killer article! I think they’d be well served to raise the gasoline tax and drop the toll booths around Boston. Perhaps it could relieve some of the traffic congestion and improve the efficiency of bus routes in the city? I’d also be keen to see how the MBTA pension liability compares to comparable US cities. Thanks for sharing your insight.
Great post. I’m really keen to see if college football expands the playoff system (8 teams maybe) as the next driver of cashflow to the organization. It’s really the only other NCAA sport which does not compete with minor league teams (baseball, hockey) for professional recruiting.
Either way, you’re comments about the hypocrisy of the organization is spot on. Reading about the cronyism and abuse amongst some of their less honorable officials makes my skin crawl.
Killer memo. I especially like the discussion of risk-sharing through joint venture arrangements. A few random questions (for discussion over a beer):
(1) Is midstream capacity increasing or decreasing?
(2) Are anchor tenents typically a bottom quartile producer on the cost curve, or is scale (hence volume) a more prized attribute?
(3) Why don’t downstream producers backward integrate into transport? I would think their cost of capital is cheaper than hedging the additional volatility.
(4) How are midstream companies valued? On an EV/Volume basis, or more traditional approach?
Keyur, loved the piece. Especially about the corporate credo. It was simple and principled to encourage consistent execution. Couple of random questions (feel free to find me in class instead of penning a long reply):
(1) Are you bullish on the growth prospects for Med Devices + Pharma in the next 10 years? I would guess their is a healthy tension between aging baby-boomers and the wave of health care reform designed to slow costs.
(2) What are the biggest sub-categories in Med Devices? Are they concentrated or diversified in terms of revenue by organ system/disease/etc?
(3) How are acquisitions underwritten? Is there a valuation range J&J thinks is the sweet spot? Do they take minority positions?
Hey Carlo, great piece. What stood out to me most was Fred Smith’s application of comparative advantage. He strongly believed that the market was underserved, subsequently focusing on narrow specialization. This drive, compounded over the decades, enabled FedEx to build a globally dominate market position. One thing I’ve always wondered, is what types of goods are increasing overall airfreight volume. Will they continue in the next decade? I’ve heard seafood is a huge category for airfreight logistics, but don’t have data to back up the claim.
Great analysis, Alex. You’re spot on; rising land prices in Mato Grosso and Goias are pushing the herd toward intensified feeding, but it’s still less than 10% of animals slaughtered each year. Brazil Foods is a good example of consolidated, integrated livestock production that makes significant $ in the export markets. It will be interesting to see your country soak up booming protein demand from Asia in the next 20 years.