Good companies are rare, two or three will make you very rich. Take Texas Instruments as an example

Good companies are rare, two or three will make you very rich. Take Texas Instruments as an example

Companies worth betting on wealth are rare

Some friends have noticed that I have said that basically my investment strategy is to say no to all listed companies first, unless I find a company that is worth betting on large sums of money. Discuss with me why I hold this view? My idea is simple, because companies that are good enough for investors to bet on their net worth are very “rare”, but if you really have to find them, the number really won’t be too much. This kind of rare enterprise is what I have repeatedly declared – Investors only need to inject two to three such enterprises throughout their investment career, and the investor will be very wealthy.

As I described in my book “The Rules of Super Growth Stocks Investing” 1-5, Charlie Munger said: “You should remember that good ideas are rare—when the odds are greatly in your favor, bet heavily.” and he also mentioned in an interview: “You only get a few opportunities, and you have to grab them aggressively when they come because even in the most favored life, they’re really rare” Buffett once warned college freshmen and investors “You’d get very rich if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up one punch. You’d resist the temptation to dabble. You’d make more good decisions and you’d make more big decisions.”. Moreover, according to many survey reports, the life span of listed companies is much lower than you and I think (see the full report in 1-5 of my book “The Rules of Super Growth Stocks Investing” for details). It can be seen that good companies are indeed very “rare”.

Philip Fisher

Philip Fisher is a representative of this idea. Interested investors can read his classic book “Common Stocks and Uncommon Profits”, and he really does it himself. Let me give a famous example, you can imagine Philip Fisher bought the stocks of a few companies when he was young, and remained unsold until his death at the age of 98; the most famous of these was Texas Instruments (ticker: TXN). Even today, no one would doubt that Texas Instruments is a very good company. But Philip Fisher bought it a long time ago, and Texas Instruments made him earn 30 times! Readers will go back and compare the investment principles described in his book. Books by authors like this are highly readable because:

  • The author’s words and deeds are consistent, and the investment principles described in the book are detailed and rigorous, with high operability.
  • Have good investment performance to endorse his investment logic.
  • The very few holdings selected by the author in the early stage proved that the author had a unique vision and was able to identify the future growth potential of these companies before most people discovered them, and bet that these companies were still new startups at that time.

Texas Instruments’ Operating Status

By product category:

Business UnitQ2 2021 Revenue and Growth RateAccount for Total Revenue
AnalogUS$ 3.46 billion, increase 42% 75-80%
EmbeddedUS$ 780 million, increase 43%18%
Student’s Calculator2%

By market:

MarketAccount for total revenue
Automotive37%
Industrial20%

About 20% of Texas Instruments’ revenue comes from China. Its main competitors in the field of analog chips are Analog Devices (ticker: ADI) and Maxim (ticker: MXIM, which was acquired by Analog Devices in 2020).

Texas Instruments’ Moats

Take Texas Instruments as an example; this company was founded earlier than Intel (ticker: INTC), and until now, it is still an excellent semiconductor leader in analog, digital signal processing (DSP), and embedded system field; the corporate moat is clear.

Especially in the automotive industry, or the industrial field, they are long-term major customers of Texas Instruments. This is mainly due to the high conversion costs of non-digital chips such as analog, digital signal processing, and embedded systems. That is, a higher moat. The reason is that the cost of conversion is too high, and it is almost impossible to change to a competitor’s product.

According to the McClean report of IC Insights, Texas Instruments ranks number one among the top ten analog fabs in the world, far ahead of its peers, with a market share of 18%, almost twice that of the second-ranked Analog Devices.

Texas Instruments’ Long Term Stock Performance

Even if you can’t be like Philip Fisher bought it decades ago (because you may not have been born), that’s okay. If you only bought it ten years ago, the return rate is still as high as 457.10%. Since Texas Instruments went public in 1953, it has undergone 8 stock splits (6 splits of 1 share for 2 shares, 1 split of 3 shares for 1 share, and 1 split of 4 shares for 5 stocks). Moreover, the current dividend yield of Texas Instruments is as high as 2.11% (2.11% is now considered a very high dividend yield in US stocks). Texas Instruments is also:

  • A US-listed company with a market capitalization higher than 98.68% of listing companies.
  • Has been listed for longer than 92.76% of listing companies.
  • A typical representative of successful US stock companies.

The picture below is the stock price trend chart of Texas Instruments displayed by macrotrends.net so far. Don’t forget that it has gone through 8 stock splits.

Two or three will make you very rich

The number of stock holdings in your portfolio doesn’t matter. We are not collecting stamps. Believe that “good companies are very rare, two or three will make you very rich.” It will make your investment simpler and easier to succeed. In the world of investment, the more complex things are, the less time they can stand the test, because complex things are more likely to go wrong. Those who cannot pass the long-term test of time and have a too low chance of success will not be able to make you big money.

Charlie Munger said in an interview “Maybe once every two years we had a major opportunity. Not very many.” Buffett once said: “Indeed, we now settle for one good idea a year.” Charlie Munger mentioned: “If I took the 30 biggest transactions out of Berkshire (in the past) 60 years, what would Berkshire be? Not much. I mean we wouldn’t be poor, but we wouldn’t be rich either. “

Disclaimer

  • The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
  • I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.

Leave a Reply

Your email address will not be published.

error: Content is protected !!