Jump to content

One big idea


dpetrescu
 Share

Recommended Posts

There’s a variance of opinions on how long the medical crisis will last, how long the economic downfall will last and also how the stock market will be impacted. As a famous philosopher once said: it’s tough to make predictions, especially those about the future. You can predicts what or when but it’s smart to not predict what and where. So I predict that sometime in the near future -next week, next month, next year... there will be an immense opportunity. So what is everyone’s one single big idea? Not a list of ticker symbols - but one single punch you’re waiting to add to your small punchcard.

 

Mine is unchanged from almost a decade ago: Simpson Strong Tie

Simple company, easy to understand, has a large market share in a very specific and small market with a good resistance to new entry. This translates to good margins and ability to increase product cost. Downside is it is tied to new home and renovation construction cycles. It’s down a bit but it could be going a lot lower soon. It also has a great balance sheet - a lot of cash, low debt and able to withstand panics.

 

Link to comment
Share on other sites

There’s a variance of opinions on how long the medical crisis will last, how long the economic downfall will last and also how the stock market will be impacted. As a famous philosopher once said: it’s tough to make predictions, especially those about the future. You can predicts what or when but it’s smart to not predict what and where. So I predict that sometime in the near future -next week, next month, next year... there will be an immense opportunity. So what is everyone’s one single big idea? Not a list of ticker symbols - but one single punch you’re waiting to add to your small punchcard.

 

Mine is unchanged from almost a decade ago: Simpson Strong Tie

Simple company, easy to understand, has a large market share in a very specific and small market with a good resistance to new entry. This translates to good margins and ability to increase product cost. Downside is it is tied to new home and renovation construction cycles. It’s down a bit but it could be going a lot lower soon. It also has a great balance sheet - a lot of cash, low debt and able to withstand panics.

You forget about their biggest competitor - MiTek. In the best of time it's a fierce competitor. But it also has a very rich sugar daddy which can supply infinite capital, don't need to worry about financing. Can do any bolt on deal they want. Can acquire any weaker competitor at cheap prices to bolster their position.

Link to comment
Share on other sites

Yes, I posted here(just in case anyone questions it)

 

https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/prty-party-city-(short)/msg397196/#msg397196

 

Was a popular thread as you can see. But there's a lot like this now. Stuff that is just entirely inevitable given whats mandated. Had mentioned others a few weeks ago like CHK, WLL(just filed), and some others. Couldn't get it together when all was well and debt available to everyone...now? Toast. Almost a sure thing.

 

My natural inclinations are to pick off good longs. But along the way there are safer and surer bets such as these. Easier IMO than the airlines or cruise ships. Those at least have a reasonable shot at assistance and a case they were healthy before all this. Ford is probably a pretty decent hedge bet on the short side as well. Poorly managed, highly indebted, changing auto landscape and massive freeze up in sales is a bad recipe.

Link to comment
Share on other sites

Excellent reference, Simpson isn’t without competition. MiTek is a Berkshire subsidiary. But MiTek is a large global company covering more segments. Simpson’s real competitor is USP, which was purchased by MiTek in 2011. MiTek USP clips are in Loews, Simpson clips are in Home Depot. Simpson and USP are the true duo leaders with almost all the market share in The wood connector market. For good reason — a new entrant would need to educate engineers and specifies, build up a catalog of thousands of small low cost clips and provide multitude of testing for each of the thousands, provide building code documentation, etc.

 

But there’s no question Simpson is still the market leader. In 2016 Simpson had a 43% market share in wood connectors, in 2019 Simpson had a 54% market share. There’s a reason for this - call up any Structural engineer and ask them what wood hangers they use and they’ll probably be confused because that’s like asking someone what website you use to search the internet. I’m an architect and when my engineer specifies something else, I’ll need to reconsider it. So far the “google” test has held up for decades.

 

Very dramatic fall since last year. Seems so obvious too, similar to the inevitable fall of Redbox and GameStop.

There’s a variance of opinions on how long the medical crisis will last, how long the economic downfall will last and also how the stock market will be impacted. As a famous philosopher once said: it’s tough to make predictions, especially those about the future. You can predicts what or when but it’s smart to not predict what and where. So I predict that sometime in the near future -next week, next month, next year... there will be an immense opportunity. So what is everyone’s one single big idea? Not a list of ticker symbols - but one single punch you’re waiting to add to your small punchcard.

 

Mine is unchanged from almost a decade ago: Simpson Strong Tie

Simple company, easy to understand, has a large market share in a very specific and small market with a good resistance to new entry. This translates to good margins and ability to increase product cost. Downside is it is tied to new home and renovation construction cycles. It’s down a bit but it could be going a lot lower soon. It also has a great balance sheet - a lot of cash, low debt and able to withstand panics.

You forget about their biggest competitor - MiTek. In the best of time it's a fierce competitor. But it also has a very rich sugar daddy which can supply infinite capital, don't need to worry about financing. Can do any bolt on deal they want. Can acquire any weaker competitor at cheap prices to bolster their position.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...