Jul 26, 2019
Today’s conversation is with Tom Russo, the master of consumer
brand investing, and two of our best students, Jeffrey Johnson and
Michael Allison. We’re talking about the 5x5x5 Student Investment
Fund and having a deep discussion about some of the specific stocks
in the portfolio. The concept for the 5x5x5 fund came out of Tom’s
concern that conventional investment funds for students offered
limited learning potential due to their short-term nature and was
made possible by a generous gift given by him and his wife,
Georgina.
The 5x5x5 fund is run by the students of the Value Investing
course at Columbia Business School, with ideas being submitted by
the students each year. Students then have the opportunity to
connect value-oriented investment theories to real-world practice
as they participate in the management of the fund. Importantly,
they are also connected with alumni and are afforded valuable
networking opportunities. At the end of five years, the
inflation-adjusted original amount is invested back into the fund
and any other gains will be used to support scholarships for
traditionally under-represented members of the class.
On this episode, Tom, Jeff, Mike, and I discuss how the 5x5x5
Student Investment Fund got started, how this fund differs from
student funds at other schools, what goes into the investment
decisions, how participation in the fund benefits students, why
some of this year’s investments were selected, and so much
more!
Key Topics:
- The 5x5x5 nature of the student value investing fund
(2:24)
- The multiple benefits to be derived from the fund (3:29)
- How 5x5x5 will become self-funding (4:01)
- The investment selection process (4:34)
- Why Tom is proud of the tough questions raised by students
(5:28)
- Why it’s so important to monitor how your original thesis is
playing out (5:46)
- Some of the notable investments in the history of the portfolio
(6:07)
- How student participation in the fund can lead to important
networking opportunities (6:50)
- A deep dive into some of the companies in the fund (8:30)
- Why Tom is excited about the poor performance of the
international stocks in the portfolio (11:01)
- The five stocks that made it into the portfolio this year
(13:15)
- Jeff’s pitch for adding Booking Holdings to the 5x5x5 portfolio
(14:09)
- The business model and competitive advantages of Booking
Holdings (15:19)
- How Booking Holdings differentiates itself from Expedia
(19:24)
- What Booking Holdings is investing its free cash flow into
(21:45)
- Why Jeff chose to pitch Booking Holdings (22:57)
- Jeff’s analysis of Booking Holdings’ valuation (24:53)
- What you can learn by comparing where an industry is in
relation to GDP (26:08)
- The growth potential of Booking Holdings’ Airbnb-type listings
(30:24)
- Mike’s pitch for adding Becle, S.A.B. de C.V. (“Cuervo”) to the
5x5x5 portfolio (31:56)
- How the limited supply of blue agave is impacting Cuervo’s
valuation (33:16)
- The governance, ownership structure and long-term growth
potential of Cuervo (37:53)
- Why the tequila industry is experiencing such consistent growth
(39:33)
- Mike’s analysis of Cuervo’s valuation (44:39)
- The story behind the acquisition of Bushmills whiskey
(48:02)
- Winter Li’s pitch for adding Rollins to the 5x5x5 portfolio
(51:41)
- Rollins’ competitive advantages (52:56)
- Winter’s analysis of Rollins’ valuation (53:58)
- And much more!
Mentioned in this Episode:
Thanks for Listening!
Be sure to subscribe on
Apple,
Google, Spotify,
or wherever you get your podcasts. And feel free to drop us a line
at valueinvesting@gsb.columbia.edu.
Follow the Heilbrunn
Center on social media on Instagram,
LinkedIn, and
more!