Two Months In
And the Upcoming Research Agenda
Notes From The Beauty Contest is a new investment blog that views current market dynamics through Keynes' newspaper beauty contest analogy. At NFTBC we will share deep dives on stocks, emphasizing a philosophy of "faithfulness" rather than trying to play the game.
Dear Friends of NFTBC
A warm welcome to those who have joined us this week. We started the week with around 25 subscribers and we’re finishing it with close to 100 - I didn’t know what to expect when I started this experiment in late January, but this seems about as positive a result as I could have hoped for. Please check out my introduction if you are not already familiar with it - it sets out the purpose of this blog and explains how I arrived at the name.
I suspect a good 80% of you have signed up due to the Regeneron post. The response has been amazing and the post has had more than 1000 views so far. Until recently I only knew a handful of investors who had a particular interest in the company, so to learn there are plenty of others is exciting. I’ve spoken to some of you already - please get in touch if you have any questions/comments or just want to say hi. Perhaps I’ll start a Substack chat thread for subscribers at some stage (I’m new to this and still figuring things out).
While I’ll certainly have more to say about Regeneron in future, it’s important to note that I’ll be writing about other businesses too, and not only biopharma ones. But if you liked my take on Regeneron, I’d encourage you to stick around.
In my NFTBC intro, I wrote:
My principal focus is qualitative and especially around the credibility of management. Keynes viewed ‘faithfulness’ as a rational response to uncertainty and I think this is one of the reasons why - if investing is inherently uncertain, who is better placed to know what lies ahead than those most involved. So I believe that if you can find competent and credible management teams, you should take them seriously - especially when others do not.
On those occasions when this strategy works (it doesn’t always), it can feel a bit like an investing superpower - the ability to gaze into the future when others seem unable. But to call it a superpower is patently ridiculous - it’s just listening to people. That’s all it is. The harder part is, of course, figuring out which people are worth listening to. Even then, occasionally the penny drops quickly - call it intuition if you like. Some of my best investments have come about this way, which is why I do it. That, and because it can take you in some interesting and unexpected directions…
I honestly never thought I would invest in the automotive sector. For much of its existence it has been a pretty awful place for shareholders. Some automotive stocks are no higher than they were decades ago! Nevertheless, it is sometimes possible to find a good business in a terrible sector - and one such business is BMW, the subject of my next deep dive. While I’m not going to give you the pitch here, it’s a really interesting time for BMW - later this year they will launch their most revolutionary product family since the 1960s. The commitment is to launch 40 products based on and around this family, within two years. And the thing with BMW is, you can count on them actually doing it - no delays, false promises or smoke and mirrors.
While there’s very little in common between Regeneron and BMW, I would argue that they share several important traits: 1) credible management, 2) ownership structures that allow them to take an atypically long-range perspective and 3) willingness to pursue a heterodox course of action in the face of overwhelming pressure to conform.
My ambition is to get the BMW note out in the next several weeks. But I’m not making any promises I can’t keep - writing is largely confined to weekends at this time, so we’ll have to see how things progress. If you can’t wait, you can see my shorter note on Rolls-Royce Motor Cars here (BMW’s high-end luxury division).
Following BMW, and barring the unforeseen, my intention is to return to the wider life sciences arena, with a note on a scientific instruments business - indeed, another business that shares the three traits mentioned above.
That’s it for now! Until next time.