Meta (Facebook): September 2022

Meta, formerly known as Facebook is a social media giant. It’s a market leader in connecting people online and monetizing it in a win-win manner. I invested in Meta back in September 2022 and kept on building the position with an average price of about $130/share. In September 2022, Meta had crashed over 60% from its all time high of about $380/share.

During this time, the market was too focused on the metaverse spending. I believed metaverse spending was definitely a lot in absolute terms ($10+ billion annually) however it was small piece of the pie. Meta had 3.7 billion Monthly Active Users (MAUs), irreplaceable ad-tech assets, strong moat in social media and a dream financial metrics. Over the past decade (2012-2022), it had delivered over 80% gross margins, return ratios in high twenties and a consistent free cash flow generation ($39 billion in prior year). My rational behind investment was rather simple, the core of Meta, social media apps were stronger than ever, 3.7 billion MAUs is not something competition can generate overnight and the company was proactive in innovation and acquisition. The only thing that was pissing off market was their spending on Metaverse and I believed that the management was smart enough to not let their egos influence their spending and one day, when they see the metaverse is not reaping benefits, they’d stop. This will be the inflection point as I believed. We ended up with 4x returns on our investment and sold all our holdings at a price of around $530/share. Purely with luck, the timing was perfect and we saw this high September 2024, this meant we had a CAGR of 100% on this investment.

US Bancorp: April 2022

US Bancorp is financial institution which has presence in US markets. I invested in US Bancorp in April 2023 at an average price of $31/share. In March 2023, Silicon Valley Bank collapse led to a generalized selling off and fear in banking stocks. As a result, US Bancorp’s share price crashed 50% from its 2021 highs.

Silicon Valley bank failed due to its concentrated deposit-base, heavily skewed towards uninsured tech-startups. These deposits (money) were invested in long-term bonds by the bank. As the interest rates increased post-covid, these bonds lost value and the depositors queued up to collect their money. This led to the collapse of Silicon Valley Bank. US Bancorp on the other hand had a really diverse deposit-base with a large chunk coming from retail customers. Additionally, management was extremely smart and had invested most of these deposits in high-quality government bonds. Management had the experience to steer through tough periods which was visible in its consistent profitability across market cycles. At the time, bank was trading at its extremely cheap valuation i.e., forward P/E of 8, it had dividend yield of 5% and a highly experienced management which practiced conservative lending. We sold the investment in January 2025 at an average price of $50/share. On this investment, we had a return on 31% on share price and including dividends, it was about 36% (dividends reinvested). 

Interactive Brokers: January 2024

Interactive Brokers provides access to over 160 markets in 36 countries with 28 currencies to its clients. It is most reputed and trustworthy broker used by retail investors as well as institutional investors across the globe.

In January 2024, it was trading at about 15 times earnings. Over the past decade, it had delivered gross margins of over 50% which was improving consistently. It had compounded client equity by 20% over a decade, had impressive return ratios and industry-leading margins despite having an in-house tech. The company took all the time it needed to add a new market, on an average it added one country per year which meant it had ample of time to reduce legal liabilities and provide the customer seamless experience. I viewed the business more like a toll road type tech company rather than a broking company wherein each trade gave a royalty (transaction fees) for practically zero incremental costs. Additionally, management is highly experienced, practice rational capital allocation and is ahead of the curve when it comes to customer experience.

To me, a quality company with over 2.1 million accounts, over 50% gross margins, client equity growing by 20% per annum, generates free cash flow and is trusted globally, P/E of 15 looked significantly cheap. I bought the stock at an average price of $22/share ($88/share before splits). I still hold the position and have added to it proactively. On the current investment, I got a return of about 104% annualized. Given I’ve averaged up after initial buy, at this point the average price is about $31/share, considering this my return till date is about 62% annualized.