In this week's Stansberry Investor Hour, Dan welcomes Matt Franz back to the show. Matt is the founder of Eagle Point Capital, an advisory firm focused on long-term investing. Eagle Point Capital has more than 5,000 subscribers on Substack.

Matt kicks things off by sharing the kinds of companies that he likes to search for. He says that these are "simple, predictable, and profitable" businesses that he can look at over a period of five-plus years and know where they're heading. But even though Matt's firm likes to have a long holding period for its stock picks, the team is constantly assessing and investigating what's occurring with the companies to ensure that they're still worthwhile buys. Matt then begins discussing a vertical market software ("VMS") company he likes. Despite the stock starting to decline following the "SaaSpocalypse" and more recent concerns of AI harming the business, Matt says there's no reason to be afraid...

I think what the bears are missing is that the code is not the moat at a business like [this one]. So writing the code was never the most difficult thing, the most value-added thing, that [the company] did... [It] has had to go out and build relationships and understand the addressable market... And in many ways, [it] knows better than the people themselves using the software what is needed or desired.

Next, Matt explains why decentralization is one of the biggest strengths for the company. It has about 1,500 business units that operate independently. Management looks at what works and what doesn't and shares the data throughout the rest of the business. But the individual units are still free to evaluate the practices and decide if they're beneficial for that particular unit and can implement them as needed. This allows the company as a whole to constantly innovate and improve itself. Matt then discusses the process this company goes through to make acquisitions. It's able to find bargain deals on smaller, overlooked businesses that can have a dominant role in their respective fields. And with the success that it has had with this strategy, it's leaning more into this method...

The interesting thing about VMS... is that the TAM, the [total] addressable market, tends to be pretty small, which means that venture capital and private equity are not really interested in these businesses... So there's very little competition. And [the former CEO's] genius in founding it was to realize that while these businesses are capped by their TAM – they tend to be very mature and they're often almost monopolies. It tends to have businesses with 50% to 80% market share.

Finally, Matt presents another company he's fond of. Its focus is mainly on coal royalties, though it also owns soda-ash assets as well. It had suffered from years of debt after investing in multiple businesses before making coal its primary business. Today, it's nearly debt-free, and while coal prices are low today, with the many mines that it owns, if the prices start soaring, the value of those mines (and the company) will also go up. And Matt leaves listeners with advice on deciding to stay long in positions in the face of potential downturns...

[Figure] out your variant perspective in your investment. Just [get] to the root of the bare thesis and [pick] that apart... I think when you can have that variant perspective, that's when you can make an investment and you're going to have the staying power to be a long-term owner, because you've really thought it through and come to some conviction that you're going to need.

Click on the image below to watch the video interview with Matt right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

The transcript is coming soon.

This Week's Guest

Matt Franz is the founder and principal of Eagle Point Capital. He founded the company in 2017 to make long-term value investments for himself, his family, and friends. Previously, Matt worked as an options trader and quantitative analyst. Matt graduated from the University of Michigan with a Bachelor of Science in engineering.