07/25/2022
Like all business student thinkbois, I’ve read the stories of success. Walter Isaacson’s Steve Jobs. Peter Thiel’s Zero to One. We all want to learn the secrets of success… but tbh, I often find the failure stories much more interesting.
The story of Blockbuster’s demise has been told and retold 100 times, but always from the outside. With Built to Fail, though, we finally have an insider’s perspective on what went wrong (hint: whatever you’re thinking, it isn’t the full story). Lots of great business lessons to be learned in this short, uncomplicated book.
Turning to the stonk market, we all know that tech/growth companies have gotten shafted. But some of them have fallen so far that they’re actually valued at less than 2-3x the cash on the balance sheet. So far I have 59 names. Could get interesting 👀
Peace out.
Mike
Business Bites
Analysis, Reviews, and Weird Business News
Don’t Want to Lose Your Ass? Study Blockbuster
Book Review
Most people probably think they know why Blockbuster failed. Ever since the video rental chain went bankrupt, ex-managers have spun a face-saving narrative that the company’s demise was due to technological factors out of their control. But is that true?
Not according to Alan Payne, a Blockbuster franchisee for 25 years.
Early Days: Over Blockbuster’s first eight years, a $10,000 investment would have grown to over $1.5M! Like many popular stocks today, gRoWtH was the only thing that Blockbuster management and investors cared about.
Decline: Contrary to the narrative, overexpansion and competition was killing Blockbuster years before Netflix was even invented. The company’s decline could have been foreseen by people knowledgeable about the business.
In 1994, Blockbuster was generating $700M in cash flow with 3,600 stores. Two years later, it had doubled store count to 7,600, but cash flow had been cut in half.
Lesson: growing a business and running a business are two entirely different things.
Be sure to check out the Tycoonist Amazon page for this book and much more.
Big Balance Sheet Energy
Stocks
Although many POS growth stocks will probably run out of money and go to $0, some of them are actually starting to look attractive on a balance sheet basis.
The Tycoonist has identified 59 stocks, mostly U.S. companies in software/tech, with positive ratios of net current asset value (NCAV) to market cap. In layman’s terms, these companies have a ton of cash and receivables, but comparatively very little debt—meaning that risk of going out of business is greatly reduced.
Process: A preliminary Finviz screen yielded 500+ candidates. This list was whittled down to exclude certain categories such as financials, real estate, and Chinese stocks. The remainder was then screened to only include companies with positive NCAV and at least some history of positive cash flow.
57 of the companies have market caps of less than $3B, and 26 are under $300M (data as of 7/15/22).
Some companies such as Kornit Digital and Vimeo have fallen 80%, but management smartly issued equity near the peak and are now sitting on huge cash piles.
Other notable names include Charlie Munger’s Daily Journal Corp., e-commerce company Wish, and publisher Scholastic Corporation.
Author’s note: I have no idea what most of these companies even do, so don’t @ me. Just take it as a starting point for further research.
Full list available here.
Mogul Moves
Tracking Big Investors and Business Leaders
WWE WWE 0.00%↑ cofounder Vince McMahon, 76, got the dirty finish when he agreed to step down as CEO last week; he was previously being investigated by the company for sexual misconduct.
Intercontinental Exchange ICE 0.00%↑ , controlled by CEO Jeffrey Sprecher, is looking to make some $ on climate change with its acquisition of Urgentem, which provides emissions and climate transition data.
Byron Allen’s privately-held Entertainment Studios will acquire the bankrupt Black News Channel for just $11M; it’s the latest in a shopping spree for Allen, who also bought The Weather Channel and numerous TV stations over the last few years.
Warren Buffett bought another $100M in shares of Occidental Petroleum OXY 0.00%↑ last week, bringing Berkshire Hathaway’s total stake to nearly $20B.
Memes and Sarcasm
OMG 😂💀
Choose your fighter
Enable 3rd party cookies or use another browser
The internet is undefeated
Last Week’s Issue
Contact
Email mike@tycoonist.co or reach out on social media.