Liberty

I think organic growth is very decent but shouldn't be compared to companies that are selling perpetual licenses and booking big gains at the moment of the sale with razor thin margins. EBIX's high-margin recurring revenue stream model means that they're seeing a smooth ramp up as they sign more people to their exchanges and other services and as those customers progressively ramp up their number of transactions. They're basically sacrificing some top line growth for profitability and predictability. I like that tradeoff. I also think this is a company where it's genuinely hard to really separate organic and inorganic growth after acquisitions. They aren't just acquiring companies to keep running them as is and get those revenues without taking the income statement hit that spending more on R&D, Sales and CAPEX would entail if the equivalent growth had been organic. They are buying customer relationships and access to certain strategic markets that are very hard to get into because this is a slow-moving conservative industry (I bet it took years to some of those companies to build these relationships, and I wouldn't want EBIX to spend years trying to get in these markets if they can cheaply and accretively acquire established players). Once they are in, they might have 20 products to cross-sell to these long-term customers while the original acquired company had just 1 product, and their costs are also probably lower than the original acquired company thanks to good cost controls, economies of scale, and Indian development. Is that post-acquisition growth organic or not? would it have happened to that company without EBIX's 19 other products and lower cost operations? Does it matter too much as long as they get a lot more value than they give away? In the end, the financial metric that matters is sustainable FCF/share, and if you look at that for EBIX over the past decade, you'll see it's very healthy. A traditional rollup doesn't have that kind of profitable growth because it has to print more shares to do more acquisitions and keep top line growth high to keep it's high multiple so it can do more acquisitions with more shares, and it eventually sacrifices its margins for top line growth because once it's on the treadmill, it's hard to get off, and it results in a brittle company that can fall from any hiccup. The size of the company grows really fast, and sometimes they even have good paper income (though no real cashflow), but the per share amount of FCF can't look good. That's just a house of cards, and the reverse image of EBIX, IMO. I'm sure EBIX could grow a lot faster if they cut their margins to 10%, sold perpetual licenses in the carrier channel, printed more shares for acquisitions and bought all they could rather than just strategic piece of the puzzle available at good prices, and leveraged the balance sheet more. But it would be growth for growth's sake and I don't think the CEO is looking for a larger empire to justify a fatter salary; he's a Buffett fan and the biggest shareholder, and I think he looks at it from the point of view of growing IV/share while minimizing risk. I don't recall exactly all the details on the bloomberg piece, but I remember looking into it last year and not being convinced. It's kind of a confused mess. It accuses them of over-stating things (by 150-200k, out of 170 million revenues - and they wrote it off when it was discovered) and then accuses them of under-stating to avoid paying earnouts, etc. Meh. EBIX has paid lots of earnouts over the years and most of its acquired managers are still with the company, and it's in their interest to be known as good acquirers. Could it be someone looking for excuses to sue because he was unhappy about how things turned out? Was this story fed to a journalist looking for anything that seemed controversial by people who were looking for anything to make the company look bad at the time? Who knows. I guess some lawsuits are par for the course for public companies in the US. AFAIK nothing ever came out of it, like the other accusations. As for glassdoor, it's interesting info, but I discount it heavily because the shorts have shown that they're ready to say anything, and because disgruntled employees are always more motivated to post than happy ones (especially for unglamorous companies). It's a self-selected group with opaque motivations, so not exactly a scientific sample. It might sound like "oh, how convenient to heavily discount this negative stuff!", but I believe in this case it's the right thing to do. Each much do their own due diligence, though.

http://www.slate.com/articles/technology/future_tense/2012/08/facebook_should_be_nationalized_to_protect_user_rights_.html I'm posting this for laughs. It's so ridiculous.. ;D I'm fascinated by people who understand business and economics so little, as well as government and civil liberties.

Agreed, though I wouldn't call it outsourcing. Most of EBIX's in-house programmers have been based in India for a decade, and they work for the company, they aren't external consultants. It's semantics, but it's more 'insourcing' than anything else :) I also think that they have an advantage there as they are operating in Raina's home turf and he knows the culture and conditions. Many companies who go to India because of the sticker price find out there that there's more to the story... I also believe that he based the operations in India not only because it's cheaper, but because he knew that there was a big pool of talented engineers coming out of world-class institutions like IIT that were under-employed and could be hired while elsewhere talent of that caliber might have been harder to get at any price. I like how they hire engineers and then take the time to train them at insurance stuff in their in-house educational facilities rather than have insurance people try to describe what they need to pure engineers, or to (gasp) try to teach programming to insurance people. Seems like the smartest way to do things.

twacowfca, indeed, making lots of acquisitions to me is a red flag, which is why I spent a lot of time trying to understand EBIX's strategy. I've written extensively about my findings elsewhere in this thread, but suffice it to say that IMO it makes a lot of sense, produces a lot more value than what is paid out, and Raina is the kind of guy who counts the sheet of toilet paper per roll to make sure he isn't getting ripped off, so costs are kept to a minimum.

Google finance shows me that BRK has beaten both the SP500 and Dow Jones index over the past 10 years. Not by a lot, but it did better. By my count it did much better when it comes to intrinsic value creation, and with much lower risk, but it might take a while for that IV to be recognized in the secondary market (who knows?).

Thanks for the history, guys. Wish I had been around back then :)

Maybe it could also double as a IKEA showroom, with price tags on everything and a terminal to order furniture in the lobby ;)

...what would it be? Some context: I realize there are many ways to look at this. I mean it as a light-hearted way to find out more about what small caps people here think are high quality and have bright prospects. I'm not looking for someone saying they'd buy some net-net and then liquidate and keep the cash, or for people to find the most undervalued company close to 1B mkt cap regardless of operational quality in the long run. This isn't so much about the market valuation as the business itself. Rather, think of it as waking up one morning and magically wholly owning said businesses, and then operating it for years, with your future wealth tied to that business. ... I think my pick would be EBIX. Some reasons: Toll road/picks & shovels in a slow-changing industry that isn't going away (insurance, and now some financials and health), high operating margins that should be sustainable, high FCF, low capex, low debt, benefits from Metcalfe's law (network effect moat), highly diversified customer base (no customer more than a couple %), highly recurring revenue streams, doesn't sell its IP but rather licenses it, geographical diversification, small fish in big pond, provide real value and efficiency gains to its customers (most are still using inefficient paper processes or old fragmented software systems) and thus has a product that should sell in both good and bad times, has decent pricing power, early player in a land-grab scenario, tight cost controls, good capital allocator at the helm, old NOLs should keep US taxes minimal for a few years, and IP is made in low tax jurisdictions (india/singapore - not some gimmicky loophole either, they've had real operations there for a decade), proven relationship acquisition & cross-selling strategy, etc. So what about you? What would you like to own?

Here's a pretty good series of videos on the early days of Blizzard (originally Chaos Studio, iirc): https://www.youtube.com/watch?v=XWU25ov1XSY

Which is what I've been saying all along. Then I assume Facebook PR got to you too ;) You tell me, you seem to know them well ;)

Interesting. It's the first time I think about it this way... So there's no limits to how many times the same share can be recycled? In theory, couldn't you have more shares sold short than the entire number of outstanding shares? Kind of crazy.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons. But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.

Which is what I've been saying all along.

No doubt Facebook's PR people can find a bunch of success stories and point them out to journalists for their PR counter-attack to the bad publicity that was recently generated, but it doesn't change the fundamental difference between social network ads and search ads. What will matter in the end is dollars, and we'll have to wait and see for those.

I never said it's not monetizable, just that it's a lot harder. Neither did I say that demographic info isn't valuable (hence Google+), just that it's only one piece of a very complex puzzle. Your anecdotal evidence can be countered with other anecdotal evidence (all I see is spammy ads that remind me of Geocities-era banners, and big ad buyers have said recently that they were not satisfied with FB ads). What will matter in the end is how much money FB makes. Maybe they'll figure it out and hit jackpot, we'll see.

Social networks remind me a bit of webmail back in its heyday. Microsoft paid hundreds of millions for Hotmail only to realize that it was hard to monetize because people go there to look at emails, not ads. If you search for "luxury car" on google and see ads for BMW and Mercedes, that's useful to you because that's what you were looking for. But ads on the side of your social feed on facebook? Some will argue that they can be very targeted because of all the info that Facebook has on you, but it still doesn't change the fact that you're not looking to buy stuff, and even if you are, there's no clear way to signal that intention like with search. Then that leaves more "branding" type of ads, but those are a lot less valuable and effective, and can easily be ignore because they're not showing something you are looking for at that moment. Then they'll probably try to keep pushing further the whole "your company needs a strong presence on FB with a brand page", but how valuable is that? Good way to communicate with your customers and remind them about you, but if I'm looking for info on a BMW, will I go to BMW's FB page or to their official website? And even if I go to the FB page, will any info be there? Is the company going to re-build their whole website on a platform they don't control, or just throw you to the existing site with a link? So how much can FB charge for these brand pages? Then maybe they'd decide to pull a Google and go into search and syndicated ads via an exchange, but what are the chances of success there? Even partnering with Microsoft - who has only lost billions on search and ads so far - would what FB has really be some secret sauce to take search to the next level? Is all the crap that people post on FB really the way to make search better for users or will it just clutter up results with junk? I'm sure advertisers would love better demographics info, but it's the user experience that makes web tools succeed or not.. We'll see. /thinking out loud I don't have a horse in this race anymore, though. I made about 25% in GOOG in a month and then sold it to buy something more undervalued... It was luck that it turned out that way, but I still believe GOOG should do well over time, though it isn't nearly as cheap now as it was at 475.

I guess if people just ride Buffett's coattail they won't need to watch CNBC shows that tell them what to buy.. :P

Here's TriSystems' website: http://www.trisystemssoftware.com/ More on the ACORD standard: http://www.acord.org/about/Pages/default.aspx

Seems like a good one at first glance. They did mention on a recent conference call that they intended to strengthen their presence in Europe, and this seems like it does exactly that right in their core exchange business. And once they are in there, they have lots of things to cross-sell (though some products will no doubt have to be adapted to the European market, so that might not happen immediately). Will be curious to see how much they paid for it. Glad it's only cash, as even after the recent run-up in price, the shares are still quite undervalued IMO.

Thanks, that's useful.

Honestly, I liked that he was candid and spoke freely, and I felt it made him seem more relatable and human, and less of a doublespeak platitude-spewing machine than some other CEOs that act like they are politicians. But that might just be me, and I'm not a shareholder...

http://www.canadianinsider.com/node/7?ticker=FTP Alfonso Ciotola sold a bunch of shares. Not sure what this means (you can never be sure why people sell).. But maybe he's being replaced by someone else to oversee the European operations and turnaround of Landquart? I can't seem to find it again, but a few months ago there was an announcement about how Alfonso's title was changed. This could all be foreshadowing of a bigger change.

http://nymag.com/news/intelligencer/encounter/jamie-dimon-2012-8/

http://www.alderonironore.com/_resources/news/2012-08-13-NewsRelease.pdf

In fact, if you are in a bubbly housing market like Canada, it's probably the opposite.