Month: October 2018

Brent Beshore – Contrarian Private Equity Investing – EP.20

Today on The Alternative Investor we have our first guest on the show: Brent Beshore! Brent is the CEO and founder of Adventur.es — a private equity firm in Columbia, Missouri. Adventur.es has a unique investment approach: they seek boring businesses. They explain this perfectly themselves:

“Boring businesses endure because they consistently solve a meaningful problem and were patiently built over decades,” “Truth be told, our responsibility is not just to seek and sustain boring businesses, but to be boring ourselves. Boring is reliable, faithful, and predictable. Boring is sustainable. We are committed to doing what we say we would, when we said we’d do it.”

This episode, Brent, Brad, and I discuss the workings of Brent’s firm, how they go about securing deals, their due diligence process, what deals they look for, and how he deals with a variety of situations within the firm. He also gives his views on growth, what industries he won’t touch, and what he thinks about current asset pricing.

Adventur.es has some pretty contrary views and approaches to traditional private equity firms so it was an extremely interesting interview that we recommend you all tune in to this week!

 

Key Takeaways:

[:10] Our guest, Brent Beshore, introduces himself and tells us a little about his background and how he got to where he is today.

[2:28] How Brent started up his private equity firm, Adventur.es, and what they’re all about.

[8:09] About the makeup of Aventur.es’ portfolio: what kind of companies they currently have, what they like, and what they’re looking for.

[11:05] How did Adventur.es get comfortable with some of the more cyclical deals (especially with the pool companies).

[14:14] Does Brent believe that volatility does not equate to risk?

[17:11] How do they have the liberty with their fund where they can hold a deal indefinitely?

[18:58] Are they reinvesting dividends each year?

[19:55] Do they have discretion?

[20:16] Does Brent find that the sellers they buy deals from generally involve competitive bidding?

[24:40] How Brent keeps a sense of urgency in their operation (without the pressure of the 3-5 year time frame a traditional private equity firm generally has with businesses).

[27:37] In most cases, is Brent dealing with the CEO who’s selling the business with a management team stepping up or is he hiring other operators to come in?

[29:21] When the owner is not staying around, and a new management team is stepping up how does Brent keep those people incentivized?

[31:05] Brent’s process of finding deals.

[34:30] If a broker sent Brent a deal he would normally want to buy, but it’s part of a bigger process with multiple firms bidding on it, does he step out?

[37:52] Brent gives us a back-of-the-envelope approach to how he thinks about what is an attractive business for Adventur.es.

[42:31] How Brent thinks about due diligence and the major things that kill a deal.

[46:53] In their due diligence process, how much time is spent within the company internally and how much is spent thinking about the market and external factors?

[50:31] About Brent’s meeting with Warren Buffett.

[52:04] What kind of multiples is Brent seeing in business right now? And how does he think about what’s the best multiple to pick?

[55:11] How much is too much customer concentration?

[57:05] How much does Brent care about growth?

[58:24] Are there any industries Brent wouldn’t touch?

[59:48] How does Brent think about current asset pricing?

[1:03:22] Where to find more of Brent’s content and Adventur.es online.

 

Mentioned in this Episode:

Adventur.es

Brent Beshore’s LinkedIn

The Oracle of Omaha

Why You Should Care About Business Quality – EP.19

Summary

The Three Main Categories of High Quality Businesses — and the One Category You Do Not Want to Invest In

Today’s an exciting show — we’re talking about business quality. Who doesn’t want to buy a quality business?

Business quality is a little bit of an amorphous term, but today we focus on thoroughly explaining what it is and why you should care about it as investor. We also put together a framework of categories for high quality businesses, such as: the organic grower, the mergers and acquisition machine, and the ATM machine (yes, we know that the M in ATM is machine.) And of course, since we talk about the businesses that are the most high quality, we also had to talk about what we call “the valley of death” — the category of businesses that we would never touch.

At the end of the day, any investment you make in a business, you want to get that investment back in the form of cold, hard cash. But to do that, you have to think not just about the price, but about the quality of the business.

Key Takeaways:

[:27] About today’s topic: business quality.

[:41] Why, as an investor, should we care about business quality?

[1:59] Our first category of a high quality business: an organic grower.

[4:52] An example of an organic grower.

[6:48] The second category: a mergers and acquisition machine (“an inorganic grower.”)

[8:57] Some examples of a M&A machine.

[11:01] Our third category: an ATM machine.

[12:38] Examples of an ATM machine.

[14:18] The category of businesses that are (usually) not high quality: “the valley of death”.

[17:49] Wrapping up today’s show with our key point: “quality, quality, quality!”

Debt: If You Owe The Bank $100 Million ….. EP.18

Summary

Today we’re talking about debt! It’s an investor’s best friend … or worst enemy.

We answer all the questions you may have about debt, such as: what is debt? When do you get debt? How much debt do you put on an investment? We also address the various restrictions that come with debt, why you should get debt (and some of the great — and not so great — reasons that can come with it), how much debt to put on your deals, and some examples of how debt can change the return on a deal.

Debt can reduce the amount of cash you have to come up with to buy a deal — but it comes with some promises you have to make to the bank (and other people) that might end up coming after you one day. But, done thoughtfully, it has its place in alternative investments — so tune in to hear more of our take!

Key Takeaways:

[:11] About today’s topic: debt!

[:35] What is debt?

[1:42] Restrictions that come with debt.

[3:10] Some great reasons to get debt.

[4:58] How Brad thinks about how much debt to put on his deals.

[9:42] Brad gives an example of how debt can change the return on a deal.

[13:10] An example in real estate, with the same numbers.

[15:22] Summarizing our key points about debt.

How Do You Pick an Investment Theme? – EP.17

Summary

How to Narrow Down and Choose an Investment Theme That Best Resonates With You

In today’s episode, we address a recent listener’s question on how to identify or pick out an investment theme. We think of investment themes as something that can help you narrow down (what seems like) an infinite list of opportunities into something more manageable and actionable.

Not only does a theme help narrow down your own list of investment opportunities — it helps differentiate you in the minds of brokers and bankers when they see deals. A theme can be an asset class, a business model, a trend, or macro trend that’s occurring in the economy.

Today we go through just some of those ways you can pick a theme to help you stand out in a sea of investors.

Key Takeaways:

[:11] Today we answer a listener question from someone who asks, “How do I identify an investment theme?”

[:52] How we think of an investment theme and why they can be so beneficial.

[5:29] Why you won’t be taken seriously if you don’t narrow your criteria.

[7:31] How to pick a theme that resonates with you.

[11:33] When you think about a theme, think about the macro trends in the world.

[13:00] How to do multiple deals within real estate while having an overarching theme to your investments.

[18:19] Summarizing our key points.

How To Think About Risk – EP. 16

Summary

Risk is an often misunderstood and poorly communicated concept. This episode covers how we think about and evaluate risk factors in real estate and private equity investments.

Risk is going to be a part of every single investment decision that is ever made and there’s no such thing as a risk-free investment. So hopefully, in this episode, we can provide some tools and a framework to help you think about risk and overcome any hesitance you may have. Brad and I discuss risk from the academics’ perspective, real estate, and private equity side; as well as risk deal killers, and general risks that factor into any investment.

Key Takeaways:

[:10] About our topic of discussion today.

[1:51] How the academics think about and talk about risk.

[9:43] How we think about risk (in real estate and private equity.)

[12:26] How Brad looks at to evaluate real estate risk.

[14:42] More factors that go into risk analysis in real estate.

[17:28] Are there any risk deal killers? What risks would kill the deal?

[20:51] How I think about risk in private equity.

Mentioned in this Episode:

The University of Chicago

Modern Portfolio Theory (by Harry Markowitz)

University of California San Diego

Standard Deviation 

Volatility

Due Diligence

Base Case

Downside Risk

Market Risk