New Investment Idea (2024)

After my last long idea in January of this year (link), I am sharing a new one today. For obvious reasons, I will only post stock picks if I personally invest a decent chunk of my money in them. It will never be a goal of mine to look for quick ideas to share on the blog simply because they are what creates the most buzz. I think good ideas are rare and relatively infrequent, and only when I really think I am facing one of those situations do I sit down with my computer and share it on the blog with paying subscribers. Today I will be talking about one of the most important investments I have made so far this year.

Some of the aspects that make this company unique are:

• It is a leader in an oligopolistic industry with secular tailwinds. Time is on its side.

• It is a highly cash-generative business which grows with very low incremental cost. It is asset-light, and ROIC is over 30%.

• It provides critical solutions that represent a small percentage of total costs for clients. 

• It has great pricing power and customers have little incentive to switch.

• No negative organic growth reported in the last 40 quarters (not even during the pandemic). Low double-digit organic growth rate over the last decade.

• It is led by an owner-operator who thinks and acts accordingly to create long-term value. Almost all of his capital is invested in company’s shares.

• Current problems create a unique opportunity for patient investors who can ignore short-term noise. Valuation is the most attractive it has been in years.

• FCF per share is likely to grow above a CAGR of 15% for many years to come. There are lots of reinvestment opportunities and TAM that is only getting bigger. High probability of outperforming the S&P 500 in the medium and long term if the management team keeps up the pace.