“An impending Family Dollar decision is a key reason why Dollar Tree (DLTR) quickly became a top holding in my portfolio; after a decade watching from the sidelines, I believe DLTR is a very compelling opportunity… I think Dollar Tree is one of the most unique and attractive U.S. retail concepts.”

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Chart Of The Week (from “BJ’s Wholesale: Mind The Gap”)

Three Notable Items

“VALUExBRK 2026”

Guy Spier and the team at VALUExBRK were kind enough to post the full recording from their event in Omaha, with commentary from Bill Ackman, Tom Gayner, Tom Russo, and others. (Personally, the two presentations I found most interesting were from Eric Markowitz and Adam Mead.) Note that the video is five hours long; if you are unfamiliar with YouTube’s “Ask” feature, I’d recommend using it to find sections or topics that are of interest to you.

Adam Mead (43rd minute): “The theme through Berkshire’s history is a willingness to bet big when it makes sense to; big acquisitions and large positions in stocks / bonds.”

“Meta launches Instagram, Facebook, and WhatsApp Subscriptions”

While Meta’s sizable and growing AI investments will largely be monetized through improved core FOA business outcomes (increasing time spent, improving ROAS, etc.), they’ve also demonstrated interest in subscriptions. I’ll be curious to see how these various offerings evolve in the years ahead.

“Consumers subscribing to Instagram Plus ($3.99 per month), Facebook Plus ($3.99 per month), or WhatsApp Plus ($2.99 per month) will gain access to extra features, like profile customization, super reactions, and story insights. Meta’s head of product Naomi Gleit noted that ‘more fun features’ will be added in the future… New plans don’t replace its existing offering, Verified, which is focused on verification, impersonation protection, and extra support.”

“How Barnes & Noble Became PE’s Most Radical Retail Experiment”

An article about the resurgence of Barnes & Noble, which sheds some insight on how brick-and-mortar retailers can add value for customers in the modern world. While price is clearly an important component, there’s more to the consumer value proposition than minimizing the cost of the contents inside a cardboard box on your doorstep (some examples: experiential, treasure hunt, etc.). Finding the retailers who can thread that needle, particularly if Mr. Market is somewhat unconvinced that their competitive position will prove sustainable over time, is likely to be a path to attractive investment returns.

“Before James Daunt took over in 2019, the company was beholden to a far more rigid display shape: the block. The setup was an emblem of Barnes & Noble’s transactional practice of making sweetheart store-placement deals with major publishers, in which books were stacked with the contractual precision of real estate developers maximizing air rights. Among the many drawbacks of this one-size-fits-all arrangement was that it failed to sell books effectively. The unsold books had to be returned to publishers, which meant fewer sales of other, more attractive books, wasted store space, lost employee time and eroded margins… Barnes & Noble’s return rate to publishers has dropped from more than 25% to ~8%. The merchandising shift is an example of Daunt’s idiosyncratic approach to corporate bookselling: Behave less like a big-box behemoth and more like a book lover.”

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).

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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.

“My sense is management changed their tune a bit over time (in a good way). Maybe that is attributable to more experience in the public markets, along with positive results that provide early indication the strategy is working… With that said, there is work left to do, both in terms of the strength of their financial results (closing the comp gap with Costco U.S. and Sam’s Club), along with how they communicate to owners (start directly disclosing certain quarterly KPI’s like paid memberships)… I am not ready to make a move, but I’ve become more encouraged by recent developments at BJ’s Wholesale.”

In the period since the latest update, the results have been a mixed bag.

One issue is the lingering merchandise comp gap relative to their two largest wholesale competitors, with an average spread of ~400 basis points to Costco’s U.S. comps over the past 18 months. (Costco will report Q3 FY26 results this afternoon, which corresponds to calendar Q1 ’26 in the chart.)

As we dig into this divergence, one clear issue is business mix: non-food categories account for ~33% of Costco’s merchandise sales (excluding gasoline, pharmacy, optical, etc.), while non-grocery categories account for ~13% of BJ’s merchandise sales. The Costco treasure hunt experience in general merchandise categories has resonated with customers in a way BJ’s hasn’t yet been able to replicate; this has been a focus for years, but the gap remains. (March 2022: “We will place renewed focus on increasing the mix of general merchandise. We need a better and more relevant assortment.”)

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“While this capacity expansion is necessary to reach their ~$2 billion FY30 revenue target, I think there’s a decent chance we’ll look back and conclude this wasn’t an opportune moment for a meaningful ramp in egg capacity and farmer supply, particularly if Vital Farms sees more price elasticity as they pursue volume growth outside of the core (i.e. a family who considers eggs from Costco, Trader Joe’s, or a local grocer a substitute at a large price gap).”

On May 7th, Vital Farms reported a disastrous first quarter, which included weaker than expected revenue growth and ~1,000 basis points of YoY gross margin compression. This softness is expected to hold at least throughout the remainder of the year, with management taking a hatchet to their revenue and profit guidance: on EBITDA, the business is now expected to roughly breakeven for the year, compared to prior expectations – set 90 days ago – for FY26e EBITDA of ~$110 million. (Their EBITDA guidance excludes roughly $30 million of D&A and stock-based compensation expense.)

As explained by CEO Russell Diez-Canseco, the main concern that I focused on in “Fragility” – price competition in the subcategory – is heavily weighing on Vital Farms: “Our Q1 performance fell short of expectations, as anticipated changes in industry pricing and promotional dynamics in the outdoor access egg subcategory had a much greater impact on our velocities than we expected. We are acting with urgency to restore volume growth by narrowing price gaps versus other outdoor access eggs, which we believe will help reaccelerate our velocities. We are streamlining our cost structure and reducing CapEx this year to better align our operating model with the current environment… Price gaps reached levels our brand could not sustain.”

I am not surprised by cyclicality in the company’s results, a reality of supply / demand imbalances and commodity (egg) price volatility, a condition the subcategory isn’t immune to. At the same time, the duration and severity of exposure to commodity cyclicality gets at a critical question on management’s long-term strategy - and by extension, the quality of the underlying business.

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Chart Of The Week (from “Airbnb: Room To Breathe”)

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Three Notable Items

“Roblox Announces Inaugural Share Repurchase Program”

While the numbers are relatively small – a $3 billion authorization, with the intent to buy back up to $1 billion over the next year – this is a noteworthy development. My view is that Roblox management has been more extreme than most public companies in their indifference to short-term P&L volatility, which helps to explain why shareholders have been on a roller coaster ride over the past five years (and with the stock falling ~40% over that period).

Roblox CFO Naveen Chopra: “Today’s authorization of Roblox’s first-ever share repurchase program is a testament to our confidence in the long-term opportunity ahead. Investing in continued growth will always be our highest priority, but the strength of our balance sheet and FCF generation allows us to support industry leading innovation while simultaneously reducing dilution.”

“CNBC’s Full Interview With Amazon Founder Jeff Bezos”

A wide-ranging interview with Jeff Bezos, including his views on wealth distribution and U.S. tax policy, the AI revolution, and data centers in space.

Bezos (38th minute): “I think so many people are afraid AI is going to take their job. I think there is going to be a labor shortage… It’s going to elevate people. Let’s say you’re a software engineer. The analogy I use is you’ve been digging out a basement for your house with a shovel, and somebody is about to hand you a bulldozer… We are going to have so much productivity in our economy… The root of civilizational wealth is invention.”

“Berkshire Hathaway Rekindles Its Tortured Love Affair With Airlines”

For the next sign of change at Berkshire post-Buffett, see the latest 13-F, which included a large increase to their stake in Alphabet and a new position in Delta (as a reminder, Buffett sold his U.S. airline basket in April 2020, which he discussed at the annual meeting). I’ve been uncertain on the role that (new) large equity investments were likely to play at Berkshire in the years ahead; it appears they will still be part of the capital allocation toolkit.

“Warren Buffett has had a tortured relationship with airline investments… His successor, Greg Abel, is showing an early fondness for them, too, with Berkshire taking a $2.6 billion position in Delta (DAL). Buffett told The Wall Street Journal that he wasn’t involved in Berkshire’s new Delta position.”

TSOH Updates

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

Monday’s research report will be an update on Vital Farms (VITL).

While the stock price has plummeted ~70% over the past year, ten different insiders have bought VITL shares on the open market in the past two weeks.

Have a great weekend!

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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 see a few long-term opportunities that will help Airbnb to achieve the growth required to justify its mid-20’s EV/EBIT multiple [at ~$117 per share]… With that said, I also get the sense management is navigating the public market challenge of focusing on the long-term while living in the short-term [slowing revenue growth and EBITDA margin pressure from certain investments].”

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Chart Of The Week

From the conclusion of the Planet Fitness (PLNT) initiation (April 2026):

“While management set optimistic growth targets at the Investor Day, most notably a mid-teens adjusted EBITDA CAGR over the next three years (through FY28), they then guided to ~10% FY26 EBITDA growth in February. I find that to be a good summation of my early takeaways on Planet Fitness: they have pulled a number of levers over the past 10-15 years to drive better financials, but I suspect there’s less low hanging fruit left to be picked. The road ahead will likely feature heightened HVLP gym competition and less room to take price. If that proves accurate, I’ll be interested to see how Mr. Market responds as the financials start lagging management’s targets.”

Planet Fitness reported soft Q1 FY26 results last week, with a cut to FY26e EBITDA (from +10% to +6%) that suggests much slower growth than the aforementioned medium-term targets set at Investor Day. In response, Mr. Market continued to pressure the stock, which has declined by >50% YTD.

Three Notable Items

“Can Tinder Win Back Women?”

While my investment in Match Group was a relatively brief one, I remain interested in trying to understand what is happening in the online dating industry, most notably at Match and Bumble. This FT article focuses on CEO Spencer Rascoff’s plan to stem years of MAU and Payers pressure at Tinder.

“Rascoff said the issues at Tinder stemmed from its failure to listen to customers and to innovate after its initial success with swipe-based matching. ‘The company took off and it became so big and so profitable so quickly that Tinder didn’t build an innovation muscle that stayed attuned to consumer tastes. Meanwhile, consumer tastes changed quite a bit over the last five years, in particular among female users who no longer appreciated the kind of quick-twitch gamified swipe mechanic of Tinder,’ Rascoff added.”

“Vital Farms Falls on Plan to Wind Down Butter Business”

While management just took a hatchet to FY26 guidance, I’m personally encouraged by their decision to exit the butter business and to greatly slow their CapEx spend / volume expansion. The caution expressed in “Vital Farms: Fragility” has proven appropriate in the near term, with the stock down another >50% since it was published in early March. At this time, the conclusions I shared in that update remains an accurate summation of my views on the stock. (Note that management did start the buyback, with ~$20 million repurchased in Q1 FY26… but at an average cost of $20.0 per share.)

CEO Russell Diez-Canseco: “The anticipated changes in industry pricing and promotional dynamics in the outdoor access egg subcategory had a much greater impact on our velocities than we expected. We are acting with urgency to restore volume growth by narrowing price gaps versus other outdoor access eggs... We are streamlining our cost structure and reducing our CapEx this year to better align our operating model with the current environment. To be clear: this is a reset of the year, not a reset of ambition… We believe the core fundamentals of the Vital Farms business remain intact.”

“How AB InBev Stopped Its Three-Year Slide”

While ABI isn’t a company that I’ve initiated coverage on at TSOH, this brief article touches on the industry volume pressures and changing consumer preferences also impacting companies like Boston Beer and Brown-Forman.

“Anheuser-Busch InBev reported organic volume growth of 0.8% in Q1 FY26, the first such increase since early 2023, defying downward trends in alcohol consumption… Michelob Ultra has benefited from AB InBev’s consistent positioning of the brand as part of a healthy, active lifestyle. The company spends more marketing Michelob Ultra in the U.S. than any other product.”

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.

“While I believe the stock is attractively priced at current levels, and is likely to deliver strong returns over the next five years, I think that conclusion is reasonably accounted for at its current portfolio weighting - admittedly, an answer partly informed by the pain incurred owning Disney over the past 5+ years. There are two scenarios where that conclusion may change: if the stock price faces continued near term pressure, or if we receive encouraging details on early adoption of ESPN flagship… While this remains a messy story, I see reason to believe today’s setup is favorable for patient investors.”

The messiness cited above applies to Disney in a few ways: they operate in an industry that is undergoing significant change; they have a new CEO who may aspire to put his own stamp on Disney’s strategy, particularly in gaming / interactive; and the company recently restructured its segment financials - again - with less granular reporting, most notably within DTC and at ESPN.

And yet, I think that the Q2 FY26 call – CEO Josh D’Amaro’s first – was unambiguous and focused. It was a step in the right direction for Disney that reflects some fresh perspective as the company begins the post-Iger era.

Disney’s strategy is focused on four key areas:

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While there is a growing list of notable positive developments at Peloton, which I’ll discuss momentarily, they lie lower in the pecking order than the one big issue for the thesis: unsustainable connected fitness (CF) subscriber losses. The number of paid CF subscribers is on track to fall ~9% in FY26, to ~2.6 million; while this still reflects impressive long-term gains, with ~5x sub growth since YE FY19 (~26% CAGR), the recent declines need to be halted.

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Chart Of The Week

As discussed in Monday’s update, Roblox is seeing a quick reversal from the impressive 2H FY25 bookings reacceleration - and with it, their stock has fallen ~70% from where it traded in September 2025 (seven months ago).

Three Notable Items

“2026 Berkshire Hathaway Annual Meeting”

This past weekend, Warren Buffett took a seat on the floor of the CHI Health Center in Omaha, Nebraska, joining tens of thousands of fellow Berkshire Hathaway shareholders as CEO Greg Abel presided over his first annual meeting. My main takeaway from the meeting is that Greg has developed a thorough and detailed understanding of Berkshire’s key businesses, including their current shortcomings and their future opportunities. As I wrote in “Berkshire Hathaway: Transition”, I suspect the coming months and years will reveal why Warren and Charlie concluded Greg was the man for the job.

Greg Abel (58th minute): “We have a lot of work we need to do at BNSF… We have to get better operationally. We’re working hard to become more efficient and more effective, but we have to recognize where we are versus industry peers… Last year, we came in fifth out of the six Class I railroads [ranked on operating margins]. That’s a reality of where we are – but we are getting better and we’ll continue to get better. This performance leaves a lot of room for improvement… To achieve what Union Pacific has achieved [with operating margins that are ~500 basis points higher than BNSF] requires a step change in how we operate and in how we approach our operations.”

“Brown-Forman and Pernod Ricard Terminate Discussions”

One month after discussion with Pernod Ricard were publicly acknowledged, deal talks have now been terminated. There was also the reported ~$15 billion (~$32 per share) offer from Sazerac, but there hasn’t been much chatter about that deal in the ensuing weeks either. As a reminder, Brown-Forman was also the subject of a takeout target nine years ago; at the time, the company had a market cap of ~$22 billion. Any decisions will ultimately be judged through the lens of the interests and desires of the Brown family.

“Brown-Forman today announced that the company and Pernod Ricard have terminated discussions, as the companies were unable to reach mutually agreeable terms… We intend to create long-term value for all stakeholders by focusing on our strategic and operational priorities. This includes unlocking future growth by expanding our geographic footprint, continuing to build brands that resonate with consumers, and enhancing operational efficiency.”

“Brian Chesky’s Playbook: Scaling, Hiring, and New Founder Mode”

Chesky has appeared on plenty of podcasts in recent years, but this discussion with Patrick O’Shaughnessy touched on some new ground. In particular, it was interesting to hear Chesky discuss the need to balance Airbnb’s long-term growth ambitions against the near term financial demands of the business – something that I sensed was becoming a bigger focus for management as GBV growth and margin expansion started to level off.

Brian Chesky (57th minute): “I have all of these visions – but when you’re a public company, and you’re giving guidance, where the difference between hitting or missing guidance… you have to be careful. But being really careful isn’t an environment for mass innovation. So, I am also exploring little sandboxes, almost like a separate app – what is a radically different Airbnb?”

TSOH Updates

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

Monday’s research report will be an update on Peloton (PTON).

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.

In October 2025, following Roblox’s Q3 FY25 results, one prominent Wall Street analyst published a note that included the following glowing comment: “Roblox printed arguably its strongest quarter ever.” While it was hard to quibble with that framing given the daily active user (DAU), engagement, and booking trends Roblox reported at the time, it struck me as reason to be cautious on the stock, at least in the short-term. In recent years, Roblox has seen sizable swings on user / engagement growth, followed by a muted response from management on its pace of expense growth; said differently, the stellar 2H 2025 growth would likely give way to an eventual period of relatively lackluster DAU / bookings growth, with outsized pressure on profitability and FCF generation. When that day arrived, near term bookings and margin estimates would be cut, and short-term optimism would fade.

Jumping to the present, we can see that this is what has happened: when Roblox reported Q1 FY26 results last week, management reduced FY26e bookings growth from +24% to +10% (midpoint), but with little indication this will result in any material change to FY26e spending. As a result, they now expect FY26e FCF of ~$1.2 billion, down ~30% from earlier expectations.

The stock, which eclipsed $140 per share in September 2025 (seven months ago), has since fallen ~70% to ~$45 per share. As a result, the stock trades about 40% lower than where it did after the March 2021 direct listing – and that’s over a period where TTM bookings more than tripled to ~$7.5 billion.

I think the long-term Roblox thesis comes down to two key issues:

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Chart Of The Week

One revealing chart following a big week for mega cap tech earnings.

Three Notable Items

“QVC Lost the Home Shoppers to Social Media Influencers”

I haven’t talked about Qurate in nearly five years, but here’s what I wrote when I liquidated the position in May 2021: “I no longer feel comfortable with the bet that I’m being asked to make. When I first invested in QRTEA in September 2020, at an average cost of ~$7 per share, I felt that I had a straightforward understanding of what needed to happen for the investment to be a success. Today, at ~$13 per share, I feel a bit behind the eight ball - and when financial leverage is involved, that’s not the place to be.” Qurate was different from the typical TSOH investment, one where the position was held on a tight leash; what happened subsequently to QRTEA shows why.

“The stuck-at-home population has long been QVC’s most reliable source of sales; its best year ever came in 2020, when it pulled in more than $14 billion in revenue. In the years since, that figure has dropped more than a third.”

“Roblox’s David Baszucki Built the Biggest Playground on Earth”

Roblox doesn’t fit the mold of a traditional gaming company, with recent engagement and DAU trends that have left industry peers in the dust. In this interview with David Senra, co-founder and CEO Dave Baszucki discusses his path to Roblox, along with his long-term vision for the platform. (Note that the stock price is down about 15% this morning following Q1 FY26 results.)

“Roblox and YouTube are both content platforms, but the content in a video platform is typically solo engagement. The content in Roblox is a scaffold for communication and being together… In Roblox, the viral loops are the quality of the content and the users being together / social connection.”

“Spotify Premium Now Includes Peloton Classes, Marking Push Into Fitness Content”

I have long viewed Peloton’s standalone digital efforts with skepticism, a conclusion subsequently supported by lackluster digital app paid subscriber trends. I’ll have more to say on this topic following Peloton’s Q3 FY26 results, but I view this global partnership as an intelligent attempt to find an answer to that question, which may also support improved CF Subscriber trends. In my view, it speaks to the unique and valuable position Peloton holds in fitness.

“Spotify is offering workout classes from Peloton to premium subscribers, marking the music streaming pioneer’s first major foray into fitness content [Spotify has ~293 million global premium subs]. The partnership will bring curated playlists and access to a catalog of more than 1,400 ad-free, on-demand content from some of Peloton’s most popular wellness instructors.”

TSOH Updates

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

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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“This is a difficult and challenging time for Nike… Our domestic footwear market is changing… Our long-held position is that our greatest asset is the NIKE trademark, which is increasingly taking its place as one of the great marks in the world. It is from this base that we attack the challenges facing us… Like many of our athletes who have faced adversity and won, we are fighting back… We believe that we can and will do better.”

Phil Knight, 1984 Nike Shareholder Letter

I have maintained a skeptical view on Nike (NKE) shares for the better part of the past four years. That conclusion was informed by the valuation, financial targets that were increasingly disconnected from the financial realities of the business, and a belief that this disconnect encouraged decisions which were subsequently putting the long-term health of the Nike brand into question.

Thus far, this skepticism has been the right call. While the stock price is a crude measure, it helps frame the magnitude of Nike’s fading optimism among market participants: at ~$44 per share, the stock has declined by ~75% from the highs. It is trading at levels that were first reached in 2014.

A few years ago, management targeted double digit revenue growth and high-teens EBIT margins. As I’ll detail momentarily, today’s valuation now requires clearing a much lower bar. And while the competitive landscape has undoubtedly become tougher over the past decade, Nike management is tackling the key issues they needed to address (internal and external). Under the leadership of CEO Elliott Hill, one thing is clear: Nike is fighting back.

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“Given some of the decisions made in the past year, along with an improving trajectory in credit, I am optimistic about what lies ahead for Ally. As it relates to the current attractiveness of the stock, note that CFO Russ Hutchinson has bought ~$1 million on the open market in recent months [he added another ~$500k in January 2026]… If the deposit gathering franchise meets my long-term expectations, along with sound credit underwriting and meaningful capital returns (particularly if the shares trade, on average, at less than 10x forward earnings), I think the stock will generate attractive returns over time.”

ALLY has seen a solid resurgence of late: the stock is up ~40% over the past year and has doubled since YE 2022 (TSR). This recent price increase has still lagged its strong earnings recovery, with Q1 FY26 TTM adjusted EPS up ~70% to ~$4.3 per share. (On an annual basis, I estimate FY26e EPS at ~$5.3 per share - up ~125% from the FY24 EPS trough of ~$2.4 per share.)

Said differently, despite a nice run to ~$44 per share, it still trades at 8x – 9x forward on FY26e EPS - and I think an EPS CAGR of ~15% is likely over the ensuing two years, to >$7 per share in FY28e. On the EPS drivers, note that Ally bought back ~$150 million of stock during Q1 FY26, the first time they’ve repurchased shares in more than three years; this will likely be a meaningful tailwind to the TSR algorithm through FY28e. (In addition, revised capital requirement proposals could lead to a ~100 basis point lift in Ally’s CET1 relative to the 2023 proposal, providing room for balance sheet flexibility.)

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Chart Of The Week

As discussed in Monday’s update, impressive near term financial results have not assuaged Mr. Market’s concerns about Netflix’s exposure to changes in the media / entertainment industry. One data point that encapsulates this concern is Netflix’s declining TV streaming market share (engagement) in the U.S., during a period where YouTube has been trending in the other direction. While there are nuances to appreciate here, this highlights a key concern weighing on the stock, with the EV/EBIT multiple contracting to ~25x forward.

Three Notable Items

“Greg Abel Has Been Leading Berkshire for 100 Days. Things Are Already Changing.”

This WSJ article about Greg Abel’s first 100 days as CEO of Berkshire Hathaway has a few interesting tidbits, including commentary on his working relationship with Ajit Jain, as well as efforts to address the challenges at BNSF and BHE (discussed in my recent Berkshire update, “Transition”).

“Abel has spent the past year giving priority to learning Berkshire’s insurance business and visiting with Ajit Jain, the brains behind the operation. Jain is expected to continue heading insurance at Berkshire, though the company has developed a succession plan for him, too. ‘He’s probably going to be at the company for as long as he can,’ Buffett said in an interview. Berkshire’s new CEO has also emphasized spending time with leaders at subsidiary companies, particularly with BNSF Railway, its railroad business, and Berkshire Hathaway Energy (BHE), where he was CEO for many years.”

“Disney Debuts Giant Screen Brand for Cinemas to Rival Imax”

While I question whether the structure of this collaboration will be effective, this news speaks to the desire of the large movie theater chains to develop alternative PLF solutions (see the historic IMAX / in-house PLF data that I discussed in the IMAX initiation). With that said, consumers continue to vote with their wallets: IMAX reached a record high share of the global box office in 2025, continued evidence the brand / product is seen as being in a class of its own. (As Gelfond argues, “We have nothing in common with the PLFs.”)

“Disney is partnering with movie theater chains on a new large-format screen certification [‘Infinity Vision’] that will roll out in time for ‘Avengers: Doomsday’ in December 2026… Close to 5,500 screens globally - about three times the number of Imax venues - would meet the standards for the new label... The founding of ‘Infinity Vision’ is in part the result of the fact that ‘Doomsday’ doesn’t have exclusive access to Imax’s screens when it opens the weekend of December 18th. Imax has an agreement to screen ‘Dune: Part Three’ the same weekend. Disney contributes more to Imax’s revenue than any other Hollywood distributor… Theater chains began holding conversations last year about establishing an industry-wide certification for their premium screens… Operators would still be able to offer their own big-screen [PLF] brands.”

“Interview: Kinsale Capital CEO, Michael Kehoe”

This was an informative interview with Kinsale founder and CEO Mike Kehoe. As it relates to Kinsale’s long-term competitive position in E&S, this quote from Simon Wilson, CEO of Markel Insurance, has stuck with me: “[Markel] has this fabulous business at the center… and we almost took it for granted that we’ll continue to win… Kinsale went right into wholesale and specialty E&S and started writing at a mid-70’s combined ratio. We took our eye off of the ball in our bread and butter business.” It’s early days, but I assume Wilson is focused on doing what he can to slow / reverse that development.

“If you’re opening a restaurant, your core competency is the cooking, the recipes, and the ambience. What is the core competency of an insurance company? It’s segmenting and pricing risk, it’s underwriting… Why on earth are you outsourcing what you should be striving to improve all the time? It undermines the value of the company… I just wonder why many insurance companies feel like outsourcing their core competency is a great idea.”

TSOH Updates

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

Monday’s research report will be an update on Ally Financial (ALLY).

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.

“My greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something, like AOL dialup or Borders bookstores, do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then they fight desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.”

- Reed Hastings (2011)

My confidence in Netflix’s competitive standing and long-term financial trajectory, along with its changing valuation / volatile stock price, has informed my position sizing throughout the course of my NFLX investment over the past four years. At one time, it was a mid-teens percentage of the portfolio; it has since declined to a much lower weighting (~6% as of the latest update) as a result of trimming and stock price weakness off the June 2025 highs.

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Chart Of The Week

As discussed in yesterday’s update, Chipotle’s comps have decelerated to levels only seen during the pandemic and the 2015 / 2016 health safety issues. In turn, margins have come under pressure, earnings estimates have been reduced, and the stock has been cut in half. Chipotle is one of many fast food / fast casual chains navigating near term pressure and a lower stock price; I suspect that a few attractive long-term opportunities lie among them.

Three Notable Items

“Peloton’s Leader Thinks He Can Coach It Back to Health”

In Q2 FY19, Peloton had ~362,000 CF subscribers; seven years later (as of Q2 FY26), the tally is ~2,661,000, with the sub base up ~33% p.a. over that period. The issue, which explains why the stock price has plummeted >95% from the highs, has been the roller coaster ride along the way (and strategic decisions made under the leadership of co-founder John Foley). At recent prices, a successful investment required little more than expense efficiency and subscription stabilization; growth, if realized, would be icing on the cake.

“If we look at the subscriber dynamics, we’re not that far off from where we were at the absolute peak of the pandemic - which is remarkable because no one could exercise any way other than at home… That was an unrealistic valuation for the company [when the market cap reached ~$50 billion in mid-2021]. I would argue that the valuation we have now is also unrealistic.”

“Pershing Square Holdings Annual Investor Meeting”

The Pershing Square Holdings annual meeting featured commentary from the investment team on a number of companies in the TSOH investable universe, including Chipotle, Meta, and Nike. I’m interested in their thought process and portfolio decision-making given our similar investment styles.

“Nike was a mistake… We did not understand how much the prior CEO had really damaged the business, and how heavy the turnaround was going to be. Our EPS estimates continued to come down. We decided the turnaround would take a lot longer and that we did not have as much confidence that it would achieve the high levels that we initially thought… We moved on… Nike was an investment we lost ~30% on during our year and a half of ownership.”

“Sazerac Offered to Buy Brown-Forman for Around $15 Billion”

The latest development at Brown-Forman: a $32 per share offer from Sazerac, with Pernod Ricard confirming deal talks are “ongoing”. For context, Brown-Forman repurchased ~$800 million of its stock over the past three years at an average price of ~$38 per share – inclusive of ~$400 million in FY24 at an average price of ~$58 per share. If there’s a deal to be made here, I would be quite surprised if it was at the price of ~$32 per share.

“Sazerac recently approached the Jack Daniel’s maker about a potential deal. The interest comes as Brown-Forman has been in deal talks with French spirits-maker Pernod Ricard. Sazerac offered $32 a share, the people said. Brown-Forman’s shares were trading above $28 midday Wednesday, having run up roughly 25% since the reports of the takeover interest began.”

TSOH Updates

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

Monday’s post will be an update on Netflix (NFLX), which reported Q1 FY26 results yesterday afternoon. I’ll dig into the recent financials, along with some updated thoughts on the path ahead for the global leader in DTC SVOD following their failed attempt to buy Warner Bros. (to me, the better outcome).

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.

“Chipotle has been a major success story during its 15-year run as a public company. Long-term shareholders who have weathered volatile periods - in terms of the stock price and the business results - have been handsomely rewarded for their patience. If history is any indication, we’ll see another rough stretch at some point; if that happens again, I will be ready to act.”

That rough stretch has arrived.

Chipotle reported -1.7% comps in FY25, led by a 2.9% decline in comp transactions; that was inclusive of -2.5% comps in Q4, with transactions -3.2%. Outside of the pandemic and the 2015 / 2016 health safety issues, these are the weakest comps at Chipotle in the past two decades – with guidance (roughly flat comps) assuming similar lackluster results in FY26.

In addition, CEO Brian Niccol, who joined the company to much fanfare in 2018, left in August 2024 to accept the top job at Starbucks. He was replaced by COO Scott Boatwright, who joined Chipotle in 2017. The stock, which reached a high of ~$69 per share in June 2024, has since been cut in half.

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