@qualityequities
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Investing in a concentrated portfolio of the highest quality companies in the world. All opinions my own. Not financial advice.
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Joined July 2022
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$NKE Nike's first quarter, through a moat lens:
Pricing: gross margin rose 0.6 points, from cheaper warehousing and shipping, not stronger prices.
Loyalty: sales through retailers rose 9% in North America. Nike's own stores and app fell 8% worldwide, and digital fell 13%.
China: down 26%, the worst of any region.
Verdict: the cost side is improving. The brand isn't earning its pricing power back yet.
Buffett has said the most important thing in judging a business is pricing power: can you raise prices without losing customers to a competitor? It's the cleanest moat test there is, and Nike is currently failing it.
What's next?
BREAKING: $NVDA hits a new ALL TIME HIGH, now up over 947,000% since its IPO.
If you invested $10,000 in Nvidia in 2008, you'd have $16 Million today.
Who would you want to manage your money?
1. Warren Buffett
2. Bill Ackman
3. Dev Kantesaria
4. Chris Hohn
5. Chuck Akre
Everyone is going crazy about $ACN Accenture shares today (up~16%) with posts like “AI is helping the business.”
But don’t forget that this same company just a few months ago effectively asked employees to defer vacation so they could bill more hours in Q4 in an attempt to pull forward revenue.
Almost no company reports maintenance capex, so investors use depreciation. At $KMI Kinder Morgan, that guess runs more than double management's own figure. At $ORCL Oracle, it falls $3.53 billion short of what the servers alone imply.
New free explainer on how to build the number from a 10-K, and which way the shortcut is wrong (dropping tomorrow morning): qualityequities.substack.com…
I warned you.
$NKE
The downfall of $NKE Nike is a masterclass in how a great company can innovate itself into a corner. By chasing higher margin DTC sales, they intentionally broke their wholesale relationships, leaving the shelf space wide open for hungry competitors like $ONON On and $DECK Hoka.
They swapped the magic of athletic performance for the efficiency of an algorithm, over-relying on retro lifestyle hits while neglecting the cutting-edge innovation that built the brand.
Now, with market share slipping and a massive turnaround underway, the lesson is clear: in the long run, you cannot sacrifice your core product identity for short-term margin expansion.
$MU Micron’s latest report was a major beat-and-raise. The company earned and sold more than Wall Street expected, and then guided the next quarter well above consensus. The basic story is that AI data centers need far more memory chips than the industry can currently supply, giving Micron unusual pricing power and very high margins.
The central question for the stock is no longer whether business is strong (it clearly is). The question is how long these exceptional supply conditions and AI-driven pricing can persist before competitors’ capacity additions begin to normalize the market.
For now, Micron’s above-consensus Q1 outlook indicates management sees the upcycle continuing into fiscal 2027.
Three questions decide whether Muse becomes a moat:
1. Does it make Meta harder to leave?
2. Does it earn money beyond subscriptions?
3. What does each user cost to serve?
The first answer is already in. An agent that runs your inbox, manages your calendar, performs various productivity tasks, cancels subscriptions, books travel based on the best deal it finds, and much more, is very hard to walk away from.
Q3 starts answering the other two.
Over the last decade, $ROL Rollins compounded FCF/share at a 13.2% CAGR (+225.5% total), tracking a steady, predictable route-based pest control moat.
But recent quarters show a sharp divergence. While trailing free cash flow per share remains sticky, the share price has taken a steep tumble from its highs.
Whenever a mission-critical compounder sees price disconnect from cash generation, it’s worth asking: Is this an overdue valuation reset on a perennial high-multiple darling, or a genuine margin of safety emerging?
Worth a deep-dive?
Big milestone for enterprise deployment. $NVDA
Today, with over 100 industry partners, we introduced the NVIDIA Open Agent Safety Platform, bringing together OpenShell and Sentry.
Artificial intelligence is extraordinary technology that will advance discovery, productivity, security, health, and prosperity for generations to come.
But its full promise can only be realized when people have confidence that AI is being built to be safe and deployed with wisdom and responsibility.
This is bigger than a single product. It's the beginning of an open ecosystem to build the trust layer for safe agent systems.
Together, we are building the foundation of the AI economy.
Trust and innovation are not in conflict. Safety is how trust is earned. We must build not only the most capable AI, but the most trusted AI, so that this extraordinary technology can realize its enormous promise for the world. nvda.ws/4hcoq7m
$META Meta's Muse is the No. 1 free app on the iPhone. Why it makes Meta a stronger business, not just a hotter stock:
What it gives the spending: a purpose. $META Meta plans $130-145 billion of capital spending this year. For the first time, there's a consumer product that clearly needs that much computing power.
The risks are real: trust, weeks after an $18 billion settlement over social media harms, the cost of running every agent, and OpenAI building its own. But $META Meta starts with what no rival can buy: billions of daily users and an ad business that funds the build. What would change the view is weak Muse engagement or a rising cost per user. Q3 in late October is the first scorecard. Things just got very interesting.
$META Meta bears think the AI buildout is wrecking one of the best ad businesses in the world.
If only they’d pay closer attention to what’s actually happening. Read more in the report below:
qualityequities.substack.com…
$META Meta spent $31.1B on capex in Q2 and kept $784M of free cash flow, down from $8.55B.
But the spending is showing signs of working. Ads sell for 12% more, and new AI models lifted Facebook conversions 15.7%.
New $META deep-dive: qualityequities.substack.com…
$META Meta spent $31.1B on capex in Q2 and kept $784M of free cash flow, down from $8.55B.
But the spending is showing signs of working. Ads sell for 12% more, and new AI models lifted Facebook conversions 15.7%.
New $META deep-dive: qualityequities.substack.com…
$META Meta deep-dive research report dropping tomorrow morning. Subscribe at link in bio.