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🦉 Never Sell?
Jim Sinegal built Costco with a "never sell" philosophy. Could this work for YOUR portfolio? (Hint: YES!) 🤫
Jeff
October 21, 2024
Hi there… Today, we're diving into a feast of financial wisdom. We'll explore Jim Sinegal's 'never sell' philosophy that built Costco, unpack the dangers of confirmation bias in decision-making, and peek into Coupang's e-commerce empire in South Korea. Buckle up for insights that might just revolutionize your investment thinking!
— Jeff
Wisdom of the Day
If the job has been correctly done when a common stock is purchased, the time to sell it is - almost never.
Back in 1983, when Sinegal and Jeff Brotman opened the first Costco warehouse, many investors scoffed at the idea of a membership-only club with razor-thin margins. But Sinegal saw something others missed - a way to build unshakeable customer loyalty.
Think of it like planting an oak tree instead of annual flowers. It takes longer to see results, but once it's established, it provides shade and stability for generations. Sinegal's "almost never sell" philosophy extended beyond just holding the stock - it permeated every aspect of Costco's business.
The results? A $10,000 investment in Costco stock at its 1985 IPO would be worth over $12 million today. That's a return of more than 120,000%! But here's the kicker - achieving these returns required incredible patience and conviction.
So, next time you're tempted to sell a stock because of a temporary setback, remember Jim Sinegal and Costco. Ask yourself: Has anything fundamentally changed about the company's long-term prospects? If not, the best action might be no action at all. After all, as Sinegal has proven, the biggest gains often come to those who have the wisdom to buy right and the patience to sit tight. — Jeff
MULTIDISCIPLINARY WISDOM
In the intricate landscape of decision-making, confirmation bias emerges as a subtle yet powerful force shaping our judgments. This cognitive tendency to seek out, interpret, and remember information that confirms our existing beliefs creates a deceptive echo chamber in our minds, inflating our confidence unjustifiably.
The danger lies in overlooking critical evidence and alternative perspectives, leading to poor decisions in both personal and professional realms. From dietary choices to business strategies, this self-reinforcing cycle can stifle innovation and lead to missed opportunities.
Breaking free requires conscious effort. Acknowledging our susceptibility, actively seeking opposing viewpoints, questioning information sources, and reflecting on past decisions are crucial steps. In professional settings, fostering a culture of critical thinking and open dialogue can mitigate these effects.
By recognizing and addressing confirmation bias, we can build confidence based on comprehensive understanding rather than selective interpretation. This grounded confidence is more resilient and adaptable, better suited to navigate life's complexities.
In a world overflowing with information, the challenge is to venture beyond our cognitive confines. By doing so, we replace misplaced certainty with informed conviction, profoundly impacting our personal and professional lives. The key is to constantly ask: Are we seeing the whole picture, or just the part that suits us?
THE MOAT
In South Korea's fiercely competitive e-commerce landscape, Coupang Inc. has emerged as a dominant force, wielding a formidable economic moat built on its unparalleled logistics infrastructure. The company's Rocket Delivery service, powered by over 100 strategically located fulfillment centers, enables same-day and next-day delivery to approximately 70% of the population within 7 miles. This vertically integrated network not only enhances customer satisfaction but also creates a significant barrier to entry for potential rivals.
Coupang's Q2 2024 results, with net revenues reaching $7.3 billion (a 25% increase) and an expanded gross profit margin of 29.3%, underscore its strong market position and improving profitability. The Rocket WOW membership program, akin to Amazon Prime, further cements customer loyalty and increases lifetime value.
Key competitive advantages include data-driven operations leveraging AI and machine learning, economies of scale, and focused market dominance in South Korea. However, Coupang faces risks including intense competition, regulatory scrutiny, and expansion challenges as it ventures into international markets.
Currently trading at a premium to its estimated intrinsic value ($25.63 vs. $19.58), Coupang's valuation reflects high market expectations for future growth. While this presents some risk, the company's robust economic moat and strategic positioning in the burgeoning e-commerce sector offer compelling long-term potential for investors willing to weather short-term volatility.
Always Invert
How can Coupang expand its market share in South Korea and achieve sustainable profitability?
Ask this:
What could cause Coupang to lose customers and fail in the South Korean e-commerce market?
Slow delivery times: Failing to maintain its rapid delivery advantage.
Limited product selection: Offering a narrower range of goods than competitors.
Ignoring customer complaints: Providing poor customer service and issue resolution.
Ask Yourself:
Is Coupang continuing to invest in its logistics network to ensure fast delivery speeds? Are they expanding their product offerings to meet diverse customer needs and providing excellent customer service with prompt responses and effective solutions?
REC
📚 Book: The Joy of Costco
Dive into the world of Costco through this whimsical A-Z guide. It's like taking a treasure hunt through one of America's favorite retailers. Learn how Costco's business model and scale can offer insights into consumer trends and supply chain management - valuable knowledge for any investor.
📰 Read: Indefensible article on Taiwan's energy situation
Explore the geopolitical and energy dynamics surrounding Taiwan. It's a reminder that global events can have far-reaching economic impacts. Consider how potential conflicts or resolutions in this region might affect your investment portfolio, particularly in sectors like technology and energy.
🎥 Video: COSTCO FOUNDER & CEO
Watch Costco's leadership discuss their business philosophy. It's like getting a masterclass in retail strategy from the source. Gain insights into how successful companies maintain their competitive edge, which could inform your investment choices in the retail sector.
🎓 Course: Artificial Intelligence A-Z 2024
Boost your AI knowledge with this comprehensive course. It's like learning to speak the language of the future. In today's tech-driven market, understanding AI applications can give you a significant edge in identifying investment opportunities in the tech sector.
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