CRH --- Think About MaloneHi all,
Great news on the acquisition today. More like these through the end of the year will go a long way to restoring management credibility and returning investor confidence to the CRH story.
I also wanted to briefly revisit the posts that I put up a few weeks ago, where I compared the CRH story to the cable story executed by John Malone with TCI in the 70s-90s, and re-executed again this decade with Charter Communications. A friend recently sent me this three-part interview with Malone from 2009, during the depths of the Financial Crisis. I can't recommend it highly enough, and I would say to all of you, read it, and think about CRH. The strategy is very similar, even though we're talking about a healthcare compny rather than a TMT company:
- Focus on levered cash flow, not earnings
- The need to consolidate a highly fragmented industry to gain economies of scale
- The use of JVs and minority stakes to build value, not just complete acquisitions of companies
Think about CRH: the management team is doing the exact same things. The only thing missing right now from the Malone playbook is stock buybacks, which I hope they will do and told the CFO a few weeks ago that they should highly consider doing.
Here are the links to the three parts of the interview with Malone:
- https://www.bizjournals.com/denver/stories/2009/04/20/daily97.html
- https://www.bizjournals.com/denver/stories/2009/04/27/daily24.html
- https://www.bizjournals.com/denver/stories/2009/04/27/daily45.html
This is going to take some time; Malone's story has taken 50 years, and it's not over yet. But look at the insane wealth he built in that time. From 1973-1998, TCI shareholders made 30.3%/year compared to 20.4% for other cable companies and 14.3% for the S&P 500.
$1 invested with TCI at the beginning of the Malone era was worth oveer $900 by mid-1998. Truthfully, I'm not going to argue that CRH has the same growth prospects that US cable did in the 1970s. But the strategy is the same.
As always, let me know if you have any thoughts, positive or negative, on what I've posted above. Keep the faith, longs.
Best,
PSDFinancier