Let me tell you about a TRUE business thriller that is still in the process of unfolding.

It’s unfolding in the German capital markets and if you ever consider investing in Germany, you should read this thread carefully and retweet it for it to reach a wider audience because German publicly traded companies (the 4th largest economy in the world) may become uninvestable if the current events remain uncontested.

Moreover, this story may also represent an interesting special situation opportunity? If you want to invest larger sums of money here with a potential multi-bagger prospect, it’s best to try to reach out to the company founder directly.

It’s a story about a founder CEO and majority shareholder who may be on the verge of being completely (!) expropriated - along with smaller shareholders.

This thread will be divided into four chapters:
1) A brief chronological overview of the most important events and dramatic turning points
2) StaRUG: A Powerful instrument that can be misused?
3) CFO and hedge fund CEO: a dubious relationship?
4) What’s next?

Disclaimer: I do own shares of Endor (I might not soon as I may be expropriated too). Obviously, l‘m not a legal expert and I have to make a few assumptions that I have no proof for, but I hope that this thread helps raise awareness and thus increases the pressure on people in charge to finally comment on the allegations that are floating around in the web.
Chapter 1: A brief chronological overview of the most important events and dramatic turning points

This business thriller is about Endor, a market-leading SMB business from Germany operating in the sim-racing sector. The Endor AG was founded in 1997, went public in 2006 and currently employs 147 people.

If you're not familiar with the business, this is essentially what they are offering:

Endor AG develops and markets high-quality input devices such as high-end steering wheels and pedals for racing simulations on games consoles and PCs as well as driving school simulators. The company sells its products under the FANATEC brand that is even featured in the new Gran Turismo movie! (check out the trailer!)

Like many other businesses, $Endor was a “Covid winner” as people were stuck at home and were looking for a way to kill time. The sim racing industry is a growing industry enjoying various secular tailwinds.

Endor was a success story run by wonderchild & CEO Jackermeier who was (and is) often referred to as the Steve Jobs of the sim-racing industry. The stock performed fantastically up until this point and was up more than 100x since its IPO and at one point, Endor was worth more than 300 million Euro.
But like many other Covid winners, Endor was – with the benefit of hindsight – mismanaged in the months and years following the pandemic. To highlight just a few issues the company ran into (it’s difficult to figure out where to even start):

❌ The company apparently grew too quickly and was unable to create the necessary structures to meet the high demand fast enough.
❌ Serious supply chain problems that continue to this day
❌ Poor customer support that still leaves some customers dissatisfied today
❌ On the e-commerce website, on Black Friday the company offered discounts by accident that cost them a lot of money
❌ Management was unable to properly manage the chip supply during COVID and in the aftermath of the pandemic and lost millions in revenue as they were simply out of stock and then oversupplied due to an outdated chip technology)
❌ In the meantime, management decided to build an oversized new HQ (with a go-kart track on the roof)
❌ Financial forecasts were off
❌ The company loaded up on debt and was run unprofitably for a few consecutive quarters
❌ Regularly changing people in the executive team

I wrote about some of these issues in this thread:

Here's a statement by the new CEO (we'll get to this in a second).

https://x.com/ReneSellmann/status/1727008461311881382

Today, for the first time, I'm revealing my 12-stock investment portfolio, along with a concise 2-line investment thesis for each position. Feel free to roast my ideas!

I used the recently launched @KoyfinCharts portfolio manager for this thread. I think being able to identify the key value drivers for each investment and being able to capture your investment thesis in a VERY concise way is a superpower in the world of investing.

You will frequently come across investment pitches covered in 60-page writeups or a 20,00- word blogpost, but generally speakig, I think nailing your thesis down to 1-2 pages (or as in this thread to just a few key insights) is far superior.

In investing, valuation is EVERYTHING! 💵

I’d argue there are three primary reasons why investors underperform the market:

📉 A) They do not WANT value stocks (this is a phenomenon David Einhorn described in his most recent appearance) or …

📉 B) They do not KNOW how to value businesses or ...

📉 C) They do know how to value businesses, but their hurdle rate is too low.

The problem is that you can buy the best businesses in the world and still have poor results.

Why? Because you overpaid – the expectations baked into the price you paid were simply TOO HIGH.

The stock market history is littered with examples of superior businesses whose stocks have delivered disappointing returns.

The most commonly cited examples may be Cisco $CSCO and Microsoft $MSFT if you bought the underlying stocks during the dot-com bubble (look at the two charts below).

If valuation is so critical, it’s necessary to point out some common valuation myths and pitfalls.

So in this thread, I’ll expose 5 common valuation myths (and if you read this thread in full, I can promise you you’ll be a better investor.
MYTH #1 – The PE Should Be Your Go-ToValuation Metric

I believe, especially among new investors a common mistake is overemphasizing the price-to-earnings (P/E) ratio.

It’s almost natural to start with this metric. This is how most people get started (which is okay).

However, many investors keep relying heavily on the P/E ratio as a sole indicator of a stock's valuation many years after having started.

But eventually, you have to move on!

You have to acknowledge the limitations of this valuation metric.

It doesn’t consider ...
❌ debt
❌ growth prospects
❌ ROIC
❌ depressed margin
❌ one-off effects
❌ industry trends
❌ reinvestment rates
❌ and competitive positioning.

Another pitfall is only looking at historical P/E ratios, neglecting the forward P/E ratio that takes into account future earnings growth.

$NVDA may be a prime example for a company that looked ultra-expensive in the more recent past but due to its stellar business performance, the stock quickly grew into the valuation.

To sum up, when you develop a broader understanding of factors to look at the PE ratio may be a valid option, but solely focusing on low PE stocks is likely a losing strategy.

Inspired by a recent blog post by @ToddWenning, I’ve recently completely overhauled my investment checklist to make the qualitative more quantifiable (“a system for quantifying qualitative judgments”).

Today I want to share my exclusive Business Quality Scoring System with you!

Having such a system is important as it will influence buying and selling decisions as well as position sizing.

It's part of my broader scoring system that also includes:
💡 Business Simplicity
💰 Company Debt
👨‍💼 Management and
🧨 Risks

Today I’ll only focus on the business quality dimension though.

To assess business quality, I further distinguish between …
✅ The width, durability, and trajectory of a company’s moat
✅ General features of “quality” businesses
✅ Past & future growth

For each bucket, I’ve developed a list of questions and you should give the company you are analyzing a score between 0-4 based on the following assumptions:
👉 0 – Very negative score
👉 1 – Negative score
👉 2 – Neutral score
👉 3 – Positive score
👉 4 – Very positive score

To illustrate how it works, let me share how I assessed AND quantified the business quality of Interactive Brokers $IBKR (see next tweet below ⬇️).
Category 1 – Moat:

Moat Width & Depth I: I can say whether the business has one or multiple strong competitive advantages over competitors (which ones?) and I know why the moat is difficult to copy. Are there large (!) barriers to entry and/or barriers to scale?
Score: 3 Points

Moat Width & Depth II: I can say to what degree the business possesses the ability to raise prices without losing customers.
Score: 3 Points

Moat Durability: I can say whether the moat is durable. What are the chances the company can maintain its competitive advantage(s) for decades to come? If I had a pile of cash, could I meaningfully compete in this space against the company, or is the competitive advantage impenetrable?
Score: 4 Points

Moat Trajectory: I can say whether the company’s moat is expanding or shrinking. The direction of the competitive advantage is likely much more important than the moat’s current size and strength!
Score: 4 Points

$IBKR's Moat Score: 14 out of 16 points

Guy Spier is known for having spent almost $700k to lunch with Warren Buffett.

He is a superb investor who’s always on the hunt for undervalued companies and his Aquamarine fund has $200M in AUM.

Here’s a list of his 5 greatest and most educational public appearances (and writings) ⬇️ #1 – Talks at Google (2014)
During his 1-hour presentation at $GOOG, Spier talks about a wide range of topics.

What stood out to me was this 8-point list to build a better investment process:

1. Stop Checking the Stock Price
2. If Someone tries to sell you something - don't buy it.
3. Don't Talk to Management
4. Gather Investment Research in the Right Order
5. Discuss Investment Ideas Only With People Who Have No Axe to Grind
6. Never Buy or Sell Stocks when the Market is Open
7. If a Stock Tumbles After You Buy It, Don't Sell It For Two Years
8. Don't Talk About Your Current Investments

Let's discuss the German microcap stock $ENDOR

I'd like to discuss the current situation with people who are already familiar with the business, so I won't explicitly outline the business model, but instead share some general thoughts and open questions I have (your input is welcome!).

If you're not familiar with the business, this is essentially what they are offering:

I'll try to structure my thinking a bit. Let's start with a few red flags:

1) Is the company structurally impaired?
There is no doubt in my mind that Endor has become a (much?) worse company over the last two years.

1a) Competition has increased significantly!
The products offered by Endor are by far not as differentiated as they used to be.

While 2-3 years ago it felt like Fanatec was the only game in town in the sim racing world, offering a wide range of products, quality DD solutions, and entire ecosystems, nowadays the offerings from competitors like Moza, Asetek, Simmagic, Simucube, and Thrustmaster are getting pretty good too.

1b) The company has lost the trust of (many) customers.
Due to the very serious (!) logistical problems and the incredibly poor customer service, many customers have lost faith in Fanatec/Endor to provide a superior customer experience. Some customers have waited over 2 months for their order and have been unable to contact Fanatec customer services. I can only imagine how frustrating that must have been.

There was (and still is) a real shitstorm online and I wonder how many people didn't order because of these shared customer experiences and ordered from a competitor.

A customer lost once is potentially a customer lost forever.

The question is: If the transition to the new warehouse and the new website is completed, can the company finally deliver an excellent customer experience and gain customers’ trust back?

1c) Management performance has been rather lackluster:
To give just a few examples:
❌ Management was unable to properly manage the chip supply during COVID and in the aftermath of the pandemic and lost millions in revenue as they were simply out of stock.
❌ The aforementioned logistical problems (how hard can it be to fulfill an online order or to get back to customers when they send you an email?)
❌ Building an oversized new HQ (with a go-kart track on the roof) and running the company into financial difficulties.
❌ Forecasts were off

1d) Debt situation
Management has admitted that the liquidity situation is "tight". The new headquarters is expected to cost around €34 million. There are various short-term loans that the company has to pay back.

The balance sheet nowadays appears rather fragile.

The company doesn't have a lot of cash and hasn't been profitable recently.

However, it seems to me that the Black Friday week has been quite successful so far, the banks aren't panicking either, so the debt situation seems to be under control.

2) Worst IR I've ever seen (seriously!)
🚩 Jackermeier not showing up for a scheduled investor conference
🚩 The old CFO not being able to answer pretty basic questions.
🚩 The website is almost always out of date
🚩 Earnings dates are postponed (without prior notice) 🚩 there are literally no earnings dates from time to time. Or the website might say "August 2023 Q2 results", then October passes by and nothing happens. I've honestly never seen anything like it.

Taking all this into account, it's easy to understand why some investors have jumped ship. Some of the bigger fund managers have left Endor because they have simply lost confidence in Jackermeier and his team.

But ... there may still be things to like (see next tweet)
So why even consider investing in Endor?

3) Fanatec's ecosystem: The size of the ecosystem and the breadth of the product mix are unmatched.

The market is probably too small for any other game to offer the same breadth of products?

I'm not even sure PlayStation and Xbox would be interested in licensing to more than two companies (and companies operating at a much smaller scale)?

4) Brand power: Although the brand has lost some of its mojo, I'd argue that Fanatec is still THE simracing brand.

For example, Fanatec's IG account has over 200k followers while Moza Racing is sitting at 56k (on Reddit its 30k vs 15k members in the respective subreddits)

Demand for Fanatec products still seems to be strong despite all the logistical problems and poor customer service.

5) Pricing power and ecosystem stickiness?
BUT ... Can Fantec use its brand strength and translate it into pricing power?

I have my doubts and would like to hear other people's views.

During the Black Friday week, Endor offered discounts they had never offered before (harming profit margins).

The biggest problem is that their products aren't very differentiated. They cannot charge twice as much as their competitors because people would just buy from a competitor. What's Fanatec's moat? I can see why people compare their tech gear to GoPro.
On PC, there are various workarounds for almost every offering these days, so customers aren't stuck in the Fanatec ecosystem - which $ENDOR investors would love to see.

If the ecosystem would actually be sticky, this would make the business model highly attractive, but I think assuming that there is a moat in the ecosystem business model was a mistake.

On Xbox and PlayStation, however, the situation is a bit different. In fact, I read this post from Jackermeier on the Fanatec forum today:
Also, most Fanatec customers tend to buy more than one product (which makes Fanatec’s business superior to other tech gear manufacturers like GoPro).

You'll see images like the one below on Reddit fairly frequently. People ordering >10 items at once. I’m not sure if the average order value was ever revealed, but it must be >$1,000?
Any thoughts on the cost discipline in the industry? Is the level of competition going to drive profits to zero because of the lack of moats? I think this is a big one!

I’ve been investing for seven years now and the opportunity set right now is one of the greatest I have witnessed over those years. That’s especially true for small-cap stocks.

15 charts highlighting why small companies are trading at historically cheap levels:
#1: Russel 2000 vs. S&P 500 total return performance at the lowest level since 2000!

https://x.com/_rob_anderson/status/1723004783492042962?s=20

Joel Greenblatt is – along with Buffett – arguably one of the GREATEST investors of all time!

Fortunately, Greenblatt taught a Columbia Class with the “goal […] to teach the course that I never had and that I wish I had.”

Here are five takeaways from his first lesson in under five minutes 👇🏼
Lesson #1 – Divergence between Prices and Values:
Prices of stocks fluctuate more than the underlying values of companies.

Greenblatt emphasizes that the volatility in stock prices provides opportunities for investors, as values don't change as rapidly.

"I don’t know why prices fluctuate so widely, and I don’t care. I just want to take advantage of it. We could sit there and figure it all out, but I like to keep it simple."

Greenblatt suggests that in the short term (1-2 years), the market is inefficient.

He believes that by doing good valuation work, investors can take advantage of market inefficiencies and be rewarded by Mr. Market.

"If you do good valuation work and you are right, Mr. Market will pay you back. Keep that in mind when you do your analysis."

François Rochon is one of the best quality investors in the world. He is the founder of Giverny Capital and compounded investors‘ capital at a rate of 15.7% annually (vs. 9.9% for S&P).

Five years ago he gave a talk at Google. Here are five takeaways from his presentation that will make you a better investor today ⬇️

(PS: Don’t miss the stock selection process that Rochon shared and will be revealed later in this thread)
Lesson #1 – Long-Term Focus:
Rochon emphasizes the importance of having a long-term perspective when investing. He suggests looking ahead five years or more and focusing on the future growth prospects of a company rather than short-term market fluctuations which are often noisy and influenced by various factors.

By looking at a more extended horizon, investors can filter out short-term volatility and focus on the actual fundamental growth potential of a company.

Put differently, a long-term perspective allows investors to ride through market cycles, giving the underlying strengths of quality companies more time to manifest.

The "Talks at Google" format is a treasure trove of knowledge, bringing renowned experts right to your screen!

Over the last ten years, Google invited some of the brightest minds in finance to its offices to share their wisdom, experiences, and ideas.

Here are my 15 favorite investment talks ⬇️
#1 – Aswath Damodaran: “Valuation in Four Lessons”

Mohnish Pabrai is one of the most famous value investors of the last 20 years.

In 2022, Pabrai delivered a presentation that was a masterclass on business valuation.

Let me break down his 5 key points: #1 – Defining intrinsic value is relatively simple

Pabrai referenced John Burr Williams who in his 1938 publication “The Theory of Investment Value” defined the intrinsic value of businesses as the present value of all their future cash flows, discounted at an appropriate rate… https://t.co/5HAaB13D2Btwitter.com/i/web/status/1…

Warren Buffett is widely regarded as the most successful investor of all time:

$1,000 invested in Berkshire Hathaway 1965 would now be worth roughly $25 million.

Buffett has built his reputation on the principles of long-term value investing and patience. However, while… https://t.co/o5jJpTa4A7twitter.com/i/web/status/1…
One of Buffett’s most famous quotes was first mentioned in Berkshire’s Shareholder letter of 1988:

"Our favorite holding period is forever."

But is it really?

Before we start: Take a guess! How long does Buffett on average hold onto his stock investments? https://t.co/oCN4TimHe6twitter.com/i/web/status/1…

Renowned investor David Einhorn recently made a shocking statement about the state of value investing.

Einhorn argues that value investing is no longer a viable strategy, and is, in fact, dead!

Let’s examine his claims and potential implications for investors ⬇️: In October of 2022, Einhorn gave Bloomberg an interview, in which he stated that he thinks value investing may NEVER come back as the majority of market participants are either unwilling or unable to value a company based on its business fundamentals and future outlook.

Only a few generations ago, investing was mostly limited to wealthy individuals. No longer! Today, digitalization and democratization are reshaping how capital markets operate.

Here are 15 FREE investing tools every investor needs to start using today. #1: ROIC.AI

This website offers you access to 30 years of financial data from 37,000 companies all around the world.

You don’t even need to register to get access to this big library of financial statements.

Have you ever heard of the 70-20-10 rule?

It can be a real game-changer for your investment process and long-term thinking.

So read this thread and adopt this mindset to become a truly successful long-term investor! ⬇️ In my view, most people do poorly in the world of active investing because they cannot handle the short-term nature of stock markets.

Apple $AAPL has been one of the best-performing stocks over the last few decades, creating enormous wealth for its long-term shareholders.

In this thread, I will take a closer look at the three underlying components of the success story of Apple’s stock so that investors... ... understand what they have to look out for when trying to make successful, possibly life-changing investments.

We will take a look at the period between 2006 and 2022, a 16-year period during which the stock’s value increased by 5,818%, a compounded return of 29%...

Understanding the importance of return on investments metrics is so important, yet few people actually get it.

And it's not even that difficult to understand.

So let me illustrate how ROIC and growth are interconnected with a few examples 👇

1/4 The average US firm has generated ROIC (Return On Invested Capital) of about 10%.

In order to grow 5%, a company with a 10% ROIC needs to reinvest 50% of its earnings (0.1*0.5=5.0%) and therefore only the other half of its earnings could be distributed to shareholders.

2/4

1/ A collection of some of my most valuable educational threads on investing and personal finance.

The threads can be found below ⬇️.

Enjoy and please share the threads that you find helpful. 2/ Investing – A thread on the power of compound interest:

https://twitter.com/ReneSellmann/status/1543573451516088322?s=20&t=aEGVBFW3pAKTPGq7g6T1yg

1/ Compounding is the single biggest financial advantage that ANY reasonably young person can access.

Yet, for some reason, the human brain cannot really fathom exponential growth.

Thus, in this thread, I'll try to help you internalize the true power of compounding. 2/ Let's start with a little thought experiment!

Imagine two people: Phil and Leon.

Phil follows the "start early" investing philosophy and invests $1,000 a month for the first ten years of his career.

1/ Let me introduce the "investing information onion." It is a practical tool that helps you classify sources of information commonly used by investors based on relevance, trustability, and usefulness. 2/ I listened to the Investing by the Books podcast (@IB_Redeye) with @chriswmayer today and they briefly mentioned the concept.

Apparently it goes back to @farnamjake1 – credit where credit's due – and I felt like the concept needed an illustration!

1/ Hello fellow intelligent investors. Today I want to explain the concept of "intrinsic value." And I will explain it in such a way that even beginner investors will develop a pretty good understanding of what is meant by the intrinsic value of a stock or an asset in general. 2/ As always, I hope you learn something new today. Let's get started!

You are probably familiar with sweeping statements such as "Investing is like gambling and I don't gamble" or “My neighbor lost a fortune in company X and that’s why I’d never invest in stocks.”