Cripplecat

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...

Long Netflix with a $373 price target, reflecting an 30% return. A recent miss on subscriber net adds and streaming announcement of several large competitors led to disappointing stock performance that has helped the stock come down from irrational valuation levels. This research explores whether Netflix can sustain its subscriber growth to justify its current valuation.

A Summer project focused on Netflix. Thank you to the team at Artisan Partners for the experience.

Long Meituan Dianping with a $112 HKD price target, reflecting an 87% return. Meituan’s value is driven by growth in its food delivery GTV and path to monetization and cross-sale opportunities. The company’s IPO in 2018 was accompanied with the news of Alibaba’s acquisition of Ele.me (its main competitor).  Concerns with competition from Alibaba led to suppressed valuation for the fast-growing tech company. Trade war headlines also irrationally affected its valuation in December even though it has no exposure to international trade. Headline news seems to have clouded the market’s view on what I believe is a sustainable moat. With the recent industry consolidation, Meituan’s management team has shown ability and willingness to further monetize its growing GTV.  

Frontdoor, inc. operates a home services platform that provides home service plans to homeowners in the United States. It provides services under the HSA, OneGuard, Landmark, and American Home Shield brand names. The company serves homeowners who require assistance with technical home repair issues by utilizing its network of pre-qualified professional contractor firms. Frontdoor primarily derives revenue from three channels: existing contract renewals, selling as part of a real estate transactions, and selling direct to consumer (DTC). With 30% and 50% of the real estate and DTC market share, respectively, Frontdoor and its American Home Shield brand is by far the largest player in home warranty market.