BG2008 Posted May 10, 2018 Share Posted May 10, 2018 I was browsing the reading list and it dawned on me that I owe one of my punchcard investment success to reading Peter Lynch's book. He said that Rock Pits are great businesses because it sells for $10 a ton, but it cost another $10 a ton to ship. So a rock pit owner has tremendous pricing power. He can draw a circle that is roughly 50 miles and no one from outside of that circle can compete with him. He can basically raise his pricing power up to the trucking cost of the competitor bringing rocks into his territory. In short, Rock Pits businesses are either monopolies, duopolies, or oligopolies depending on how many are in a local market. This invaluable concept made so much sense and I was able to absorb it so quickly that it lead me to dig deeper into FRP Holdings Some sell side analyst had valued the rock pits at $25mm based on some DCF with 10% discount rates. I came up with a value that was closer to $200mm. At the time, the market cap of FRP Holdings was only $300mm. So this was a big swing factor in my analysis. FRP Holdings was at one point 80% of my IRA. Are there other concepts like Rock Pits, Mr. Market, Network Effects, etc that are very important yet very readily understood that you have come across either in reading or in business where the light bulb just went on and you're like Holy Crap! Please Share! Link to comment Share on other sites More sharing options...
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