason is that he thinks and behaves long term. The average time for holding securities has dropped from 5 years in the 1970s to 10 months today. So when your time horizon is 5-10 years, you've already separated yourself from many investors out there.

With a long time horizon of 5-20 years, you're going to have periods of high inflation and periods of low inflation. High interest rates, low interest rates. Tense geopolitical situations, more relaxed ones. So when you think of it through that lens, and accept that you can't control any of these factors, an investor's stock analysis should focus on the things they can control.

Good companies tend to stay good and get better. Weak companies tend to stay weak and get weaker. During periods of economic weakness, he finds that the under-levered, founder-run, founder-owned businesses, rather than being reactive, can gain market share and perhaps make attractively valued acquisitions.

Bread and butter is advertising. Founder is still involved in the business. Compounds shareholder wealth over the long term at elevated rates, and this will continue.

The 2 mega-cap tech stocks he owns are MSFT and META, both of which he thinks are better businesses than GOOG.

Checks a number of boxes. Founder-run, founder-owned. Nice ROIC. However, growth hasn't been there, in mid-single-digits. Very expensive at 33x PE. Classic example of excellent business, but challenging valuation.

Tongue in cheek, he estimates that in 5 years, price will double from today; in 10 years, quadruple. That's based on 15% compounding every year; at that rate, your investment doubles every 5 years. He doesn't actually set price targets. His largest holding at 15%.

Must look at fundamentals of the business. For CSU, haven't changed; in fact, have gotten stronger. Deploys increasingly large amounts of capital, disciplined in looking for high rates of return before acquiring. Founder-run, founder-owned. High margins. Not much debt. High and consistent ROIC. Well run.

Founder-run, founder-owned. Some debt, as it's part of the business model. Tremendous job of increasing shareholder wealth, should continue. Only hiccup is that this type of business is not particularly savoury or win-win from a society perspective.

See his Past Top Picks for his choice in the space.

He owns no banks, mainly because they're not founder-run, founder-owned. Doesn't mean they can't be managed well, but for him that's a hard "no". ROICs have been in low-mid double digits, not bad, but hard for a company to grow at a greater rate than its ROIC.

An area he's not involved with, mainly because it involves too much predicting. For example, if you held uranium in 2010 you probably started to feel pretty good about things. Then the Fukushima crisis knocked it down. Now in 2024, it's just starting to come back.

He gets why people get excited about it. But he's been at this for 25-30 years now, and there have always been pockets of enthusiasm for the clean, cheap, safe, wonderful energy of uranium. Earnings can be challenged, ROIC isn't strong. A lot of expectation built into recent action.

An area he's not involved with, mainly because it involves too much predicting. Earnings for the sector can be a challenge, ROIC isn't strong. A lot of expectation built into recent action.

No comments on short-term moves, as he invests for the long term. Meets a number of his criteria. Founder-run, founder-owned. ROIC quite strong. Valuation of 62x PE leaves him on the sidelines. Fast-moving space. Share split has no effect on the stock's value.

This question may be the best one he's ever had in 5 years on Market Call, as it speaks to the process of identifying securities to invest in. #1 metric is ROIC, and there are variations on that theme.

Average ROE of the market is 8%. Standard economic theory states that if a business has an ROE of 20-30%, competitors will come in and eat the lunch such that the returns for all businesses in that space will come down to the cost of capital, around 6-8%. However in practice, looking at the likes of CSU or ATD or NKE or META, we see businesses that have been able to produce a 20% ROIC for years. That tells him there's a moat around that business preventing others from coming in and reducing ROIC.

Businesses set to outperform will have a history of strong ROIC.

He generally won't touch a business unless the people running the business also own a sizable portion of that business through insider ownership. He wants them to be acting like the rest of the shareholders.

Not really a huge difference. Return on Equity can be juiced by levering up your balance sheet. Return on Assets is probably the single most important return metric you can look at, because it can't be increased by debt.

His third largest holding at around 7%, added to it recently. Includes a business akin to the Yelp of Japan, recovering strongly since Covid. Trades at 21x PE, dividend yield's around 2%. Buys back shares. Very well run. Long term, should be able to increase earnings at 10-15%.

His choice instead of GSY. Over its history, great job of allocating capital. When liquidity gets tight, like right now with interest rates up, it will be busy underwriting loans. When liquidity becomes easy, it will reduce loan underwriting and continue to buy back shares. A 5% holding for him.

Cyclical. A 1.5% weight for him, and he'd recommend investors adopt a similarly small position. Capex budgets for telecoms and such have been pinched during this time of elevated interest rates. Long-term tailwinds of going from 4G to 5G to 6G. Compelling value.