A Primary Research platform for long-term fundamental investors.
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we're hiring software engineers - if you're interested in building AI tools to institutional investors learn about businesses, please reach out.
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OnlyFans printing 40% EBIT margins and 50% FCF margins on £1bn revenue and £5.5bn GMV...
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Todd Combs on balance sheets
‘The biggest mistake an analyst can make in the initial stage of research is to start their assessment by looking at earnings’
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This interview with Former Exec at $TSLA insurance is pretty interesting
TSLA Insurance is supposedly running at 150% loss ratio with 40% total loss frequency
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‘If you’re willing to work on a 7 year time horizon, you’re now competing with a fraction of people’
Bezos
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Former Director at Google Cloud on why consumption-based Saas is so much better than user-based SaaS
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Nick Train on valuing Diageo and superlative companies
“To me it appears that "exceptional companies with durable competitive advantages" are in fact cheap almost all the time.”
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It's amazing how capital efficient Costco is for a retailer
$14bn payables
$12bn inventory
12x inventory turns, payables largely cover the inventory and working capital as % of sales averaged 0.5% for the last 10 years
$COST
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A current John Deere dealership owner on dealership economics $DE :
"It's interesting. 70% of our revenue dollars come from new and used sales, roughly split in half with 35% used and 35% new. Parts make up 20% of our business, and service accounts for 10% in terms of revenue. The margins are just the opposite. Service has a 70% margin, parts have 35%, and sales are about 5% to 6%"
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Paul Marshall on portfolio concentration
‘Fund managers don’t have the bandwidth to analyse enough stocks to retain about more than 10 high conviction names’
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Buffett on buying Disney in 1966
One thing that is truly underestimated about WEB is patience
He not only buys great companies, but he had the patience to wait until the valuation is literally a no brainer
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Former Waymo director on Waymo long-term licensing ambitions: $GOOG $UBER $LYFT
"They are operating as a robotaxi company to demonstrate the market. This context helps clarify their actions. If they only wanted to be a robotaxi company and compete as a first-party service, it wouldn't make sense. Their aim is to license their technology. Currently, they are experimenting with different models. They will maintain a robotaxi presence in the U.S. with a first-party ride-hailing service in select markets, maybe 10 or 12. In the future, they would prefer if the Waymo Driver is not just in Waymo One but also with other fleet operators on networks like Lyft and Uber. They want as many Waymo Drivers in a market as possible. The relationship between Waymo, Uber, and Lyft is more collaborative in the long term, they are partners. They probably are competing right now with Waymo and Uber being the major players in this value chain. They are figuring things out and negotiating"
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Gross margins are massively undervalued
Stable GM's over 10-yr period signals far more about the competitive positioning of a business than anything below on income statement
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The higher the quality, the higher the probability this quality will persist:
‘The ROICs of the best performing companies do not revert to the 15yr aggregate median’
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You could’ve paid 281x earnings for L’Oreal in 1973 and still outperformed the market over 26 years
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Munger invested in Stonehouse, an Aus-based manager that has only invested in 3 companies in 12 years
Impressive discipline.
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Small, elite group of companies that have +18% p.a. for 30 YEARS!
Which one would you own for the next 10 years?
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'the Porsche guys were shocked when they saw the fixed costs of Ferrari.'
Ferrari's margins are higher not only because of the brand, but because of the lower fixed cost in building and testing supercars
$RACE
inpractise.com
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Conifer Management LLC, run by Greg Alexander, owns 6.4% of Burford Capital
Buffett said Greg was one of the top 3 investors in the world (with Klarman and Lu)
$BUR
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Can you really ‘learn’ to be a great investor or is it genetic?
‘Many great investors might be somewhere on the autism spectrum’
H/t @bethanymac12 review of @williamgreen72 new book
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Fascinating interview with Former CEO of Loro Piana
imagine doing these types of deals for a job...
$lvmh
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This is interesting
‘Few executives or entrepreneurs I have ever known have said anything brilliant or novel. If an enviable attribute comes across, it is an almost constitutional inability to mope’
on.ft.com/3uPioBu
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$EVO is a 10 bagger in 2 years
and the business is growing 100% yoy at >50% incremental NET PROFIT margins
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We're releasing a clothbound hardback book
We've curated a number of our favourite interviews that share timeless insights about how industries and businesses work.
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After over 2,500 hours of interviewing executives, we're posting the In Practise Primary Research Checklist
blog.inpractise.com/in-pract…
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this is a high quality response from a company after an activist takes a position
$mkl
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Nick Sleep on lessons from scaling laws for investors:
1) Business ought to be able to self-fund
2) High returns on incremental invested capital
3) Large growth runway
4) Barriers to entry increase with size
+
5) Core skeletal structure of the business has to be SIMPLE
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Buffett's consistency outperforming in the early years is phenomenal
it's also interesting that the 'superinvestors' underperformed 35-40% of the years
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Mark Leonard on payments as an opportunity:
"payments, this is my own personal belief, is a race to the bottom, and it's a scale play, and it's going to be ugly"
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E&Y and New Constructs paper on the value but difficulty in calculating ROIC
'ROIC explains 71% of the differences in valuation for S&P 500 companies'
newconstructs.com/wp-content…
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Bezos on math-based decisions vs judgment-based decisions...
via Nomad's shareholder letters
igyfoundation.org.uk/wp-cont…
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Evolution Gaming's moat
"There is no space for an operator like us – or even a land-based casino in the US – to make the investment and develop their own live casino offering."
$EVO
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Terry Smith on why the 2 and 20 fee structure does not work
Should there be any mgmt fee today?
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funny quote by a 40-year wine industry veteran...
"the beer people have all the money; the liquor people have all the margin; the wine folks have all the fun"
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Simple but powerful heuristic
'an index of S&P 500 companies in which the founder is still deeply involved performed 3.1 times better than the rest over the past 15 years'
hbr.org/2016/03/founder-led-…
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New Research on Evolution Gaming's Asia and Crypto Risk $EVO
We’ve followed EVO closely since 2019, including throughout 2021. This work doesn't rehash old risks.
We believe we've uncovered various potential significant risks to its unregulated Asia business:
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The unit economics of low cost gyms are amazing
I've been playing with some numbers for The Gym Group
$GYM.LN
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NEW INTERVIEW: Evolution Gaming & Asian Unregulated Gaming Markets
Anyone interested in $evo should read this!
inpractise.com/articles/evol…
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THREAD: the fascinating story of the creation of $LVMH and the opportunistic billionaire Bernard Arnault
amazon.co.uk/Predators-Icons…
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What companies treat their shareholders with the same level of respect as Berkshire?
These immediately come to mind:
Constellation Software
Markel
Heico
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We're hiring an investment research analyst
If you'd like to spend all day researching companies and speaking to former senior executives then please reach out
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$cost ‘Kirkland margins are about six percentage points higher than for brands such as Hershey or Kellogg’s.’
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We have just never seen results like this at such a scale
The incremental margins on billions of $$ is insane
$GOOG
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Nick Train on the one company he would buy and hold for 20 years if the market closed
H/t @FT
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"investors often undervalue the best companies"
- Lindsell Train
The red and blue lines show the multiple you could pay for companies with different long-term ROE to match the 11% MSCI average return.
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A thread on dialogue and the art of conversation - reflections on over 2,500 interviews in 7+ years.
Over years of practice we have been heavily influenced by the work of physicist David Bohm on the subject, and his book On Dialogue
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Ferrari's philosophy is to never sell one car more than the demand.
"The protection of the residual value, the pre-owned market, for us, is a priority"
$RACE
inpractise.com/articles/ferr…
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Lindsell Train on valuation and compounding
‘If you only remember one thing from this note, then this justification for paying PE multiples in 30s and 40s and above for great companies should be it’
lindselltrain.com/~/media/Fi…
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This is a fantastic old interview with Bernard Arnault on building and managing a brand
‘A brand must have a heritage; there are no shortcuts’
hbr.org/2001/10/the-perfect-…
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Unity has 80-90% market share in AR/VR
Unreal gets a lot of press because it's sexy, but Unity seems to have a huge advantage in industrial applications
$U
inpractise.com/articles/unit…
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“Cynicism appears to be a coping strategy by the cognitively less gifted to avoid being duped by others. Less competent individuals are more likely to be cynical across the board.”
Common to believe that cynics are smarter - a stereotype that doesn’t hold up to scrutiny
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A Claims Manager at Progressive Insurance sheds light on the carrier's decision to steer 80% of its total loss volume to IAA vs 20% to Copart $CPRT...
"Yes, that's correct. I'll explain. It's similar to CCC versus Mitchell. CCC is much bigger, but we use Mitchell. Twenty years ago, when we started using them, they offered us a better deal, and we grew with them, similar to IAA. Over the years, we've become IAA's number one customer. They give us priority, like picking up vehicles quickly and providing better storage locations in the salvage yard, ensuring vehicles are in better condition when sold a month later. They've worked closely with us, and as we've grown, they've been very accommodating. Despite the acquisition by Ritchie Bros and issues others faced, we didn't have many problems because we were their VIPs, their priority."
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Is there another 97 year old on this planet that can take questions like that for 3.5 hours straight?
Charlie Munger is one of a kind
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Former Roper Technologies VP on the stickiness of VMS:
"Your question might be whether it's too sticky for a law firm to stick to custom-built legal practice management software or for a hospital to stick with hospital management software. My answer is that this stickiness is becoming more diluted. It won't remain sticky, and you will see the results in two to three years, not even five.The reason is that technology, especially for clients like lawyers, doctors, or surgeons, was very expensive 10 years ago. They weren't tech-savvy and needed extensive training to use basic software functions. This has changed significantly in the last decade. Now, doctors using software are resistant to taking notes on a PC; they prefer using a tablet or mobile phone. This wasn't the case 10 years ago, and the same applies to law firms. On one side, end users have become more tech-savvy and aware. On the other, startups are disrupting the market by automating boilerplate templates and workflows. Users no longer have to stick with software that has many issues and bugs because there are now competitors"
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Former Head of Google Travel on why OTA's will gain power post-covid19
$BKNG $EXPE
blog.inpractise.com/covid-di…
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How lean can you run a $50m AuM hedge fund with a 1% mgmt fee?
What is the minimum amount of operating costs?
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Rob Vinall’s thoughts on becoming an independent fund manager
‘Don’t bother marketing’
mitimco.org/wp-content/uploa…
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Narrowbody and widebody production rates are at 2017 and 2012 levels yet passenger volumes up ~150% since 2012
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‘The reality is that dividends are the route to average returns. Excellence in reinvestment is the route to above average returns.’
- Akre
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NEW INTERVIEW: Constellation Software: Culture & M&A
"Every one of those operating partner leaders, their second and third tiers and right down to the GM level, are free cash flow generating people, it is a remarkable system"
$CSU
inpractise.com/articles/cons…
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Naked Wines is 'arming the rebels' just as Shopify is in e-commerce
This can be explained by the income statement of Willamette Valley Vineyards, a small US-listed winery
$WINE.LN
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Nick Sleep on scaling laws and internet versus physical retail
'we want a skeletal structure that can support growth from mouse to elephant without too much skeletal re-engineering'
h/t @MilesMJohnson
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Former M&A Director of Constellation Software's on the deal sourcing process
$csu
"They have a database of around 70,000 or however many software companies. Basically, every software company in the world is included."
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$POOL revenue growth model
Currently trading at ~22x NTM FCF and has guided to 6-9% rev growth beyond 2022
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Tiger is back.
One of the greatest stories in sport.
‘Earl put him through psychological warfare and prisoner of war techniques’
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NEW INTERVIEW: Former President at TransDigm on value-based pricing
'TransDigm is very strict about understanding what’s called pass through or leakage, to the aftermarket. They will go to their OEM customers.. and fix contracts and pricing'
$TDG
blog.inpractise.com/transdig…
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Kelly Partners Group has compounded revenue 32% over 14 years by rolling up Aus-based accountancy practices
$KPG
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Here is a list of online companies we've recently covered that are down over 25% from ATH:
Netflix $NFLX down ~45%
Former Head of International Content on $NFLX structural advantage producing global content
inpractise.com/articles/nflx…
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Bill Miller sharing timeless wisdom in his last quarterly update
‘We believe time, not timing, is key to building wealth in the stock market’
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Somewhat incredibly, in Costco's 1983 business plan, it seems that Sinegal thought they would be a USD 1bn revenue business at maturity, with 12 warehouses and USD 1bn in sales as a northwest business only.
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This is incredible.
Wuhan auto dealer recording daily sales similar to pre-crisis levels..
theday.com/business/20200408…
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Whenever I see fast growing companies, I think of this from McKinsey...
'Of companies growing > 15% between 00-03, only 26% were growing >15% after 10 years.'
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