Author Topic: SYTE - Enterprise Diversified  (Read 148390 times)

BG2008

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Re: SYTE - Enterprise Diversified
« Reply #500 on: October 08, 2018, 07:18:19 AM »
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Rant over.  I think guys like Keith Smith are salt of the earth and great assets for SYTE.  I also think that the asset management business offers something that is truly differentiated from the S&P 500.     


Jurgis

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Re: SYTE - Enterprise Diversified
« Reply #501 on: October 08, 2018, 07:21:33 AM »
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Good post.
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globalfinancepartners

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Re: SYTE - Enterprise Diversified
« Reply #502 on: October 08, 2018, 07:24:21 AM »
+1, good post.  I think a lot of folks on this board can attest that investment management and real estate investment can be really good businesses.  There are certainly worse strategies than focusing on these strengths.

Spekulatius

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Re: SYTE - Enterprise Diversified
« Reply #503 on: October 08, 2018, 09:26:00 AM »
It’s not odd. If it doesn’t get mentioned, it means it get sold off.  It’s implied ,the way I read this letter. I have been in the corporate world long enough to read the tea leaves, and this seem as clear as they come.

What I was trying to convey: that they possibly want to get rid of the HVAC business isn't odd at all. But if HVAC is a disaster then I believe our great value investing hero WEB would say just that in his shareholder letter. I'd expect the same from these guys. But maybe there are some (legal) issues with that that I am not aware of - explaining the 'stay tuned for more details' in the shareholder letter.

You don‘t state that a business is a disaster before you sell it obviously, but they will probably more frank regarding their assessment, once the business is sold.

BG2008 hit the nail on the head, imo.
« Last Edit: October 08, 2018, 03:01:54 PM by Spekulatius »
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BG2008

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Re: SYTE - Enterprise Diversified
« Reply #504 on: October 08, 2018, 02:53:25 PM »
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Rant over.  I think guys like Keith Smith are salt of the earth and great assets for SYTE.  I also think that the asset management business offers something that is truly differentiated from the S&P 500.   

BTW, I meant to say the asset management business of SYTE (not just any asset management business) offers something that is truly differentiated from the S&P 500. 

Junto

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Re: SYTE - Enterprise Diversified
« Reply #505 on: October 09, 2018, 08:20:01 PM »
I see a pattern with "fund managers" who wind up buying businesses like WEB.  WEB at one point bought a gas station in Omaha and he quickly found out that it is a tough business and he and his family wind up working on the weekends and pumping gas and cleaning windows.  I think a lot of us, asset managers, don't know or forget how hard it is to run actual businesses.  We read annual reports and argue about what is a good business move and what is a bad business move and how we would do things differently.  We're kind of like the talking heads doing Monday morning quarterbacking.  In reality, if you ever played an actual sport or ran a business, you will know that the real world is very different and much harder.  Your opponents don't just lay down and let you run all over them.  Your employees don't do exactly what you tell them to do.  On paper, running a Chinese food take place is a great business because you don't need to manage working capital.  It is a capital light business.  Yes, it cost $100-150k to open up a place, but if you run it well, you can net $100k in a year.  Your customers pay you at the point of sale, but you pay your vendors after 1-2 months.  It's fairly recession proof.  Everyone has to eat, right?  $6 lunch specials is the cheapest you will get.  As a fund manager, we would mistaken many of these view points as being advantages and someone may say "hey, let's roll them up"  I'm sure that the mom and pop people don't know how to run it as well as a professional fund manager.  What the fund manager forget is that the owner's got his wife and three kids working pretty much full time to make that $100k a year.  It is not representative of the true business.  I have an uncle who does very well as a HVAC guy.  But he works like 12-14 hours a day and he's very good at what he does.  You can't take him out and replace him with a 20 year old who clocks in and clocks out.   

Peter Lynch mentioned that some financial entities tried to roll up the lobster fishing industry mentioning scale etc.  The truth is lobster fisherman is a irrational breed of people who smoke Marlboros, are grumpy, but work like hell, and loves being on the water.  Yes, it's a shitty living and they don't make anything.  But they go to work everyday being on the water.  They may even dislike their job/business, but they show up everyday to do it.  It's being a part of a shitty American dream.  You try to roll up the lobster fishing industry, you will go broke.  If an industry is fragmented, there is likely a good reason why it is.  As a manager, you really need to understand why and examine what you're bringing to the table that will alter the economics.   

Rant over.  I think guys like Keith Smith are salt of the earth and great assets for SYTE.  I also think that the asset management business offers something that is truly differentiated from the S&P 500.   

There are real reasons why private equity firms have operating partners. Very insightful post and applicable in many industries.