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https://x.com/i/lists/1669153613199835138?t=R0mCicxs7zfJE_yOAek4gQ&s=09
Dimitry Nakhla | Babylon Capital®
Investment professionals generally advise against market timing, but I advocate for patience in selecting individual stocks, waiting for the market to offer exceptional opportunities with quality compounders
Looking back at 2024, here are 8 examples where my timing paid off🧵
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InsideArbitrage
$RPRX Royalty Pharma shares rise 5% pre-market as the company announces transformative step in its evolution with the acquisition of its external manager and $3 billion share repurchase program - Equals 25% of its current market cap of $11.64 billion!
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InsideArbitrage
Quanterix $QTRX to Acquire Akoya Biosciences $AKYA in an All-Stock Deal for $286.34 Million -
🧬Akoya shareholders will receive 0.318 shares of Quanterix common stock for each share of Akoya common stock they own.
🧬Akoya is valued at about $3.73 per share, representing a premium of 40.23% from the stock’s last close.
🧬The deal is expected to close in Q2 2025.
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InsideArbitrage
RT @business: Mars is borrowing the equivalent of $1 billion through privately-placed bonds, sources say, as it begins to repay bank loans it took out to help buy foodmaker Kellanova https://t.co/Aur9U4jQo2
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Hidden Value Gems
Some stock commentary from Terry Smith's 2025 Letter 🧵👇
New positions: $ATLKY $TXN
Sold: $DGE.L $MKC $AAPL
"Atlas Copco is a Swedish industrial company which makes compressors, vacuum equipment, electrical and pneumatic tools and which has three characteristics which we find attractive:
➡️it outsources much of the manufacturing so making it capital light which enhances returns;
➡️it is highly decentralised with over 600 operating entities which have considerable autonomy in addressing their local market; and
➡️there is a controlling stake held by the Wallenberg family vehicle which should lead to good long-term decision-making since they have been in business for 151 years this year."
1/9
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Dimitry Nakhla | Babylon Capital®
Evaluating a company solely by its return on invested capital isn’t sufficient.
The best companies to invest in are those operating in markets that are expanding.
This is crucial because growth opportunities amplify the advantages of high returns on invested capital.
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Stock Analysis Compilation
Arquitos CM on Liquidia $LQDA US
Thesis: Liquidia is poised to capture at least 50% market share due to its more tolerable drug and patented manufacturing process, significantly increasing its profit potential.
(Extract from their Q3 letter) https://t.co/VgcF05IK4Y
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sports by Q1 2025. Announced Chief AI Officer, Behshad Behzadi, who previously helped spearhead AI initiatives at Google $GOOGL. Brazil legalized sports betting last December and sports book licenses will be awarded this summer – this will be a large sports betting market (think ~$5-6bn GGR in next few years). Asia opportunity in India and Japan. African countries like Nigeria, South Africa, and Ghana. Confident in MLB partnership and should continue to have 3 of the 4 major US sports leagues under their umbrella (Genius has the NFL). NBA contract is off to a great start – a lot left to unlock with the NBA. Advertising continues to be an opportunity – programmatic and paid social – ranks as one of top global advertisers in online betting and casino space. Ads is just one of the many ways to profitably leverage their massive datasets for the benefit of customers.
Anyone looking to ramp on this name should chat with Ryan Sigdahl at Craig Hallum. He’s the best on the street and a class act. - Radnor Capital tweet
AkhenOsiris
Adweek: Agencies Are Spending More on TikTok Ads This Year Despite US Ban Uncertainty
One agency executive, speaking anonymously to protect industry relations, plans to increase the agency’s TikTok spend by 20%–30% this year. DigiShopGirl Media will increase spend by between 15%–18% over the year, according to CEO Katya Constantine. At VML, clients are boosting their yearly influencer budgets on TikTok by 30-50%. Some brands are committing for the entire year, while others are focusing on the first half of the year or maintaining a steady stream of ad-hoc campaigns throughout, according to Mae Karwowski, CEO of Obviously, VML’s influencer marketing agency.
U.S. ad spend on TikTok is projected to surge 57% YoY in the first two months of 2025, according to ad data firm Guideline, based on forward booking data from agency partners for upcoming campaigns. And TikTok has been growing: Since 2020, TikTok has posted an annual compound growth rate (CAGR) of 118%, rising from 2% to 20% of total U.S. social ad spend, per Guideline.
“TikTok is still pushing agencies and brands to commit to increased YoY spend through up-front deals, and they are still selling up-front media placements well into 2025,” the first agency executive said. “TikTok has confirmed in writing, although not in contracts, that they will honor refunds for reserved inventory if the app is shut down.”
The first agency, which established its contingency plan in November last year and plans to implement it by the end of January, is advising brands to reinvest 80% of their TikTok ad budget, spanning performance, ecommerce, and brand marketing, to other channels.
For commerce-focused brands, this reserved budget may shift to platforms like Amazon and Pinterest Shopping. Full-funnel marketing dollars are likely to flow to OTT streaming platforms like Hulu and ESPN under Disney’s portfolio, while performance ad dollars will shift toward Instagram Reels.
Already, 5% of the agency’s clients have begun redirecting budgets away from TikTok since last year.
At DigiShopGirl, the contingency plan involves reallocating 90% of TikTok’s performance ad dollars to Reels, YouTube Shorts, and, to a lesser extent, Snapchat, particularly for brands targeting U.S.-based consumers.
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AkhenOsiris
$ZS CEO Chaudhry at Needham Growth Conference on AI Monetization:
Q: At a high level for these Gen Al offerings that you guys have, are we at a significant enough volume with your customers at this point to start thinking about what that associated uplift to the deal value is at this time?
A: So it is still early stage from a volume point of view. We want that traction is in the right direction. When we add our Al based technology to some of our bundles, we're able to get the bundled price up in the 20% range.
So we are not trying to say I need to lead in as a separate Al product. Because Al is making things smarter. The example I gave ZDX for Copilot, customers see distinct value, that's where they get ready to give more.
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Stock Analysis Compilation
Baron Real Estate Fund on Vornado Realty Trust $VNO US
Thesis: Vornado Realty Trust is poised for growth due to its well-located portfolio and improving office market fundamentals in New York City.
(Extract from their Q3 letter) https://t.co/JM4TLAjzMc
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InsideArbitrage
🚨 $LUV Leadership changes at Southwest Airlines
Two longtime executives, Tammy Romo, Chief Financial Officer, and Linda Rutherford, Chief Administration Officer, are retiring on April 1, 2025, after more than three decades with the airline.
- Tammy joined Southwest Airlines in 1991 and became Chief Financial Officer in 2012.
- Linda joined Southwest in 1992 as a Public Relations Coordinator and worked her way up to become Chief Administration Officer.
- Southwest will begin a search for Romo's replacement.
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Startup Archive
21 year old Mark Zuckerberg explains why he isn’t worried about competition from Google
When asked if he was worried about Google eventually competing against Facebook in a 2005 guest lecture at Harvard, a 21 year old Mark Zuckerberg gave the following reply:
“I think that one of the cool things about this time in technology is that individuals are leveraged and able to do way more than they had really ever been able to do before… Instead of worrying about who’s the big player and what Google is going to do next? You can just get a lot of stuff done.”
He points out that Facebook was able to scale to 300,000 users and 400 million page views per day with just 50 people and servers that cost only $100 per month. Meanwhile Google was doing 250 million page views a day with hundreds of thousands of machines and 5,000 employees.
Mark argues:
“The most important thing is to have smart people. As technology becomes more generic and less expensive, the leverage point becomes the people.”
Mark believed that if he could recruit more intelligent people, Google’s resource advantage wouldn’t matter. He also believed Facebook’s small size was an advantage:
“When you’re a small company, then you can be really nimble and get a lot of stuff done, and there’s relatively little bureaucracy. So if you have smart people who can take advantage of that to build cool things, then that’s a [big advantage].”
Video source: @cs50 (2005)
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Hidden Value Gems
RT @HiddenValueGems: Something I have started considering and was wondering what smart people were doing.
Are you thinking of relocating to save on costs & taxes, improve lifestyle and other reasons?
- Yes
- No
- I have just relocated
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Quiver Quantitative
RT @QuiverCongress: The House is about to vote on the Illegitimate Court Counteraction Act.
It would impose sanctions on ICC officials who investigate, arrest, detain, or prosecute any protected person of the US and its allies.
Here's a summary of the bill text: https://t.co/lIfDDvYTcT
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Stock Analysis Compilation
Alluvial on Zegona Communications $ZEG LN
Thesis: Zegona Communications is a turnaround investment poised to transform Vodafone Spain into a profitable telecom powerhouse within the next 2-3 years.
(Extract from their Q3 letter) https://t.co/PDmx9kHXA6
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InsideArbitrage
Brightcove $BCOV announced that the HSR Waiting Period for its merger with Bending Spoons expired on January 8, 2025. https://t.co/lfptdXtozK
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Startup Archive
Jensen Huang: “VCs don’t invest in business plans”
When asked for advice on business plans and raising venture capital, Jensen tells the student audience at Stanford:
“VCs don’t invest in business plans… They invest in great people. And so the question is: do they trust you? Your reputation matters. Your history matters.”
He explains that a one of the key reasons Sequoia wrote the initial check into NVIDIA was because he had done great work with Andy Bechtolsheim, the founder of Sun.
Jensen also argues that you need to have a vision that’s “sufficiently large to invest in.” Because of the nature of the businesses VCs invest in, the odds of success are rather low.
“If they need to put in $10 million and the market is only $20 million, they’ll never get that $10 million back with a reasonable return.”
But market size is secondary to people:
“You might have to reinvent yourself over time, and if you want to reinvent yourself, you need to have great people. That’s why great people are so important.”
Video source: @StanfordOnline (2011)
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Stock Analysis Compilation
Bell AM on GMO Payment Gateway $4689 JP
Thesis: GMO Payment Gateway is a promising investment opportunity due to its strong growth history and favorable market conditions for cashless payments in Japan.
(Extract from their November letter) https://t.co/VtHkqQxuRd
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InsideArbitrage
Barnes Group Inc. $B announced that its shareholders voted to approve for their acquisition by funds managed by affiliates of Apollo Global Management $APO at the company’s Special Meeting of shareholders . The transaction is expected to close before the end of Q1 2025.
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Quiver Quantitative
RT @QuiverCongress: We just received text from Representative Marjorie Taylor Greene's "Gulf of America" bill.
See below: https://t.co/eM1YCj4v1U
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AkhenOsiris
RT @SaaSletter: 👀 Quick excerpts from MS Thematics “Uncovering Alpha in AI's Rate of Change” (64 pages)
- notable + growing importance of AI to Financial Sector
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AkhenOsiris
RT @RadnorCapital: Caught up with Sport Radar $SRAD this morning. Thesis intact. It doesn't appear that declining NBA viewership is having any negative impact on the business and they continue to be very happy with the contract and opportunity to provide more solutions to leagues and sportsbooks (4sight streaming, alpha odds, etc.). I could also make the argument that declining viewership incentivizes leagues to invest more in fan engagement, which is a core mission / competency of Sport Radar.
Interesting how the narrative around NBA vs. MLB has shifted over the last couple of years. I'd imagine they continue to ebb and flow.
I'd also note that the NBA is one of many leagues Sport Radar does business with globally. Sport Radar $SRAD reported this morning, and the stock is up ~10%. They are the leading provider of data and analytics to the sports ecosystem (most importantly sports betting books). Think of it as a “picks and shovels” play on the growth of online sports betting / fan engagement globally.
I’ve been long this stock for a couple of years, and it has done nothing – my blended cost is just under $10 (stock currently ~$10.45). You would have been better off putting your money in the S&P 500 and forgetting about it (I recommend this to young investors with time on their side). Also, important to note that being early is often indistinguishable from being wrong. So do your own work.
So why has the stock of a rule of 40 (revenue growth rate + profit margin > 40%) company trading <10x60% of the company is owned by insiders: Canada Pension Plan, Tehcnology Crossover, and Radcliff. If you’re a PM, its just easier to express a bullish view on sports / betting by owning Draft Kings (again, I like them both). Sport Radar is a more complicated story, with a much lower float, and it hasn’t gone anywhere in a couple of years (no bid) – so why bother?
My best guess (again, I’ve been wrong) is that sentiment around this stock mimics what Draft Kings was a couple years ago – people thought Draft Kings was a decent business but would never be a good stock because they would never get leverage on their massive customer acquisition costs. Draft Kings is up ~4x since that narrative was popular.
Bull case math for Sport Radar suggests 2026 revenue could be ~$1.5-1.6bn (vs. street ~$1.3-1.4bn) and almost $400mm EBITDA (vs. street ~$300mm). I get there using a ~20% revenue CAGR (which we have visibility into given the contracted nature of their business) and a ~25% EBITDA margin (low end of their 25-30% long term target). So even if we don’t get multiple expansion (which I find hard to believe, given the upside to numbers), the stock should theoretically compound with earnings growth >20%.
A few other thoughts from the call…
Revenue grew +28% y/y and EBITDA +29% y/y in Q1, despite elevated sports rights costs. US revenue grew +65% (~25% of total) and rest of world +19% (~75% of total). Raised full year guidance (although by less than the beat, but this is conservatism – the current CFO wants the new CFO to have a low bar when he starts in June). Also $5-6mm of project costs moved from Q1 to rest of the year. As confident as ever with operational structure and margin trajectory. NRR (net retention rate – basically the growth from existing customers minus churn) accelerated to 116%, from 111% in Q4 2023. Announced intention to commence share repurchases under $200mm authorization in the next trading window – they agree that their stock is undervalued. Strong balance sheet with ~$275mm net cash and generating substantial free cash flow. Excited about Alpha Odds product – new AI-driven odds technology that has helped operators boost profits, most notably by an average of ~15% during this years UEFA championship qualifiers. Alpha Odds is currently live in soccer, but they plan to launch soon with tennis and basketball, before adding 3 more [...]
AkhenOsiris
Imagine everyone in the world was as easy to convince as Ivan? 😂
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AkhenOsiris
$ZS CEO Chaudhry just finished speaking at Needham Growth Conference
"From budget and spend point of view, I see no concern on the cyber budget side of it. In fact, cyber is becoming more and more critical. It's not just on CISO's mind, it's CIO's mind, it's on board's mind, it's audit committees mind as well. Most customers we talk to and I talk to lots of them, the cyber budget are generally flat to maybe up 5% or 10%. They have been going up. Most cases, they're up to some degree. Now IT budgets, some of these IT budgets are flat. And some may have gone up, but in many cases, customers are asking for how do reduce cost. And some of the money may be getting redirected towards some of the Al projects. So we see pressure on the IT side of it not on the cyber side of it. What we are able to do in that situation? Think of this diagram. If I can start showing the picture and say, Mr. Customer, can take out these 6 products in Q1, these 3 in Q2, these 7, 3rd quarter and 4th quarter and create a spreadsheet table showing net cost savings, that story is very compelling.
And we end up saving a lot of money, that's how we get the deals done. Now think of this as essentially consolidation and simplification. Of course, some vendors like to talk about platformization and all this stuff. This is essentially consolidation."
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Investing visuals
Duolingo $DUOL A.K.A. "The Money Bird": its paying user growth over time is top notch👌 https://t.co/MeMU4H6aI9
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App Economy Insights
RT @EconomyApp: 🎮 Could Tencent buy Ubisoft?
Bloomberg reported that the Chinese giant may pursue a buyout or take the company private.
The stock is nearly 90% off its 2021 high.
Who else could step in? 👇
https://t.co/hyCc7Jx3NW
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Stock Analysis Compilation
Baron Asset Fund on Welltower $WELL US
Thesis: Welltower Inc. is well-positioned to capitalize on robust growth opportunities in the senior housing industry, with potential for earnings to more than double over the next five years due to favorable demographics and strategic management initiatives.
(Extract from their Q3 letter)
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Quiver Quantitative
RT @QuiverCongress: JUST IN: @RepBrandonGill just introduced the “REMAIN in Mexico Act”.
It would re-instate Trump’s “Migrant Protection Protocols”.
Follow here for updates. https://t.co/XASDo1wZ5k
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InsideArbitrage
Arch Resources $ARCH and CONSOL Energy $CEIX announced that their shareholders have approved all proposals related to the pending merger of the two companies. The transaction is expected to close on January 14, 2025. Post-completion, the combined company will be renamed "Core Natural Resources, Inc." and its common stock is expected to begin trading on the NYSE under the symbol "CNR" on January 15, 2025.
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