Weekly Update: 2/7/21
Amazon's new boss, musings from a "suit", investment theses on PAR, KKR, ESTC, APPS, ROKU, NYT, NXGPY, FTCH and RICK, interviews w/ Ron Baron & Stan Druckenmiller, Lockheed Martin is undervalued
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: AMZN, PAR, KKR, ESTC, APPS, ROKU, NYT, NXGPY, FTCH, RICK, TSLA, LMT
Meme of the week
📊 Charts of the week
HODL
There are always reasons to sell, but at the end of the day, buying and holding equities remains the clearest path to long-term wealth accumulation. Time in the market beats timing the market. At the same time, the March 2020 drawdown and subsequent rally perfectly illustrated one of my favorite Warren Buffet quotes: “Be fearful when others are greedy, and greedy when others are fearful.”
Amazon’s new boss
Taking a page out of cross-town competitor Microsoft’s book, Amazon recently announced that Andy Jassy will be the new Amazon CEO after Jeff Bezos steps down later this year. What a run by Bezos—mans turned an online bookstore into one of the most incredible businesses ever, boasting a market cap of $1.7 trillion as of the time of writing.
The fact that both Seattle giants named insider cloud leaders as company CEO is a testament to the importance of the cloud for each company’s future. Back in 2006, Jassy led the team that set up AWS, and he has been involved in running the division under various titles ever since — most recently as CEO.
Although most consumers know Amazon for its global e-commerce prowess, it is actually AWS that is still the profit center of the company. Amazon's most recent numbers revealed 2020 revenue of $386bn. AWS made up only 12% of that revenue number, but its sky-high profit margins mean it makes up almost 60% of Amazon's total operating profit.
Peak Super Bowl ads?
The decline in viewership, on linear TV at least, suggests that peak Super Bowl ads might well be behind us.
📚 Good reads
Greenhaven Road Capital — Q4 2020 Investor Letter (link)
Greenhaven killed it last year (105% returns after fees & expenses vs ~16% for the S&P 500). Their letter includes commentary on Par Technology (PAR), KKR, Elastic (ESTC), Digital Turbine (APPS), Roku and The New York Times (NYT). Some thoughts on PAR (one of my favorite stocks for the next 3-5+ years):
2021 should be an interesting year for PAR. They began the year announcing that CKE Restaurants, which operates Carl’s Jr. and Hardee’s, had selected their Brink POS (point of sale) system. CKE’s nearly 4,000 restaurants would represent a 30% increase in Brink’s store count. 2021 should see an acceleration of growth in installs, rising ARPU from pricing and payments, the sale of their legacy defense business, and a large acquisition utilizing the cash raised in October. There remains a very long runway for growth and the opportunity to leverage the strategic positioning of the POS as the spine of a restaurant to add adjacent software products for the hospitality space. PAR is our largest holding.
Jeffries — 10 Random Musings From A Boomer Who Has Been In The Financial World For Three Decades (link)
This note from a “suit” was originally published on January 27th during the heart of the meme stock mania, but I came across it last Tuesday as the inevitable Gamestop, AMC, etc. dump began. Some timeless lessons here.
Tollymore Investment Partners — December 2020 Investor Letter (link)
Tollymore is a London-based private investment partnership that has achieved impressive annualized returns (27.9% net of fees & expenses vs 14.5% for the MSCI All Country World Index) since its inception in 2016. The letter discusses two of their holdings (Next plc & Farfetch) and includes an appendix with a transcript of an interview they did with Good Investing TV. An excerpt on Farfetch:
FTCH has the right model for industry domination. FTCH does not compete with any other large luxury marketplace. Its competitors are online brand ecommerce, omnichannel multi-brand stores and online multi-brand retailers. Jose Neves is playing for winner take all: “I believe a single company will orchestrate this revolution in the conversion of offline and online luxury retail because, even if multiple retail-tech vendors emerge, the new technology will have to be adopted both by retailers and consumers. We believe consumers will always gravitate to one single app, forcing vendors to gravitate to one single platform, most likely a platform that has already built consumer-side critical mass and benefits the entire ecosystem. This all translates into a potential $450 billion addressable market for Farfetch, which, as the operating system for luxury, we want to transform, empowering individuality for consumers, curators and creators of fashion.”
Various investors — RCI Hospitality Holdings (ticker: RICK) investment theses. RICK is a Houston-based owner/operator of 39 strip clubs and 10 military-themed sports bars/restaurants called 'Bombshells.’ I initially discovered the company on FinTwit and thought it was a joke, but was pleasantly surprised to find that it’s a compelling investment opportunity
1 Main Capital — Yaron Naymark of 1 Main Capital presented his in-depth investment thesis on RCI Hospitality at Best Ideas 2021. Includes video presentation & slide deck
Capy Capital — short write-up analyzing the investment opportunity/thesis as of February 3rd
RICK is one of my favorite small caps and “reopening” plays. I started building my position at ~$28 in early December and the stock has been making it rain ever since. Despite the run, I think there’s still a nice runway of growth ahead
🎧 Press play
Masters in Business — Ron Baron on Investing in Tesla and SpaceX
Bloomberg Opinion columnist Barry Ritholtz speaks with legendary investor Ron Baron, who is the chairman, CEO and portfolio manager at Baron Funds. He founded Baron Capital Management and Baron Capital Inc. in 1982, and boasts more than a half century of research experience. Today, Baron Funds is known for its long-term, fundamental, active approach to growth investing; it has $49 billion in assets under management.
Ron Baron is one of the greatest growth investors of all time. It was great hearing about his investment philosophy and somewhat unconventional journey to becoming an investing GOAT.
📺 Videos of the week
Goldman Sachs — Interview with Stanley Druckenmiller, Chairman and CEO of Duquesne Family Office
In this episode of Talks at GS, investor Stanley Druckenmiller discusses his current outlook on the market, his approach to risk management throughout his career, and his perspective on the conversation surrounding the role of capitalism in American society.
Druckenmiller is a legendary investor and shared a ton of his insights in this 20-minute interview. John Street Capital summarized the video into a Twitter thread.
Lockheed Martin (LMT) - Stock Valuation - Estimated Investment Return
This video is an analysis of Lockheed Martin from the fiscal year 2020 financial results as well as an estimate of the future value and possible investment return based on a discounted cash flow (DCF) and EV / EBITDA market multiple approach.
Lockheed Martin (ticker: LMT) is a wide moat business with consistent top and bottom-line growth, strong free cash flow yield, and a shareholder-friendly management team. Here’s a recent write-up on the qualitative and quantitative aspects of the business.
Given the industry’s historically strong returns, I’ve been looking to add some aerospace and defense diversification to my portfolio. LMT looks attractive here, so I plan to start a position and will add shares if the price comes down even further.
Disclosure: None of this is investment advice. I own AMZN, PAR, ESTC, ROKU, FTCH and RICK shares.
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