Sunday Finds + 3 Thoughts From Last Week
Podcast episodes on Pool Corporation and Nelnet this week
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. More layoffs at Meta
The pain at big tech for employees is not over, apparently:
Meta plans another round of layoffs that could affect thousands of workers, according to a Bloomberg News report published Monday evening.
The job cuts could start this week and represent an additional round of layoffs, adding to the 13% of Meta workers who were laid off as part of a major cost-cutting plan announced in November.
Meta announced that 11,000 workers would be fired in late 2022. If we subtract this number from the 86,482 employees working at Meta at the end of 2022 (the layoffs didn’t become official until the first quarter of this year) the company currently has 75,482 employees.
At the end of 2021, its headcount was 71,970. At the end of 2020, it was 58,604.
Let’s say this new round of layoffs gets rid of another 10,000 employees (it will probably be less). That would bring Meta’s headcount down to 65,482 assuming it doesn’t make any net hires during that period.
For a company whose revenue is up 35% since 2020, I think that is a pretty rational headcount goal. It will stabilize operating margins while still leaving plenty of room to invest for growth in its metaverse, AI, and other initiatives. From here, it can grow its headcount at a more reasonable pace compared to 2020, 2021, and 2022.
Perhaps surprisingly, Meta seems to be moving the most rapidly in rightsizing its bubble hiring spree. Alphabet and Amazon seem less eager to do so and still have a ton of work to do in order to get a more rational cost structure.
Will we see them bite the bullet and make these cuts?
2. The consumer looks strong until it doesn’t
That is all.
3. The widest spread between business quality and the management team
What stock has the widest spread between the quality of the company and the quality of the management team?
There were a few interesting responses to this one. This can go two ways: bad business/good management and good business/bad management.
My pick for good business/bad management is Salesforce. Benioff is not the right person to run this business today. And man, what a good business it is.
For bad business/good management, I’ll choose NVR. They operate in a shitty commodity industry (building homes) but have operated intelligently for decades.
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 Good Reads
The Proper Way To Discuss Share Repurchase - Ian’s BNR
A company has effectively four options to deploy capital: invest in organic growth, acquire something, pay a dividend, or repurchase stock.
When you choose to repurchase, you are effectively stating those other three options aren’t as good. That may well be true, but it requires a proper framework to evaluate
Pandemic Economics, Housing and Monetary Policy Part I - Calculated Risk
I noted this increase in 2021, and correctly deduced that there was a surge in household formation, and that some of the demand was from roommates separating (among other factors). See from 2021: Household Formation Drives Housing Demand. Data released since then has shown that the surge in household formation was largely driven by roommates splitting up due to work-from-home.
Inside Uber’s Move to the Cloud Part 1 - The Pragmatic Engineer
For me, Uber’s move to the Cloud illustrates there’s an increasingly small number of companies for whom it’s worth operating large data centers and achieving better returns by manufacturing hardware via an ODC, instead of buying it from an OEM.
1 Good Podcast
Homebuilders have experienced major whiplash over the last few years. The pandemic originally caused them to slam the brakes on new development. Then the housing boom happened and they raced to catch up and build — but then they ran into supply-chain constraints. Then in 2022, the interest rate shock put the market into a freeze. But before that building can begin, how do developers find completely unused land and turn it into new homes? Who takes on that risk? Who buys and brokers that land? On this episode of the podcast, we speak with Chase Emmerson, the co-CEO of Emmerson Holdings, an Arizona-based boutique land investor. He explains the process of securing land, getting it permitted for development, obtaining water rights, and more. He also walks us through what he's seeing in the housing market right now.
Smart, Insightful, and Funny Tweets:
