Welcome back everyone. Today is going to be a
continuation of last episode where we reviewed the portfolios
of super investors. Only this time I think we even
have a better slate. I honestly believe that this is
a better group of super investors.
First of all, we have the full portfolio changes of Bill
Ackman. So last time we had a preview,
we got to see that he bought a lot of Uber and I went over the
investment case of Uber. But this time we can see a lot
of different trades he's making, trimming off Chipotle, trimming
off Hilton. He is doing some interesting
things with Nike. We're going to be looking at
that. Then of course, we have Valley
Forge Capital with none other than Dev Kantasaria.
He's personally my favorite. Dev, I believe is I think he's
the best. He's my favorite.
I'm a little biased, but I love his portfolio.
I love his frame of thought. We're going to be at what he's
doing, the trades that he's making.
We have the Chuck Auchre portfolio.
They bought a new company that I find really interesting and I've
seen this company show up across a couple other super investors.
As I've looked into it. I'm really impressed by this
one. So we're going to be looking
through Chuck Auchre's trades. Then we have Warren Buffett in
the Berkshire portfolio, we have Mark Massey with Alterock
Partners, and we have Michael Bury.
And we're going to be looking at all of these giving some context
and insight. Now, we'll first kick things off
with Bill Ackman. We already went over his
publicly released at least news that he bought Uber and I think
that's a great one. Like I've said many times, I
think 9 out of 10 situations investors will make money on
Uber here. So I like the Uber buy, but Bill
Ackman has a lot more going on with his portfolio in his 13 F
filing. We get to see all the other
companies that he's trading, he's buying and he's selling.
Now one thing I'll point out that's important is that this
website Data Roma only shows the US listed equities, so you don't
see the international stocks, one of them being Universal
Music Group. He owns the largest position in
his portfolio as UMG. Blackman loves the licensing
style of business. Universal Music Group is like
the landlord of the music industry.
They charge licensing fees for anybody that uses their music
and videos and movies and of course on companies like Spotify
or Apple Music. Now in terms of his largest
holding, which again, if it was here, it would be UMG right at
the top here. So you can just imagine that.
But in terms of his largest holding, I personally like
Spotify more than UMGI, think it's more compelling and
interesting story. Spotify is often looked down on
by investors because of the low margins and the questionable
profitability. But what they've proven over the
past year is that they can push up margins.
They've done so the gross margins of the company, the
operating margins have gone up over the past year.
For example, if we look at the ratios of Spotify, the gross
margins of only 30% are super low.
To put that in perspective, Booking Holdings has higher
operating margins then Spotify has gross margins.
So this is very low gross margins, but you can see them
starting to take up a little bit year over year.
In 2023, it was 25.6%. So they're actually increasing
their gross margins, they're increasing their operating
margins like crazy and of course their profit margins are
following. So this company is getting a
nice return on capital employed. The numbers are moving in the
right direction and the cash flows are following.
If we look at Spotify's quarterly trailing free cash
flow, you can see the nice story here.
Explosive free cash flow growth as they're reducing their budget
on things like podcasts. On top of that, one of the most
compelling parts of Spotify is just the sheer number of people
using this application. When we look at the monthly
active users, it's climbed up from 300 million, in fact below
300 million in only 2020. Fast forward five years, now
there are 675,000,000 monthly active users.
This is incredible worldwide organic growth.
And you see this across the Premium and AD Tair, both of
them growing like crazy. The AD Tair Works is a freemium
version. People join on, they use the AD
Tair for a while, they fall in love with the product, then they
upgrade to the Premium. Now again, Bill Ackman likes
that licensing business of UMG, the company that owns all the
rights to all of this music. So there's two different stories
here of the different relationships these companies
have, but I'm on the side where I think Spotify will be a more
compelling investment and I believe it's going to have
better returns over the next 10 years than UMG, but we'll have
to wait and see. Now, in terms of Bill Ackman's
other investments, he holds Brookfield Corpus's largest
position. He added a little bit to that
one. I think it's great.
I like Bruce Flatt, I like Brookfield, I like what they're
doing. He has one company that I, I
can't get behind. I don't understand this one.
It's Restaurant Brands International.
This is the owner of Burger King.
Burger King is a middle of the road fast food restaurant.
It's right there with like Wendy's and a couple other fast
food places. It's nothing exceptional.
It's certainly no Chick-fil-A. It's not a nice sit down
experience like Texas Roadhouse or Chili's.
It's just a fast food restaurant and I don't think it's even
compelling as Chipotle, so I don't know why he owns it.
On top of that, it's also ironic to me that Bill Ackman owns
Restaurant Brands International as a huge concentrated position,
a company that serves burgers and fries, while he also
criticizes Coca-Cola and Pepsi for having addictive and
unhealthy products. He's continually on the RFK
Junior train, saying that these companies have used advertising
to get people to buy unhealthy foods.
But then he owns Restaurant Brands International.
So I don't understand this investment both from just an
investment standpoint or from even his own philosophical
standpoint of owning a company that goes contrary to his own
personal beliefs. I just don't believe this
company fits in his portfolio and I'm waiting for Bill Ackman
to dump it. So I think it both makes sense
from an investment standpoint and from Bill Ackman's own moral
objective against unhealthy foods to dump this company.
And I think it's only a matter of time until he does it.
The next one up is Chipotle. What you can defend is being
quite a bit more healthy than Burger King.
Either way, Chipotle is a large position, but he's continually
reducing this one. If we look over Chipotle since
2018, he's been overall a net seller.
He has as in fact 1/4 where he added slightly to the position
amongst dozens of quarters of selling it.
So overall he's dumping this position.
It makes sense why he's selling this one.
There's simply better opportunities when Chipotle
stock has pulled forward so much of its earnings.
It trades at such a high valuation now that you have to
grow substantially to justify today's valuation.
No changes on Howard Hughes Corp, no changes on Google.
We have him adding a little bit to Nike and this needs some
explanation. You see that he added to Nike
last quarter, but that's not an accurate reflection of what's
going on. Bill Ackman gave us an update in
his most recent investor presentation that he actually
sold all the equity in his Nike position, so he doesn't own any
more Nike stock. Instead, he converted it to deep
in the money call options. So he took all the equity, sold
it all, converted it to this position, and then he probably
used a lot of that equity to enter into the Uber position.
I believe that's the trade he's making.
But the way that this works is because this website doesn't
track any type of over the counter call options.
It's going to show next quarter that he dumped his Nike
position. So you're going to see that in
the 13 FS next quarter. It'll look like Bill Ackman
completely sold out of his Nike stake.
That's not really what happened. He's simply converting it to
call options in his investor presentation.
He says the new structure allows us to preserve the upside
potential of owning the stock outright while unlocking capital
to make new investments. Those new investments he made I
believe was Uber. He also reduced his Hilton
position and he added to Seaport Entertainment Group.
That's a very small 1% position. Overall, a very strong
concentrated portfolio from Bill Ackman and I like the trades
he's doing now. Next up we have my personal
favorite, which is Dev Kantasari with Valley Forge Capital
Management. He now manages over 4 1/2
billion dollars. He's grown his portfolio
dramatically over the past 15 years and he's attracted more
asset center management as he's shown incredible market being
performance. Now he's accomplished this
through a group of highly concentrated investments into
incredibly powerful monopolistic companies.
In most cases, you'll see the commonalities here.
They're monopolies or they're duopolies.
They're tollbooth companies, meaning that they earn money off
of the transactions or commerce of other businesses.
He loves companies that have very high margins.
They have high returns on tangible assets.
They don't require a great deal of capital expenditure or even
marketing budget to grow. They have natural organic
growth. They have a ton of operating
leverage and scalability. All of these characteristics
boil down to a very high quality company of which he makes these
super concentrated bets in. And some of them have been
phenomenal bets over the past decade, the most recent one
being FICO. This one has dramatically
outperformed the market and it's now a 34% position.
O Fico's by far his largest holding still.
And even though he's had this incredible outperformance with
FICO trading at a super high valuation, he has the discipline
to continue holding and that's a very rare thing to see.
Most investors would dump this position entirely if they had
this type of out performance. He's doing these slight trims,
just taking a little bit of gains to funnel into different
companies, but he's not slashing the position down in size.
He's not reducing it as a huge percentage of his portfolio.
He still likes FICO today, and in a recent podcast interview,
he said that FICO deserved to trade up.
It's now where it deserves to be.
It got there rather quick, but it's a company that wholly
deserves this momentum and trading.
So I suspect he's going to continue to keep FICO as a large
position in his portfolio in the future.
Now I can see that two of the companies he's added to are very
similar here, S&P Global and Moody's.
Both of these are talked about online as being overvalued
companies. They trade at a high multiple.
But here we have Dev Kantasaria adding to both of these
positions. He increased S&P Global by 3%,
even though it's already a 20% position.
So it's a massive outsized position and he's adding a bit
more to it. Then we have Moody's, a 14%
position and he added 2% to it. This is the complete
counterintuitive thing to do. Instead of taking gains and
using slogans like you can't go broke taking gains, Dev
Cantosaria further concentrates into the winners.
He feeds the flowers, he lets them grow even more.
He adds more to these positions when they dip down.
So I see a very disciplined investor here that continues to
follow his investing philosophy. Now one of the concerns here
that I have and this is for a holding that I I currently own
is right here with ASML. This is only a 2% position and
he didn't add any to FML, even though FML has gone through a
sell off. If we look at the trade history
from Devcantasaria, he added to FML doubling his position in Q3
of 2024. So two quarters ago that was at
around $850. The quarter ended at 8:33.
So he was adding to the position when it was 850, but here we
have ASML today trading at 7:50. And even in last quarter when he
could have added to it, it was trading at 6:50 and he didn't
add any more to the position. The fact that he did not add to
that position when it dipped down as much as it did makes me
believe that he has his reservations about the company.
He has some concerns about it. I believe that Dev Kantasaria is
holding ASML as a smaller position because he believes
it's not quite as predictable as required to become a larger
position. He puts a massive emphasis on
predictability, and even though FML has a large Moat, it's a
very wide Moat company. There are some concerns,
specifically with international politics, with relationships
with China, that could cause Dev to become a little bit less
certain about the future predictability of the company.
Now that's just speculation, but I believe that's the case
because otherwise, if he was 100% certain about the future
predictability, he would have added more to this position.
Instead, he chose to add to S&P Global and Moody's, which are
not on as big of a dip as ASML. So this is one that I wouldn't
be surprised. I'm not going to be shocked if
he ends up selling out of ASML. If he becomes convinced that
it's less predictable and it doesn't meet his high standards,
he'll dump the company. And if that's the case, I plan
on doing my own assessment of the company and coming to my own
conclusions. Even though I think
Devcantasaria is incredibly smart, I really like what he
does with his portfolio. That doesn't mean that they're
always right, and sometimes super investors get things
wrong. They get things wrong that I
think are even somewhat obvious things in certain cases.
One example of a disagreement I had with Dev Kantasaria was his
sell of Amazon. I thought he should have doubled
down on the company, bought more of it, but he ended up selling
out. He bought the company back in Q3
of 2021 when Amazon was trading for around 160.
That was the reported price at the time.
Then he ended up reducing the position in 2022 and selling
completely out of it in Q1 of 2023.
At the time, Amazon was below $100.00.
So he bought Amazon at a rather full price and then he sold it
when it was off 50%. The company he bought with this
money was Intuit. Since then, Intuit is up around
50%. So Intuit made a little bit of
gains, but Amazon is up 150% from the sell price.
What I ended up doing during the same time period, the very same
quarter that he dumped his position in Amazon, is I bought
more of the company. I bought it January 3rd of 2023
and I bought it again and again and again.
I bought over $15,000 of the stock doing a series of buys.
This is at a share price of $85 per share.
Now, I'm not pointing this out to say that that I'm better than
Dev Kantasaria. I don't believe that's the case.
But it's to say that you don't have to agree with everything
these super investors do. In some cases, you can disagree
and still be right. They make good decisions
frequently, but they're not always right and they're not
infallible. So if Dev does end up dumping
his ASML position in the future, I'll be making my own
independent analysis on that. I won't just be following him
with whatever he does now, as other trades he did here were
interesting. He trimmed his into IT position
by 10%, so minor trade there and then he bought Equifax and MSCI.
These two companies both fit well within the Valley Forge
Capital portfolio. We can start off with Equifax.
Most people understand Equifax is one of the credit bureaus
where they collect your information and they sell that
credit information for a small fee.
So it fits within the portfolio of Devcantesario where he loves
these type of credit companies. Think about it, he owns Moody's
and S&P Global. They're both credit rating
agencies. He owns FICO, which is a loan
origination rating system, and then Equifax is now a credit
Bureau, so he's investing all across the credit system.
But with Equifax, there's something that most people don't
realize when first looking at this company is that the credit
rating portion of the business is only around 40% of their
total revenue. So it's less than half of the
company. What is that other 5060%?
That is the identity business. It's called the Workforce
Solutions. The Workforce Solutions segment
offers employment, income, criminal history, Social
Security number verification services.
So it's basically know your customer information.
When a business wants to be sure of who their customers are or
who these people are. If they want to verify income,
if they want to verify employment, if they want to know
about this person for certain, they use this workforce
solution. So most of Equifax is not a
credit rating business, it's this workforce solution
business. But what they're doing here is
more of the same in selling data and analytics.
We have a number of different transitions going on with the
company right now that's powering it for the future.
The cloud transformation, Equifax has completed a
significant transformation to cloud native environment.
They're moving from on Prem to cloud.
This is something that I've highlighted as a bull case for
companies like AWS, Google Cloud and Azure.
So you see Equifax doing this right now.
We have data and analytics capabilities.
There's strong record growth. The company has shown
significant record growth, adding 20 million active records
in 2024. So the number of people that
they're verifying is growing new strategic partnerships.
They've signed 15 new strategic partnerships in 2024, including
a notable partnership with Work Day.
And then they're also rolling out a bunch of different
products. So even though this is a small
position, you get an idea of why it fits within his portfolio.
It goes right along with the other companies he owns.
The other one that he recently introduced as a new position is
the index business, which is MSCI.
Now, MSCI is very similar to S&P Global's indices business.
S&P Global owns the Dow Jones indices, which has indices like
the S&P 500, the Dow Jones, it has things like SCHD.
Those are all from the Dow Jones indices, but MSCI owns the world
indices. They're mostly outside of the US
and as the rest of the world grows, this company naturally
makes more money through their licensing agreement.
This is another company that in terms of the finances, the way
that this company set up, it fits well within the portfolio.
They have very low expenses relative to the revenue of this
company. It has almost no CapEx
expenditure. There's some sales and marketing
and R&D, but that's been relatively flat as the company
continues to grow revenue, which means they're sizing operating
leverage, they're buying back shares, reducing the share
count. The free cash flow consistently
grows. In fact, it looks crazy
consistent when you look at this free cash flow.
Look at this trend over time. This is on a trailing 12 month
basis, but that's 24% free cash flow growth.
Year over year, 24% free cash flow growth is impressive, but
on a per share growth, it's growing 26% because remember
they're buying back shares, increasing their per share
growth. And in terms of dilution with
stock based comp, you can see the purple bars there.
It's almost nothing. It's a tiny fractional
percentage, not enough to really factor in.
So this is an undilutive fast growing, organically growing
company. When we look at the revenue, the
top line revenue grows at around 13%.
I like MSCI a lot. It's a company that I wouldn't
mind owning. The only issue is every time I
look to buy this company, I just believe I'd rather own a little
bit more of S&P Global. So for me, it's one of those
difficult positions. I could buy into MSCI, but I
already feel like I got a good deal with S&P Global with a very
similar business model. So overall, the Valley Forge
Capital portfolio continues to be consistent, methodical.
They're executing their strategy exactly as they lay out.
Next up, we have the Chuck Auchry portfolio.
Chuck Auchry himself is a living legend.
The guy's incredible. Unfortunately, he's not running
this portfolio anymore. So we have we have the new
leaders of the portfolio and they're trying their best to
follow the same methodology and thought process.
Overall, I think they're doing an OK job.
I don't like to see them sell out as some of their most iconic
holdings that continue to be in a very good position.
So I don't like the constant trimming of Moody's, a
MasterCard. I just don't think it's
necessary. These companies should just
continue to compound for a very long period of time.
But putting that aside, I do like and I at least I think it's
interesting, some of the companies are buying, one of
them being Costar Group Poland Capital bought.
This is a new position and we also have Chuck Ockery's
portfolio adding to this position, one of the few
companies they've added to well, what is Costar Group and why are
these super investors buying it? Costar Group provides
information, analytics and online marketplace services to
commercial real estate, hospitality, residential and
other related professional industries across the world.
They also own a handful of websites that are very popular
amongst the real estate industry.
All these different renter websites, all these different
ones that connect different people to agents, they're in
that business of owning and distributing data about the real
estate industry. They also have a lot of
compelling things moving forward with this company.
We note here from Qualtrm that Costar holds a robust position
in the commercial real estate sector with a noteworthy 93%
renewal rate in subscriptions. 93 percent is insanely high.
That is the same retention that Costco has.
That's higher than most subscriptions in the world.
So this shows that this is almost like a business
subscription. When somebody signs up, they
view it as part of their industry, something that they
need to have. When you're only losing 7% of
customers per year, that's all you have to replace.
That is a very, very sticky subscription.
Diverse revenue streams. The company manages a diverse
set of product offerings across commercial, multi family
residential markets and including successful platforms
like apartments.com, Loopnet, which help mitigate risks
associated with any single segment of their business.
So even if real estate's doing poorly, they're going to be
affected by that, but to a lesser extent than the real
estate industry in and of itself.
It's a bit how like S&P Global has Commodity Insights where
they price out commodities. That business in and of itself
is not as volatile as the commodities themselves.
So they're a little bit detached from the real estate industry
themselves. They have proven growth.
Costar has displayed consistent growth, achieving 54 consecutive
quarters of double digit revenue growth.
This trajectory speaks volumes about their ability to adapt,
innovate and secure market leadership across various
segments. Now Qualtrum highlights that as
one of the the benefits of this company and it truly is one of
the most incredible things about this company.
Let me bring up a chart here. This is the quarterly trailing
12 months, which smooths out the revenue over time.
That looks pretty smooth, right? You don't see too many revenue
charts that look like this. It almost looks fake, but these
numbers are real. That is one of the the smoothest
trajectories ever, but that's on a trailing 12 month basis.
Check out when I move it to quarterly, which typically is
much more volatile across different companies, it's almost
indistinguishable from quarterly.
It looks almost just as smooth, not quite, but it's still
incredible. I don't see charts like this
hardly ever. So it really is incredible what
they're able to do. They just grow revenue
consistently 10% year over year almost every single quarter
without fail. And the reason that they can do
that all comes back to this incredible metric here, I
believe the most important one. They're 93% renewal rate.
Again, it's hard for me to overemphasize how incredible of
a retention that is. If there's a company that has
figured that out, whether it's Netflix or Duolingo or Costco,
Spotify, if you can retain 93% of customers year over year, you
only have to replace 7%, you have yourself an incredible
business, hands down. That's enough right there for me
to know it's an incredible business.
The company is also widely popular.
So even though you probably haven't heard about this company
in and of itself, the services they offer are super popular.
The company's platforms including Costar and
apartments.com, both strong user engagement metrics with average
monthly unique visitors reaching 163 million.
These figures are indicative of an effective brand awareness
campaign and successfully marketing.
Overall, Costar is an intriguing investment.
I like what I see here. When I look at the
profitability, it's certainly gone down over the past year.
And I think the reason that investors are now buying into
the stock is they believe that if there's any type of
resurgence in the real estate market, in the home market, that
those numbers Will Rock it back up.
And I think that's what they're planning on.
FICO looks expensive today because home originations have
slowed down. People aren't buying and selling
as much as they did 10 years ago.
But if that picks back up because interest rates go down,
Fico's going to do really well. And the same case can be made
for Costar. It's another company that should
benefit meaningfully if the real estate market heats back up.
Overall, the Aqua portfolio's good.
I like their new buys, but I wish they held on to their most
powerful, dominant companies that they already own.
Now moving on, we have the king himself, the best investor to
ever live, Warren Buffett. We can take a look at what's
going on with Berkshire Hathaway.
Let's go ahead and take a look at the biggest trades here.
They reduce their position by 2% in Bank of America.
This comes at surprise. They've been doing this for a
few quarters. I think it's a good move.
I think that they owned a lot of these banks.
I don't think they're the best companies in the market.
So it makes sense that they're trimming their positions.
They bought into Constellation Brands, that's the new holding.
They increase their stake in the Domino's and Occidental
Petroleum. We have them increasing
SiriusXM, Verisign and Pool Corp over the last quarter as well.
And then there's some cells and one of these could sting for
some investors that went into this company, Ulta Beauty, they
eliminated their position entirely.
This is not a lot of trading. Warren Buffett has mostly done
nothing over the past year. And I think that in and of
itself is instructive. It speaks a little bit to the
market we're in. They do not believe that there's
any dramatic deals in the market right now.
So while you see people on social media, people across the
Internet buying stocks left and right, pushing prices up,
pushing up PE ratios, now comparing stuff not even based
on PE but on price to sales, they are justifying even more
grossly overvalued companies, justifying narratives that are
even more extreme and unpredictable.
During all this market hysteria and speculation, Warren Buffett
remains completely still. And this is what he does.
He waits until he sees value in the market that's so clear.
There's such clear value that he's getting that he describes
it as a caveman hitting him over the head with a club.
You can't mistake it. You don't need to try to
rationalize it with complex formulas.
It's just such great value that it's unmistakable.
And that's when he'll start buying again.
But as of right now, you see what the Berkshire portfolio is
and it's not changing that much. Now moving on, we get to Mark
Massey of Altarock Partners. They have $5 billion into a very
concentrated portfolio of only four or five meaningful
positions. Now, I'll be honest here, I do
not like the trades that they made this quarter.
I think they're counterproductive.
I think that many of them will come back to bite them.
For example, one of the companies that they sold the
most of was FICO, which looking at their holdings, is one of
their strongest companies. So they're dumping their
strongest companies because of valuation concerns.
FICO traded up to a high PE ratio.
They sold out of the stock, and hopefully they can buy something
that will do better. But in most cases, I think
that's counterproductive if you're already in the green by a
large extent on a great company and the fundamentals remain
intact as a very bright future. There's multiple tailwinds for
FICO in the future. It'd be one that I would just
hang onto. I would maybe trim some of it
like Dev Cantisario did, but still have it as a meaningful
position. Instead, they sold out of it,
and they also sold out of a lot of other companies, or at least
they reduced their stake. They reduced their stake in
Transdyme and Amazon and Microsoft and Moody's and
MasterCard and Visa. It's fine to add to Google here.
I think that's a great one. But overall, I think these
trades are somewhat counterproductive.
They'd probably be better off just holding their positions.
Now, finally, we got to see what Michael Bury has been up to.
This is one that I always give of the disclaimer that I don't
think he's a great investor to follow, to buy into his
positions or sell out of them because he does things so
rapidly. He changes his portfolio
overnight. For example, in just the last
quarter, here are the trades he made.
He sold 100% of shift 4. So he was in that company as a
huge concentrated position, 16% of his portfolio, it's gone in a
single quarter. It's just gone.
So if you created a thesis around this company and you were
invested in it because you saw Michael Bury buy it, now all of
a sudden he's out of the company and you don't know exactly when
he sold. You just know it was during last
quarter. You'll see the same thing.
He bought into Estee Lauder, Pinduoduo, he bought into
Chinese stock. So he's betting heavily on a
Chinese stock recovery right now.
Alibaba is his largest position. Baidu is his second largest, JD
is his third. Those are three Chinese
companies that makes up around 35 to 40% of his portfolio.
But then we also have Estee Lauder, which has a bunch of
exposure to China. It's heavily reliant on the
Chinese market recovering. So we can know directionally
what Michael Bury's betting on. He's betting on the Chinese
equities to recover over the next year.
We don't know how long he'll stay in this trade, but that's
how he's positioned right now. So there we had a look overall
at the Super investors. And if you enjoyed this series,
make sure you subscribe to the channel.
I'll have more content out soon. That's all for now.
See you in the next one.