Rightmove (RMV) is one of the decade’s top-returning stocks.

Investors have generated a +1,500% total return!

Studying the Super Stocks of the past helps us spot future Super Stocks today.

Here’s a thread on what made RMV a network effect monster 👇
macro-ops.com/super-stock-ca…
2/ Biz Description & IPO

RMV is a property portal in the UK. They allow RE agents, homeowners & homebuilders to list their home for sale on their website (think Zillow).

Before IPO, RMV offered initial shares to its customers (RE agents and developers).

That’s confidence.
3/ Owning Their Market

In 2004 RMV was the largest property list site in the UK.

They commanded 79% market share in total pageviews.

24/25 top RE agents listed homes ONLY on RMV

25/25 top UK home dev. Listed on RMV

82% of UK homebuyers that bought on the internet used RMV
4/ The Power of Network Effects

It’s a classic network effect model:

- More home listings = more site visits
- More people encourage agents to list on RMV.
- Seeing the buying, home devs list on RMV.

This reinforces that network. Soon, an impenetrable ecosystem is born.
5/ Narrative To Numbers

RMV displayed EARLY & HIGH rev growth in its first 3 years:

- 98%
- 85%
- 69%

In total, they grew revs from 17.6M in ‘04 to 113M in ‘07 (540%!).

At the same time, they expanded operating margins from 27% to 53%.

By 2007, RMV traded for 21x EBIT.
6/ Early Sentiment

I’m always interested in early sentiment on a super stock.

Here’s a good summary of the RMV sentiment around its IPO:

- Expensive price
- Good brand name
- Popular biz

2 things analysts got wrong:

1. RMV wasn't expensive
2. Popular = network effects
7/ First Mover Advantage

RMV moved first during the UK’s Home Information Packs (HIPs) legislation.

They made an in-house HIP portal so customers could store HIP-mandated documents on the RMV website.

Second, RMV funded the HIP for customers until the house sold.
8/ HIP Ramifications

RMV’s moves on the HIP news set the standard for competitors. They established a “rule of law” for the RE listing industry.

It cost RMV $8.5M to make in-house HIP tech.

They could’ve outsourced, but it would’ve reduced customer experience.
9/ Rely on Core Business, Not Catalysts

The UK govt halted HIP program. RMV’s $8.5M investment was worthless.

The stock dropped 20% on the news and down 30% that week.

Yet the core biz was growing 60% w/ expanding operating margins.

Terminally, it's core biz that matters
10/ The Housing Crisis

08-09 was a bad time for housing.

Without looking at financials, you’d expect RMV to post lower revs, profits & margins.

That wasn’t the case. Revs shrunk 6% in ‘09 while op. margins expanded to 56%. How?

- 100% GM
- Scalable SG&A
- No debt & low D&A
11/ Share Price =/ Biz Value

Knowing the above, we’d expect a slight (if any) decrease in RMV’s stock price.

But what we got was a 75% peak-t0-trough drawdown from 07-09.

While the stock crashed, the biz grew rev $13M, OI $10M, and expanded margins 800bps

EfFiCiEnT mArKeTs?
12/ Potential Screens To Find RMV

Here’s a stock screener that would’ve picked up RMV during 2004-2005:

- Revenue Growth YoY: 25% or Greater
- Operating Margin: 20% or Greater
- Current Ratio: 1.5x or Greater
- Market Capitalization: $1B or Less

Get to hunting for RMVs!
13/ Reviewing The Thesis

Like most Super Stocks, the bull case rested on a few variables:

- Expand users & RE agents on the platform
- Incentivize home developers to list on the platform
- Maintain low SG&A expenses

Thesis was simple and biz model powerful. RMV was a monster!

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More from @marketplunger1

30 Dec 20
[THREAD] A Sober Look at SPACs

Sorry to rain on the SPAC parade, but it's important to understand the inherent shareholder disadvantages in the current SPAC structure:

- Higher cost/dilution
- Lower returns

Great article from Harvard Law.

Source: corpgov.law.harvard.edu/2020/11/19/a-s…
1/ The SPAC Structure

SPACs raise cash and have 2 years to find a company to take public.

SPAC owners dilute shareholders via three ways:

- Warrants
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- Rights

This leads to SPACs historic high costs & poor post-merger performance.

Here's an illustration ...
2/ Further Embedded SPAC Dilution

The article mentions 3 other forms of dilution:

- SPAC sponsors pay themselves with "promote" of 25% of SPAC IPO proceeds

- Redeeming shareholders receive 11.6% annual return (incentive to redeem)

- SPACs pay u/w fee on IPO proceeds
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21 Dec 20
[THREAD]

Bill Miller (@B3_MillerValue) is one of this generation's best investors.

There's 3 things we can learn from him:

1. Free cash flow above all else
2. Disregard investment style labels
3. Buy at points of lowest market expectations

Let's go!

macro-ops.com/bill-miller-le…
1/ FCF Is King

A biz is worth the sum of its future FCFs discounted back to the present.

Miller examines things like:

- LT economic model
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He wants to buy >6% FCF yields.

Important: Growth < COC = bad investment
2/ No Labels Investment Approach

The thing I love about Miller the most is his disdain for investment labels.

It's not Growth vs. Value for him. It's paying less than what a biz is worth. Period.

In doing this, Miller avoids investing in value traps because "they're cheap"
Read 6 tweets
2 Dec 20
[THREAD]

Let’s learn about Mr. Market’s latest AI IPO: C3 AI

C3 allows companies to develop, test and run full-scale, real-time enterprise AI applications.

The company’s led by one of the sharpest founders/CEOs in the game, Thomas Siebel.

Let's learn🚀
macro-ops.com/c3-ai-mr-marke… Image
1/ Executive Leadership

C3 is led by Tom Siebel, one of the sharpest founders in this space.

His resume includes:

- Helping Oracle reach $1B in revenues
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Here's Siebel's reasons for starting C3 (hint, not about $) Image
2/ Culture Matters

C3 has one of the best Glassdoor ratings/reviews I've seen:

- 89% approve of CEO
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- 4.6/5 stars w/ 338 reviews

Employees rave about three things:

- Meaningful work
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- Great incentives (paid learning) ImageImage
Read 21 tweets
5 Nov 20
5/ Example of Great AI Company: Stitch Fix

Defensible Data: Personalized style data from previous $SFIX orders

Problem Solved: Predict what customers will want/not want

Moat: Only $SFIX has access to its data. This makes the product better for everyone

Here's @bgurley's take:
6/ The 4 Quadrants of AI Application

AI has four unique stages of industry application:

1) Transition: high penetration + low scale
2) Germination: low penetration + low scale
3) Growth: low penetration + high scale
4) Developed: high pen/scale

source: Deloitte white-paper
7/ Which Industries Fit In Each Quadrant?

Deloitte has a killer chart showing which industries fall in each quadrant (see below).

We're (@MacroOps) focusing on these four industries:

1) Retail
2) Healthcare
3) Education
4) Finance

Let's highlight the first two ...
Read 7 tweets
5 Nov 20
[THREAD]

Artificial Intelligence (AI) is one of the most attractive & exciting spaces in the investment universe.

The potential moats, business models and solutions are tantalizing.

Here's what makes a Great AI company, and where we can find them 👇
macro-ops.com/great-ai-compa…
1/ What Makes A Great AI Company?

Will Vorheis wrote a great piece on this. It boils down to one thing:

- Data Dominance

What this means: A company has a virtual monopoly on the data it needs to train its model

Remember: The best data = the best model = better data/model
2/ AI Companies Need The Right Data

Data for data's sake isn't enough. To create a *true* moat you need the *right* kind of data. Defensible Data!

Defensible Data has two factors:

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- Solves an actual problem (not a theoretical one)
Read 4 tweets
3 Nov 20
[THREAD]

I loved @ARKInvest 2020 Bad Ideas Report.

Great way to red-team conventional "value-based" ideas.

Here's the 5 Bad Ideas:

1. Physical Banks
2. Brick & Mortar Retail
3. Linear TV
4. Freight Rail
5. Traditional Transport

source: bit.ly/3l0FXQw

Let's learn Image
1/ Physical Banks

Why it's bad: "The cost burden that branches place on traditional banks is increasing while their utility is decreasing."

What's better: "In contrast, digital wallets are acquiring millions of customers at a cost 98% lower than that for banks" Image
2/ Brick & Mortar Retail

Why it's bad: "If square feet were to stabilize at current levels, brick and mortar retail sales would continue
to fall as e-commerce takes share. Roughly
$1 trillion worth of real estate would have to be repurposed by 2025."

What's better: E-commerce Image
Read 7 tweets

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