This week on Equity Mates

Hey there Equity Mate,

We hope you enjoyed the first episodes of our Summer Series this week.

Over on Equity Mates Investing Podcast we’re diving into 12 stocks with 12 expert investors to understand their research process and how they build an investment thesis.

On the Get Started Investing Podcast, we’re taking a journey to financial independence and discussing the pro’s and con’s of the FIRE movement.

Plenty of content to keep you listening and learning however you’re spending your summer.

Here’s what will be dropping this week:

• Monday: Equity Mates (Apple | Spotify): Up more than 200% in 2023, what does 2024 hold? - Nvidia

• Tuesday: Get Started Investing (Apple | Spotify): Change your mindset, change your life

• Thursday: Equity Mates (Apple | Spotify): Creating a three-sided trucking marketplace - Landstar System

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Your questions, answered

Jasper asked via email:

When talking to clients, what do you suggest in terms of cash flow?

We put Jasper’s question to Glen Hare, founder of Fox and Hare:

Maybe I'll answer that by touching on a few mistakes that I see people make. One of the big ones is they're just saving whatever's left over. If you're saving whatever's left over, then that's going to give you absolutely no clarity as to when you're actually going to be able to achieve your goal.

If you're wanting a $1,000,000 place, and you need a 10% deposit then you need $100,000. If you know that you're saving $2,000 per month or $3,000 per month, it's going to be really clear as to when you're going to be able to get there.

If you're just saving whatever's left over or putting money in a savings account and then subsequently taking it back out, that's going to give you no clarity as to when you're actually going to get there.

So pay yourself first.

If you have a question you’d like answered, hit us up at ask@equitymates.com

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What we’ve been reading

The Late-Night Email to Tim Cook That Set the Apple Watch Saga in Motion

The Apple Watch saga has been somewhat lost in the distraction of Christmas and New Years, but the world’s biggest company has been facing big problems with one of its big sellers. On 21 December, Apple stopped selling the Series 9 and Ultra 2 Apple Watch on its website before an official ban went into effect in the United States on 26 December. Apple then was able to get a temporary pause on that ban on 27 December, but the larger question still remains before the courts - has Apple infringed on the patents of medical device maker Masimo?

If, like us, you missed this story in late-December, this Bloomberg article tells the Apple Watch saga from the beginning. It starts a decade ago, in in 2013, when Apple CEO Tim Cook received an unsolicited email from the Chief Technical Officer of Cercacor Laboratories, the sister company of Masimo. The CTO’s pitch was that Apple’s Watch could incorporate new technology and become a leading medical device in the burgeoning wearables market. Less than a day after that email was sent, Apple recruiters were in touch with the CTO and they eventually hired the CTO and a number of people from his team.

The key piece of technology that is at issue here is a pulse oximeter that allow the latest Apple Watches to noninvasively and accurately capture the level of oxygen in a person’s blood. Masimo claims that Apple is using their intellectual property by infringing on their patents and that Apple stole trade secrets when they hired this engineer.

This case has been making its way through court for years. In most previous hearings, Apple has won. But in October last year, Masimo were able to have an import ban granted by the US International Trade Commission (which Apple is appealing). If Masimo wins the appeal, Apple will not be able to sell the latest Apple Watch’s in the United States without coming to some kind of agreement with Masimo or changing the technology in question. A big headache for Tim Cook to start the year.

John Hempton on Hibbett (Nasdaq: HIBB)

John Hempton is one of Australia’s most well-known fund managers, particularly notable for his short selling. However, in this note he has written about a stock he is long on, the American sporting and athletic retailer Hibbett. Across his funds, Hempton’s owns 5% of the company.

Based in Alabama, Hibbett started as a sporting goods store in the south of the United States. However, as athletic gear and sneakers have become fashionable, Hibbett has positioned itself to capitalise on that trend. Importantly, they acquired another athletic retailer City Gear in 2018 to help supercharge their sneaker sales.

But it remains an intriguing investment from Hempton. There are some giants in the sports and athletic retailing market in the United States - Dick’s Sporting Goods is a $12 billion company and Foot Locker is $3 billion. So why has Hempton invested in a smaller ($800 million) and lesser known player?

As Hempton explains, it all comes down to the market dynamics and the retailers’ relationships with their powerful suppliers - namely Nike and Adidas. This is an interesting look at how Hempton has taken a contrarian position in a well studied market. Time will tell if it is a good investment.

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