Determining that 2023’s energy profits are at “normal” or mid-cycle levels is likely a reasonable conclusion with profits back to 2008 levels. The good news for energy investors is that since 2015 the oil and gas sectors have been underinvesting in replacing reserves. Genuine scarcities may exist and may do so for a considerable period.

It seems the dominant robotaxi and auto insurance company to be found it necessary to lower prices to sell affordable cars. Lessons learned about operating leverage for sure.

Some sell side analysts model revenues growing from today's $59 billion to $150 billion over the next four years and earning margins close to 51.4% at present. Call it $75 billion in earnings in early 2028. That's “only” 23x earnings four years out at today's market cap.

China has no iron ore as a natural resource. It therefore imports 70% of seaborne iron ore, which is smelted to make steel and it internally consumes half of global supply.

China consumes 14 million barrels of oil per day, importing 11.3 million of the total in 2023... It is hard to expect 2023’s resurgence to continue for long with the population in decline.

Progressive leads in telematics, or the use of GPS in monitoring cars and driving habits to help properly rate risk and in setting premium. While the gap can be closed, Progressive has been more profitably gobbling up market share and passed GEICO last year as the second largest private passenger auto insurer in the U.S.

The proceeds financed a growing position in Dollar General, our rural retailer that we trimmed in 2020 and more recently materially added to, as the stock declined lower and lower, growing in our opinion cheaper and cheaper.

Chinese investors are substantial owners of commercial real estate all over the world... the best bet would be zero equity exists under much of this property. Investors have barely marked down carrying values.

A shrinking Chinese population is a certainty. There is nothing the CCP or Chinese population can do about their demographic situation. The economy is massively overbuilt, particularly the property sector and infrastructure. Debt is a bigger problem in China than anywhere in the world, the problem exacerbated by surplus capacity of nearly everything.

By paying multiples pushing 30x earnings (a 3.33% earnings yield), you don't get as much bang for the buck. Spending three-fourths of cash flow retired the share count by 2.7% a year from 2021 to 2023.

This letter posited two years ago that 2021’s 13.3% record profit margin (a record by a landslide), would mark a secular peak and a level perhaps never to be attained again.

What now? There is no way the five or seven stocks can be repeat performers, although Nvidia is doing its part so far. Much of their success came from expanding prices relative to fundamentals.