Liberty

"Prime Day 2019 Surpassed Black Friday and Cyber Monday Combined" https://www.businesswire.com/news/home/20190717005462/en/

New post (part 1 of 2) on Burford by Scuttleblurb (subscription required): https://www.scuttleblurb.com/bur1/

https://www.prnewswire.com/news-releases/att-and-microsoft-announce-a-strategic-alliance-to-deliver-innovation-with-cloud-ai-and-5g-300886310.html

I believe the increased valuation in some stocks is due to the rush into compounders. I believe after one of the longest economic expansion in modern history, a lot of companies look like compounders, but are more cyclical than they seem. We will see after the next recession. Since many of them are roll ups (albeit well run roll ups), there is also reflexivity at work, such that a high valuation enables faster growth through acquisitions, due to lower cost of capital. Example are Heiko, ROP, DHR, TDG, ROK. They are well managed companies well worth keeping an eye on, but the valuation is a couple of bridges too far, since investors now discount many years of current growth rates into their stock prices. I'd agree with that. As an example, ROP has spent $11 bn on acquisitions in the last ~9 years to grow FCF from $471 mm in 2010 to $1.3 bn today. Meanwhile, EV/rev has more than doubled (~8.5 now from ~3.5x in 2010) and EV/FCF has nearly doubled (upper teens in 2010 to low 30s today). ROP acquisition targets aren’t cheap - the last one was done at around 17x EBITDA, so that keeps ROIC down. However, their return on tangible capital is very high due to the asset light business model. They can pay the high prices, because their cost of capital is very low, due to their high valuation and because debt is very cheap. Nevertheless, the comparison with Valeant doesn't hold water - ROP leverage isn’t high and they don’t buy cigar bits (at least they haven’t so far) to milk cash. my concern is simply with the valuation and the suspicion that some of their business lines may be more cyclical than thought. The one company they I am a bit suspect of is AVGO, especially after their pivot into acquiring software companies (and low quality one at that - CA Technologies). You can look at some of the older businesses that ROP owns, mostly the old industrial/energy stuff, and even after like 20 years of no acquisitions in those segments, the businesses keep getting better. They have like 30%+ EBITDA margins on these industrial businesses, and they didn't start there at all. These segments that haven't had any M&A have also grown organically a lot during that period (the energy stuff was hit in the recent crash, but that's normal in more cyclical industries.. over the cycle they did well). So the idea that they're buying declining assets and somehow hiding that like Valeant did doesn't make much sense.

https://www.pymnts.com/news/partnerships-acquisitions/2019/visa-acquires-germany-based-payworks/

Every acquirer is like valeant. Noted.

This kind of napkin math misses a lot. What are the assets that they bought? Do they have different economic characteristics than what they used to own? Suppose it depends on whether or not you include intangibles and goodwill in your ROIC calcs...yes they've bought more software/higher ROIC assets, but that's still $11 bn in cash out the door...what would the FCF CAGR have been without those acquisitions over the last decade? Is 8.5x revenue a reasonable price to pay? The question is, going forward, are those businesses of higher quality? Do they have stickier/more recurring revenues, higher margins with room for operating leverage, fewer needs for capital to grow or even negative working capital dynamics, self-reinforcing network effects in their industries, larger TAMs/higher terminal value, more opportunities to do accretive bolt-ons, etc. Some businesses are worth higher multiples than others because they'll produce more cash over their lives, and you can't know that by taking just a snapshot and looking at the short term. You have to understand the businesses, not just look at aggregate numbers, to understand a company like this one.

This kind of napkin math misses a lot. What are the assets that they bought? Do they have different economic characteristics than what they used to own?

Some commentary on the company in this letter: https://static1.squarespace.com/static/58f7798829687f53ff30baf8/t/5d2cb4770f60db0001b4a56c/1563210872722/Upslope+-+2019Q2+Letter.pdf

Good post by Bill Gurley from 2011, going over the various competitive advantages and characteristics that make some companies more valuable than others: http://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/ Good overview of the basics (and most of what's important in investing is remembering the basics).

Greg, I think you live in the burbs. 4 hours without AC in NYC in 90 degree weather can kill people. There is no grass and you can just chill in the backyard. You lose power and everyone's apartment becomes an oven. People also get stuck in elevators, the elderly have to walk up and down 30 floors to get home, etc. Tall glass buildings without HVAC (even just airflow from fans) can turn into quite hostile places rather quickly too..

I think this has been discussed earlier in this thread. Probably not a good use of time to go over it de novo. There's also a shareholder letter where Mark goes over amortization.

They break out the organic growth in the MD&A: Note that most of the value comes from the maintenance and recurring line, which is the sticky, high-margin revenue. They will often reduce or cut less profitable professional services and hardware sales at acquired companies if they don't feel it creates enough value, so it can be a headwind to the aggregate number without affecting much how much economic value is being created.

h/t @pearnick I only flipped through a few statutory reports, but didn't see much disclosure regarding P&L performance of acquisitions. Have you attempted to break out organic vs acquired growth? The company breaks organic out in pretty good detail. I'm on my phone so don't have it in front of me, but it's in the fillings, and also was in the letters.

Lex Fridman of the MIT AI Podcast interviewing Jeff Hawkins: https://lexfridman.com/jeff-hawkins/ Very thought-provoking episode, especially the last 1/3rd.

Volaris acquisition: https://www.enlightenmentmag.com/news/windward-software-owners-retire-sell-business-to-volaris-group https://www.windwardsoftware.com/company/about-us.html h/t @pearnick

10 days left for the Deadwood book kickstarter project by Matt Zoller Seitz: Now at 2/3 funded, but please, if you have any interest at all in the show (my favorite of all time), give your support! It's only a few bucks for no doubt many hours of entertainment, a new perspective on a classic show, and a way to relive the show one more time through the book. thanks!

I don't think this needs to be personalized in a negative manner. HHC has thousands of investors long and short, I'm sure. If Tobias has been short for even just a year, he's not lost anything, as the stock is now just back to where it was not long ago.

tl;dr: Of course. That's the power of having an existing user base this large to bundle and cross-sell to.

https://www.cnbc.com/2019/07/11/microsoft-teams-passes-slack-in-daily-users-rajesh-jha-explains-why.html

https://www.motortrend.com/news/2013-tesla-model-s-beats-chevy-toyota-cadillac-ultimate-car-of-the-year/

Some slides from a presentation by Pat Dorsey (looks like it's from 2011): https://dorseyasset.com/wp-content/uploads/2016/07/10-years_100-analysts_2000-stocks_vic_omaha.pdf

https://stratechery.com/2019/shopify-and-the-power-of-platforms/

https://traviswiedower.com/2019/07/11/spotifys-moats-management-and-unit-economics/

Barry Diller interview in Sun Valley: https://www.cnbc.com/video/2019/07/10/media-legend-barry-diller-dont-know-who-is-going-to-win-the-streaming-wars.html