dwy000

just out of curiosity, how is everyone calculating returns? I contribute and take cash out of my investing account on a regular basis during the year so it's not just a clean "end of yr compared to beginning of year". If you add cash in December the dilutive effect should be substantially lower than adding that same amount in February. Conversely, if you add cash and buy a stock in December and it immediately goes up 20% it should have an outsized impact vs buying some stock and having it immediately go up in February. Do you just use the IRR or XIRR function, have the broker do it or something else? I've always done it like a mutual fund where there's a "unit price" and then I add or subtract cash at the previous week's unit price. But it's a lot of work and I'm not sure if it's the same calculation method that others use.

The value of teams is driven by ego not cash flow. But that's why they are generally poor stock investments when the stub is public. You don't get the ego boost that the majority owner does but you suffer the cash flows. If your holding period is shorter than the majority owner's you will never be able to realize on whatever discount the market decides is applicable.

I agree they won't have that much FCF. But if they can still delever to 4x by end of 2025, even after paying out that $330m (from FCF and/or add'l debt), it's hard to see the market cap worth less than $1.1bn with that much organic growth.

It would be interesting to see what the broker value % is of the entire market as a whole. How much of the growth was due to consolidation of smaller players on the broker side as opposed to multiple expansion in excess of the insurers.

I'm assuming most of the deleveraging will be from earnings growth as opposed to large debt paydown. Still, if they can repay $330m in cash earnouts while simultaneously delevering, that's pretty impressive for a $1.1bn market cap.

While state based wealth is out, what is most interesting is that, probably for the first time, every one of them is self made and there isn't an oil baron or real estate person on the list. Usually the list is filled with family dynasty wealth or the kids of oil/real estate barons. When people freak out about wealth concentration I like to look at these lists and remember that dissipation happens pretty quickly and it is still possible to come from nothing and make a fortune.

Well said. That country has so many long-ingrained issues that no single person can solve them, let alone in a single term. He's also got to work with existing parties which means he won't be able to actually do a tenth of the things he claims or wants.

MSFT looking like accidental geniuses here. They get Altman, Brockman and now virtually the entire team. They just bought OpenAI for next to nothing. And given their original investment in OpenAI appears to have been mostly in cloud credits not cash they can even save on that spend. I can't fathom what the Board meetings must have been like and how they saw this as the best outcome.

There's kind of 2 levels to the pricing. The bookrunner will give the salesperson the price for the derivative. That price includes his/her cost to hedge and often a little juice for the book. Keep in mind the bookrunner generally has thousands of trades in their book and their pricing will reflect where the book is positioned at time of quote. Often, if their book is heavily weighted in the other direction they will price the trade low because its a natural offsetting position for them anyways. The salesperson will then tell them to add on the desired P&L and the bookrunner will give them a final price for the client. Rarely is that P&L under $10k, especially for a corporate. The more complex or custom a product and the more unsophisticated the corporate, the higher that goes. The risk to the bank is with the bookrunner. It's their job to hedge out the excess risk. Note, excess risk, because the bookrunner is running a large, active book with risk as their job on a day to day basis. The quants, the bookrunner's boss(es), the risk manager all maintain a high degree of oversight over the book as a whole and it is managed for a whole host of risks (most commonly referenced as daily VaR). Risks are managed real time based upon 100 underlying variables and reported out constantly. That way you know of 2 bookunners are each within their risk limits but combined might exceed the banks' desired limit. I used to hear salespeople batching at the bookrunners's price and his response is like "I'm way long vega in the 4 year and need to add gamma in the 5 so that's the price. Take it out of your P&L if the client is complaining." If the client has inside knowledge on something and the bookrunner doesn't there really isn't much impact because he/she will hedge it out with other counterparts who have the same info he/she does. There's a lot more to it but it's definitely not as susceptible to accidental risk as people think. Absolutely nobody at the bank wants to risk a blow up because that ends their bonus, their job and likely their career.

The new Michael Lewis book on Sam Bankman Fried is out this week. Not a better writer out there to tackle a more interesting topic. I can't wait for this one. Great 60 Minutes interview hyping the book.

Well it appears you're not a big fan!!! While obviously I don't hold a candle to your knowledge of the business, I was surprised at the level of dislike your note seemed to imply. I was curious however in some of the points you made on financial engineering: . - on add backs, other than stock based comp, all of the add backs seem to be the exact same ones that BRO uses (other than the lovely catch all "other" for BRP). What are you seeing that's excessive or unusual? - for the tax agreement, upon first read it appears to reflect only the actual cash savings at the consolidated parent they get solely because of the LLP structure, gets passes back 85% to the founders. The 85% is excessive since the LLP member share is only about 42%. But given the group is not a tax payer I don't think any amounts would have been paid to date. When future tax are due it could be more inequitable - I'm not sure the EBITDA metric would be affected by the tax agreement because it's a pre-tax metric. It would impact cash flow when they become a tax payer down the road but I don't get how it impacts using EBITDA as a performance metric. - the interest rate caps may be pricey but it appears they've made over $22m in gains by owning them. With the amount of debt they've got (all floating rate) it seems pretty prudent to hedge that. This also wouldn't impact EBITDA since it's added back (or subtracted because it's gains) with interest expense. - on Lowry Baldwin walking away - the proxy shows him owning over 25m shares which is over $625m of value. Other than the A share/B share confusion, he actually seems pretty aligned with shareholders. Your points on the cost of acquisitions being excessive and what proportion of organic revenue is actually just pricing, are both very valid and give me more reasons to pause. Plus, the stock based comp is getting WAY out of hand. Not to mention the amount of leverage and earnouts due over the next 9 months.

Take a deep breath - this is normal. I can't remember a time when various indicators weren't out of whack or pointing to problems. The minute you feel certainty and lack of worry is the time to be very, very afraid. If things are going great you worry about the inevitable downturn. If things are going poorly you worry it will continue indefinitely. There's always a doomsayer predicting (very rationally) that it's all going to crash down and the next depression is almost upon us. There's a reason Buffett and Munger and most legendary investors ignore what the markets and economy are doing and focus on individual companies.

Odd this got posted recently because for the first time ever I saw them in my local Costco last week. Got some for the kids to try. Naturally they love them (sugar, fake creme, cake - what's not to love for kids). They're already asking to buy more.

Slide 15 is the best one in the deck. It underpins just how strong the entire industry is across the board. BRO is slightly better, but just having a position in the peer group puts you WAY ahead of the market.

If you like the Newcastle one you might like Sunderland Til I Die which is a similar documentary but a team struggling with relegation.

That's true - but the FTC can't fix that part of it, just the legal stuff

you're actually not legally required to join a union. and if you're a member of one you are permitted to resign.

Want to hear the thoughts on BRP too. I'm concerned that they have a ton of contingent earn out payments this year that should use up most excess cash flow and push back meaningful debt repayment. Once those are reduced however, it should free cash flow pretty nicely to reduce debt. Not a big fan of the very confusing cap structure whereby the A shares and B shares reflect the pre-IPO partnership structure. The publicly traded holding company technically only owns 53% of the operating company (the A shares). I guess it works but the share count keeps throwing me off.

I think its a bunch of things: - far less public companies today as the benefits of being public are far outweighed by the hassle of reporting requirements, PR, legal liability and costs - all of which really only works at scale; - Peter Lynch wrote that in the 80's before the internet - most of those companies he pointed to as "buy what you know" were retailers or restaurants opening new stores. That doesn't exist as much anymore although new food concepts seem to be flourishing. - technology - most startups and fast growth companies nowadays are tech based which scales faster but is easily replicable so it makes moats more difficult - globalization - I don't think there's less competition as much as the competition is no longer just local or national, it's global. Between technology and global competitors margins are lower and you need scale to compete and that results in consolidation. - more investors using better technology to screen from fewer options. There's no operating under the radar screen until some enterprising investor discovers your stock. - etc. etc. The book was and is one of the all time best investing books for newbies. But I don't think the opportunities are as broad as they used to be.

That was a bold move. If the Dis/Chrt dispute leads to a revamp of the cable packaging those retrans payments that make up half of their cash flow are in jeopardy.

That's probably true but can you imagine the nightmare it would be waiting and hoping for a government solution while your house was in shambles. It would be a miracle if that came through within 2 yrs of the event. More likely that a smaller or midsized event prompts the discussion and a quasi solution.

Nah, it was the public fight between Disney and Charter.

I enjoyed this too but it wasn't what I thought or was hoping it would be. I wanted insight into the logistics and financial workings of supermarkets (why is milk at the back, details on placement fees, coupons, etc, etc) and it covered some of those indirectly but it was really a series of personal stories of people within the supermarket universe (a truck driver, a person trying to sell them a product, etc). It even had the author working at Whole Foods for a while selling fish. It was interesting but not really about supermarkets per se, more the people who make them work.

Chances are it would still beat what we are all trying to do here.

forgot to reiterate what Inofeisone mentioned - if the plan is a true "reinvestment" plan and not one that issues new shares, you will effectively be receiving cash and simultaneously be making a market purchase of stock. There's price risk there for a very short period of time but the important difference is the accounting: lower Equity by the amount of the dividend and simulaneously lower cash. The share count would be unchanged. You will be taxed as a regular dividend even though you didn't net any new cash in your account.