저자: 100BaggersInvestor · 외국인
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foreign how would you see inflation panning out and to what extent do you take inflation into account When selecting a stock and invariably that will intertwine with you know your your view or not view around uh interest rate cycle as well Terry yeah okay yeah I mean obviously those are topical and finally I think let's go back to my upbringing or it is my early career again um we're all very subject to recency biases the first thing I would say if we're not careful and people talk about uh inflation a lot now because it's an issue in their minds and then they're not wrong to think about it I'm not suggesting they are for a moment um but you need to get it in perspective um I started work in 1974 uh late 1974 and my first full year in work was 1975.
um I wonder if I give your uh your listeners a moment to guess no Googling you lot uh what the CPI went up by in 1975 in the UK foreign in the past I've seen real inflation in action all right uh and I can tell you how do I see inflation coming out I simply don't know I mean I I don't feel that I've got enough insight into this to say however I'm not totally pessimistic about it although we've clearly got inflation at the moment the reason I'm not um uh that personally pessimist about is if you look back at the fact it's always a good place to start you will find there's not any positive correlation or strong positive correlation between commodity prices and retail prices um uh in fact there are quite strong negative care relations in a number of Commodities over time and the reason for that and this comes back to how do you because you said well Terry about how do you select companies report is the first impact of inflation is not on consumers it's on companies you know we don't buy Commodities you don't go and buy Commodities you buy things that have been processed by companies even when you buy nice oil no you don't you buy gasoline or diesel you don't buy a home when you buy food it's it's agricultural Commodities which have been processed to to deliver to deliver to you or it's Electronics things that have been processed in terms of resources in terms of cobalt and so on and lithium to make Electronics the first impact is on companies it's not on and that may work through companies into consumers in the end and then we'll have a real inflation which means this if you're trying to think of what company do I want to own in the inflationary period own one with a high gross margin gross margin is the difference between revenues and cost of goods sold companies take in stuff they take in ingredients components services do something to turn them into a private and say it to you and that's your gross margin difference between those two things the average gross margin in our portfolio is 60 which is to put it in English for you they make things for four and they sell them for 10.
the average on the index is 40 which is to say they make things for six and they sold them for ten now if you're going to have a period of inflation where the the cost of goods goes up by 10 right it's clearly a lot better if it goes up from 40 to 44 and 60 to 66 basically the impact on your profitability which was lower in any event in the other companies is much greater high gross margins are a buffer for companies um and they are also a measure of their pricing power I mean the best gross margin companies in the world are people in the software business uh and people in in Goods where the cost of goods are very low things like cosmetics and in their case I think you could have inflation and it wouldn't matter at all basically so that's where we're looking the one thing where inflation I think will have quite a lot of impact negatively on on not just our companies but the market in general but probably disproportionately own us and you touched upon it is if there is an a big pickup in an inflation which persists and that's the other thing it's not much just whether we've got inflation we've obviously got very unusual circumstances at the moment in terms of covid the pandemic the recovery and the supply chain I don't think we'll know whether we've got secular inflation until we've lacked that but if it does persist and requires Central Bank action interest rates will go up and when interest rates go up valuations come down basically so I I'm not when you think about our portfolio you you I regard it as a two-stage question Terry if there is inflation are you worried about the fundamentals of your company not much and certainly not prepared with the market right are you worried about valuation yes quite a lot I think it could have quite a profound effect or valuation if if inflation takes all persists on the Central Bank action foreign
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