May 2022 monthly wrap
Every month I share a summary of what I’ve read, seen or heard that I’ve found interesting. Expect the format to evolve over time, as well as what’s included. If you have any feedback, please hit me up! If you missed the April Monthly Wrap, you can find that here.
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The Long Game Update
Just the one new post this month. I collaborated with another writer, Young Money Capital on this post discussing Cvent. I think Cvent is has the potential to be a great capital compounder. Here’s an excerpt of my thesis below (my fellow writer had a slightly different view):
The under-appreciated (power) of Cvents product, in my view, is that they are just as user-friendly for event planners as it is for venues, and it enables seamless collaboration between both sides of the event, and therein lies the network effect. I think the current valuation represents a very attractive entry point to buy a market leader led by an extremely high quality and well-seasoned CEO, Reggie Aggarwal. In my view, the market is punishing the company for going public via SPAC, and it’s been associated with several lower-quality companies that were able to go public when they probably shouldn't have. I think Cvent is one of those companies that can quietly compound revenues at 20% before generating FCF margins of 30% as a mature business in the longer term.
The pseudo hedge fund?
I continue to sit on the side lines and have not made any investments. While valuations have cooled to pre-covid levels, I still think the market hasn’t fully priced in continued interest rate hikes and geo political risk. I am maintaining a watch list of ~15 stocks, and may opportunistically initiate a position where I see a particularly compelling entry point. I’m most excited about the potential to buy high quality infrastructure SaaS businesses at reasonable prices (no names disclosed yet!).
What I have been reading, watching and listening to
Every month I will share a selection of things that I’ve found interesting. Only a few things to share this month, it was a busy time at work with a bit of travel. Here’s what caught my attention in May:
The Nomad Partnership Letters: Fair warning, this is a chunky (but extremely rewarding) read. In the future, I plan on distilling all 225 pages into a digestible post, but this is a compulsory read for any investor. Nicholas Sleep and Qais ‘Zak’ Zakaria ran the Nomad Partnership for 13 years, and absolutely crushed the market. When they wound the fund up (about a decade ago now) they told their LPs to take their final distribution and invest it equally across Amazon, Costco and Berkshire - not a bad piece of advice. The letters provide insights how they thought about investing, the concept of scaled economies shared, views on capital allocation and case studies (the Costco one was my favourite). I thought this quote from the letters very succinctly broke down what every long term investor should try and do.
“The trick, it seems to us, if one is to be a successful long-term investor, is to recognize the sources of enduring business success, get in early and own enough to make a difference. Which raises two questions: what are the sources of success and second, if these are so readily recognized up front why are they not discounted in prices already?”
The answers to both these questions are in the letter.
The Beast Within the Beast: Instagram - this is an interesting and well researched write up by my Cvent collaborator, Young Money Capital. It’s an interesting perspective on valuing instagram. His analysis suggests Instagram as a stand alone entity would almost be $400bn!
The Rise of Cash App - I love companies with (under appreciated) network effects and this analysis of Cash App within the Square ecosystem was a great read unpacking those network effects.
The Last Lecture (Randy Pausch): Carnegie Mellon University used to run a series of lectures called “The Last Lecture”. The premise of these lectures was simple - hypothetically if you had one last lecture before you were about to die what would you present? On September 18th 2007 Randy Pausch delivered the last lecture and in this case, it wasn’t hypothetical. Randy had been diagnosed with pancreatic cancer and had 3 - 6 months to live. The talk is about achieving your childhood dreams, but there are a couple of head fakes (which i won’t reveal) at the end of the lecture. I must have watched this lecture a dozen times and it still inspires me.
Tweet of the Month
Every month I will share a Tweet I came across that I found interesting. For May, it was this tweet from Jon Erlichman with a video excerpt from an old 60 mins segment, which was discussing Amazon’s valuation in 1999. Reporter sceptically: “A couple of geeks who sketched out some software, could destroy Seers Roebuck?”…The rest, of course, is history.
Stay patient, focussed and rational.
TLG