Luis V. Sanchez
@LuisVSanchez777
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Founder of LVS Advisory, a boutique investment firm. luis @lvsadvisory .com. Tweets are for information only, not investment advice.
Central Florida
Joined May 2016
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LVS Advisory's Q2 2024 investor letter:
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In July 2022, Tom Peterffy was asked why $IBKR doesn't extend duration to generate higher returns. His response:
"That's the kind of risk that we do not want to take. We will continue to invest in T-bills"
He nailed it.
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"I personally have spent $50,000 in 3 months in Clash of Clans"
- CEO of $MTCH Bernard Kim
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TikTok is monetizing at $0.06 per hour vs. $0.64 at FB & Instagram (Sensor Tower / Morgan Stanley estimate).
Here is a crazy thought: what if Facebook was just over-earning for the past few years?
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A couple of weeks ago, I had a wide-ranging call with a video game industry CEO covering $NTDOY, $ATVI, $EA, $U, $RBLX, and more. Here are some of the comments that stuck with me:
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Bobby Kotick acquired $ATVI for $400k 30 years ago out of bankruptcy and was able to sell it to $MSFT for $70 billion. An incredible story.
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PayPal offered me to "buy now pay later" on my takeout order today. I now have a mortgage on my dim sum.
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I had a fascinating conversation covering the payments industry with an early Square employee for
@MosaicRM
.
We discuss: Jack Dorsey, $SQ, $PYPL, Stripe, $AFRM, $APT, $V, $MA, & more
Here is a thread containing my highlights:
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I asked a live dealer start-up how they compete with Evolution Gaming.
The response: "Evolution Gaming is a monopoly, we look for the niches that are too small for them to invest in." $EVO
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What is the highest quality business with a stock down over 70% from highs?
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It's stunning to see a $900bn stock move 20%+. One would think with all the sell-side coverage, alt data, and industry expert scuttlebutt, analysts wouldn't have this much of a margin of error.
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I've been studying the online gambling industry for the past 6 months. I wanted to share my thoughts with this presentation which also covers my investment thesis on Flutter Entertainment $FLTR $PDYPY and Evolution Gaming $EVO.
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Video game investment thesis:
Gen-Z prefers video games over all other forms of entertainment. Older generations prefer watching TV.
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$AMZN announces hundreds of layoffs in the Alexa division the same week it announces hundreds of layoffs in the video game division.
Jassy gonna show us margin expansion in 2024 and I'm here for it.
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Equifax just said subprime delinquencies are worse than 2009/2010 levels. $EFX
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What is the highest quality business below a $2 billion market cap?
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An $LVMH handbag my wife bought 3 years ago has appreciated 63% in the secondary market. Not bad.
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Owning $PYPL increasingly feels like owning a digital payments ETF. PayPal has a best-of-breed solution for almost every emerging payments trend.
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Every customer call I have on Autodesk:
AEC Firm: Autodesk is so expensive and they charge more for it every year. It's horrible.
Me: So are you evaluating alternatives?
AEC Firm: No, the software is great and we can't get our jobs done without it.
$ADSK
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@JerryCap
I just had an $EVO customer call this afternoon. Paraphrasing but the comment was:
"Evolution is like crack to operators. You buy it, get hooked on it, and pretty soon you depend on it. Some operators have 50% of their GGR coming from Evolution games and that's before NetEnt."
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Which 13Fs are most likely to contain a future 100-bagger?
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At 10x sales and 50x EBIT, what is the bull case for WD-40 here? $WDFC
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"Nintendo has so much money in the bank that you should really think of them as an investment bank more than a games company, because their investment portfolio is probably more influential in the short term than their sales." $NTDOY
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The Neobank landscape by customer size & valuation. h/t Jefferies report. Will add a few more graphics/insights to this thread:
cc.
@JerryCap
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What are some former compounders that stopped compounding?
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Thank you NYC for being my home for the last 9 years. I am looking forward to the next adventure.
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I had a great conversation with a mobile gaming CEO. We covered $SKLZ, $ZNGA, $SE, $ATVI, $GOOGL play store, Fortnite, e-sports, and more.
Here are my highlights:
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In 5 years regulators will complain that Facebook's acquisition of Oculus was monopolistic and should be divested. Hindsight is 20/20. $FB
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Shout out to
@edwardwchang
for making a great call on $AMZN at the bottom and for being right for the right reasons.
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Attached is a short write-up for long Expedia. I published a 30 page version of this write-up on
@SumZero
today. We are long $EXPE & $LEXEA.
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Also, does anyone else remember those charts showing dollars spent lagging time spent projecting the movement of advertising spend from linear to digital channels? 🤔
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Great conversation with a former MSCI executive on
@MosaicRM
. We discussed the company’s moat, unit economics, sales cycle, and more. $MSCI $SPGI $MCO $BLK
A thread highlighting some interesting points:
1/x
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Feastables on the liquidation rack at $OLLI. 70 cents each.
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Interviewer: How would you describe the culture of AWS?
AWS Former: Have you ever seen Game of Thrones?
- Expert call transcript on $AMZN
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A lot of musicians are complaining about the economics of Spotify but lost in the debate is how the company saved the entire music industry.
From $SPOT's 10K:
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One of the hardest parts of being a generalist analyst/PM (for me) is balancing a focus on the names/themes you are primarily tracking while continuing to explore new ideas and turnover rocks.
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$CHTR increased my bill by 20%. I called to complain. They reduced my price to below what I was already paying and gave me more speed + 1 year of free mobile service.
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When investing in public markets, quality is your best guarantee against permanent loss of capital, price discipline differentiates returns.
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It's not every day you see a public company CEO buy deep out-of-the-money call options on their company in the open market. $CLMT
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Very good list of accounting and governance red flags.
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I've been doing work on Tencent Music ($TME) and I am surprised by how good of a business it is.
(short thread)
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Here is a short write-up I put together on Cerner. $CERN
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Naked Wine $WINE is a phenomenal business with a long growth runway (Disclosure: I am long). If you're not familiar with it, I highly recommend:
1)
@ElliotTurn
's write-up
2)
@goodinvestingc
's interview with the CEO, Nick Devlin.
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Netflix won the streaming war. $NFLX
After years of refusing to sell new stuff to Netflix, Disney is licensing 14 popular TV shows to ... Netflix.
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Here is my Entercom $ETM short thesis that was published on
@sumzero
a few weeks ago. I will be updating my post for today's earnings report.
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$TRIP calling out Google as their largest competitive risk:
"our most significant challenge remains Google pushing its own hotel products in search results and siphoning off quality traffic that would otherwise find TripAdvisor via free links and generate high margin revenue"
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Video games account for ~70% of mobile app store spend, and the publishers primarily advertise on Facebook and Google.
In other words, if you own $AAPL, $FB, or $GOOGL, you are massively long the video game industry.
- 2021 Gaming Industry Size: $180b, 3b players
- 50% Mobile, 25% Console, 25% PC (Roughly)
- 14% of IOS apps are games BUT they account for 70% of spend
- Pent-up demand due to chip shortage (Xbox series X & PS5 sold out)
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$EVO has gained market share and expanded margins despite a dozen discounted copycat products. This demonstrates the strength of the moat.
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"we used to define a hardcore gamer as someone who bought five or more games a year, for which Netflix's model makes a lot of sense. But today, we define a hardcore gamer who plays 20 hours or more a week, because they may only play one game."
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Murphy USA $MUSA is already more than a 5-bagger less than 10 years from its spin-off.
+47% so far in 2022. Currently trades for 16x 2023 EPS.
h/t
@bizalmanac
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Evolution Gaming's $EVO chief game designer wants to take floor space in land-based casinos. Talk about TAM expansion.
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Great answer by $EVO's CEO when asked how the company will respond to copy cats in the industry. To paraphrase: make the product better and widen the gap between $EVO and the competition.
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I really enjoyed this episode, thank you for sharing!
A couple of points I would add:
1) The network effects are even stronger than they appear. Architechs use $ADSK software to design but engineers and construction managers also need to have ADSK to use the design files
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Podcast
#34
is up!
@borrowed_ideas
returned to discuss his latest pick, $ADSK. We discuss how the company is a literal textbook example of high switching costs and their growth outlook.
YouTube link here, but on your favorite podcast platforms too:
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Today an insurance CEO told me if he left the industry he would start a fund to short all the undersized insurers. They just can't compete.
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Want to find under-valued stocks? Screen for companies currently not included in an index (mostly off the map for passive investors).
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“A lot of creators go to TiKTok because that’s where they can quickly build a large audience and then they tell people to follow them on Instagram because that’s where they can monetize with brand deals.” - great podcast on the creator economy $FB
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Disclosure: I own shares of $IBKR.
I shared my investment thesis here:
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"Google and Meta capture less than 50% of the US digital advertising market. Given the astonishing growth of Amazon, TikTok... it is reasonable to characterize the digital advertising market in 2022 as being materially more competitive than it was in 2016"
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Behavioral biases explained by a poker pro.
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Relative valuation analysis is a trap.
You should be able to look at everything you own in isolation and conclude the business is attractive & the valuation is reasonable.
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New $MTCH bull thesis. People forgot (or never learned) how to socialize offline.
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The origin story is worth a read.
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Tax arbitrage is the most under-appreciated "edge". Buy the kind of businesses that can be held for the long term and remain disciplined.
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Congrats to everyone launching a fund later this year. You're going to have great returns.
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$ICE has reported 42 consecutive quarters of y/y ARR growth for its data business which now accounts for a majority of revenue and earnings. cc
@JerryCap
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Attached is a write-up for long Rightside Group (NAME). We published a detailed version on
@SumZero
. We are long $NAME.
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Adyen vs. Stripe may be a toss-up but a clear take away is that the era of Worldpay, FIS, Global Payments, etc., is ending quickly.
The Forrester Wave: Merchant Payment Providers, Q3 2020
Stripe $ADYEN $FIS $FISV $PYPL $GPN $JPM $WRDLY $ACIW Cybersource
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In 2006 $IAC accidentally bought a controlling stake in Vimeo when they paid "slightly above $20m" for CollegeHumor. Today, $VMEO has a $7bn market cap.
File this under one of the best investments in recent memory.
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Saw a guy wearing a hoodie that says “GAAP”.
Regime change.
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That's the whole press release. Other companies should take note!
$WINA
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@CCM_Ryan
Not my view but industry consensus:
- Nintendo's IP isn't as relevant as it was 15 years ago because the company hasn't translated IP to mobile
- Nintendo is unwilling & unable to monetize their products with a modern gaming biz model (free to play, live services)
- "tough comps"
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This is the LVS Advisory update for July 2021. I discuss our year-to-date performance and provide a stock pitch on our largest investment, Avid Technology. $AVID
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I'd like to share my Q2 investor letter where I discuss LVS Advisory's investment thesis in online gambling and Flutter Entertainment.
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I went full suburban.
Thank you NYC for being my home for the last 9 years. I am looking forward to the next adventure.
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Spotted this in a VIC write-up and strongly agree. Staying 1 step ahead of quantitative investors by taking advantage of data not yet hitting financials should be a larger focus for bottom-up investors.
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YouTube has >7x music streaming audience vs.
#2
Spotify and pays artists the least. Google/Apple music pay artists >5x per play than Pandora
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Jeremy Grantham is a thoughtful and well-spoken commentator but it annoys me that he doesn't have the humility to admit he has been exactly wrong for the last 10 years.
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I shared my thoughts on why I invested in Twitter stock $TWTR
You don't have to turn over rocks to discover Twitter's business but there is a lot more to the story than meets the eye.
A quick thread thread👇
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Highly recommend this Strauss Zelnick interview. $TTWO
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I posted a new idea on
@SumZero
. Long $MGI.
Here is a summary of the thesis. you can read the full analysis here:
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We're going to need to add another "A" to FAANG. $ADBE
$PYPL x $ADBE
Adobe jumps into e-commerce payments business in challenge to Shopify
h/t
@scalethemis
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Thoughts on Netflix potentially expanding into video games.
Quick thread 🧵
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$AFRM isn't truly BNPL. 62% of GMV is interest-bearing.
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Scuttlebutt is something few investors do well because it's fraught with confirmation bias.
In addition to the interviewer potentially asking leading questions, it's important to think about what biases the interviewee may have.
Some quick thoughts on what works for me:
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Great conversation between Bobby &
@LuisVSanchez777
. I enjoyed hearing Luis discuss his adventures in $ARC & the lessons he learned. 1 that stuck w/ me was: before doing scuttlebutt, come up w/ targeted questions to ask a company's customers. Ask open-ended, not leading questions
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Activision $ATVI is in a tough competition position.
At high-end, Microsoft $MSFT is directly competing with games and is willing to bid-up acquisition prices
At low-end, services like Unity $U and Epic Unreal have lowered the barriers to entry by reducing game dev costs
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I booked my trip to the $BRK meeting. See you guys there!
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$SSNC discussed replacing a couple thousand employees with robotic process automation software to save over $100m in 2023.
This will be a game changer for the fund admin industry if it works.
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$SCHW believes there is nearly 50% upside to their net interest margin over the next 2 years even if the fed starts to cut interest rates this year.
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This is LVS Advisory's Q1 2023 investor letter.
I discuss investments in $AVID, $SCHW, $NFLX, $BJ, $JYNT, $GOGO, $ABMD.CVR
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