1/

$SPOT is a dominant market leader in music streaming, above $GOOGL, $AAPL & $AMZN.

They are also now market leader in podcasts, taking over $AAPL last year.
2/

After a 46% decline from ATH, $SPOT now trades at ~3x NTM sales and ~11x NTM gross profit.

If gross margins expand in FY22, it maybe be closer to 9-10x gross profit.
3/

@TSOH_Investing made an interesting point of $SPOT possibly being the only company below a $50 Billion market cap with the potential of reaching 1 billion MAU.

Any others you can think of?
4/

$SPOT is currently executing the $NFLX playbook by spending big on original content. Most notably of course is the $100 million acquisition of the @joerogan podcast.
5/

Podcasting is probably the most appealing aspect of future growth & gross margin improvement.

Audiobooks, meditation apps, live-concerts, live-podcasts & maybe even ticket sales are all interesting prospects.
6/

A YouTube advertisement model may be an interesting avenue for podcasting at $SPOT

Taking away the inconvenience of organisation and transactions between advertisers and podcasters.
7/

The big questions for $SPOT are;

- Can they improve gross margins / is there op leverage?

- Can they maintain market share over $AAPL $GOOGL $AMZN

- Are they too dependent on the labels and could they potentially lose a label in the future?
8/

I don’t have great answers to those questions, so I’ll float it out there to $SPOT bulls like @TSOH_Investing @SleepwellCap and anyone else out there.

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More from @frankinvesting

Jan 25
Thread/

$BABA cloud business is being completed missed by the market.

Let me explain why Alibaba Cloud, which makes up just ~10% of LTM revenues, could become worth more than the entire current market cap by FY25
1/

Alibaba Cloud made US$9.2 Billion in revenue for FY21 and grew 33% YoY.

They have ~38% market share of the cloud industry in China. Which is slightly more market share than AWS has in the US.
2/

In their investor presentation, $BABA projected that the cloud market in China will grow at a 37% CAGR until 2025.

The IDC estimated the CAGR to be 33% over the next 5 years.

The global cloud market is estimated to grow at 17.5% annually.
Read 7 tweets
Jan 21
1/

I’ve been re-reading through Joel Greenblatt’s class notes from his lectures.

Highly recommend for anyone who hasn’t read them. Thanks @FocusedCompound for making it easily accessible.

focusedcompounding.com/wp-content/upl…
2/

In lecture 3, Greenblatt discusses why value investing works. He brings up the mean reversion of ROE.

Which is something I think most investors don’t consider.
3/

The reasoning for ROE mean reversion is pretty simple. High ROE companies attract competitors that eventually take profits away.
Read 9 tweets
Jan 19
1/

Value of $TCEHY gaming business.

As of Q3 2021, 24% of total revenue came from domestic gaming & 8% from international gaming, so 32% overall.
2/

Tencent’s LTM revenue is $87b, therefore $27.8b came from gaming.

If we look at the $MSFT acquisition of $ATVI for $68.7b as a guide, they are paying 7.6x revenues for the gaming business.
3/

$TCEHY gaming business at 7.6x sales is worth $211 billion.

Tencent’s gaming business is a faster growing & higher quality business compared to $ATVI with a much lower customer acquisition cost and incredible exposure through WeChat & QQ.
Read 7 tweets
Jan 15
Thread/ Special situation $DTY

Dignity is vertically integrated funeral services business in the UK. Stock price is down ~80% from all-time high.

Previous management made bad acquisitions and increased prices as volumes declined.
1/

Thanks to Simon Caufield and his presentation at MOI ‘Best Ideas’ conference @manualofideas @JMihaljevic

Also thanks to @bkaellner for putting this list of companies together, so I could filter straight to the small-caps.

2/

UK value firm Phoenix took advantage of beaten down stock price in 2018 and & have played an activist role.

They have increased their position twice, now owning ~30%. The CIO of Phoenix, Gary Channon is temporary CEO at $DTY currently. Old management has been replaced.
Read 11 tweets
Jan 13
Thread/ $TCEHY back-of-envelope valuation.

Since the IPO in 2004, Tencent has returned ~45% annually to shareholders, turning $1 into $553.

Let's have a brief look at what returns could look like moving forward over the next 5yrs...
1/

Let's start with a base case.

@JordsNel from Vineyard Holdings put in the hard work with his deep-dive that I highly recommend. He shared the est. global industry 5Y growth rates weighted against Tencent's revenue (see below).

Jordan's weighted avg. growth rate was 14.6%
2/

Let's round that up to 15% which is still conservative considering China's CAGR in each industry is likely to be above the global avg.

Additionally the capital allocation from Pony Ma & management + the dominant market positioning is likely to lead to much higher returns
Read 8 tweets
Dec 31, 2021
1/

My largest position in my portfolio is a ~45% weighting in an Australian micro-cap. The company is Kelly Partners Group $KPG.AX

Here is a brief introduction to my highest conviction idea..
2/

Kelly Partners is a specialist chartered accounting network founded by Brett Kelly in 2006. They listed on the ASX in 2017 and now have a ~$200m market cap.

Since 2006, revenues have compounded at 32%. The business has doubled in size on average every three years.
3/

Founder & CEO Brett Kelly owns 50.4% of Kelly Partners. The partners, management and board of directors make up another 8.9%. So overall, the insider ownership is 59.3%

Management are aligned with shareholders and incentivised to create long-term value.
Read 10 tweets

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