Speedwell Research's News Update and Weekly Recap
Navigating The Tariff Storm, Built to Last, Execution Dance, RH's Mouse Trap, Seeking Risk Clarity
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.
In case you missed it, last week, we released our 4Q24 business update on RH.
This is a key time for RH as their business isn’t just undergoing a lot of transformation, but they are facing potentially extreme supply chain pressure from tariffs.
The Synopsis Podcast.
We released a dialogue episode discussing the potential impact tariffs and the trade war, in addition to a 4Q24 business update on RH.
Upcoming.
Podcast
We have an interview with Simon Kold, author of “On the Hunt for Great Companies”!
Research
Our next research report will be on AppFolio! This is a vertical market software company that caters to real estate property owners.
Coverage
There are no conferences or earnings for our companies next week.
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.
Dialogue: Tariffs, Trade War, RH Business Update
The Tariff Storm: “Right now, we’re going through a huge storm and we don’t know when the storm is gonna end. We don’t know how bad the storm is gonna be, but we’re gonna hit a storm. And so, as an investor, you want to invest in businesses that have the strongest ship that can withstand the storm.”
Endure. Adapt. Outperform: “It’s more so that these events are going to come and go. And so you just need a company that you feel is confident and versatile enough and ran by somebody who’s competent enough with a strong enough competitive advantage that when inevitably things go wrong that they can withstand and come out the other side.”
High Quality Ships: “There’s 50,000 public companies. You could think of each of these companies as their own sort of boats. And what we’re doing as investors is we want to find the highest quality boat to go on.”
Endurance Over Immunity: “I don’t know that the right answer is to try to find the boats that are the most immune from the storm. I think the right answer is to find the boats that are built to last.”
Durability in Question: “It’s one of those instances where investors can have a lot of confidence in the business, but they might not have confidence in their ability to withstand.”
RH Stock Price Commentary: “The stock does seem to be pricing in some sort of bankruptcy risk. And it’s not that if you look at the numbers and all their moves that it’s likely or anything like that, I think it’s just the fact that, you even need to have this conversation makes people nervous.”
The Execution Dance: “It is that dance between executing on the opportunities in front of you, maintaining a company that can survive in various environments, but not being so afraid to invest in anything and hoarding hundred of millions of dollars on the balance sheet.”
RH’s Job To Be Done: “The ‘job to be done’ that RH is really fulfilling and if you’re thinking about the consumer hierarchy of preferences, the preferences that they’re fulfilling is basically not just aesthetics, but also convenience.”
RH Mouse Trap: “RH’s whole mouse trap is that we’re going to be very top of mind. We’re going to show people what aesthetics are, what design is. You’re probably going to come visit us at a restaurant way before you ever think about buying furniture. That’s going to expose you to the brand. And all of that means that when it has come time for you to actually buy furniture, we’re going to be somewhere that you want to come to and purchase that furniture from. And so it is a very different sort of customer acquisition funnel or customer journey than any of these other competitors.”
The Investment Matching Principle: How the Risk/Return Profile Connects to Diversification
Impairment Drives Allocation: “A successful investor can be one who diversifies a lot or a little, but it will always be someone who “matches” risk of impairment of capital with the number of independent investments they make.”
Reducing the Odds of Failure: “The general idea is that if you have a portfolio of multiple investments, the probability that something will go wrong with multiple investments simultaneously is much less than the probability that something will go wrong with any one investment.”
Seek Risk Clarity: “Now the point is not to look for adverse events and see what you can own in order to offset that risk, but rather just to be aware of how exposed your portfolio is to a given risk. If an offset happens to exist, then that risk is somewhat mitigated.”
Risk Mitigation is a Feature, Not a Thesis: “It would be poor practice to purchase any business just because it stood to benefit should a risk manifest in a separate business, but it could still be considered a risk mitigate in the overall portfolio.”
Two Methods to Account for Risk: “There are two methods for accounting for risk in a portfolio. Method one is to select investments that carry reduced risk profiles. The second method to account for risks in a portfolio is with positioning and the number of independent investments you have.”
Converging Positions to Return: “It is an investor’s job to match the risks inherent in each investment to the number of independent investments they make so their portfolio’s ‘expected return’ has a high probability of being realized.”
Read the Investing Matching Principle memo here
What is a Fair Investment Assumption
Find Investments Like a Scientist: “Much like a scientist, it is your job to generate hypotheses. Instead of exploring the world of physicality’s though, you are exploring the world of possibilities.”
Bet Where it Pays: “As an investor, you want to find the opportunities where you can be compensated disproportionately for the informational content of your thesis. You want your payoffs to be higher than your chance of being correct. That is all investing is.”
Thesis Components: “Your hypothesis is typically called a thesis, and it involves an idea of 1) how they create and capture value, 2) how they protect that value, and 3) how you price that value.”
Broad Thesis Increases Your Odds of Being Right: “An independent investor has the luxury of making their thesis as general and broad as they are comfortable with. This is not only far easier to do, but it increases the chances they will be correct.”
Conviction Follows Clarity: “The more research an investor does, the easier it is to distill down the investment thesis into key assumptions, and have more confidence in those assumptions. This means they can have a lower informational content thesis with high conviction.”
The Simple Game: “The game is simple: find situations where the payoffs of being right are higher than the odds of being right. Make your assumptions as modest as possible to increase your chances of being correct. And if you are unsure… pass.”
Read the What is a Fair Investment Assumption memo here
3. Coverage Updates.
Meta
Releases new Llama 4 Models: Scout and Maverick
“We’re introducing Llama 4 Scout and Llama 4 Maverick, the first open-weight natively multimodal models with unprecedented context length support and our first built using a mixture-of-experts (MoE) architecture. We’re also previewing Llama 4 Behemoth, one of the smartest LLMs in the world and our most powerful yet to serve as a teacher for our new models.” - Meta Founder and CEO Mark Zuckerberg
“Our goal is to build the world’s leading AI, open source it, and make it universally accessible so that everyone in the world benefits.” - Meta Founder and CEO Mark Zuckerberg
CoStar Group
Board Refreshment and Establishes Capital Allocation Committee
“Announced the appointment of John Berisford, Rachel Glaser and Christine McCarthy to the Company’s Board of Directors.”
“The Board also established a Capital Allocation Committee to support the Board’s and management’s comprehensive review of the Company’s capital structure, capital allocation priorities and financial targets, including for international expansion and significant investments by the Company’s major brands, including CoStar, Apartments.com, LoopNet and Homes.com. As part of its work, the Committee will review the Company’s ongoing investment in Homes.com and ensure an appropriate timeline for profitability.”
CoStar Wins Trade Secrets Lawsuit Against News Corp’s Realtor.com
“This lawsuit was a PR stunt from the start - ridiculous, and totally devoid of merit… Nine months later, after a warning from our lawyers about sanctions, Move folded. We did not settle. We didn’t pay a dime. Move simply capitulated. From the beginning, Move had no evidence linking CoStar Group to any trade secrets, and this dismissal proves it. This was a desperate, anticompetitive stunt to slow down Homes.com as we passed Realtor.com in the marketplace.” -CoStar Group Founder and CEO Andy Florance
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 twice weekly. Feel free to drop questions you want answered on any video!
Tariffs Simply Explained
The Perfect Analogy for Trade
Why Trade at all?
Economic Impacts
How to Analyze a Stock for Beginners
Picking a Stock to Research
How to Conduct Research
Other Links.
Howard Marks: Nobody Know (Yet Again) (link)
A Letter a Day: Shopify Cofounder and CEO Tobi Lütke IPO and AI memo (link)
Michael Mauboussin on Long-Term Investing: How I Learned to Stop Worrying and Ignore Volatility (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).
