Jerry Capital

Good read on Autodesk here https://www.architectmagazine.com/technology/architects-versus-autodesk_o

He discussed this in his 2017 letter. So I think the context may be a joke. See attached.

Angi had a bad quarter

Tinder had a great quarter

Good find writser, have you done that with their reports before? Very smart thinking.

Thanks Normax. I would tend to agree with that I am not sure even if you were bearish if you would describe your short thesis as a "liquidity crunch". I think there is a good case to be made that the company is too expensive 15+ based on book value (non cash write ups, large single victories) but I don't think I'd describe it as a liquditiy short... Maybe I am wrong!

It's happened before that the market has got it wrong. If anyone can confirm that would be great. In the meantime remember Element Financial dropped 40% in a similar situation.

It's not cryptic. I don't have a formula or calculation. It's more about looking out a long time horizon, and thinking, can they take what might have been a lucky win with Peterson and build some sort of moat, shift to a more recurring revenue model with an asset management arm and portfolio financing. The multiple that a truly uncorrelated (not negative but zero correlation) equity with stable earnings would be incredibly high (think $V $MA type mutliple)... You have decent downside protection IMO and a very interesting bull case. It's more of a Bill Miller style investment for me, and that is reflected in the weighting in my portfolio. Does that make sense?

You can't think of it like that. You have to be more creative.

It's a good point re the ability to smooth out earnings. It is no appropriate to value Burford on earnings, its clear that NI is not FCF... A company is worth the present value of its future FCF. BUR management knows NI is not FCF and therefore uses only a modest amount of leverage. You can't pay off debt with NI! If they were giving guidance and using a lot of leverage and supporting those with "adjustments" (like VRX) I would run very quickly... They are not doing that. So even if they are keeping the Peterson case a little low to "smooth" earnings it does not present blow up risk, it simply means paying a multiple of earnings is not the best way to look at the business... And as an analyst we have to decide what the normalized FCF for the company is (not an easy task indeed!). If management was selling shares or increasing the leverage those would be deal breakers for me.

It should also be clear that at some point they probably will uplist. The reason they are on the AIM is because they did, indeed start there as a micro-cap, and specifically started in the UK because the UK is the standard for international contract law. This is why they as well as their competitors are there. You might say that lowers the level of "suspicion," it all flows naturally from the history of the business. These are all very valid concerns and should be expressed in your position size.

I think both sides have said enough of these specifics. Ideally the thread could evolve to sharing some interesting links, videos, news etc. I'll start Here is a good trade journal I found for litigation financing. Does anyone else have similar resources they found interesting? https://litigationfinancejournal.com/top-judge-recommends-london-establish-special-fund-tackle-uks-access-justice-problem/

Some cases come directly from CFOs the other come directly from law firms. I am not sure about the exact split. The reason they get flows from law firms is because law firms don't have balance sheets they simply cannot finance the asset themselves all the LPs take their money out every year. That will most likely never change, it's hard for most professionals to change from having no skin in the game to putting up the $...

It is impossible to predict if they will have another Peterson, it is unlikely for sure. Again it is similar to a VC fund, I would invest in the next round of Gurleys investments and he is operating in the frothiest of markets (see Softbank), yet I believe he will continue to generate significant alpha over time. But I think its important to point out that EVEN if funds came into litigation finance like they are now, if that accelerated and it became completed saturated, there is still a probability that they underwrite good investments. That said, I believe it is more likely that the industry will remain structurally inefficient for a vareity of reasons that will continue for the foreseeable future. The leader in a structurally inefficiient market certainly will take their share of 1) fund flows, 2) attractive investments. I also think that it is important to note that management is trying to shift this business away from "needing another peterson" and more towards a company that should be valued on actual cash flows, the asset management arm, the portfolio financing (lower ROIC but revenues and cash flows become more stable overtime = multiple of FCF not multiple of BV). This is the right thing to be doing. We will probably look back in a couple of years at they will not have completed this transition, the stock will have underperformed, maybe even a permenant loss of capital. But I have a hard time seeing it being much more than 30% from $15 per share (50%? OK size your position accordingly, this is not supposed to be in your portfolio at 20% weight!). Even CG has a $12.5 price target (or close to that) and they pretty much laid out the most bearish case possible on the company. The other side of the coin, albeit a lower probability, is a lot of things work out for them, and alot of things work out for them when the S&P 500 goes through a bear market, the economy goes through a recession, etc. If Burford can show that they are recession resistant, that they transition to a FCF valued firm with semi recurring revenues, the jsutified mutliple will be insanely high, you will make A LOT of money. At the right size, this is an interesting stock to put in your portfolio to get convexity and a lot of potential alpha should we hit a ugly bear market.

Of course. I just again, I don't want to put words in your mouth. May I ask what specifically do you think is not sustainable here?