bizaro86

Oh good. I know when I look at Dundee I always think, man this would be perfect if they just had a bit more of their NAV in illiquid microcap speculations.

I'm probably around 40-50% new users. Interestingly (from a very small sample size) they seem to be increasing their wallet share on individual customers. I've had a few people return for the same events multiple years in a row. I each case the number of feedback (proxy for transactions) those people had between stays had been growing year over year. So as new user growth slows they will need to take wallet share on existing users to maintain growth rate, which I think they can do even without adding experiences, restaurants, etc.

Yes, I find calendar slow to load. That would be something they could improve. On the other hand, there is a 0% change I move away from them over that issue. Also, I think more regulation of the space is likely to increase their moat as the incumbent. They are on the ground floor in every jurisdiction, so get integrated into the process. To create a competitor you need to launch at least nationwide (and probably world wide). When airbnb started they just launched their website everywhere. Now a competitor would need to integrate hundreds of municipal regulatory regimes at launch. Decent moat just from that... I tried to get some shares on a few secondary sites but couldn't find any. I'd definitely pay a $30B value for it, but I bet it comes out higher than that. Revenue/bookings are up huge since they announced that $100 MM EBITDA. I think this business is worth more than Booking.com.

I run rentals on airbnb in a major city catering towards business travel. I've never had anyone try to extend directly. I set up my own site to market independently. I put my prices 33% lower than airbnb prices, even though they only charge low single digit fees.more than 99% of my bookings come through them, even at the higher price point. Also, a significant percentage of my customers are staying for the first time on airbnb. They are growing very quickly, and their operating leverage is likely very high. I've interacted with them only a few times and paid many thousands in fees. Other factors: they are adding more tools for professional hosts. Their previous UI was very cludgy for managing multiple properties. Now it is much better, which should allow them to take market share in independent property managers, which is a big market in vacation areas. I received a survey from them awhile back asking whether I'd be interested in getting an advance on my payments (paid prior to check-in) for a discount. This would essentially be a factoring arrangement. I said no, as their proposed pricing tiers were very, very high (20%+ effective rates). However, running a hosting business eats working capital, and doesn't necessarily attract financially sophisticated people. I think there is a very good chance they will be able to deploy a few billion in float at double digit returns on that.

Oh for sure. Not saying it would be easy or that I could do a better job. It just seems to me that they have become a top-of-mind destination for family business owners looking to sell in the USA, and I think Europe would be a good place to look to expand that. At a certain number of generations on some of these businesses you'd think liquidity might get attractive, but you could still honor the idea of a family business by finding it a permanent home.

I'd love to see them start buying European companies in a bigger way. Lots of quality private businesses there. One from me that fits that theme would be Medela. They make pumps for expressing breast milk for babies. That has become a common requirement, and it isn't something people scrimp on. They make the most common brand used by hospitals, and the pumps are intuitive, high quality, and high priced. The company is private, so would need to be a negotiated transaction.

In a post-WEB world, Howard will carry more than a 1/14th weight on the board. He will be chair, and have the posthumous backing of his legendary father to "protect the culture." That will give him broad leeway to make decisions if that is what he wants. I agree that while I always felt he was unqualified, I thought he'd be essentially harmless. (Sort of like adding a university professor to a board - probably a waste of time but it's doubtful anyone listens to them so maybe no harm/no foul). If it turns out he's actively crazy that changes things. I think more information is likely necessary to determine that.

This is the primary reason why I think commercial airplanes will always have at least one pilot sitting in them during my lifetime.

Just to check - your position is that I'm not permitted to share examples but you are welcome to? It seems to me that the last word of his original post "Examples?" Rather directly invited examples, and it's not like I wrote a case study... Anyway, I think good management can overcome a poor industry but maybe not a poor business (or secular decline as mentioned above). I think there is probably something to be said for having competitive advantages at the beginning of a firm. I can't think of too many companies that went from a non-differentiated offering in a poor business to eventually become a compounder. The only one that comes to mind is when Intel pivoted from memory to CPU chips only, and became differentiated in a notoriously poor industry (semis). They had scale advantages in a large niche, which I think was the difference, and good management intentionally pursued that.

I think there is a distinction to be made here around competitive advantages somehow. Most people (including WEB) would say that retail is a pretty bad business in general. But there are some companies that have been long term compounders in that industry (WMT, COST). I think their managements have been able to generate competitive advantages from the beginning of the firm. By comparison, someone new coming into Sears or JC Penney is trying to fix something that is probably irreparably broken. A below average position in a below average industry isn't something good management is likely to be able to fix. I really think there is an epiphany somewhere in this thread that I can't quite put my finger on- thanks for starting it!

There are a number of examples of long term compounders based on good management in what I would consider poor businesses. Alimentation couche tarde would be one - great success in the convenience store/gas station business.

Were you buying when it was at the same price earlier in 2018? Still doesn't look cheap to me, but I know it's never been "cheap" per se. I wasn't. Earnings are up since then, and my net buy price (got put to on $200 written options) is still over my 25x earnings target buy price. (Although probably around 25x 2019 earnings) If it keeps declining (or stays flat as earnings continues to grow) I will buy more. This was just a nibble. I think it was more was over 30x trailing earnings in the summer. A partial (non-rational) factor is that my income is very seasonal, so 100% of my savings capacity occurs between Oct 15-Jan 15th, so I have new cash to deploy. I agree it's still not classically cheap.

COST. Has come down with the market, so just topping up my position. Long term quality holding.

9.77% Winners included and RSYS, IKM.TO/PEA.TO, LIF.TO, and FOX. Biggest loser was IVFH. NYRT wasn't great either.

Thanks! Good point about a deal break potentially having two ways to move against you. I tend to put deals with no or too expensive borrow in the "too hard" pile. I know some folks do well with them, but I try to keep complexity down.

I have printed out writsers post. Great stuff, thanks! Quick question, as one thing doesn't square with my experience. Why would you say cash is less risky than stock? Obviously some of your other factors come into play here (eg size) but it seems to me that having to come up with actual cash increases risk. A buyer can pretty much always print more of its shares to fulfill a deal, and if I hedge them out I don't care what happens in the meantime. I suppose a big decrease in stock price changes the chances of shareholders approving? Actually, as I think about it, this just happened on one special situation I did, where Precision Drilling lost a bid to Ensign because Ensign offered cash and Precision's bid (which was a topping bid) dropped materially in value due to the oil market rout. I bought slightly below the cash value hoping for a raise from one, which didn't happen. On a straight acquisition though I wonder if share deals are more or less likely to close. My guess would be slightly more likely because financing doesn't fall through, but would be curious to hear thoughts on the matter.

I would say my special situation returns have been pretty inversely correlated to how much press an idea got. NYRT was a loser this year, and that odd-lot tender that got called off after it got put on Seeking Alpha was another.

This is certainly anecdotal, but banks have started to get conventionally financed properties back in Alberta. (Source: conversations with AB real estate lawyers with foreclosure practices). This is bad for them for two reasons: no mortgage insurance means they are on the hook for the full loss, and in AB conventional mortgages aren't recourse to other assets. Interestingly, one lawyer I chatted with recently mentioned that BNS has been taking deed backs in lieu of foreclosure (basically short sales) in cases where the borrower comes to them and demonstrates they can't pay. While the other lenders proceed to foreclosure, which dings the credit report of the borrower but costs more and takes longer. Pros and cons to both methods from a lender point of view, but I thought the distinction was interesting. BNS has historically been the most aggressive with mortgages for rental properties in AB, which may be a factor as they likely have lots of conventional exposure to folks without an emotional connection to their property.

Should be a majority of the disinterested shareholders requirement as well shouldn't there?

Another potential way to add a bunch of leverage is through split shares. Basically, these are retail yield pig vehicles. They start with a $25 NAV, split between a $10 preferred share and a $15 common share. The prefs get a preferred dividend, and the common gets a levered play on the underlying portfolio. They tend to overdistribute on the common, so the NAV often decreases. But that just makes them even more levered. As an example: TSX:FFN is a portfolio of 15 US/Canadian financials. Largest positions are BofA, JPM, WFC, and GS (in order) so potentially attractive valuations. The NAV in total is ~$16, so the NAV to the common is ~$6. The common trades at $6.26 CAD, so you're paying something for the leverage. They distribute $1.20 to the common per year (until they bottom out at whatever the NAV minimum is). This is close to 3 to 1 leverage on a diversified portfolio of financials at relatively low cost.

Way out of the money options are the biggest amount of non-recourse leverage possible, I think. Whether that is a good idea....

MFCB owns a royalty on an iron ore mine that has shut down in Canada. Tacora, the private company that owns the mine announced they had closed the funding on the 27th. This is a big deal, as it should be $20 MM+ in annual revenue at 100% gross margins for a company that has a market cap of ~$60MM after the move. We talked a but about it in the ALS thread.

If the step-mom runs the business, I think it's very likely that the "do-nothing" choice ends up with ~100% of profits paid as salary/benefits to the step mom.

Mfcb calls

Added to a long term position in ROST. Big down week surrounding earnings, which were a beat. I believe the market is reacting to the Q4 guidance which was lower than what folks have been expecting and what they have been consistently delivering. They have consistently sandbagged guidance and then beat it, so I'm not concerned about that.