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Deep Dive

Related: Summary Learning: The Investment Memo; 📈Public Equity Investment Memo; Opportunity Canvasing

Similar to an investment memo, a deep dive is your overall thinking about a specific company or investment opportunity including your notes, models, and evolving hypothesis. The key difference between a memo and a deep dive is typically that a memo is meant to follow a specific structure that drives towards action; you read a memo and have an answer to the question "therefore, what?" A deep dive is a library of knowledge; there may not always be a resulting action but the reader will walk away significantly more informed on the topic.

The reason you create a deep dive is often after you have gone through the process of Opportunity Canvasing and have identified a key trend within a broader theme that is interesting. For example, your canvas might have led you to the e-commerce market and you read the statistic the total online sales have increased their growth rate from 9% to 30%+ in the first half of 2020. That is a trend that feels worth investigating. The more you investigate it you may develop a thesis like "if people are selling online they're going to need tools to help them do that." So you decide to investigate Shopify. Now Shopify becomes the subject of your deep dive. Your deep dive may be more broad like "E-commerce Technology Vendors" where you want to lay out the entire landscape.

Creating a deep dive is an opportunity to gain a deeper understanding of a specific company, and can be a valuable resource to some of these companies as well. The ability to correctly profile a company is a valuable skill for your own analysis and for the companies you work with.

There is a never-ending list of ways you can go about developing a deep dive. There also isn't always a clear outline for what is important until you immerse yourself in the content available. Here are some approaches you might take.

Key Research

General Search

Google is your best friend. (see Research)

Try phrases like

"what does [COMPANY] do?"
"[COMPANY] alternatives"
"[COMPANY] product demo"
"[COMPANY] pricing"

Review Google Trends to see if any relevant key words about the company have been increasing / decreasing in popularity
Review Glassdoor looking for hints about company culture, both the good and the bad
Review G2, Capterra, or vertical-specific review sites; anywhere customers would leave reviews or opinions of the company's products or services
Review YouTube looking for both product demos and interviews with people discussing the company or market

Secret Research Techniques

Hello! A short, non-healthcare related issue today that I thought might be interesting. Over the years I've found some research "hacks" to be helpful that I thought I would share with you all. I won't share all of them, cause that would put me out of a job :) Two types of google searches are very helpful to me.

outofpocket.health

Specific Filings

If the company is public you should be able to find different public reports the company has filed, often by searching "[COMPANY] investor relations."
You may also be able to get access to analyst research on these companies through things like CapIQ

Personal Interviews

Two key ways you can get first-hand perspective is to seek out (1) people with relevant knowledge and experience, and (2) other investors that focus on that particular category.
If I were diving deep into "behavioral health" as an industry I would search that exact phrase in LinkedIn and try and find anyone I know with relevant experience

Building a Framework

Key Questions

Throughout this entire research process you should be keeping a running list of questions that you have. Some of them may be very specific like "What does SAML mean?" Some may be more general like "Why are there so many players in this market?"
Over time you'll strike out some of those questions because you'll continue to do research and answer them. Over time you'll be left with what is likely a list of some of the most difficult questions to answer

Market Dynamics

see: 🏘️Evaluating a Market

Pay attention to the aspects of the market that affect every player. This could include changing consumer preferences (e.g. no one wants to own music anymore), or regulatory impact (e.g. every state has their own regulation around pre-fabricated housing)
Try to paint a picture of the most important "things to know" about this market that should come to define the way you think about this market and whether those components are good, bad, or neutral

Key Players

see: 📐Evaluating Competition

One of the most critical parts of actually being informed on a given space or company is a familiarity with relevant names and how they relate to each other.
The flip side is also true. The fastest way to identify whether or not someone is actual knowledgeable on a particular space is to ask them about names you know are relevant and they're not familiar with them at all.
As you come across relevant names you should try and keep a running list as well as an attempt at categorization in terms of what that player does in particular. It's okay to have one name show up in multiple categories. Often a company will not only do one thing in a market so it's important to understand the overlap.

Differentiation

see: 📐Evaluating Competition

You're not only trying to generally understand how these names relate to each other, but if you have a specific target in mind you're paying particular attention to what makes that name unique.
Alternatively, if you know you want to investigate "e-commerce technology providers" but you don't yet know what is interesting you're paying attention to "what seem like the most interesting parts of this market to play in?" Maybe email marketing is commoditized and uninteresting but customer demand prediction is more interesting.

Key Drivers

see: 🎤Evaluating Financials + Key Metrics and 🎚️Understanding the Drivers of a Model

Always be thinking about what the most important drivers are in this market. If you're diving deep into software for customer service call centers you'll realize that some critical components are:

# of call center agents
Avg. revenue per agent
Hours per month of agent calls (because some vendors charge for usage hours)

Any market will have unique drivers that often make up the very high level thinking within a given market

The Output

Usually after you've immersed yourself in all this information you need to somehow summarize it. This can evolve into two outputs: (1) summary for yourself, and (2) summary for other people.

For Yourself

The best way to do this deep dive and then have it available to you is through a note-taking system (see Taking Notes). All the individual pieces of information should be connected to other ideas you spend time thinking about.

For Other People

You could take a few different approaches to creating a summary output to share. You could create a long-form written summary (most of the examples below follow that model.) You could also create a market map presentation; basically a powerpoint outline of the market that explains the players and their relation to each other, the key considerations, and areas that you think are most interesting. What the one-slide market maps are typically focused on is bucketing different players into different categories. They're typically missing a lot of the information you could include in a broader write-up.

Some examples of limited market maps: E-Commerce Enablers, Remote Work

Better example of a market map + deep dive context: Creator Economy Market Map

The best outputs are those that become evergreen content, something that provides real value, is high quality, and can be shared over and over again. One great example of this is "The Makings of a Multibagger" by the Alta Fox Capital intern class of 2020:

<<< Even more interesting when you can find a business that is more under the radar than most. You want to add unique perspective in the work that you do and sometimes being the thousandth person to write about Facebook won't be as helpful as finding something less trafficked.

Examples

For more detailed deep dives into specific companies, see Company Deep Dives

💹Public Equity

Part l: A History of Visa - Mine Safety Disclosures

INTRODUCTION Visa is one of the biggest companies in the world. Cards bearing the Visa logo are used more than 340 million times every day. And the Visa brand is one of the most-recognized on the planet.

minesafetydisclosures.com

Part l: A History of Visa - Mine Safety Disclosures

Workday (WDAY)

Workday, Inc. (WDAY)Market Cap: $42.5 BillionAnnual Revenue: $3.8 billion3 Yr. Avg. Revenue Growth: 31.7%PE Multiple: 78.7Dividend Yield: n/aRecent Price: $180.67Fair Value Estimate: $180 The Business Workday develops cloud-based human capital management (HCM) and financial management applications for large and medium-sized businesses.

mikesandrik.com

AT&T

Written by Luke Poling (reach out to ryan@investingcity.org if interested in contacting Luke) Thesis AT&T pays investors to wait for upside. The company provides a safe, yet bountiful 7% yield while also having significant potential upside as the Time Warner acquisition begins a new era of growth. History Alexander Gra

www.investingcity.org

What is Amazon?

What exactly is Amazon? This is the question that has consumed me for the last ten years. I have sold to and bought from Amazon in about as many ways as one person can; I built an auto parts brand ...

zackkanter.com

Deep Dive on Uber

Uber has become a verb. When we search for something on the internet, we google it. When we want to avoid the hassle of parking in NYC, we Uber over to meet our friends. The narrative of "verb" investing is powerful enough to create a compelling and engaging investing thesis.

mbi-deepdives.com

Spotify: A Case Study in Business Strategy and Value Compounding | MOI Global

"If you focus on near-term growth above all else, you miss the most important question you should be asking: Will this business still be around a decade from now? Numbers alone won't tell you the answer; instead, you must thing critically about the qualitative characteristics of your business."

moiglobal.com

Spotify: A Case Study in Business Strategy and Value Compounding | MOI Global

Agora: Democratizing Real-Time Engagement

I recently started a position in new IPO Agora $API or commonly referred to as the "Twilio of China". I generally dislike buying the "x" of "y" but while researching Agora, I discovered that it is far from just a Twilio clone.

richardchu97.substack.com

Agora: Democratizing Real-Time Engagement

Thoughts on Sea Limited

I've become very excited about Sea Limited over the last 6 months, so I wanted to do a write-up of my thoughts and observations here. (Disclaimer: I own stock in Sea Limited (NYSE: SE) so I have an interest in the company performing well.

julieyoung.substack.com

A Short History of MongoDB

Pete DeJoy | July 31st, 2020 In 2007, Eliot Horowitz, Dwight Merriman, and Kevin Ryan had just had their adtech startup acquired by Google and were looking for their next challenge.

petedejoy.com

Peloton

Enjoy this free breakdown. If you want more, consider subscribing. Peloton sells premium exercise bikes and more recently, has started selling treadmills. $2,245 for the former and $4,295 for the latter. The company has a certain caché to it. For instance, check out this funny Twitter thread that went viral last year.