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jawn619

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Posts posted by jawn619

    Raritan Capital Q2 Letter

    in General Discussion

    Posted

    I did look at the 3 statement model. Not my intention to sound overly critical, but your model doesn't really analyze anything. It just summarizes the financials.  For example, SPNS and MGIC have very similar margin profiles and while SPNS is growing slightly faster does that really warrant valuation premium of >100%?? I mean I obviously haven't done a ton of work on these names, but right off the bat that seems a little crazy. I just don't think your model is much of a model, if that makes sense.

     

    Thanks for the feedback. If you couldn't see the difference, it's my fault for not explaining more clearly, no offense taken.

     

    Sapiens and Magic are very different businesses. Over 90% of Sapien's revenues are maintenance and support, which is highly recurring in nature and has extremely high gross margins. What does this mean? imagine a scenario where  Sapiens grows revenues at around 15% for the next two years. This mean they'll have about $250M of revenue. This last year 30% of the revenue increase fell to EBIT, and i'm guessing as they grow even more than 30% of the incremental increase will drop to EBIT. Let's just say 35% falls into EBIT and the company will be $250M of revenue and $45M of EBIT. Now all of a sudden a 12x EBIT multiple doesn't seems so crazy for a company growing 20%, has a long runway, sticky recurring revenue and possibility of price increases.

     

    Looked at another way, since most of the revenue is recurring, an acquirer could come in and cut a lot of SG&A and still maintain a 30-40% EBIT Margin. Off currently $185M of revenue that's around $55-75M of EBIT. Acquirer could pay 10x that multiple and it would still be an attractive valuation.

     

    TLDR: because of the recurring nature of maintenance and service revenues, Sapiens is worth more and current market valuation is modest.

    Raritan Capital Q2 Letter

    in General Discussion

    Posted

    Eh - I strongly dislike ideas like this where the perceived discount is based on a SOTP analysis that includes ownership of public equities. It makes the *huge* assumption that the market is correctly valuing those public companies.  I've seen many SOTP analyses like this where instead of the investment increasing in value to close the discount to the perceived SOTP value, the value of the underlying holdings decreased in value to close the discount.

     

    I think if you want to put together a compelling idea you have to go through each of those underlying public companies and get really really comfortable that the market is valuing them correctly.

     

    Thanks Glory! To address your concern, I did. I believe the valuations of the underlying businesses are reasonable, if not understates intrinsic value for all except maybe Matrix. For example, Take Magic, which trades at 1.2x EV/Revenue, has 40% gross margins and trades at 7.5 EV/EBITDA.

     

    Check the 3 statement model where all the subsidiaries are listed in different tabs.

    Does anyone have experience setting up an LLC/RIA?

    in General Discussion

    Posted

    Has anyone used RIAinabox.com or RIA Compliance Consultants?

     

    I've spoken with both and they seem pretty similar in terms of price and services provided. I wanted to see if anyone on the forum had any experience with either of the providers. Thanks!

     

    I went through the process of setting up a RIA and I didn't use either of them. I did all the paperwork myself and am familiar with the details of the process. PM me, I'd be walk you through the complete process.

    Does anyone have experience setting up an LLC/RIA?

    in General Discussion

    Posted

    I have gone through the process. There are a few steps

     

    1. Set up the LLC

    2. Go through Finra Entitlement and file the ADV online through there

    3. Register as RIA through your state.

     

    Doing all the paperwork is yourself is the cheapest option. Or you can pay someone $3K to do it for you. Whole process can take a few months.

     

    You can go through

     

    http://brokercheck.finra.org/

     

    Look up some funds and then use their ADV part 2 as a template.

    The TRUE Cost of a Wedding

    in General Discussion

    Posted

     

    Members of this board probably don't have the ability to find a wonderful woman and see that a wife is a great investment.

     

     

    Wow, what a way to paint with a very broad brush. From this thread I'd argue just the opposite. There are quite a few who've discovered that a spouse (and kids) are worth more than dollar amounts or opportunity cost.

     

    You're right. I didn't read the previous posts. My apologies to the board

    The TRUE Cost of a Wedding

    in General Discussion

    Posted

    From Ross Perot's Biography.

     

    "I clearly remember the day that Margot and I shopped for her engagement ring. We bought it in Baltimore at Tyson's Jewelers. It cost eight hundred dollars. That almost cleaned out my bank account, but it was worth every penny."

     

    Members of this board probably don't have the ability to find a wonderful woman and see that a wife is a great investment.

     

    Who run the world, girls - Beyonce.

    Textbook example of a wonderful business

    in General Discussion

    Posted

    Wonderful business that could and possibly should have died during the Great Recession.

     

    I'm somewhat surprised when MCO is quoted as an example of company to put into concentrated portfolios. What if US regulators had more teeth?

     

    I think it's extremely difficult to foresee that regulatory risk. You have the benefit of hindsight, but I don't think it's possible or prudent to care about that risk if investing in 2000-2001. The case study was more about how to identify businesses that are capital light, have a competitive advantage, and using excess capital to buy back shares.

    Benjamin Graham - The Memoirs of the Dean of Wall Street

    in Books

    Posted

    "When I entered, I was an innocent and sensitive child; when I graduated, just past twelve, I knew how to steel myself against fortune's slings and arrows, to earn a little money in a variety of ways, to concentrate hard on whatever I had to do and above all, to rely mainly upon myself for understanding, encouragement, and pretty nearly everything else"

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