Everybody knows the name, but no one knows the company
High-quality, >40% ROICs, secular growth, 8x ev/ebitda
Looking back at our returns over a longer period of time, we generally see three buckets of successful investments.
One are event-driven, shorter-term trades. Think our TMM. The second are more ‘hairy’ situations, where most of the total return is generated from a normalizing situation which the markets values at higher multiples at some point. You might associate ToffCap mostly with these kind of investments.
But the last bucket is perhaps the easiest – good, quality names trading on decent multiples. There’s generally not a huge upside to these situations, but they are easy to follow and make for great trading vehicles. Every now and then they have a bad quarter (like every company) and you can almost blindly buy.
The combination of 50-80% returns on valuation plus the usual buying the dip generates very decent returns over time, on situations that require a relatively small amount of effort to track.
Today’s name fits this last bucket very well.
It’s a high quality company exposed to a high quality market
Strong, resilient and clean fundamentals. A very profitable, asset-light model generating very high returns on capital
It’s pretty unique – as in there isn’t even a listed direct competitor
It’s still pretty much undiscovered
And the valuation is quite attractive for such a company
Let’s take a look.