Portfolio changes in the last months
In the last months I started to value great capital allocators and quality companies. Since then I cut my allocation to high growth stocks in half. Great capital allocators like $ASML, $CSU.TO or $RICK now account for almost half of my portfolio. Live and learn.
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My portfolio evolution over the last months
In the last months I started to value great capital allocators and quality companies. Since then I cut my allocation to high growth stocks in half. Great capital allocators like $ASML, $CSU.TO or $RICK now account for almost half of my portfolio. Live and learn.
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3 Reasons to own $RICK
On my ninth day of my "3 reasons to own" series, we have something spicy. RCI Hospitality holdings aka RICK is a serial acquirer and operator of gentleman clubs/strip clubs and an operator of a sports bar chain.

1st reason: The core business of nightclubs is a highly fragmented industry where RICK owns just 2.5% of the market. The company has 500 clubs that meet its M&A criteria(more on that later) in their sights. New nightclubs are rare because most cities don't give out new licenses anymore, so it's a game of consolidation for the existing clubs. This gives them a deep moat.

2nd reason: In 2016 the CEO read "The Outsider CEOs" by William Thorndike and established a great capital allocation strategy with the company. The focus switched from the revenue maximization focus to FCF/share focus. The strategy includes M&A of high-quality nightclubs at 3-5x EBITDA depending on the quality of the business, organic growth through expansion of their bombshell sports bar concept through company-operated and franchisee locations and opportunistically buying back shares at a FCF yield of 10% or higher.

Recently the CEO made a comment about the very small buybacks, even though they are currently around 12-14% FCF yield. They are able to get 33-100% cash on cash returns on deals lately, so buybacks at a 12-14% yield don't seem that lucrative.

3rd reason: RICK has a very high margin profile, generating an 84% gross margin, 32% EBITDA margin and a 13% FCF margin. The company also has great cost controls. Even in the lockdown quarters they managed to stay at a minimal positive Free Cash Flow.

I hope you enjoyed this post, tomorrow I'll be back with $MELI
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3 Reasons to own $ADBE
Eigth-day of my "3 reasons to own" series, today with a SaaS king: Adobe.
1st reason: Look at those margins! Adobe has some of the highest margins out of my companies. SaaS businesses are great.

2nd reason: Adobe has a dominating market position in some key markets for the future. I believe that the gig economy will transform work and Adobe will provide the software.
The graphic software market is dominated by Adobe with 90%+ market share for example. Most design jobs will require you to know how to work with Adobe products. That's a deep moat right there.

3rd reason: Even though the company doesn't pay a dividend, they are buying back a lot of shares with their massive Free Cash Flows

So that was Adobe, tomorrow is gonna be spicy, with $RICK
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Not saying I’m going to buy it right of way BUT I’ll be doing some digging into $RICK

(Might try to sell some out options)

If past performance is not the future performance and they debt that I see is management (managed properly) I might get really interested since I see that management has been buying shares (the amounts are not huge but I do like when management is spending their money to buy shares and not via options)
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Great thread, I would imagine loosing of Covid restrictions is a tailwind for them as well.
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After my post from yesterday about my Cashflow usage ranking I found $RICK thanks to a comment on my twitter.
Seems like a company that goes exactly by these principals. I will do a thorough research into the company soon and share my findings.

Sold out of $RICK today.
Wasn’t a large position. Want to trim number of names I hold so I can focus my limited time on the better businesses I want to follow and hold.
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