Investing in water is not a new idea but I think it's worth looking into regardless. There's a lot of different paths you can go down when it comes to water: Desalination, Atmospheric Water Generation , Water Wells , Residential Water Damage, and the success of brands like Liquid Death.

I'm calling for any suggested readings regarding water; whether it's from a commercial or residential POV. What companies should I add to my search?

News Stories:

School Drinking Water + Killer Bacterial Infections

Around Twitter

Presidential Candiates Blaming Atrazine in the water + Threads about tap water to sell filters + PFAS exposure

$PNR $ACM $AOS $ECL $CLH $FBIN $WTS $XYL $ZWS $FELE $MWA

If GLP-1 medications are 'life changing' drugs, then it reasons that the consumption habits of US consumers is also set to change.

In the US there are ~100m overweight individuals. With consumer spending at 70% of GDP then the consumption from this cohort is worth ~$4.2 trillion ( 2021 GDP of $23 trillion). To what degree will consumption habits shift following a life changing drug?

Say 40% of the 100m individuals take GLP-1 medication and subsequently have their lives changed, this subsect represents $1.7t of consumer spending. This altered consumer will eat different meals, buy different clothes, have new status symbols, and new hobbies. This shift in spending will give birth to new brands and will prove to be a headwind for other companies. If an individual only substitutes / eliminates 5% from their original routine then it would still equate to a $84 billion dollar shift in consumption.

Below is a completely random collection of market share estimates. I was curious to what’s more interesting; the gap between the #1 & #2 players or the degree to which the overall market is consolidated?

Would you rather invest in a company that operates in a near duopoly or a company that has significantly more market share than their top competitor?

Please comment with any interesting market share dynamics you’re aware of. I think the next step of this analysis would be to compare EBITDA margins among the different cohorts of market concentration. Ideally I would also be able to attach a timeline on how long this relationship has been in place; is this a recent consolidation or have the #1 & #2 players been battling for years?

It's common to see deferred revenue/unearned revenue on a companies balance sheet but it is worth digging into what comprises this line item. It's technically a liability since the company is not yet allowed to recognize the revenue, but they have collected the cash. With the cash in hand the company now has flexibility on how to maximize their financial position.

Some famed examples of collecting cash up include insurance companies, airlines, enterprise software, and memberships like your local gym, Amazon prime, or Costco.

The smart phone has enabled companies to develop products that make customers lives easier while allowing the company to have more cash on hand. $SBUX customers pre-load their digital wallets effectively granting Starbucks an interest free loan & $MTN has customers pay for their full season pass months in advance of ski season.

I am wondering what companies are poised to increased their deferred revenue moving forward. What other businesses can devise methods to collect cash up front from their customers?

There are ~9,000 independent oil & natural gas producers in the Untied States. While there are extremely large players like ExxonMobil, BP, Shell, Etc. there is also ample opportunity for smaller players to exist.

I think this is relevant when forecasting the market dynamics of the green revolution. There won't be 9,000 different companies producing solar panels or even 90 different companies producing heat pumps. We are looking at much more consolidated markets. For every $1 spent on energy today there is some portion of profits trickling down to smaller players in the oil and gas industry but if the world successfully transitions away from oil & gas the same $1 spent on energy will be distributed amongst a smaller and more consolidated profit pool.

Some may debate the actual monetary savings or efficiency of green infrastructure but that's really beside the point. Whether it is through social influence, government subsidies, tax incentives, or building code requirements, the transition is going to happen.

This is not to sound like a conspiracy theory but it's evident there is a concerted effort among prominent investors for the world to make the transition. It is not so much a passing of the torch from the oil & gas industry to green solutions but more like a snatching of the torch from a green energy coalition. Just look at the board & investors for Break Through Energy Ventures. Titans of industry working together to fund solutions that align with new ESG mandates and environmental standards, I wouldn't bet against their success.

I think it's possible investors are underestimating the sheer scale of this movement. We are still in the early innings of a multidecade secular trend of adoption. It took me until this very moment to appreciate that the energy companies of tomorrow may actually enjoy more favorable market dynamics than the energy companies of the past.

Pet food is a category that is beginning to mirror human diets where owners are paying close attention to ingredients and the overall dietary substance. On the other side there are 90m+ who need to buy food for their pets and not everyone is particularly interested in optimizing their pets diet.

When ignoring the idiosyncratic differences in inventory & factoring in small time stores there are >80,000 locations where you can buy pet food. There are ~90m families in the United States with a pet & $CHWY has ~20m customers with 73% of revenue coming from Autoship. On the high end this points to ~16% of US pet owners subscribing to Chewy's Autoship.

Counterintuitively I think pet food is one of the better use cases for ecommerce. At first I was worried shipping costs would drag down Chewy but that's because I was assuming they must operate in a world of fast 2 day shipping. The need for pet food is extremely predictable, if your dog needs a new 40lb bag of food on October 12th, why can't Chewy have the food leave the warehouse 3 weeks prior to arrival? I am assuming it is possible to negotiate lower rates with UPS/FedEx due to the lack of urgency for these deliveries. Basically whenever one of these companies has some slack they can slowly move the food along it's desired route while also ensuring it is delivered on the date needed.

In theory it's possible to decide your pet's diet the very first day you adopt them & have the food automatically delivered over the course of it's life. There is nothing proprietary about Chewy's Autoship, it's just that they've gained the most traction. There is no reason to discount the possibility of Walmart or your favorite grocery store pursuing consumers to sign up for Autoship as it would allow them to free up valuable shelf space in stores. (Not to mention the looming threat from Amazon)

I'm still not sure what the takeaway here is. On one hand pet food appears to be a bit of a commodity as it can be bought in so many different locations. On the other hand we know the tides are shifting where the food choices are becoming more nuanced. With an increased desire for owners to choose the 'right food' I think this is where the Chewy funnel becomes valuable. Steering 20m consumers in a particular direction can translate to some serious buying power when they purchase wholesale.

I'm sure @paulcerro has some thoughts but I think it's clear that many consumers prefer to order their petfood online, as there is no shortage of brick & mortar locations where pet food is sold.

Doors & locks have been around for thousands of years as a valued tool to maintain our privacy and protect our personal property. Allegion is a company that focuses on access control security products and solutions, with their brands sold in 120+ countries.

Allegion is a notable player in their end market but it has been such a boring investment the last few years. Tepid revenue growth and little evidence they are on a path to sustainable margin expansion. Over the years they have reduced share count and reduced debt but what will excite investors moving forward?

Adoption of Smart doors & locks should be the catalyst for margin expansion. We have a history of really steady margins, essentially 19-20% EBIT margins every year. Smart doors & locks introduces the possibility to layer on high margin recurring software revenue to the existing business.

Allegion recently completed an acquisition from $SWK for their commercial door division, which includes ~ 130m of annual recurring service revenue (recurring revenue is the very thing that would make Allegion an exciting business).

$LTCH has done a great job of highlighting the value proposition of digitizing doors for property managers and residents alike. I think it's possible to look at Allegion today & co-opt the Latch investment thesis. At their core $ALLE is hardware company trying build out/acquire software while Latch is a software company trying to build hardware or partner with hardware producers.

There are a number of macroeconomic headwinds facing the company but from a historical perspective the company is trading at a low valuation. If you believe in the potential of smart doors & locks then Allegion may be an attractive way to bet on the continued growth of the Smart Home/ Smart Workplace.

Smart TV's and their operating systems has been a hotly debated topic the last couple years. I think it's agreeable that it is unlikely for the end state of this operating system race to result in a duopoly market like the PC ( Mac / Windows ) or Smart Phone ( iOS / Android ).

For this post I am focusing on just low priced TVs. This is where Roku & Vizio compete. I find it interesting that Vizio has recently experienced a similar growth rate as Roku while also closing the monetization gap. Both companies are using hardware as a loss leaders for adoption, as their respective platforms are driving 95-105%+ of gross profits.

The remaining question is who has the superior approach to gaining marketshare among the low end consumer?

Roku serves as a partner to OEM's which allows these companies to skip the platform R&D to focus on hardware efficiencies in a bid to drive down the overall price of the TV. Vizio is vertically integrated where they must spend on both hardware R&D and platform R&D. At first this seems like a larger burden for Vizio if they wish to have the lowest priced TVs but perhaps it's advantageous. Perhaps by owning the entire process internally Vizio can allow hardware to become a larger loss leader than Roku.

It seems to just be a CAC/ LTV question. Take a loss of X dollars on the sale of the TV today but make it up over the remaining years as the TV owner consumes advertisements. Improve your platform technology and shorten the payback period. Improve your hardware and keep the user for longer, as there is no guarantee they will buy a Vizio again once the TV breaks.

New information has surfaced to make me consider reducing the size of my position in $SEDG

I entered the trade based on increased demand for their products, which remains to be true. However, the supply side of the equation was a problem in Q2. Now the heatwave in China is causing some factories to shutdown for a few days. I am unable to determine if SolarEdge's supply chain is actually effected or not but this seems like a fool me once shame on you, fool me twice shame on me situation.

Last quarter the company's margins & output were negatively effected by factors outside of their control, and now it looks like there is a risk of this occurring again. Core to my bull thesis was rising energy costs in Europe but I also failed to recognize how this could be a double edge sword for a company that has a factory in Europe. Rising input costs and potential limitations of energy use is a problem for all European manufacturers.

So to sum it up SolarEdge may once again be negatively effected by supply chain issues in China, are facing rising input costs at their European factories, and also face currency headwinds due to the EUR weakening relative to USD.

I still believe in the company long term and believe investing in inverters is the simplest method to bet on a widespread increase in demand for solar energy. It's like if you were bullish on new car sales you could bet on tire sales, inverters are that essential to the functionality of a complete solar system. $ENPH trades at a richer multiple than SolarEdge but now this premium is starting to make sense, as Enphase may be the superior instrument to bet on inverter sales.

For now I am keeping my position intact as the technicals of the chart remain solid. The company is above the 50 & 200 moving day averages but if momentum begins to fade I now have stop orders to trim my position accordingly.

Personally SolarEdge was one of the most anticipated earning reports of the season. Positive reports across the industry from peers like $ENPH lead me to believe similar news was in store here. I believed SolarEdge was better positioned than Enphase into Q2 and the coming months. On 08/02 earnings were released after hours with some disappointing results. I'm still confident it the company's position in the industry as well the overall industry tailwinds. This quarter wasn't great but I believe investors will be able to look through a number of 1 time events and see a path to greater margin expansion in the coming quarters.