3 "buy-on-a-dip" companies to hold forever
Investing in 123 #10/2024
1 question to reflect on
The result of last week's question: Thrilled for those that never had a down year. I’m in the 16% or more camp myself, although the past couple of years have been kind.
This week’s question:
Cash is king, or is it? Index investors want to stay fully invested. Value investors always have some cash on the sidelines. Buffett has 325 Billion in cash right now. How do you look at the markets now? Do you prefer being fully invested? Maybe you’re trimming because of all the heat?
2 quotes, do you agree?
"By failing to prepare, you are preparing to fail."
Benjamin Franklin
Providing a cash cushion, always doing your due diligence. Preparation is key. Even if you’re fully invested, do you have a list of companies you would rotate in if a dip occurs?
“Just as I know that anything is capable of happening so also do I know that it’s not bound to happen. So I look for the best and am prepared for the opposite.”
Seneca
Covid was a black swan event. The great financial crisis too (although some saw something coming as explained in my favorite movie: The Big Short). The whole reason why I combine quality compounders with microcaps (Yin-Yang) is that the microcaps allow me not to wait for a crash. They provide ample opportunity.
However, here are 3 companies I would buy in an instant if their share price dropped 50% tomorrow ⬇️
Which company would you buy in a heartbeat if it dropped tomorrow?
3 ideas of the week
Games Workshop(Ticker: GAW.L)
Category: Cash generator with pricing power
What does it do?
They hold the intellectual property for Warhammer Fantasy and Warhammer 40,000k. Warhammer is a very popular miniatures game. The IP of Warhammer is enormous: 550 novels and numerous video games and tabletop games are set within its realm.
Why should you care?
Warhammer’s popularity continues to increase. Amazon Prime has obtained the rights to make a TV show (with Henry Cavill, the most popular Warhammer fan producing), but it seems they haven’t put the pedal to the metal yet. Playing a Warhammer wargame doesn’t come cheap. GW has significant pricing power, and that will stay relevant in the near future. But a P/E of 30 is too expensive for my taste.
Medpace (Ticker: MEDP)
Category: Growing master capital allocator
What does it do?
Bringing a new drug to market is a long and expensive process. New companies need significant investments and take on a lot of risk. Medpace helps companies go through these clinical trials and reduce the risks related. They provide services and have expanded their offering through laboratories worldwide.
Why should you care?
If you’ve read any previous articles, I’m not an expert in biotech or the pharmaceutical industry. But Medpace is an outlier. From the skin in the game to the CEO’s curious story and the unique business model, Medpace is poised to hold its ground in the future. You can find a great write-up on the company here. (note: I’ve just read a class action lawsuit has been filed claiming violations of certain SEC laws). They do buybacks but are very conscious about the price of the stock in the market.
Adyen (Ticker: ADYEY)
Category: Growing cash generator
What does it do?
Adyen is a payment processor with worldwide operations. It grows organically, never does acquisitions, and has a very unique culture that the management team protects at all times.
Why should you care?
There is still a lot of growth ahead with more and more payments going cashless. In addition, Adyen has a land and expand strategy: landing an initial customer, and showing their value by for example increasing authorization rates, then expanding the volume handled by existing customers. They want to provide value to merchants and not be perceived as a commodity. Find my full write-up below. Would love to buy this one once more at 700…
May the markets be with you, always!
Kevin
You’re saying that you would buy Medpace if the price would drop 50%. But would you also buy it if drops 12%-15%?
Thanks. Medpace is a good company.