The Swedish Match Acquisition May Have Changed The Trajectory of My Life

And other thoughts on the path that has led our little business venture to where it is today

In the spring of 2015 — my senior year of high school — I was planning on attending college in California to become an engineer. I had gotten into a great school in a fantastic location and was looking forward to 4+ years of sunshine, learning, and fun.

One weekend that spring, I was in Texas for my grandma’s funeral. After the ceremony, our extended family visited Grandpa’s house. My cousin recently had a kid who may have been two years old at the time.

The kid was, well, a two-year-old and didn’t want to sit around with adults talking about stuff from 50 years ago. Neither did I, so I “volunteered” to watch him and play in the backyard for a while.

While we were out there looking at Grandpa’s koi pond, I got a strange notification on my phone. My dead Twitter account got a direct message request from an assistant at a PAC-12 school. The coach introduced himself and asked if I would be interested in playing for the school as a preferred walk-on for their football team.

I was a decent football kicker who had gotten some interest from Ivy League schools and a lot of smaller colleges. But nothing substantial enough to convince me to abandon my current path. I planned to try and walk on to the football team in California but was shown no interest by their coach when I reached out.

This PAC-12 offer — which secured a roster spot and competition for the starting position, albeit without a scholarship — changed the game for me. It was the “big time” of college football, for those that are unaware of how the sport works. I would be on the road playing in front of tens of thousands of people in places like Oregon, UCLA, and Colorado each fall. As long as I performed better than my competition, of course.

Even though it was May of my senior year, my parents and I made the decision to switch schools. I enrolled in the PAC-12 school and under three months later I was at summer practice competing for the starting spot for the season that began in September. It was just too exciting of an opportunity to pass up, regardless of the lower “academic quality” of the school. I was still going to get an engineering degree, but this was considered a party school instead of a polytechnical college, something that would definitely hurt my initial job prospects after graduation.

Why am I going into all this detail about my path to college? It was at this school that I met my Chit Chat Money co-host Ryan. If I hadn’t made the switch from the California school, it is likely I would have never met him and the podcast would have never started. We then would have never started the Arch Capital fund.

What’s even more interesting is how lucky I was to get this offer from the Pac-12 school in the first place. The football team has an operations building. In the operations building, students work as secretaries. Apparently, one of the secretaries was a student from my hometown who had seen me play in high school. When she saw the special teams coach and noticed (or overheard, I’m not exactly sure on this story) that they needed another kicker, she made an offhand remark about a kicker from where she grew up (me) that was pretty good. The coach decided to look me up and the rest is history.

If this secretary — whom I didn’t know and never met — hadn’t told this special teams coach about me, my life path would be completely different. Just one small decision from a random person and the entire trajectory of my job/career changed. For the better? I’d like to think so, but you can never know for sure.

It reminds me of this beautiful chart from the Wait But Why guy:

Which leads me to Swedish Match. For those unaware, we started up an investment fund in early 2021 but decided to close it down. Of course, we went into full details on a podcast episode, which you can listen to on all platforms:

This was a big decision for us. We are now focused solely on the podcast and don’t plan on trying to manage outside capital. At least, not for a long while.

Our fund had a large position in Swedish Match. The company was a sizable player in the nicotine space and had a fast-growing new product called Zyn that was dominating the category in the United States. We thought the stock was undervalued and made it an ~8% position in the portfolio (from what I remember) at cost.

Turns out that Phillip Morris International thought so too and decided to acquire the stock at a slight premium to our cost basis. This was in May of 2022. We were upset at the time because we believed the business was getting taken out before Zyn’s potential was fully realized.

Looking back, this acquisition had a huge impact on the fund’s returns. For one, we made mistakes with the cash proceeds we got from the buyout. These mistakes would likely not have been made if Swedish Match remained an independent company as our plan was to make it a “never sell” position.

Second, our thesis on Zyn worked out even better than our most optimistic assumptions:

The majority of Swedish Match’s earnings growth was driven by growth in Zyn volumes. Without multiple expansion, the stock is likely up 100% from the ~106 SEK price we sold at in the spring of 2022 since Zyn volumes doubled. Well, maybe not 100% but pretty damn close, I know that for certain.

If we owned Swedish Match up until the fall of 2023, the fund’s returns would have been a lot stronger. This is not an excuse for bad returns and underperformance. It is simply to point out that small changes can have big impacts on your life path.

Better performance may have equaled more investor inquiries and potentially even some fresh investments to join the fund. With this momentum, would we have kept the fund open? I can’t say for certain, but it seems somewhat likely.

It’s funny to me how these small events — sometimes through no decision of your own — can leave major ripples down the line.

Another example may have just happened to me. I was at the gym and saw someone I hadn’t seen in years. His kid and I were classmates in elementary school, and he always seemed to like me. He is an extremely wealthy individual and is about to have a lot of cash come in after an acquisition closes. I don’t want to disclose his name, but the deal is worth tens of billions and will make him a billionaire (I think).

So we get to talking, and he asks what I do for work. I tell him I write for the Motley Fool and run this podcast, although it is always hard to tell how much people truly understand what I do when I explain Chit Chat Money. We end up talking for 30 minutes, a lot about the financial markets and his new venture, as well as some hilarious “old men yell at cloud” gripes about the FTC.

After the conversation, I realized how fantastic an opportunity it would have been to see this guy again while the fund was still open. He trusts me, has a lot of cash coming in that he is likely looking to diversify, and we needed a large investor to keep the momentum going. I think there was a decent shot we could have convinced him to join the fund as a limited partner. Although at this point, I guess we’ll never know.

Swedish Match getting acquired did not have an immediate impact on my day-to-day life. But it may have ever-so-slightly shifted the state of the world that my life will now be drastically different 10 years from now. Just like the secretary making a comment to that special teams coach. Just like if I saw the wealthy individual a month before we decided to close instead of a month after.

Who knows what things would look like if we had momentum with the fund? Conversely, what opportunities will arise as we stop any aspirations for professional money management? I have no clue, but that’s what makes this fun. All we can do is keep putting in effort and follow the life path that opens up for us.

It makes me think of the famous Joseph Campbell quote:

If you do follow your bliss you put yourself on a kind of track that has been there all the while, waiting for you, and the life that you ought to be living is the one you are living. Follow your bliss and don't be afraid, and doors will open where you didn't know they were going to be.

Or the famous Bruce Lee water quote:

Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot, it becomes the teapot. Now, water can flow or it can crash. Be water, my friend.

The uncertainty of the future can be scary. Many people seem to block this out and keep their lives as “certain” as possible to avoid the stress that may materialize from these changes. I think it is much more enjoyable, fulfilling, and exciting to embrace the chaos.

Brett