Author Topic: CODI - Compass Diversified Holdings  (Read 895 times)

Cevian

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CODI - Compass Diversified Holdings
« on: November 08, 2018, 12:51:31 PM »
Any investors in CODI?

There have been a lot of threads lately on how difficult it is for people to emulate Buffett's private business acquisition strategy. Most holding companies are having a difficult time getting the recipe right. These guys seems to have figured it out and IMO are doing a great job and earning a good reputation.

P.S. I've taken a fairly large position recently since it appears that that someone sold a large block.
« Last Edit: November 08, 2018, 12:55:08 PM by Cevian »


Foreign Tuffett

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Re: CODI - Compass Diversified Holdings
« Reply #1 on: November 08, 2018, 06:32:07 PM »
At first glance the debt looks a little concerning. $1.1B in debt + two classes of preferred stock. The debt is also on the expensive side, particularly the 8% senior notes and 7.875% series b preferreds.

What makes you like the stock?

Peregrino

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Re: CODI - Compass Diversified Holdings
« Reply #2 on: November 09, 2018, 01:54:46 AM »
Been a while since I’ve looked at the company, but the share price has hovered around mid teens per share for the past several years and they’ve maintained a high single digit yield over that period.

As I recall their strategy was to buy assets unlevered and make the new subs take out debt from the parent whose interest payments provide the cash for the parents dividend. 

Sort of like a BDC plus PE portfolio wrapped in one.

matts

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Re: CODI - Compass Diversified Holdings
« Reply #3 on: November 09, 2018, 02:49:13 AM »
This is an externally managed BDC-like company. It pays the manager 2% fee along with a "profit allocation" according to a formula that I could not find being disclosed even in the 10K. I'm SURE the terms are very shareholder friendly...

I don't know if the stock is cheap, but this has nothing to do with "Buffett's private business acquisition strategy".

So can we be a little more careful about dropping his name?

can you tell us what the profit allocation formula is? I wasn't able to find it.

globalfinancepartners

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Re: CODI - Compass Diversified Holdings
« Reply #4 on: November 09, 2018, 03:39:49 AM »
Try pages 185-190 of the original S-1:
https://www.sec.gov/Archives/edgar/data/1345122/000095013305005575/w15027sv1.htm

And, yes, I think it's ridiculous that they basically haven't published it since

This is an externally managed BDC-like company. It pays the manager 2% fee along with a "profit allocation" according to a formula that I could not find being disclosed even in the 10K. I'm SURE the terms are very shareholder friendly...

I don't know if the stock is cheap, but this has nothing to do with "Buffett's private business acquisition strategy".

So can we be a little more careful about dropping his name?

can you tell us what the profit allocation formula is? I wasn't able to find it.

matts

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Re: CODI - Compass Diversified Holdings
« Reply #5 on: November 09, 2018, 04:21:46 AM »
Thanks.

So it's basically 20% of all gains. They have a 7% annualized hurdle, but if they hit it, there is a catch-up provision to make sure they get 20% of all gains.

Seeing how the long-term average of the stock market is what? around 9%? It's not a big accomplishment to hit the hurdle over time.

Disclosing your fees once every 15 years seems reasonable... Uncle Warren would be proud.

Call me when they switch the fees to 20% ABOVE 7% and start disclosing it to people who may not have been part of the IPO in 2005.

btw, love how in the presentations, at first glance and to retail investors, it might seem like the profit allocation is 0.1%. They don't bother to clarify or disclose the truth anywhere else.





Peregrino

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Re: CODI - Compass Diversified Holdings
« Reply #6 on: November 09, 2018, 05:42:47 AM »
Not sure what you guys mean when you say they don't disclose their compensation formula.

Its stated very clearly on page 33 of their 6/15/2017 Investor Day slides
http://ir.compassequity.com/static-files/e95f94fe-bbce-4550-88f1-9c3dc5437c61

matts

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Re: CODI - Compass Diversified Holdings
« Reply #7 on: November 09, 2018, 05:52:57 AM »
Not sure what you guys mean when you say they don't disclose their compensation formula.

Its stated very clearly on page 33 of their 6/15/2017 Investor Day slides
http://ir.compassequity.com/static-files/e95f94fe-bbce-4550-88f1-9c3dc5437c61

Fair enough. But I didn't see it in the updated investor presentation that is featured on their IR page. It has most of the analyst day slides, but not that one. Also, nothing I could find in their annual report/10k. All documents an investor would go look at as opposed to the non-current (now) analyst day presentation. That does not seem odd to you?

Every BDC that I remember glancing at was much more transparent than that.



globalfinancepartners

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Re: CODI - Compass Diversified Holdings
« Reply #8 on: November 09, 2018, 06:13:08 AM »
Yeah, it's great that they included it in a presentation slide - but it was nowhere to be seen in many years of SEC filings, including 10Ks.

Peregrino

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Re: CODI - Compass Diversified Holdings
« Reply #9 on: November 09, 2018, 06:39:01 AM »
Don't have a bone to pick as I'm neither long nor short, but it's mentioned tangentially in the 2017 Annual Report (numbered page 60, actual page 81) that they charge these fees
http://ir.compassequity.com/static-files/d1796688-fca9-4ef4-b016-28e27e9ef0f4

And while not spelled out with a numerical calculation in that document, it IS spelled out in their Proxy from April 2018 (numbered page 26, actual page 32)
http://ir.compassequity.com/static-files/bb2b98b2-ab27-46d4-956a-2f521d993d61

Hope this helps dispel the notion that they're being secretive about the fees they charge.