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Welcome to the Compounders Podcast. On this show, Host and Investor, Ben Claremon, will explore the topic of compounding from various angles, including through interviews with public and private company executives, investors who focus on compounders, and newer investment firms that are building a business they hope will become more valuable over time.
Episodes
Tuesday Oct 26, 2021
Tuesday Oct 26, 2021
My guest on the show today is Jeff Bailly, the Chairman and CEO of UFP Technologies. UFP is a 480 million dollar market cap company that specializes in designing foams, films, and plastics materials for the medical, automotive, consumer, and aerospace markets in the United States. Jeff joined the company in 1988 and became CEO in 1995.
Jeff has been instrumental in helping turn UFP into the company it is today. After years of somewhat limited growth, UFP made its largest acquisition ever in 2018—of a company called Dielectrics--and that deal has transformed the company’s margin profile and growth trajectory. And the big changes that have occurred since the deal have not gone unnoticed by the stock market. Accordingly, I thought it would be really instructive to hear from Jeff about the process that led to UFP’s recent success.
In this enlightening discussion, we will cover:
- The genesis of the Dieletrics deal and the strategy surrounding moving into medical end markets
- Jeff’s thoughts on the key elements that have allowed the stock to appreciate to a level 20 times its value when Jeff became CEO
- The benefit of being patient and having a willingness to suffer as CEO
- Areas in which UFP still has a long runway to get better
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.
For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Oct 19, 2021
Tuesday Oct 19, 2021
My guest on the show today is Adam Symson, the CEO of E.W. Scripps. Scripps is a 1.45 billion dollar market cap company that owns and operates local and national television stations. The company was founded in 1878 and over the years has operated within a number of different media businesses. The company spun off its cable TV business, Scripps Networks Interactive, in 2008 and then exited the newspaper business in 2015. These transactions served to focus the company more on its local TV business.
However, since becoming CEO in 2017, Adam has led an aggressive acquisition campaign that has created a large and differentiated National Media segment whose stations mainly operate over-the-air. The Scripps management team anticipated that cable TV subscribers would continue to cut the cord and through these acquisitions has positioned the company to benefit as more people choose to watch TV via an antenna.
Given all of the M&A activity and the dynamic nature of the pay-TV environment, I was excited to talk to Adam about:
- How competition from digital ad platforms like Facebook are impacting local TV advertising;
- The value of having a background in investigative journalism;
- The rationale for the pace of acquisitions that have occurred during his tenure;
- What it is like to work for a 100+ year old, family-controlled company; and
- How Scripps develops win-win relationships with its various stakeholders
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Time stamps:
- 1:18 Introduction
- 2:54 The rise of social media advertising and its effects on paid TV media
- 5:20 The state of the local broadcast TV industry in 2021
- 7:10 Building a resilient culture in a volatile industry
- 9:39 The company ethos that comes from developing a $15 billion asset
- 11:29 Suffering short-term pain for a long-term gain in the podcast space
- 15:29 Capital allocation strategy in the media industry
- 18:55 How Scripps employs value investing as a media company
- 22:28 The logic behind acquiring the Katz network
- 26:13 Taking a big M&A swing during a global pandemic
- 33:15 Investing with Berkshire Hathaway as a partner
- 35:45 Creating win-win partnerships with various industry constituents
- 38:48 Navigating the unbundling movement as a media company
- 44:13 Balancing OTA and cable viewing within the same company
- 47:34 Investor concerns regarding the traditional media industry
- 49:49 The sports rights battlefield and the future of sports on broadcast TV
- 53:54 Why regulation in media needs to evolve
- 57:38 From investigative journalist to public company CEO
- 60:09 Assessing employee fit in a competitive job market
- 61:22 How Scripps wins over the next 5 years
- 62:51 Mistakes made over the first 4 years as CEO
- 64:34 ATSC 3.0 and the technological evolution of broadcast TV
- 66:38 Preparing for the future of broadcast TV
- 67:11 The most misunderstood aspects of Scripps
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.
For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Oct 12, 2021
Tuesday Oct 12, 2021
My guest on the show today is Brian Recatto. Brian is the CEO of Heritage-Crystal Clean, a 670 million dollar market cap company that provides cleaning and waste removal services to customers in the US. HCCI is one of the key competitors to Clean Harbors, a company whose CEO we also interviewed on this show. Specifically, Heritage operates in 2 segments: an Environmental Service division that offers parts cleaning and containerized waste management services; and an Oil Business segment that collects, re-refines and then re-sells used motor oil.
Brian took over the CEO role in 2017 and, aside from a brief COVID-related speed bump in 2020, he has overseen consistently improving results and a higher stock price. COVID presented—and continues to present—a number of challenges for Heritage but the company’s strong balance sheet and consistent Environmental Services businesses have allowed it to weather the storm. With that as a backdrop, Brian and I had a great discussion about:
- How the company has navigated the challenging customer disruptions over the last 18 months;
- The ups and downs associated with owning and operating an oil re-refinery;
- The future of hazardous waste regulation and why HCCI is one of the good guys when it comes to environmental matters;
- The benefits of operating dense route networks and how Heritage defends its market position; and
- How the company approaches M&A and the prospect of adding a third leg to the company’s stool
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Time stamps:
- 1:18 Introduction
- 3:00 Navigating COVID-19 as a waste services company
- 8:52 Why Heritage highlights individual employees on its investor relations website
- 10:45 Creating lines of communication between senior management and field employees
- 11:56 How the rise of electric vehicles will impact HCCI
- 16:19 Evolving a waste services business as customers become more ESG-focused
- 18:13 How to tell what is a great ESG story
- 21:37 Growing an underappreciated parts washing business
- 23:34 Approaching win-win relationships with regulators
- 27:25 The logic behind creating a more vertically integrated business model
- 31:27 IMO 2020 and its significant impacts on Heritage
- 34:10 Balancing competition in new and foothold markets
- 36:57 The route density network effect
- 38:43 Additional monetization opportunities at Heritage
- 40:39 Helping frontline employees become effective salespeople
- 43:06 The challenges of hiring and retaining people within a tight labor market
- 45:50 Assessing the potential of automation in a services business
- 47:06 Managing the volatility of the re-refinery business
- 51:35 Setting fair goals for employees who work in volatile business lines
- 52:56 Family influence at Heritage: appealing or concerning?
- 55:59 Balancing short-term pain for long-term gain
- 57:39 Looking back at that last 4 years as CEO of Heritage
- 58:50 Bolt-on and tuck-in acquisition opportunities
- 1:01:17 Filling in the West Coast coverage gaps at Heritage
- 1:03:18 The benefits of scale in the waste services industry
- 1:05:17 The biggest changes experienced over the last 15 years
- 1:06:45 The most misunderstood aspects of Heritage-Crystal Clean
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.
For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Oct 05, 2021
Tuesday Oct 05, 2021
My guest on the show today is Jorge Gonzalez, the CEO of The St. Joe Company. St. Joe is a 2.53 billion dollar market cap company whose main asset is a huge landholding in Northwest Florida. A lot of investors may remember that the company has been the subject of a number of short reports over the last decade but since Jorge became CEO in 2015, St Joe has consistently grown its revenue and EBITDA—and has diversified its revenue base. Also, after a period of time in which the stock was unable to break out, over the last year it has risen to levels that had not been seen since the mid-2000s.
Given the company’s recent success, I was excited to talk to Jorge about his vision of the future of the company and what people may not be appreciating its asset base. Specifically, we discussed:
- What it means to operate as an owner-oriented company;
- The demographic trends that are fueling growth in Northwest Florida;
- What the shorts have gotten wrong over the years;
- How the company approaches the risk of hurricanes in the region; and
- What Jorge has learned from the company’s Chairman, Bruce Berkowitz of Fairholme Capital
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Timestamps:
- 1:18 Introduction
- 2:36 Being named the next CEO of St. Joe
- 3:19 Shifting St. Joe’s strategy, culture, and process of execution
- 4:08 Adjusting corporate strategy to expand the total market size
- 5:18 St. Joe’s vast land holdings and unique moat
- 6:38 Florida’s demographic shifts and how that might affect St. Joe
- 8:18 How COVID has affected the trends driving St. Joe’s business
- 9:52 Handling cyclicality at a macro and geographic level
- 11:46 Building a recurring revenue stream in a traditionally cyclical business
- 15:28 Further enhancing an already improving business model
- 18:05 Balancing an expansion beyond Florida with internal investment opportunities
- 19:10 Choosing between internal development, partnerships and the sale of land assets
- 20:58 The synergies that exist between residential, commercial, and other infrastructure
- 24:04 Ensuring expertise exists within a small core team
- 25:45 What does a good partner look like for St. Joe?
- 27:36 What does St. Joe mean by “owner-oriented?”
- 29:19 Why St. Joe invests so heavily in growth over buying back shares
- 30:52 Lessons learned from Bruce Berkowitz
- 31:51 How decisions get made at St. Joe
- 34:40 How to decide which people should be on the bus
- 37:17 What factors did David Einhorn get right in his 2015 short analysis?
- 38:42 St. Joe’s remaining developable acreage
- 40:14 How St. Joe benefits from a 50-year master development plan
- 41:58 What attractions are missing from St. Joe’s core counties
- 42:58 Building win-win relationships with government stakeholders within the community
- 45:27 How St. Joe avoids being seen as “too powerful” within the community
- 46:37 Building storm resiliency in an area directly affected by environmental challenges
- 49:49 The benefits of building modern infrastructure from scratch
- 50:57 How modern community design has improved over the years
- 52:35 Futureproofing a home or community as a real estate developer
- 55:14 How an investor should approach St. Joe
- 58:31 St. Joe’s key performance indicators and measures of success
- 59:47 Why St. Joe is still a “cheap” investment
- 62:07 Looking at book value per share as an assessment of St. Joe’s progress
- 62:50 Instilling a long-term mentality within a corporate culture
- 64:14 Why mistakes are sometimes more valuable than are successes
- 65:42 The most misunderstood aspect of St. Joe
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.
For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Sep 28, 2021
Tuesday Sep 28, 2021
My guest on the show today is Mark Dankberg, the co-founder and Executive Chairman of Viasat. Viasat is a 3.8 billion dollar market cap company that provides broadband and communication products and services worldwide. Viasat started off a defense-oriented company but has since layered on consumer and business-facing offerings by developing the world’s leading high throughput geostationary satellites.
Over the next 2 years, Viasat will be launching 3 new satellites that will give the company the ability to offer global coverage to its military and in-flight WIFI customers. Additionally, Viasat is rolling out community WIFI initiatives to help people in emerging and frontier markets connect to the internet for the first time. All of this is happening while the company is facing a growing threat from low earth orbit satellite providers such as Elon Musk’s Starlink.
Given how much is going on and the fact that Mark recently went from being the CEO to assume the Executive Chairman role, I thought it would be a perfect time to talk to him about the following topics:
- The future of the global satellite broadband industry, including competition with Starlink;
- What the US military needs now from Viasat and how that may evolve over time;
- The cultural differences between the defense and commercial sides of the company;
- How Viasat can benefit from all the space-related activity going on right now; and
- Why this was the right time to shift his focus
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Key takeaways:
- Deeply understanding your customers’ wants and needs is a prerequisite for success in both D2C and B2B business. But, the more intermediaries you have, the less you can really understand your end customers. Also, working with distribution partners can be difficult if the goals of the organizations are not aligned.
- Not every industry is a winner-take-all market. Network effects and multisided marketplaces can create virtuous cycles and winner-take-all markets. In industries with supply constraints, negative network effects drive competition and ensure a diverse set of offerings.
- Bandwidth demand is heavily affected by geography and low-earth-orbit (LEO) networks are geographically limited. Despite offering low latency, every incremental satellite will only spend a fraction of its time over the areas with the most demand, and far more over oceans and other low demand areas. This is why a hybrid network that includes geostationary and LEO satellites is likely the best solution for customers.
- When a company is entering new markets or introducing new products, it is imperative to be a voracious reader of business history and theory, as well as to be well-grounded in the basic math that governs the industry.
- Modern warfare requires real-time information and instant communication. Accordingly, the U.S. military will need an up-to-date network of satellites with ground stations placed in safe locations in order to process and anticipate the moves of its adversaries.
Timestamps:
1:18 - Introduction
2:56 - Diversifying into direct-to-consumer (D2C) with the 2009 WildBlue acquisition
5:06 - The organizational restructuring required when shifting towards D2C
7:06 - Building a D2C sales organization within a legacy B2B company
11:51 - Making stair-step improvements with every new satellite launch
18:50 - The process of deciding to build Viasat’s own satellite
27:30 - Satellite broadband is not a winner-take-all market
31:32 - LEOs, GEOs, hybrid networks and why there is no “best” satellite design
45:27 - Building a cohesive culture with two distinctly different business segments
51:23 - Why Viasat 3 will play a key role in the future of warfare
58:25 - How Viasat benefits from all of the excitement around space
62:40 - What Mark has learned from Baupost Group’s founder Seth Klarman
65:53 - Being confident in putting out guidance even before the Viasat 3 satellites launch
70:55 - The least understood aspects of Viasat
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.
For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Sep 21, 2021
Tuesday Sep 21, 2021
My guest on the show today is Alan McKim, the Founder, Chairman and CEO of Clean Harbors (NYSE: CLH). Clean Harbors is a 5.6 billion dollar market cap company that provides environmental and industrial services within North America. The company has two segments: Environmental Services and Safety-Kleen Sustainable Solutions. In the Environmental segment, Clean Harbors collects, treats and disposes of waste within its company-owned landfills and incinerators. In addition, the Safety-Kleen division provides cleaning and waste disposal services to customers such automotive repair shops. In fact, Clean Harbors is the largest recycler of used motor oil in North America.
Alan McKim founded the company in 1980 and took it public at $9 in 1987. Over that period of time, Clean Harbors has made a number of large acquisitions, including the transformational merger with Safety-Kleen in 2012. The company now produces over 3 billion dollars in revenue and its stock has risen to over $100 per share.
It is not often that I have a chance to talk to someone who has run a company for 40 years. So, I really enjoyed peaking with Alan about the following topics:
- The uniqueness of the Clean Harbors asset base and how that creates a moat;
- How the company decides to take big swings when it comes to M&A;
- Educating people about how Clean Harbors is a good actor in a world increasingly focused on ESG;
- The impact of further environmental regulation on the company; and
- Building a cohesive culture over 40 years
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Key Takeaways:
- Moats that are developed in highly regulated industries can be quite durable
- Large acquisitions often take some time to get right but you have to be willing to periodically take big swings
- Regulators can be your allies: every inspection is an opportunity to learn new best practices and build a safer environment
- Even companies that don’t start with a focus on return on invested capital (ROIC) can develop that metric as a North Star—and shareholders can help with that process
- Creating a culture of safety is essential at company with thousands of field employees
Time stamps:
1:19 - Introduction
3:03 – Rationale for making the biggest acquisition in CLH’s history
5:23 – How familiarity with a business improves post-merger integration
7:12 – How environmental sustainability played a part in the acquisition of Safety-Kleen
9:10 – Are people actually putting used motor oil down the drain?
10:07 – Strategy behind keeping acquired brands alive
11:29 – Why take another $1 billion-plus swing at HydroChem now
14:05 – Integration learnings from 65 acquisitions
16:53 – Acquisition strategy learnings over a long career of acquisitions
18:54 – The virtual impossibility of green-fielding brand new incinerators in the US
20:30 – Why now is the time to expand incinerator capacity through brownfield development
23:07 – Building a culture and company that will accept short-term pain for long-term gain
24:45 – How CLH has suffered from acquiring assets outside of its core
26:23 – The advantage of having recently added a new incinerator to a facility
28:04 – Creating win-win relationships with diverse regulators
29:49 – Using regulatory fines as a learning moment
31:43 – How to position a company to benefit from future regulation
33:41 – The moat that comes from having a dense route network
34:55 – The impact of the electric vehicle revolution on used motor oil demand
36:52 – Challenges facing the re-refined oil business
38:36 – What’s being missed at Clean Harbors
41:21 – Building a sustainable and consistent culture through organic growth and acquisitions
43:40 – Career learnings around compensation
45:17 – Succession planning as a founder and CEO
46:57 – Empowering a board to give real feedback to the founder
48:58 – Building an adaptable organization in an ever-changing industry
51:04 – Improving internal ESG planning and participation
52:44 – How shareholder feedback has been helpful in the past
54:32 – Why insider selling of shares isn’t always a bad thing
55:48 – International M&A as a potential avenue
58:47 – Alan’s ideal legacy
60:38 – Focus as a tool for growth
62:12 – The origins of ROIC as an internal north star
63:54 – The least understood aspects of Clean Harbors
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.
For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Sep 14, 2021
Tuesday Sep 14, 2021
My guest on this episode is Jeff Rosica, the CEO of Avid Technology, a 1.2 billion dollar market cap company that sells software and hardware for digital media production and management. For decades, Avid’s products have been considered the gold standard in the entertainment industry. In fact, its Media Composer and Pro Tools products are used to make many of the movies you see and to create the songs you listen to.
Jeff Rosica was Avid’s Chief Sales Office and became the CEO in 2018. Since then he has overseen the company’s transition to a SaaS, or software-as-a-Service business model. After a few fits and starts, the company has started to deliver on its margin and cash flow targets as the benefits of the business model transition are flowing through the financial statement. Given the company’s recent success and my desire to better understand Avid’s journey, I thought it would be a great time to catch up with Jeff and discuss:
- What moving from perpetual licenses to a subscription software business really looks like internally
- How the company is approaching a world where people can create great content on their iPhones
- Whether or not having activist shareholders involved in the company can be helpful
- And how to balance the different cultures within engineering and sales teams
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Key Takeaways:
- You can’t fix a business without first fixing the culture. Without the right people, you have nothing
- Fear the innovators more than you fear the incumbents. If you aren’t willing to cannibalize your own business to innovate, you’ll never win against the ankle biters.
- Listening to alternative perspectives is incredibly important and often activist investors can be those voices.
- With the right underpinning of a solid company, you can change a company incredibly quickly—and probably even faster than you would think. You might regret certain things you do if you move fast, but you’ll always really regret the things you didn’t change and improve.
Time stamps:
1:20 – Introduction
2:50 – Being named interim CEO with no forewarning
4:55 – Communicating your strategy as a new CEO
6:02 - Was being CEO always part of the plan?
8:10 – What it took to fix a broken culture
9:49 – Building a media creation tool in the age of iPhones and accessible software
12:55 – Competing with innovative ankle biters as the incumbent
15:55 – Balancing the dreams of engineers with the realities of the business
18:34 – How COVID has changed consumer needs for media creation
21:07 – Moving from a perpetual license business to a modern SaaS structure
23:27 – Fixing a company first and then thinking about M&A
26:50 – Capital allocation strategy now that M&A is on the table
29:23 – How activist shareholders have helped AVID
35:13 – Maintaining bargaining power even against the largest customers
37:17 – Remaining focused in a world with geographically diverse opportunities
39:18 – Managing rising stakeholder expectations during a period of rapid growth
41:00 – Incentivizing an organization to achieve stretch goals
43:48 – COVID’s long term effects on a tradeshow-focused industry
47:49 – Mistakes made and lessons learned as a brand new CEO
51:07 – Expanding an organization’s focus from the short run to the long term
53:05 – Jeff’s ideal legacy
54:37 – Knowing when a company is ready to take on new initiatives
56:29 – Getting better at communicating with stakeholders regarding ESG
59:05 – Lessons learned in trying to get the right people on the bus
1:01:45 – Why industry consolidation has always been 1 year away
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire. For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Wednesday Sep 08, 2021
Wednesday Sep 08, 2021
My guest on the show today is Mauricio Ramos, the CEO of Millicom. Millicom is a 3.75 billion dollar market cap mobile and broadband company that primarily operates in Latin and South America. What is most interesting about Millicom is its leading positions in its largest markets and how rapidly the company is transforming itself into a broadband leader in the region.
Mauricio has been CEO since 2015 but has been involved with the industry since the late 1990s. Over his tenure, he has overseen the company’s ongoing exit from its African operations as well as its expansion through M&A into new markets such as Panama. Mauricio spent a number of years working for Liberty Global and has brought the John Malone cable playbook to Millicom.
COVID has presented the company with some unique challenges and I thought it would be a great time to catch up with Mauricio about his outlook for Millicom and the markets the company operates within.
In this conversation, we had the opportunity to cover:
- The rationale for spending aggressively to become a more broadband-focused company
- What he learned about cable industry while working for Liberty Global
- The process of working to become better known by US investors
- The benefits of owning cable and wireless assets in their markets
- How to establish a cohesive culture across borders
Key Takeaways:
- The biggest learnings from Liberty Media’s John Malone: business focus and clarity are what drive success so you must eliminate distractions.
- How to create moat in cable and broadband: benefit from a first mover advantage where possible, build a committed customer base that is driven by great customer service, offer multiple products that allow you to sell a low priced bundle and consistently reinvest in your brand
- Developing cultural traditions within an organization can build incredible employee buy-in across all levels of an organization.
- Turning your employees into long-term investors through compensation drives organizational buy-in for long-term strategic decisions.
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Timestamps for this episode:
1:19 - Introduction
2:55 - What happens when your largest investor exits its position
6:52 - The flexibility and autonomy afforded when a controlling shareholder departs
9:12 - Millicom’s unique structure that comes from trading on two exchanges
10:32 - How an investor can get comfortable investing in Latin America
16:07 - What Mauricio learned from John Malone and Liberty Global
21:16 - Fixed mobile conversion as a value generator
24:39 - What is Millicom’s moat?
29:04 - Customer service culture as a moat
31:52 - Creating a consistent culture across varied geographies
37:24 - The benefits of Millicom’s scale in Latin American
41:04 - How Millicom creates win-win relationships with governments and regulators throughout Latin America
46:18 - The perception of cable and mobile businesses and the disparate multiples they trade at
51:00 - Millicom’s capital allocation strategy
53:45 - How strategy can vary depending on market position within a country
56:55 - How to align the organization behind long-term goals even if there are short-term challenges
59:22 - Mauricio’s biggest learnings from his years as CEO
1:01:50 - What is the most misunderstood part of Millicom?
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire. For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Aug 31, 2021
Tuesday Aug 31, 2021
My guest on the show today is Jim Hallett, the former CEO and now Executive Chairman of KAR Auction Services. KAR is a $2.25B market cap company that operates within the wholesale auto remarketing industry. Jim is very well known in the used car auction industry and has built up a wealth of knowledge over his close to 30 years at KAR. He joined the company back in 1993, then became CEO in 2009 and just this past April stepped back to Executive Chairman.
During his tenure, Jim has overseen the company’s spin-off of IAA, which is now a $7.3B market cap company on its own. He also has helped spearhead the company’s aggressive initiatives to extend its digital offerings and add scale beyond KAR’s physical car auction facilities.
In this wide-ranging discussion, we covered:
- Jim’s thoughts on KAR’s very important pivot to digital that occurred in 2020
- What has changed about the car auction industry over the last three decades
- Why he thought it was the right time to pass the torch
- Maintaining the company’s culture within a rapidly changing industry
- Why KAR believes that the model of the future is hybrid: digital and physical
If you are at all interested in how incumbent companies defend their turf against digital upstarts, this was a great discussion.
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Timestamps for this episode:
1:50 - Introduction
3:42 - KAR’s rapid digital transformation
6:12 - Putting customer safety over market share
9:30 - Managing stakeholders during a transformational change
11:50 - Layering a digital strategy on top of a historically brick and mortar business
13:42 - Balancing KAR’s rapid digital transformation with the needs of customers
16:37 - Digitizing their dealer-to-dealer business through M&A
20:43 - Key lessons learned competing against digital upstarts
23:14 - M&A: to build or to buy?
25:30 - Successful leaders have to embrace change
28:56 - How do you know when to pass the CEO torch?
31:31 - Digitization of the used car auction industry
33:42 - Imparting a culture of optimism
36:42 - Growth opportunities via expanding into Europe
40:02 - Limiting management distraction while expanding outside the US
41:12 - Competing for digital talent from Indiana
44:40 - Pushing old school customers to digitize their business
48:42 - Maintaining a moat within an increasingly digital world
51:35 - Jim Hallett’s ideal legacy
54:45 - Biggest changes in the car auction industry over 3 decades
57:57 - Most underappreciated aspect of KAR’s hybrid model
1:00:25 - Why the industry may never be fully digital
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire. For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
Tuesday Aug 24, 2021
Tuesday Aug 24, 2021
My guest on the show today is Sean O’Connor, the CEO of StoneX Group (NASDAQ: SNEX), a $1.2 billion dollar market cap financial services company that generated over $50 billion in revenue in fiscal year 2020. Sean became the CEO of International Assets Holding Company in 2002 and was a key architect of the 2009 transformational merger with FCStone that serves as the foundation of what StoneX is today. During his tenure, the company has been quite acquisitive and has added several new product lines and geographies. Currently, StoneX is involved in a number of businesses, including:
- Risk management and hedging services
- Commodities trading
- Equity securities trading
- International payments; and
- Foreign exchange services
Sean has been a steward of a stock that is now 3.5 times higher than it was when the FCStone merger closed, a period of time in which book value per share is up over 4 times. In this wide-ranging discussion, we cover:
- Sean’s philosophy on M&A and integrating companies
- How StoneX approaches risk management and what the company has learned from prior mistakes
- The process of incubating and funding an international payments business; and
- How financial services companies can distinguish themselves from competitors
This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/
Timestamps for this episode:
1:50 - Introduction to SNEX CEO Sean O’Connor
3:35 - Why even attempt a transformational merger during the Global Financial Crisis
12:04 - The challenges associated with deals where the minnow swallows the whale
19:30 - Deep integration vs. a hands-off approach post-acquisition
23:00 - Building a differentiated risk management culture at StoneX
31:01 - Important lessons from significant loss events
37:11 - Starting an international payments business from scratch
44:04 - How StoneX looks at cryptocurrency as an opportunity
47:37 - Creating a moat around StoneX despite the competition
59:13 - StoneX’s relationship with regulators and becoming good at regulation
1:03:19 - Key elements that have propelled StoneX’s valuation
1:06:27 - The most underappreciated aspect of StoneX: long term-compounding
To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire. For more information about Cove Street Capital, please visit: https://covestreetcapital.com/
iTunes: https://apple.co/3xlUvPY
Spotify: https://spoti.fi/3jxkxLl
Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.
All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.