10k Words | May 2024

Apparently, Confucius did not say “One Picture is Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars...

Cocoa and AI have both been hot over the past 12 months. The valuation gap between AI companies and everybody else has been expanding - so no surprise 41% of the S&P 500 mentioned AI during quarterly calls. We dig into EPS growth in US and Aus. After reflecting on 700 years of interest rate decline and the mathematical justifications for EV/EBITDA multiples, we end on an unusual chart showing the backlog of cinnercuak aircraft deliveries.

Cocoa market tops out

Source: commodityreport@substack.com

Are AI companies valued differently to non-AI companies?

Source: Theory Ventures

Proportion of S&P 500 companies mentioning “AI” during quarterly earnings calls

Source: Goldman Sachs

S&P 500 year-on-year earnings growth for March quarter 2024

Source: Factset

EPS growth breakdown by investment style (US market)

Source: Bloomberg

ASX EPS growth by financial year

Source: Wilsons

Portion of ASX listings (ex Materials, Energy & Property) that have sustained revenue and EPS growth greater than a level over the past five years

Source: Equitable Investors, Koyfin

700 years of interest rates declining

Source: Bank of England

What EV/EBITDA multiples should be based on ROIC, growth & depreciation factor

Source: Morgan Stanley

Commercial aircraft deliveries in 2023 v backlog

Source: McKinsey