Enlightened Capital Blog

ENB is one of the largest North American midstream companies, generating annual EBITDA of more than C$13bn and Distributable Cash Flow (DCF) of more than C$9.4bn. ENB is well diversified across liquids pipelines, gas transmission pipelines, a gas distribution utility, and renewable power generation. ENB’s earnings have been extremely stable over time, driven by the constructive regulatory environments ENB operates in, which minimize both commodity price risk and volumetric risk. Furthermore, ENB has a strong asset base, transporting 25% of all crude oil in North America including 2/3’s of all Canadian exports to the U.S., and transporting 20% of all the natural gas consumed in the U.S., in addition to owning the largest Natural Gas Distrubtion business in North America.

ISRG is an excellent company demonstrated by its 92% market share in robotic assisted surgery, generating strong ROE’s over time, and with strong growth opportunities ahead. ISRG enjoys a first mover advantage in robotic surgery with more than 20 years of experience selling robotic surgery systems and backed by more than 22,000 peer reviewed articles supporting the clinical and economic benefits of robotic surgery compared to open surgery and minimally invasive surgery (MIS). Furthermore, the robotic surgery market is characterized by high customer switching costs and regulatory barriers. These switching costs are driven by the large capital cost for the robotic systems, and the substantial amount of training surgeons undergo to operate these machines. Furthermore, there are high regulatory barriers to entry, with regulatory approval required for new products to come to market.

Progressive is an attractive opportunity, and I expect the company to generate 12-15% IRR's for investors over the next 5 years. Progressive is a leading property and casualty insurer who has generated industry leading ROE’s over the past two decades driven by its excellent underwriting performance. PGR’s superior underwriting is driven by both a lower loss ratio and a lower expense ratio. Specifically, PGR prices policies on a much more segmented and granular basis than its peers, by utilizing telematics such as Snapshot for personal auto and Smart Haul for commercial auto. Additionally, PGR’s direct to consumer (DTC) marketing strategy and lower commission rates paid to agents have led to lower customer acquisition costs.

Every great investor has a clear investment philosophy helping them narrow down their investable universe from a possible 630,000 global public companies. Professional investors are typically limited in their investable universe based on their fund’s investment policy which determines which companies are eligible for investment based on geography, market cap, sector, and investment style such as value or growth. However, as an individual investor, I have a great competitive advantage: the ability to invest in any company regardless of its geography, sector, or market cap.

UnitedHealth Group (UNH) represents an attractive investment opportunity, and I expect UNH to deliver 13-15% IRR’s over the next five years. UNH maintains a dominant across the healthcare landscape including: health insurance, pharmacy benefit management (PBM), healthcare delivery, and healthcare data analytics and consulting. UNH’s strong market share has led to improving margins and phenomenal returns on capital over time, and I expect these trends to continue going forward. Management has proved themselves to be excellent capital allocators balancing share repurchases, bolt-on acquisitions, and capex and continues to target 13-16% EPS growth over the long-term, as well as 20+% ROE’s and mid-teens ROIC’s. Despite a market cap of $288 billion, UNH has substantial growth opportunities ahead driven by the aging U.S. population, continued consolidation of provider groups, and global opportunities to grow UNH’s healthcare data, analytics, and consulting platform. The scale of UNH’s growth opportunities are underappreciated, as the total addressable market for its non-insurance businesses is $1.45 trillion globally, with $850 billion in the U.S. and $600 billion abroad.

Recently we simplified saving for college by helping you narrow down what financial assumptions to use. For my next trick, I’ll tackle an even more complex topic- retirement planning!

In this post we’ll do the same analysis for retirement planning that we did for saving for college, and simplify the process for you. I’ll walk you through the process of creating a budget, thinking through your financial goals and help you figure out what assumptions to use for retirement planning. I’ll also highlight why it is so important to start saving for retirement as soon as possible.

Large cap U.S. banks such as BAC and JPM, offer an attractive investment opportunity given my expectation for improved profitability driven by lower efficiency ratios and higher Net Interest Margins (NIM’s). Additionally, the banking sector currently trades at a historically large discount to the S&P 500 as well as the sector’s own history. Finally, banking sector balance sheets are much stronger than they were heading into the 2008 Global Financial Crisis, allowing the sector to emerge from this recession in a much healthier position.

Even small changes in your financial planning assumptions can lead to massively different potential outcomes. These assumptions can include expected investment returns, expected inflation, and your annual savings. This is especially true over longer time frames, due to the power of compounding, as well as all the unforeseen circumstance we all face. Because no one can see into the future, I like to analyze a range of possible scenarios for my family’s financial planning. This allows me to take comfort in the fact that even in a worse-case scenario, we will still be able to achieve our financial goals.

Recently I came across a chart on twitter that made me rethink my approach to asset allocation. The chart shows which asset classes are expected to generate strong returns in different economic environments and is a powerful tool for helping you develop your asset allocation. While I don’t recommend making substantial changes to your asset allocation, small changes can be beneficial depending on your economic outlook.

Bruce Greenwald’s Competition Demystified accomplishes its goal of simplifying competitive analysis. While Porter’s Five Forces is the most well-known framework for strategic analysis, Competition Demystified simplifies Porter’s Five Forces, by focusing on barriers to entry as the most important competitive advantage in an industry. Greenwald’s book provides value for both investors, and corporate executives looking to improve or maintain their competitive positioning within their industry.