#WednesdayWisdom No.10 and How To Analyze Stocks

The MMMT Wealth set approach to analyzing stocks

Oliver | MMMT Wealth

Jan 31, 2024

It’s #WednesdayWisdom No.10, a little benchmark for me!

Thanks to all of you who have subscribed so far. I promise it’s only going to get better.

For those of you who haven’t subscribed yet, what are you waiting for?

How to analyze stocks

Here at MMMT Wealth, we always use the same foundation to analyze stocks.

If you can’t get answer all these questions clearly, then you should go nowhere near the stock.

These are the fundamental questions I like to ask myself, but I also pick small bits and pieces from other investors checklists.

For example, here’s the stock selection process from Francois Rochon. P.s. he’s beat the index by 3,866% since 1993.

And here’s a checklist that Michael Mauboussin uses.

His information on Change in Shares Outstanding is particularly good to consider.

I’ll compile all the other super investor checklists to my page.

One Investment Idea - PYPL 0.00%↑

PayPal has been in the media a fair amount this week, so I thought it was a good time to give my brief views on the company after the innovation day on January 25th.

In case you’re not aware of the story, check out this video. It’s the PayPal CEO Alex Chriss announcing that he was going to “shock the world” with PayPal’s innovations.

Subsequently in the days before the announcement the stock rose on the anticipation, only for Alex Chriss to release a pre-recorded 15 minute video describing some AI features which PYPL 0.00%↑ are introducing into their business in 2024 (which quite frankly the prior CEO should have implemented over a year ago).

On the perceived “disappointment”, the stock plummeted ~5% in an afternoon.

Here’s my quick opinion:

Yes, Alex Chriss did underdeliver and definitely didn’t “shock the world”, but the changes are fundamentally positive for PayPal.

They’re introducing a very consumer centric focus using AI, lead generation, improved checkout efficiency, cashbacks, and upgrades to Venmo.

Even before these changes, the company has a large margin of safety.

Take a look at this post on X I created which highlights the strong fundamentals.

Revenue growth 7.7%
Net margin 12.9%
ROIC 6.0%
Free cash flow $3.1M
Current ratio 1.3
FCF Yield 7.2%

On top of this, though very unfortunate (and I hope that those affected receive generous packages), PYPL 0.00%↑ announced last night they were laying off 7% of their workforce which will lead to an annual saving of ~$400M.

This will lead to a more efficient, agile, and innovative business.

The company no doubt has a few challenges, but Alex Chriss appears to be a very proactive CEO who is building back their competitive advantage.

At this valuation, it’s a strong value play.

Would you like a deep dive on PayPal? Let me know in the comments.

1 Graphic

In the MMMT Wealth 10-step framework, point 10 is all about valuation.

Here’s a visual based on the teachings of the “dean of valuation”, Aswath Damodaran.

1 Twitter (X) Thread

This week Bernard Arnault became the richest man in the world.

He’s also very rarely spoke about, so I thought I’d change that. Here's a thread which summarizes his 10 best life and investing lessons.

1 Quote

There’s a common misunderstanding in the retail investing world that if “hedge fund managers can’t beat the index, then how can we…”

It’s important to understand that hedge fund managers/asset managers are very restricted.

They have huge structural disadvantages contrary to what many people actually think. It’s much easier for retail investors.

“Average investors can become experts in their own field and can pick winning stocks just as effectively as Wall Street professionals by doing just a little research.” - Peter Lynch

That’s it for the day

I hope you loved this article. As I develop on here, I’m sure there will be some changes to my structure and style, so please do leave some feedback for me.

About the author

Make Money, Make Time is written by Oliver, a qualified CA, and investor who has read over 300 investment books, and spends more than 50 hours per week researching stocks so that you don’t have to. Let’s level-up together!