"Haraka haraka haina baraka"

It’s almost the end of a brutal year in investment or, if you look at the bright side of real investment opportunities, probably a good year. I heeded my own advice of leveraging the strong U.S. dollar and took an overseas trip. After a break of 12 years, I travelled to Kenya and Tanzania. One thing that was noticeably different from my last visit was the ubiquitous presence of M-Pesa, a mobile phone-based banking system. Everyone from street vendors to restaurant waiters transacted with M-Pesa with much confidence and ease.

M-Pesa was first launched in 2007 in Kenya as a way for customers to instantly send money to each other, similar to Venmo but the big difference being no need for a bank account to transact on M-Pesa. In much of the world, people don’t live near banks or have bank accounts. In Tanzania, for example, only 23% of the population has a bank account, and in Afghanistan, it’s 9%. For many people, the M-Pesa service became their first and often only access to financial services, propelling its fast growth and adoption across the country.

For a good investor who evaluates the long-term economic prospects of a business, these are the types of investments in which you’d hope to get involved: A product that has largely contributed to the growth of formal financial inclusion across the continent, and also one credited with lifting roughly 2% of Kenyan households out of extreme poverty. This is quite a contrast to what we currently find in the crypto market and its impact. Within the closed-loops of crypto, where people exchange coins back and forth, the only source of “revenue” is speculation on coins. Crypto isn’t M-Pesa.

Year in review

My core investment principle is that good investment is a long game with appropriate considerations for risks and objectives, acknowledging that business cycles move through expansionary and contractionary periods, which provide varying levels of opportunity.

The volatility of the market is unnerving, and holding on to your investment against the barrage of news feeds is even harder. I want to share an excerpt from an essay by Warren Buffet that may help you stay focused:

“Following Ben's (Benjamin Graham) teachings, Charlie and I let our marketable equities tell us by their operating results — not by their daily, or even yearly, price quotations — whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it. As Ben said: ‘In the short run, the market is a voting machine, but in the long run it is a weighing machine.’ The speed at which a business's success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price.”

As interest rates are expected to remain elevated, there are few factors you can look at to see the resilience of companies in a tough macro-economic environment: Does the company have the ability to develop revenue, profit and cash flow to cover expenses? Does the debt level affect the margins in a high interest-rate environment?

As the year comes to a close, I looked back some of the investment opportunities I highlighted in the previous newsletters. The table below reviews a handful of those companies. Free cash flow (FCF) is the cash left over after a company pays for its operating expenses and capital expenditures, and debt-to-equity (D/E) ratio compares a company’s total liabilities with its shareholder equity and can be used to assess the extent of its reliance on debt.

Company	D/E	Free Cash Flow	Opportunity	Fair Value	Current Price
SHEL	0.4	31.76 Bil	​Short term: leverage LNG and oil price volatility, especially in Europe.	66	55.61
TTE	0.38	37.23 Bil	Short term: leverage LNG and oil price volatility, especially in Europe. Long term: energy transition to renewables, with 30% of current spending in to renewables.	64	58.83
UBER	1.74	506 Mil	Ground transportation recovery, 83% growth from last year.	73	26.55
LYFT	1.3	(-334.84) Mil	Ground transportation recovery, 22% growth from last year.	55	10.95
DAL	6.11	347 Mil	Undergoing cost-cutting measures and profitability expected in 2025.	57	33.80
CZR	3.35	(-261) Mil	Casino reopening, higher revenue expectation from sports-betting, larger than MGM.	80	49.34
BUD	1.15	7.5 Bil	Accelerated digital transformation and strong consumer demand continue to increase earnings.	90	59.61
​GSK	2.11	6.9 Bil	Oversold due to concern over Zantac litigation. Diverse portfolio that spans respiratory, HIV and vaccines.	50	35.97
DIS	0.51	1.06 Bil	Park and theater reopening and transitions to a streaming future with Disney+, Star+, Hulu, and ESPN+, with streaming profitability expected in 2024.	155	93.38

Software stock valuations have reached a level not seen since 2008, according to Morningstar analysts. For only the second time in the last 20 years, software stocks are now trading at an average discount of 18%, and that is even more attractive than the broader technology sector.

Company	D/E	Free Cash Flow	Opportunity	Fair Value	Current Price
SNOW	0.04	1.2 Bil	​First mover advantage in multi-cloud database offering data lake and data warehouse platform, cuts significant cost of ownership.	295	144
VEEV	0.02	741 Mil	Leading cloud CRM tailored for life science industry, tracking a year ahead of their 2025 revenue goal of $3 billion.	265	172.17
WDAY	0.59	348 Mil	First mover advantage in multi-cloud database offering data lake and data warehouse platform, cuts significant cost of ownership.	229	169.6

One of the Swahili phrases my niece introduced me to, which describes a general attitude of people in Kenya, was “Haraka haraka haina baraka,” meaning “Hurry, hurry has no blessing.” I thought that this was apt in many aspects of our lives — especially in investment.

I wish you all a wonderful Christmas and holiday season, and greater success in 2023.

Disclaimer: The financial products or operations referred to may not be suitable for your investment profile and investment objectives or expectations. It is your responsibility to consider whether any financial product or operation is suitable for you based on your interests, investment objectives, investment horizon and risk appetite. theinvestment411 shall not be liable for any damages arising from any operations or investments in financial products referred to within.