Christian Hansen, Ghazi Amazon, Jeff discussed on Capital Allocators

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How are the other ways that you think about what competitive advantages get incorporated into the kinds of business. You like though the obvious right disruptors low low cost providers ghazi amazon but we've actually developed the number of what we call typologies typologies that we think are a little bit difference won't one of them for example example is a is a an outsourced aren't d company. We have found when you look at various companies in different industries that we can classify them them in certain ways where you don't have to be specifically in one industry for instance. There's a company called core labs in the portfolio which is basically ultimately. Ah outsource sir of measuring the the core samples in gas wells in oil wells. They were once a part of an integrated oil oh company but they can because they weren't essential element. They got spun off on their own and interestingly so now what they do is they sell their services to all the integrated drill all the big drillers in an integrated oil companies and over time because that's an outsourced r._n._d. Process we can look at that company versus other outsource our companies and and maybe other industries for instance christian hansen which is a <hes> enzymes company that creates enzymes and biologics for the use in yogurts in jesus and very simple business that an analyst that's just looking at maybe the materials sector might look at christian hansen. It's really very richly priced but if you think in terms of it being outsourced r. and d. company argument would those types of businesses deserve higher multiples because what what they ultimately do they start the low in their very low cost part of the process but then they kind of climbed the value chain and they start adding larger and larger services to the point now our christian hansen if you look at the known or or you'll play or any of the other yogurt manufacturers. They're really branding companies now. In christian hansen is the company that that develops the taste and the texture and the caloric content. If you can kind of look at the world more in a general sense you can kind of see these relationships you know core or lab just looking at the energy sector looks expensive christian hansen just looking at the materials sector looks expensive but if you look at them really as outsourced r. and d. e companies like we do you can say that hey their margins ought to grow from twenty five to thirty so what most people will see as being expensive we can actually make the argument they're not and so you have these these businesses with growing moats and then you also mentioned you start talking about culture <hes> similarly. How do you go out and really assess a company's culture sure. I think that's one of the most fun parts of our job and because nobody does it. You know it's interesting you if you look at the read fill fischer's book common stocks and uncommon profits which again is one of the classic he it's interesting as i think he has a twenty five point checklist on how to analyze a company and interestingly of the twenty five point checklist probably fifteen points are all qualitative elements which is just the reverse of what most people on wall street we do most people spend ninety five percent of the time crunching numbers running d._c._f._s. models which by the way has zero competitive advantage because you have thousands upon thousands of people doing the same work where we can get a massive competitive advantage by doing the things that other people are not and so when you're trying to assess a culture really one of the best ways if i wanted to assess g._m.'s culture and get a you know one of the best things to do is not just talked to the c._e._o. Or the c._f._o. Jeff oh but it would beat. It's eight. Oh let me talk to people that have left on good terms. Of course you talked the suppliers and you talk to vendors and you talk to competitors. It's good to talk to competitors..

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