The Acquirers Podcast

Timing the Market with UNH: Waiting for Valuation Imperfections to Clear

"UNH was in free fall until I announced that Buffett had taken a big position, in which case it bounced. The only impediment was the valuation, and when that was removed, he made his move."

The commentary on UnitedHealth Group (UNH) underscores Buffett7s disciplined approach to timing the market. By waiting for valuation imperfections to be corrected before investing, the strategy highlights patience and the importance of a via negativa approach in capital allocation.

BNSF Railway as a Strategic, Geography-Driven Bet

"I think the BNSF deal is particularly interesting. Its geography, positioning for the shift toward Pacific trade, and favorable tax changes made it an undervalued asset and a compelling strategic move."

The discussion describes the BNSF transaction as a strategic move that leveraged geographic positioning and regulatory/tax catalysts. This insight illustrates how diversification into capital intensive, yet efficient, infrastructure can provide an edge in anticipating shifts in global trade patterns.

Buffett7s Apple Investment as an Exemplary Trade

"I think that Apple is the greatest trade ever because Buffett put so much absolute, so much capital to work in absolute terms. And the downside was minimal while the upside was extraordinary."

The speaker highlights Buffett7s Apple investment as a pinnacle example of executing a high-conviction, low-downside trade that delivered exceptional returns. This commentary underscores the importance of capitalizing on brands with strong consumer presence and minimal risk.

Overweight European Natural Gas for Dividend Yield and Infrastructure Edge

+3.52%current return

"Equinor, Vara and Harbor Energy. And the thesis, I mean, the thesis at a very high level, each company is a little bit different. But at a very high level, the thesis is, well, these companies all have good solid balance sheets. They all have double digit capital return in the form of dividends with a little bit of share buyback as opposed to a lot of share buyback and a little dividend... And then you have the potential for capital appreciation, which is higher than it would be in the United States because Europe just doesn't like oil and natural gas."

The insight highlights an overweight position in European natural gas companies based on their strong balance sheets, attractive double-digit dividend yields, and infrastructure advantages. The strategy capitalizes on European energy supply dynamics, particularly in a post-Russian gas landscape, aiming for steady income and potential capital appreciation.

MAG7 Overinvestment in CapEx May Erode Future Returns

"The impact of that will be in about three years' time that their return on invested capital is probably half where it is now as a result of those depreciation and amortization hitting the financial statements."

The dialogue warns that the heavy CapEx spending by leading MAG7 stocks—across companies like Meta, Google, and others—could lead to a significant erosion in future returns. As these companies invest heavily in physical and intangible assets to maintain competitive advantages, the subsequent depreciation may compress their ROIC over the coming years, signaling potential risks for investors.

Trade Call: Buy Crocs ($CROX) on Oversold Catalyst and Attractive Earnings Multiple

+6.91%current return

"Crocs coming into last earnings, the implied volatility was eight or 9% and the stock sold off from $101 to $75... even though they just had their highest revenue quarter ever. The operating cash flow shows a price-to-earnings of around 4.5 compared to the headline P/E of 20... I think the sell-off was overdone."

The guest urges investors to consider buying Crocs ($CROX), which experienced an overdone sell-off (from $101 to $75) despite record revenue and strong fundamentals such as 30% YoY growth in China and an attractive cash-adjusted earnings multiple (approx. 4.5 P/E). The rationale is that the market reaction is excessive, presenting a re-entry point.

Trade Call: Buy Portillo\"s ($PTLO) on Undervalued Price-to-Sales and Strong Insider Buying

-7.42%current return

"I was going to talk about two stocks today, Crocs and Portillo\"s... In Portillo\"s you had big inside buys by the CFO and the general counsel at the same time. For this one, I\"d focus on price to sales... it’s trading at 0.68 right now and if the market starts believing, I think that\"s going to go from 0.68 to three pretty quick. You\"re buying it now for half the price with twice as many locations."

The guest recommends buying Portillo\"s ($PTLO) based on substantial insider buying (by CFO and general counsel) and an extremely low price-to-sales ratio of 0.68. The thesis is that with market acceptance, the multiple could expand to around 3, driven by strong same-store performance and robust net promoter scores.