Speedwell Research's News Update and Weekly Recap
Right Tail Capital Interview, Borrowed Judgement, Why Decisions Clarify with Research, Copart (somehow) Increasing their Moat, CoStar CEO Plate Spinning
Welcome to Speedwell Research’s Newsletter. We write about business and investing. Our paid research product can be found at SpeedwellResearch.com. You can learn more about us here.
This is a weekly recap, where we summarize recent content you may have missed.
Table of Contents:
Speedwell Releases & Upcoming
Spotlight
Coverage Updates
Sharing Links
1. Speedwell Releases & Upcoming.
Research.
We released a new Speedwell Research Memo: An Interview on Investing with Speedwell Research’s Drew Cohen. This is a reproduction of Drew's unedited interview feature on Compounding Quality.
This is the first and only time Drew has ever talked openly about personal investing decisions.
If you missed it, last week released our 61-page extensive research report on APi Group (stock ticker NYSE: APG)!
This company is a leading provider in life safety and fire protection services. A large portion of their revenues come from statutorily mandated services that are mission critical and represent a relatively small portion of a customer’s overall operating expenses.
They are almost a 100 year old company but have only recently gone public with the help of multi-billionaire and Co-Chairman Martin Franklin.
The Synopsis Podcast.
We posted three podcast episodes this week!
1) The first was an interview with Jeremy Kokemor of Right Tail Capital. In this conversation, Jeremy shares his experience running an investment advisory firm, how he picks stocks, and talks about 3 of his past investments in quality businesses.
2) The second was a dialogue episode discussing the recent updates on CoStar Group and Copart. We talk about 1) the different levers Andy Florence is pulling to help achieve double-digit growth for CoStar Group, 2) whether Andy Florence's management style suggests the business isn’t “great”, 3) Copart’s many tailwinds, and 4) Copart’s international efforts, plus a Purple Wave update.
3) The third podcast we released was an article episode, reading the latest Speedwell Research memo, “An Interview on Investing with Speedwell Research’s Drew Cohen” (Compounding Quality Interview). This is the first and only time Drew has ever talked about 1) personal investing decisions, 2) his biggest investing mistakes, and 3) investment decision making
Upcoming.
Podcast
Dialogue on Investing and a Recent Memo
Airbnb or Walker Dunlop Company Episode?… not for a while longer, BUT find a directory of our full backlog of company podcasts episodes here.
Research
Our next research report will be on AppFolio! This is the vertical market software company Constellation's Mark Leonard said he wanted to learn from in a recent AGM. It is also one the best investments legendary investor Reece Duca ever made.
Coverage
RH reports 4Q earnings on Tuesday.
Become a Speedwell Member today to get access to all of our research updates and our in-depth research reports!
2. Spotlight.
Below are select quotes from our various writings and podcast.
Interview with Jeremy Kokemor of Right Tail Capital
Time is a Friend of a Good Business: “If it’s a great company that can continue to reinvest at higher rates of return, then let’s let that business and management team continue to create value for us as investors.”
Knowledge Builds Conviction: “Owning a quality company changes how you react… when you have more confidence in the business you own, you can trust yourself to have better behavior when you do see something like a down draw or the stock market going against you that because you have more ability to kind of discern what is actually going to be these fundamental factors of the business.”
Portfolio Concentration: Most of the literature I’ve read over time suggests that once you get somewhere in the realm of 10 stocks, an investor still gets most of the benefits of diversification… it allows me to really focus my time to our investors benefit, and that’s a number of businesses that I can understand really really well and maintain the research on over time.”
Position Sizing: “I do have caps. For the most part, I’m willing to let the investments run… I want the investments to be big enough where they can have a sizeable impact on our returns. But I also don’t want any position to be too big that you when I make a mistake or miss something, that it would have a dramatic impact on the portfolio.”
Diamonds in the Rough: “A business that is super high quality, but in an industry where you wouldn’t necessarily expect to find a really high quality company or a lot of investors don’t want to deal with home building at all. It’s super cyclical. But, it’s a perfect example of a company that has not only survived, but thrived over time and generated great returns for investors.”
Positively Compounding: “I just love the process of how do we all get a little bit better each day and knowing how much that compounding can really matter. So whether we’re talking about investing or we’re talking about health and fitness or just general reading, those little improvements and how can we each move ourselves like more to the right tail.”
CoStar and Copart Dialogue
Great Plate Spinner or a Great Manager?: “It does kind of feel like he scrambles across a lot of different business lines... It kind of comes back to this question, you know, can you have a quality business without a great manager?”
Resiliency of Copart: “Copart just dancing through all the turbulence and saying, don't worry, we're going to do fine either way.”
Growth Lever for CoStar: “They're starting to really build out their international operations. Just as a reminder, there is no real version of Costar internationally and no competitor that really has that same level of granular data that they provide.”
Copart Increasing Consumer Surplus with Insurance Companies: “Copart is continually further entrenching themselves, just doing more and more for their customers.”
Apartments.com Dominance: “Apartments.com disclosed again 99% renewal rate. So this is a product that's really not getting much churn. It reached 90% of all renters through their marketing channels.”
An Interview on Investing with Speedwell Research’s Drew Cohen (conducted by Compounding Quality)
What Circle of Competence is Really About: “The circle of competence isn’t about familiarity or simplicity in the business model, but about confidence in your assumptions.”
Research Builds Conviction: “Deep research is critical to building conviction. You have to have enough confidence in all of the research you’ve done that you can be sanguine when the stock moves. If you have a tendency of becoming fearful when your stock is down, you likely didn’t do enough research.”
Research Clears the Fog: “If you do the research, you don’t need to make decisions because answers become clearer and clearer.”
Continuous Learning: “You can’t be complacent and must continue to research and analyze the businesses you already own.”
Don’t Borrow Judgement: “The reason why we spend hundreds of hours analyzing a business is to thoroughly understand it. The purpose of the research is to build confidence in our assumptions. The valuation then dictates what the return those assumptions will yield. We are open to contradictory opinions, but we don’t blindly follow anyone—we only follow our research and our judgement. It doesn’t make sense to go through this whole process to just “borrow” someone else’s judgement.”
Read: An Interview on Investing with Speedwell Research’s Drew Cohen here
3. Coverage Updates.
Dream Finders Homes.
Wall Street Journal: Homebuilding costs could rise on tariffs (link)
“Once fully phased in, will add anywhere from $7,500 to $10,000 to the cost of building the average American family home.”
With Dream Finders Homes having a ASP of around $500k, this would decrease gross margins by about 1.5-2%.
The article also note that the crackdown on undocumented workers could indirectly result in a smaller pool of construction workers and thus higher labor costs, further weighing on builder’s gross margins.
Meta.
Bloomberg: AI Chip Startup FuriosaAI Rejects Meta’s $800 Million Offer (link)
“[Meta] is also working on chips designed for its own AI workloads, including powering the ranking and recommendations ads on Facebook and Instagram. In 2023, it introduced its first custom AI inference chips — and it unveiled an upgraded version last year.”
This offer was an attempt to further increase Meta’s competitive position in building AI inference chips, which would aid in creating new models for LLaMA and MetaAI.
Etsy.
Appointed Rafe Colburn as Chief Technology Officer (link)
“Rafe Colburn currently serves as Chief Technology & Product Officer at Depop, where he has successfully scaled the technology team to support rapid growth and transformed the customer experience to one that is more app-based and discovery-centric.”
4. Sharing Links.
Check out Speedwell Research’s Drew Cohen’s YouTube Channel. It is focused on general investing and business content. Videos are released every Tuesday and Thursday. Feel free to drop questions you want answered on any video!
Why Emotions are your Enemy in Investing
“If the first thing that drew you to a stock was the price, that means it will be the price the drives you”.
Other Links.
A Letter a Day: First Shareholder Letters; Lessons from Pixar, Google, Amazon, Bank One, and Danaher (link)
Michael Mauboussin on Measuring the Moat, Assessing the Magnitude and Sustainability of Value Creation (link)
Mohnish Pabrai on Risks and Uncertainty in Investing (link)
A Letter a Day: Bill Chrisholm, STG Cofounder and Boston Celtics Owner (link)
Horizon Kinetics on Owner-Operators vs Agent-Operators (link)
Paul Graham: A Project of One’s Own (link)
And a special thank you to Matthew Harbaugh for helping put this weekly recap together!
The Synopsis Podcast.
Follow our Podcast below. We have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.
Speedwell Research Reports.
Become a Speedwell Research Member to receive all of our in-depth research reports, shorter exploratory reports, updates, and Members Plus also receive Excels.
(Many members have gotten their memberships expensed. If you need us to talk with your compliance department to become an approved vendor, please reach out at info@speedwellresearch.com).
