Research sets us apart
We create a sustainable investing edge by conducting our own, original research on the market and stocks
Each idea undergoes a rigorous research process used by Wall Street hedge funds to identify long-term winners
Generally, we look for stocks with the potential to double in 5 years (~15% growth annually)
Our research process
How we find the winners
Identify High Growth Industries
Develop an Investment Thesis
Test and Verify Investment Thesis
Build a Model
Value & Stress Test
Identify industries with the greatest growth potential
Size the market opportunities and risks
Narrow the list of potential investments to the select few that can meet our desired growth level
Perform 360° evaluation of business model
Further refine our assumptions on the investment case
Build a 5-year growth model
Determine whether company can 2x in 5 years (i.e., grow at +15% annually)
Perform final due diligence and "what if" scenarios to confirm the company belongs in a Vested portfolio
Case study
Why TSMC is a Vested stock
Performance:
3-year return: 150%
5-year return: 206%
Dividend Yield: 2.4%
What do Apple and Tesla have in common? They both make great products but rely on TSMC to manufacture their chips. TSMC is one of the few chip makers that can produce leading ledge semiconductors at mass scale, giving immense pricing power and leverage over the world's most powerful companies
We are bulls on this stock due TSMC's superior positioning in a critical sector. TSMC achieves 35%+ net margin and 25%+ return on capital, consistently. These profits are typically re-invested in the business, making it near impossibility for competitors to keep up
As the world requires more and more advanced chips (think Metaverse, 5G) , TSMC will be able to grow consistently even as the world economy goes through cycles.
At Vested, we seek to find long-term compounders like TSMC.
Why Stitch Fix is a NOT a Vested stock
Performance:
3-year return: -60%
5-year return: -25%
Dividend Yield: 0%
Direct-to-Consumer companies like Stitch Fix advertise their goods directly to consumers instead of going through offline malls or Amazon. Despite their catchy ads, and sometimes, good products, they tend to have one serious problem - high customer acquisition cost (CAC) relative to customer lifetime value (LTV).
Typically, we would like to see the ratio between LTV and CAC >3, meaning a company generates 3 times the return on an acquired customer over the lifetime. Said otherwise, the value of clothing you purchase on Stitch Fix over the time you are a customer should be 3 times higher than the costs (advertising, promotion, discounts) Stitch Fix spends on you over the same period.
As it turns out, the LTV / CAC ratio Stitch Fix generates is <1, so on average, it actually loses money on each customer. Not a very sustainable business model in the long run.
At Vested, we try to avoid companies such as Stitch Fix which may generate short-term gain, but long-term pain.