Cripplecat

MSCI is a high-quality compounder that has near monopoly position in the international index business. It benefits from several secular tailwinds that will provide mid-teens earnings growth for the next decade. MSCI’s market position in ESG research has potential upside as large as the passive investing trend we saw over the last 2 decades. While ESG makes up just 6% of the business today and is overshadowed by a wonderful core index business, it is the fastest growing segment that saw accelerated growth recently. Further, it should generate operating margins somewhere between that of a ratings agency and an index provider (50 – 70+% margin). I believe the market undervalues the earnings power of the MSCI due to ESG segment’s relative size and lower visibility as well as the company’s extremely long-term reinvestment horizon.

Venmo monetization is underway going from virtually $0 revenue just a few years ago to $450 million annual run rate, 39 bps monetization rate. Compared to PayPal’s overall take rate of 2.5%, it would appear that Venmo is under-monetization. Only ~1/3 of its payment volume generates revenue, driven by instant transfer fees – 100 bps fee. Management expects Pay with Venmo to become a significant driver (~2.6% fee), but adoption has been slow so far. Pay with Venmo (PWV) has had limited consumer awareness. Most of PWV volume happened through user clicking through the PayPal checkout button to reveal the PWV option. Thus, a significant percentage of PWV volume has come from users that already use the PayPal button - cannibalizing PayPal checkout volume. As PWV was launched a few years ago, I believe many overlapped users have already seen the PWV option wherever it is available. The slow uptake implies 1) there is little user overlap or 2) there is significant user overlap, but few opted t...

Green Dot is a vertically integrated fintech/payment company mainly serving unbanked/underbanked population – people with limited access to the traditional banking system. It emulates traditional banking experience (cash deposit/withdrawal, digital payment, bank accounts) through a network of over 100,000 retail locations and digital banking. Its consumer business (59% of revenue, 93% of earnings, -8% y/y) pioneered the prepaid cards industry that allowed its core customers to participate in digital payment. As of FY19, Green Dot has 5 million active accounts (-5.6% y/y). Green Dot launched Banking-as-a-Service platform (39% of revenue, 7% of profit, +26% y/y) to grow 2B business, where GDOT becomes the back-end technology to help customers provide payroll, banking, and disbursement service to employees and/or customers. BaaS counts Apple, Uber, Intuit, and Walmart among its customers.

Pat is the founder of Dorsey Asset Management, former director of research at Sanibel Captiva Trust, and former Director of Equity Research at Morningstar, where he developed Morningstar’s economic moat ratings and methodology for analyzing competitive advantage. He is also the author of two books – The Five Rules for Successful Stock Investing and The Little Book that Builds Wealth.

CASY operates 2,161 convenience stores across 16 states. 56% of its stores are in communities with less than 5,000 people and another 26% in locations with 5,000 to 20,000 people. CASY has two distribution centers with a third planned for FY21. Its unique store base and scale highlights CASY’s competitive advantage. Since 2010, revenue grew at 9% CAGR, propelling the stock from $35 to over $170. During this period, CASY averaged 68 net new stores per year, growing store base by 3.8% annually. CASY also remodeled/updated its aging store base, driving significant improvement in same store sales. Nationally, industry labor cost pressures led to increasing fuel margin for gas stations (gas margins are used to offset store operating cost). CASY’s fuel margin increased from 14 cpg in 2010 to 20 cpg in FY19. Recently, CASY announced a CEO change, bringing in former CEO of IHOP, Darren Rebelez. In the same month, its stock broke out to the upside as it beat EPS expectations and improved FY20 g...

Etsy is a two-sided marketplace for unique and special items. As of 3Q19, it has 45 million active buyers and 2.4 million active sellers, up 21% and 17% y/y, respectively (excluding Reverb). Etsy processed $4.5B in GMS in the twelve months ending 9/30/19, growing 21% y/y. It generates revenues from listing fee (13%), transaction fee (30%), Etsy Payments (30%), and marketing and shipping services (26%). Network effect/scale and captivity characterizes its competitive advantage. Etsy stock trades on GMS growth and potential profitability. Management has a few initiatives that aim at driving growth: 1) free-shipping initiative launched in 3Q19 encouraging sellers to offer free-shipping for orders over $35; and 2) Etsy Ads launched in September 2019 to combine Promoted Listings (sellers pay Etsy to display items higher in search results) and Google Product Listing Ad (sellers pay Etsy to bid for keyword ad through Google) into one advertising platform. These initiatives are expected to gen...