January 2020 #1
Access to some materials included in this newsletter may be limited to Red Forest Capital funds.
ARTICLES
The article below on Jason Redman is not necessarily business-related, but I found it inspiring, to say the least, and worth sharing. One quote: “The Purple Heart recipient required dozens of operations and skin grafts to survive but managed to find meaning within his intense suffering. During his recovery, he placed a sign on his hospital door that read:
Attention to all who enter here. If you are coming into this room with sorrow or to feel sorry for my wounds, go elsewhere. The wounds I received I got in a job I love, doing it for people I love, supporting the freedom of a country I deeply love. I am incredibly tough and will make a full recovery. What is full? That is the absolute utmost physically my body has the ability to recover. Then I will push that about 20 percent further through sheer mental tenacity. This room you are about to enter is a room of fun, optimism and intense rapid regrowth. If you are not prepared for that, go elsewhere.’”
Another article on PG&E: https://www.wsj.com/articles/pg-e-wired-to-fail-11577509261?mod=hp_lead_pos1
If you have some time to kill, the article below, from a speech given by Charlie Munger, is one of my all-time favorites and well worth it. The speech itself is also available on Youtube.
INDUSTRIES
FBOs and services to FBOs: I have mentioned this to some of you, but a public company I was diligencing called Macquarie Infrastructure owns a collection of assets including terminal storage assets (which may also have some interesting tailwinds behind them, more on that another time) and also FBO assets. According to the company, the FBO industry is fragmented, my understanding is that air travel continues to grow at a healthy rate. I don't know the CAPEX requirements, which could be substantial.
Plumbing distribution: I think there are attractive elements to some distribution companies that can insulate them from disintermediation from the company whose products they distribute. Someone mentioned the below company to me, which I have not had time to look at but thought I would include. While plumbing isn’t very exciting, I would imagine the industry is very fragmented and it seems fairly recession-proof.
Utility and other infrastructure maintenance: See article above. Seems like a large need with aging infrastructure, both for PG&E in the article above and also with other parts of American infrastructure.
Internet gaming/gambling/player account management: Interesting company I read about called GAN, which does player account management for the casino industry. I am not saying this would be a good acquisition (seems like customer concentration, non-recurring
revenue and perhaps large software customization for clients), but it is still an interesting niche in the growing space of internet gambling: Twitter thread about it here, where I first heard about it.
Family offices: Businesses that support family investment offices. This could be with things like administration or performance reporting. Or this could be done through some form of software. The software would likely need to be very robust and customizable (for the client), given the diversity of needs.
Here is a searcher’s response to one of my last industry ideas in response to my suggestion about looking into the broader craft brewing industry, more the companies that service the brewers than the brewers themselves:
Matt, I was at ZX Ventures (https://investments.zx-ventures.com/) prior to launching the search . ZX Ventures is the innovation and venture arm of Anheuser Busch that was set up in 2015 to be ready for a world when people reduce consumption of Anheuser Busch's
mainstream brands such as Budweiser and Stella Artois and consume more craft beer / alternative beverages. The link provides a list of their current portfolio. The companies are all in the craft beer/alternative beverage ecosystem and you will see several data and
logistics companies in the portfolio. ( I was a board observer on several of them ). I would caution searchers/investors from investing in any craft beer-related companies because ZX Ventures has a $1B+ acquisition war chest and has been on an acquisition spree of companies that support the craft beer industry. Post-acquisition, ZX Ventures will provide the Anhuseser Busch operational support ( supply chain, route to market, packaging, labeling, marketing, distribution, testing ) to each of these portfolio companies. As a result
the competitors of these portfolio companies will struggle and the service providers to these competitors will lose clients . Therefore several microbreweries/packaging/labeling companies have been on sale recently.
Here's an article - https://www.cnbc.com/2019/07/24/ab-inbev-just-made-1-billion-frominnovation-group-zx-ventures.html