tnathan

I own both now in size. The market is still highly fragmented and you can look at recent revenue growth as a floor. For reference see the attached PDFs from Houlihan Lokey who track the industry well q2-2024-insurance-brokerage-market-update.pdf insurance-distribution-market-update-q1-25.pdf

AJG is being priced to grow at 4% in perpetuity. The insurance market has grown at ~5% nominal over long time periods. A top insurance brokerage should grow at least that (plus additional for M&A, better fees as a % of policies placed). You're paying a very fair price (even favorable) for a great business here.

Got filled on a standing order of EACO at $70

Yeah health insurance names are both cheap and starting to trade well. Love ELV + MOH. I have a lot of the insurance brokers too, but have been building smaller positions in FI, FIS, VRSK, CWST, WCN, ALSN, TW, ACGL. Lots more I haven't bought but would look at EXP, SFM, INVH too

Just a general comment, but there are SO MANY DEALS right now in unloved sectors (insurance, defensives, res. reits, data providers, software, healthcare). They probably won't work until this AI stuff clears but what a great opp for 3-5 yr holds

Margins are a factor of (1) Take rate from customers (either flat fee or as a % of premiums placed) (2) Cost to deliver service (headcount, technology, etc) ... AI should decrease cost to deliver service, and I don't see competition decreasing take rates. Take rates are more a factor of bargaining power over carriers and control of distribution and less on competition with other brokers (and hence why margins have gone up over time for brokers)

I think there is legitimate integration risk for BRO after their huge and outsized acquisition (vs past acquisitions). If they can't digest and integrate as quickly as planned it limits (1) The amount of additional M&A they might be able to do and (2) Makes further small / mid sized M&A less material to current size of the business. People love BRO for the inorganic engine its created, and if that is less effective or less material moving forward perhaps you give them a lower multiple. All that said I'm not worried and its a top 5 position for me, but I've always been buying the entire group recently as well as ACGL, PGR on the carrier side. The market is still very fragmented and there is plenty of rollup opportunity, but prices are a bit inflated with PE getting into the game.

More LQDA and FI

$virt

He's totally wrong, its about judgement and truly understanding businesses and their moats better than other investors who can't / won't know everything from an LLM that only knows past info. Investing is about the future. Look at how many software names are trading near 52 w lows -- if you have good insight that a specific vendor has great lock in and wont be displaced by AI vibe code yada yada, you can probably make a killing.

MUSA, ALSN

AI will be really beneficial to brokers -- lots of headcount and process that can be moved towards an AI workflow. Not sure the brokers are really that forward thinking though so will take time. The less standard the policies that are being written, the less likely there is AI impact, IMO

Half position in ACGL, and starters in TW, ICE, WCN, SFM

Thought it might be interesting to start a thread compiling everyone's favorite right tail investments (think multibagger potential, not well understood by market, but risky). I'm interested in having a section of my portfolio dedicated to these, hopefully specific ones that don't have a ton of correlation to the other bets or to the market. Here's a few I can think of that I'm currently involved in: ASTS BE Ethereum

For what it's worth, I actually do think over a 10 year period the hyperscalers will make a very good return on the capex spend. Companies building models without the ability to bundle with an overall consumer + enterprise offering will suffer. And if the bubble bursts and nvda chips get cheaper, it'll just cost less to build. But i have no doubt that the market will be many times bigger than people are imagining and to win you need to be building now

Yeah we all know they're investing ahead of the actual application layer. It will be totally fine if you think a substantial amount of value accrues to the cloud companies when the application layer does come(which I don't see how it won't)

Can you explain this? It's not really a commodity if the cloud companies have >30% margins ...

But the TAMs will explode. No reason why the cloud providers can't charge substantially more when they are the backbone of all AI applications. In the example I gave above, the LLMs are currently being paid probably a few million to provide the backbone of these Finance AI companies. That is the current starting point, but the ability for them to take a much greater slice of the pie once AI applications start to make real money is clearly there. Now TAMs should include a bunch of service and labor costs (e.g., I'm an AI application company that can replace 20% of your labor in a specific area, so I will charge 50% of that replacement cost and a company keeps 50% of the savings -> I am the hyperscaler powering that application, I will price my services to the AI application company so that I take 50% of that -> Now all of a sudden hyperscaler TAM is based off of labor savings (e.g., 25% of total labor saved or whatever) which was not really in the realm of possibility before)

Yeah I think the article is spot on. It's the ease of use / implementation for specific use cases or workflows that really matters. Think of your average person at your average slow moving company -- there is no way these companies create their own agents effectively from both a functionality + implementation persepctive. A great example of things that are currently being done successfully in the finance world are companies that have sprung up to assist private equity firms in their M&A / due diligence process. Think: (1) upload VDR -> (2) query all of this data in a useful and streamlined way (3) do other cool stuff that used to take hours (e.g., pulling all the specific clauses from the 100 loan agreements you might have and put into a spreadsheet), (4) quickly output 80% finished reports of various types that used to take hours / days. Essentially now you can either go through more deal flow or reduce your headcount and get through the same amount of deal flow. Or just spend more time on the important stuff, whatever your goal. AI will be huge, I think businesses are just waiting for AI-savvy young people to create the tools (e.g., AI software / agents) that they can easily plug and play into their current workstreams without having to actually know anything about AI. That is coming, first to the highest value / easiest use cases, then to everything else. Just going to take some time

People might hate this but Carvana is also a good example

+1

sold 50% of this today

BAH had a nice quarter the backlog has really expanded these are looking more interesting

For anyone looking for a very good summary of where BAH is currently at (and I know I'm late here and it may have been covered above) I thought this was helpful: https://tbri.com/blog/doge-federal-it-vendor-impact-series-booz-allen-hamilton/

+1