Joe Raedle
After I covered my bull thesis in the last article, Carvana Co. (NYSE:CVNA) has gone through a series of speculative ups and downs. We are also in a tough macro environment that future used car prices
Carvana: Showing Signs Of Efficiency Improvement
Summary
- The 2022 Q2 results showed some relieving signs for Carvana from both profitability and cashflow standpoints.
- There is still a long way to go in terms of cost cutting.
- CVNA has low variable costs but high fixed costs.
- CVNA's model is actually profitable.
My strategy is to invest in strong companies and wait for high conviction and obvious opportunities that the average investor can spot. With 10x potential!! I believe the best investment idea is those 'no brainer' ones, sometimes high uncertainty + low-risk. The products and services have to be 10x better than competitors (selection, convenience, value). I value good management with aligned interests (usually seasoned CEO like founders, family businesses, etc). The CEO must be highly focused on his mission. Focus on customer success is the key.I also like companies that can grow with durability. Speed is the no.1 competitiveness of a company. FOCUS is the most important thing for success. I believe free cash flow (a better metric than net earnings) will come after growth as long as the company can improve the dynamics of operational cost between growth and maintenance. I hate the company with its business going south even though the evaluation is cheap. I hate regulation and I believe government always screws things up. I don't think a moat is constant, competitive dynamics are always rapidly changing. The best company is the one with the strongest capability to adapt and change. Low churn is the key!! I like the ones that have the capability to recover from crises and challenges.I believe a market crash is a constant event rather than cyclical. The market won't go linear and extreme situations can be normal (e.g. when the stock goes down, people start to lose harvesting and it goes down more). True durable business is the win-win-win one that benefits everyone. I like businesses that are unique and offer lasting value to society. TRUST is the No.1 currency in business, I want to invest in companies that people trust!!! As my Hobby account, I will write my thought about business and stocks intermittently.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of CVNA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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