Sunday Briefing: On Constellation Software,, Netflix, and Tiger Global

Sunday Briefing: On Constellation Software,, Netflix, and Tiger Global

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Welcome to the Sunday Briefing newsletter where I share some of the interesting lessons in life, business, and investing that I’ve come across during the week.

Latest on Junto

For the past two weeks, I have posted what you can call a two-part series on Constellation Software, the VMS serial acquirer led by legendary capital allocator Mark Leonard, and Topicus, the spun-off operating group touted as a mini-Constellation destined to repeat the history across the Atlantic. As my other company write-ups, these are accessible by Junto members.

Constellation Software: Incentive Systems and Return Constraints. I touch on Constellation’s trajectory as an HPC, the economics of a VMS, returns on capital, challenges in organic growth, the runway for M&A, the company’s incentive system, and prospects for the use of FCF.

Topicus: Reverse Scale Advantage and Open-Ended Opportunities. I touch on how Topicus carries on Constellation’s ethos, incentive systems, and strategy, whether it’ll work, the company’s value drivers, capital and ownership structure, challenges, and some thoughts on FCF yield.

What I’ve been reading

Why Netflix never goes down.

“One of the reasons why Netflix is the leader in this market and has the number of subs they do […] is something that pretty much everybody outside of the technical part of this industry underestimates, and that is Open Connect,” Dan Rayburn, a media streaming expert and principal analyst with Frost & Sullivan, tells The Verge. “How many times has Netflix had a problem with their streaming service over the last 10 years?”

Playing different games.

[…] we are seeing the emergence of a new velocity-focused strategy in the venture/growth asset class that will fundamentally change the way that venture capital is raised. By breaking many long-held but outdated rules & norms of venture/growth investing, Tiger has developed a flywheel that enables them to offer a better/faster/cheaper product to founders while generating more $ gains than their competitors. Tiger is eating VC, and with the right context, I think it’s clear why.

Business of the week

Visa Inc—one hell of a business. And one which is expected to continue to be one hell of a business. Not one I own, though.

Download the full model and make your own assumptions here.

Visa stock analysis sheet

Quote of the week

Bill Ackman on volatility.

“Volatility is the friend of the unleveraged long-term investor. We much prefer the bumpy road to higher rates of return than a smoother rise to more modest profits.”

A thought

The very best investors are certain of just about nothing. Good decision-makers are content with the world being an uncertain and unpredictable place, and so they think probabilistically. Instead of focusing on being sure, they try to figure out how unsure they are.

Have a great coming week,
Oliver Sung

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