MOI Global - unknown
The speaker critiques the prevalent reliance on quantitative models in investment, advocating for a qualitative approach that prioritizes business attributes and management quality. This approach is exemplified through the case of High Vision, a Canadian company founded in 2004, which has shown significant growth and is led by a capable management team. The company has grown its revenue by 23% annually until its IPO in 2020, without requiring additional funding until then. The speaker highlights the importance of management, using historical examples like Apple and IBM to illustrate how leadership can drastically alter a company's trajectory. High Vision's CEO, Merco Weer, has a strong background in tech firms like Silicon Graphics, which adds credibility to his leadership. The company's leadership team is experienced and has a significant ownership stake, aligning their interests with those of external investors. Despite a drop in share price post-IPO, the company is seen as undervalued due to low analyst coverage, presenting a potential investment opportunity.
Key Points:
- Focus on qualitative aspects of business over quantitative models for investment decisions.
- High Vision has grown significantly with a 23% annual revenue increase until its IPO.
- Strong management is crucial; High Vision's CEO has a credible tech background.
- The company is undervalued due to low analyst coverage, presenting an opportunity.
- High insider ownership aligns management's interests with investors.
Details:
1. 🔍 Embracing a Unique Investment Approach
- The speaker presents a distinct investment strategy, contrasting it with traditional methods by emphasizing 'back to front upside down thinking.'
- This approach encourages questioning conventional wisdom and using unconventional logic to identify investment opportunities.
- The speaker references Ronald Coase to illustrate how data can be manipulated to support any desired conclusion, implying the need for critical analysis and skepticism in investment decisions.
- The approach is designed to exploit inefficiencies in the market by looking at data and trends from a different perspective.
- Examples of this approach in action include identifying overlooked assets or market anomalies that traditional analysis might miss.
2. 📊 Championing Qualitative Over Quantitative Analysis
- Prioritize qualitative aspects of a business in investment strategies to gain a competitive advantage, as it addresses elements often overlooked by traditional quantitative models like DCF and CAPM.
- Develop an investment thesis based on qualitative analysis before consulting quantitative data, ensuring the data serves to support the thesis rather than dictating strategy.
- Utilize real-world examples or case studies to illustrate successful applications of qualitative analysis, emphasizing its practical benefits over purely quantitative methods.
3. 💎 Discovering the Hidden Gem: High Vision
- High Vision is identified as a largely unknown but high-quality business that meets key investment criteria and demonstrates 'Golden Threads' of success.
- It boasts a strong management team and holds a market-leading position, making it an attractive investment prospect.
- The company's favorable growth prospects highlight its potential as a compelling investment opportunity.
- The motivation behind the discovery of High Vision was to apply mental models for identifying successful businesses, inspired by Charlie Munga.
- Specific growth metrics or data points about High Vision's market position and future prospects would further enhance the investment evaluation.
4. 🚀 High Vision's Remarkable Growth Journey
- High Vision, a Canadian company established in 2004, achieved a consistent growth in Topline Revenue at nearly 23% CAGR over 16 years until their IPO in 2020.
- The company managed to grow significantly from an initial $8 million investment without requiring additional funding until the IPO, demonstrating strong financial management and business acumen.
- The 2020 IPO was strategically aimed at raising capital for acquisitions and investing in organic growth, marking a key turning point for the company.
- Despite the challenges of 2020, including the COVID-19 pandemic, the IPO marked a pivotal moment for accelerated growth and expansion.
- Since the IPO, High Vision's revenue has notably increased, underscoring the successful impact of the capital raise and strategic initiatives.
- Post-IPO, High Vision strategically acquired three companies, enhancing its market position and expanding its product offerings.
- The company initiated several organic growth strategies, including expanding into two new international markets and launching a new product line, which contributed to a 30% increase in customer base within the first year post-IPO.
5. 📉 Market Misunderstandings and Opportunities
5.1. Market Misunderstandings
5.2. Investment Opportunities
6. 👔 Leadership Excellence at High Vision
- High Vision's founder and CEO, Merco Weer, has decades of experience in senior management and sales, with past roles at Hewlett-Packard and Silicon Graphics.
- Silicon Graphics was a pioneer in computer-aided design, visualization, and high-performance computing, once holding over 50% of the graphics market.
- Merco Weer turned around the struggling European operations of Alias, which was later sold to Silicon Graphics.
- High Vision has experienced two decades of strong double-digit growth under Weer's leadership.
- High Vision's leadership team is high-caliber, with some members having worked together for over 15 years.
- Merco Weer and his family own about 14% of High Vision, valued at approximately $20 million, which is 20 times his cash compensation.
- Insiders at High Vision collectively hold just over 31% of the equity, indicating strong alignment of interests with internal management and external stakeholders.