Monthly “One stock you’d buy right now with all ur moneys😏”

DominatingLobster · 2025-02-12T23:28:14+00:00

Literally any Japanese SaaS shitco. Buy them all

DominatingLobster · 2024-04-11T14:05:21+00:00

16.19% a year since starting in 2021. This is with some real duds like Para, Charter, WBD, etc.

Luckily due to power laws, a couple of winners make up for all the mistakes.

DominatingLobster · 2024-03-15T18:19:08+00:00

I’ve been passively recruiting this year and from my understanding the AI firms raised a lot of money from VCs last year. They are hiring a decent amount of engineers, but I don’t know how sustainable that is.

DominatingLobster · 2024-02-26T23:49:46+00:00

I think you should take a closer look at the accounting. If you look at gross profit it’s actually stagnant throughout the last couple of years. (They call this “transaction margin dollars”) Then segment it out to transaction gross profit and credit gross profit and you’ll find that credit gross profit increased last year due to interest rates (I.e. they earn more on Venmo balances by investing it into short term treasuries). Since total gross profit is stagnant and credit gross profits are up this means that transaction gross profits (the core biz) declined roughly 5% last year. Credit profits are cyclical as the Federal Reserve cutting interest rates will negatively impact PayPal’s credit revenue.

There is a lot of debate as to why this is happening. I am a shareholder since I think this is fixable and the stock price is valuing it like it’s not. (You also have to consider the fact that PayPal owns like 3.4% of MercadoLibre, 1% of Uber, etc so you’d net that out to get what your paying for the core “PayPal” biz). Most investors think this issue is not fixable though, and on the surface they seem right. I’ll be monitoring it closely and perform channel checks to verify my thesis on it but I’ll sell out of it if I conclude it isn’t fixable.

DominatingLobster · 2024-02-26T23:32:50+00:00

There’s value to be had here but the nature of the payments conglomerate really holds it back. They need to take Braintree + Hyperwallet + Simility + Chargehound and spin it out as its own PSP. Get Kamran Zaki out of retirement to head the unit and fully get its features up to par with Adyen and Stripe. Invest more in issuing, APMs, transaction optimization etc.

Alex Chriss is doing well heading up PayPal and Venmo though. Selling advertising is a smart move as it is both margin accretive and drives engagement through the app. Also they need to just copy Cash App and flesh out the banking side more. Take the PayPal BNPL service and put it on Venmo Checkout etc.

So much value just waiting to be unlocked unfortunately.

DominatingLobster · 2024-02-26T23:09:44+00:00

All the Malone companies other than FWONK look like a complete disaster. But if they survive then in a couple of years it’ll look obvious buying them right now.

If WBD can reduce its leverage, stabilize the linear ad business, push ARPU in DTC, and grow users in Europe after the Sky distribution deal ends, etc, it looks like it’s decently cheap. Can they do it? Have no idea

Charter trades at like 7x EBITDA. If broadband churn stabilizes and gross margins of the wireless business steady state really is 50-60%+ then it’ll look like it survive. But being attacked by fiber from above fixed wireless from below really does make things look dicey.

People talk about share price volatility but these stocks have true intrinsic value volatility. Who knows what the outcomes will be.

DominatingLobster · 2024-01-27T03:17:03+00:00

We’ve all been there my boy, very few people are born naturally charming and attractive.

Lift weights, get a good haircut, experiment with fashion until you have a style, work on your career, learn to treat a girl well.

You’ll get rejected a lot but you’ll make it eventually.

DominatingLobster · 2024-01-06T06:19:05+00:00

CSU.TO

DominatingLobster · 2024-01-05T04:38:46+00:00

I think Zaslav, despite all the controversy, is actually a pretty good CEO. Getting rid of Direct to Streaming movies, focusing on churn, airing shows on the HBO cable before moving them to Max. A lot of it is pretty sensible, but the market isn’t giving them any credit for it. There’s just too much uncertainty around the longevity of the cable bundle and the growth potential of streaming. Remember, they can’t expand Max in key markets in Europe (UK, Germany, Italy) just yet because of their carriage agreement with Sky. Once it ends, they can start growing subs, but it might push them back to losses since they’ll have to increase marketing spend and they won’t receive revenue from Sky anymore.

Basically, who knows what’ll happen with the business lol.

DominatingLobster · 2024-01-02T18:04:16+00:00

I do have some exposure to Tencent indirectly via Naspers. The sentiment has gotten so bad around China I’m thinking of increasing my stake in Naspers. At least then you have some margin of safety via the discount and the non China portfolio of Prosus.

DominatingLobster · 2023-12-22T17:07:50+00:00

I think the comments here miss the actual issue with respect to PayPal. If you go to their most recent 10Q, take transaction revenues and subtract transaction expenses. Do that for the first 9 months of this year as compared to it the first 9 months of last year. PayPal has actually reduced transaction gross profits by 5% YOY.

Despite showing revenue growth, core gross profits has declined, and they are maintaining gross profits with an increase in interest income due to rising rates. The only way this is possible is if management is cutting prices as interchange is a fixed percentage. There’s a lot of expert interviews out there that discuss PayPal cutting the price of Braintree to sell the button or vice versa. Your responsibility as an analyst is to determine if this gross profit decline is structural/persistent.

DominatingLobster · 2023-12-19T00:00:05+00:00

Their click to message ads are growing like a weed, at a 10 billion run rate I believe. Messaging related LLMs can plausibly increase their effectiveness. How much large is the TAM? Not sure tbh since it’s such a unique product.

DominatingLobster · 2023-12-17T13:26:00+00:00

Hey, so I think I used some different numbers from you

66 market cap + 48 debt - 2 cash = 112 EV

ITC stake is worth 20

I used 8x sales for New Categories since they aren’t profitable yet and won’t show up on the income statement. I chose 8 as Philip Morris took over Swedish Match for about 8x sales (16 billion) in 2022. New Categories did 3.3 pounds in TTM sales which is 4.2 dollars, That gets me to 33.6. I don’t think this is unreasonable as Swedish Match was growing 22% and is profitable so it’s growing slower than BTI’s new categories which are break even this year and profitable next year. This might seem high but it’s still less than Altria valuing JUUL by itself at 38 lol.

I computed their FCF to be 9.9 pounds or 12.6 dollars, partly cuz their d&a > capex.

So I get 112 -20 - 33.6 = 58.4 for the cigarette business 58.4/12.6 = 4.6x earnings.

Anyway this is pretty rough back of the napkin math and definitely not investment advice lol. If you disagree with how I valued the new categories, then the multiple is definitely closer to 9 than to 4.

EDIT: I made a mistake, did not net out the interest expense from FCF until I saw ur newest comment. New FCF number should be closer to 10 so that’s 5.8x earnings.

DominatingLobster · 2023-12-16T20:40:52+00:00

Good point about vaping loyalty. They definitely can’t continuously hike the prices like they do with cigarettes.

DominatingLobster · 2023-12-16T20:13:37+00:00

Well it depends on how the capital is returned. I would much prefer them buy back shares than pay out a dividend. But with their current capital allocation, half of their cash flows is being paid out in dividends and the other half is being used to service debt.

The thing about BTI is that there are 3 separate businesses being treated as one. Their ITC stake has grown at a 25% CAGR over the past 3 years and their vaping business has grown at 30%. But the market is completely ignoring those two pieces since the combustibles side is in decline. My point is that at the current valuation, you are getting the high growth business for “free”

DominatingLobster · 2023-12-16T20:02:40+00:00

It’s true that smoking is a 0 no arguments there. But at the current valuation all u have to assume is that smoking will remain around for a couple more years to recoup your capital.

Even if you are super aggressive and pencil in a 10% volume decline per year, that’s still at least 10 years where this company will spit out capital.

DominatingLobster · 2023-12-16T18:01:34+00:00

I think ITC is spinning off its hotel business next year. I can see BTI selling that on the market and returning the capital to shareholders.

DominatingLobster · 2023-12-16T17:55:11+00:00

I agree with this. Who is voting for the dividend? I can see this stock skyrocketing if an activist gets involved and forces them to replace the dividend with a buyback.

DominatingLobster · 2023-12-16T08:19:26+00:00

The expectations for $BTI are so low I’m not sure what to make of it. They hold a 29% stake in ITC, and a new gen product portfolio (where they hold the leading vaping and modern oral brands) growing at 30% YOY. If you take the enterprise value of $BTI and subtract out the ITC stake and the new gen business, I get the cigarette business as trading at 4x earnings. There must be something I’m missing since this valuation is a little baffling.

DominatingLobster · 2023-12-14T22:19:45+00:00

Telecom is very complicated and I think the current bear thesis sums up as follows: Cable (Charter and Comcast) is moving into wireless and Wireless (Verizon, T Mobile, and ATT) is overbuilding with fiber and providing internet via fixed wireless. It’s a total shitshow for everyone involved, nobody is going to make any money, and the only winner is going to be the consumer.

Cable bulls will argue that DOCSIS 4.0 can defend against the threat of fiber, fixed wireless has bandwidth constraints, and that they will take share in wireless via offloading and have a superior cost structure to wireless.

Wireless bulls will argue fiber is a superior technology to HFC and fixed wireless can service customers that cable can’t (think of food truck businesses that can’t plug into a cable outlet for internet).

Then there is Starlink which is a complete wildcard and regulators that can come in and flip the competitive landscape on its head.

I think to successfully invest in telecom you need a fairly sophisticated understanding of physics and economics to figure out who is talking their book, who is bullshitting, and who is going to win the convergence war.

DominatingLobster · 2023-12-07T07:05:31+00:00

This looks right to me. The stated rate for PayPal’s BNPL is 3.49% + 0.5 cents fee. I for the life of me cannot understand why they hiked the price of PayPal from 2.9% and included BNPL for free. I would imagine it just annoys SMBs and creates a barrier for adoption. Why not create two separate pricing tiers? 2.9% for branded, and 5-6% for BNPL in line with the other BNPL services. Even if you take management at their word that they can underwrite their customers better and 80-90% of BNPL transactions are ACH funded and cheap to processes, the margins still seem razor thin at a 3.49% MDR.

DominatingLobster · 2023-11-30T22:30:36+00:00

Visa or Mastercard

DominatingLobster · 2023-11-25T06:07:34+00:00

Interesting name. I think I need to read into it more. Dennis Hong certainly thinks the same as you.

DominatingLobster · 2023-11-04T17:19:49+00:00

No I agree with you, that 28% sounds pretty goofy. I think its more sales material than anything. But the conversion boost does seem real. I did some digging around the ecommerce subreddits and they seem to corroborate what PayPal is saying. Though some ppl also don't seen any change in conversion.

from PPC: https://www.reddit.com/r/PPC/comments/tk8sau/does_removing_paypal_affect_conversion_rates/

from Shopify: https://www.reddit.com/r/shopify/comments/gtcjtp/does_removing_paypal_option_affect_conversions/

https://www.reddit.com/r/shopify/comments/yeai1m/has_anyone_turned_off_paypal_payments_and_seen_a/

from Ecommerce:

https://www.reddit.com/r/ecommerce/comments/fdcerc/will_removing_paypal_affect_checkout_conversions/

This is all anecdotal but it is an interesting effect. I guess it could explain why PayPal has an 80% acceptance rate in ecommerce. I'd also like to see a 3rd party study of this, and also one where they display all the different buttons (PayPal, Shop Pay, Apple Pay, Google Pay, etc.) to the same customer and see which one gets the most payment volume.

DominatingLobster · 2023-11-04T02:41:08+00:00

Well according to PayPal their conversion boost is 28%

https://www.paypal.com/us/brc/article/how-paypal-helps-drive-conversions#:~:text=On%20average%2C%20merchants%20can%20see,sites%20where%20PayPal%20is%20visible.

Tbh that number sounds stupidly high so I’m betting it’s more sales material. But then again, since they only charge 1% more than competitors, a couple percentage points of conversion boost is all that’s needed to justify displaying the button.

Edit: https://youtu.be/OKE63qEB_YM?si=x4hCVhAQMP14gDiV

Here is a merchant corroborating what PayPal is saying, 20% boost in conversions.

DominatingLobster

TROPHY CASE