No. of Recommendations: 3
- Further selling pressure from paranoia that AI will replace the need for their software. This reason is very naive when you are familiar with specialized vertical software. I estimate AI hype will be a net benefit for organic growth as it will stimulate auxiliary upgrades but the systems (flight scheduling, travel booking, insurance brokerage and billing, etc) cannot be replaced.
- They are more than anything a value investing compounding machine and have compounded 30%+ the last 20 years. That wasn’t a typo. In recent years compounding around 20%.
- Their circle of competence is small/ medium specialized vertical software companies. I know this industry well and revenue is insanely sticky. It will take a longer post to explain that. So what they do is buy with a return on invested capital in the 20-30% range.
