Sunday Finds + 3 Thoughts From Last Week

A new investing podcast you need to follow

Oct 01, 2023

Welcome to Chit Chat Money’s Sunday Finds + 3 Thoughts From Last Week. In this newsletter you will find three topics I thought about last week, links to shows we’ve recently released, and links to some interesting articles, podcasts, and tweets. Check out the archive here.

Chit Chat Money Podcasts From Last Week

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1. Listen to the JRo Show

This week, our friend and past Chit Chat Money guest John Rotonti launched a new podcast called the JRo Show. You can find it wherever you get your podcasts.

We have the pleasure of helping produce the show and think it will be a hit due to John’s strong rolodex of experts in and outside the field of investing and superb interview skills.

His first episode was with Bill Nygren, a veteran of the investing world. He shared some of his show notes on Twitter (link):

Here are some of my highlights from the episode:

You can’t become a great investor unless you can communicate clearly
Investors first build quantitative skills, then work on qualitative
Capital deployment can make or break an investment thesis
Every week they are thinking about tax lots that they can harvest at a loss (interesting insight into a larger fund)
You don’t need to be first to an idea in order for it to work
The PM can be the “bad cop” and ask the tough questions during a meeting with a management team
"compounders” don’t have to have high sales growth

Remember, you can listen to this wherever you get your podcasts!

Links:

Apple:
Spotify:
YouTube:

2. Implications of Google Pixel growth

It looks like Google’s phone ambitions are becoming — perhaps surprisingly — very successful:

In Japan, which is the world’s third-biggest economy and an important market for apps and games, sales of Google Pixel smartphones rose six times in the second quarter of 2023 compared to a year ago, according to research firm Counterpoint Research's findings published by Bloomberg. This increased the company's market share to 12 percent.
While that's important news on its own, what makes it even more interesting is that Apple's market share declined from 58 percent to 46 percent during the same period, marking this the first time in two years that the Cupertino giant's share has fallen below 50 percent.

While Google could make some money selling hardware and likely is, the true value comes as a moat widener for Maps, Search, and YouTube. Pixels are generally cheaper than an equivalent high-end smartphone, which Google is comfortable with because it doesn’t actually need to make money from selling them.

Plus, the more market share Google has in hardware, the less in traffic acquisition costs (TAC) it has to pay Apple, Samsung, LG, etc.

While many loud voices proclaim Google/Alphabet are on the way to irrelevance, if you look at the facts the company seems to be consistently executing and expanding its already dominant competitive advantage.

3. Adyen’s competitive edge

We are publishing a podcast on Adyen next week. I can’t wait to see what people think, it was a fun one with a company at a unique point in time (no spoilers on our investment conclusions, you’ll have to listen and find out for yourself).

To solicit some feedback, I tweeted out my thoughts on Adyen’s competitive advantages, which I think are strong:

Process is an uncommon competitive advantage and usually one I think is uncertain. But in Adyen’s case, given the other industry players, its founder-led management, and its culture in general I actually think it may be its strongest edge.

I also love companies that have multiple competitive advantages. It can give you a “margin of safety” as it is unlikely all of these moats would erode in a short time period. With Adyen, it could lose its management team and start making acquisitions and lower itself to the competition in payments (which we go into detail about on the episode). However, it would still retain its economies of scale and switching costs, allowing it to earn outsized profits.

Episode is slated to come out Tuesday! Listen wherever you get your podcasts.

See you next week,

Brett

***Our fund, Arch Capital, may own securities discussed in this newsletter. Check our holdings page and read our full disclosure to learn more.***

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