SVN Capital
@SvnCapital
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Founder, Portfolio Manager - SVN Capital "Money often costs too much" - Ralph Waldo Emerson Disclosure:
Lincolnshire, IL
Joined June 2020
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I love this chart from JP Morgan Wealth Management: reasons not to invest 1999 - 2021 with an overlay of what S&P 500 has done since. It's easy to get lost in the most recent "apocalypse", but look at the power of patience and compounding...
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Good advice from JPM - Case for staying invested (always). 7 best days happened within 2 weeks of the 10 worst days.
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Lou Simpson RIP. The investment world lost a savvy investor today.
Bob Miles in his wonderful book The Warren Buffett CEO dedicated an entire chapter to Lou Simpson in which he had an interesting comparison of Peter Lynch and Lou:
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Peter Thiel at Stanford in 2017 - "Competition is for Losers".
This is a gem and is absolutely worth 50 minutes of your time. I've jotted down some of the nuggets below.
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While I own $KKR I have always appreciated and looked forward to Marc Rowan's $APO views. Here in the Q3 2023 call today, is Marc talking/teaching about the state of the investment universe from his vantage point.
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1/5 $EVO 2021 annual report:
Global gaming market - Eur 359 bill, 75% land-based
Online gaming market - Eur 23.9 bill; 5yr CAGR - 16%
Live casino market - Eur 7.5 bill; 5yr CAGR - 31%
$EVO - Eur 1.1 bill (2021); 5yr CAGR - 50%
Big TAM
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Credit Suisse released its 2023 report on family-owned businesses recently. It's been a great tradition in CS since 2006 and I hope it will continue even after UBS takes over CS.
There are some interesting findings:
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$LVMH Q4 2023 earnings call; It's always great to hear Bernard Arnault's take on the luxury landscape:
- Dior slowing down a little (deliberate?)
- some watches can be Eur 500,000 - 1.0 mill
- LVMH doesn't discount; "Discount is what Pernod and Remy do"
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$CPRT Every year around this time I look for the 'Crash Course' report from CCC Intelligent Solutions. This year's 172-page deck just arrived.
- Vehicles have become smartphones on wheels
- Repair is becoming more expensive
- Higher vehicle values meant fewer total losses
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“Returns to shareholders in public companies where the founder is still involved are 3x higher than in other companies” - The Founder’s Mentality by Chris Zook and James Allen
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$EVO buying back shares! Not a lot but it is a good start - Eur 400 mill of shares!
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$EVO - More than 2/3rd of the recently announced share repurchase authorization was done in 5 days. 👏👏👏
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Great presentation by Brian Bares of Bares Capital. Compounded capital at high-teen% over the last 18 years.
Finding an Edge; creating a moat around an investment process via
@YouTube
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$EVO has been quietly answering the doubters.
Regulatory issues? Well, in addition to releasing new games (88 planned for 2022), another new studio opened today...in CT. $DKNG and Fanduel $FLTR went live on launch.
TAM? Peru just approved iGaming.
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Sometimes I feel that the power of reinvestment doesn't get its due credit for wealth creation.
Here is John D. Rockefeller, the richest man on earth then, who didn't go to college, on how he felt about dividends.
Source: Titan by Ron Chernow
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$DNP announces adding 3 more distribution centers (currently has 9) at a cost of PLN 420 mill, financed with internal funds. Historically, each distribution center served about 300 - 450 stores. Another indication of potential store growth.
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$EVO acquiring Galaxy Gaming for $124 mill, including debt, to be paid in Cash. Putting some of that cash to work!
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$ODFL released its deck yesterday; Capital Management captured in one slide:
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$EVO initiation with a BUY (Sep 2022) at SEK 1,260, and here is the crux of the thesis.
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A gem of a $EVO interview on
@TegusHQ
today. Both the interviewer and interviewee made it informative, fun and answered all the major questions. Missing was the regulatory angle, but still worth it.
Why can't casinos copy what EVO does?
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$EVO - New capital allocation framework; Another Eur 400 mill share repurchase annoucement!
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An interesting look at how and why Sweden has produced some world-beating gaming/gambling companies like $EVO, $KAMBI, $KIND, $BETS, and others.
The most common employee skill...is not a nurse or a teacher, but a programmer.
The Swedish Invasion
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Great piece by Graham Weaver on how to live an asymmetric life:
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@Prof_Kalkyl
I agree. To me this feels like blaming Budweiser when a liquor store sells beer to a minor who used fake ID.
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Martin Carlesund $EVO in an interview today says they'll release 25 new games along with its Q4 release and 90 games in 2022! In the past, it has been 1/3rd that, but of course, 2021 was a little light in this regard. 90 new games would make it a monster year.
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$DNP Frmr. Category director of Jeronimo Martins answering why margins at DNP are consistently higher...
Reasons: Store open cost + oper. exp. + fresh meat
Open. DNP store = 1/2 the cost of Biedronka = 1/4 the cost of Lidl
🙏
@TegusHQ
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$EVO the market leader in live casino is positioned well to benefit from more states regulating. According to Scientific Games ($LNW) investor deck, the size of the US iGaming market is massive. Live casino should grow as well.
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$EVO In addition to the excellent deep dive by
@wolfofharcourt
I'd recommend the reports by Ed Young of Morgan Stanley. Here is one of his latest.
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Reading ‘Memos from the Chair’ by Ace Greenberg of Bear Stearns. Picked it up ‘cos Warren Buffett had written the Foreword. Many of these memos are quirky. This one jumped out…
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$EVO competitive strength in 2 paragraphs, from a former NetEnt executive in a recent interview.
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I recently presented $EVO as my best idea. But some in the audience disregarded it on moral grounds as a ‘sin’ stock.
I’ve seen Warren Buffett address moral issue relative to cigarette stocks; Terry Smith on alcohol.
But here is Thomas Jefferson:
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The Art of (Not) Selling from Akre Capital Management - (Not) by Chuck Akre, but by Chris Cerrone
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$EVO An expert on
@TegusHQ
discusses the competitive landscape in the live casino supplier landscape
Even if an organization has Pragmatic, Playtech, and Evolution as 3 main suppliers, EVO will still be taking 60%-70% of the business simply because of the quality of games
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$EVO a couple of interesting data points from $PTEC call on Thursday, 9.22.22:
1. Live casino is expected to hit $18 bill GGR by 2025
2. NJ allows streaming across the US and outside
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$EVO has completed about 55% of its Eur 200 mill repurchase announcement. Not bad but hope to see more. Perhaps further clarification on widely discussed misinformation about the company?
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I was looking forward to this piece; it didn't disappoint.
Bernard Arnault – ‘Paris is booming’
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$KNSL released its Q4 '23. Warren Buffett said the following in his 1987 letter:
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From a recent
@tegus
interview of a former $EVO executive, answering why in-housing of live casino doesn't make sense.
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$EVO - From DraftKings' investor day deck today: Based on NJ gross revenue/adult, US iGaming TAM of $52 Bill. Also says, extrapolating from NJ is likely conservative given PA and MI's iGaming performance.
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With companies like $CSU.TO and $PAR being the rage of some on
#fintwits
this is a must read replete with examples of companies with growing TAM, expanding GMW, and flyweel on wheels.
Ten lessons from a decade of vertical software investing
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Just got back from Sweden after meeting some wonderful management teams. I can see what Ed Chancellor wrote in his wonderful book ‘Capital Returns’ about Scandinavian exceptionalism:
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Nick Murray in his book "Simple Wealth, Inevitable Wealth" captures the essence of his book, his investment philosophy which is similar to mine, in a postcard.
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A must-listen for anybody interested in $EVO. Thanks to my friends
@Pierreobv
and
@Lou_Mannheim
for a great conversation. 🙏
It was great to have one of the post prominent financial twitter profiles on the podcast,
@Lou_Mannheim
to discuss $EVO. In this 2hr podcast, Magnus breaks down his investment case for Evolution and we also discuss some of the recent controversies.
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@LiviamCapital
The question is a good sieve. For me, it would be Dino Polska $DNP.PL Check out my overview piece
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A great book about how to improve performance by quieting the mind. Sort of a spiritual exercise. One could replace the word "Tennis" with "Investing" and enjoy it as an investment book.
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$WRB Rob Berkley Jr. in the Q2 earnings call talks about why Excess & Surplus (E&S) continues to grow. $KNSL the only publicly traded insurer that is 100% E&S has been highlighting the same.
Rest of his prepared remarks is interesting & worth reading.
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@yanisvaroufakis
in his wonderful book ‘Adults in the room’ about the Grexit saga, dishes out a joke - …about insurance companies…or, is it about golfers!
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1/5 $DNP Biedronka, owned by $JMT.PT, announced Q4 2023 results on Mar 7, 2024. It is the largest mkt share holder, in groceries, in Poland and is the largest competitor to DNP. However, just from this call one could see the diff in strategy and focus
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Thanks to
@JamesClear
for this wonderful chart in his book Atomic Habits; it’s applicable to many aspects of life, but particularly to investing with a patient, long-term approach
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$KKR CFO Robert Lewin thoughtfully answers the question on capital return. With so much growth opportunity, the focus will be on insurance, core PE, strategic M&A, and share buybacks.
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$EVO State of Maryland is one step further to legislating iGaming. h/t
@nextdotio
The Innovation Group submitted a study to MD in late 2023. Some interesting data points:
- Growth of GGR
- MI growing at a much faster clip
- ~30% play in illegal channels in MD
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$MKL I don't own it but am a big fan and follower of Tom Gayner. Qual. of the man is evident in his candor & skin in the game
- Q3 had good, bad, ugly; Collateral protection, a new prod had some issues
- owns $74 mill of stock, and continues to buy
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$ODFL Reasons for its long-term success in 1 page - from its latest deck released this morning
CFO since 2013 was $8.0 bill, 25% of which went to increasing the door count. Mkt. share went from 3% in 2002 to 12% in 2022
Operating Ratio went from 85.5% in 2013 to 70.6% in 2022
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$EVO deserves a better shareholder base. This from FT today. More states legalizing online gambling, more players, more bets, and more spending: all +ve for $EVO.
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$CPRT An expert on
@TegusHQ
today explains how $IAA which is the largest competitor to CPRT, lost GEICO, one of its largest customers.
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$LVC keeps doing what it has been doing for a long time now.
Outstanding financial performance in 2023 again:
- CFO up +69%
- EPS up +45%
- Op. margin 59%
Net cash on the Bal Sheet. Founders own 39%.
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$EVO a recent
@TegusHQ
interview in which an expert answers the question:
"Why do players keep going back to EVO even when some operators lead them to other suppliers' games?"
The answer is quite telling: it all comes down to player experience. Hard to beat EVO in live casino
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From Baron Capital. A wise man stretched out, spewing wisdom.
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Sweden: a marvelous country of only 10 mill that's steeped in innovation.
"The Zip, monkey wrench, 3-point seat belt, pacemaker, tetra pak...are all from Sweden."
Some wonderful family businesses.
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As 2022 comes to a close, $EVO continues to remain one of my favorite businesses. Here is Martin Carlesund answering what drives the creative process at EVO, in Jan/Feb 2020 Gambling Insider. While ~ 3 yrs old, it gives a glimpse of the man, the culture & Co.
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I like the "Rule of Three" by Giverny Capital (Canada):
1. 1 year out of 3, the market will go down by > 10%
2. 1 stock out of 3 will disappoint
3. 1 year out of 3 we will underperform the index
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$MKL Tom Gayner on Q4 2023 call yesterday - Insurance operations not great (Combined Ratio was 98%) while Ventures and Investments were great. Bad news up front, no beating around the bush...I like that in a CEO.
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“If we consider games of chance immoral, then every pursuit of human industry is immoral; for there is not a single one that is not subject to chance, not one wherein you don’t risk a loss for the chance of some gain.”
- Thomas Jefferson in 1826
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$MKL another glorious letter to shareholders (2022) from Tom Gayner. Clearly explains the confusing and ludicrous nature of GAAP accounting for insurance companies.
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$EVO Q2 2022 results look good. Slightly slower revenue and margin on the lower end.
@Lou_Mannheim
and
@gnufs
have covered the details well.
My addition is on:
1) Regulatory issues
2) Capital management
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$CPRT announced FQ4 2023 results. Great results.
1. Capex was hi; ~$2.4 bill over the last 5 years; still looking to add land!
2. Cash pile is massive; $2.4 bill to help fund potential land deals; moat widening!
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Sweden:
Evolution AB - $EVO
Poland:
Dino Polska - $DNP
LiveChat Software- $LVC
I’m always impressed with the number of quality growth stocks available in Europe:
France🇫🇷
- Sartorius
- LVMH
- Hermes
- L’Oreal
Denmark🇩🇰
- Novo Nordisk
Netherlands🇳🇱
- ASML
- DSM
Switzerland🇨🇭
- Sonovo
Germany🇩🇪
- Nemetschek
- SAP
Italy🇮🇹
- Diasorin
- Campari
Faves?
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1K
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$CPRT an interesting article by Andvari Associates on vehicle complexity and the cost of repair leading to higher total loss ratio
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$RYAN, the only public wholesale broker, announced Q4'23 today. RYAN is the largest broker serving $KNSL. CEO Pat Ryan and President Tim Turner gave some great color on why they expect the E&S market to continue flourishing. Good read-thru for KNSL.
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There are many smart $EVO shareholders that I follow, but
@gnufs
digs up details that is outstanding and puts him in a league of his own.
$EVO Haushalter:
"We need to save baccarat and make it appealing to the next generation"
Baccarat remains Evolution’s most popular product in Asia by a long way – the “600-pound gorilla”
"The US has become our biggest slots market, which has sort of happened overnight"
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$HEI A wonderful conversation on Wencor deal, PMA, and opportunity, with an expert. Thanks to
@_inpractise
.
- PMA is accepted everywhere
- Wencor overlap is only 12-15%
- Mendelsons and their LT thinking
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$LVMH Bernard Arnault in H2 2022 call on how Rolex handles counterfeits and how he may try that approach.
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$EVO a fascinating discussion. Graham Rhodes
@longriver_hk
is a great interviewer, comes up with good questions and
@gnufs
is one of the best brains on the name. 🙏
I had the pleasure of speaking with Ali Gündüz
@gnufs
about Evolution $EVO, going through the full laundry list of issues like increased competition, Asia, the slow roll-out of game shows in the US, RNG and capital allocation. Full transcript here:
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$EVO continues to execute.
Funky Time - another unique EVO production...increasing distance from its competition. With more game releases planned for H2 2023, I expect this snowball to gather mass.
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$DNP in Poland just released its Q3 2022 earnings
- LFL sales growth in 9 months is 28.3%
- 2,069 stores; 813 new stores in 2022
- Q3 2022 LFL sales 33.2%
- Q-o-Q growth in Sales/EBITDA/Net Income: 9.8%/18.9%/24.2%
All this with a war next door! Outstanding Q.
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$RMS "...when there is a tougher time, there is a flight to quality syndrome..." - Axel Dumas (CEO) in H1 2024 call today.
A picture is worth a thousand words:
"The solid first-half results, in a more complex economic and geopolitical context, reflect the strength of Hermès’ model." - Axel Dumas, Executive Chairman of Hermès
$RMS Q2 2024 revenue growth by business line:
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I am glad to see $EVO come out with a strong response to this anonymous slander report.
The $EVO allegations are 1) Not a new problem, meaning the VPN work-around, and 2) Not mainly Evolution's responsibility, but the operators'. This is just ugly mudslinging from a helpless competitor with one intention - to make Evolution look bad.
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Must read for vertical software investments - $CSU, $TOI.V, $PAR, and others.
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$DNP Q3 2023 results show the strength of this business model, again
- Solid revenue, profitability and store growth
- Back to a healthy LFL spread over inflation in Poland
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Another strong Q today from $LVC in Poland - the best in customer communication apps.
- ~ 80% ROC
- 100% revenue in USD; >50% expenses in PLN
- Net cash on BS
- Owner operated;
@mariuszcieply
(Founder, CEO) owns 13%
- Trades at 18x E; 4.5% FCF Yld; 4.4% Div Yld🤔
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$EVO reminds me of “Every storm runs out of rain” - Maya Angelou
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Here is Jay Adair, then President, now Co-CEO of $CPRT, answering a question about share buybacks in Sep 2005 after Hurricane Katrina. I looked at the episodic buybacks since 2005.
I wish more CEOs had this much clarity about capital.
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$CPRT this was the best part of the FQ2 2024 earnings call yesterday: "...capitalization with our clients is a distinctive competitive advantage."
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The importance of "time in the market"—Dr. Hendrik Bessembinder has a new report. It's an interesting study showing the power of compounding over a long time, even at a modest rate.
h/t
@manualofideas
@JMihaljevic
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My friend
@JonCukierwar
does a fantastic job 👏🏽 of describing the Polish grocery chain Dino Polska $WSE:DNP.
Company just announced that they have opened 96 new stores in Q2 and have ~2,000 stores; long runway ahead.
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This is a great interview:
Chick-fil-A, a private, family-owned business, unfortunately, I might add, has never had sales less than the previous year in its 76-year history!
Chick-fil-A Chairman Reveals the Secret Recipe for Success! via
@YouTube
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Jay Adair, CEO of $CPRT gets $1.00 in cash comp and gets options to buy 1.0 mill shares - from 10K filed yesterday (9/28/20).
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$LVC, one of the best customer communication focused SaaS comapnies, formally changes its name to Text SA fully reflecting its text focused product suites
Highly profitable (op. mgn lo 60%), healthy growth, B/S with net cash, owner operated SaaS, divvy 4.3%, trading at 20x P/E
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From this wonderful book about $ODFL titled ‘Helping the world keep promises’ which goes through the history of the company.
Today, $ODFL is one of the few trucking companies that doesn’t have union labor, one can see why. Culture continues to help keep the Union away.
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Bill Miller Q2 2020 Letter. Grizzled veteran with an optimistic view. I like the reference to George Soros and "...you want to be long the stuff that's going up, and short the stuff that's going down."
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$CPRT CCC Crash Course Report 2024 is out. All factors leading to a higher total loss ratio are continuing to go up - vehicle complexity, cost of labor...
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$DNP 2022 results out. Another outstaning year:
- 2,156 stores
- 28.5% LFL sales vs. inflation of 15.4%
- Some margin pressure due to inflation & supply chain
- Long runway ahead
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Started reading “Diary of a Hedgehog” by Barton Biggs. Fascinating to read his answer to “struggling with yourself” in the market - maintain a personal investment diary…written in the heat of the moment…
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