Investing Reflections - March 2025 ($IWG; $EVO; $CVNA; $ABL; $FOUR)
My bets, and some interesting names that I have been thinking about.
Consistent with the rest of my posts so far, I am writing this so I can look back on my thinking in the future — in this case, I want to focus on how I’m thinking about my current portfolio as well as other things/businesses I’ve thought about recently.
I don’t know if I’ll do this monthly, quarterly or continue this at all…we’ll see how useful this is — both to myself and to anyone else reading this. I’m experimenting with things to write about other than actual stock pitches, which obviously do not come along consistently.
A couple interesting ideas I looked at recently
Abacus Global Management ($ABL)
ABL’s main business is to acquire life insurance policies from older individuals for cash (before the policies expire) and then either hold them (i.e. in hopes of obtaining the payout) or sell them for a spread (e.g. to an investor looking for uncorrelated returns on a portfolio of life insurance policies or the original carrier looking to close out the policy early and release regulator-required reserves). It also operates a few related ancillary businesses including asset management, portfolio servicing, etc.
ABL is qualitatively a very unique business.
At the micro level, the business itself is seemingly a win-win for all stakeholders. In the ordinary course, 9 out of 10 life insurance policies expire without payment — by selling their policies to ABL, older individuals can obtain a guaranteed cash payout that they might not otherwise have realized. On the other end, alternative asset managers/investors can hold these policies for uncorrelated returns or insurance carriers can buy back and cancel these policies to clear up reserves for a net gain. ABL maintains a decades-long track record and a network of relationships with wealth advisors that look to have created a durable funnel for new policy acquisitions.
At the macro level, the life insurance market is massive and a very small portion of policy holders are aware that they can settle their soon-to-expire policies for cash. ABL, as the only life settlements player that is publicly traded, is positioned well to grow into this largely untapped market.
I’ve passed on this idea for now because I really can’t understand the quality of its earnings with the information it has provided in order to come up with a valuation that I am confident in.
Management’s non-GAAP metrics include substantial unrealized gains on policies. On one hand, there is good reason to believe unrealized gains will at some point become realize given that FMV is based on management’s models refined over decades. However, on the other hand, if I were to apply any notable discount or adjustment to remove the effect of non-cash gains, the current valuation of the company doesn’t look too amazing in my view.
Although the business is expected to grow significantly, I expect significant dilution over the next few years, and I am unsure how fast earnings can grow to outweigh this drag. Although management is paid on the low end, it is not unreasonable to think SBC will increase and weigh on the business over the next several years — indeed, ABL unilaterally accelerated the CEO’s massive equity compensation package recently. There are also a number of warrants outstanding — if you believe in the investment case for ABL, then the strike price of the warrants is below the intrinsic value of the business and regardless of the fact that management can deploy that capital at 15% ROIC, the issuance of those shares would still be net dilutive in most scenarios.
This is a weird one because I have little doubt that this is a profitable business that ABL is in a great position dominate. I think it’s an “up and to the right” story, but I just can’t put my finger on the slope of that line right now.
Shift4 Payments ($FOUR):
FOUR has a compelling business model driven by successful M&A and entry into various POS verticals. Currently, it has the technology to successfully use M&A as a customer acquisition method. Direct competitors in the POS space (e.g. Toast, Lightspeed) are largely focused on their verticals and will first need to build out their product offering to be in a position to replicate FOUR’s M&A strategy. Upstream players (e.g. the various payment processors), as some have pointed out, either haven’t had the greatest track record in M&A or the economics of this space make such a strategy nonsensical financially due to their massive size. So, at a high level, FOUR’s growth model looks fairly defensible for at least the medium term.
The valuation isn’t unreasonable. What entices me about this name is that it could really well be one of those “wonderful businesses at a great price” bets. But I don’t want to let the prospect of buying what looks to be a great business at a great price to cloud my thinking here. How will the business fare once the founder/CEO leaves? Is there real, underlying organic growth? Does that even matter, really? Should I go in relying on M&A to continue, organic growth be damned?
I probably need to do more work on this one to build conviction. But, I generally like what I see here and will keep it on my close watch list.
Snapshot
As of the end of March 2025, my portfolio breakdown was as follows:
I have a big SPY position that came to be because of restrictions on my retirement accounts and on general stock trading at my prior job. I am now unrestricted, so I hope to shift more of my SPY and cash into individual investments as I find them. I’m in no rush.
I have already written in more detail about my investments in Evolution AB and International Workplace plc. The only other position I haven’t discussed in detail is Carvana. I have owned this position for many years (my first purchase dating back to 2019) and held through the rise, fall and recent rise again, adding at times along the way. It had become an extremely large portion of my portfolio, so I trimmed it during the back half of last year and now hold a position that I feel comfortable holding onto. I still think there is ample runway for the company. The bull and bear cases for CVNA have been beaten to death, and there are many who have written on it elsewhere if you are interested. I have a small Ethereum position that I’ve held for many years, which I’ll let run. At this point, I think about it as schmuck insurance in crypto.
Disclaimer: None of this investing advice.