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Investment portfolio spreadsheet with all of my core holdings, non-core holdings, swing trades and hedges
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My investment portfolio is up +198% in 2024, after being up +134% in 2023 and now up +3,000% since January 2020 when I got back into investing full-time.
Here’s my investment strategy which focuses on high-quality growth stocks… I own 15-20 core holdings (great fundamentals, compelling valuation) plus another 5-10 non-core holdings (good fundamentals, reasonable valuation) plus another 5-10 swing trades (good fundamentals, reasonable valuation, compelling technicals).
As long as the fundamentals remain strong and valuation remains compelling/reasonable, then I’ll add on pullbacks.
I only want to own stocks that have at least 50% upside within the next 1-2 years and at least 100% upside within the next 3-4 years.
My objective is to maximize the upside in good markets and minimize the downside in bad markets. I accomplish this by being very selective with my stock picking and disciplined on valuations while using a variety of hedging strategies to protect my gains in market downturns.
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FOUR Q2 earnings report: https://d1io3yog0oux5.cloudfront.net/_e329e813025507a00c20472a89ad40cf/shift4/db/3583/33778/pdf/Shareholder+Letter+6.30.2024.pdf
FOUR Q2 earnings webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=kdVa9JAh
FOUR Form 10-Q: https://investors.shift4.com/sec-filings/all-sec-filings/content/0001794669-24-000026/0001794669-24-000026.pdf
Shift4 Payments (FOUR)
Investment Thesis
Shift4 powers billions of transactions annually for hundreds of thousands of businesses in virtually every industry, both in the US and now internationally.
Shift4 offers bundled payment solutions and typically works with businesses that have a physical presence. These businesses are complex and historically have had numerous vendors to accept payments, manage customer interactions, and operate them. A large resort may operate even more software systems to enable online reservations, check-ins, restaurants, salon, spa, golf, parking, and more.
When Shift4 went public in 2020, the majority of its customers were restaurants in the US. Since then, the company has done a lot to diversify its business into other niches and countries. Restaurants now account for approximately 1/3 of volumes while hotels and resorts account for another 1/3 and then the “others” category ie stadiums, retail, Starlink, etc represent the final 1/3.
Shift4 intentionally serves complex merchants in challenging card-present verticals where its platform, product, and software integrations provide an impressive moat.
For restaurants, Shift4 offers its own cloud-POS solution called SkyTab. Despite severe competition from companies like Toast, Square, and others, Shift4 signs up thousands of locations every quarter. With hotels, Shift4 possesses 550+ unique software integrations with companies like Microsoft, Oracle, Agilisys, etc, that are required to serve the hospitality vertical. With sports stadiums and theme parks, Shift4 has a product it purchased and enhanced three years ago called VenueNext, which has quickly become the category leader. Right now, the company is taking these products and integrations internationally, focusing on Canada and Europe.
Shift4 generally targets established businesses with a lower risk of failure (just look at the list of their customers) and acquires them with minimal spending. It then successfully cross-sells its products and services to these businesses.
Shift4 seems determined to continue doing these smaller, strategic acquisitions which I’m fine with me as long as they’re accretive within 12-18 months. Yesterday Shift4 announced they were issuing $1.1 billion of senior notes, maturing in 2032 with a 6.75% coupon. FOUR will likely use half of these proceeds to retire the convertible debt maturing next December and the rest of the cash might be used for additional bolt-on acquisitions I endorse this use of capital because leveraging cheap debt to do accretive deals is much better for shareholders than using cheap stock at 10x EBITDA.
The company generated 4-year CAGR growth in its end-to-end volumes, gross revenue less network fees, and EBITDA of 75%, 48%, and 82%, respectively, while simultaneously expanding margins and improving FCF conversion.
At the same time, the market is underappreciating FOUR to the point that the company's CEO and major shareholder, Jared Isaacman, has threatened to take the company private. He even made a remark on the earnings call saying “now turning to restaurants which I feel like at times, we should not even talk about because if we were simply known as the Toast (TOST) of hotels and stadiums, we'd probably be more appropriately valued”.
I feel his pain because FOUR does seem undervalued given the current fundamentals and outlook for the next few years, however maybe this is finally changing. FOUR is up +20% since they reported earnings last week so perhaps the market is finally giving them some respect.
Even with the +20% move in the past week, even on a fully diluted basis, FOUR is still trading at just 11.9x CY2024 EV/EBITDA and 9.6x CY2025 EV/EBITDA with EBITDA expected to grow at a 28% CAGR from CY2023 through CY2028.
Based on current and future estimates, I still think FOUR is 25-30% undervalued at current prices and should be trading in the $90s or higher.
Shift4 remains the largest fintech position in my portfolio, because the fundamentals are great and the valuation is compelling. In my opinion, Shift4 still offers a great risk/reward at current prices (for long term investors) plus there’s always the possibility they get acquired at a 30-40% premium or Jared takes the company private with the help of private equity.