Dan Loeb's pitch for Informa and my 'first look' at the stock; 95 Warren Buffett quotes on his 95th birthday; Labor Day weekend at the U.S. Open
1) Two weeks ago, I started my series on the three stocks Dan Loeb of hedge fund Third Point pitched in his second-quarter letter to investors.
On August 20, I took a look at the first stock, mortgage originator and servicer Rocket (RKT). Then on August 21, I looked at the second stock, convenience-store operator Casey's General Stores (CASY). And I did a deeper dive on Casey's the following day.
Today, I'm doing my "first look" analysis of the third stock... live-event operator Informa (INF.L), which trades on the London Stock Exchange. (There's also a thinly traded American depositary receipt, IFJPY.)
In the letter, here's how Dan introduces Informa:
The company connects buyers and sellers in various industries, enabling business interactions, and disseminating knowledge across verticals. We believe Informa has built a strong, underappreciated moat around its core events business benefiting from network effects, scale, and process power since managing events with tens of thousands of attendees is not an easy endeavor. For example, some trade associations have reported incurring losses on their annual shows, while Informa enjoys ~30% margins. Well-run scale events build a brand and become "must-attend" franchises for industry participants.
And he concludes:
... in a world that is becoming increasingly more digital, the value of high-quality live events should meaningfully increase to both exhibitors and attendees. We believe the company will accelerate revenue growth, particularly through its Middle East strategy, and compound earnings at a double-digit rate for many years, all while returning meaningful cash to shareholders through share repurchases and dividends and acting as the sole consolidator of the fragmented events industry. Despite these qualities, the stock trades at a mere 14x forward earnings multiple.
So let's dive into the financials...
The stock has more than doubled since its COVID-19-crisis lows and currently trades near an all-time high:
After a decade of stagnation from 2006 to 2015, revenue and operating income have taken off (albeit with a major hiccup during the pandemic):
Free cash flow ("FCF") has mirrored operating income:
Note that the business has almost no capital expenditures ("capex"), which I like to see. I also like Informa's margins – in particular, its 20% operating margin:
Turning to the balance sheet, net debt is 3.1 billion pounds. That's modest for a business that generated 811 million pounds of FCF in the past year:
To understand the changes in net debt, we need to look at how Informa has allocated its FCF:
There are all sorts of interesting things going on in the chart above...
Informa issued stock to pay for acquisitions in 2014 and 2016, and to cover losses during the pandemic. It made substantial acquisitions in 2023 and 2024, but chose to use debt to pay for them.
Plus, it has been buying back stock for the past three and a half years. And it has grown its dividend over this period, with the stock currently yielding 2.4%.
Lastly, let's look at valuation...
At Friday's close price of 877 pounds and 1.3 billion shares, Informa has a market cap of 11.3 billion pounds. Add in the 3.1 billion pounds of net debt, and it has an enterprise value of 14.4 billion pounds.
Analysts expect Informa to earn 0.56 pounds this year and 0.60 pounds next year. That means the stock is trading at 15.7 times this year's estimates and 14.6 times next year's.
Those are very reasonable multiples for such a unique, high-quality business. So my Stansberry's Investment Advisory team and I will take a closer look to see if it's worth buying.
If we decide to add it to our model portfolio, Investment Advisory subscribers will be the first to know, as always. (To learn how to become a subscriber if you aren't one already, click here.)
2) Happy birthday to Warren Buffett, who turned 95 on Saturday! In his honor, Kris Heyndrikx of the blog Potential Multibaggers compiled 95 of Buffett's best quotes. Here are the first five:
"The most important investment you can make is in yourself. Nobody can take away what you've got in your head, and everybody has potential they haven't used yet."
"Time is the friend of the wonderful business, the enemy of the mediocre."
"I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business."
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
"Our favorite holding period is forever."
3) My parents, my cousin Radesh, and I have a Labor Day tradition going back a decade: We go to the U.S. Open tennis tournament in New York City.
My parents, who were driving down from New Hampshire, didn't arrive until Saturday. And Radesh flew in earlier from San Francisco. He and I were joined by my buddy Fred Singer, who was the best man in my wedding 32 years ago, and Porter Stansberry, who persuaded me to join Stansberry Research seven years ago (first picture below).
It was not only Porter's first time at a tennis tournament, but the first time he'd ever ridden the NYC subway (second picture)! And in the third picture are my parents, my sister with her dog Captain Sprinkles, my oldest daughter, and her boyfriend:
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.