This article is excerpted from a letter by MOI Global instructor Mark Walker, Managing Partner at Tollymore Investment Partners, based in London.
“When I’m wrong, I change my mind. What do you do?”
–John Maynard Keynes
We initiated a position in TRIP in September 2016 for $61. We sold our final shares in the business in November 2019 for $32. Over the duration of our holding, TRIP has had the largest weighting of any stock, averaging 12.8% of assets under management. Despite the large difference between the initial acquisition price and the final sale price, TRIP has detracted only very slightly from Tollymore’s cumulative results; the average purchase price was $44 and the average sale price $43. While reasonable portfolio management mitigated the potential for permanent dollar impairment of partners’ assets, we have, of course, suffered a significant opportunity cost of investing in TRIP. And we have made fundamental errors of judgment from which we seek to learn.
TRIP makes money by generating traffic, converting that traffic into a monetisable event (an advertising lead or booking), and charging an auction-based price for such conversion. We saw a significant monetisation opportunity given the huge global influence TRIP has on billions of travel decisions globally, and the low customer acquisition costs TRIP enjoys as a result of its trusted, top-of-funnel brand. The company saw this opportunity too. Management embarked on multiple methods of stemming the company’s economic leakage – from Instant Book to media advertising. While these initiatives depressed near term operating results, we contended they were sensible efforts to materially improve the company’s long run earning potential.
What really excited us about TRIP was the potential to connect existing demand (500mn unique monthly visitors) to acquired or developed supply in adjacent verticals (experiences and dining). In so doing TRIP could leapfrog the chicken and egg problem associated with nascent platform business models. We remain excited about this potential.
However, our enthusiasm for the prospects of TRIP’s hotels business has waned. With hindsight, we were the proverbial boiling frog in recognising the escalating challenges faced in the core meta business. We underestimated (1) the declining utility of meta to consumers, and (2) the size of the advantage afforded to Google as a result of being positioned just a few inches closer to the consumer.
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Disclaimer: The contents of this document are communicated by, and the property of, Tollymore Investment Partners LLP. Tollymore Investment Partners LLP is an appointed representative of Eschler Asset Management LLP which is authorised and regulated by the Financial Conduct Authority (“FCA”). The information and opinions contained in this document are subject to updating and verification and may be subject to amendment. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this document by Tollymore Investment Partners LLP or its directors. No liability is accepted by such persons for the accuracy or completeness of any information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained in this document. The information contained in this document is strictly confidential. The value of investments and any income generated may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to future performance.
About The Author: Mark Walker
Mark Walker is the Managing Partner of Tollymore Investment Partners, a private investment partnership investing in a small number of exceptional businesses to compound clients’ capital over the long term. Prior to founding Tollymore Mark was a global equity investor for Seven Pillars Capital Management, a long-term global value investing firm based in London. Mark joined Seven Pillars from RWC Partners, where he was part of a two-person team managing a newly launched, long term global equity fund. Prior to that Mark worked as an investment research analyst for Goldman Sachs and Redburn Partners. He is a qualified chartered accountant, and graduated from Edinburgh University with a First Class MA Honours degree in Economics, graduating first in his class.
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