XPO piqued my interest because of its sheer undervaluation – trading at less than a half of ODFL’s EV despite having an almost similar EBITDA!
While this looked too appealing, a deep dive into the company changed my opinion to the contrary.
Allow me to present both the Bull and Bear cases in this deep-dive.
Around a year back, Carrier (CARR) was spun off from UTX (now Raytheon Technologies). The event coincided with one of the craziest markets of all time. Finally, I sold off my entire position in CARR on Friday, garnering a decent 3.5x return in a year. While I always prioritize the process over the outcome, it’s a great feeling when you get a great outcome following your investment philosophy. I’m a big Joel Greenblatt fan. I might have read about his investment in Host Marriott spin-off (having similar parallels to CARR) in his classic book numerous times that I could speak about it even in my sleep now. Last month, I was amazed to read exquisite details about that investment along with excellent insights on Greenblatt’s investing principles in a fascinating book – Richer, Wiser, Happier. The author, William Green, brings never-before known investing principles from one of the world’s best super investors in this highly recommended book. Hence, after selling my position, it was a good opportunity to document my learnings and what I could have done better by drawing parallels with the Host Marriott spin-off.
When Canada’s richest family realized that the high-profile adventurous merger of its largest owned entity, Thomson, with Reuters, was a fatal decision, it was too late to change tracks. This was perhaps the most flawed capital allocation decision in its history.
But this has reversed now.
In this post, I explain the market misconceptions and what makes TRI a stunning business. I delve further into how I identified the stock after having it on my watchlist for a number of years.
I have been a Honeywell shareholder since 2016 when Dave Cote’s transition, created a short window of opportunity. This post is a book review of Dave Cote’s book along with my comments from a shareholders lens.
While the book’s central tenet is that a company can invest both for the short-term and long-term without impacting long-term competitive advantages, I was amazed to find tons of treasure to make better life decisions.
More than a year back in March 2019 we had taken an exposure in Union Pacific (UNP) triggered by the appointment of Jim Vena, protégé of Hunter Harrison, as the COO of the company. Even though the company joined the Precision Scheduled Railroading (PSR) bandwagon much earlier in September 2018, the announcement did not instill confidence to pull the trigger then. The initial investment started with a tumultuous journey as the freight volumes went from a mild recession in late 2019 to one of the worst (in 100+ years of history of freight) in March 2020. While jittery and shaken by the magnitude of destruction, a $ 2.1 m open market purchase by William Laney, former CEO of Sysco and director of UNP could not go unnoticed, as this was the largest purchase by an insider after 2015. After all, at the March-end price the Street was factoring a mere inflation-like growth of 3.5% (vs. 11% last 10 years) to an already depressed 2019 free cash flow implying no benefits of PSR.
This post explores the many facets of change in dynamics for the railroad sector through the lens of an American icon – Hunter Harrison. We explore his life through book summaries of two highly recommended books …..
CARR provides an asymmetric opportunity resulting from the valuation dislocation after its spinoff from UTX.
In April I wrote an exclusive thesis on VIC about the asymmetric opportunity presented by the valuation dislocation from the spinoff of CARR. Since then the stock has risen by ~70% vs. a range of between 5-20% for Trane, Johnson Control and Lennox. Now that the exclusivity period for VIC is over and I still maintain half the position I am writing a concise version of the thesis which could help anyone gain an understanding of investing in the HVAC industry.