Connor Leonard - Capital Light Compounders & Reinvestment Moats - [Invest Like the Best, EP.64]

This week’s conversation is an ode to old school, fundamental public market investing. My conversation is with IMC’s Connor Leonard, who spends most waking hours thinking and reading about markets. His mandate is to invest purely as if it was his own money, with no pressure to hug a benchmark, and no pressure to do much of anything other than earn strong long-term returns. The portfolio that results from this approach is highly concentrated and unique. Connor’s strategy is to sort companies into four categories based on their type of sustainable competitive advantage. As you’ll hear, the vast majority fall into the first category, which means they don’t have such an advantage and therefore should be largely set aside. We spend the majority of our conversation talking about the other three categories: 1) companies with a legacy moat, 2) companies with a re-investment moat, and 3) an interesting category Connor calls “capital light compounders,” which we explore in detail. When you step back and think about public markets, you realize how amazing it is that we can, from afar, buy an interest in so many companies around the world. A select few go on to deliver outstanding returns. This conversation highlights how hard that can be, but also how fun and ultimately rewarding. Please enjoy my talk with Connor Leonard. For more episodes go to InvestorFieldGuide.com/podcast. To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Books Referenced Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Links Referenced Pat Dorsey Podcast Episode David Tisch podcast Will Thorndike Podcast episode Show Notes 2:31 - (First Question) – Trends in value investing 2:52 – Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor 4:43 – A look at Connor’s backstory and the history of IMC, parent company of Golden Corral 8:01 – Why Connor loves the public markets so much 9:21 – The concept of intrinsic value when looking at companies 12:36 – How Connor categorizes MOATS 13:21 – Pat Dorsey Podcast Episode 14:27 – Legacy MOATS 16:11 – Reinvestment MOATS 17:58 – Capital light compounder MOAT 20:00 – Why classifieds are an interesting business model 25:12 – Looking at platform businesses 26:56 – Looking at companies in the 500 million to 5 billion range and what makes it so enticing 30:34 – What is the process that gets Connor to find investment opportunities 35:53 – David Tisch podcast 36:15 – How Connor looks at industry classifications 41:30 – Connor’s strategy for running his portfolio 46:36 – The circumstances in which Conno would buy a legacy MOAT company 46:49 – Will Thorndike Podcast episode 46:51 – The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success 49:21 – How do you pick managers that will beat the markets 52:21 – Second reason to buy a legacy MOAT 54:48 – Comparing the reinvestment MOAT and Capital A compounder in Connor’s portfolio 58:16 – Connor’s Mt Rushmore of Capital Allocators 1:00:03 – Impactful mentorships for Connor 1:01:52 – kindest thing anyone has done for Connor 103:04 – What in the discussion with founder of IMC got him the job Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag