Page 27 - DIY Investor Magazine | Issue 36

But Chris has made several additions to the portfolio in the second half of the year, believing the long-term potential for some companies remains positive.
Pinterest is one example; the image sharing platform’s share price reached astronomical levels during the pandemic but has since fallen back, as interest rate hikes drove more speculative valuations out of the market.
A fall in valuation enabled BASC to take a position, with the managers confident the firm will deliver earnings growth in the years ahead.
Pinterest delivered its first full year of profitability in 2021, with $355m in net income, and brought in Bill Ready as CEO
in June of this year. Ready previously developed Google’s commerce products and shareholders hope he’ll be able to grow Pinterest’s sales, with more ad revenue and expansion into new markets.
It’s similar with Mister Car Wash (MCW), another recent addition. Since going public last year, the company has seen a marked decline in its share price.
However, the Brown Advisory team believe the underlying business looks strong and the fall prompted BASC to take a position.
Operating 400 carwash sites may not sound exciting, but MCW has delivered exceptional growth over the past decade; the company increased its annual revenue more than six-fold, with an annualised growth rate of 18%.
It continued that into 2022, with sales for the first half of the year
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up 19.3% compared to last year.
Growth has been driven in large part by offering monthly subscriptions to its ‘Unlimited Wash Club’; approximately two-thirds of MCW’s H1 revenues came from subscribers to the service and the number of subscribers grew by close to 185,000.
This model means revenue figures are smoother and more predictable than they would be if the company was offering a regular service, where customers just turn up and pay.
Both MCW and Pinterest capture the ‘3G’ characteristics which BASC looks for, and illustrate how valuations are factored into the investment process – yes, the two companies look capable of delivering compounding future returns, but the managers only took a position in them once their share prices had fallen from inflated highs.
This process may still be susceptible to near term volatility but, over the long run, it could be more likely to deliver superior returns to shareholders.
It certainly has in the past, with Chris’s strategies delivering returns ahead of the benchmark for investors since 2006.
We’ll have to see if it’s the same over the next few years, but it certainly seems as though his approach has proven over time to avoid the cigarette butts.
View the latest research on BASC here >
Disclosure – Non-Independent Marketing Communication.
This is a non-independent marketing communication commissioned by Brown Advisory US Smaller Companies. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
Dec 2022
DIY Investor Magazine ·