New Enterprise Subscription Tier: Constellation Software, AMZN, BUR, JDG, Wix, TSLA

Content Published Last Week

1. Constellation Software: A Competitive Analysis

2. Company Profile: Burford Capital

3. Amazon Retail: A Valuation Approach

4. Amazon: How a Unit Flows through the Network & Unit Costs

5. Burford Capital Valuation Framework

6. Company Profile: Judges Scientific PLC

7. Tesla, Elon Musk, & the Manufacturing Engineering Culture

8. Wix, Shopify, & Wordpress: Agency Customer Perspective

9. Alphawave: Hyperscaler Customer Chip Development

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Visible Alpha built a platform to analyze consensus data for financial and operating metrics on over 6,400 publicly traded companies. Rather than digging through models one by one, Visible Alpha creates consensus data for every line item included in sell-side models so institutional investors can better understand expectations on metrics beyond just revenue and earnings. Try Visible Alpha for free here.

New Enterprise Tier

Today, we’re launching a New Enterprise Subscription Tier offering investment research built upon our internal, proprietary primary research.

Over the last few years, executive interview content has exploded. We never set out just to provide interview content or executives; it’s our mission to help investors and ourselves understand and build conviction to invest in the best businesses globally. Although we plan to double the number of interviews published this year, we believe signal and signal now matter more than ever.

We also believe that we’re in a unique position to produce differentiated research, especially as MiFID 2 takes its toll on both independent and sell-side research. We have over 2,600+ hours of experience conducting primary research interviews combined with internal executive sourcing capabilities. We plan to utilize our network and experience in new ways to produce investment research on the best companies globally.

This includes new content formats such as:

IP Research Analysis: reports built upon internal primary research conducted privately with executives within our network. We aim to focus on 1-2 specific questions that drive the thesis of a large cap, quality company. All our work is built from internal scuttlebutt research.

Value Chain Analysis: aim to help investors understand the mechanics of value chains in industries where structurally advantaged businesses compete. We explore how units flow from suppliers to customers, the bargaining power across value chains, and the durability of structural advantages of large cap, quality companies.

Midcap Company Profiles: help investors get up to speed on the core drivers of a company as effectively as possible. Profiles focus on global quality companies less than <$10bn in market value and less covered by other research institutions.

IP Subscription Tiers

Primary research will always be at the heart of our business and investment process. Over the next 3 years, we plan to ~4x the number of interviews published annually on our platform.

Access to the Interview Library will remain affordable and is currently available via our Core Subscription Tier at $400 per year. All Core Subscribers will maintain access to the backlog of our research analysis content. Periodically, we will also release IP Research pieces on the Core Tier.

On top of our Core Interview library, we will increasingly produce more curated, proprietary investment research for our New Enterprise Tier.

All existing Core and Enterprise subscribers need to upgrade to access the New Enterprise Tier. Please contact us if you’re interested to discuss access.

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Upcoming Content on the New Enterprise Tier

1. Transdigm & Aero Aftermarket Value Chain

2. Progressive vs GEICO - Analysis

3. AMZN Advertising Profile

4. Google Display Network vs The Trade Desk - IP Analysis

5. Markel - Analysis

6. HEICO - Analysis

7. Fever Tree - Profile

8. Kinsale Insurance - Profile

9. ISRG & Surgical Science - Profile

10. Brown & Brown & Insurance Broker Value Chain

11. Bergman & Beving Profile

12. ChemoTech Profile

13. Keyword Studios Profile

14. Ashtead Analysis

15. Admiral Analysis

Enterprise Customers will also be able to request and vote on our Enterprise Research pipeline.

Constellation Software: A Competitive Analysis

This piece of research is a good example of the type of work we will be releasing on our new Enterprise Tier.

One common thread from interviews in our library was the increasing amount of competition from private VMS consolidators trying to replicate Constellation’s success.

Over the last 6 months, we have identified 34 private VMS consolidators competing with Constellation and 43 senior M&A executives that have left CSI in the last 3 years.

We have privately interviewed multiple executives who left CSI and joined or started competitors to understand more about their strategy, the VMS competitive landscape, and potential risks to CSI.

At the 2021 AGM, Mark Leonard was asked what would cause a 50% decline in his estimate of CSI equity value. His response:

“We have not been able to deploy the capital and half our value is associated with deploying capital at high rates of return. I can say that with a high degree of certainty.” - Mark Leonard, CSI AGM 2021

This competitive analysis shares what we found in our research and specifically explores the impact of increased competition on CSI’s ROIIC and capital redeployment rate.

Company Profile: Burford Capital

IP Company Profiles are focused on producing succinct profiles on quality midcaps with <$10bn EV. These are not 100 page reports. We aim to focus only on what matters. Profiles are aimed to provide insight, not information. We will use company filings, presentations, and other resources to provide information and leverage our primary research experience and network to share insight.

Profiles aim to be timeless. If you pick up this report in 5 years time, it should still be valuable and provide a framework to analyze the company. If it’s not, we’ve failed.

We’ve been following BUR since 2016 and have published various interviews and analysis on the industry.

1. IP Interview with BUR Co Founder and CEO

2. Our analysis on litigation finance return asymmetry

3. In Practise Interview: Case origination with Director at Augusta Ventures

4. IP Interview with Investment Manager from Omni Bridgeway

5. IP Analysis: YPF Risk Reward

6. IP BUR Investor Dialogue

7. IP Interview with a BUR competitor, Bench Walk Advisors

Given BUR recently won the YPF case, we’ve produced a Company Profile to provide a framework to analyze, understand, and value litigation finance assets and Burford as a whole.

We explore the litigation finance industry structure, return profile, history of BUR, its accounting, YPF, and how to find cash returns of its core litigation finance business.

The focus of the Profile is to explore whether BUR’s reported IRR’s are real and persistent. We went through every investment BUR has historically made to reconcile the numbers and reported returns.

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Amazon Retail: A Valuation Framework

This IP Research Analysis is another example of internal research we will produce going forward. For companies that have opaque reporting or where extensive primary research can help shed light on unit economics, we aim to provide a framework for how to value or analyse certain business units or companies.

AMZN’s retail business is a good example of this. From our research and additional private conversations with former AMZN executives, this analysis walks through step-by-step how we think about calculating AMZN’s EBIT / GMV for e-commerce and retail including its physical business.

We also cover the Q4 22 numbers in detail given it seems AMZN Retail has made progress cutting cost from net of the extraordinary impairments.

We share our workings and can provide the model if necessary.

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Burford Capital Valuation Framework

Following on from the BUR Company Profile, given the summary judgement of YPF, we share our valuation framework for BUR. We walk through how to value each segment of the company:

1. Core litigation non-YPF book

2. YPF

3. Asset management

We also work through how much of the YPF assets BUR can sell this year, at what price, and how it may impact the FV mark of the adjusted-YPF book value once SEC has confirmed the new valuation methodology next quarter. These are short-term catalysts that we believe are relevant for anyone looking closely at the equity.

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Amazon: How a Unit Flows through the Network & Unit Costs

This analysis walks through step-by-step how a parcel flows through Amazon's network. We breakdown what percentage of parcels are shipped through AMZN's own network, UPS, and USPS. We compare the per parcel costs of shipping through each channel and the calculate the potential cost savings over the next 5 years as AMZN insources more parcels through its own network.

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Company Profile: Judges Scientific PLC

JDG is a UK holding company of niche scientific instrumentation manufacturing businesses. It is owner operated with ~12% inside ownership and one of the most disciplined and patient management team's in the UK. Over the last 17 years, FCF per share has compounded 20% per year for 17 years and the equity is a 100-bagger.

This profile explores JDG's portfolio history, acquisition mistakes, and the core drivers of intrinsic value. We go deep into Geotek's business, its unit economics, and the risk of the size of Geotek to JDG.

We also lay out a framework of how to value JDG and model how many acquisitions it needs to complete to compound inorganically at double-digits whilst maintaining ROTIC.

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Tesla, Elon Musk, & the Manufacturing Engineering Culture

One of the most fascinating interviews we've read on Tesla's culture and Elon from someone who worked fairly closely with him for 5+ years.

I think physically he's strong. He can work hours of meetings with teams starting at 11 P.M. and ending at 3 A.M. in the factory. Physically, he is unusually strong. Mentally, his brain is super strong. The speed of understanding stuff and learning new stuff is really scary. I've worked in this subject matter for 20 years. He'll ask me to present something, I do, and in five minutes, he gets it and will ask me questions that I have no answer for. He's scary. He's like a monster. - Former Manufacturing Manager, Tesla

Wix, Shopify, & Wordpress: Agency Customer Perspective

A Wix and Shopify agency partner compares the offerings:

Wix has upped their game over the last couple of years. 10 years ago, it was a different game. They were very focused on small businesses, but the direct-to-consumer performance wasn't there, and there weren't enough modules. It was a great drag-and-drop builder, but that's what you got. After they opened up dynamic pages, databases, Velo, Editor X, and all the different feature sets, it's been a huge competitor for WordPress internally. Anything that we can do on WordPress now we can do on Wix, if not more easily. WordPress would take us maybe two to three times longer to build than what we can do on Wix. It also depends on the client's budget, and if it's a smaller budget, then, hey, let's just bill our work; we're not going to lose it. There are no real major differences today. Five or 10 years ago, there was a drastic difference between WordPress and Wix, and you could do much more in WordPress. Today, whatever you can do on WordPress, you can do on Wix. There’s no real difference. - Wix Agency Partner

Alphawave: Hyperscaler Customer Chip Development

With its acquisition of OpenFive, Alphawave can offer chip design services in addition to its high-speed connectivity IP. A former Google Chip Engineer describes the development process at Google and how Google views different chip suppliers including Alphawave:

The difference is that OpenFive did not have any IP whereas Broadcom has high speed SerDes IP, which Alphawave also has after acquiring OpenFive. Other players do exist and I have used them when I have done low budget chips in the past. Broadcom are the most expensive design house to take RTL to GDSII. Uniquify is a small shop who Marvell and Broadcom outsource to when they run out of time. Several small houses are doing good work and are viable businesses. TSMC has an arm called GUC, and I made a chip at Google using them. They might have the TSMC name behind them but they don't speak English well. Broadcom has an advantage as you can speak to their guys who are in the Bay Area. GUCs documentation is also not the best quality. - Former Google Chip Engineer