The Rational Cloning: Weekly Ideas #43
310 Value on Equinix, Yellow Lab Life Capital on Vale, Tweets That Make You Go… Hmm 🤔
Welcome to the 43rd edition of the Rational Cloning Newsletter (Weekly Ideas Series).
Helping you discover the best ideas of others.
Happy cloning.
Weekly Investment Ideas
(1) Why the Bears are Wrong About Equinix
I think the bears fundamentally do not understand how the cloud is delivered to customers via interconnected data centers. They believe that it is the cloud players that hold all the cards in the relationship, when in fact it is the interconnected data centers who hold the cards, as they are the choke point between the cloud providers and the customers. Furthermore, the use of GAAP numbers for earnings multiples and returns calculations on the surface tries to appear to be morally pure, while in reality it is a disingenuous attempt to prove their narrative that data centers have low returns and are expensive.
(2) Volatility is the Ally of Quality, Don’t Let Anyone Tell You Otherwise
Bottom line – if you are a high quality / high margin commodity producer, you obviously want a high average spot price over time, but you actually benefit from the volatility of that spot price being higher instead of lower. Even if it drives your shareholders crazy.
So how does the koala think about Vale trading at a ~$60Bn market cap?
It’s just a part of the investment, and the volatility makes Vale’s longer term position only stronger.
You have to learn to love volatility and chaos if you are going to invest in commodities and commodity producers such that you make it work to your longer term advantage.
(3) Time for a walk (taking a summer break)
Great piece and selection of ideas, worth a read.
Tweets That Make You Go… Hmm 🤔
Check out previous issues of Weekly Ideas👇
The Rational Cloning: Weekly Ideas #42
Great read. I especially liked the tweet with the "rookie trader" simulation. Very interesting. Makes a lot of sense to me tho.