Saber Capital Management's John Huber describes inevitable retail winners + $FND thesis

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Dec 20, 2023

John Huber, the founder and portfolio manager at Saber Capital Management, discusses the concept of "inevitable retail winners" and shares his thesis on Floor & Decor. He talks about characteristics of inevitability, gives examples of retail companies that exemplify this concept, and delves into the moat and valuation of Floor & Decor. The podcast also covers topics like retail management and culture, macro impact on Floor & Decor, and the risks associated with the investment.

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Introduction

00:00 • 5min

Inevitable Retail Winners and the Importance of Differentiation

04:30 • 17min

Comparing Potential Retail Winners and Factors for Success

21:40 • 4min

The Superiority of Larger Distribution Centers

25:15 • 16min

Impressive Returns on Capital for New Stores in the Retail Industry

41:10 • 22min

Private Equity Ownership and Lessons from Home Depot

01:03:10 • 3min

Growth and Business Strategies of Home Depot, Walmart, and Floor & Decor

01:06:20 • 10min

Analyzing the Potential of Five Below and Understanding Retail Investments

01:16:10 • 3min

John Huber, Founder and Portfolio Manager at Saber Capital Management, joins the podcast today to describe the concept "Inevitable Retail Winners", characteristics of inevitability, as well as talking through many different examples that exemplify this concept. In addition, John shares his thesis on Floor & Decor (NYSE: FND).

For more information about Saber Capital Management, please visit: https://sabercapitalmgt.com/home/

Article from Base Hit Investing: https://basehitinvesting.substack.com/p/munger-podcast-thoughts-retail-stocks

YAV blog post on retail: https://www.yetanothervalueblog.com/p/cyber-monday-thoughts-part-1-retail

Chapters:

[0:00] Introduction + Episode sponsor: Alphasense

[1:55] What is an "inevitable retail winner" and Charlie Munger's thoughts on this

[10:19] Restaurants

[12:34] Various retail companies mentioned, are they "inevitable retail winners"; characteristics of "inevitability" - using AutoZone as an example as well

[22:09] Retail management and culture

[27:33] Floor & Decor $FND: what is their moat? / customer experience / why inventory is a moat

[38:55] Pro vs. DIY customer spend / comment on ROIC on new stores / does $FND want to own their own stores

[45:14] Macro impact on $FND?

[51:14] $FND valuation

[58:20] $FND described as a "category killer"

[1:00:21] $FND risks

[1:03:36] Any difference in $FND pre vs. post IPO + mistakes management made in the past

[1:07:16] Push back on $FND thesis: recent acquisitions and "category killer"

[1:11:32] Any other retails that John thinks has a chance to be inevitable or he thinks that a lot of investors talk about in this "inevitable" way

Today's episode is sponsored by: Alphasense

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