Hi there… Today, we're diving into a feast of financial wisdom. We'll explore Seth Klarman's billion-dollar patience play, unpack the power of goal-setting in overcoming our love for quick wins, and peek into ANSYS's engineering simulation empire. Buckle up for insights that might just revolutionize your investment thinking!

— Jeff

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Wisdom of the Day

How Seth Klarman's Cash Hoard Turned Patience into Profit

Seth Klarman's decision to sit on nearly $1 billion in cash at Baupost Group in 2017 stands out as a masterclass in patience and discipline. While others chased returns in an overheated market, Klarman saw something different - a lack of attractive opportunities.

Think of it like being at an auction where everyone's bidding feverishly. Instead of joining the frenzy, Klarman chose to keep his paddle down, waiting for better deals to come along. His $1 billion cash hoard wasn't idle money - it was dry powder, ready to be deployed when the right moment arrived.

And arrive it did. When the market corrected in early 2018, Klarman pounced, scooping up quality assets at discounted prices. The result? Baupost outperformed the S&P 500 by several percentage points that year, turning what seemed like a drag on performance into a significant advantage.

So, next time you're tempted to invest just because everyone else is, remember Klarman's billion-dollar timeout. As Peter Lynch wisely said, "If you can't find any companies that you think are attractive, put your money in the bank until you discover some." After all, as Klarman proved, sometimes the best investment move is to wait for the right pitch. — Jeff

MULTIDISCIPLINARY WISDOM

How Goal-Setting Overcomes Our Preference for Immediate Rewards

In the complex landscape of human decision-making, our tendency to choose immediate rewards over long-term benefits poses a significant challenge. This phenomenon, known as temporal discounting, often leads us astray from our long-term aspirations. However, effective goal-setting emerges as a powerful tool to overcome this innate preference for immediacy.

By establishing SMART goals - Specific, Measurable, Achievable, Relevant, and Time-bound - we create a tangible link between present actions and future rewards. This connection helps counteract temporal discounting by making distant objectives feel more immediate and attainable.

Visualization and accountability further enhance the effectiveness of goal-setting. By vividly imagining future benefits and sharing our objectives with others, we reinforce our commitment and patience.

Importantly, goal-setting taps into our intrinsic motivation, shifting focus from potential losses to anticipated gains. It aligns our present actions with our future selves, bridging the gap between current realities and long-term aspirations.

In a world that often pushes for quick fixes, thoughtful goal-setting empowers us to make choices that truly matter. It's not just about discipline; it's about creating a roadmap that honors our long-term interests while acknowledging our human nature. By mastering this skill, we can navigate past the allure of instant gratification towards more fulfilling outcomes.

THE MOAT

ANSYS (ANSS)

In the rapidly evolving landscape of technological innovation, ANSYS, Inc. stands as a beacon of excellence in engineering simulation software. The company's comprehensive suite of solutions positions it uniquely to capitalize on the growing demand for simulation tools across various industries.

ANSYS's Q3 2024 results, with GAAP and non-GAAP revenue of $458.8 million and an 8% growth in Annual Contract Value, underscore its robust market position and consistent demand. The company's non-GAAP operating margin of 42% showcases effective cost management and operational efficiency.

ANSYS's economic moat is both wide and deep, anchored by a comprehensive and integrated simulation portfolio, high switching costs for customers, continuous innovation, strategic academic partnerships, and a global, diversified customer base. The company's commitment to R&D, investing around 20% of revenue, ensures it remains at the forefront of technological advancements.

However, ANSYS faces risks including potential technological disruption, economic sensitivity, integration challenges from acquisitions, and dependency on skilled personnel. Despite these challenges, the company's strategic initiatives and strong market position provide confidence in its ability to navigate future headwinds.

Currently trading at a premium to its estimated intrinsic value ($300.00 vs. $250.00), ANSYS's stock reflects market optimism about its future growth and dominance in simulation software. For investors seeking exposure to a company that combines technological leadership with stable growth prospects, ANSYS presents a compelling opportunity, albeit at a price that requires careful consideration of the potential risks and rewards.

Always Invert

How can ANSYS, Inc. dominate the engineering simulation market?

Ask this:

What could destroy ANSYS, Inc. and make its software obsolete?

• Ignore new technologies (e.g., AI, cloud computing)

• Fail to innovate ( stagnant product development)

• Overlook competitors (e.g., underestimate new entrants)

Ask Yourself:

• Is ANSYS actively integrating cutting-edge technologies like AI and machine learning into its simulation software?

  • Look for features that leverage these technologies for things like automated simulations, predictive modeling, or enhanced data analysis.

  • Investigate their partnerships or acquisitions of companies specializing in AI or related fields.

  • Examine their research and development investments in these areas.

REC

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