John Barr of Needham Funds presented his in-depth investment thesis on Vacasa, Inc. (US: VCSA) at Best Ideas 2022.

Thesis summary:

Vacasa is the leading vacation rental property management company in the U.S. It went public via a merger with the TPG Solutions Pace SPAC in December 2021. At a recent price of ~$8.32 per share, Vacasa has a market capitalization of ~$3.6 billion, ~$580 million of cash, and annual revenue of ~$900 million.

Vacasa has been investing in new markets since 2016. The company earns higher contribution margins in markets with more than 250 units under management. The company should benefit from economies of scale; as Vacasa increases the number of units under management across its markets, corporate gross and net income margins may expand.

Vacasa has proprietary data about rental prices, demand, and property expenses, and also the data analytics capability for decision-making. Vacasa has ~6,000 operations and maintenance employees and offers good pay, benefits, and a career path for local operations staff.

Vacasa reminds John of CoStar (CSGP). In 2009, CoStar had just completed a multi-year investment program that set the company on a track to outperform for years. John believes Vacasa has an opportunity to expand margins and grow earnings as it increases density in established markets. However, a risk exists that Vacasa’s investments might not succeed.

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About the instructor:

John Barr is a Co-Manager of the Needham Growth Fund (NEEGX). He has been its Co-Manager since January 2010. He also manages the Needham Aggressive Growth Fund (NEAGX). John started on Wall Street in 1995 with Needham as a sell-side analyst following technical software companies, including electronic design automation (EDA) companies. John rejoined Needham in 2009 because of the culture, which lives and breathes growth companies and long-term investing.

From 2000 – 2002, John was a managing director and senior analyst at Robertson Stephens, following semiconductor technology companies. He was an Institutional Investor All-Star and was ranked by Reuters as leader of one of the top software teams. In 2002 John moved to the buy-side and joined Buckingham Capital Management where he served as a portfolio manager and analyst for their diversified industry long/short domestic equity hedge fund.

John’s first career was outside of Wall Street, where he spent 14 years in sales, marketing and management, primarily in the EDA industry. Working in these small companies makes him think like an owner and to look for that trait in his investments. John loves the challenge of identifying businesses with compounding characteristics and getting to know the companies over the course of years. From his industry experience, he looks to invest in companies that he would have liked to have been part of.

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