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Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today's Issue Read Time: <3 minutes

• Lesson: NVIDIA's not-so-crazy valuation
• Timeless Content: Why company swag should matter to investors
• Thread: Looking at Crowdstrike's valuation
• Resource: A 401(k) primer
• And more!

Together with Finchat* I (Feroldi here) have used Finchat as my primary stock research tool for over a year. ​Finchat makes it easy for me to chart hundreds of business metrics with just a few clicks. I track valuation metrics, financial metrics, and company-specific KPIs of my favorite businesses, such as unit volumes, same-store sales, or dollar-based net retention. However, I recently discovered that I can use Finchat to track my portfolio statistics. The picture above shows the stats on my real-life portfolio. I was thrilled to see that my portfolio is packed with businesses that are growing fast, have great margins, and have strong returns on capital. This is why I'm a happy paying customer of the premium version of Finchat. While the free version is great, being a premium user lets me access 10 years' worth of financial data, track analyst estimates, and get the portfolio statistics you see above. If you want access Finchat's premium features, use this link to sign up and save 15% off the annual price. Yes! I Want 15% Off Finchat Premium!

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Friends,

Over the past 18 months, NVIDIA has made a lot of investors very wealthy. A $50,000 investment in November 2022 is now worth over $300,000. (Note: none of us Brians were smart enough to make this move.)

If you look at traditional valuation metrics, it might seem like you've missed the boat on this one. Consider NVIDIA's most-watched valuation metric: its Price-to-Earnings (P/E) ratio. This figure was recently in the triple digits. Even after its blowout earnings it still clocks in at well over 60:

But here's something we harp on a lot here: the market is forward-looking. The past only matters insomuch as it informs what the future might look like.

What happens if we look at today's price versus what analysts expect the company to earn over the next 12 months (its "forward" P/E ratio)? That metric clocks in around 37 -- still not cheap, but much more reasonable.

Even then, we have to remember analysts are far from perfect. At the same time last year, analysts underestimated NVIDIA's full-year earnings by over 50%. If we assume a more modest 20% under-estimation, it would push its forward P/E ratio even lower:

• Forward P/E ratio (adjusting for analysts' errors) of about 30 -- very reasonable given current growth rates.

Look, we aren't saying that NVIDIA is cheap. We're also not saying we're going to go out and buy the stock.

What we are saying: investing seems easier when we look backwards. We have actual numbers to look at. Investing seems harder when we try and guess what's going to happen in the future. But it is in trying to tackle this harder task that great investing returns are born.

The one silver lining for us: the task isn't quite as daunting if you focus on the uber-long-term (think: decades). Bet on things that never change -- like people paying for convenience, lower prices, greater selection and freedom -- and investing in the companies that are delivering those things.

Over the long run, just getting this part right is enough for fantastic returns.

- Brian Feroldi, Brian Stoffel, & Brian Withers

One Simple Graphic:

One Piece of Timeless Content:

Often, great companies defy the status quo. You can frequently see evidence of greatness when researching a company's culture. This blog post from Permanent Equity CIO Tim Hansen explains why company-funded swag could be a sign of an outstanding investment.

One Thread:

Brian Stoffel @Brian_Stoffel_ This might seem blasphemous, but I don't think $CRWD is *crazy* expensive right now. Just *normal* expensive. Here's why👇 2:42 PM • Mar 13, 2024 7 Retweets 133 Likes Read 5 replies

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One Resource:

Does your workplace offer a 401(k) plan? If so, you have access to a great way to invest on "autopilot." Check out all the ins and outs of this ever-popular investment vehicle in this article: What Is a 401(k) and How Do They Work?​

One Quote:

👋 What did you think of today's newsletter?

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More From Us:

📗 If you've read Brian Feroldi's book, he'd love a review.

👨‍🎓 Interested in learning to read financial statements like Warren Buffett? Check out our self-paced course, The Buffett Method.

🎬 Want a review of popular company earnings? Check out our YouTube channel! Snowflake, Nvidia, and Palo Alto's earnings reviews are now available!