Value Investing Received this brainteaser in an interview today. No right or wrong answer but curious for everyone's thoughts. |
- Received this brainteaser in an interview today. No right or wrong answer but curious for everyone's thoughts.
- Howard Marks - Growing the Pie
- Sportsman Warehouse- SPWH
- Naspers & other SOTP stories
- Long Thesis on Hong Leong Industries Sdn Bhd
| Posted: 01 Apr 2019 05:05 PM PDT "I have a box that either has zero or $100 inside. Each outcome has a 50% probability. It costs $20 to open it and find out. I only have $10 so I need someone to invest another $10 with me. If there is nothing inside the box, we both get zero. In the event that there is $100 inside the box, how much of the $100 would you require as your return for you to want to invest with me?" Thoughts? If you could fill out your expected return in this poll that would be great (https://www.surveymonkey.com/r/HFQ7MYQ). I am trying to figure out what a "consensus" fair value price would be. Thanks! [link] [comments]  |
| Howard Marks - Growing the Pie Posted: 01 Apr 2019 03:34 PM PDT |
| Posted: 01 Apr 2019 07:00 PM PDT Industry The outdoor activities and sporting goods market is highly fragmented and competitive. There are four distinct types of stores; independent locally owned stores often known as "mom and pop", specialty retailers such as Bass Pro Shops, sporting goods stores such as Dicks Sporting Goods, and mass merchandisers such as Amazon and Walmart. U.S. outdoor activities and sporting goods retail sales in our related product categories totaled over $70 billion in 2017. The size of the pie is increasing as wildlife recreation has increased across all categories that Sportsman operates in. This increased participation is evidenced by numerous surveys involving recreation participation. Over the past decade, specialty retailers, such as Sportsman Warehouse, have gained market share of equipment sales at the expense of mass merchants, discount stores and independent retailers, or "mom & pop" shops, which Sportsman believes comprise approximately 65% of the market. In addition, while there are over 55,000 federal firearms licenses, or FFLs, in the United States today, only 4,000 are currently held by national or regional specialty stores. Since FFLs are issued at the store level, these statistics imply that the remaining 93% of the market is fragmented among mom & pop stores. This fragmentation the market presents an attractive opportunity for Sportsman to continue to expand its market share, as customers increasingly prefer a broad and appealing selection of merchandise, competitive prices, high levels of service and one-stop shopping convenience. Company Profile Sportsman Warehouse was founded in 1986 as a single store in Midvale, Utah and has grown to 87 stores in 22 states. The company is the largest outdoor specialty store base in the Western United States and Alaska. The stores range from 15,000 to 65,000 gross square feet, with an average size of approximately 40,000 gross square feet. The company currently has plans to grow to 100 stores. The company sells hunting, shooting, fishing and camping gear. The company believes it is less capital-intensive for it to open new stores compared to its principal competitors because of its no frills store layout. Stores generally require less square footage than the stores of its competitors and a smaller initial cash investment. In small- to medium-sized markets, Sportsman Warehouse is often able to establish itself as a standalone destination for customers. In larger markets, the company has successfully leveraged existing infrastructure to open stores in shopping plazas near complementary retailers. In 2018, the company expects to grow its square footage by approximately 3% as it shifts some cash toward reducing its debt balance. Over the long term, Sportsman's target remains to grow its square footage at a rate of greater than 10% annually. Sportsman effectively serves markets of multiple sizes, from Metropolitan Statistical Areas, or MSAs, with populations of less than 75,000 to major metropolitan areas with populations in excess of 1,000,000. It generates consistent four-wall Adjusted EBITDA margins and returns on invested capital across a range of store sales volumes. Sportsman's stores typically reach a mature sales growth rate within three to four years after opening, with net sales increasing approximately 25% in the aggregate during this time period. For the 40 stores opened since 2010 that have been open for a full twelve months (excluding our 10 acquired stores), Sportsman achieved an average four-wall Adjusted EBITDA margin of 13.1% and an average ROIC of 74.1% excluding initial inventory cost (and 27.9% including initial inventory cost) during the first twelve months of operations. In addition, Sportsman's achieved an average pre-tax payback period of less than one year (excluding initial inventory cost) and expect to achieve an average pre-tax payback period of approximately 2.5 years (including initial inventory cost). Moat Sportsman holds against the online stores as regulatory restrictions create certain structural barriers to the online sale of approximately 33% of Sportsman's revenue, such as firearms, ammunition, certain cutlery, propane and reloading powder. As a result, this portion of its business is currently more protected from online only retailers, such as Amazon. Management Sportsman appointed a new CEO from the role of COO. Prior to joining the company in 2017 Jon Barker was VP Global Officer for Wal-Mart Stores. The current CFO has announced that he is leaving the company and the company is currently searching for a replacement. Valuation The company earned $.55 per share and trades at $4.8 per share. It trades at roughly 9 times earnings. Due Sportsman's moat, expanding market share, and less capital-intensive requirements I believe Sportsman is a buy at current prices. Thoughts and feedback are welcome [link] [comments]  |
| Posted: 01 Apr 2019 11:32 AM PDT As many of you already know, Nasper's is IPO'ing their stake in Tencent. I assume this is partially to help close the valuation gap between Tencent & and its various holdings. If I'm not mistaken, for the longest time, Naspers traded below its stake in Tencent. Any ideas as to the reasons for this? I have a few ideas, but curious to hear what you guys think. Have any SOTP stories really worked out? I feel like most end up going nowhere....except where they spun off an actual operating business into a separate public entity that could be independently valued. [link] [comments]  |
| Long Thesis on Hong Leong Industries Sdn Bhd Posted: 01 Apr 2019 04:29 AM PDT |
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