BUY MOATS

“I do think over time, AI will probably overtake that to some degree. It's pretty clear that AI is a transformational force within the software space. And probably the majority of names in the space today will experience major issues over the coming decade or so.”

“And so the issue is that when a home buyer comes to Zillow and clicks on a listing, Zillow sells that click as a lead to a partner agent, and that agent may or may not be the listing agent or the property. And so in many cases, it's not. Zillow takes the buyer lead that came in because of the listing agent's property and then sells it to a competing agent.”

“Rates are going higher and the dollar is starting to go lower. And that shows you that money is fleeing out of US markets, out of US assets and into foreign markets, which means higher interest rates, downward pressure on equities. The internals of the market are showing you what's happening.”

“I'm giving MNTN a thumbs up if it can gather a little more momentum and break above this hundred day moving average, which it's trading right at right now. If it does hit those earnings numbers, then it looks cheap. If you can break above a dollar—or sorry, $11.75, $12 in that range, then I think this has more upside.”

“You're going from in the thirty, forty, 60% range over the past few years of earnings growth down to eight next year. That usually creates some sort of earnings multiple compression. I would be very patient to pick this up because of that growth slowing, which is creating multiple compression, which means probably lower prices.”

“I think it's a bit of a taboo in the value investing world, but equity issuance does not have to be a bad thing if it's done at a price above intrinsic value. And that's something Warren Buffett has very much emphasized over the years. When you look through the timing of when CoStar sold more equity in the company, they've generally been very opportunistic about when they would do so with the stock being pretty richly priced at those times. And so for example, we have the chart on screen where they did an equity raise in May 2020 at a price that's 50% higher than where the business is valued today, six years later.”

“The $100,000,000 in annualized revenue is from essentially a standing start three years ago, which sounds like pretty good progress, but the math behind that is very painful because CoStar has invested more than $1,000,000,000 in marketing to drive that growth, which is what caught Dan Loeb's eye. And so if you look at CoStar's s g and a spending, so think of that as their overhead, and that includes their marketing and promotional spend on homes.com, they're basically just buying eyeballs at the top of search results, but that's not necessarily translating into consistent organic traffic.”

“I do think over time, AI will probably overtake that to some degree. It's pretty clear that AI is a transformational force within the software space. And probably the majority of names in the space today will experience major issues over the coming decade or so.”

“Any cash you're gonna need in the first in the next probably two, three months, I'd probably wanna be in money market or something like an escrow. And then anything beyond the three months, then you could probably park in something like this—between three months and a year, year and a half, two years max.”

“But despite being founder led, I was really disappointed at the amount of insider ownership here. I mean, you normally expect someone like this to own a really large stake in the business, but a stake is only worth about $70,000,000 and it's less than 1% ownership in the overall company. And maybe to play devil's advocate, just to be fair, a big part of that is because they've issued so much equity over the year, they've done so many acquisitions, naturally his original stake in the business has become diluted over time.”

“I think it would be fair to say that OTC Markets Group is very much a quasi monopoly. So you have the New York Stock Exchange and you have the NASDAQ as competitors, but OTCM is really the only alternative if you want to access U. S. Markets without the very strict listing restrictions and fees that come with those primary exchanges. And beyond that, if you're too small of a business, the New York Stock Exchange and Nasdaq just simply won't serve you and that leaves OTC Markets as your only option.”

“It's pretty ironic that one of OTCM's biggest strengths is that they have to rely on these regulatory hurdles. However, if certain regulations were to change, that would obviously open up the ability for other businesses to completely destroy or at least impair OTCM's business model, which I view as a potential existential threat for OTCM.”

“And before we do that, I'd like to leave you with a little quote from Mark Twain who says, buy land. They're not making it anymore. And it's a tongue in cheek expression, but I think there's also a pretty good argument for owning the company at the heart of the commercial real estate industry too, if you can get it at the right price, which we have a suspicion we might be getting.”

“And I think this is pretty incredible, but management has said one of the biggest drivers of their annual churn is not from people switching to competitors' products, but just simply from their customers going out of business. Like, that's crazy. CoStar accounts get canceled because the business using them goes out of business, not because someone is switching to a competitor.”

“The real opportunities are in the companies that are applying AI effectively to make their businesses more efficient. And I think those that run on small margins already have the most room to grow because small changes in their cost structure can make a massive impact on their total profit.”

“If a typical retailer could halve their hidden food waste costs, it could grow their profit margins by more than 20%. That's without raising prices, without cutting staff. That's just straight to the bottom line. So it's about getting smarter about what they order in the first place, and that's what AI is helping with.”

“Also in 2018, we had the cannabis mania and in that year there was a huge flood of cannabis businesses that were listing on the OTCQB and OTCQX. This obviously bolstered corporate services revenue and even the pink market had elevated trading volumes. But by 2019, that trend reversed after the cannabis industry fell through. Now looking at 2021, the spike was much more cyclical in nature. With free money just pouring into people's bank accounts, buying stocks was one way to just use that money. And trade people did. So OTC Link electronics communication networks exploded from an average of 11,500 transactions daily in 2020 to an average of 48,000 by 2021.”

“If a typical retailer could halve their hidden food waste costs, it could grow their profit margins by more than 20%. That's without raising prices, without cutting staff. That's just straight to the bottom line. So it's about getting smarter about what they order in the first place, and that's what AI is helping with.”

“The real opportunities are in the companies that are applying AI effectively to make their businesses more efficient. And I think those that run on small margins already have the most room to grow because small changes in their cost structure can make a massive impact on their total profit.”

“So if we apply a 25 times multiple to $55,000,000 that gets us to a market cap of about $1,300,000,000 Enterprise value should be similar given OTCMs minimal net cash and minimal debt position. So if we divide that up by projected shares outstanding in 2030 and we factor in a modest dilution from SBC, this yields a per share value of roughly $113 Now based on today's price of $54 that implies an IRR of about 16% plus you're getting about a 4% dividend yield on top of that.”

“So in 2025, they spent a paltry $1,600,000 in marketing and advertising. So if we assume that 100% of that spend was on corporate services, which I assume is actually even a lower number, then they acquire new issuers at a cost of only $3,700 each. And now their annual fee is around $26,000 meaning that they're getting a ridiculously high return on investment on other advertising spent.”

“And so in 2014, CoStar acquired apartments.com for about $585,000,000 And that seemed like a really expensive deal because at the time it was a solid, but not the most dominant rental listing property portal. And Zillow was arguably much bigger in rentals and rent.com was also a significant player too at that time. It is. And I agree with you. The thing is you have to underwrite two scenarios. So that's very material for CoStar. The result is that today, apartments.com generates roughly 1,200,000,000 a year. So think about that from a $585,000,000 total acquisition price a little over a decade ago to now a billion dollar plus revenue share. I mean, that is a really extraordinary return on investment.”

“So he started CoStar Group in 1987 and the initial business was honestly just really unglamorous for as passionate as I think he was about it. What he did was he sent these researchers out into the field with clipboards and cameras, and they would physically visit commercial properties, and they would document everything from the square footage of it, who the current tenant is, what the asking rent is, how much available space there is. They would take photographs of the building and just really whatever information as much as they could possibly get. And then they would compile all of that and they would sell it to these paid subscribers who wanted access to that information on floppy disk.”

“That company is OTC Markets, and here's a wild fact. The platform they run covers over 12,000 secondurities, more than both major exchanges combined, yet the whole operation runs on fewer than a 130 people.”

“I think it's a really worn out analogy, but people always talk about selling picks and shovels during a gold rush and how that's a better business than actually trying to find gold in a gold rush. And to me, OTC Markets is very much a picks and shovels company for investing in the growth of equity markets in aggregate.”

“Cromwell Colson has been a long tenured CEO, having been in that position with OTCM now for twenty nine years. Now given that tenure, you may be thinking he's the founder of the business, but interestingly OTCM has been around since 1913 and was formerly known as the National Quotation Bureau. As of 2026, Cromwell Colson directly owns over 27% of the shares outstanding. So he has tons of skin in the game.”

“Any cash you're gonna need in the first in the next probably two, three months, I'd probably wanna be in money market or something like an escrow. And then anything beyond the three months, then you could probably park in something like this—between three months and a year, year and a half, two years max.”

“You're going from in the thirty, forty, 60% range over the past few years of earnings growth down to eight next year. That usually creates some sort of earnings multiple compression. I would be very patient to pick this up because of that growth slowing, which is creating multiple compression, which means probably lower prices.”

“So in 2025, OTCM had $33,600,000 of customer prepayments sitting as non interest bearing current liabilities on the balance sheet. Now this essentially makes OTCM a negative working capital business, which is actually highly favorable because it means that OTCM's customers provide zero cost financing annually and persistently.”

“Don't get me started, Daniel. That's a rabbit hole. Never get to homes.com because I think land.com is super cool. I saw 10 acres of land for sale on land.com on this private island off the coast of North Carolina, and it was in the Outer Banks for anybody who knows the area, and it was for $500,000. And so I texted a bunch of friends and family. I was like, guys, come on. This is our big chance to own an island together, and it doesn't matter if there's no house or no plumbing installed. We'll figure that out all later. And, yeah, I don't know. Apparently, nobody found that to be a compelling sales pitch, but I was ready to do it.”

“Rates are going higher and the dollar is starting to go lower. And that shows you that money is fleeing out of US markets, out of US assets and into foreign markets, which means higher interest rates, downward pressure on equities. The internals of the market are showing you what's happening.”

“I'm giving MNTN a thumbs up if it can gather a little more momentum and break above this hundred day moving average, which it's trading right at right now. If it does hit those earnings numbers, then it looks cheap. If you can break above a dollar—or sorry, $11.75, $12 in that range, then I think this has more upside.”