Thread by @sf_sun_rise

1/ Thread: Washington post case study

One of my favorite investment story’s and WB’s best investments (100x baggers including dividend). Let’s unpack driver of return and some lessons we can learn to today’s monopolies

2/ Berkshire acquired $11M stakes in the Post in early 1973, WB joined the board in the fall of 1974. According to Buffett's 1984 speech, in 1973, Mr. Market was offering to sell the Post for $80M while you could sell the Post’s assets to any private buyer for $400 million

3/ So the 100x return was driven by low valuation? No! Valuation had limited impact on total returns.

From 1972-92 Post grew revenue 10% p.a. and profit by 14% p.a. Share count reduced by 37%. WPost was good old growth stock with good capital allocation (WB helped the latter)

4/ To dig a little deeper on sales growth, price increase drove growth for newspaper division. Price grew by 5x (from $168 to $860 per daily circulation) while volume grew steadily 2.3% per annum.

Similar story with Newsweek (Magazine) division.

4/ Lesson: Good old pricing power is key for long term return. Buyback, volume growth helped.

But sustained price increase is king since it drives both revenue and margin expansion

5/ Applying this to today’s ads monopolies: I suspect peak revenue per ‘daily subscriber’ of $GOOGL and $FB might be more than market expect

6/ Washington post achieved over $1,500 (!) revenue per daily circulation (inflation adjusted).

Facebook is only approaching $100 per U.S daily user across platforms. I suspect Alphabet revenue per user still also long way to go.

$FB $GOOGL

7/ On the flip side: we also know what happened when network effect is lost with Newsweek.

Which is a matter of when more than if for today’s monopolies.

wsj.com/articles/SB100…

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