Author: 8th Wonder Investment - A Stock Market Compendium. Available on Amazon. https://teapawt.org/t.co/vbywxAN34e Nothing I say or post is financial advice. Ever.
Virginia, USA
Joined October 2012
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When I wrote this book, I wrote it as much for me as for anyone else because I think it's important to have an anchor in investing– something to help keep us grounded with a good mindset/philosophy in a world full of confusing, disorienting noise. I wanted to write something that I could come back to on occasion for the purpose of recalibrating myself. Market noise can shift our psyches over time. Like waves beating against a cliffside, it can slowly degrade the thought processes we originally set out to use. This book was meant to help with that. That's why I called it a compendium.
Thanks @realroseceline for the thoughtful review!
Book review: 8th Wonder Investment by David Perlmutter @Muzzlebuster
I spent the weekend reading David’s book, and it’s one of those reads where I don’t necessarily learn something new, but I keep nodding my head the entire time thinking, yes, this is exactly how investing should be thought about.
He says that investing without fully analyzing a business is like jumping into a swimming pool without checking if there’s water in it. You might be fine, or you might break your neck. That analogy explains how he thinks. He then writes about various liabilities and how they interact with each other, which naturally leads into the balance sheet.
The balance sheet section is important because most investors barely understand it. David emphasizes cash conversion and whether assets actually turn into cash in a sensible timeframe (ie $DLO has this in spades!). Too many people invest without understanding how value flows through the income statement, balance sheet, and ultimately the cash flow statement. He focuses on what he calls “potent metrics” (I like the verbiage). The earning power, operating cash flow, and free cash flow. These are obviously the things that really matter.
He says a company must have a sound balance sheet to even be considered (I agree with you David!). Debt should be easily manageable, with plenty of room to spare, even if conditions worsen or something unexpected happens. If a business can only survive in perfect conditions, it’s not an investment.
He’s also a big believer in margin of safety because protects you when your forecasts are wrong and rewards you when you’re mostly right. He says if the price doesn’t offer one, the opportunity isn’t valid.
One of the strongest parts of the book is how he thinks about stocks through yield. Before buying anything, you should ask a very basic question. What can a share of this business yield to me as a shareholder? Everything flows from that. Yield today, yield on cost tomorrow, and the company’s ability to distribute cash over time. It’s a very pragmatic was to think abot the economics of a business.
He compares literal yield versus implied yield, which I also really liked. Not because it is revolutionary or profound, but because it showed how he thinks about valuation. He says in 2023, $NVDA generated $27b in free cash flow and returned about $9b to shareholders. The stock didn’t rise because of the payout. It rose because its earning power grew. Free cash flow yield matters because it represents what the business can return over time, even if it doesn’t do so immediately. In the long run, stock prices follow earning power.
He also talks about comparing free cash flow yield to the “risk free rate”. When a stock offers a yield meaningfully above treasuries, that spread becomes a margin of safety. The wider the spread, the more protection you have. Perhaps at good example of this at the moment is $CSU ?
He says another prerequisite is understanding whether a company’s free cash flow yield on cost will compound over time. If you owned the business for 5 or 10 years, would your yield improve? He correctly uses $EBAY as an example of a company that has maintained free cash flow but failed to grow it.
He also discussed Management. He focuses on returns on capital employed (ROCE), which is one of my favorite metrics as well (imho ROCE is superior to using ROIC, albeit not always, because in this game there are 50 shades of grey and it’s never black and white). Returns on capital tell you how good management actually is at allocating resources, albeit there are several unique ways to measure returns on capital. He also,talks about shareholder value creation versus destruction when dividends, buybacks, and incentive alignment. Munger said it best, “show me the incentives and I’ll tell you the outcome.”
1/2👇
Hey remember 5 minutes ago when $AMZN was about $227? Those were the good old days.
For me, the investment process starts with finding a company who offers something valuable that others have trouble reproducing in terms of scale, quality, or both. The trick is to think hard about why it's hard for others and to try and understand why it will still be hard in the future. If you get that piece right, that's about half the game.
Well, that dip didn't last long. Sometimes, the market is so dumb. All you can do is scratch your head at it and push in. $AMZN
$AMZN
Amazon’s Q3 2026 earnings press release gave us all we needed to understand where the stock price could go over the next couple of years.
“Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028.” — Andy Jassy, CEO
That is an extremely important statement that gives us the ability to underwrite a potentially large opportunity. Note that the term “OVER 40%” was used.
Context:
AWS TTM revenue $161.4B
North America TTM revenue $460.3B
International TTM Revenue $175.8B
Operating margins continue their trajectory north, now at 13.9%
1/4 🧵👇
It's a wonderful day to wind it all down and just relax. To touch some grass. On days like this, the less I think and simply enjoy the present - the cool of the wind and the warmth of the sun - the more fulfilled I feel.
I started a new book in the fall sun. Have you read it? If so, let me know what you thought of it.
$AMZN
Amazon’s Q3 2026 earnings press release gave us all we needed to understand where the stock price could go over the next couple of years.
“Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028.” — Andy Jassy, CEO
That is an extremely important statement that gives us the ability to underwrite a potentially large opportunity. Note that the term “OVER 40%” was used.
Context:
AWS TTM revenue $161.4B
North America TTM revenue $460.3B
International TTM Revenue $175.8B
Operating margins continue their trajectory north, now at 13.9%
1/4 🧵👇
As usual, I’ll start with the downtrodden scenario to protect myself.
2028’s operating margin declines to 13%, yielding us an operating income (OI) of $133.54B.
The market pays its lowest-ever P/OI of 25, bringing a market cap of $3,338.5B.
Today’s market cap (MC) is $2,630B.
This means an increase in MC of 26.9% in 2 years, or a 12.7% CAGR on our money from today’s market price.
3/4👇 $AMZN
What’s more likely?
The operating margin increases to 14.5% as AWS grows. That brings an OI of $148.96B.
The market pays a P/OI of 27, bringing a MC of $4,021.92B, an increase of 52.9% in two years, or a CAGR of 23.7% on our money from today.
If the market’s sentiment towards the cash flow picture ticks higher, perhaps the market pays a P/OI of 29 instead.
That brings a MC of $4,319.55B, an increase of 64.2% in two years, or a 28.2% CAGR on our money from today.
If we play around with operating cash flows and the price the market will likely pay for it in 2028, we get a similar outcome.
Here’s the thing. AWS is by far the fastest growing segment in all of Amazon. But it’s also the highest margin piece. As AWS takes up more and more share of total business revenue, that pushes Amazon’s (total) operating margins north. And this phenomenon doesn’t even account for operational efficiencies stemming from various uses of AI or other optimizations. A fast growing AWS mixed with ascending operating margins has always been the backbone of how I thought about the investment case. And it’s simply playing out.
We can watch the market continue to press down the P/OI it is willing to pay because of skittishness around current cash flow dynamics, and we can still make great money from here.
I bought $AMZN shares early this morning at $227.79/share. Not financial advice.
4/4 end.
🤖 Made with AI
Wait, so you're telling me nothing changed politically or otherwise and I get another ~10% off? Luiz Inacio Lula da Silva was Brazil's president for the first 4 years of $MELI's public life, and has been back in office since 2023. What has Mercado Libre accomplished during those times? Again, nothing has changed.
David Perlmutter retweeted
Ganó Lula y Mercado Libre $MELI ya cae un 6% en el mercado nocturno.
Con Lula en el poder, la acción ya subió un 270% en sus dos primeros mandatos y un 114% en el último.
Meli salió a bolsa en agosto de 2007 a 18 dólares. El viernes cerró en 1.810. Son unas 100 veces en 19 años, cerca de un 27% anual compuesto, solo por precio. En ese tiempo pasaron más de una docena de gobiernos de izquierda, de centro y de derecha en sus tres mercados principales.
En Brasil la acción subió con Lula, con Dilma en plena recesión, con Temer, con Bolsonaro y otra vez con Lula.
En Argentina subió con el kirchnerismo, con Macri, con Alberto Fernández y con Milei.
En México subió con Calderón, con Peña Nieto y con López Obrador, y bajó con Sheinbaum, que es del mismo partido que López Obrador.
Mismo signo político, resultados opuestos.
Con Milei, el gobierno más pro mercado de la serie en Argentina, es con el que menos subió, un 12% hasta ahora.
La acción llegó a ese período en máximos y después el negocio atravesó una etapa de márgenes más finos.
Las dos caídas más grandes de su historia tampoco tuvieron origen político. En 2008 se desplomó un 83% por la crisis financiera global. Entre 2021 y 2022 perdió dos tercios de su valor por la suba de tasas en Estados Unidos.
Mientras tanto el negocio no paró de crecer. En 2007 facturaba 85 millones de dólares. En 2025 facturó 28.900 millones, unas 340 veces más. Vende algo que la gente necesita con cualquier gobierno, comprar, pagar, recibir un paquete, pedir un crédito. Y opera en varios países, así que la crisis de uno la compensan los otros.
La política sí la golpeó en el corto plazo.
En 2018 el peso argentino perdió la mitad de su valor y la acción cayó un 24% en el año. Las devaluaciones achican lo que factura en dólares y los cepos le complican la operación.
Y, aun así, ningún gobierno le cambió la dirección.
Tampoco fue un camino tranquilo.
Quien la tuvo desde la salida a bolsa pasó por una caída del 83% y otra de dos tercios antes de llegar a multiplicar su inversión por 100.
19 años, más de una docena de gobiernos y una sola constante, el NEGOCIO.
No seas cortoplacista, Mercado libre es una bestia.
Abrazo
$TEA.AX
Tasmea’s stock price is in a correction at the same time that the company is raising guidance (again). Here we are one more time with a potentially substantial opportunity.
Tasmea recently presented at the TIP Group Conference. They moved their FY2027 EBITA guidance from A$202M-208M to A$205M-210M. A slight uptick, but it lends confidence in their projections. NPATA guidance moved to A$130M-$133M, implying that 63.3% of EBITA will move down to the bottom line.
The guidance, however, does not include acquisitions. In a recent interview, Managing Director Stephen Young said that Tasmea is very likely to acquire another A$40M-$50M in EBITA during FY2027, and many years after. I’m going to take the bottom of that range and assume a 25% miss — A$30M in acquired EBITA for FY2027.
A$205M + A$30M = A$235M EBITA
A$235M x 63.3% gets A$149M NPATA
Current diluted shares = 258,964,396. This is a jump up of 11.85% from the prior year — the cost of acquiring ~A$70M in EBITA.
If they are acquiring A$30M in EBITA, I will assume a 6% jump in share count: 274,502,260.
A$149M NPATA / 274,502,260 gets $0.54 NPATA / share FY2027
This would be an increase of around 100% from the prior year.
Tasmea’s share price today is $8.99 (10-22-2026), representing a P/NPATA (TTM) of 32.67.
Let’s look at some far lower prices:
$0.54 NPATA/share x P/NPATA 20 = $10.80/share. A gain of 20.1% from here.
$0.54 NPATA/share x P/NPATA 24 = $12.96/share. A gain of 44.2% from here.
$0.54 NPATA/share x P/NPATA 26 = $14.04/share. A gain of 56.2% from here.
I’m sure you’ve noticed that this is a lowball scenario. That's how I like to do it, and it's the only thing I prefer to act on, because when the low scenario comes true I make money, but when the normal or greater case comes true, I make tons. I'm just protecting my downside which often amplifies the upside.
But still, imagine it this time next year, where management has successfully hit $45M acquired EBITA and is guiding for something similar the following year. They just reported FY2027 earnings and the market continues to hand the stock a P/NPATA in the 30s because NPATA just grew over 100% and management thinks it will grow pretty fast again. It’s easy to see how the stock could be a double from here.
Not financial advice. Do your own research.
The two reasons I have never been interested in investing in $SE are 1) the management, specifically what Stoffel mentions here, and 2) I don't like the Garena business segment. I can't have any confidence in whether any of its games will be fashionable a few years from now. And they definitely need them to be.
As an investor in $SE , I want it to succeed.
But you are vastly overlooking:
👉 Ridiculous over-expansion during the pandemic (France, Poland, etc)
👉 During that over-expansion, NOT focusing on fulfillment, which would have create a rock-solid moat by now
$BN Brookfield Corporation should do this on their IR page.
$MELI acaba de lanzar un asistente de IA para inversores, directo en su web de investor relations.
Se le pueden hacer preguntas variadas vinculadas con el negocio de la empresa, sobre documentos publicados en la SEC, cartas a accionistas, consultas sobre métricas, sobre su ecosistema, resultados de trimestres, etc. para obtener la respuesta directa en el chatbox.
Por supuesto que sólo se indicará información pública.
Excelente incorporación, vamos a probarlo!
I think that two things will prove to be true at once.
1) Anthropic and OpenAI will prove to have very weak business economics under the surface. Come 2027/28, the ROI will simply not be there in large-enough fashion. There will be tons of demand for AI, but endless competition from lack of a substantial-enough barrier to entry will mean a race to the bottom in prices, even if they have great models/products. Google, Meta, everything in the realm of open source, Chinese models, and anyone else under the sun who brings a model forward will compete for use. OpenAI and Anthropic won't be able to prop up the amount of spend inherent in their businesses because of falling prices from competition.
2) Even with bad economics, OpenAI and Anthropic's products will remain very important to the USA and others. Being among the most advanced models means that there are certain things that their models will be best for. At least some advanced use-cases will likely show preference towards these models, and may even label them as necessary.
My tinfoil hat tells me that these businesses will IPO and, soon after, their profitability will show cracks. We will see a lot of red in the markets that will serve as an opportunity for buying because ultimately it will not disrupt the momentum of AI in general. Many stocks will crash, including the hyperscalers, and a year later we will be talking about how much of an overreaction it was. Kind of like the tarrif selloff of April 2025.
When OpenAI and Anthropic's stocks eventually fall, other large companies who can benefit by incorporating/utilizing their models, and who can support their continued development with their other cash flow generative business segments, will acquire them. $AAPL, $AMZN , and $MSFT come to mind as possibilities. Once all of that is done and behind us, the market will need to find another wall of worry to climb. And climb it will.
$ROAD has been on many investors' radar lately. I have some thoughts that might surprise you. Article link in the comments below 👇
10 months ago, I wrote this about $CRWV CoreWeave, Inc. Did I miss the mark?
Over the last 2 quarters, CoreWeave $CRWV increased their operating income by $33M. They increased their operating expenses by $44M.
Gross profit was $996M. Operating expenses of $944M takes them to an operating income of ~$52M.
From there, they owe ~$311M in interest expenses on their debt.
Current debt (due within 1 year) is ~$3.8B with only ~$1.9B cash in the bank and negative earnings. Long-term debt adds another ~$10.8B in liability.
They could have the best tech on Planet Earth. You could fill volumes on all the things I don’t understand about this business. But it doesn’t matter. It’s just not my style of investment. I spent 5 minutes on it and passed. That could be my loss. I understand that. But I have very limited time to allocate to researching, and my main priority, far and away higher than any other, is staying out of trouble.
Genuinely, I hope investors make an absolute killing on it. ♥️