Sunday Briefing: On Adyen, house money, and Shein

Sunday Briefing: On Adyen, house money, and Shein

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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

One company write-up was posted on Junto during the week.

Adyen: First Principles Formula. On the payment ecosystem and its history, distributional strategies, the competitive positions of modern players like Stripe, Square, and Adyen, how Adyen is different from the two others, unified commerce, and a brief on the stock price.

What I’ve been reading

House money.

Young people (myself included) are notoriously dumb. And right now, a lot of young people are incredibly rich. Being notoriously dumb (or at least, having notoriously high risk tolerance) is an important ingredient to getting rich quickly. Being notoriously dumb (or at least, having notoriously high risk tolerance) is also the trait that makes it impossible to stay rich.

How Shein beat Amazon at its own game.

Through its manufacturing partners on the ground in China, Shein churns out and tests thousands of different items simultaneously. Between July and December of 2021, it added anywhere between 2,000 and 10,000 SKUs — stock keeping units, or individual styles — to its app each day, according to data collected by Rest of World. The company confirmed it starts by ordering a small batch of each garment, often a few dozen pieces, and then waits to see how buyers respond. If the cropped sweater vest is a hit, Shein orders more. It calls the system a “large-scale automated test and re-order (LATR) model.”

Business of the week

The business of the week is CoStar Group Inc—the commercial real estate data provider that keeps on compounding.

Key assumptions for the DCF:
– 5-year rev growth rate: 12%
– Gradual growth decrease to 3% terminal in y10
– Target EBIT margin in year y10
– Terminal value EV/EBITDA: 20x
– Incremental invested capital turnover: 1x

Download the valuation model here to make your own assumptions.

CoStar Group stock valuation

Quote of the week

George Soros on investing.

“Money is made by discounting the obvious and betting on the unexpected.”

A thought

In reflexion of Soros’ quote above…

The rational value investor understands that cheap prices merely mitigate left tail risks and that the trick is to select the businesses where the right tail may be longer than other investors anticipate.

Have a great coming week,
Oliver Sung

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