Adam’s blog Pound the Rock Investing is one of my favorite reads. Greystone Capital Management: -5.1% Median 1H 2020Īdam Wilk runs Greystone Capital Management. The long-term benefits of a negative working capital model only accrue to companies offering products and services that will experience long-term growth in demand with minimal cyclicality.” “If revenues fall, working capital consumes cash rather than providing it. But there’s a caveat: you need to grow to maintain the benefits. Reinvest the float before you make payments. You can see the power of a negative WC cycle. Instead of requiring incremental capital to support its working capital needs, the firm is free to use excess cash to subsidize investment in fixed assets, perform acquisitions, or return capital to shareholders without sacrificing growth opportunities.” “For a firm that operates with negative working capital, growth actually provides a capital subsidy as additional cash rolls in. Here’s Dave explaining why a negative working capital model is attractive: For starters, working capital is current assets minus current liabilities. The company is not exactly exciting or communicative (despite the name) and perhaps that is why Nuvera shares languish at 8.3x free cash flow and 7.4x cash earnings (net income plus intangibles amortization).”ĭave spends the rest of the letter discussing the power of negative working capital. I am hard-pressed to find a better combination of robust free cash flow generation, low risk operations and a healthy balance sheet. The company enjoys a substantial net cash position, enabling it to return virtually all its earnings to shareholders via share repurchases.”ĭave’s Take: “The company will benefit from increased need for quality consumer and business broadband connections in its Minnesota and Iowa service territories. LICT has invested heavily over the years and now boasts a fiber-heavy, state-of-the-art network that is well-positioned to deliver broadband to rural Americans for decades to come. The magnitude of these payments allows Bredband2 to operate with negative invested capital and fund all its capex needs from customer pre-payments.”ĭave’s Take: “ LICT is in prime position in the telecom industry. Like Intred, Bredband2 generates substantial cash from advance payments by customers. What’s more, Intred has created a negative working capital cycle where it gets paid in advance for its services, effectively creating investment “float” and subsidizing its investment needs.”ĭave’s Take: “ Unlike Intred, Bredband2 is largely non-asset-based, providing its services on networks owned by other parties. The company is no longer an obvious value based on free cash flow yield, but Intred continues to enjoy a strong set of investment opportunities, both internal and external. This fiber-optic network operator continues to sign up new clients for its ultra-high-speed network, and recently acquired a competitor. COVID-19 has not slowed down P10’s ability to form relationships with new clients”ĭave’s Take: “ Shares have more than tripled since our initial purchases. I love Dave’s letters because he cuts right to what matters: the Fund’s holdings and investing-related concepts.ĭave’s Take: “ I believe P10 shares are currently worth between $3.50 and $4.00, and potentially far more in future years depending on the company’s ability to acquire additional highmargin, predictable fee streams from alternative investments managers. If you don’t know who he is, check out my podcast with him here. Let’s start with Laughing Water Capital.ĭave Waters runs Alluvial Capital. Many fund managers released their Q2 letters over the weekend. Investor Spotlight: More & More Q2 Letters! We’ll see how prices follow through this week. The stock broke out above the 50MA and 200MA, giving us stronger belief in a newly-formed uptrend. The company has great qualities: net cash, growing revenues, expanding pre-tax margins and high ROIC. Breakout members were alerted to this trade a week before the breakout. We also feature a newsletter article on Costco (COST) business model and the latest Aswath Damodaran YouTube video.Ĭhart Of The Week: ANET completed an inverse H&S on the weekly chart last week. Episode 35: Gautam Baid – Compounding Knowledge, Investments and Passion.36: Micro Cap Mastery & Unit Economics w/ Connor Haley, Alta Fox Capital (NEW).Can’t wait to bring you new episodes every week. In other house-keeping news, we’ve got a killer line-up of podcast guests this month. After this week we’ll head back to more topical coverage of various investing related articles, videos and blogs. We’re nearing the end of our Q2 letter analysis. Happy August! We hope you’re staying cool and your portfolio remains hot.
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