The company started in 1973 in Santa Barbara, California, when two college buddies started selling flip flops - originally known as “Driftwood Dans”, but the name was later changed to “deckas”, a slang phrase that referred to the stacked appearance of their sandals. A decade later, in 1985, the company licensed a sport sandal called Teva that had been created by a Colorado river rafter. Those two products carried the company to a 1993 IPO, and would eventually lead the way to two transformative acquisitions in the company’s history: the 1995 deal for UGG, which makes sheepskin boots, and the 2012 deal for HOKA, which makes maximalist running shoes. (HOKA co-founder Jean-Luc Diard: “The Deckers partnership brought two things for HOKA. First, it was a group in the footwear business, so they could bring [benefits with suppliers and production]. Second, it didn’t have a running brand in the portfolio… It was a four-year plan, with stages of additional capital investment so everyone could use that experience in learning how to work together.”)

As you can see below, those two brands account for the vast majority of Deckers revenue base. Notably, the HOKA brand, which has reported ~5x revenue growth since FY21, is on track to rival UGG’s size for the first time.

The rise of brands like HOKA and On, which has coincided with a lesser position for incumbents like Nike, has been a well-covered theme at TSOH Investment Research. It’s a story we’ve also watched from the angle of retailers like Dick’s Sporting Goods and Academy Sports + Outdoors.

What makes today’s DECK initiation timely is the carnage in the space.

Each of those companies has seen its stock price decline meaningfully from its all-time highs, with significant underperformance versus the S&P 500 over the past year; they also trade at wide discounts to their historic valuations.

Some see what has happened in recent years and argue the space is uninvestable (too much fad / fashion risk). I think that’s a broad brush which may close people’s eyes to compelling opportunities – with Deckers itself a great example over the past 10-20 years: DECK has been nearly a 30-bagger over the past two decades (~18.5% CAGR), leaving the S&P 500 in the dust.

As noted above, Deckers growth over the past decade was led by HOKA. The brand was founded in 2009 by two former executives of French sports equipment company Salomon. The idea, as one running blogger put it in the early 2010s, was a shoe with an oversized midsole and a wide body, utilizing maximalist design already applied to other sports equipment like powder skis, golf clubs (drivers), mountain bike tires, and tennis rackets. (“‘HOKA ONE ONE’ originates from the Maori language, meaning ‘to fly over the earth’.”)

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I’ve decided to make a portfolio change, which will be completed during today’s market session. This was the allocation as of yesterday’s close:

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From “On Holdings: Maintaining Pace” (July 2026):

“Mr. Market has some concerns about the sustainability of their current financial trajectory. Personally, I am somewhat less pessimistic about On than I think this rating implies. I see a premium athletic brand that etched out a unique position in the industry, at least at its current size… If I walk away from [On’s 2026 Investor Day] with more appreciation for where this business can go over the next five to ten years, I will be open to changing my conclusion.”

The Investor Day in question was held last week in Zurich, with the company setting medium-term financial targets through FY29, announcing their first share repurchase authorization, and detailing their plans to expand into golf and soccer (welcome aboard Mbappé). For a stock that has spent most of 2026 heading in the wrong direction, the >10% pop in response was a notable change in direction; with that said, it’s still down ~35% year to date.

The Mbappé signing is a fitting place to start, because I think it captures the broader strategic vision for On. As management noted at the Investor Day, “We are entering because at the premium end of the sport there is still space left open for radical innovation on the pitch... A few incumbents own the architecture of the category, and they compete head-to-head. We will play a different game… Our innovation engine has given us an entry ticket nobody else holds. I’m quoting Sydney Schertenleib – ‘I’ve never felt the ball like this before’. That’s what Sydney said after her very first practice in an early concept of our upcoming performance football boot. This is the disruptive power of LightSpray. On a football boot, LightSpray does something that no other boot has done: it puts almost nothing between the foot and the ball.”

It’s clear that On’s initial efforts in soccer will be focused on top of the line premium cleats with a LightSpray upper (they currently offer two different styles of LightSpray men’s shoes – the Cloudmonster 3 Hyper for $280 and the Cloudboom Strike 2 for $310). They have no interest in competing with lower end (~$100) soccer cleats sold by Nike and Adidas, let alone the endless list of brands sold through sites like Amazon for even less. On enters the market with a clear focus on selling to a select group of soccer players who are willing to pay a premium for the highest quality boot they can make.

This should sound familiar, because it mirrors what they’ve done in running, tennis, etc. As co-founder Caspar Coppetti has said about On’s early days, “Passionate runners were investing more into their gear every year. They were willing to pay for progress. They were the most valuable customers in the running category, but no brand catered to them exclusively. That was the moment where it all made sense to us. We would disrupt running with innovation, and we would only sell at the premium end of the market.”

Critically, On consistently acts in a way that reinforces it’s premium brand image. To paraphrase management, operating in that manner is simple in principle, yet demanding in practice, and powerful because it compounds.

As management noted, On has the industry’s lowest discount rates and the highest average selling prices (“since 2023, we have taken ASPs from $145 to $170”). On the latter figure, they also noted their U.S. wholesale ASPs are ~40% higher than their peer average. In a more mature category for On like Running, the company’s pricing architecture has evolved to cover a broader range of price points, with success driving “better” / “best” SKU adoption:

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Going Through Some Pain”)

Three Notable Items

“Ralph Lauren’s Patrice Louvet On Magic, Logic, & Saying No”

An interview with Ralph Lauren’s CEO focused on the company’s turnaround efforts over the past decade. As we think about the long-term evolution of companies like Nike, I think Louvet shares valuable insights for investors.

19^th minute: “We had overextended the brand. We were overextended in off-price, and we had a department store presence that was very significant. We were in a lot of places where we, frankly, were not proud of being there. My filter for the team was two things: first, are we proud of the way we show up; and second, is it financially attractive? If the answer is no to either, then we need to make an intervention to address the issue, or get out. We left about $1 billion of revenue on the table [from pulling back on distribution]. I was confident it was the right thing to do. I had done something similar when I ran the fragrance business at P&G, where I saw the benefits in terms of brand desirability… In hindsight, I wish we had done even more… It would be foolish to think we can create the desirability we’re looking to create if we look good in our Chicago store, but in other locations the brand image is different. The consumer needs to have a consistent, holistic experience for the brand.”

“Peloton Is Revamping Its Treadmills”

As expected, Peloton has revamped its treadmill line, including a cheaper, foldable model with a list price of $2,195 (relative to the other Tread models, the Flex is much more price competitive with the NordicTrack T Series). In addition, the company is progressing on talks to refinance ~$800 million of debt. Both of these developments are important components to my thesis.

“The connected fitness company unveiled three new treadmills and new features for its Peloton IQ artificial intelligence platform with tools for runners, walkers and hikers. Peloton aims to widen its customer base, from people looking for a more affordable, space-saving treadmill to more experienced athletes looking for personalized coaching.”

“Bob Chapek Is So Not Over Getting Fired From Disney”

Former Disney CEO Bob Chapek is out with a tell-all book about his career at the company, which culminated in his late 2022 firing from The House Of Mouse. This discussion with Ben Fritz of the Wall Street Journal primarily highlights the difficulties Chapek faced in navigating his relationship with Bob Iger. While there are two sides to every story, I think that there’s some merit to Chapek’s version of the facts: as opposed to doing what he could to position his successor for long-term success, Iger undermined Chapek and was happy to see him go. Iger’s history with Disney exemplifies the various challenges a great CEO must be able to navigate. On the topic of succession, Iger has proven a good example of what not to do – and I would argue that he materially hurt The Walt Disney Company as a result of his self-serving actions. (This timing is surely coincidental, but Harvard Business Review also released an interview with Iger yesterday morning that touches on this topic.)

“If the cues I got from the opening press conference [in February 2020] weren’t enough, when he did the interview with Ben Smith [in April 2020] where he essentially reasserted himself as CEO - that was as big a sign as possible of an attempt to undermine me.” (From the April 2020 NYT article: “Mr. Iger has effectively returned to running the company. After a few weeks of letting Mr. Chapek take charge, Mr. Iger smoothly reasserted control.”)

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research will be an updated look at On Holdings (ONON).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

“One notable deal signal is the aforementioned ‘cheap’ price tag. At Foot Locker’s 2023 Investor Day, management detailed a long-term plan to reach >$800 million in FY26e EBIT; needless to say, if they were truly confident in that vision, they would not have sold the business for anywhere close to ~$2.4 billion. The more plausible answer is that Foot Locker’s financial struggles were expected to persist – and, from Dick’s perspective, that the expected future benefits are dependent upon their influence and ownership.”

In early 2025, the Dick’s investment thesis was a simple one: a management team with a clear long-term strategic vision for their business, along with straightforward capital allocation priorities. The company had meaningfully improved its unit economics, and was evolving its store footprint to the “House Of Sport” and “Field House” experiential prototypes. In addition, they’d repurchased ~$2.5 billion of stock in the preceding four years, which was meaningfully reducing the share count. It was a straightforward strategic vision, and the financial results suggested it was going according to plan.

Then they decided to change course.

In May 2025, they announced the ~$2.4 billion acquisition of Foot Locker. While management argued this was similar to deals like Galyan’s in the early 2000s, there were two key differences: first, it nearly quadrupled their total store count, and second, it gave them a significant international presence.

On the Foot Locker deal call, Chairman Ed Stack said they’d long considered this move: “It’s something we’ve looked at and thought about for a long time.”

It’s looking like they should’ve thought about it even more.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Fever-Tree: Beyond Tonics”)

Three Notable Items

“The Rise of Organized Retail Crime at Big Box Stores”

An interesting discussion on the Odd Lots podcast with Scott Glenn, Home Depot’s VP of Asset Protection. As I listened to this interview, I was reminded of something that Charlie Munger once said to Chris Davis about Costco’s membership model: “I was challenging Charlie on the idea that there was a certain number of customers who would go shop at Costco if they didn’t have to be a member… It would seem to me keeping customers out of your store who would otherwise be there is a mistake… One of Charlie’s insights was ‘Think about who you’re keeping out… That cohort will have 100% of your shoplifters and it will have 100% of your thieves… It’s the intelligent loss of sales… You think that more is better, but more isn’t necessarily better’.”

29^th minute: “In organized retail crime, ‘boosters’ are the people who do the stealing. They are recruited, they are given a list, and they are given the promise of money or drugs when they come back with the product. They go out and take the risk of stealing from the stores… They then take it to what we call the ’fence’, the consolidator of the product. It could be somebody’s garage, a warehouse facility, a flea market, you name it… The ‘fence’ then cleans the product [removing electronic tags, anything that identifies the retailer where the product was sold, etc.] and offers it for sale somewhere. More and more, that’s online. In the past, it included the Amazon’s and the eBay’s of the world, but since the ‘Inform Consumers Act’ was passed in 2023, we’ve seen less in those places; it has moved to peer-to-peer markets like Craigslist and Facebook Marketplace.”

“Acquired: Home Depot”

Keeping with the retail theme, Ben Gilbert and David Rosenthal of the Acquired podcast released an episode about the history of Home Depot. For those who are interested in more detail on the company’s turnaround efforts in the late 2000’s, revisit the TSOH initiation, “Home Depot: Intense Focus”.

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02:06:00: “What CEO Bob Nardelli missed was how important being entrepreneurial was to the company’s success… You don’t want to centralize decision-making that you can push closer to the customer… He was all about Six Sigma and operational excellence, a GE guy through and through – but operating Home Depot was not the same thing as manufacturing turbines at GE… Nardelli replaced huge swaths of the retail workforce with part-time, general labor. The whole philosophy of having knowledgeable people who can make a $0.25 washer sale that helps a customer fix their kitchen sink, which leads to something bigger down the line, was gone. ‘We’re going to bring in 16-year olds with part-time jobs just to ring the cash registers’… Before Nardelli, all the store managers were promoted up from store associates; he changes the criteria, preferring candidates with college degrees… And a couple of years into Nardelli’s tenure, customer satisfaction among HD shoppers falls to the lowest level of any major U.S. retailer.”

“30 Years of Berkshire Meetings in 60 Minutes”

Earlier this week, I joined David Barbato to talk about “Buffett & Munger Unscripted” and TSOH Investment Research. Companies discussed include Fever-Tree, Microsoft, Dollar Tree, Berkshire, and Comcast, among others. Thank you to David and to Micro Cap Club for having me on the podcast.

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Dick’s Sporting Goods (DKS).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

From “Fever-Tree: A Pivotal Moment” (March 2026):

“Group results have been defined by headwinds in UK Tonics – a business which accounted for more than 50% of FY18 revenues, and which declined at a high-single digit annualized rate over the next seven years. The good news is that UK Tonics have since shrunk to only ~20% of Fever-Tree’s revenue base. The rest of the pie is a ~£300 million business that grew at a mid-teens annualized clip over the past seven years, primarily due to the expansion of the non-Tonics range – starting with gingers, followed by premium sodas / soft drinks, cocktail mixers, and non-alc RTD’s. My investment is a bet on their long-term runway in the other ~80%.”

Fever-Tree’s long-term value outside of its home market will largely be determined by the evolution of their U.S. business, managed in partnership with Molson Coors. In 1H FY26, the U.S. region delivered low-double digit constant currency revenue growth, with the brand’s retail value ($) share in ginger beers and tonics reaching record highs. As noted on the call, growth accelerated through the period, with Off-Trade sales growing 6% in Q1 and 11% in Q2, and with that growth rate climbing to the mid-teens in July and August (the first two months of Q3 FY26). I think this is the early innings: an acceleration to high-teens U.S. growth should materialize in 2H 2026, and I expect at least mid-teens p.a. growth to persist in the years ahead. (CFO Andy Branchflower: “You’re seeing a combined benefit of more doors, more shelf space, and an improving rate of sale… Each month, it’s building.”)

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While few stories rival the lore of Reed Hastings’ $40 late fee, Alarm.com CEO Steve Trundle was also fueled by a frustrating customer experience: “I had a home security system installed by one of the large national companies – and after three months, I was so disappointed with the experience that I found a couple of really talented people to work on some ideas. It took about four years for us to develop a working product, then we took it to market.”

Alarm.com was originally founded around the turn of the century within MicroStrategy, where Trundle was CTO. That changed in 2009, when the subsidiary was sold to a consortium of investors led by ABS Capital Partners for ~$28 million. Six years later, in July 2015, the company went public at $14 per share, or a valuation of ~$630 million (ticker “ALRM”). The stock, which peaked at ~$105 per share in late 2020, has struggled subsequently, closing on Friday at ~$55 per share (it has declined ~35% over the past five years).

For investors, the question is whether this slide portends more trouble ahead, or if it’s a false alarm that has created an attractive long-term opportunity.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Celsius: The Pepsi Put”)

Three Notable Items

“Meta Settled Its Child Safety Lawsuit. Now Comes The Hard Part.”

Following the settlement announced two weeks ago, this CNBC video examines the specific changes that Meta will implement for young users to live up to the terms of the deal with nearly every U.S. state (daily time limits, time based default blocks, muted notifications during school hours, etc.).

California Attorney General Rob Bonta: “We’re suing TikTok now, and we’re looking to ensure that they adopt similar practices and commitments to what Meta did. We are very interested in Snap and YouTube as well. We want everyone in the industry to take the steps like Meta is required to now.”

“Markel Chairman Steve Markel to Retire”

Not a surprising development given that Steve Markel is in his late 70’s, but with the notable change that Tom Gayner will now be CEO and Chairman. In addition to Gayner’s additional role, Simon Wilson and Andrew Crowley were promoted to the roles of Co-Presidents of Markel.

“The Board announced the establishment of a Leadership Council, consisting of the Lead Independent Director, Chairman and CEO, and Co-Presidents. The Council is designed to facilitate regular coordination among independent Board leadership and senior management, and enhance the Board and management’s review of strategy, performance, and capital allocation.”

“Peloton’s push into gyms: CEO Peter Stern’s big bet”

An interview with Peter Stern, which covers his career experience prior to joining Peloton, along with his long-term strategy to evolve the business from a connected fitness company to a connected wellness ecosystem.

“I believe so deeply in what Peloton does its members, and what it can do for many more people… When I heard there was an opening at Peloton, I quickly found out who the recruiter was; I called him and said, ‘I’m your guy.’… This was a dream job… Over time, I believe the definition of the company became too narrow compared to the potential of our impact.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an initiation on Alarm.com (ALRM).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

From “Celsius: A Global Opportunity?” (published June 2025): “While their relationship hasn’t always been perfect, Coca-Cola and Monster have generally worked towards the same long-term objectives. It’s less clear to me that will be true for PepsiCo and Celsius, particularly outside of the United States. What I find disheartening about this is that there’s a pretty clear opportunity for a more cohesive strategy: between Rockstar, Sting, and Celsius / Alani Nu, you’d have a collection of brands to serve a broad range of energy drink consumers, in terms of age and gender, as well as value and premium brands (similar to Monster’s Strategic Brands). Instead, they are set to compete with each other as they each look to build their global presence.”

In an industry with a seemingly endless barrage of new entrants over the past two decades, Celsius has managed to achieve the impressive feat of building a portfolio that captures about 20% of the U.S. energy drink market – and with it, they’ve become a real competitor to behemoths Red Bull and Monster.

This was achieved with one hand tied behind their back: only competing in sugar free, which accounts for about half of the ~$29 billion U.S. energy drink retail market (put differently, they account for ~40% of the ~$15 billion sugar free subcategory). It is a uniquely positioned brand competing well against the sugar free varieties from Red Bull and Monster, while fending off direct (more narrow) competition from energy drink brands like Bang and Reign.

A straightforward strategy that was focused on expanding the Celsius brand throughout the U.S. and around the world was then muddied by the ~$1.65 billion Alani acquisition. As I explained, I was of two minds about that deal:

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Dollar Tree: Weathering The Storm”)

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Three Notable Items

“The cult $4.99 rotisserie chicken defying inflation”

In the July 2021 Costco initiation, I opened with the story of Jim Sinegal and the $1.50 hot dog: “If you raise the f-ing hot dog price, I’ll kill you. Figure it out.” While it doesn’t rival the lore around the hot dog, Costco is also well known for its $4.99 rotisserie chickens, with ~157 million sold globally in FY25. This Financial Times article details the investments Costco has made in recent years which have helped them to maintain the $4.99 price point.

“Costco has devised ways to mitigate losses on rotisserie sales. One was to construct the $500 million slaughterhouse, which has reshaped a rural corner of the US Midwest since it started operations in 2019. Building the plant gave Costco negotiating leverage with third-party poultry suppliers, according to Walt Shafer, who was COO at Lincoln Premium Poultry, the Costco subsidiary that runs the Nebraska chicken business… Birds killed at the Nebraska slaughterhouse meet about a third of chicken sales at the retailer’s hundreds of US stores… Costco’s decision to open the Lincoln plant was aimed at vertical integration. Far from the chicken heartland of the US South, Costco has recruited ~100 farms to raise chickens under 15-year contracts.”

“How Celsius Became the King of Normie Energy Drinks”

More on Celsius in Monday’s update, but this Bloomberg article details the company’s rise over the past 10-15 years, from near extinction to a brand portfolio accounting for ~20% of the U.S. energy drink market (MULO+ W/C).

“From 2000 to 2013, says beverage industry consultant Mike Sweeney, more than 1,600 energy drinks tried to get in on the action. Celsius managed not only to outlast most of its competition but also to find itself near the top of the category long dominated by Red Bull and Monster.”

“PG&E, Edison Fall on California Wildfire Liability Worries”

An update relevant to the discussion on Berkshire Hathaway Energy (BHE) and PacifiCorp in “Berkshire Hathaway: Transition” (March 2026). As Warren Buffett bluntly stated at the 2025 annual meeting, “BHE is worth considerably less than it was two years ago based on societal factors. The public utility business is not as good a business as it was a few years ago.”

“California lawmakers introduced a bill that would update the state’s wildfire response, but would not move liability away from publicly traded utilities… PG&E said the bill ‘does not adequately address the financing risks created by California’s current wildfire liability framework’.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Celsius (CELH).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

From “Walmart: Full Steam Ahead” (November 2024): “From where we stand today, there’s no question Mr. Market has greatly changed his odds on these bets relative to three and a half years ago: at that time, the forward EPS multiples were ~23x and ~21x for Walmart and Dollar General, respectively. Today, I have those numbers at ~32x and ~12x, respectively. That is an understandable change directionally given what has taken place; what’s less clear to me is whether the magnitude of the swing is justified.”

On an absolute and a relative basis, the latest quarter presented reason for celebration for Dollar General: the company’s +3.5% comp for Q2 FY26, attributable to ~2% growth in traffic and ~1.5% growth in ticket, bested the result at Walmart’s U.S. business for the first time in more than five years.

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From “The Dollar Store Downturn” (September 2024):

“Once Family Dollar is sold, I think Dollar Tree (DLTR) has a clear path forward at the core banner. The combination of the low opening price point ($1.25) and the inclusion of some multi-price SKU’s (~15% of the product mix) presents the opportunity for a better customer experience and a better business… At ~$66 per share, Dollar Tree has a market cap of ~$14 billion [adjusted for FDO]… Mr. Market’s asking price for the core banner - less than 10x EV/EBIT - is simply too low… I believed DLTR was priced to generate attractive long-term returns at ~$85 per share, and that remains true at current prices. I have decided to buy more DLTR (to a ~13% weighting).”

Shortly after that update was penned, the investment thesis was thrown a curveball as a result of significant changes to U.S. tariff policies. The past two years presented a number of twists and turns, and few retailers were more impacted than Dollar Tree. Despite this, as we now approach the (hopeful) end of these external developments, the company has managed to navigate its way through as a result of its unique value proposition in U.S. retail. While Mr. Market is looking more favorably on Dollar Tree’s long-term prospect, with the stock price nearly doubling over the past 24 months to ~$128 per share, I believe the company’s strategic transformation remains in its early innings.

In Q2 FY26, Dollar Tree reported +3.7% same store sales (comps) growth, with traffic returning to positive territory. In combination with the strong +6.5% comp in Q2 FY25, that brings the two-year stacked comps growth to +10% (as a point of comparison, that’s ~300 basis points higher than Walmart U.S.).

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Portillo’s: Strategic Reset”)

Three Notable Items

“TSOH + Masters In Business”

I recently joined the “Masters In Business” podcast at Bloomberg HQ in NYC to discuss “Buffett & Munger Unscripted” and TSOH Investment Research. A big thank you to Barry Ritholtz and Bloomberg for having me on the podcast, and I hope that you enjoy our discussion.

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“Dick’s Sporting Goods Bet Big on Sneakers With Foot Locker. It Backfired.”

As I discussed in “A Position Of Strength”, success for Dick’s Sporting Goods over the past five years has largely been attributable to a much improved position in the footwear category. That development surely informed management’s decision to take on a challenging hand with Foot Locker, and they have quickly been presented with the realities of that difficult position.

I wrote the following at that time, and it seems fitting to repeat this week:

“The primary takeaway from my DKS research has been the company’s success in the Footwear category, along with the clarity of their strategy and capital allocation priorities; in many ways, it mirrors Home Depot’s experience in the 2010’s. The market views this deal as an impediment to that roadmap, and I think that’s directionally correct… While I view [the FL deal] skeptically, it isn’t something that, for me, disqualifies DKS as a potential investment.”

“On Tuesday, the company warned of lower profits for the year, saying consumers weren’t spending on footwear - which accounts for most of Foot Locker’s sales. Dick’s shares tanked, falling more than 30%, their biggest decrease on record. Ed Stack, Dick’s executive chairman, said the sneaker market is awash with inventory and rivals slapping on discounts, which has pressured Foot Locker to keep pace.”

“Heirs to the Jack Daniel’s Fortune Are Fending Off a Takeover - and a Rogue Cousin”

A topic I’ve discussed on a few occasions, with the interesting update that CEO Lawson Whiting was pushing hard for the family to consider Pernod’s offer (per WSJ reporting). Combined with the oddly worded board statement from July - “Sazerac’s proposal is not actionable” – I suspect Brown-Forman’s continued independence is currently subject to much internal debate.

“Earlier this year, CEO Lawson Whiting and George Garvin Brown IV, a former Brown-Forman chairman, explored a potential merger with Pernod Ricard, maker of Absolut vodka and Jameson Irish whiskey. Garvin Brown, who grew up in Canada, serves on the board of Wolf Pen Branch, a family investment entity that controls 60% of the voting power in Brown-Forman… When other members of the family caught wind of the talks with Pernod, some weren’t happy. Whiting pushed them to support a merger in a video call with family members... The CEO told the family that the deal with Pernod was the best thing for them and for the company.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Dollar Tree (DLTR).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

“The company’s new units, particularly those opened in Texas over the past 12-18 months, have underwhelmed… Non-comp restaurants, most of which are in Texas, are at run rate AUV’s of roughly $4.5 million – well below expectations… Financial results by region reveal an important consideration for their model: Portillo’s doesn’t just have high AUVs - they need high AUVs.”

Much has changed over the past year for Portillo’s.

First, in September 2025, CEO Michael Osanloo “departed the Company”. His successor, Brett Patterson, joined in February 2026 following a brief stint as the CEO of Miller’s Ale House. In addition, Portillo’s has turned over a number of other top jobs in the past year, most notably the CFO, the Chief Development Officer, and the Board Chair. (Alongside the Board Chair transition, both representatives from Berkshire Partners left the board.)

Second, the stock price slide that started back in 2021 has continued, which comes amidst a more difficult backdrop for the restaurant industry: PTLO closed on Friday at $5.0 per share, down ~75% over the past three years.

The combination of those two developments informs the third: Portillo’s is in the middle of a strategic reset, particularly as it relates to new unit growth in markets like Texas. As Patterson said on the Q2 FY26 call, “We just built too many units too quickly. In Dallas, we built 12 in three and a half years. In Houston, we built six restaurants in 16 months… That’s not something we will repeat going forward… The locations and sites that we’ve opened in those markets, they don’t model appropriately right now for sales and returns… The build costs we went into those market with are prohibitive to generating a reasonable return based on [current] sales.” (As of yearend FY25, Portillo’s had 19 Texas locations, or nearly 20% of its total restaurant count. This is a state where Portillo’s opened its first location in 2023.)

Naturally, this conclusion is informing slower unit growth expectations: as opposed to the ~10 net new units per year that Portillo’s added during FY23 – FY25, next year’s plan contemplates just five new locations. As a reminder, prior management was targeting annualized net new unit growth of 12% - 15%; anything close to that level of growth is clearly off the table at this time.

One thing that hasn’t changed is management’s focus on smaller restaurants and lower build costs, as exemplified by their recent ~3,100 square foot DFW airport location. For context, that’s about half the square footage of their ~6,250 square foot “Restaurant of the Future” 1.0 store prototype, and it sounds like their intention will be to go smaller with the 2.0 store prototype.

As a public company, Portillo’s has kept moving down the path towards smaller, cheaper, and ultimately less distinctive restaurants, with the recent addition of further time and distance between new openings (informed by their struggles in Texas). Management explained their evolution on average restaurant size at the 2026 ICR conference: “We’ve learned over the years we don’t need to build restaurants in new markets at the same size as we have in Chicago… Over time, as Portillo’s grew in popularity, the restaurants got bigger and bigger. For example, we opened the Canal & Taylor restaurant in 2016 at 9,000 square feet, which does $20 million - but we [mistakenly] took that same approach to new markets... and got ourselves too big outside Chicago. We have been working on that problem now for several years.”

I’m of two minds about the strategic shift underway.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Roblox: Accepting Uncertainty”)

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Three Notable Items

“Walmart Reports Q2 2027 Quarterly Results”

Walmart reported relatively soft quarterly results, most notably their weakest U.S. same store sales growth in more than six years; that was despite >500 basis points of e-commerce comp contribution, with expedited deliveries (in <3 hours) accounting for nearly 40% of store-fulfilled orders. I’ll have more to say on this in the coming weeks when Dollar General and Dollar Tree report.

CEO John Furner: “Our price gaps to conventional U.S. grocers are strong, and they continue to widen. The share gains we see from this channel have persisted, alongside the drug and dollar formats... Fast delivery in the U.S. grew 48% in Q2. Speed matters, and we have a significant competitive advantage. Our physical footprint, fulfillment infrastructure, and local delivery capabilities allow us to move closer to customers while maintaining an attractive cost structure. We’ve now expanded under 30-minute delivery into 38 U.S. markets... Ecommerce sales now represent more than 23% of our sales mix in Walmart U.S., which is double the level from five years ago.”

“How a pesky Jordan copycat dribbled around Nike in China”

A story in the FT about Qiaodan, a relatively small Chinese sportswear company whose name translates to “Jordan” (as in Michael Jordan). In addition to the company’s interesting history, the story speaks more broadly to the competitive threat that Nike and its peers face from China’s domestic sports brands (something I’ve been talking about at TSOH for many years).

“Since its founding 26 years ago, Qiaodan has spent a significant chunk of that time embroiled in a legal dispute with Michael Jordan, who appears to have inspired its branding. However, in 2020, Qiaodan was ultimately found only to have infringed an element of Jordan’s prior name rights. The sportswear company — which has expanded into running trainers and yoga gear — is now a fully fledged nationwide retailer, with about 6,000 stores, most of them under franchise arrangements. In a store in the lower-tier city of Yueyang, its Air Jordan-style high-top trainers sell for Rmb339 (~$50).”

“AI Music Startup Suno Bets Anyone Can Be a Rock Star”

A Bloomberg profile about Suno, the company who’s mission is to build “The AI Music App”. My interest here is less about Suno specifically, and more about the growing importance of UGC and AI-generated content across various forms of entertainment (video, music, gaming, etc.). I suspect the changes that we’ve seen in recent years are just the tip of the iceberg.

“Paying users can train Suno on their voices, so their creations can sound like they’re singing them. More than 100 million people have used the product since 2023, and over 2 million people shell out as much as $30 a month for it. Co-founder Mikey Shulman says Suno will do for music what Instagram did for photography… This led to huge increases in downloads, making Suno the most popular music app in Apple’s store for a few weeks, surpassing Spotify.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Portillo’s (PTLO).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

I’ve decided to make a portfolio change, which will be completed during today’s market session. This was the allocation as of yesterday’s close:

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From “Disruption In The Other Direction” (February 2026):

“Despite outperforming any reasonable expectations from five years ago on DAU growth, bookings growth, etc., Roblox generated >$4 billion of FY22 – FY25 cumulative net losses. I think Roblox would benefit from a clearer long-term financial road map, i.e. an update to the framework outlined at the 2023 Investor Day. Not only would it help investors to bridge the divide between today’s impressive platform KPIs and long-term profitability, which would likely dampen its stock price volatility, but it would also set some guardrails for management to ensure priorities remain appropriately balanced. (Note that Netflix started providing a margin framework for streaming in 2013.)”

In Q4 FY19, Roblox had ~19 million global DAUs, with total TTM engagement on the platform of ~13.7 billion hours. What happened at Roblox over the ensuing six years (through YE FY25) was nothing short of phenomenal.

First, the company was a major beneficiary of the pandemic, with DAUs and platform hours more than tripling over the next three years (FY20 – FY22), to ~59 million and ~49.3 billion, respectively. What happened in the subsequent three years (FY23 – FY25) was even more impressive: another leg of huge growth after digesting that much enlarged base of users and hours. By YE FY25, Roblox had ~144 million DAUs with ~123.9 billion hours of TTM engagement. The following graphic, from Matt Ball’s “The State of Video Gaming in 2026”, contextualizes this expansion within the broader gaming industry. To put this data into words, Roblox took substantial engagement share (hours played) in gaming over the past 5-10 years, such that its engagement is greater than Fortnite, PlayStation, and Steam combined.

The latest move higher for global DAUs has made the pandemic-fueled growth of 2020 look rather pedestrian. As you can see below, Roblox added ~59 million net DAU’s in 2025 (TTM Q4 FY25), which is nearly 4x greater than the ~18 million net DAU’s that the platform added throughout 2020.

While the company is embarking on a period of tougher results, which I’ll discuss in more detail below, I think the above data lends support to the following comment from CEO Dave Baszucki: “We believe that we are navigating a period of normalization following a year of massive growth.”

In the near term, the financial KPI that best captures this normalization is YoY bookings. The company’s Q2 FY26 results disappointed, and now they expect a mid-teens YoY decline in bookings in Q3 FY26; as depicted below, this is pressure on bookings growth that they haven’t experienced before.

The stock, which traded above $140 per share in September 2025, closed on Wednesday at ~$39 per share - their second ~75%+ stock price decline in five years as a public company. As I’ve noted at various times since the April 2022 Roblox initiation, I think management’s inability and / or unwillingness to adopt a clearer set of long-term financial objectives for investors has invited outsized stock price volatility… which is something management should not be indifferent to given heavy reliance of SBC to compensate employees.

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From “Airbnb: Room To Breathe” (May 2026): “I think that Mr. Market will be more patient as long as solid growth and profitability is sustained in the core business, giving management room to breathe and to lay a solid foundation in those newer businesses (as CEO Brian Chesky says, to go from one to ten to many). A reacceleration in GBV growth is an encouraging sign of the sizable opportunities that lie ahead. I think the risk/reward on Airbnb stock remains attractive at current levels [at the time, ABNB traded at ~$130 per share].”

The solid growth that was required to appease Mr. Market has materialized: Airbnb reported strong 1H FY26 results, and with their Q3 FY26 guidance implying ~17% YoY TTM GBV growth in the coming quarter – a meaningful acceleration from the ~10% YoY growth that was reported in 1H FY25.

The Q2 results reflected broad-based geographic strength, most notably the acceleration to mid-teens YoY growth in North America, helped by the World Cup. Management didn’t directly quantify its impact, only saying it resulted in “millions of guest arrivals”, which compares to a total of ~148 million nights & experiences booked during Q2 FY26. As you can see below, North America revenues were up ~16% YoY, or roughly ten points higher than the average over the preceding two years. Given that the U.S. accounted for ~40% of Airbnb’s FY25 revenues, a ten point lift in the region would imply a roughly four point benefit to consolidated revenue growth, all else equal. If so, that would also suggest a tough comp for the business as we get to Q2 FY27.

For what it’s worth, someone in my network told me Airbnb disclosed on the follow-up call that the World Cup contributed less than one point to YoY room nights growth. I don’t know if that’s accurate or not; what I do know is that management shouldn’t be sharing such information behind closed doors. I’ve reached out to IR on this, and will let you know as I gather more information.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Peloton: Subscriber Squeeze”)

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Three Notable Items

“On Reports Q2 FY26 Results”

On’s Q2 FY26 results included a reduction to revenue guidance, which was met with a decidedly negative response by Mr. Market (the stock price fell ~20%). The quarter included another deceleration in the Americas constant currency revenue growth rate, one KPI that I’m focused on. More broadly, it seems we’re at an interesting moment in the company’s long-term evolution: managing topline growth and inventory / distribution in a promotional market environment while keeping clear focus on their premium brand positioning.

On co-CEO David Allemann: “In wholesale, some of our everyday running franchises tracked below our ambitions in a highly promotional multi-brand marketplace, particularly in the Americas. This is something we are not pleased with, but our response is where the premium standard proves itself. We have been intentional and disciplined on managing sell-in to the channel. We choose not to build in-channel inventory that could compromise our full price integrity.”

“Rockstar founder builds Celsius stake, wants to take over as CEO”

An interesting development at Celsius, particularly given that Rockstar (in UCAN) was added to their energy drink portfolio following the latest evolution of their PepsiCo relationship. CELH shares, which reached ~$67 per share in October 2025, have seen their price fall >50% from the 52-week highs.

“Russ Savage, founder of Rockstar, has purchased millions of shares of Celsius and is calling for the ouster of CEO John Fieldly... Savage controls more than 12 million shares of Celsius [~4.7% stake]. While Savage has been quietly advising Celsius to change its cost structure and marketing strategy for over a year, he now says new leadership is needed. ‘The CEO, COO, brand manager, and marketing manager all need to be fired,’ Savage told CNBC.”

“Netflix, Disney, And Investing In Media In 2026”

Earlier this week, I joined Ryan Henderson and Brett Schafer of the Chit Chat Money (CCM) podcast to discuss Disney, Netflix, and the broader media industry. If you are interested in this topic, I would also recommend revisiting the February 2022 podcast that I recorded with Ryan and Brett about Netflix.

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Airbnb (ABNB).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.