In Practise
@_inpractise
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A Primary Research platform for long-term fundamental investors.
Joined October 2015
New Podcast release: IP Fieldwork . Focused on the art of primary research. We explore common mistakes, challenges and opportunities to improve the art and science of interviewing industry professionals.
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OnlyFans printing 40% EBIT margins and 50% FCF margins on £1bn revenue and £5.5bn GMV.
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Imagine you're 21 years old. and write this as an investment thesis . GOAT . $BRK
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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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Sales growth is the key driver of long term stock performance
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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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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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How should we look at ROIC for roll ups like $TDG or $DHR ?.
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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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Kinsale is a 25 bagger in 8 years and is still growing 30% py.
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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 .
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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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Former CEO, Aldi UK . "Aldi when entering a market would prefer that its competition is stock market listed. Stock market listed companies have . incentive schemes, which means that the management is not likely to react to a new threat until the last minute". $WMT, $KR
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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’.
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The mental flexibility of Bill Miller is insane . Supposedly a 'traditional value' guy who has not only rode $amzn for 20 years but was v early in $btc at ~$250. Hall of Fame investor IMO.
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Fascinating interview with Former CEO of Loro Piana . imagine doing these types of deals for a job. $lvmh
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$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 .
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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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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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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'.
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Bezos on math-based decisions vs judgment-based decisions. via Nomad's shareholder letters .
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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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NEW INVESTOR DIALOGUE: Evolution Gaming $EVO. We discussed the short report, US growth opportunities, and $evo management quality
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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'.
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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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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!.
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Warren Buffett bought a 40-acre farm when he was 15. as you do when you’re 15
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THREAD: the fascinating story of the creation of $LVMH and the opportunistic billionaire Bernard Arnault .
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What companies treat their shareholders with the same level of respect as Berkshire?. These immediately come to mind: . Constellation Software .Markel.Heico.
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We're hiring an investment research analyst. If you'd like to spend all day researching companies and speaking to former senior executives then please reach out.
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$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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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. 1/12.
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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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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 .
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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’.
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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’.
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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 .
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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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Former Head of Google Travel on why OTA's will gain power post-covid19. $BKNG $EXPE.
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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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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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Zuck is way more of a visionary than people give him credit for . $FB.
“There are . a finite number of different social mechanics to invent.” - Zuck. $FB $SNAP $TWTR
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HEICO on why commercial aero aftermarket is a unique industry . $HEI
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Rob Vinall’s thoughts on becoming an independent fund manager. ‘Don’t bother marketing’ .
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This is one of the most fascinating stories about Buffett . Who buys a farm at 15?
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Buffett on a franchise vs a business. Reminder there are few real franchises out there
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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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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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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". $CSU.
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Nick Sleep on scaling laws and internet versus physical retail . 'we want a skeletal structure that can support growth from mouse to elephant without too much skeletal re-engineering' . h/t @MilesMJohnson
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$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.
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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 .
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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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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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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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This is incredible. Wuhan auto dealer recording daily sales similar to pre-crisis levels.
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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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There is nothing like chemistry as a moat . ‘Most of the whiskey made today won’t hit the shelves for at least another 12 years’ . $DGE
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How do you choose a discount rate when valuing stocks?. Here is Peter Seilern on WACC:. "Common sense suggests that quality growth businesses with predictable future earnings and moats should command a lower discount rate than companies which have neither"
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Constellation Software 2006-12 provides perspective into ave price increases yoy $csu
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This one paragraph shares so much insight into Ferrari's philosophy and way of business. Residual value is KING. 'You will never find a Ferrari dealer or a Ferrari manager, like myself, pushing. We never push. Ever' . $RACE.
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We are building a coverage list of the best businesses listed in US or Europe between $500m - $10bn EV. What companies should we include?.
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How sticky is S3?. From a Former AWS Director of 10 years. $AMZN
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interesting perspective from CIA on how to detect lying . "Ignoring truthful behavior helps us manage our biases, so we don’t even have to think about them when the task at hand is detecting deception."
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NEW WEEKLY ANALYSIS: Halma, Danaher, CSU & Serial Acquirer Org Structures. We've been exploring how $CSU can scale to 100 acquisitions per year and whether it's possible for $HLMA to replicate
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We've been studying EU food delivery for the last month and thought we'd share some comments on the importance of the delivery fee and price elasticity of demand. $TKWY $UBER $DASH $ROO.
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The base rate of high revenue growth is shockingly low . Very few companies defy base rates on Rev growth.
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Sad that I don't get excited about Howard Mark's memo anymore.
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