chompsterama

Dad, is this you?

Cambria and Vertu don't exactly represent the same business. Cambria has Lamborghini, McLaren, Rolls, Bently, Aston. Vertu sells to everyone else. Assuming one does not have institutional constraints (which you probably don't if you are looking at microcaps), it seems only two questions really need to be answered to warrant an investment in Vertu at half of TBV and 3x earnings. 1. Will car dealers go the way of newspapers? Historical journalism and its role in getting you the news via newspapers were a little bit of a bait and switch whereby they were funded by the advertisers. As soon as those advertisers found a more effective medium, they ditched journalism and the whole thing fell apart. That could happen with car dealers. Having a third party dealer is not likely the most efficient way for a manufacturer to sell a car - see CVNA's market cap if you have any doubts. If a more effective and efficient medium comes about OR is more widely adopted by manufacturers OR consumers, then car dealers might go the path of local newspapers. 2. Will Vertu's management team dilute me? At this price, I don't think much else really matters.

while claiming that purchases of retailers on life support has nothing to do with their retail real estate business - it's just an investment opportunity. And something along the lines of SPG is not a mall company. There is more than one way to go through life I guess.

Why will they grow mid-single digits? Up to this point, they've grown their subscription offering at well over 20% p.a. That should continue at a good clip. Offsetting this is a natural fall-off of their existing live-training business. But to track future sales growth, it's combination of deferred revenue combined with the rate at which they are adding "client partners" (sales people) and the productivity rate of those client partners. Both metrics the company provides freely. I think mid-single digits is conservative. Of course, normalized. I have no idea what the next year looks like.

At this point, the business seems to have born out its ability to churn out $20-30m in earning power (cash). Revenue is basically recurring, client retention is above 90%, revenue retention is well over 100% with add-on services. Gross margins are in the 70% and looking out past COVID, for every dollar of sales growth (which they will almost certainly see in the mid-single digits) drops something like $0.45 to the bottom line. So a business like this trades at 10-12x. And it's growing. And SBC is not crazy and there's essentially no debt. What am I missing? I mean GAAP doesn't show the progress in the business because of amortization charges and deferred revenue, but beyond that?

I've had the exact same experience. I'm still with them, but their service and compliance teams are unbelievably bad. FWIW, try their ProServe team or their Prime desk - they can usually push things along. But still, I often hang up and call again to get another rep. #Anectdata

Yes. Invest float badly. Fairfax give excellent demonstrations of this on a fairly regular basis. FWIW I also happened upon HIIG's Glassdoor reviews yesterday. Pretty consistent reports of a toxic work environment, though not sure how much weight to assign to such reports. Steven Way is very difficult to work with. Keep digging. That may or may not be why some acquirers are not as interested as they might be otherwise - particularly at >BV on top of the prior period developments never-ending.

Insurance brokers/M&A contacts are very aware of the kabuki dance. Both of those I ran it by offered similar details: Westaim wants too much. Offers are ~80%/bv.

Thanks for this and I agree it's cheap, but SOTP won't really matter until cash flow actually arrives. Who knows when it arrives. Arena probably reinvests for some time and HIIG continues to have PPD's worsen (most of these books only go one way once a trend is established). It's also worth noting that while HIIG was shopped in 2019 there was basically no industry interest over 80% of BV. HIIG is definitely not worth BV. But still, it seems hard to permanently lose money at today's prices. Though it's really tough to tell how and when the cash flow to the HoldCo actually moves up and stays there.

I was okay with missing the opportunity because I thought hindsight is 20/20 and the world was practically melting seven weeks ago to the point that the Chinese Government was apparently preparing a possible armed confrontation with the US. However, reading that made me feel that it's not alright to miss it because I did not have to back up the truck and my truck would be still full after all of it. I was really looking for another GGP, and this could've been it. I clearly remember that this will go up at least 300-500% if the capital markets still allowed Wayfair to operate, so I'm going to remember this painful experience. Especially when I invested in Valeant near the highs on information way less concrete. It goes to show that it makes no sense to time the market and buy when you see an opportunity, even with all the uncertainty. What did you have to lose? Only the capital you put up and even if you had a paper loss of 99%, you could always buy up more if you think the prospects are good. WOW It’s a fun ay statement they timing doesn’t matter with this “investment” when timing obviously needed to be perfect to get that multibagger return. What do you mean? :-\ It wasn't about timing but rather pricing because at $30 you are getting the company for almost as much as they invested to build it with paying customers. Even if you had the foresight to buy it at $30 - it went to $20. Therefore, one would've lost 33% of their investment in under a week. I did not look at it as a trade, but rather a commitment to see it through. For whatever reason Wayfair was not able to raise cash, it would've gone a lot lower than $20. As mentioned, one did not have to back up the truck on this investment. You literally told me this on a PM re: Wayfair: "Wayfair is one of those companies that I'm not comfortably owning for decades on end, but as a trade, I was happy to oblige ... As an investment, I wouldn't touch with a ten-foot pole, not because Wayfair is a cesspool, but rather I do understand the business as much as I want or rather figure out how to topple Wayfair's competitive position (if any). As a trade, the price was way too low on a technical and relative valuation basis."

Most of the evidence points to less competition, stable margins, and strong growth. They have a very strong competitive position. Is this a great business? No. The ROE is pretty modest. They are one of the the best companies in a commodity industry. IBKR is a very good business, but falls short of being a great business. I am comfortable owning a sizeable position, but I'd prefer to own something else right now. If we're defining great by ROE, then lever up and juice those ROEs! The reason IBKR has a low ROE is because they have something like $7 billion in excess capital and they'll probably build that to $10 billion. Peterffy refuses to risk the business in the pursuit of efficiency ratios for a short-term beauty contest. It's a very very good business. Valuation aside.

Ah man. Why didn't I just pull the trigger? This was the obvious outcome. I really think this was obvious in hindsight. This was as obvious as knowing on March 23rd that the market would be at the same level as mid-Oct 2019 by the end of April. ::)

Can you point me in the direction of where you are seeing these bonds? Can you buy them on Fidelity? No idea re: Fidelity - I don't use the platform for bonds. This is the 7% coupon Jun15 '26. USN20146AB73

I'll just point out again that bonds are at $74 with decent volume. Unsecured creditors believe there is no equity value here (barring something like a really anxious bondholder wanting out).

Yes, this is a very good point. Chomp is somewhat correct: the churn and low LTV makes this a very challenging business. But the negative working capital and mass customization make Vistaprint a very, very good business. It is these core economics which allowed Vistaprint to become a "financial engineering story" and "roll-up" in the first place. It also allowed management to ignore the core business and get tempted by too much debt. Another important point: the economics for mom-and-pop print shops were already challenging. These lockdowns will accelerate the offline to online transition. I understand what widenthemoat is saying with RTNA. Problem is you can't buy that - you buy multiples of TNA+debt and that return still depends on massive ad spend because the business has little recurring revenue, lots of competition, and they're selling commodity products. This RTNA was exactly Buffet's argument with KHC - but fortunately for KHC, they sell branded consumer staples, and sales wouldn't fall off a cliff if they stop ad spend. That's not the case here. Slowing ad spend today juices the near-term net margins, ROIC, etc. but I fear that won't last. Fortunately, they had the benefit of recently turning down spend combined with a fantastic economy. They couldn't permanently turn down ad spend otherwise revenue would fall by a greater and great percentage the further along we go.