Moats & Multiples

SHOCKING: Many neocloud executives we spoke with feel that if they have non-NVIDIA networking gear on their cluster, or if their cloud has an AMD GPU or TPU offering, NVIDIA will retaliate. They feel that retaliation includes not giving early allocation or no longer supporting a potential IPO/VC raise.(1/3)🧵

Back of the envelope $SPGI $SPGI trades for $120.82B market cap. Apply $MCO current 26.31x NTM multiple to $SPGI 𝐑𝐚𝐭𝐢𝐧𝐠𝐬 business ($3.14B LTM operating profit) → $82.61B Apply $MSCI 27.20x NTM multiple to $SPGI 𝐈𝐧𝐝𝐢𝐜𝐞𝐬 business ($1.33B LTM operating profit) → $36.17B 𝐑𝐚𝐭𝐢𝐧𝐠𝐬 + 𝐈𝐧𝐝𝐢𝐜𝐞𝐬 = $118.78B $SPGI entire market cap is $120.82B ___ You’re basically getting Energy (Platts), Market Intelligence, and the Mobility spin-off for free And here’s the value to those: 𝐄𝐧𝐞𝐫𝐠𝐲 (Platts): $975M LTM operating income (14.72% CAGR from 2021–LTM) — Conservative 15x multiple → $14.63B 𝐌𝐚𝐫𝐤𝐞𝐭 𝐈𝐧𝐭𝐞𝐥𝐥𝐢𝐠𝐞𝐧𝐜𝐞: $1.21B LTM operating income assuming 8.5x multiple (IYKYK) since according to Mr Market it’s never going to grow → $9.68B 𝐌𝐨𝐛𝐢𝐥𝐢𝐭𝐲 (spin-off): low-end $7B All together = $31.31B ___ 𝐈𝐦𝐩𝐥𝐢𝐞𝐝 𝐭𝐨𝐭𝐚𝐥 𝐯𝐚𝐥𝐮𝐞: ~$150B, or ~25% higher than today’s market cap (~$510 share price) — $118.78B + $31.31B = $150B All while margins keep expanding and >80% of FCF is returned to shareholders At some point, Mr Market will take notice For now, let the accretive buybacks continue ___ Post inspired by @moats_multiples who shared an excellent piece titled “Inside TCI’s Conference: The Anti-AI portfolio” — link below 👇🏽 moatsandmultiples.substack.com/p/inside-tcis-…

@DimitryNakhla Thanks so much for sharing the post! I tend to agree that S&P could be an incredible buy at these levels.

Don't find this surprising at all. Spoke to two friends recently who echoed this sentiment. One is an engineer at CVC and another at Adyen. Unless cost per token drops dramatically or ROI on token spend increases, I see this as bad news for the LLM companies.

Nick Sleep didn't hire researchers, count cars, or call suppliers before buying Costco. He just saw what everyone else overcomplicated — and made 4x. A piece on why judgement and patience beat information in modern markets: open.substack.com/pub/moatsandmu…

@filippogarba @SouthernValue95 His view was that Microsoft's core business franchises are more prone to AI disruption vs. Google which is likely to reinforce its competitive advantages because of it. Personally, I'm not convinced that Office gets it lunch eaten by the LLMs.

@SouthernValue95 I am not as talented as Chris Hohn but I don't see the logic of a strong preference for $GOOGL over $MSFT, especially at this valuation

TCI's Chris Hohn on $GOOG and financial infrastructure ($V $MA $MCO $SPGI $DB1 "Within the technology sphere, TCI maintains positions in Google and SAP. Whilst they didn’t really discuss SAP, they seemed quite bullish on Google and its prospects in AI. Notably, they pointed out that unlike its peers, Google has a strong presence across every layer of the AI stack and that AI was a self-reinforcing competitive advantage in its other businesses e.g., AI has made the search business even better for users and customers. TCI project Google Cloud to grow at a 45% p.a. rate to 2030 and see it as one of the big winners in AI." "There was quite a bit of discussion around businesses in what TCI labels financial markets infrastructure – Visa, S&P Global, Moody’s, Deutsche Borse. The common seam through these discussions was the standards/protocol nature of these businesses which makes them near impossible to disrupt. All the while, most of these companies seem to be trading at decades low valuations on the fear of AI disruption from the market. TCI’s conviction here was evidenced by the increased allocation of capital to these businesses which the firm hopes will generate a high-teens net IRR over the next five years." moatsandmultiples.substack.com/p/inside-tcis-…

This guy went to Chris honh’s conference and write about it moatsandmultiples.substack.com/p/inside-tcis-…

@cloneinvestor Hey! Thanks for sharing my post. Learnt a lot from the conference and it was great to hear Chris and the investment team present their views.

@SouthernValue95 Thanks for sharing my article!

Chris Hohn just told a room of allocators he's "scared" of this market. Then he showed us the portfolio he's hiding in and why he dumped Microsoft. My notes from TCI's investor conference below: open.substack.com/pub/moatsandmu…

“Never confuse genius with luck and a bull market.” - John C Bogle

Like a moth drawn to a flame, I couldn't help myself and had to get a word in about IPOs. Read my latest article on Substack for free! open.substack.com/pub/moatsandmu…

I've increasingly become more bearish on my position in Microsoft. Check out my free Substack article where I go into depth about this. open.substack.com/pub/moatsandmu…

Took a bit of time off but we're back - check out my latest post on Substack! open.substack.com/pub/moatsandmu…

@AlecStapp How much of this represents tech companies using flex capacity contractors like $EPAM and $GLOB less?

Note that the Y-axis goes below zero... 👀

@themattharbaugh LVMH $MC is a world-class business with an exceptional brand portfolio, no doubt. But two key risks stand out to me: 1.What does normalised earnings really look like? 2.The unanswered question of succession.

Guy Spier on investing in $MC

@RealJimChanos People underestimate the sheer complexity behind Carvana's $CVNA operations. Success is determined by not only being an effective used car dealer but also a vibrant e-commerce platform, an efficient logistics company, and a quasi bank. Doing one of those things is hard enough.

I know no one cares about the “quality of earnings” these days, but would be remiss if I didn’t point out that $CVNA would still be losing money on record volumes, ex-gain on sales.

thoughts on what truly drives superior investment outcomes

I find it laughable that poor businesses will blame everything but themselves for their decline. $WW Great businesses have the gall to disrupt themselves when their industry shifts. ft.com/content/b54d22… via @ft