Weekly Update: 2/14/21
BTC on the balance sheet, social media peaks, mistakes & memes, Farfetch's pandemic success, the qualitative margin of safety, Barry Diller, YOLO responsibly
Welcome to Beating the Odds. Our goal is to create and curate content on investing, strategy, tech, fashion and anything else we find interesting.
🔍 Tickers mentioned: TSLA, BTC, FB, TWTR, SNAP, GME, FTCH, COST, IAC, MGM
Meme of the week
In light of Tesla becoming the latest public company to shift some of its cash to bitcoin, it was only right.
📊 Charts of the week
Social media’s evolving landscape
RIP Myspace. How long till Reddit and TikTok hit their peaks?
📚 Good reads
Stratechery — Mistakes and Memes (link)
“Who controls the memes controls the universe.” As laughable as that sounds, the GME mania and post-Obama political landscape, among other things, offer some compelling evidence to its truth. Alex Danco’s recent post on George Soros’s concept of reflexivity is another great piece highlighting similar themes.
Financial Times — How Farfetch prospered in a pandemic year (link)
Really good article from the FT (try accessing via this link if the above link paywalls you). Here’s a quick excerpt:
Neves’s choice of a business model that differs from other online retailers such as Net-a-Porter or Matches Fashion has proven crucial: Farfetch would not buy any inventory and therefore took less risk on fleeting trends. Instead, it acted as a marketplace that connected fashion-hungry shoppers to boutiques or brands and earned a commission of about 30 per cent on each sale. It also helped boutiques with the cumbersome work of photographing each piece, creating a modelling studio in its Porto office.
Although its complex logistics are invisible to shoppers, Neves built Farfetch as a technology company whose platform matched supply with demand, while handling the painful details of transport, payments and customs to deliver to shoppers in 190 countries. Its system can now dispatch a €4,600 Balenciaga velvet red coat from a store in France to the door of a consumer in Beijing in under four days.
While reading these paragraphs, I was reminded of Kai Wu’s (Sparkline Capital) report titled The Platform Economy. In this piece, Wu explains why “platform” businesses have thrived and explores the characteristics of industries where disruptors have been most successful: inefficient gatekeepers, high fragmentation, and untapped supply.
Ensemble Capital — The Quality Margin of Safety (link)
I’m a big fan of Ensemble’s investment research and general investing philosophy, and enjoyed this post explaining how they think about the “margin of safety” concept from a qualitative perspective:
In the chart below, the blue line represents what your subsequent compound return would have been had you bought Costco at the market price between 2002 and 2015. The orange line shows what your return would have been had you paid 40 times earnings for Costco during that period.
Both are illustrations of how the market can consistently underprice wonderful companies, a topic which we’ve discussed HERE and HERE.
One lesson investors should not take from these examples is that you can pay up for any company. The further you get from investing in an exceptional business, the more valuation should matter to your thesis.
The End of Accounting Blog (Professor Baruch Lev) — M&A In The Wake Of Corona (link)
Originally published in December 2020, but still relevant as M&A activity remains strong through the first quarter of 2021. Did someone say “SPAC”?
🎧 Press play
KindredCast — Barry Diller In His Own Words
Today, an episode long in the making: Barry Diller, Senior Executive and Chairman of IAC and Expedia, catches up with LionTree and Kindred Media Founder and CEO Aryeh B. Bourkoff. Their conversation touches on everything from the shifting political landscape and tech platform regulation to IAC’s resiliency throughout the pandemic. Listen until the end to hear his frank assessment of several of his well-known business peers, too.
Not a ton of non-IAC stock talk on this one, but hearing from the legendary Barry Diller is always insightful. Some highlights specific to IAC: Diller broke down how he thinks about the business as a conglomerate and “anti-conglomerate,” Vimeo’s future as an independent company and why IAC invested in MGM last summer.
📺 Video of the week
All Star Charts — YOLO Responsibly | Happy Hour w/ Howard Lindzon
You have 2 choices:
1) You can complain that you don't like the rules, you don't like the people who make and enforce those rules, you don't like the people who take advantage of those rules and you can take your ball and go home. You can do that. You have that right in this country.
or
2) You can acknowledge the fact that you don't like certain rules, you don't like some of the people who make and enforce the rules, and you especially don't like some people who take advantage of those rules. But if you can't beat them, join them!
We choose #2. Because this is nothing new. We figured this out decades ago. Welcome to the market.
Enjoy!
JC and Howard are a couple of stock market vets and it was refreshing to hear their thoughts on the market. I agree with a lot of what they said. Overall, I don’t think the public markets are in a bubble, but beware of pockets of froth out there…
Disclosure: None of this is investment advice. I own BTC, FB, FTCH and IAC shares.
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