This article is authored by MOI Global instructor Todd Wenning, a senior investment analyst at Ensemble Capital Management, based in Burlingame, California. Visit Ensemble’s Intrinsic Investing website for additional insights.
As discussed on our Fall 2018 Conference Call, we owned shares of pet insurance company Trupanion in our core equity strategy. In July, we sold our shares prior to Trupanion’s earnings and wanted to provide an explanation of that decision.
Trupanion was an “emerging moat” position in our portfolio. With emerging moat businesses, we are looking to be early investors in companies that are in the process of establishing durable competitive advantages. Given the higher uncertainty around emerging moat companies, they are intentionally small positions in our portfolio.
The ideal situation is to own a rule breaker on its way to becoming a Rule Maker.
Netflix is a perfect example of this dynamic. For most of its history, Netflix was breaking the rules of traditional media on its way to becoming the first global scale media company. Having proven that model, legacy content creators like HBO and Disney are trying to replicate it.
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About The Author: Todd Wenning, CFA
Todd is a senior investment analyst at Ensemble Capital. Before joining Ensemble, Todd was an analyst at Johnson Investment Counsel, where he worked on the firm’s SMID cap strategy. Prior to that, Todd was a sell-side analyst at Morningstar, where he led Morningstar’s equity stewardship methodology and covered companies in the basic materials, industrials, and consumer sectors. Earlier in his career, Todd worked for The Motley Fool, SunTrust Asset Management, and Vanguard. He holds a BA in History from Saint Joseph’s University in Philadelphia and the Chartered Financial Analyst designation.
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