Category: Uncategorized (Page 1 of 2)

The last few years I have been less active as a writer. I want to update this diary to another important thing I believe I’ve learned.

In the last few years in particular, it has become increasingly clear to me how rare it is for most people to entertain two (either *seemingly* or real) contradictory viewpoints at the same time. Increasingly, thoughtful moderates are the new radicals in our society. Intellectual laziness and mental shortcuts often lead to black and white thinking.

Crypto: revolutionary, or scam? 

In the spring of 2019 I entered BTC for the first time in size, after a years long fascination. In the early summer of ’20 I started experimenting on the Decentralized Finance ecosystem (on-chain activity on Ethereum). Fast forward to today and I am super conflicted about my current sizeable BTC and ETH position (in the last few months, I no longer hold any ETH tokens and have all exchanged them for ETH).

I hold the following seemingly contradictory viewpoints:

1. Blockchain, in the big scheme of humanity (thinking in centuries here), is revolutionary and historic. A fundamentally different way for humans to potentially organize and coordinate internationally. And with built-in infectious mechanisms to spread. Potentially the end of nation states, eventually (though as Peter Thiel wrote in the latest edition of The Sovereign Individual: Mastering the Transition to the Information Age: if crypto is decentralizing humanity, AI technology is inherently centralizing)
2. Most crypto’s are almost certainly scams (in numbers, not value). Most people talking about crypto don’t even have a notion of the difference of on-chain or off-chain transactions. In other words, they are buying into “get rich quick”. Likewise, most crypto projects (in numbers, not value) are scams catering to these people.

Synthesizing these two points in one Naval quote: Bitcoin is a tool for freeing humanity from oligarchs and tyrants, dressed up as a get-rich-quick scheme. Or, as human rights activist Alex Gladstein put it on this podcast: the Trojan Horse was irresistibly beautiful on the outside, so the Spartans let it in (even though prominent voices warned something was off). Likewise, for the autocratic ruling classes, Bitcoin is welcomed as a number-go-up technology on the outside, and a freedom-go-up technology on the inside.

But here’s the thing. Even if certain projects are revolutionary and innovation is happening very quickly right now, that does not make e.g. ETH a good risk-reward right now per se. Indeed, very hard to tell at hundreds of billions in market value. Almost no one can build an analytical model, and tokenomics experts are numbered.

Here’s my point: what is the % of people with this nuanced view? I believe it is in the single digits. Maybe crypto is just polarizing, but so are many other things.  

Corruption: unfair hence bad per se 

I recently attended a book club meeting, and one topic was whether country A was more corrupt compared to country B (corruption in both country A and B is very low on a global benchmark). I interjected the heated discussion by sharing the idea that “corruption might be unfair (between citizens), but a small bit might be beneficial for society as a whole, to keep a well developed country running, and away from gridlock against building new highways, bridges etc. (it provides some concentrated benefits to politicians to nudge them to fight more against e.g. not in my backyard phenomena)”. I also added immediately that I am not working for the government, nor anyone in my family (i.e. I have nothing personal to gain by defending “a bit of” corruption as a necessary evil to avoid gridlock). To be honest, I’m not convinced of this argument myself. But the rash reaction was interesting in itself though, and unanimous. It felt like no one at the table even considered my point for a second, it was thrown out immediately with no’s and scolding.

European CO2 market: unfair hence bad per se

Say what you will about the European ETS market for CO2 emissions, but it provides the cheapest manner of saving CO2. The invisible hand through the certificate market guarantees the most efficient capex projects to save emissions if the EU decides to curb the annual emissions target. Politicians will come up with ideas du jour of how to save CO2, but the cost of saving CO2 through solar panels and wind turbines in countries with little sun nor wind, let alone residential solar panels, ranges from 5 to 20X more expensive when compared to curbing ETS emission certificates.

Criticism is that the CO2 emissions market opens up possibilities for corruption (e.g. companies and industries each lobby with politicians to get the highest grandfathering of certificates at the beginning of each period). Note that this criticism is in my opinion very justified. But the unfairness between participants does not detract from the fact that ETS is by far the most efficient mechanism to save CO2. Ex-post the unfair handouts,  the market will still do its magic, and the easiest CO2 saving projects will get done.

Vaccines and post-CV19 political convulsions 

I personally tried to survey the scientific evidence for and against the new revolutionary mRNA technology before making a decision. I came to the conclusion I was personally unable to reject the notion that this particular technology was a bad risk reward for me personally (I tried to find the leading edge arguments against, and got so far to find out that most were made in bad faith with factual inaccuracies and half-truths), and decided to get vaxxed.

Anecdotally, most anti-vaxxers around me have absolutely no reasonable arguments against the medical safety. But let us not conflate this with being certain we are right per se (see also: crypto tourists).

It seems like society split in two through a decision of (in)action. My personal view of organizing society post-CV19 is to abolish all special government policy for CV-19 in terms of restrictions (i.e. what Singapore and Scandinavian countries are doing). It seems to me that those that now have self-selected for low medical risk are autistically trying to clamp down on human rights on those that have self-selected for a riskier lifestyle. Mostly in the name of denying the latter a choice they already made, and absolute truths.

I might very well be wrong in this view. In fact, my conviction here is low compared to the other arguments laid out above. But the point is: how many people are both vaxxed and in favour of abolishing all centralized CV-19 government policy? (private pubs, restaurants can still cater to vulnerable people with very restrictive rules!). Few.

How many “conspiracy theories” have become “scientific” consensus in the last year? This Lex Fridman podcast with Richard Dawkins digs deeper into the propagation and evolution of (conspiracy) ideas.

Why should I even bother to look closer into crypto, DeFi and NFT’s, a domain that’s being touted right now by a lot of stupid people around me?

Why should I even begin to consider that an unfair phenomenon could be beneficial for society in aggregate?  

How is not having a hostile environment against coal, gas and oil extraction even compatible with the energy transition?

Conclusion

All models are wrong in some ways. Reality is messy. Ask: how is this wrong? Nourishing a small ego has always been a superpower, especially in the political and investing sphere. In today’s world littered with short term information, contrasting the short term with the long term perspective is a growing superpower.

Thinker on radical ideas that make you smirk. These are a good starting point to gain an edge.

I welcome your examples in the comments!

“A little bit of corruption is good”

A recent idea that made me smirk: Radical Markets – Marrying Classical Liberalism and Common Ownership (Marxism)

This post’s title is a wink at the book “Being Right or Making Money” (never read the book, yet like the title).

It is important, yet hard to draw correct investment lessons from experience.

I think I recently found a personal bias in the last few years. I unduly focused on finding investments with *multiple* *interesting* thesis points.

Take GOOG as a counter point. For the vast majority of time, GOOG has been an analyst’s favorite, with “buys” outnumbering “sells” by a wide margin.

Yet GOOG holders are making money hand over fist time and time again.

I believe the main investment thesis on GOOG hasn’t changed much since IPO. The main thesis point is simply the “positive feedback loop”, i.e. better AI algorithms draw in more users. Users generate useful feedback to improve those same algorithms. Rinse, repeat. In my opinion, GOOG has always been the AI and large datasets company.

I have followed GOOG for a long time. It was the first company I wanted to buy as a young engineering student (my father stopped me) after reading “The Google Story”.

Once I gained control over my savings, I always felt I did not have an edge vs consensus. Everything I know about the company is public knowledge. Most insights are scattered around.

There is nothing interesting for me to write on GOOG, everything interesting has already been written by greater investors and greater writers!

Is it possible the edge here is to understand the “positive feedback loop” thesis point, given the AI dynamic, is not “very, very important”, but instead very, very, very, very, very, very, very* important?

Assigning outsized weights to thesis points does not make for very interesting blog posts.

The above lesson was largely learned by having worked for a great portfolio manager who fostered the ability, I believe, to spot super important thesis points.

Let me know what you think.

I believe FB is in the same boat (biggest network reinforced by AI = unprecedented). There might be a larger binary risk involved, but on a risk adjusted basis the low valuation seems compelling.

Disclosure: Long GOOG, FB.

TC

*aka high conviction on super durable long runway growth. Is this what John Huber means when he wrote on Facebook “the best business model ever created”.

As I’ve outlined before, there is no informational edge in most large-cap stocks, but there absolutely
is a time-horizon edge for those who are willing to thoughtfully analyze what most people want to
avoid out of fear of what the next year might look like.

I guess great investors who sometimes write 1 pager theses, like Mr. Huber, are telling us to focus on their thesis points as being “very, very, very, very, very, very, very important”.

Added 0.5% to Sogou position @ USD8.1 per share.

Just taking advantage of the share price volatility. Higher spread to offer price of USD 9 per share. 10% return for a very high certainty event that is likely to close in 3-4 months.

Bought Sogou shares @ USD 8.25 per ADR. 6% position.

This is a merger arb with 8% spread over 5 months. While I focus on finding long term investments in high-quality businesses, I just cannot resist myself when short-term investment opportunity with good risk-reward arise.

Tencent is privatising Sogou with an offer price of USD 9 per ADR. This deal has reached a definitive merger agreement in Sep 2020 and hence the spread completely disappeared.

In Dec 2020, Sogou announced that they amended the merger termination date from 29/03/2021 to 29/07/2021 due to the need for antiregulatory filing and subsequent clearance from Chinese regulators.

“In late November 2020, THL and Parent made an antitrust filing with relevant PRC regulatory authorities in connection with the Sohu Share Purchase and the Merger. Considering the time needed for the clearance of such filing, the parties decided to extend the termination date under the Sohu Share Purchase Agreement and the Merger Agreement. On December 1, 2020, (i) Sohu.com, Sohu Search, and Parent executed an Amendment No. 1 to Share Purchase Agreement, to extend the termination date under the Sohu Share Purchase Agreement from March 29, 2021 to July 31, 2021, and (ii) the Company, THL, Parent and TML executed an Amendment No. 1 to Agreement and Plan of Merger, to extend the termination date under the Merger Agreement from March 29, 2021 to July 31, 2021.”

I am confident that Sogou deal will get approved by Chinese regulators because:

1. Tencent is not dominant in search

2. Sogou is very important to WeChat commerce ecosystem that Tencent will go out of its way to make Sogou deal happen

I expect them to get approval before 29/07/2021 and hence the expected time to completion of 5 months.

After evaluating the financial resulting ending Sep 2020, it seems clear that I was probably being too conservative for not adding to Jet2 during the period of time where they raised new equity and sold logistics business. At that point, the risk of ruin is extremely remote and I have always believed in the normalised earnings of GBP 150m which means I could easily justify a market cap of GBP 1.5bn.

So I could have made a purchase around GBP 1bn market knowing full well that the risk of ruin is minimal. But I didn’t. And I don’t really have any good justification. So this is a mistake of inaction.

However, we are where we are now at a market cap of GBP 2bn. What to do next?

Jet2’s lack of a long growth runway concerns me quite a bit as it already commands a 40-50% market share within the UK’s package holiday sector. Hence Jet2 is unlikely to be a multi-bagger from here. But it could grow its market share to 60-70% as it comes out of this pandemic. I estimate its package holiday business could grow to 5 million customers within the next 3-5 years up from its current 3.2 million customers (pre-pandemic).

On the pricing side, I continue to be worried about ticket pricing due to a glut of plane capacity. But Jet2’s route network overlap with the major airlines is minimal and expect to shrink coming out this pandemic as Ryanair and easyJet retreat from the regional airports.

Finally, Jet2 gained incredible customer goodwill which could improve the sustainability of its franchise.

So on balance, it is a better business now versus 9 months ago. It is set to recover in 2021 and beyond.

I think I am in a better position to take advantage of any price correction now!

Bought 10% position in 51jobs @ 70USD per share.

This is a classic Chinese ADR privatisation deal with a PE sponsor. DCP Capital is currently offering to take 51jobs private. My guess is that mgmt team will join them in the privatisation deal at some point and hence they only have to buy 50% of the shares outstanding.

I should note that as compared to other Chinese ADR privatisation deal, the valuation sounds fair. So I believe there is very little chance of price improvement from here. Overall, I think the deal is very likely to pass within 3-6 months.

I see this deal as a way to earn a higher return on cash with a good risk-adjusted return.  I would not want to participate in merger arb if I can find high quality companies to own for the long term.

Sold 4.2% of Avanza @ SEK185 per share.

It pains me to sell Avanza. But I cannot justify its valuation at this level. The trading intensity of Avanza customer base is so abnormally high (+50% versus an average of last 5 years) that it is only a matter of time before trading activity normalises. Hence current Avanza’s earning is materially overstated and putting a peak multiple (26x) on a materially overstated earning base is not good for prospective returns.

On the other hand, Avanza’s intrinsic value has benefitted from customer growth. I still have a 2% position in Avanza and I look forward to buying Avanza back at a lower valuation.

Generally, I do not try to trade around investments as I usually don’t make money out of it. Especially for a very high-quality franchise like Avanza. But when the valuation is so out of whack, I have to act.

After a lot of “backbreaking” research work, I am finally a proud shareholder of Nintendo!

Nintendo is a legendary Japanese video game company that has remained a mainstay in the industry for over 35 years, mostly because of its competence as a world-class game content creator. Nintendo owns the top 2 highest-grossing video game franchise of all time – Pokemon and Mario. Unlike most games that only last for less than 1 year, Nintendo’s most popular game franchises have exceptional longevity. For example, Nintendo’s current top 5 grossing games have been around for more than 10 years. I believe that Nintendo’s best days are ahead of it because its genius as a game maker will be amplified as Nintendo builds a direct and deep relationship with its gamer base. This new relationship with its gamer base will transform Nintendo’s cyclical revenue into a recurring one.

Unlike traditional media of TV, books and music, video game is an interactive entertainment media. This is a highly immersive environment where the gamer can interact with the game environment and change the course of events in the game world. Video games, because of this interactivity, are in essence problems for gamers to solve. It is believed that human instinctively derives happiness from solving problems and the harder the problem, the more intense the feeling of happiness when the problem is solved. Using this perspective, a video game is a cheap and effective medium to create all kind of problems for humans to solve. Nintendo’s genius lies in its ability to create problems (game contents) that are fun for the gamers to solve and to find the subtle balance between been too difficult and too easy. In short, Nintendo knows how to make games fun to play; or in Nintendo parlance, it “creates unique forms of play”.

Nintendo’s adopts the classic razor and razor blade business model. Gamers first purchase the Nintendo console, or more specifically Nintendo Switch which is the latest generation of Nintendo consoles, and separately buy the games to play on the console. Nintendo’s business model is to sell consoles at cost and make majority of the profit on the high gross margin game sales.

Traditionally, Nintendo is seen as a cyclical business because it is more reliant on the success of its console (hardware) rather than its true strength – games (software). Since new games released on the latest generation of console cannot be played on the previous generation of consoles (no backward compatibility), gamers might not upgrade to the latest generation of console which lead to limited incentives for game developers to develop new games for a console with small install base. This dynamic led to either huge successes or devastating failures. For Nintendo, Wii was a huge success but followed by Wii U which was a total commercial failure. But I believe this is changing as Nintendo’s relationship with its gamer is evolving to a more direct and continuous one which eventually lead to an almost recurring revenue stream.

Console games are evolving from distinct game worlds where gamers buy the game upfront with no further cost to persistent game worlds that gamers make ongoing payments. Many examples of very success persistent game worlds, such as World of Warcraft and League of Legends, have demonstrated incredible longevity and significantly higher revenue potential relative to distinct game worlds. As more gamers play more games with persistent game worlds, they are likely to play the console longer and more likely to upgrade to the new generation of console to enjoy better graphics.

Going forward, games’ backward compatibility is going to be a standard feature for the next-generation consoles. Without backward compatibility, each new generation of console resets the install base to zero, and the introduction of backward compatibility means that new console adds to the current generation console’s install base rather than a reset.

Nintendo builds a direct relationship with its gamer base through Nintendo Account which holds the entire library of games ever purchased by the gamers. This is a very powerful relationship as gamers could bring their games seamlessly onto the latest generation of console. Nintendo can also create new subscription products such as Online Membership which further improves revenue visibility.

Previously game developers found it very costly to develop for multiple gaming platforms (Nintendo, Sony, Xbox) as the underlying hardware architectures are different. Game engines such as Unreal and Unity provide a standard software development environment such that it is much easier for game developers to launch their games on multiple platforms. This dynamic amplifies Nintendo’s strength as a superior game developer relative to its competitors, who are primarily platform businesses with limited game development DNA, as gamers who previously buy Nintendo consoles just for the exclusive Nintendo games can now also get the games that are otherwise available on Sony and Xbox.

All of the four factors above – console games evolving from discreet to persistent game worlds, game’s backward compatibility, direct to gamer relationships and interoperability of gaming platforms – means that Nintendo’s strength as a world-class game maker is going to be the key driver for success going forward and the console’s cyclical risk is more muted.

Every time a big technology paradigm shift appears, there is always a risk that incumbents could somehow be disrupted. Cloud gaming is the latest technology paradigm shift. While it is still not clear to me how cloud gaming is going to change the industry, I am confident that Nintendo can thrive as long as they are able to apply their game development DNA to the cloud gaming environment. However, Nintendo might not be able to adapt to the cloud gaming world just as they still struggle to adapt to the mobile gaming environment.

Nintendo has failed to adapt to the mobile game environment because they do not have the operational capability to operate persistent game worlds that are live and requires a continuous content upgrade. Nintendo’s game production is more akin to making a movie rather than a talk show that requires new episodes every day.

I view Nintendo’s lack of game operation competence as the single biggest concern now. If I see evidence that Nintendo has developed a strong game operation competence, then I will increase our investment in Nintendo meaningfully.

I believe that Nintendo can easily have 100m of gamers who would consistently spend USD 100 per year on Nintendo games almost on a recurring basis within 1-2 years. This translates into a USD 10bn revenue base. Assume they breakeven on hardware, Nintendo could generate USD 4bn of net profit. This implies 15x P/E which is very reasonable valuation for such a high-quality company.

By the way, I have never had so fun researching a company!

Sold out of Eslite Spectrum @ an average price of TWD 75 per share. Generally speaking a very disappointing investment because of my mistake in judgement.

In Jun 2020, Eslite announced the closure of Shenzhen mall due to an inability to reach a rental agreement with CR Land. COVID-19 probably accelerated the already sub-par performance of SZ Eslite.

The further deterioration of the HK business also compounded Eslite’s problems both due to social unrest and COVID-19.

TW business continues to have limited LfL growth.

I believe the key underlying issue is due to the core Eslite business model of bookstore + shopping is just not that strong. My mistake has been to overestimate the strength of this business model.

My original hypothesis depends on Eslite bookstore ability to continuously generate traffic which can be monetised through other merchants. However, traffic generated by the bookstore is neither high in volume nor valuable enough.

I hope Eslite would continue to do well as it plays an important role in spreading art and culture in Taiwan.

The portfolio delivered a net return of 7.9%[1] for first half of 2020 while FTSE Global All Cap index’s return is -6.7% during the same period. Our portfolio’s cumulative return since 2016 is 86.6% while the above-mentioned index’s cumulative return is 45.3%. Cash is 48% of the portfolio.

In the past six months, COVID-19 introduced unprecedented level of uncertainties and challenges for businesses. Most of the businesses in our portfolio performed exceptionally well given the tough circumstances. Below are some operational highlights:

Games Workshop reported revenue growth and profit growth of 4.6% and 8.3% for the 12 months ending 31 May 2020 despite having no revenue for 6 weeks. Fans are escaping to Warhammer to seek temporary respite from the stressful lockdown environment. On 25^th July 2020, Games Workshop successfully launched the latest edition of Warhammer 40K with improved game play, new story lines and miniatures; and fans responded enthusiastically. The Warhammer IP continues to grow from strength to strength with a record pipeline of video games and an upcoming mass-market TV show. Warhammer is truly a global franchise which is still in the early innings of its growth trajectory. I am thrilled to be part of this journey. Games Workshop is our largest investment and constitutes ~15% of our portfolio.

As a travel company, Dart Group is disproportionately impacted as customers cancelled their holidays due to CVOID. They took this opportunity to build enormous customer goodwill by refunding its customers quickly. The management team also quickly sold assets and raised new capital to ensure they can survive under any conditions.

Avanza has benefitted from the global tailwind of increased participation from retail investors with the growth of new customers accelerating. 139,100 new customers joined Avanza during the 6 months ending June 2020 – an incredible 100% growth versus same period in 2019. Consistent many other retail brokerage platforms globally, the average trading volume per customer increased by 50%. With a largely fixed cost base, Avanza’s net profit grew 211%. Avanza’s short-term operational performance is driven by a myriad of market factors such as market volatility and prevailing interest rate level. However, in the longer term, the most important driver for Avanza’s intrinsic value is the growth of its customer base. Avanza’s current market value is probably ahead of its intrinsic value. I have resisted the temptation to sell Avanza shares as there is still an exceptionally long growth runway for Avanza. Avanza’s customer base is 10% of Sweden population but its share of savings capital is only 5%. Our long-term return should be slightly above Avanza’s long-term customer growth rate of 15% due to operational leverage.

Eslite Spectrum is a physical retailer from Taiwan. While its Taiwan operation is relatively well insulated from the impact of COVID-19, its mainland China operation took a big hit. Due to the pandemic, it closed the Shenzhen store. I believe the pandemic is simply a catalyst to reveal the inherent weakness of Eslite’s retail model of using Eslite bookstore as a traffic generator and monetised through carefully selected third-party vendors. My mistake is to over-estimate the brand reputation of the Eslite bookstore as a traffic generator and its merchandising capability. Hence, I will be exiting this investment.

When I consider my performance in this period, I give myself a B minus – reasonable but not stellar performance. It was not stellar because I was too conservative in deploying capital due to my hesitation to take advantage of investments opportunities that were offering attractive absolute long-term return. Overall, it is a reasonable performance as I have the conviction to hold onto existing investment and added two news investments – Nintendo and Ryman Healthcare.

I am increasingly convinced that partnering with great businesses is the most reliable strategy to grow wealth over a long period of time. Accordingly, the highest priority is to increase the weighting of great businesses within our portfolio. While I will always be open to the generally undervalued and special situation investments, the relative opportunity cost of owning them will increase as I find more great businesses to own.

I am glad to report that Compounders currently make up 36% of our portfolio up from 3% in 2017. As a reminder, I define Compounders as great businesses with durable business moats and an exceptionally long growth runway. I intend to hold our Compounders for as long as possible unless 1) there is a mistake in my judgement, 2) the valuation is so ridiculous that prospective long-term return is below risk-free rate, 3) there is better investment opportunities. In the last six months, we became business partners to two great businesses – Nintendo and Ryman Healthcare – which I will explain in detail later. I believe that our Compounders as a group can sustain ~10% return for a long period of time.

The high cash level is due to the successful closure of Yixin investment in June 2020. While no one can grow rich sitting on cash, I am willing to be patient and wait for great opportunities to present itself. After all, one must not lose money to make money.

[1] Assuming a fee structure of 1) no management fee, and 2) a 20% performance fee above 5% threshold i.e. 8.6% – (8.6%-5%)*(20%) = 7.9%

Ryman Healthcare reported its annual results ending Mar 2020. Overall they have done a fantastic job taking care of the residents and NZ as a country also did a great job containing COVID. The likelihood of a liquidity crisis at Ryman has reduced significantly as the sales process has resumed and the care business generated strong cash flow even at the peak of COVID-19 crisis. Nonetheless, the near term financial performance is likely to be negatively impacted as the sales momentum takes time to resume. However, Ryman’s long term prospects are intact and, if anything, Ryman is likely to emerge as a stronger company.

Added another 4% to Ryman Healthcare @ NZD 13 per share

My conviction in Nintendo grows as I learn more about the company. Recently, there was a Bloomberg article that claimed Nintendo has reduced ambitions in mobile games due to its success with Switch. And a few days later, Nintendo announced a new cross-platform (mobile + Switch) Pokemon game called Pokemon Unite which is a joint development with Tencent. Despite the deluge of criticism by Pokemon hardcore fans, I am very excited about this game. I think Pokemon IP has incredible adaptability and this is just the beginning.

More importantly, this signals another attempt by Nintendo to transition from Game as a Product (GAAP) to Game as a Service (GAAS) over time. (For more details on GAAP vs GAAS see this post ) While it is hard to predict exactly how this transition will happen, I am confident that it will happen. My best guess is that Nintendo will use mobile games as a way to funnel gamers to their own game system and they will adapt more service capability to their game system over time. Pokemon Unite is one such example.

Added another 2.5% to Nintendo @ JPY 50700 per share

The deal is finalised today and closed out all Bitauto / Yixin positions.  A cool 20% return in 6-months. I consider special situation opportunities such as this one to be perfectly reasonable investment opportunities given the generally high market valuation. Will probably participate if similarly good opportunities arise again.

However, one must recognise the real money is made with a great company that can compound over time. The special situation opportunities seem to me to have real reinvestment constrains because one cannot always find wonderful special situation investments with attractive absolute returns despite good risk-adjusted return. And not scalable after a certain capital size(not an issue for me now but hopefully it will be).

Frankly, it just feels less satisfying than owning great businesses that just keeps improving and making a real impact on the world.