“Never, ever, think about something else when you should be thinking about the power of incentives.” – Charlie Munger
The Owner-Operator Advantage and Our Portfolio Focus
- Breach Inlet Capital prioritizes long-term returns for our Partners
- We favor “owner-operator” businesses where the CEO and/or Chairperson owns significant equity and is often the founder
- Insiders’ large ownership stakes sharpen focus on value creation and increase alignment with us as minority shareholders
- We consider aligned operators tend to be less myopic, as they prioritize long-term growth vs. beating Wall Street’s quarterly estimates
- Owner/operators think independently and avoid the herd mentality of peers
- We believe the owner-operator approach has a positive impact on company fundamentals and thus equity values over the long-term
Owner-Operator Mentality Leads to Better Capital Allocation
We believe owner-operators spend excess cash like it’s their own, because it truly is. Value maximizing capital allocation decisions include, but are not limited to:
- Repurchasing shares
- Special dividends
- Value-accretive M&A
- Strategic usage of debt
- Internal investments
Our Portfolio Companies with Owner/Operators
- IES Holdings (IESC)
- Leading installer of integrated electrical systems in data centers, e-commerce warehouses, high-tech manufacturing facilities, and residential homes
- Intermex (IMXI)
- Leading provider of money transfer services from the U.S. to Latin America
- OneWater Marine (ONEW)
- Leading retailer of premium boats in the US
- Tiptree (TIPT)
- Holding company that primarily owns Fortegra, a leading provider of specialty insurance and warranties
IES Holdings (IESC)
- Chairman/CEO Jeff Gendell owns 58% of IESC
- Gendell’s equity stake is worth $600mm+, dwarfing his $825K salary
- Executive compensation primarily tied to rolling 3-year cumulative earnings
- Since Gendell named Chairman in Nov ’16, IESC deployed ~$150mm into accretive acquisitions and ~$60mm into opportunistic share repurchases
- As a result, IESC generated a 25%+ EPS CAGR and 20%+ annualized shareholder return since 2016
Intermex (IMXI)
- Tenured CEO Bob Lisy owns ~3% of IMXI
- Lisy’s equity stake is worth $25mm+ or ~25x his annual salary
- Most of his compensation (80%+ in 2022) is variable and linked to profit growth
- Since Lisy and the Board approved a buyback in 3Q21, IXMI already repurchased $67mm or ~8% of shares outstanding
- Due to Lisy’s thoughtful leadership and a superior business model, IMXI generated a 35%+ EPS CAGR since 2017 and 20%+ annualized shareholder return since its 2018 IPO
One Water Marine (ONEW)
- Founder/CEO Austin Singleton owns ~10% of ONEW
- Singleton’s equity stake is worth $50mm+ or 70x+ his annual salary
- His long-time COO (Anthony Aisquith) owns ~4% of ONEW
- Most of their compensation (80%+ in 2022) is variable and linked to profit growth
- Since 2016, they have deployed $386mm into attractive acquisitions
- In turn, ONEW generated a 60%+ EPS CAGR since 2017 and ~30% annualized shareholder return since its 2020 IPO
Tiptree (TIPT)
- Founder/Executive Chairman Michael Barnes owns 27% of TIPT
- Barnes’ equity stake is worth $140mm+ or 140x+ his annual salary
- Most of his compensation is tied to TIPT’s share price rising materially
- Since 2017, TIPT’s primary asset (Fortegra) produced a 25% adjusted earnings CAGR
- Fortegra’s high growth and Barnes capital allocation led to TIPT generating an annualized shareholder return of 15%+ over the past five years
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This information is not complete and is only current as of the date hereof and may be superseded by subsequent market events or for other reasons. This information is not investment advice and is not a recommendation to purchase or sell any specific security. All opinions herein are those BICM. BICM does not make any representations or warranties as to the accuracy or completeness of the information including that obtained from third parties or which is provided in third-party sites linked in this presentation.
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