Speaker holds a significant personal stake in Remitly based on strong recent financial performance (margin expansion, marketing ROI) but excludes it from the core portfolio because he does not see it as having a durable long-term moat.

Anyway, I want to talk about not Visa and Mascat. I want to talk about remittly and I think I went into the stock at about 12 to $13 which it reached after my pitch and I bought a quite sizable position for my personal portfolio and since it's gone up about 80 to 90% and the pattern is pretty similar to it which is why I want to discuss it today as one of our winning stocks even though it's not part of the intrinsic value portfolio

the margin level that I expected remittly to hit in 2028, potentially even 2029 has already been achieved in the last two quarters where net income has inflicted materially and the company showed it can operate highly profitably.

Companies like Hermittly and Reddit do show you that you really have to understand the earnings power of a business. And you know, looking at remittly, I remember at the end of last year, the company guided down their EBITDA margins.

You know, EBITDA is a proxy for operating earnings. They guided it down from 16% to 12%. And then the stock sold off pretty dramatically as you could imagine. So if you look at it now, that margin is at 22% and they pulled off that turnaround just in a single quarter.

So I have no doubt that the management team probably always knew about the margin potential, hence the earnings power point that I made a moment ago. And it feels like they decided though, hey, we got to show investors what this company is capable of as soon as we focus more on profitability and margins.

And apparently that is all it takes. It's one of the quickest margin turnarounds I've ever seen. Maybe besides Reddit. It was impressive for sure. And I can say that I expected an intraquarter turnaround like that.

And it's not like remittly stopped investing. I mean their major expense as we also covered back then is marketing and remittly has an incredible return on that marketing spend.

I think it's about 6x after just a few years of an acquired customer. So, you don't want them to stop spending on ads and they primarily saved on wages and investments beyond marketing.

And I just want to give a bit of background on why that is. And I could see how it's confusing to not include a company in the intrinsic value portfolio, but to make it especially a sizable bat in your personal portfolio.

And Sean's doubts about payment companies are obviously only a small part of the reason.

And so if I don't want to own remittly and and Kyle doesn't either, then we can theoretically still add it to the intrinsic value portfolio as long as you have a meaningful stake in it, Daniel.

And so it wouldn't be a full position if we don't have consensus among the three of us, but it could be a one or 2% tracking position as we handled it with Reddit after I unwisely didn't want to make it a full position immediately because again I lacked the vision that you saw.

I didn't push on adding midly. Um, and it was primarily for two reasons. So, the first one is Time Horizon. This podcast is going out twice a week. Back then, it used to be only once per week.

And we are primarily focused on pitching new companies each time, not reviewing old ones, all portfolio holdings, which to some extent is what we're doing today. And that also means that we can't really buy value plays that need daily or at least weekly reviewing and will be sold after a couple of weeks or months simply because it's so much harder to keep people updated.

There's so many companies that we constantly getting questions about and they are not even in our portfolio. So it was just a bit too much to handle and that's why we settle for primarily adding companies that we see as having sustainable modes that we can hold for many many years.

And I don't expect remittly to be that sort of company, although I would say that I hope to own for as long as possible in my personal account.

And and a good example for why that might not end up being the case is that they just went through some major and unexpected business changes. And while I think they were the right thing to do and the right decision, those things just wouldn't happen at, you know, Google, Amazon, or Netflix, those sorts of companies.

Yeah, it sounds like you might be referring to the CEO stepping down. you're still informed about the company. That's not too bad. And yeah, that was part of it. Um, and it did go well.

I think he primarily did it because he generally felt like the new CEO would do a better job considering the current size of the company because again, sort of going from a small cap to a midcap by now.

But it was also surprising. I got to say that. And they also introduced new products just briefly before that that are aimed more at the micro and small businesses. And you could argue that it's generally a good thing, but I sort of like the sole focus on remittances and I hope they will keep that as their primary focus because there's a whole lot of competition in the enterprise space, right?

Micro businesses and solarreneurs are different, but it's a first step to go into this SMB space, small and medium businesses, and there are just a lot of companies competing for the same customers there.