'Interesting company because they don't have any direct competitor': Del Vicario on Games Workshop

Key Concepts

• VMS (Vertical Market Software): Specialized software designed for specific industries or niche markets.
• SaaS (Software as a Service) "Apocalypse": A market correction period where valuations for software companies significantly declined.
• Economic Moat: A company's ability to maintain competitive advantages (e.g., intellectual property, lack of competition) to protect long-term profits.
• PIM Strategy: A capital allocation strategy involving investments in minority stakes in public equities.
• Double-Edged Network Effect: A business model where value increases for both sides of a marketplace (in this case, insurance companies offloading assets and global buyers seeking salvage vehicles).

Constellation Software (CSU)

Investment Thesis: Jason Del Cario notes that while Constellation has historically been overvalued, the recent "SaaS apocalypse" has corrected their valuation to a more attractive range—specifically in the "low 20s" in terms of cash earnings. This provides an entry point for investors who previously found the stock too expensive.

Strategic Evolution:

• Capital Allocation: While historically focused on VMS, the company is exploring new avenues. Founder Mark Leonard previously indicated a potential pivot if VMS opportunities became scarce.
• New Initiatives: The company has introduced a "PIM strategy," involving minority stakes in public equities.
• Diversification: They have previously attempted to acquire assets outside of pure VMS, such as an unsuccessful bid for an oil-related software company, signaling an intent to expand their scope.

Games Workshop (GAW)

Business Model & Moats: Games Workshop operates in a niche, "cult-like" hobbyist market centered on Warhammer figurines and lore.

• Intellectual Property (IP): The company leverages its Warhammer IP across multiple media, including video games, books, and a pending deal with Amazon for film/TV adaptation.
• Competitive Landscape: Del Cario highlights the company’s lack of direct competitors and strong barriers to entry, characterizing it as a "very strongly moted company."
• Customer Loyalty: The hobby exhibits high "stickiness," with evidence of multi-generational participation (father to son to grandson). Del Cario notes that the hobby is so ingrained that core customers prioritize it even during financial strain.

Market Clarification: Del Cario clarified a common confusion regarding UK stock quotes: prices are often listed in pence (e.g., 20,000 pennies) rather than pounds, meaning a quote of 20,000 is actually 200 pounds.

Copart (CPRT)

Market Dynamics: Copart operates in the salvage/junkyard industry, a sector characterized by a duopoly.

• Market Concentration: Copart and IAA control approximately 80% of the market.
• Operational Utility: The company serves as a critical intermediary for insurance companies, helping them offload totaled vehicles.
• Global Arbitrage: Copart has expanded the market for totaled vehicles by facilitating sales to international buyers. Many vehicles written off in North America are often not severely damaged and are highly sought after for rebuilding or parts in overseas markets.

Investment Rationale: Del Cario’s firm has followed Copart for six years. The investment decision was driven by the company's strong market position and a recent 50% decline in share price, which the firm views as a compelling valuation.

Synthesis and Conclusion

The investment philosophy presented by Hillside Wealth Management focuses on identifying high-quality companies with strong "moats"—whether through intellectual property (Games Workshop), market dominance (Copart), or operational excellence (Constellation Software). The common thread across these recommendations is a disciplined approach to valuation: waiting for market corrections (the "SaaS apocalypse" or price drops) to acquire high-quality assets at attractive entry points. Each company discussed possesses a unique competitive advantage that insulates it from traditional market pressures, whether through global network effects or deep-seated consumer loyalty.