0️⃣2️⃣ Joe Magyer's masterclass in compounding, fascinations and buying a $1.10+ for $1 [The Countdown #2]
Jan 31, 2024
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Joe Magyer, investing expert and influencer, talks about his three fascinations, team structure, valuation, his favorite coffee spots, early passion for equities, hiring for investing success, investing in compounding companies, approach to risk management and evaluating businesses, and the role of CEOs and capital allocation.
Investing in high-quality businesses with high customer retention rates can lead to market dominance and increased value.
Investing in business-focused companies that prioritize customer loyalty and engagement can lead to rapid value creation.
Financial flexibility and expanding into new markets offer significant growth potential for companies with strong balance sheets.
Deep dives
Importance of Customer Retention and Optionality
One of the main ideas discussed in the podcast is the significance of customer retention and optionality for investing in high-quality businesses. The speaker emphasizes that investors often underestimate the value creation potential of businesses with high customer retention rates. For example, a company with a 90% customer retention rate can spend more on customer acquisition or improve margins, leading to market dominance and increased value. The speaker also highlights the importance of optionality, which includes factors like balance sheet strength, market size, and the ability to expand into new markets. Optionality and customer retention play a crucial role in identifying businesses with the potential to compound intrinsic value over the long term.
The Advantage of Investing in Business-Focused Companies
Another key point discussed in the podcast is the advantage of investing in business-focused companies. The speaker explains that focusing on businesses with the ability to deliver value to customers and maintain loyalty is more important than just recurring revenue. Business-focused companies that prioritize customer loyalty, satisfaction, and engagement tend to outperform. These companies often have loyal customers, strong brands, and the ability to scale into new products, markets, and services. The speaker highlights the power of network effects and the competitive advantage they bring, which can lead to rapid value creation over time.
Understanding the Importance of Financial Flexibility and Going Global
The podcast also emphasizes the significance of financial flexibility and the potential value of expanding into new markets. The speaker points out that companies with strong balance sheets have the advantage of being able to reinvest in their businesses and explore new opportunities. Additionally, the speaker challenges the common belief among Australian investors that Australian companies struggle when expanding overseas. The speaker argues that while moving into foreign markets presents challenges, it also offers significant optionality and growth potential. The discussion highlights successful examples of Australian companies, such as Computershare and Altium, that have thrived internationally, showcasing the value of thinking globally.
Hiring for Shared Values and Overlapping Competence
When hiring for his investment team, the speaker emphasizes the importance of finding individuals who share the same long-term focus and growth-oriented philosophy. While they don't need to have identical areas of expertise, he looks for candidates whose circle of competence overlaps with his own, allowing for different perspectives and pushing the team towards new ideas. He believes in hiring for cultural fit and embracing a diversity of viewpoints while maintaining a consistent style and philosophy.
Investing in High-Quality Growth Companies
The speaker considers himself a value investor, but places greater emphasis on being directionally right about business quality and varying perceptions around it. He prioritizes investing in high-quality growth companies with attractive unit economics, visible market opportunities, and strong competitive advantages. While price matters, he believes that being right about business quality tends to lead to better long-term returns. He focuses on software, enterprise SaaS, e-commerce, and payments, as well as recurring revenue businesses that can withstand potential economic downturns.
Welcome to The Countdown series on The Australian Investors Podcast, where we countdown the 15 most popular and impactful interview episodes ever released on The Australian Investors Podcast. Going all the way back to 2017!
While this episode comes in at #2 for Owen, based on community impact, Joe was easily the #1 guest and had the most positive influence on followers of The Australian Investors Podcast.
We believe his concise views on quality investing, return on invested capital, fishing where the fish are, frameworks for modern value investing, technology, unit economics and more, are the best Australia has seen over the past two decades.
Note: you can access the show notes and resources, and see that the full interview was first published March 13th 2019:
As we countdown to #1, let Owen know what you think over on X/Twitter: https://twitter.com/OwenRask
In this episode, Joe describes his three fascinations in great detail, how he structures his team, valuation and loads more, including his favourite coffee spots in and around Melbourne and Sydney.
DISCLAIMER: This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs, before acting on it. If you’re confused about what that means or what your needs are, you should always consult a licensed and trusted financial planner. Unfortunately, we cannot guarantee the accuracy of the information in this podcast, including any financial, taxation, and/or legal information. Remember, past performance is not a reliable indicator of future performance. The Rask Group is NOT a qualified tax accountant, financial (tax) adviser, or financial adviser.
