Sunday Finds + 3 Thoughts From Last Week

Podcasts on Royal Caribbean and SoFi!

Sep 25, 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. Dollar General and Adyen: Plug your nose and buy?

Dollar General and Adyen were seen as bullet-proof compounders for a long time. DG was favored by the “value” side of the investing world, while Adyen was a favorite among the growth stock bros.

Today, that sentiment has entirely flipped:

These two businesses couldn’t be any different, but the way investors are viewing them right now is quite similar. Both are facing competitive pressures that are hurting profitability as they get further and further away from a pandemic era when they thrived due to the macroeconomic environment.

Clearly, the companies have some issues that need to be worked out. But…that’s the point though?

You don’t get above-market returns by buying the consensus trade after it is consensus. Nobody is going to get rich buying Nvidia today. If you think either of these companies has a durable competitive advantage, now may be the time to plug your nose and buy some shares.

[insert Buffett “greedy when others are fearful” quote]

2. Tinder’s $500 a month mega-tier

This week Tinder launched a new $500-a-month subscription called Tinder Select:

The new plan announced Friday, called Tinder Select, was only offered to less than 1% of Tinder users who are among the app’s most active, the company said.
For nearly $6,000 a year, users will be able to access new features, such as “VIP” search, matching and conversation, that aren’t currently provided with its existing paid plans, it said, without providing further details.
Tinder said it will open up applications for Tinder Select on a rolling basis. It offers three other subscription tiers that start as low as $24.99 a month, according to its website.

Hard to tell what the exact benefits are, but it looks like it will give subscribers access to match with whatever user they want, no swiping through a randomized list required.

Very few people will pay for this. Nobody reading this will likely ever pay for Tinder Select. It is likely not worth what Tinder is charging.

However…there are wealthy young people (cough, cough, dudes) who will buy Tinder Select. For every thousand subscribers, that adds $6 million in annualized revenue at extremely high incremental margins. With hundreds of millions of online daters around the world, I think Tinder Select can at least get ten thousand subscribers within a year or two.

It looks like the online dating market is learning from mobile gaming, which makes its money from a small number of users who spend big to “win” the games. The industry term is “whale” and dating apps are not much different.

If you want to hear our stock analysis episode on Match Group (which also goes over the risks facing the company), here’s a link:

3. What investors think about way too much

As with most memetic internet content, the new “guys think about the Roman Empire way too much” topic has spurred some great investing tangents.

There are quite a few things investors think about way too much. Here are a few examples that come to mind for myself:

Warren Buffett and Berkshire Hathaway (I’m not joking when I say I probably think about Buffett at least three times every day)
How Ted Weschler turned $70k into $264 million (courtesy of Buyback Capital)
Amazon’s capital expenditures chart (and reinvestment runway)
How much you could have earned reinvesting dividends in tobacco stocks
Taiwan Semiconductor and ASML
Whether modern monetary theory makes sense
The board meeting scene from Margin Call

Comment with any others that come to mind. Thanks to everyone who regularly listens to the podcast! Exciting stuff coming in the near future.

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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3 Intriguing Reads

Less Dues, More Machina - Citrini Research

As discussed in my piece on how to play AI beneficiaries (which you should read first here), I laid out the case that the best risk reward in my triphasic model came in the form of data centers – being long the picks and shovels / bottleneck in the AI hyperscale – so that the uncertainty of how the paradigm might play out would be reduced. In other words, you should be long the companies who’s benefit is nearly inevitable and who’s risk is minimal (Nvidia is, of course, the quintessential example).

However, I have gotten some feedback from readers who are interested in tempting fate by trying to pick the ultimate winners in AI Software and Services. The killer app / AI assistant / company of the future, the companies who derive gain from the apex of the second & third phases directly (Democratization of AI/ML and Specialization/Integration of Models and Tools, respectively) rather than being the enablers and implementers that allow AI to proliferate.

Marketing Lessons From The Roman Empire - Hot Takes

The Romans understood the power of connectivity and both the physical and metaphysical benefits. Their vast network of roads not only facilitated trade but also symbolized Rome's dominance serving as a visual representation of their power. As Cicero the famed Roman orator stated, "the highways of the Empire lead everywhere," reminding us that a strong brand identity and robust infrastructure can pave the way to becoming a household name. And look how successful this was, we’re still talking about the Roman Empire, after all.