What I Own and Why

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It is commonly stated in the value investing community that you should be able to clearly explain why you own an investment in a few sentences or you probably shouldn't own it. Here I break down my investments along with a brief explanation of why I own each of them. I am currently in a bit of a defensive stance, hence the large allocation to Treasury bills, as I have had difficulty finding investments that justify "swinging" vs. being paid 4.3% interest to wait for a "fat pitch".

The S&P 500 is a low cost way to own 500 of the largest and most dominant public U.S. companies. In order to be added to the S&P 500 a company must have positive reported earnings in its most recent quarter, and the sum of its earnings over the previous four quarters must also be positive. This filters out companies that have yet to achieve profitability which is likely to produce a slightly higher quality group overall compared to a total market fund [1].

Treasury bills are short term loans to the U.S. federal government of 4-52 weeks duration, and since the government has the ability to tax its citizens and print money on demand, there is near zero risk of losing your money [2]. Treasury bills are currently paying annualized interest of around 4.3% and are not taxable at the state level. They are marketable and mostly insulated from interest rate risk due to their short maturity, so you can quickly turn them to cash when opportunities arise. Treasury bills are comparatively attractive at the moment with the S&P 500 trading at a sporty P/E ratio around 25, which when inverted implies a current earnings yield of only 4.0% [3].

Warren Buffett is the foremost authority on what makes an exceptional business, and Berkshire Hathaway is the business he created. Through the massive insurance operation at its core it generates float, which is money received from insurance premiums that will eventually have to be paid out in claims. Due to the company's large net worth in relation to float it is not limited to investing primarily in low-interest fixed income securities like a typical insurance company, and instead uses the money to purchase quality businesses likely to generate higher returns, both in the form of wholly owned subsidiaries and stock of publicly traded companies. Most years the float is better than free, meaning Berkshire is being paid to borrow the money, providing a near-ideal version of leverage. Official P/E numbers for Berkshire are volatile and misleading due to the inclusion of unrealized capital gains in GAAP earnings, but approximating "look-through earnings" as Buffett suggests yields a P/E of 22 compared to 25 for the S&P 500.

Alphabet is the most impressive technology conglomerate on the planet and the ultimate long term compounder. The four most valuable companies in the U.S. excluding Alphabet are Apple, Amazon, Microsoft and Nvidia, with the most lucrative portions of each being the App Store for Apple, Amazon Web Services (AWS) for Amazon, Microsoft Office for Microsoft, and AI data center chips for Nvidia. Alphabet is the runner-up or second runner-up in every one of these key segments: The Google Play Store is the only true competitor to Apple's App Store, Google Cloud is the fastest growing of the three major cloud providers and is gaining significant market share from AWS, Google Workspace is also gaining ground in distant second to Microsoft Office, and Alphabet's TPU AI chips are one of the most serious threats to Nvidia. Then there's Alphabet's core business, Google Search, with exceptional economics and a 90% market share. YouTube is similarly fantastic as the leading streaming platform globally, commanding nearly as much American TV screen time as the entire cable industry combined. In addition, Alphabet has a handful of emerging businesses that could prove highly valuable as a group. The most significant is Gemini, which is in second place and gaining ground on ChatGPT for top AI chatbot. Alphabet is also majority owner of Waymo, the leading U.S. autonomous taxi company, as well as leading AI-powered drug discovery company Isomorphic Labs, and owns 100% of Wing—one of the three biggest U.S. drone delivery companies. To cap it all off its venture capital arm capitalizes on its ideal location in the heart of Silicon Valley, and has built significant early stakes in top startups including SpaceX, Anthropic, Stripe, and Databricks. Similar to Berkshire, official P/E numbers for Alphabet are volatile and misleading due to the inclusion of unrealized capital gains in GAAP earnings, but again employing a "look-through earnings" strategy yields a P/E of 25 [4], about equal to the S&P 500, but with a much higher quality mix of businesses.

Lululemon is the world's leading high-end athleisure apparel brand, has zero net-debt, a P/E ratio of 9, a longstanding price-sensitive share repurchase program, and has been using over 100% of free cash flow the last two years to aggressively buy back shares. The share price has dropped 78% from its peak in late 2023 due to a double digit drop in earnings from reduced demand for tight fitting athleisure wear, increased competition from new disrupters Alo and Vuori, and tariff headwinds. Despite the recent challenges Lululemon remains a premier brand with quality products, higher margins than competitors, and a strong balance sheet. The fickle nature of fashion trends and recent demand weakness add risk, but with Lululemon still one of the top brands for Gen Z and Millennials, and revenue still growing slightly YoY, there's plenty of potential upside here at current prices.

Deckers is an American footwear company with two flagship brands in Ugg and Hoka, mid single digit revenue and earnings growth, exceptional after-tax return on unleveraged net tangible operating capital, a modest P/E ratio of 12, a net cash position equal to 10% of the market cap, an honest and capable management with a track record of price-sensitive share repurchases, and has been spending over 100% of free cash flow on buybacks in the trailing twelve months. There's some fashion risk here, particularly with Ugg, but there's a lot to like given the current stock price.

Last updated 11/8/2026

[1] As of this writing 94% of the companies in the S&P 500 are profitable compared to only around 60% for the Russell 2000 U.S. small-cap index

[2] Whether the return is sufficient to keep up with inflation and maintain buying power is another question but you know you will get your dollars back plus the promised return

[3] The S&P 500 return is understated when compared in this way because it is likely to grow over time as the earnings of its constituent companies grow whereas there is no reason to expect the treasury bill return to have sustained growth over the long term

[4] Removes investment revaluation gains and losses and assumes the unrecognized earnings of minority investments are immaterial

This essay is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as legal, tax, investment, financial or other advice.