Sunday Finds (on Monday) + 3 Thoughts From Last Week
Podcasts on Meta and Big Lots last 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:
Is There Deep Value Opportunity in Big Lots? (Ticker: BIG) With Mikro Kap David
Investing Power Hour #43: Hindenburg Exposes Adani; Personal Finance Questions; AR/VR Busts Again
Chit Chat Money is presented by:
Stratosphere.io, a powerful web-based research terminal for fundamental investors.
Stratosphere.io has made it easy for us to get the financial data we need with beautiful out-of-the-box graphs for researching stocks.
🎉Stratosphere.io just launched their brand new platform and you can give it a try completely for free.
It gives us the ability to:
Quickly navigate through a company’s financials on their beautiful interface
Go back up to 35 years on 40,000 stocks globally
Compare and contrast different businesses and their KPIs
Easily track insider transactions and news updates for any stock we follow
Get started researching for FREE on the Stratosphere.io platform today, or use code “CCM” for 15% off any paid plan.
1. Book recommendation: Becoming Trader Joe
I recently finished Becoming Trader Joe. It is a business biography on the beginning of Trader Joe’s written by the founder Joe Coloumbe.
The company has grown sales by 19% a year for decades, slowly morphing into one of the largest grocery chains in America. Read about Coloumbe’s strategy and you’ll see why.
Here are a few of my top quotes from the book:
The most basic conclusion I drew from her book was that, if you adopt a reasonable strategy, as opposed to waiting for an optimum strategy, and stick with it, you’ll probably succeed. Tenacity is as important as brilliance.
At Stanford I’d been taught that employees neer organize because of money; they organize because of un-listened-to grievances.
Given the number of households, I would judge the degree of suitability based on my experience since 1954 in looking at California real estate, and then based on driving the area thoroughly. I would never trust a broker’s judgement. If I saw a lot of campers and speedboats in the driveways, I’d ax the location. People who consume high levels of fossil fuels don’t fit the Trader Joe’s profile.
My ideal, often stated to everybody, was that Captains (store managers) should have the chance to make more than executives in the office. In a traditional chain store, managers aspire to become bureacrats with cushy, high-paying jobs in the office. I wanted to kill such aspirations from the start.
The time for leaving a company is when it is running well and is well staffed.
2. American Football Rights and the Impact on Streaming Video
With two of the largest TV events of the year (the NFL conference championships) last week and the Super Bowl on deck, I have been thinking about how sports — mainly American football — will impact the streaming wars in the years to come.
There’s also the new Acquired podcast on the NFL, which was great and is linked to later in this post.
The NFL just signed a decade-long deal with its traditional broadcast partners (ESPN/ABC, Fox, CBS, NBC). Amazon was included for the Thursday night game. The deals will likely stem subscriber losses for the traditional cable bundle, at least if you include virtual providers like Hulu Live and YouTube TV.
But at what cost? The contracts are clearly not profitable for the broadcasters. They also take capital away that should be invested in streaming video platforms, all of which are destined for failure except for the Disney bundle.
Eventually, whether it is five, ten, or 15 years down the road, the majority of sports content will be streamed over the internet. This will mean the death of cable/traditional TV. So what are these broadcasters’ plans? Again, excluding Disney as it should be able to transition content over to ESPN+.
I have high conviction in saying this latest NFL deal won’t be the savior for the broadcasters, but what kills them. It allows streamers (Netflix, Amazon, Apple, HBO, Hulu) to go full steam ahead and win all of the non-sports eyeballs, which they are doing with ease.
Then, when sports deals steadily come up for renewal in the next 15 - 20 years, these broadcasters will be on their last breath, all thanks to these current unsustainable sports rights contracts. Who will be there to scoop up the rights? The streamers, of course.
This blatant misjudgment by the legacy entertainment companies is playing right into the long-term strategies of Netflix, Amazon, YouTube, and Apple. Disney will probably be fine given its success with ESPN+ but needs to walk a fine tightrope. Fox Sports will be a wildcard but seems outmatched financially.
Whatever happens, it will be exciting to follow through a business/investing lens.
3. Will Benioff Be the CEO of Salesforce a Year From Now?
My guess is no. The activist sharks are swirling and show no signs of slowing down. Three new members are coming to the board of directors, including the head of the activist fund ValueAct.
When it comes out that an actor and a musician have been influencing you on the direction of your enterprise software company, you may have let things get a little too loose. Unless Benioff can prove he can run this business profitability, there’s no reason he should be around next year. Because this business is just too good and too large to not be gushing cash for shareholders.
We will be covering Salesforce as we wrap up our big tech theme for the month of January. Watch/listen to the episodes on YouTube, Spotify, or wherever you get your podcasts by searching “Chit Chat Money.”
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.***
***Want our FREE weekly wrap-up delivered to your inbox each week? Subscribe here***
3 Good Reads
Meet the Latest Housing-Crisis Scapegoat - The Atlantic
In reporting on the housing crisis, I often hear some version of a simple story purporting to explain why so many Americans struggle to afford a place to live. The story goes like this: Housing costs are unaffordable because [INSERT BAD COMPANY HERE] is greedy and jacking up prices. The villain can be Airbnb or developers; it can be deep-pocketed foreigners or iBuyers. The story is compelling because it does not directly implicate regular people, sympathetic institutions, or elected officials.
As we observe the state of XR in 2023, it’s fair to say the technology has proved harder than many of the best-informed and most financially endowed companies expected. When it unveiled Google Glass, Google suggested that annual sales could reach the tens of millions by 2015, with the goal of appealing to the nearly 80% of people who wear glasses daily. Though Google continues to build AR devices, Glass was an infamous flop, with sales in the tens of thousands (the company’s 2022 AR device no longer uses the Glass brand). Throughout 2015 and 2016, Mark Zuckerberg repeated his belief that within a decade, “normal-looking” AR glasses might be a part of daily life, replacing the need to bring out a smartphone to take a call, share a photo, or browse the web, while a bigscreen TV would be transformed into a $1 AR app. Now it looks like Facebook won’t launch a dedicated AR headset by 2025—let alone an edition that hundreds of millions might want.
TikTok Is a New Kind of Superweapon - Gurwinder
For thousands of years, humans sought to subjugate their enemies by inflicting pain, misery, and terror. They did this because these were the most paralyzing emotions they could consistently evoke; all it took was the slash of a sword or pull of a trigger.
But as our understanding of psychology has developed, so it has become easier to evoke other emotions in complete strangers. Advances in the understanding of positive reinforcement, driven mostly by people trying to get us to click on links, have now made it possible to consistently give people on the other side of the world dopamine hits at scale.
As such, pleasure is now a weapon; a way to incapacitate an enemy as surely as does pain. And the first pleasure-weapon of mass destruction may just be a little app on your phone called TikTok.
1 Good Podcast
The NFL - Acquired
The NFL — it’s almost synonymous with America today. And its history is a fascinating lens to explore the nation’s development over the last 100 years, from WWII to TV and suburbs to the Internet and social media. What began as a quasi-illicit league in small midwestern towns is now the single largest media property in the world today by revenue. And whether you watch football or not, this is one incredible business story. Acquired is ready for some football — let’s kick this Season off right!
Smart and Funny Tweets:
