TIP576: Mastermind Q3 2023 w/ Tobias Carlisle and Hari Ramachandra
Sep 10, 2023
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Tobias Carlisle is a value investor and the mind behind two deep value ETFs, while Hari Ramachandra brings his intriguing insights on alternative investments to the table. They discuss intriguing stock picks like Constellation Software, Brookfield Corporation, and Winnebago. Tobias shares his bullish outlook on Winnebago, while Hari delves deep into Brookfield's corporate strategies. The conversation also touches on valuation methods, the lessons learned from investment mistakes, and the role of community in fostering growth among investors.
Constellation Software has a proven track record of acquiring small vertical software businesses and achieving high returns through disciplined financial management.
Constellation Software's culture, disciplined financial management, and access to valuable data give them a competitive advantage, but increased competition and the need for new areas of focus pose challenges for future growth.
Mark Leonard, the CEO of Constellation Software, is highly regarded for his successful capital allocation strategies and decentralized structure, attracting founders and perpetual owners to sell their businesses.
While Constellation Software has a strong track record, potential investors may want to wait for a more favorable entry point due to the company's high valuation and consider market weaknesses to enhance potential returns.
Deep dives
Constellation Software's track record of success and growth
Constellation Software has been compounding annually for 34% since its IPO in 2006, with a 20% annual return over the past 20 years. They have a proven track record of acquiring small vertical software businesses and have accumulated close to 1000 of them. This approach has enabled them to achieve high returns and expand their market presence.
Competitive advantages and challenges for Constellation Software
Constellation Software has a strong culture, disciplined financial management, and access to valuable data, which gives them a competitive advantage. However, increased competition in the software industry and the need to transition into new areas may pose challenges for their future growth. The valuation of the company is also considered fairly high, which might limit potential returns.
Mark Leonard's leadership and the company's unique approach
Mark Leonard, the CEO of Constellation Software, is highly regarded for his successful capital allocation strategies and aligned incentives. The company focuses on disciplined acquisitions and maintaining a decentralized structure. These factors contribute to their ability to attract founders and perpetual owners looking to sell their businesses.
Valuation and investment considerations
Currently trading at a high multiple, Constellation Software's valuation may be viewed as expensive. While the company has a strong track record, potential investors may want to wait for a more favorable entry point and consider market level weaknesses. Patiently watching for an opportunity to buy at a discount could enhance potential returns.
Stock Pick: Winnebago
Winnebago is a small company that manufactures RVs and has seen extraordinary growth in recent years due to the surge in demand during the COVID-19 pandemic. The stock is currently trading at a relatively low price and offers potential upside as the company rebounds from the pandemic and continues its growth trajectory. With a solid balance sheet and steady cash flows, Winnebago presents a reasonably low-risk investment opportunity with potential for reasonable returns over the next few years.
Market Dynamics and Potential Upside
While the RV market has seen some challenges due to the COVID-19 pandemic and a potential glut of used RVs in the market, Winnebago has demonstrated its ability to survive difficult times. Analyst estimates suggest potential revenue growth for the company in the coming years, which could translate to a significant increase in stock price performance if achieved. With a reasonably low valuation and limited downside risk, Winnebago offers potential upside for investors.
Analyst Opinions and Buying Strategy
Analysts have varying opinions on the value of Winnebago due to the uncertainty caused by the recent market dynamics. However, many see the stock as undervalued and believe in its growth potential. As an investor, it is essential to have a long-term perspective and a strategy that aligns with the company's potential performance over the next few years. The key is to focus on a sufficiently long holding period to fully capture any potential growth.
Joining the Mastermind Community
If you are interested in connecting with like-minded investors and gaining valuable insights and discussions about stocks and investing, consider joining the mastermind community. The community provides a platform for networking, sharing ideas, and learning from experienced investors. To join, visit theinvestorspodcast.com/mastermind and apply to become a member. Get involved in the community's events, such as live Zoom calls, book clubs, and social hours, which offer unique opportunities to deepen your investing knowledge and connect with fellow investors.
In today's episode, Stig Brodersen speaks to Tobias Carlisle and Hari Ramachandra. Stig outlines why he put Constellation Software on his watchlist and is waiting to buy the dip. Hari’s pick, Brookfield Corporation, is one of the world’s largest alternative investment management companies with over $725B of assets under management. Tobias pitches Winnebago, a value stock coming off the strong demand from COVID.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
01:33 - Why Hari is bullish on Brookfield Corporation (BN)
07:56 - Why Hari is not bullish on Brookfield Asset Management (BAM)
22:37 - Why Stig is bullish on Constellation Software (TSE: CSU)
37:13 - Two different methods to value Constellation Software
59:39 - Why Tobias is bullish on Winnebago Industries (WGO)
1:11:52 - How can you pitch your stock to the TIP Mastermind Community
1:47:02 - How to meet up with TIP in NYC in October
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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