MI310: A Serial Acquirers Deep Dive w/ Chris Mayer
The Intrinsic Value Podcast - The Investor’s Podcast Network
The Investor's Podcast Network
4.6 • 592 Ratings
🗓️ 5 December 2023
⏱️ 60 minutes
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| 0:00.0 | You're listening to TIP. |
| 0:02.7 | They'll see something trading at 26 times earnings or 30 times earnings and they'll think that it's expensive. |
| 0:09.5 | But when you work out what the return on capital is of that business, then you can just look at something simple. |
| 0:16.7 | You could look at ROE and then you could look at how much they're reinvesting every year. So if the ROE is, |
| 0:23.9 | let's say, 20% and they're reinvesting 80% of that, you know, paying out 20% of dividends, |
| 0:30.8 | then you've got, you know, 16% roughly in compounding. And then your question is, you know, |
| 0:35.3 | question for you, then is that good enough for you as an investor? Is it secure enough? Is it durable enough? Do you feel good enough about it that you're willing to sit and wait? And there's some sliding scale. You're going to find some that, you know, they're in 30 percent and maybe they're doing, they're paying out, again, 20 percent. Now you're looking at 24 percent kind of is your compounding. And you have to, and that makes a big difference. So then when you think about it in terms of a decade out, you just sort of forecast what 24% compounded is over a 10-year period of time. It's a big number. And then you put a multiple on that at the end of 10 years and compare it to today and get your IRA, |
| 1:14.8 | and you can see suddenly, if you have a company that's going to increase earnings six, |
| 1:20.6 | eight times over the next decade, suddenly whether you pay 30 times earnings or 35, |
| 1:24.4 | suddenly doesn't seem like, you know, that big of a deal, right? |
| 1:32.4 | In this episode, I chat with Chris Mayer about the special qualities of serial acquires that make them compelling investments, tricks on how to value serial acquirers, the importance |
| 1:37.5 | of decentralization for successful serial acquirers, the proper dynamics to look for between |
| 1:42.9 | the acquirer and the acquired, the proper uses |
| 1:45.9 | of leverage to use in mergers and acquisitions, characteristics to look for in scaling |
| 1:50.4 | serial acquirers, the proper management traits to look for in highly successful serial |
| 1:54.7 | acquirers, and a whole lot more. My first exposure to Chris Mayer was probably the same as most |
| 1:59.9 | listeners, from reading his book |
| 2:01.7 | Hunter Beggars, stocks at return 100 to 1, and how to find them. After reading that, I started |
| 2:07.3 | looking at his portfolio very closely. Even though I had my own framework for quality, his strategies |
| 2:11.8 | were completely aligned with what I was trying to do. I'd send him some ideas, which he hasn't |
| 2:16.3 | bid on yet, and ask him for feedback |
| 2:18.0 | on my own analysis. He graciously helped me with my thinking on all sorts of topics, |
... |
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