Weekend Cleaning

Funko

Funko reported a strong quarter with sales jumping 38% YoY to $233 million in the 4th quarter. Their stock is back above $21 a share, giving them a market cap above a billion & having the stock roughly double off the December lows. They are opening a Hollywood store to boost brand awareness, are projecting YoY growth rates of 18% to 20% (above expectations) on top of the beat & are growing into the board games category through their recent acquisition of  Forrest-Pruzan Creative.

The fact that Fortnite, which the Washington Post called “the biggest pop culture phenomenon of 2018” accounted for only 12% of our Q4 sales and 5% for the year, showcases how Funko is like an index fund of pop culture. The property is important, but it’s just one of many in our portfolio.
Evergreen properties accounted for about 46% of our sales in Q4 and 47% for the full year. Again, this shows that we’re not reliant on a small number of hits, nor are we reliant on only new content

Funko President Andrew Perlmutter

Grocery Stores

Grocery store stocks once again sold off on news Amazon will attack the category by launching another line of grocery stores.

eBay

eBay added 2 board members from activist investors Elliot Management Corp. & Starboard Value.

China Doom Machine

Kyle Bass was once again interviewed on Real Vision. He mentioned how capital left China in a variety of formats including loans in foreign currencies not paid back, diamond sales, cryptocurrencies, etc. & how those generally happened in waves until they got shot down by regulators.

Software Eating the World

Microsoft launched a feature for automatically creating an Excel spreadsheet based on a photograph of a table.

LendingTree

LendingTree is up to $322.60 from a December 24 low of $200.05, a gain of over 60% since the market bottomed. They are now valued at over $4 billion. A large part of their growth has been based on acquisitions.

  • 2016: CompareCards
  • 2017: DepositAccounts.com, MagnifyMoney, SnapCap
  • 2018: QuoteWizard, ValuePenguin, Student Loan Hero

Their core business has seen growth through aggressive expansion of their Google Ads / AdWords ad campaigns.

Through the next 3 to 6 months that ad spend will still provide additional growth, but it looks like the ad spend has flattened over the past couple months, so in about 9 months that ad spend will be required to maintain share rather than buy growth. Some of their other acquisitions like ValuePenguin rely more on organic exposure, while it appears MagnifyMoney has been fairly flat on Google Ads spend & DepositAccounts.com has ramped up their Google Ads spend over the past half-year.

Outside of CompareCards.com (which has a similar Google Ads chart to the above LendingTree chart) most of their secondary sites are generally far more reliant on organic search than their main site.

When you look at the acquisitions we’ve made, they’ve all been people who are in kind of the same business we’re in, albeit, in some cases, more SEO-oriented. Our SEO strategic initiative was because we knew that we were under-indexed there from a marketing perspective. And the combination of Magnify, Deposit and now ValuePenguin, we feel like we’ve built and will continue to build organically an SEO business. But I would not anticipate more SEO-oriented acquisitions, okay? We feel like we’ve achieved that strategic objective.

J. D. Moriarty

They also mentioned growth rates of specific properties:

We’re also beginning to see real traction in SEO with meaningful growth across multiple brands and product categories. DepositAccounts and MagnifyMoney have both doubled their revenue since we acquired the brands in 2017. And through our centralized SEO function, we’re becoming a scale player in the content transaction model space.

Our investment in off-line advertising is also resulting in lift across a number of channels, including direct traffic, branded SEM and SEO. We’re seeing a 40% year-over-year increase in direct-to-site loan requests, a 43% lift in branded SEM loan requests and a 17% increase in loan requests from SEO channels.

LendingTree Chairman & CEO Douglas R. Lebda

Last year when LendingTree was close to their peak I bought some put options that turned out ok. If I were broadly long the market now I would be tempted to consider buying a few LendingTree put options or maybe some put options on Wayfair. On the conference call LendingTree mentioned their My LendingTree platform could see strong growth due to cross-marketing of higher payout credit card offers.

I think UBS Investment Bank’s Eric Edmund Wasserstrom gets at the core issue with the market size opportunity & growth drivers at their elevated P/E ratio.

I guess what I’m ultimately trying to discern is, on the one hand, the recent drivers of guidance upside have come largely from acquisition integration. And at the same time, it looks like within the core business, there’s an increase in marketing and acquisition costs. And so I guess what I’m trying to understand is, has there been some change here wherein organic growth is just becoming more challenging and, therefore, more expensive to accomplish? And is that some indication of kind of the go-forward economics of LendingTree’s business?

LendingTree has held up quite well when compared against the likes of QuinStreet, which has slid from $20.02 to $13.60 a share after a weak Q4. No doubt LendingTree is a stronger business, but then there is also a huge gap between trading at around a 10x multiple or trading at about a 50x multiple.

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