Kelly Granat
speaker
261 appearances
1 recordings
1 series
first heard Mar 2025
last heard Mar 2025
Kelly Granat’s voice in public audio — every appearance, attributed to the second.
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Appearances
And in terms of the management team of the company that's running it.
So I think it's, Change in leadership, it's a new product that the market doesn't appreciate fully in terms of its capability, how big it can be, how accretive it is to margins and returns, how little capital it requires, ways to leverage the core IP of a business in new channels, in new products.
the value of distribution to the earlier conversation and how that's underappreciated in certain businesses and the ability to flow other products, other services into that. Or, you know, sometimes it's just the benefits of scale. The companies get to a certain size and then their market power step functions, right? And
And then that somehow improves the value proposition and the flywheel of what they're doing in a way that the market doesn't fully appreciate. And we see this now, I would say, like in the alts space, for example, where these businesses are now, you know, they're all mostly public and that's new.
unparalleled customer service, product innovation, opportunities for talent development, new channels of growth, it's spinning on its own in terms of this flywheel, right? In a way that I don't think anybody could have really anticipated. And what's interesting about these is,
the bare case on them because they're a new asset class as public companies is we haven't really been through like a big cycle. So how will they perform? And then the other piece I think the market struggles with is how do you value the carried interest part of their revenue model, right?
Everyone can value management fees and make a projection around how AOM will grow, but what do you pay for that, right? And so that's interesting to me because we can do work on that. We can have a point of view on that. We can look across cycles, look across products, how they're growing and think about how funds perform.
and have a thoughtful analytical answer to that question, but there isn't an answer to that question yet, and these are still under-owned relative to all of the big institutions that have to index, that have to own these things, and will continue to have to own them in bigger size as they grow.
And so the idea of a new asset class is sort of interesting to me, even though Blackstone's in public for a while, but all these companies are newly public in the last decade, and I think the world is still figuring out how to analyze and value them as public companies.
We own a lot of one-off ideas in non-bank financials. So the alt is one example of that. But we have a number of positions of single stock, not thematic companies that are doing really interesting things online. One is around transformative M&A at scale. One is around product innovation. One is around AI that's not an AI business, but is using AI to thoughtfully do things inside of a sector.
So that's an area where I feel like we typically don't do a lot with the banks. not an area where we feel like we can really add value. There's regulatory risk and all the, and we don't think, you know, those are not sort of, don't really measure against our quality filter as businesses.
But there's a number of pockets inside of financials that we think are not very well covered that are pretty interesting. And we've got a great team doing research there. So I think that's one area. We have been investors for really decades. two decades almost, and continue to be in the aerospace market, both OEM and aftermarket, and continue to love those businesses.
They have all of the attributes of businesses we like, great organic growth, great pricing power. As people fly more, planes get used more, there's a need for repair. replacement parts. They get spec'd in to planes as they're being built. And so they're typically single source or sole sourced. And they're super low cost as a percentage of the overall plane.
And so they're just recurring revenue businesses with a lot of pricing power and very little capital against those businesses to grow organically. And I feel like there's a pretty good open-ended structural story around people traveling more and valuing experiences. And so that will continue to, I think, be a very productive area for us.
And there's a bunch of different names that we've owned in that ecosystem and will continue to own likely over time. So I think that's another big area. Those are two. I mean, consumer is harder, I would say. Most businesses were more active there on the short side than the long side at this point, just because there's just an inherent maturity to, I think, a lot of those businesses.
And the ones that are the really scaled winners, even just watching the revaluation of Walmart in the last 18 months has been super interesting as they've really emerged as a more consistent executor. And Doug's done a fantastic job, I think, with that business. But that, I mean, Walmart's now trading at a pretty hefty multiple and Costco's trading really, I mean, these are the best,
you know, executors in the space and they're really expensive. So I think the market has sort of figured out that they are the winners. And so less to do there in my mind in terms of runway for long growth that's underappreciated or maybe fairly valued relative to the actual level of growth.
It's one of the things we debate a lot, honestly, is in areas like healthcare, this happens in certain sectors and also in certain geographies where there's very few companies that have high growth or have exposure to a thematic that the market is excited about because of a geography or because of a sector focus.
And we like those businesses too, but they tend to trade at valuations that don't stack up against businesses that we see across the portfolio that are more compelling. So even though we love lots of companies around the world and would love to own them, we're always waiting for like a
a wobble or a dislocation or a perceived competitive threat to give us our chance to own them because they don't stack relative to owning more of a lot of the compounding businesses that we love.
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