Bread Crumbs Research
@breadcrumbsre
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I invest in unrecognized/underappreciated excellence. "Trying to spot a great manager remains a game very much worth playing". Mostly small caps
Joined February 2011
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Investors on how they analyze company management (thread):
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Been reading a lot of shareholder letters recently. My personal Hall of Fame letters:
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Best shareholder letters - S&P 500 edition (2022)
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Frequency of the word "visionary" in corporate filings
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How stock-based compensation inflates underlying FCF
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1/n Why you should not always take SaaS gross margins at face value
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My stock screening criteria for this market:
Up and to the right chart
Owned by ARK Invest
Popular on TikTok / WSB
High short interest
CEO has account on Twitter
Hated by value investors
Memeable
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Companies with substantial R&D budget, very long investment cycles and ability to withstand pressure from public market investors are a great source of option-like returns, can quietly build some products for years with stock staying flat and then suddenly going parabolic
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Imagine a fund manager with zero skin in the game investing in companies with management who have zero skin in the game. that's 2 levels of misaligned incentives
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I am Ukrainian. There is no justification for what Putin is doing to my country. He should be stopped at any cost.
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The next Jeff Bezos will be the person who will make healthcare dramatically more affordable
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Platform/Internet companies after reaching $100M GP:
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the best investment opportunities are in buying quality growth companies at firesale value multiples. it's also hard AF
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Zuck: we will invest gazilion dollars in metaverse
Zuck: it was a joke
Zuck: we will invest gazilion dollars in AI instead
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How did Denmark, a tiny nation of less than 6m people create such a massive business?
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Since going public in 2018, $roku has had four 50+% drawdowns. Wild
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Recipe for a career-making trade:
1) find a near bankrupt biz people are afraid to touch
2) it should be a successful turnaround case
3) it should have huge reinvestment opportunity and be led by an outstanding mgmt team
4) hold for 10-20 years
(Inspired by Weschler’s DVA trade)
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I don’t have a lot of strong opinions but I think people holding stuff like Asana and at 40-50x sales are insane
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How do you get a multibagger? You need 1) positive surprises in growth; 2) positive surprises in margin; 3) multiple expansion; 4) patience.
How do you lose >90%? 1) negative surprises in growth; 2) negative surprises in margin; 3) multiple compression; 4) patience.
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During Mar 2000-Sep 2002 when S&P 500 declined from 1500 to 800, these stocks delivered >100% returns. It's possible (although hard) to make money being long in a bear market
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$AMD risk factor summary from 10-K. Why don't more companies do this?
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LTV/CAC is a modern equivalent of EVA, which was popular in 90s.
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Baillie Gifford's 10 Question Stock Research Framework
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ok, both 100x bagger and 2-3x bagger areas seem too crowded. I'll focus on 37x baggers instead, nobody seems to be focusing on those
#edge
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Been studying management as a value driver for the past year. One of key takeaways - what really matters is not how good management team is in absolute terms, but how good management team is RELATIVE to management teams of competitors.
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Solely for accounting geeks: A Primer on Reading Annual Reports
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this thing is not going to disrupt anything. thanks
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Howard Schultz on his decision to stop disclosing comps
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Any examples when people made money buying a pre revenue company at $100b valuation?
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Where to fish: 50 best stocks in S&P 500 over the past 10 years
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Odd observation: when a company inlcudes financial results over the long-term, higher chances mgmt team is long-term oriented $ggg
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How many companies do you know where a founder is buying c. $100m of stock from market on a weekly basis?
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Doordash is frequently compared with Amazon, but Amazon was trading between 2x and 3x revenues most of its history, Doordash is trading at 15x revenues 🤷♂️
Even if this is the next Amazon, future returns from here won't be similar to buying Amazon at 2x revenue.
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Bezos pitching his company to a young woman holding 100 shares is an all time classics
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Thread on stocks which went nowhere over several years yet later went up
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You probably have not heard before about former Graco CEO Pat McHale. But he is an interesting person and a true leader. During his time as a CEO of Graco (2007-21) stock delivered 500% return, having materially outperformed S&P 500. Some lessons from him are below.
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Wrote a short post on the war in Ukraine
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Anyone building investment theses from scratch these days? I mean completely ignoring sell side, VIC / SA / any other writeups and coming to your own conclusion based on primary sources and legwork?
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Just a reminder for myself to be extremely selective
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So you guys are looking for 10-baggers, right?
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Founder-led companies: have they outperformed because they are "founder-led" or because they are "mostly tech"?
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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SaaS Sales and Marketing expense to Revenue $team $twlo $bill $wday $dbx $shop $ddog
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S&P 500 companies with P/E below 12. Anything interesting here?
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+0% in the first 4 years, +2000% in the next 4 years
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"Management may sell stock for many reasons, but they buy for only one reason"
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Compiled a list of US-based companies with >$1bn market cap that have decentralized management structures
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$AMZN compensation philosophy is prob as good as it can be
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If you wanted someone to fail as investment professional, what books would you recommend them to read?
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what are some examples when people thought the company was a shitco and then suddenly it turned out to be a great biz? $rh comes to mind
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CEO ownership at some founder led tech companies over time (since founding)
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In hindsight this was arguably the best fintwit thread of 2021
1/ Lessons From The Tech Bubble:
Last year, I spent my winter holiday reading hundreds of pages of equity research from the 1999/2000 era, to try to understand what it was like investing during the bubble
A few people recently asked me for my takeaways. Here they are -
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SaaS revenue trajectory after reaching $100M revenue ($80-$130M)
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Teladoc buying Livongo is arguably one of the worst major acquisitons of the past decade
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I’m old enough to remember times when SaaS companies trading at 10x sales were considered to be expensive
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during dotcom bubble there was a phenomenon where tech bubble led to outflows from other sectors which resulted in "negative bubble" (e.g. abnormally cheap valuations) in other sectors. any signs something similar might be happening today?
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Revenue retention rates among selected SaaS companies $TWLO $WORK $CRWD $AYX $ZS
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"Asset-light" as well as "capital intensive" are misnomers. The difference between these two business models is largely coming from a failure of GAAP to properly reflect investments in intangible assets
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Seeing a lot of people studying successful companies and trying to find the next Amazon, Netflix or Google. What many fail to do is studying notable failures. You can learn as much (if not more) from studying great failures.
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If you're into reading biz biographies like me this is a good collection
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Best performing S&P 500 stocks over the past 10 years $DXCM $NVDA $MKTX $DPZ $NFLX
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Jeff Bezos on his management and decision-making approach in 1997 $AMZN
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Having extremely loyal shareholders is a superpower
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Thread on non-GAAP operating profit/EBITDA of SaaS companies. These metrics are "as reported" from the last 10-K
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Hypothesis: we are early in "metaverse" hype cycle/bubble. Watch $50-100M market cap companies declaring they are building "metaverse" with their stocks going parabolic
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List of publicly traded SaaS in 2014. How many of them are still around in 2020?
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