Beyond Hype: The Real Benefits of ChatGPT in Fundamental Value Investing

My Mom kept asking me: “Can’t you use ChatGPT to help you pick stocks?” She means well. She is always looking out for her, now 44-year-old, son and wants him (me) to do well.

My initial response was one of irritation. Mom is a wonderful person, but her expertise is far away from the land of fundamental value investing.

The more she asked, however, the more a gnawing suspicion grew in my mind. Perhaps somewhere out there in the market, someone has figured out how to make ChatGPT go “cha-ching” for them. A sort of Aladdin’s magic lamp, that once rubbed the right way would produce excess returns unavailable to the uninitiated like me.

Then I came across a paper about using AI in value investing by someone who had recently launched their own investing firm. Brushing aside the suspicion that the author was merely using the label of AI as marketing spin for his new venture, I read 30+ pages of his findings.

All I was able to glean is that despite copious efforts the author and his team were able to use computers to come up with a universe of fundamentally attractive companies to serve as their hunting ground for mis-priced stocks. Having done the same thing manually already without any AI, I wasn’t that impressed. I appreciated the author’s honesty that they failed in any attempts to have AI predict future fundamentals of companies. Definitely not Aladdin’s magic lamp, at least not yet.

So, armed with a fresh subscription to ChatGPT 4, I embarked on a quest to find out what could AI do for a?fundamental value investor?like me. I purposefully picked a company that I know well, O-I Glass, so that I could check the validity of what I was being told. Below are the prompts I used, and what I got from the language model.

Prompt: “Act as an equity analyst”

ChatGPT 4: A bunch of text telling me that it’s ready and some directions for what it could do.

Prompt: “Tell me what O-I Glass does as a business”

ChatGPT 4: O-I Glass, Inc., formerly known as Owens-Illinois Inc., is one of the leading manufacturers of glass containers worldwide. As of my last update in September 2021, here's a summary of the company's operations and business:

1. Core Business:?O-I Glass primarily manufactures glass containers, which are used by food and beverage companies to package their products. Their customers range from large multinational brands to local businesses.
2. Global Presence:?O-I has a significant global presence, with operations spread across multiple continents, including North America, South America, Europe, and Asia.
3. Innovation:?The company has been focusing on sustainability and innovation in recent years, emphasizing the recyclability and eco-friendliness of glass as a packaging material. They have also been developing new manufacturing techniques and design innovations to maintain their competitive edge in the market.
4. Sustainability:?Glass is 100% recyclable and can be recycled endlessly without losing quality. O-I Glass emphasizes the sustainable benefits of glass packaging and its role in a circular economy.
5. Challenges:?Like many manufacturing businesses, O-I Glass faces challenges that include fluctuations in raw material prices, evolving consumer preferences, competition from alternative packaging materials (like plastic and aluminum), and regulatory issues in different regions.
6. Strategic Initiatives:?The company has been involved in various strategic initiatives to optimize its production footprint, reduce costs, and address debt levels. This includes divesting non-core assets and streamlining its operations.

Prompt: “Who are the company's competitors?”

ChatGPT 4: O-I Glass, Inc. operates in the glass container industry, and like any other industry, it has several competitors. As of my last update in September 2021, some of the major competitors in the global glass container market include:

1. Ardagh Group:?A global supplier of infinitely recyclable, metal and glass packaging for some of the world's leading brands. The company operates in multiple continents and is considered one of the significant players in the industry.
2. Vidrala:?A European-based company that manufactures glass containers primarily for the food and beverage industry.
3. Verallia:?A major global producer of glass bottles and jars for beverages and food products. It has a strong presence in Europe and South America.
4. Anchor Glass Container Corporation:?An American manufacturer of glass containers.
5. Bormioli Rocco:?An Italian-based company specializing in glass containers as well as other glass products.
6. Gerresheimer AG:?A German-based company that, among other things, manufactures glass containers for the pharmaceutical, perfume, and cosmetic industries.
7. HEINZ-GLAS:?A global company known for producing high-quality glass containers, particularly for the perfume industry.

Besides these companies, there are numerous other regional players in various parts of the world. Also, while these companies directly compete in the glass container industry, O-I Glass also faces indirect competition from producers of alternative packaging materials, such as plastic and aluminum.

Prompt: “How has market share changed between glass, aluminum and plastic containers in the markets in which O-I Glass competes in?”

ChatGPT 4: The competition between glass, aluminum, and plastic containers has evolved over the years due to various factors such as environmental concerns, cost efficiency, consumer preferences, and technological advancements. As of my last update in September 2021, here's a broad overview of the trends in market share for these materials:

1. Glass:
2. Advantages: Glass is non-porous and impermeable, meaning there's no interaction between the container and its contents, which can preserve the product's taste or freshness. Additionally, glass is 100% recyclable and can be recycled endlessly without loss of quality, making it a sustainable packaging option.
3. Challenges: Glass containers are typically heavier than plastic or aluminum, which can increase transportation costs. Additionally, they can be more fragile.
4. Trend: Glass usage had faced a decline in certain markets and segments due to the rise of plastic and aluminum. However, there's been a resurgence in interest due to sustainability concerns around single-use plastics.
5. Aluminum:
6. Advantages: Aluminum cans are lightweight, resistant to breakage, and have a high recycling rate. They're especially popular for beverages like beer and soda.
7. Challenges: While recyclable, the process of making aluminum is energy-intensive.
8. Trend: Aluminum has maintained a strong presence, especially in the beverage sector. The craft beer movement, in particular, has embraced aluminum cans, citing benefits like portability and protection from light.
9. Plastic:
10. Advantages: Plastic is lightweight, resistant to breakage, and can be molded into various shapes and forms. It's been widely used for beverages, personal care, and household products.
11. Challenges: Environmental concerns surround single-use plastics, as they contribute to pollution and are not always recycled. Certain plastics can also leach chemicals into the product they contain.
12. Trend: Plastics had seen significant growth, especially in sectors like bottled water. However, backlash against single-use plastics and increased regulatory measures have led to a reconsideration of its use, especially in consumer-facing industries.

For O-I Glass, these trends mean that while there are challenges from competing materials, there's also an opportunity, especially as sustainability and circular economy concepts gain traction. Consumer preferences are also shifting, with many consumers now looking for environmentally-friendly packaging options.

However, the exact market share numbers and how they've changed over time can vary depending on the specific market (geographically and by product category). For the most up-to-date and detailed insights, industry-specific reports or market research studies would be the best sources.

Prompt: “Perform a Porter 5-Forces analysis on the Glass Packaging industry in which O-I Glass competes”

ChatGPT 4: Certainly! Porter's Five Forces is a framework developed by Michael E. Porter to evaluate the competitive forces at work in a given industry and understand the underlying drivers of profitability within that industry. Here's an analysis of the glass packaging industry using this framework:

1. Threat of New Entrants (Barrier to Entry)

• Capital Intensive: The glass packaging industry requires significant investment in manufacturing facilities, research & development, and distribution networks. This creates a high barrier to entry.
• Economies of Scale: Established players like O-I Glass benefit from economies of scale which can deter new entrants.
• Brand Recognition: Established companies have built trust with customers over time, making it hard for new entrants to gain market share quickly.

2. Threat of Substitutes

• High Threat: Plastic and aluminum containers are significant substitutes for glass packaging. While glass has sustainability benefits, plastics are lighter and sometimes cheaper, and aluminum offers benefits like being lightweight and resistant to breakage.
• Consumer Preferences: Growing environmental concerns could reduce the threat from plastic containers, but this also depends on regional regulatory environments and consumer awareness.

3. Bargaining Power of Buyers

• Diversified Customer Base: The glass packaging industry serves various sectors like food, beverages, pharmaceuticals, and cosmetics. This diversification can reduce the bargaining power of any single group of buyers.
• Quality and Branding: For certain premium products, glass is seen as a higher-end packaging material. This can reduce buyer power if they prioritize the aesthetic and quality benefits of glass.

4. Bargaining Power of Suppliers

• Limited Number of Suppliers: The industry might depend on a limited number of suppliers for raw materials like silica sand, soda ash, and limestone.
• Cost Impact: Any price fluctuation in these raw materials can impact the cost structure for glass packaging manufacturers.
• Switching Costs: If there are alternative suppliers available, the switching cost might be moderate. However, long-term contracts or regional constraints can affect this dynamic.

5. Competitive Rivalry within the Industry

• Established Players: The presence of established companies like O-I Glass, Ardagh Group, Verallia, etc., means that there's significant competitive rivalry.
• Product Differentiation: While glass packaging can be seen as a commodity, there's room for differentiation in design, quality, and innovation. Companies that can innovate can potentially command higher margins.
• Market Growth: In markets where the demand for glass packaging is stagnant or declining, competitive rivalry might increase as companies compete for a bigger share of a shrinking pie.

In conclusion, the glass packaging industry faces considerable challenges, especially from substitutes and potentially from powerful suppliers. However, the high barriers to entry and the potential for differentiation provide some degree of protection against these forces. To navigate this environment, companies in the industry need to focus on innovation, sustainability, cost-efficiency, and building strong relationships with both suppliers and customers.

Prompt: “What is O-I Glass's competitive advantage?”

ChatGPT 4: O-I Glass, one of the world's leading manufacturers of glass containers, has several competitive advantages that have enabled it to maintain its position in the industry. As of my last update in September 2021, the following are some key competitive advantages of O-I Glass:

1. Scale and Global Presence:?O-I Glass operates on a global scale, with facilities in numerous countries. This large footprint provides economies of scale, enabling cost efficiencies in production, distribution, and procurement.
2. Diverse Product Portfolio:?The company offers a broad range of glass containers catering to various industries, including alcoholic beverages, non-alcoholic beverages, food, pharmaceuticals, and others. This diversification reduces dependence on any single market segment.
3. Innovation and R&D:?O-I Glass has been at the forefront of innovations in glass packaging. They've developed new manufacturing techniques, designs, and sustainable solutions, keeping them competitive and relevant in the market.
4. Sustainability:?Glass is inherently sustainable, being 100% recyclable and able to be recycled endlessly without loss of quality. With increasing global focus on sustainability and reducing single-use plastics, O-I Glass's core product inherently aligns with these environmental values.
5. Brand and Reputation:?Having been in the industry for over a century, O-I Glass has established a strong brand reputation for quality and reliability. Their longstanding relationships with major brands globally are a testament to their credibility in the industry.
6. Customization Capabilities:?O-I Glass has the capability to produce customized solutions for brands, allowing for differentiation in the market. This is especially crucial for premium brands seeking unique packaging designs.
7. Vertical Integration:?In some regions, O-I has made efforts to control more of its supply chain, allowing for better control over raw material costs and ensuring a consistent supply.
8. Strategic Investments and Acquisitions:?Over the years, O-I Glass has made strategic investments and acquisitions to strengthen its market position, expand its capabilities, and enter new markets.

While these competitive advantages have given O-I Glass a strong position in the industry, it's crucial to note that the company also faces challenges. Competition from other materials (plastics and aluminum), evolving consumer preferences, regulatory changes, and the need for continuous innovation are among the challenges O-I Glass and other glass manufacturers face. Successful navigation of these challenges requires a continuous focus on innovation, cost management, and aligning with market trends.

Prompt: “Compare O-I Glass's global scale with that of its competitors”

ChatGPT 4: O-I Glass has historically been one of the largest manufacturers of glass containers globally. To compare O-I Glass's global scale with its competitors, we should consider several parameters, such as production capacity, geographic presence, revenue, and the number of facilities or plants.

As of my last update in September 2021:

O-I Glass:

• Geographic Presence: O-I Glass has a significant global presence with operations across North America, South America, Europe, and Asia.
• Facilities: O-I has multiple manufacturing plants spread across these regions.
• Market Position: In many markets where it operates, O-I Glass is among the leading suppliers of glass containers.

Key Competitors:

1.?Ardagh Group:

• Ardagh is a major player in the global glass container market.
• They have a diversified geographic presence, with operations in Europe, North America, and other regions.
• Historically, Ardagh's metal packaging business also made it a substantial entity in the broader packaging industry.

2.?Verallia:

• Verallia is another significant player in the glass packaging industry.
• Its presence is robust in Europe and South America.
• It operates numerous glass production facilities across these regions.

3.?Vidrala:

• Vidrala has a strong presence in Europe.
• While its scale might not be as expansive as O-I Glass or Ardagh, it remains a key player in the regions it operates in.

4.?Anchor Glass Container Corporation:

• Anchor Glass primarily operates in North America.
• Its scale in terms of global presence is more limited compared to companies like O-I Glass and Ardagh.

In summary, while O-I Glass has a comprehensive global scale and presence, companies like Ardagh Group and Verallia also have significant international footprints. However, the exact scale comparison can vary based on the specific metric you're looking at (e.g., revenue, production volume, number of plants).

Prompt: “Who among the companies has the lowest unit costs?”

ChatGPT 4: A bunch of generic stuff that basically didn’t answer my question

Prompt: “Who is O-I Glass's strongest competitor and why?”

ChatGPT 4: As of my last update in September 2021, O-I Glass has several competitors in the global glass packaging industry. Among these,?Ardagh Group?is often considered one of the strongest competitors to O-I Glass in terms of scale, capabilities, and market presence. Here's why:

1. Global Presence:?Like O-I Glass, Ardagh Group has a significant global footprint. They operate in numerous countries across continents, allowing them to serve a broad customer base.
2. Diversified Product Portfolio: Ardagh offers a comprehensive range of glass containers catering to various sectors, from food and beverages to cosmetics and pharmaceuticals.
3. Innovation and R&D:?Ardagh, similar to O-I, places a strong emphasis on innovation and research & development, ensuring they stay at the forefront of the industry's needs and trends.
4. Financial Strength: Ardagh Group's financial performance and stability allow them to invest in strategic initiatives, R&D, and other avenues for growth.
5. Sustainability Initiatives: Ardagh has been proactive in promoting sustainability, understanding the environmental advantages that glass packaging provides over some other materials.
6. Vertical Integration: Ardagh Group has integrated certain parts of its supply chain, allowing for potential cost advantages and greater control over raw materials.
7. Metal Packaging: Besides glass, Ardagh Group has a significant presence in metal packaging. This diversification allows them to cater to a broader range of customer needs and insulate them from fluctuations in one particular segment.

While Ardagh Group stands out as a strong competitor to O-I Glass, it's essential to understand that the competitive dynamics can change based on specific markets, product segments, and evolving industry trends. Additionally, companies like Verallia also play influential roles in specific regions and product categories.

Prompt: “Perform a SWOT analysis on O-I Glass, then perform the same on each of the major competitors”

ChatGPT 4: Certainly! Let's start with a SWOT analysis for O-I Glass based on information available as of September 2021:

O-I Glass:

Strengths:

1. Global Presence: Operations in various countries provide a diversified revenue stream and customer base.
2. Extensive Experience: Over a century of experience in the glass manufacturing industry.
3. Innovation & R&D: Strong emphasis on developing new manufacturing techniques and designs.
4. Diverse Product Portfolio: Offers a broad range of products catering to multiple sectors.

Weaknesses:

1. Debt Levels: Historically, O-I Glass has had a relatively high level of debt.
2. Dependence on Core Markets: Significant revenue generation from alcoholic beverages can be seen as a concentration risk.

Opportunities:

1. Sustainability Trend: Growing focus on environmental concerns can push more brands to choose glass over plastic.
2. Emerging Markets: Expanding in fast-growing markets with increasing consumption of packaged goods.
3. Strategic Partnerships: Collaborating with brands for bespoke designs and sustainable solutions.

Threats:

1. Competitive Landscape: Strong competition from other packaging materials and glass manufacturers.
2. Regulations: Changes in regulatory environments, especially around recycling and environmental concerns.
3. Economic Fluctuations: Economic downturns can impact consumer spending and, consequently, demand.

Ardagh Group:

Strengths:

1. Diversified Offerings: Presence in both glass and metal packaging industries.
2. Global Operations: Significant international footprint similar to O-I Glass.
3. Financial Stability: Robust financial performance with capabilities to invest in strategic growth areas.
4. Innovation Capabilities: Emphasis on R&D to meet evolving customer demands.

Weaknesses:

1. Debt: Like O-I, Ardagh has historically carried a significant amount of debt.
2. Complex Organizational Structure: Given its diverse operations, managing the varied businesses can be complex.

Opportunities:

1. Sustainability Initiatives: Further leveraging the sustainability advantages of glass.
2. Acquisitions: Strategic acquisitions to expand market presence or capabilities.
3. Emerging Markets: Opportunity to expand further in fast-growing regions.

Threats:

1. Competition: From other packaging materials and within the glass industry.
2. Regulatory Changes: Environmental and industry-specific regulations.
3. Economic Downturns: Can impact demand for products, especially premium offerings.

Verallia:

Strengths:

1. Strong European Presence: A major player in the European glass packaging market.
2. Specialized Focus: Concentrated expertise in the glass packaging domain.
3. Innovation Driven: Focus on design and manufacturing innovations.

Weaknesses:

1. Geographic Concentration: While they have a presence in South America, they are heavily reliant on the European market.
2. Limited Diversification: Primarily focused on glass packaging.

Opportunities:

1. Sustainability Drive: Leverage the environmental advantages of glass.
2. Expansion in Emerging Markets: Diversify geographic presence to reduce concentration risks.
3. Custom Solutions: Collaborate with brands for unique packaging designs.

Threats:

1. Intense Competition: Europe has several glass manufacturers, leading to stiff competition.
2. Economic Uncertainties: Especially in Europe, economic fluctuations can impact demand.
3. Shift in Consumer Behavior: Movement towards alternative packaging solutions.

Prompt: “Provide a breakdown of O-I Glass's cost structure by category”

ChatGPT 4: Gave me a generic answer without much insight or any numbers

Prompt: “Analyze O-I Glass's quality of earnings and support your conclusions”

ChatGPT 4: Gave a laundry list of how to determine quality of earnings, but didn’t provide any insight specific to the company being asked about

Prompt: “What has been the company's organic revenue growth for the period of 2007 through 2020?”

ChatGPT 4: Told me to go read the 10-Ks (ouch!)

Prompt: “Assess the management”

ChatGPT 4: Gave a laundry list of a bunch of factors used in assessing management, but didn’t actually assess O-I Glass’s management or provide any real insight

Prompt: “If you could ask the CEO of O-I Glass 3 questions, what would you ask and why?”

ChatGPT 4: If given the opportunity to ask the CEO of O-I Glass three questions, they should be insightful and address key areas that provide understanding beyond readily available public information. Here are three potential questions and the rationale behind each:

1.?Sustainability and Innovation:

• Question: "Given the increasing emphasis on sustainable packaging solutions globally, how is O-I Glass innovating to ensure that glass remains not just a viable but a preferred choice for manufacturers and consumers in the future?"
• Why: Sustainability is a significant trend in the packaging industry. Understanding how O-I Glass is leveraging its core product (glass) in the sustainability wave provides insights into the company's long-term vision and adaptability to changing market dynamics.

2.?Competitive Landscape:

• Question: "Considering the competitive pressures from alternative packaging materials like plastic and aluminum, what strategies is O-I Glass employing to differentiate itself and to ensure growth in its market share?"
• Why: The packaging industry is diverse, with various materials vying for dominance. By understanding how O-I Glass positions itself and competes, one can gauge the company's strategic agility and potential for future success.

3.?Operational Efficiency and Cost Management:

• Question: "With global operations and challenges such as transportation costs, raw material price fluctuations, and regional demand differences, how is O-I Glass optimizing its operations for efficiency and profitability?"
• Why: Operational efficiency is crucial for a manufacturing company like O-I Glass. Gaining insights into how the company manages its cost structure and optimizes operations can indicate the company's ability to maintain profitability and adapt to changing economic environments.

These questions aim to shed light on the company's strategic positioning, adaptability, and operational prowess, three key areas critical for the success of a global manufacturing and distribution company.

Prompt: “If you could talk to anyone in the world about O-I Glass in order to better understand its business and future prospects, who would you talk, what would you ask, and why?”

ChatGPT 4: To deeply understand O-I Glass's business and future prospects, one would ideally engage with a mix of insiders, who have firsthand knowledge of the company's operations and strategy, and external stakeholders, who can provide objective insights and external perspectives.

1. Andres Lopez, CEO of O-I Glass (or whoever holds the CEO position at the time of inquiry):

• Question: "Considering the rapid changes in consumer behavior and the packaging industry's evolution, how does O-I Glass envision its role in the market over the next decade?"
• Why: The CEO will have the most comprehensive view of the company's strategic direction, challenges, and opportunities. This question would uncover the company's long-term vision and strategic objectives.

2. A Key Client from a Major Industry (e.g., Beverage or Food):

• Question: "Why do you choose glass packaging from O-I Glass over alternative materials, and what would make you consider switching?"
• Why: Understanding a major client's perspective offers insights into what makes O-I Glass's offerings attractive and highlights potential threats or areas for improvement.

3. A Research Analyst Covering the Packaging Industry:

• Question: "From your industry-wide perspective, what are the major shifts you foresee in the packaging landscape, and how well-positioned is O-I Glass to navigate these changes?"
• Why: Analysts have a deep understanding of industry dynamics, competitive positioning, and external challenges or opportunities. This would give an external and potentially unbiased view of O-I Glass's position in the market.

4. An Employee in O-I Glass's R&D or Innovation Department:

• Question: "How is O-I Glass innovating to address sustainability challenges and compete against alternative packaging solutions?"
• Why: Direct insights from those in innovation roles can highlight the company's readiness and efforts in addressing market demands and trends.

5. A Sustainability Expert or Environmental Activist:

• Question: "Given the environmental impact of various packaging materials, how do you view the role of glass in the future of sustainable packaging?"
• Why: As sustainability becomes a key concern in the packaging industry, an expert in this field can provide a perspective on how glass, and by extension O-I Glass, fits into this narrative.

By speaking to these individuals, one could gain a holistic understanding of O-I Glass's internal strategies, external market perceptions, competitive advantages, potential challenges, and the broader industry's direction.

Prompt: “Describe the company's market presence in depth”

ChatGPT 4: Certainly, O-I Glass's market presence can be dissected across multiple dimensions, such as geography, product segments, clientele, and market share:

1.?Geographical Footprint:

• North America: Historically, O-I Glass has had a strong presence in North America, especially in the U.S. Here, they serve a broad spectrum of industries, from alcoholic beverages to pharmaceuticals.
• Europe: Europe is another significant market for O-I Glass. The European market is characterized by a strong preference for glass containers, especially in wine-producing countries like France, Italy, and Spain. The company has manufacturing facilities across the continent.
• Latin America: O-I Glass has seen growth opportunities in Latin America, particularly in the beer and non-alcoholic beverage sectors. They have plants in countries like Brazil, which is one of the prominent emerging markets.
• Asia-Pacific: While it has a presence in this region, the company faces competition from local players. This area presents growth potential due to its vast consumer base and growing middle class.

2.?Product Segments:

• Alcoholic Beverages: A significant portion of their revenue comes from this sector, particularly from beer and wine manufacturers.
• Non-Alcoholic Beverages: Soft drinks, juices, and other beverages also contribute to the demand for glass containers.
• Food: Glass jars for preserving and storing various food items, like pickles, sauces, and jams, are part of O-I Glass's product offerings.
• Pharmaceuticals: Glass vials and containers for medicines and other pharmaceutical products are also a part of their portfolio, although this might not be as substantial as the beverage sector.

3.?Clientele:

• O-I Glass serves a mix of large multinational corporations, regional players, and local businesses. Their client base spans prominent names in the beverage and food industry to smaller boutique brands.
• Their clientele's diversity provides a balanced revenue stream, ensuring they aren't overly reliant on a single customer or sector.

4.?Market Share and Competition:

• O-I Glass is one of the leading players in the global glass container industry. However, the exact market share would require specific data from industry reports.
• They face competition from other global giants like Ardagh Group and Verallia, as well as regional players in specific markets. In some regions, there might also be competition from local and smaller manufacturers.

5.?Strategic Alliances and Partnerships:

• O-I Glass, like many large corporations, may form strategic alliances or partnerships to enter new markets, co-develop products, or enhance its supply chain. These alliances can provide them a competitive edge or faster access to emerging markets.

6.?Branding and Positioning:

• O-I Glass has positioned itself as a leader in sustainable packaging solutions, emphasizing the eco-friendly nature of glass as 100% recyclable and non-toxic.

7.?Innovation and R&D Centers:

• To stay competitive, O-I Glass invests in research and development. They have innovation centers where they work on improving glass production technologies, designing new types of containers, and enhancing the sustainability aspect of their products.

To provide an exact and updated description of their market presence post-2021, one would need to consult the company's latest annual reports, investor presentations, and other official publications.

Prompt: “How has the industry changed over the last 10 years?”

ChatGPT 4: The glass packaging industry has undergone several changes over the past decade due to a variety of factors, from sustainability concerns to technological advancements. Here's a breakdown of some of the significant shifts and trends from approximately 2011 to 2021:

1.?Sustainability and Environmental Concerns:

• Shift Away from Plastics: Growing awareness about the environmental impact of single-use plastics has boosted the glass packaging industry. Glass, being 100% recyclable, has emerged as an eco-friendlier alternative.
• Circular Economy: There's a push towards creating a more circular economy, where materials are reused and recycled, minimizing waste. The recyclability of glass positions it favorably in such an economy.

2.?Technological Advancements:

• Production Efficiency: Innovations in manufacturing technologies have allowed for more efficient and faster production of glass containers.
• Lightweighting: Efforts have been made to produce lighter glass containers without compromising strength. This reduces raw material use, transport costs, and the carbon footprint.

3.?Market Dynamics:

• Emerging Markets Growth: There's been significant growth in demand from emerging markets, especially in Asia and Africa, due to rising middle-class populations and urbanization.
• Diverse Product Portfolio: The industry has seen an increase in the diversity of glass products to cater to various consumer preferences, from color-tinted glass to uniquely shaped containers.

4.?Consumer Trends:

• Premiumization: There's a trend towards premiumization in certain sectors, like alcoholic beverages, where consumers are willing to pay more for premium products. Glass packaging, with its perceived high quality and aesthetics, plays into this trend.
• Health and Safety: With concerns about chemicals leaching from plastic containers, glass is seen as a safer option, especially for food and beverages.

5.?Competition from Alternatives:

• Aluminum and Metal Packaging: Especially in the beverage sector, there's competition from aluminum cans which are also recyclable and lightweight.
• Flexible Packaging: Some segments have seen a shift towards flexible packaging solutions due to their convenience and reduced weight.

6.?Regulations and Policies:

• Single-use Plastics Bans: Many countries and regions have implemented or are considering bans on single-use plastics, indirectly promoting alternatives like glass.
• Emission Standards: Stricter environmental regulations have pushed the industry to innovate and reduce emissions during production.

7.?Consolidation and Mergers:

• The industry has seen consolidation, with larger players acquiring smaller ones to expand their geographical presence, enhance production capacities, or diversify their product portfolios.

8.?Supply Chain Challenges:

• Global events, such as the COVID-19 pandemic, have highlighted vulnerabilities in supply chains. The industry had to adapt to disruptions in raw material supply, labor shortages, and changes in demand patterns.

9.?E-commerce and Packaging:

• The growth of e-commerce has impacted packaging needs. There's a demand for glass packaging that can withstand shipping without breakage, leading to innovations in packaging design and protective measures.

10.?Customization and Personalization:

• With advances in printing and labeling technologies, there's a trend towards more personalized and customized glass packaging, especially for limited editions or promotional campaigns.

In summary, the last decade for the glass packaging industry has been shaped by a mix of technological, environmental, consumer, and market dynamics. Sustainability and innovation have emerged as the key drivers, positioning glass as a preferred choice in many segments. However, the industry continues to evolve, and keeping abreast of the latest trends and challenges remains crucial.

Prompt: “Provide the strongest negative case about O-I glass as an investment that is still realistic”

ChatGPT 4: Certainly. While it's essential to keep in mind that the following points present a hypothetical bearish perspective on O-I Glass as an investment, it's equally important to consider the broader context and perform due diligence before making any investment decisions. Here's a potential negative case against investing in O-I Glass:

1. Debt Burden: Historically, O-I Glass has had a substantial amount of debt on its balance sheet. High debt can lead to significant interest expenses, which can reduce profitability. It also reduces the company's financial flexibility, potentially making it more vulnerable during economic downturns.
2. Competition from Alternative Packaging: The beverage and food packaging industry is diverse, with products available in plastic, metal, and paper containers. Innovations in alternative packaging could erode the market share of glass containers. For instance, aluminum cans are gaining traction in the beverage market due to their lightweight nature and recyclability.
3. Capital Intensity:?The glass manufacturing process is capital-intensive, requiring significant investments in plants and equipment. This can limit the company's ability to pivot quickly in response to changing market dynamics.
4. Vulnerability to Economic Cycles:?Glass packaging demand is closely linked to consumer goods, making O-I Glass's revenues somewhat cyclical. In economic downturns, reduced consumer spending can lead to decreased demand for packaged goods, impacting O-I's revenues.
5. Operational Risks:?Manufacturing operations carry inherent risks, such as machinery breakdowns or production disruptions. Any significant operational setback can affect production capacity and harm the company's financial performance.
6. Environmental and Regulatory Concerns:?Glass manufacturing is energy-intensive and has a considerable carbon footprint. Stricter environmental regulations in the future could increase production costs. Moreover, if competitors in alternative packaging can position themselves as more eco-friendly, it could adversely affect the demand for glass containers.
7. Geopolitical Risks:?O-I Glass has a global footprint, exposing it to geopolitical risks, currency fluctuations, and potential trade disruptions. For instance, tariffs or trade wars can increase costs or impact the company's ability to serve certain markets.
8. Dependence on Key Markets:?If a significant portion of O-I's revenues come from specific industries (like alcoholic beverages) or geographies, any negative trend in these sectors could disproportionately impact the company.
9. Challenges in Emerging Markets: While emerging markets offer growth potential, they also present challenges such as political instability, less mature supply chains, and unpredictable regulatory environments. O-I's ventures in these markets could face setbacks.
10. Innovation Lags:?If O-I Glass fails to keep up with the industry's technological advancements and innovations, it risks losing competitive advantage, which could affect its market share and profitability.

While this outlines a bearish perspective on O-I Glass, it's crucial to balance this view with positive indicators, historical performance, and the broader industry outlook. Always consult multiple sources and perhaps even financial professionals when evaluating an investment.

Prompt: “Who are some specific customers of O-I Glass?”

ChatGPT 4: Gave me some generic customer categories but no specific customer names

Prompt: “At what historical valuation ratios has O-I Glass's stock traded at over the last 10 years?”

ChatGPT 4: Told me to go check Bloomberg or Factset

Prompt: “What did I not ask you about O-I Glass that is important and that you could tell me?”

ChatGPT 4: When assessing a company like O-I Glass, you've covered a broad range of topics. However, there are always additional angles to consider for a comprehensive understanding. Here are some areas that weren't explicitly covered in our previous discussions:

1. Innovation & R&D: Has O-I Glass invested in research and development to innovate within the glass packaging industry? Innovation can be a key differentiator, especially in traditional industries.
2. Sustainability Initiatives: Glass is often touted as a more sustainable alternative to plastic. How is O-I Glass capitalizing on the sustainability trend? Are they making strides in producing eco-friendly products or reducing their carbon footprint?
3. Mergers & Acquisitions: Has O-I Glass been involved in any recent mergers, acquisitions, or divestitures? These can significantly impact the company's market position, financial health, and future prospects.
4. Employee and Workplace Dynamics: What's the company's reputation as an employer? Employee satisfaction, turnover rates, and company culture can indirectly impact financial performance and operational efficiency.
5. Supply Chain: Given the nature of its business, understanding the company's supply chain can be crucial. Are there any vulnerabilities? How has the company managed supply chain challenges, especially in the wake of global disruptions like the COVID-19 pandemic?
6. Global Operations and Currency Risk: Since O-I Glass operates internationally, it's exposed to currency risk. How does the company hedge against this, and what impact might currency fluctuations have on its earnings?
7. Legal and Regulatory Risks: Is O-I Glass facing any significant lawsuits or regulatory challenges? These can have both financial and reputational impacts.
8. Dividend Policy: If you're an investor, the company's approach to dividends can be essential. Has O-I Glass consistently provided dividends? What's their policy in this regard?
9. Stakeholder Engagement: How does O-I Glass engage with its stakeholders, including communities where it operates, its employees, and its shareholders? Good stakeholder relationships can bolster a company's reputation and operational success.
10. Capital Allocation Strategy: How does the company prioritize its capital expenditures? Are they investing more in growth, paying down debt, or returning money to shareholders? Understanding a company's capital allocation strategy can give insights into its long-term vision and financial health.

Remember, while these questions provide a more in-depth look, no analysis can be truly exhaustive. It's always beneficial to take a holistic approach, considering both quantitative and qualitative factors when evaluating a company.

Conclusion

What ChatGPT did well:

• Provide a comprehensive company overview
• Correctly name the company’s competitors and fairly assess their competitive positions
• Provide a good start to qualitative company analysis and that of the company’s competitors

Where ChatGPT fell short:

• Anything having to do with actual numbers
• Wasn’t able to perform any kind of insightful quantitative analysis of historical results
• Many answers were vague and generic and could apply to many companies rather than insightful and specific with respect to the company being discussed

Where this leaves me is that I think that ChatGPT is a good tool to quickly familiarize yourself with the company and the industry. The next time I am researching a new company, I will probably spend 30 minutes with ChatGPT on broad overview and competitive questions to orient myself and plan for further research.

At this stage for me ChatGPT is a time saver rather than something that could provide unique insight that directly leads to excess returns in the stock market.?How about for you??What prompts have you found helpful that I didn’t mention? And have you figured out how to make ChatGPT into that Aladdin-like money-making magic lamp? If you have, you don’t have to tell me how, but please leave a comment and tell me so that I have something to aspire to.

If you liked this article, please “like"?and?share?it and?subscribe to the free Behavioral Value Investor Substack?where I write weekly articles on Investing and Behavioral Finance.

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About the author

Gary Mishuris, CFA?is the Managing Partner and Chief Investment Officer of?Silver Ring Value Partners, an investment firm that seeks to apply its intrinsic value approach to safely compound capital over the long-term. He also teaches the Value Investing Seminar at the F.W. Olin Graduate School of Business.

Note: An?earlier version of this article?was published on the Behavioral Value Investor Substack