AVOID TRADE DESK

“But in mid-2025, the FHFA, the regulator that oversees Fannie Mae and Freddie Mac, officially approved Vantage Score 4 as an alternative scoring model for those government-backed loans. And Vantage Score is owned jointly by the three major credit bureaus for context. So the very institutions that used to distribute FICO scores now have a competing product that they would love to push themselves.”

“And then one of the craziest changes when looking at Reddit has just been the inflection and the margins of the business of net income margins in 2024 were negative 37%. And by 2025, a year later, they were 24% in the positive direction. So in Q4, we actually saw margins hit 34%.”

“The point being, if I have to choose between upgrading TransDigm and maybe Copart to full 5% positions or selling them and taking Amazon from 5% to, let's say, a 9% position, I would actually go for the latter.”

“Because once you own the rights to a song, you essentially own a perpetual royalty stream with almost zero marginal cost of production. So you don't need to manufacture anything. You don't need to run servers. You don't need to reprint the music every single time that somebody plays it. And that's why their free cash flow conversion is so astronomically high.”

“And so, the problems compounded through 2025 for them when the company first got on our radar. And you've seen revenue growth decelerate from 25% in Q1 to down to 14% by Q4 of 25. And then, with the most recent earnings just a few weeks ago, they actually did beat Wall Street estimates, but their guidance for Q1 2026 implied growth of only 10% year over year.”

“But in mid-2025, the FHFA, the regulator that oversees Fannie Mae and Freddie Mac, officially approved Vantage Score 4 as an alternative scoring model for those government-backed loans. And Vantage Score is owned jointly by the three major credit bureaus for context. So that's Equifax, TransUnion and Experian. So the very institutions that used to distribute FICO scores now have a competing product that they would love to push themselves.”

“And one of the other advantages that Airbnb has is they have this degree of supply exclusivity. And so, a large part of Airbnb listings are exclusive to the platform. They're not on Vrbo, V-R-B-O, or booking.com. And that's especially true in newer markets like Latin America and the Asia Pacific region. And so, the vast majority of Airbnb hosts are individuals with one or two properties, and it's a side income for them. It's not their primary business.”

“I feel like some people will listen to this and feel like, okay, this is a rejection of Copart and TransDigm or some sort of implicit prediction that we don't think the businesses will do well, which is not the case at all. It's just a question of when we're managing our portfolio, if we can exchange two companies on the margins, that we have to do all the same amount of work to track and keep up with, for one company or a bigger bet on one company that we know we really, really like, it's just a lot easier to manage.”

“That means you're buying those assets at a 60% discount to what they're actually worth on paper in the public markets. So if you just look at the Ferrari stake alone, which is about two-fifths of Exor's total net assets, it's worth almost the entire market cap of Exor because of that 60% discount.”

“So, managing calendars and bookings across multiple platforms ends up being more hassle than it's worth. So, they just pick Airbnb and stay there, and it also helps that Airbnb has this really smooth user-friendly interface. And that stickiness means a guest searching for a specific type of property in a specific location genuinely cannot always find it elsewhere.”

“The Switch 2 is the first console that embraced an ecosystem-like approach. And so one major difference being backward compatibility, which means that a new console could play games from older console generations. So if you own a Switch 1 and decide to buy the new Switch, then you can still play the same games on your Switch 2 without needing to buy a new version of the game or losing all of the progress within the game.”

“Exor's net asset value, the total value of all of its investments minus any debt is somewhere around 33 billion euros. And the market cap of Exor itself is only 13 billion euros. So that means you're buying those assets at a 60% discount to what they're actually worth on paper in the public markets. And so if you just look at the Ferrari stake alone, which is about two-fifths of Exor's total net assets, it's worth almost the entire market cap of Exor because of that 60% discount.”

“But I do think that as a stock price has fallen, Trade Desk has not necessarily gotten cheaper because the intrinsic value of the company has declined simultaneously. So yeah, it's just hard for me to argue that the Trade Desk has a clear moat. And so for context, in March, a major ad agency in France known as Publicis issued a memo advising clients to avoid working with the Trade Desk due to this failed audit on their fee structures that apparently happened.”

“The point being, if I have to choose between upgrading TransDigm and maybe Copart to full 5% positions or selling them and taking Amazon from 5% to, let's say, a 9% position, I would actually go for the latter.”

“The Switch 2 launched in June last year and it sold 3.5 million units in the first four days online. So that's the fastest launch of any Nintendo console in its history. And by the end of December 2025, it had sold far more than 17 million units in just 7 months.”

“I think that's why the data licensing business exists and AI companies need high quality human generated text to just train their models. Reddit's archive is one of the richest such datasets. Licensing that data has been another nice little boost to profits. It's not a huge thing. It's not the core business of Reddit, but I like it that with all these companies that are basically threatened by AI currently, with Reddit, you basically have somewhat of a hedge because they are so valuable to all of these LLMs.”

“I think what makes this business model so attractive from an investment standpoint is the cost structure. Because once you own the rights to a song, you essentially own a perpetual royalty stream with almost zero marginal cost of production. So you don't need to manufacture anything. You don't need to run servers. You don't need to reprint the music every single time that somebody plays it. And that's why their free cash flow conversion is so astronomically high.”