Return on Capital

Vertical Integration in Media: Netflix

The Queen’s Gambit A month ago, Netflix’s new limited series “The Queen’s Gambit” took the world by storm. For chess enthusiasts like myself, the allure was the central role chess played in the film [Beth Harmon’s games were allusions to famous World Chess Championship matches, openings like the Sicilian were featured prominently, etc.] Although, I …

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Intro to Defense Contracting and Lockheed Martin

The Making of Lockheed Martin When I read the book “Prophets of War” [which is a must-read for anyone invested in NOC, LMT, RTX, etc.], the following sentence stood out to me: “It [Lockheed Martin] is the nation’s stop government contractor, with $36bn in federal contracts in 2008 alone. That comes out to roughly $260 …

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Interview with Air Products IR [APD]

[Mun Sheih requested not to be recorded, so a transcript is not available. Interview Date: July 9th, 2020] Mun Sheih is the head of IR at Air Products. The biggest takeaways of the call were (1) you can utilize “piggybanking” and “density strategies” to drive incremental margins in regions where there is an on-site presence; …

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Vertical Integration in Healthcare [UNH, CVS, ANTM, CI]

The U.S. Healthcare industry is politically charged and riddled with complexity, prompting most investors to hold their noses and look the other way. It might pay to pay attention, though. After all, how else would you have realized UnitedHealth Group was a 10-bagger over the last 10 years [~27% annual return since September 2010]? A …

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Okta and Base Rates

Any student of psychology knows the famous “Librarian and the Farmer” question posed by Daniel Kahneman in Thinking Fast and Slow. “As you consider the next question, please assume that Steve was selected at random from a representative sample. An individual has been described by a neighbor as follows: ‘Steve is very shy and withdrawn, …

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Bond Markets and Electronic Trading [MKTX and TW]

“The Fox knows many things, but the Hedgehog knows one big thing.”  Greek poet Archilochus  A Market Stuck in the Past  This quote aptly describes the differing strategies of MarketAxess and TradeWeb, which IPO’d last year. TradeWeb is the fox and MarketAxess is the Hedgehog. At their core, these companies are trading platforms, much like MSCI and SPGI. …

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Interview: Call with AutoNation IR [AN]

AutoNation is one of those surprisingly resilient companies that isn’t talked about enough. It was founded in 1996 by none other than Wayne Huizenga. Prior to AutoNation, he founded Waste Management and was instrumental in its astronomical growth. Prior to Waste Management, he co-owned Blockbuster Video back when it was one of the best performing …

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The Evolution of the Data Center [CSCO, ANET]

“Gilfoyle: The software you wrote just shit the bed, no surprise.  Dinesh: My software’s fine – it’s just running on your shit hardware!”  Silicon Valley  Issues with Old Hardware  Silicon Valley is meant to be a satirical show, but this perpetual tug-of-war between software and hardware certainly exists. Over the past few decades, the ability …

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The Naspers Ecosystem, Part 3: Payments

Back in 2014, Naspers combined all of its payments investments into one company, PayU, which currently represents the whole Payments vertical. As a result, PayU presents itself as an emerging markets payments solution with operations in 18 of the 20 fastest growing markets. The crown jewel of this portfolio is the Indian segment, which makes …

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The Naspers Ecosystem, Part 2: Food Delivery

The Food Delivery business is Naspers’ biggest loss-making venture. Naspers’ exposure extends to its stakes in Delivery Hero [$1.3bn invested to date; ~22% ownership], Swiggy [$837m invested to date; ~39% ownership] and iFood [$400m invested to date; ~55% ownership]. Delivery Hero is a European publicly traded company with operations in across the world. Swiggy is …

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