Led by owner-operator Drew Houston, Dropbox is at an interesting inflection point in its growth story. Unlike other cloud players, the stock has been seemingly been left out of the “work from home” rally over the past six months. Up only 7% this year and trading for around 15x normalized free cash flow, the company looks undervalued. Attractive upside exists if the company can come anywhere close to hitting their 5-year performance targets.
Read MoreIt's only when the tide goes out that you find out who has been swimming naked. Since the economic tide went out in March, two large frauds have come to light: Lukin Coffee and Wirecard. This isn't unusual. Frauds tend to cluster at the end of the business cycle when investors take off their rose-tinted glasses.
Read MoreCSW Industrials is a company of which I would be happy to own 100%. The Dallas-based firm is best classified as an “industrial growth” company and embodies many of the characteristics I look for in a business.
Read MoreKnowing when and, arguably more importantly, when not to sell a stock is a topic that often goes under-addressed in the investment world. How we decide to exit a position is a question we are asked frequently, so we thought it made sense to put our decision-making framework on paper.
Read MoreNow that Berkshire’s Q2 10-Q and 13-F have been filed, I thought it would be a good time to review the company’s intrinsic value. If you want to skip straight to the punch-line, here it is: my assessment of Berkshire’s intrinsic value is virtually unchanged from Q4 2019 at $700 billion or about $300 per class B share. To see how I arrive at that conclusion, read on. But before I talk about valuations, I’ll review some of the moving parts in the first half of 2020.
Read MoreAt first glance, the reorganized PG&E looks like a special situation and value investor’s dream because of the lengthy list of catalysts and cheap valuation. Additionally, a slew of prominent value investors own large stakes in PG&E, including Buapost Group, Third Point Management, Appaloosa Management, and others.
Read MoreTractor Supply has been one of the best performing stocks of the past twenty years. It even beat the likes of Apple. The company is a niche “rural lifestyle retailer” whose customers are “recreational farmers, ranchers, and all those who enjoy living the rural lifestyle.” A rural retailer seems like an unlikely business to back one of the country’s best-performing stocks. Which begs the question, how’d they do it?
Read MoreIn 2012 William Thorndike set out to uncover the secrets of the best CEOs in modern industry. He identified eight which stood head-and-shoulders above the rest. Their stocks outperformed the S&P 500 by over 20x and their peer group by over 7x.
Read MoreLowe's has 90% of Home Depot's store count but only 40% of Home Depot's market value. This discrepancy isn't due to store size or capital structure. Lowe's has 87% of Home Depot's the selling square footage but only 41% of Home Depot's enterprise value. What gives? Why is a Lowe's store worth 40 cents on the dollar of a Home Depot store?
Read MoreIt is hard to believe that after outperforming the S&P by 87% over the last five years Crown Castle has drawn the ire of one of the country’s most prominent activist investors, Elliot Management. Maybe more surprisingly, it looks like Elliot is on to something.
Read MoreOne of humanity’s perpetual challenges is to avoid knowing enough about something to think we’re right, but not enough to know we’re wrong.
Read MoreBill Ackman recently organized a “blank check company” also known as a special purpose acquisition company, or SPAC. The company filed its S-1 on June 22nd under the name Pershing Square Tontine Holdings and ticker PSTHU. A SPAC is a public company that raises capital with the intent to merge, acquire, or otherwise combine with a yet to be determined private business. If no transaction occurs within two years investors get their money back at par.
Generally, SPACs should be viewed as highly speculative endeavors and accordingly are not something we spend much time investigating. However, this opportunity is more interesting than usual for several reasons.
Read MoreRestaurant Brands International (RBI) is a conglomerate of QSR (quick-service restaurant) brands. Some of the world’s most prominent investors have spent billions assembling it over the last decade.
Read MoreIf someone new to investing were to ask me where to start when trying to find potential investments, I would recommend first studying predictable, free cash flow generative businesses with a defensible competitive position. I can’t value a business if I can’t reasonably estimate the cash the business will generate over the next 5+ years, and I am only interested in owning above average businesses which tend to display the above characteristics. Secondarily, but of no less importance, is to pay a price for that business that affords a margin of safety in case some of your assumptions are off the mark.
We try to spend most of our time researching businesses that meet these criteria, and this week I’ll take a look at Dunkin’ Brands Group, owner of the Dunkin’ and Baskin-Robbins franchises and a business that scores highly on many of these marks.
Read MoreWinston Churchill famously said, “Never let a good crisis go to waste.” Rather than say it, Wyndham Hotels' (WH) management is doing it. While others viewed April’s precipitous drop in RevPAR as a disaster, management viewed it as an opportunity to reset the company’s cost structure. On the May 5th call it explained that it had already slashed 2020’s cash outlays by $255 million and permanently reduced costs by $100 million. The permanent savings are from a reduction in facilities, vendor spend, and 440 positions.
Read MoreSome businesses fly under the radar and are far better than one would initially suspect. They quietly compound capital at high rates of return and ward off competitors using subtle but sustainable business models. The familiar names of Ross Stores, TJ Maxx, and Burlington Stores, which I’ll refer to from now on as discount retailers, have thrived by offering excellent value on brand name merchandise to customers for many years.
Read MoreThe S&P has almost fully recovered from its March plunge. Year to date, it is only down 6.5% (including dividends). Cheap compounders are once again in short supply (though we’re working on a few you’ll see in subsequent write-ups), so some special situations are naturally catching our eye again. This week there are two: the Ecolab exchange offer and forced selling in Kontoor Brands.
Read MoreThe hotel and hospitality sector has been decimated by the COVID-19 related economic shutdowns. We think this has provided long term investors a chance to buy a great business, Hilton, at a substantial discount, and we recently did just that. Check out this weeks’ article to learn more about our the business and our thesis.
Read MoreWhen Masco's CEO Keith Allman took the helm in 2014 he said "I view myself as a transformational leader. That's how the board views me, and that's why they appointed me. I'm not a status-quo guy." (source: WSJ).
He's stayed true to his word over the subsequent five years. Today, Masco's transformation looks largely complete. It is less cyclical, with 90% of sales focused on repair and remodeling, and concentrated in high return brands high Delta and Behr.
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