Artem Fokin of Caro-Kann Capital presented his in-depth investment thesis on Trupanion (Nasdaq: TRUP) at Wide-Moat Investing Summit 2018.

Artem is a returning instructor. The MOI Global community enjoyed Artem’s two prior thoughtful and well-researched presentations on CommerceHub (June 2017), which was taken private less than a year later at a ~34% premium compared to the price when he presented it, and TripAdvisor (December 2017), which has returned 60%+ since then.

Here is how Artem summarizes his investment thesis on Trupanion:

Let’s start with a quote:

“I have always been attracted to the low cost operator in any business and when you can find a combination of (1) an extremely large business, (2) a more or less homogeneous product, and (3) a very large gap in operating costs between the low cost operator and all of the other companies in the industry, you have a really attractive investment situation. That situation prevailed twenty five years ago when I first became interested in the company, and it still prevails.” –Letter to Mr. George D. Young from Warren Buffett, July 22nd, 1976

Of course, Warrant Buffett was writing about GEICO.

Trupanion has these all three characteristics, and we think it can become a multi-year or even multi-decade compounder.

In addition, Trupanion has all these features:

  • A founder – CEO who is an intelligent fanatic Founder.
  • Strong alignment of management with shareholders: CEO’s equity stake is worth more than 160x (not a typo!) than his executive compensation in 2017.
  • Moat based on proprietary data and virtuous cycle flywheels.
  • Massive under-penetrated market with a multi-year or even multi-decade growth runway.
  • Product with the best customer value proposition.
  • Mission-driven culture.

Listen to this session:

slide presentation audio recording

About the instructor:

Artem Fokin is the founder and portfolio manager of Caro-Kann Capital LLC, a hedge fund based in San Francisco. Prior to founding Caro-Kann, he was a principal at Outrider Management LLC. Before entering the investing industry, Artem was an attorney with Greenberg Traurig LLP in New York City. Artem earned an MBA from the Stanford GSB (Arjay Miller Scholar), a Master of Laws degree from NYU School of Law (Newman Scholar) and a bachelor of law from the Higher School of Economics (Presidential Scholar) in Russia. Artem is admitted to the practice of law in the State of New York and is a dual citizen of the United States and Russia. Caro-Kann Capital LLC is the general partner of an investment partnership based on the principles of value investing that focuses primarily on special situations and compounders. Caro-Kann Capital is named after a chess defense that emphasizes building safety and defensible position before contemplating an offensive strategy. The Founder’s substantial legal experience brings a greater ability to analyze complex corporate documentation accompanying extraordinary corporate events. The Fund’s core investment principles include: (1) concentration when properly compensated, (2) risk is not equivalent to volatility, (3) non-economic selling can lead to attractive opportunities; (4) capital allocation is often underappreciated by the market, and (5) incentives and insider ownership are paramount.