That brings us to the second question from above: if you operate from the perspective that these “macro” developments are knowable / predictable, how would it impact your decision-making? I think that answer is at least partly dependent upon your investment approach. For example, as discussed in “My Investment Philosophy”, my north star is to own high-quality businesses for the long-term (that’s the approach that feels most appropriate for me given my time horizon, mindset, etc.). I believe this approach, when reinforced by rules around portfolio decision-making, has the necessary inputs to develop an uncommon level of earned conviction / trust, as appropriate, in certain companies and management teams (“you build trust through consistency over time”). That said, it’s an approach that probably isn’t as well suited for trying to avoid those periods of stress (or, in situations that really go poorly, value traps). Put simply, I think your perspective on the “right” way to invest should impact your answer. (As discussed in “The Evolution of A Value Investor”, I used to think about these different approaches in terms of being “right” or “wrong”. I now tend to think about them in terms of trade-offs.)

Shortly after the turn of the 21st century, Charles Rolls was ready for another challenge. The inspiration for his next endeavor came from an insight he had while reviving the Plymouth Gin brand: distillers dedicated significant time and resources to the production of high-quality spirits (liquors), but that wasn’t the case for mixers. For a gin and tonic, where the tonic is the majority of what’s in the glass, Rolls argued that these cheap, low-quality mixers with artificial sweeteners, preservatives, and flavors were diminishing the spirits (“It fundamentally undermined the idea of why you created a premium gin, if everything just tastes the same when you make a G&T”).

When Rolls met advertising executive Tim Warrillow in 2003, the two discovered they shared a similar vision: “The mixer category was long-forgotten and overlooked; it was dominated by large conglomerate brands [like Schweppes and Canada Dry] who were focusing more on manufacturing efficiency than quality or flavor…. People were willing to pay ever more money for high-quality spirits, yet they had no choice with increasingly artificial mixers.” That insight led to the creation of Fever-Tree (“FT”), which launched its first product, Indian Tonic Water, in the UK in 2005. (Warrillow has been FT’s CEO since 2014, the same year the company went public.)

After the market close on Tuesday afternoon (September 19th), I will be increasing prices for the TSOH Investment Research service. If you’re a paid subscriber before the price change goes into effect, you will be grandfathered in at today’s rates for as long as you’re subscribed to the service (currently $49 per month or $349 per year; the new pricing is $74 per month or $499 per year).

This is the first pricing change since the service launched in April 2021. Over the past two and a half years, I’ve shared roughly 200 write-ups with subscribers. That list has included dozens of deep dives, portfolio holding and watchlist updates, investment philosophy discussions, and complete portfolio transparency (disclosure of all portfolio changes before they are executed).

If you’re a long-term investor who aspires to own high-quality businesses, we share a similar investment philosophy. If you’re interested in having complete access to my equity research, now is an ideal time to consider a subscription. If I can answer any further questions to help with your decision, please let me know (DM or email).

Thank you.

One stock for ten minutes, new episode every Friday

"As of August 31st, Charter’s ~14.7 million pay-TV customers cannot access Disney’s TV channels. (It hasn’t been resolved in the past ten days.) On Monday, Charter pay-TV customers will not be able to watch the Bills / Jets game on ESPN (that said, it will also be on ABC and ESPN+); those TV customers have already missed some high profile college football games, as well as the final rounds of the U.S. Open tennis tournament. This is a critical moment for the pay-TV ecosystem; the endgame of the Charter / Disney carriage battle will reverberate through the media industry in a major way."

One stock for ten minutes, new episode every Friday

From today's update:

"The recent results at Five Below present some questions, particularly relative to the FY25 financial targets that management set in early 2022: (1) FY25 revenues of ~$5.7 billion, ~60% higher than the ~$3.5 billion expected in FY23e; (2) FY25 EPS of ~$10 per share (“more than double EPS” from $5.0 in 2021), ~85% higher than the ~$5.4 per share expected in FY23e; (3) FY25 EBIT margins of ~14%, ~300 basis points above 2023e; and (4) ~2,200 stores by yearend FY25, which implies an additional 650 (cumulative) net new units in 2024 and 2025 (that will require a pace of annual unit growth that is ~2x higher than what FIVE reported over the past five years)... I’d argue Mr. Market is expressing some doubts on the near term “Triple-Double” targets; is that a fair assessment based on today’s trajectory (an unrealistic goal), or is it a compelling opportunity for investors?"

As noted in the introduction, I’ve long been impressed with the company’s launch of new features like I’m Flexible, Categories, and Aircover. Similar Listings joins that group, but it’s distinct in one important way: while the others on the list have been a net positive for guests and hosts alike, I think Similar Listings will primarily benefit Airbnb guests at the expense of hosts (in aggregate) through lower ADR’s. By design, Similar Listings will provide the relevant information / data for hosts to develop a clearer understanding of where they stand in the market; in doing so, its adoption will likely lead to improved platform efficiency. (On that point, this comment stood out to me: “ADR remained stable YoY as increases in prices listed by Hosts were offset by guests’ willingness to pay… In North America, we saw a 2% decrease in available prices as Hosts reduced prices.” This is the first time they’ve discussed this “available prices” metric; that timing surely isn’t coincidental.)

What does this all mean? Imagine a market with three listings of comparable quality / value at $120, $140, and $160 per night. The $160 property, which is ceding bookings to the cheaper listings (and potentially to other alternatives in the market / region like hotel rooms), may only be seeing ~20% occupancy rates. Over time, you could imagine a scenario where Similar Listings could show this host how lowering their “available price” to $130 - $140 per night would likely result in a meaningful increase in their occupancy rates. In that scenario, if the volume gains for this host are not fully incremental to Airbnb (i.e. sourced from competing hotel rooms in the region or trips that would’ve otherwise not been booked), that would suggest the second host, at $140 per night, could see an impact on their volumes… which may lead to a response on their end too. This (overly simplistic) example helps to illustrate why Similar Listings could be supportive of Airbnb’s goals. (Whether that’s aligned with the goals of Airbnb’s hosts is a tricker question; nobody likes the prospect of facing more knowledgeable / tougher competitors, but that’s life.)

TSOH Weekly #6: Walmart

A discussion on the company's evolution under the leadership of CEO Doug McMillon