Author Topic: Your best wide moat idea today  (Read 4751 times)

Okonomen

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Your best wide moat idea today
« on: January 22, 2020, 10:01:03 AM »
Hi,

Was just wondering since most stocks trade at ATH, 2019 was a crazy good year etc. What is currently your best wide-moat idea?

Mine: Fox Corporation
Insulated from the streaming substitution as they focus on live events and is considered a must-have in many TV viewers TV bundles
Founders own 40% of stock and has recently announced a 2 bUSD bb = 10% of stock
Generates +30% ROIC annually
Has low CapEx requirements
Strong brand/franchise in the US which is pivoting to digital avenues
Growing their local TV segment
Low debt
Trading at 10% FCF yield
Has lots of non-core (partly hidden) assets worth close to 10 USD/share combined (tax asset, ROKU stake, Stars GRoup stake, studio lot, cash)
Has huge pricing power towards cable distributors making them capable of growing revenue LSD

Main risks:
Can't grow revenue like this forever. flow TV is slowly declining
founders may do stupid things... e.g. it seems the Murdochs want to some day merge Fox with News Corp
As they focus on live news/sports they don't really create content with ever lasting IP like Disney etc. However, they also have great WC as content creation is also capital intensive and requires WC
« Last Edit: January 22, 2020, 12:59:59 PM by Okonomen »


FiveSigma

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Re: Your best wide moat idea today
« Reply #1 on: January 22, 2020, 11:29:20 AM »
Okonomen, how do you arrive at FCF multiple of 10x?

Okonomen

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Re: Your best wide moat idea today
« Reply #2 on: January 22, 2020, 11:34:42 AM »
Okonomen, how do you arrive at FCF multiple of 10x?

Deduct non-core assets and assume close to 2 bUSD fcf. However, I haven't taken into consideration some modest stock price appreciation

ValuePadawan

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Re: Your best wide moat idea today
« Reply #3 on: January 23, 2020, 10:43:54 AM »
For the widest moat I'd have to go with Chr Hansen they provide the freeze dried cultures used to make 70% of the world's yogurt and 50% of the world's cheese.

Extremely High switching costs because if you change the culture you change the taste and customers don't want their favourite yogurt to change taste. They also have selectively bred bacteria that make yogurt taste sweeter and creamier with less sugar and fat by transforming lactose into glucose in the fermenting process. [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6339885/]

Because the bacteria is a small cost in the making of yogurt and the switching costs are high they can increase prices a lot. Also with all the R&D they do on different cultures of bacteria they are able to come up with new products that no one else has like the example I gave before.

In terms of price its not interesting but in terms of moat its huge.

BG2008

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Re: Your best wide moat idea today
« Reply #4 on: January 23, 2020, 10:54:31 AM »
For the widest moat I'd have to go with Chr Hansen they provide the freeze dried cultures used to make 70% of the world's yogurt and 50% of the world's cheese.

Extremely High switching costs because if you change the culture you change the taste and customers don't want their favourite yogurt to change taste. They also have selectively bred bacteria that make yogurt taste sweeter and creamier with less sugar and fat by transforming lactose into glucose in the fermenting process. [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6339885/]

Because the bacteria is a small cost in the making of yogurt and the switching costs are high they can increase prices a lot. Also with all the R&D they do on different cultures of bacteria they are able to come up with new products that no one else has like the example I gave before.

In terms of price its not interesting but in terms of moat its huge.

Thank you for such insight!!!

Jurgis

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Re: Your best wide moat idea today
« Reply #5 on: January 23, 2020, 11:39:36 AM »
FOXA is narrow moat with negative trend according to M*  ;) I would tend to agree.

If you want wide moat value stock, buy BRK.
If you want wide moat growth stock, buy GOOGL.
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TheAiGuy

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Re: Your best wide moat idea today
« Reply #6 on: January 23, 2020, 11:51:28 AM »
Facebook.  Itís essentially a monopoly and the CEO is crazy young.  Itíll beat the market for the next 30 years.

RadMan24

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Re: Your best wide moat idea today
« Reply #7 on: January 25, 2020, 12:59:14 PM »
Tesla.  ;)

Lakesider

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Re: Your best wide moat idea today
« Reply #8 on: January 25, 2020, 01:46:43 PM »
XRO AU. Just world class cloud accounting software from New Zealand aimed at small and medium businesses. Once you use it you are unlikely to change it, its beautiful. Lots of great features, automatic bank feeds and reconciliations,  invoice scanning ect... Their environment allows developers to create apps and sell them to XRO users. Lots of value add on top of the subscription fees.

Have taken over AU and NZ, doing really well in UK too. They are starting to penetrate the US, struggled at first but the subscription growth in the US seems to be accelerating.

Has been a 3x for over the last couple of years. I got uncomfortable with the valuation and sold recently, but i,m having serious FOMO because i know its a great bushiness.

ValuePadawan

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Re: Your best wide moat idea today
« Reply #9 on: March 11, 2020, 12:08:10 PM »
Now that the market has taken a hit I'm out hunting for high quality businesses with big moats because some are trading at fair prices for once. I was wondering if anyone has any suggestions of where to look? (other than at airlines which I have already picked through.)