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InsideArbitrage
Stryker $SYK Acquires Inari Medical $NARI in an All-Cash Deal Worth $4.9 Billion :
🩺Under the terms of the agreement, Stryker will commence a tender offer for all outstanding shares of Inari’s common stock for $80 per share in cash, representing a premium of 60.74% from the stock’s last close.
🩺The deal is expected to close by the end of the first quarter of 2025.
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Stryker $SYK Acquires Inari Medical $NARI in an All-Cash Deal Worth $4.9 Billion :
🩺Under the terms of the agreement, Stryker will commence a tender offer for all outstanding shares of Inari’s common stock for $80 per share in cash, representing a premium of 60.74% from the stock’s last close.
🩺The deal is expected to close by the end of the first quarter of 2025.
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Hidden Value Gems
Food for thought from Ruchir Sharma via @FT
🧵 👇🏼
Ten trends to watch in 2025
1️⃣ Return of the contrarians
History shows that the global economy and markets move in cycles, not straight trend lines. Contrarian investing is rooted in these patterns.
1/11 https://t.co/wkMwOKI2Lp
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Food for thought from Ruchir Sharma via @FT
🧵 👇🏼
Ten trends to watch in 2025
1️⃣ Return of the contrarians
History shows that the global economy and markets move in cycles, not straight trend lines. Contrarian investing is rooted in these patterns.
1/11 https://t.co/wkMwOKI2Lp
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Startup Archive
Naval Ravikant: “The future will be almost all startups”
“I firmly believe that the efficient size of a company is shrinking very rapidly, and so the future will be almost all startups.”
In the clip below from a 2012 interview, Naval speculates that information technology will reverse the centralizing force of economies of scale following the Industrial Revolution.
“I think the contract work trend is going to increase, and I think the size of your average company is going to decrease. I think we’re going to see more and more billion dollar businesses built by four or five people, and it’ll stay at that.”
He doesn’t think we’ll see many more companies like Facebook or Google with tens of thousands of employees:
“I think any entrepreneur worth their salt could today build Facebook with a few hundred people… Facebook and Google are in the situation that large companies end up in where the founders know that 80% of the people are not really needed, they just don’t know which 80%.”
Video source: @PandoDaily (2012)
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Naval Ravikant: “The future will be almost all startups”
“I firmly believe that the efficient size of a company is shrinking very rapidly, and so the future will be almost all startups.”
In the clip below from a 2012 interview, Naval speculates that information technology will reverse the centralizing force of economies of scale following the Industrial Revolution.
“I think the contract work trend is going to increase, and I think the size of your average company is going to decrease. I think we’re going to see more and more billion dollar businesses built by four or five people, and it’ll stay at that.”
He doesn’t think we’ll see many more companies like Facebook or Google with tens of thousands of employees:
“I think any entrepreneur worth their salt could today build Facebook with a few hundred people… Facebook and Google are in the situation that large companies end up in where the founders know that 80% of the people are not really needed, they just don’t know which 80%.”
Video source: @PandoDaily (2012)
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InsideArbitrage
Getty Images $GETY and Shutterstock $SSTK to Merge in a $3.7 Billion Deal -
📸Shutterstock shareholders can choose one of three options at closing: $28.85 in cash per share, 13.67 shares of Getty Images stock per share, or a combination of 9.17 Getty Images shares and $9.50 in cash per Shutterstock share.
📸The merged company will be called Getty Images Holdings, Inc. and will keep trading on the New York Stock Exchange under the symbol “GETY.”
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Getty Images $GETY and Shutterstock $SSTK to Merge in a $3.7 Billion Deal -
📸Shutterstock shareholders can choose one of three options at closing: $28.85 in cash per share, 13.67 shares of Getty Images stock per share, or a combination of 9.17 Getty Images shares and $9.50 in cash per Shutterstock share.
📸The merged company will be called Getty Images Holdings, Inc. and will keep trading on the New York Stock Exchange under the symbol “GETY.”
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InsideArbitrage
Cintas Makes $CTAS $5.1 Billion Takeover Offer for Uniform Supplier UniFirst $UNF - WSJ
👔Cintas proposed acquiring all of UniFirst’s outstanding common and Class B shares for $275 apiece, in cash.
👔Cintas plans to publicize its offer imminently after UniFirst’s board refused multiple times to engage further in any deal talks.
👔UniFirst's discussions with Elis SA in October 2024 had ended without the companies reaching any agreement.
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Cintas Makes $CTAS $5.1 Billion Takeover Offer for Uniform Supplier UniFirst $UNF - WSJ
👔Cintas proposed acquiring all of UniFirst’s outstanding common and Class B shares for $275 apiece, in cash.
👔Cintas plans to publicize its offer imminently after UniFirst’s board refused multiple times to engage further in any deal talks.
👔UniFirst's discussions with Elis SA in October 2024 had ended without the companies reaching any agreement.
Elis SA made an informal takeover proposal to U.S. peer UniFirst $UNF - Bloomberg
⏩UniFirst reached out to Elis to gauge its appetite for a deal after Elis’s takeover approach to rival Vestis $VSTS became public last month.
⏩Elis made a non-binding proposal for UniFirst, whose board rejected it in recent days, and the companies aren’t currently in talks.
⏩It remains to be seen whether the interest in UniFirst will be revised. tweet
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Stock Analysis Compilation
Orbis on HDFC Bank $HDB US
Thesis: HDFC Bank combines robust market share growth and a strategic merger, presenting a compelling value opportunity amidst temporary earnings pressure
(Extract from their Q3 letter) https://t.co/rNXDFIdNIS
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Orbis on HDFC Bank $HDB US
Thesis: HDFC Bank combines robust market share growth and a strategic merger, presenting a compelling value opportunity amidst temporary earnings pressure
(Extract from their Q3 letter) https://t.co/rNXDFIdNIS
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Dimitry Nakhla | Babylon Capital®
8 months ago I stated:
“Today at $300💵 $LULU appears to be worthwhile consideration for investment”
Since then, $LULU shares gained +37% ✅*
As I suggested in the post attached below👇🏽
“$LULU can demand a >20x multiple IF it beats growth estimates over the next few years, signaling that the sell-off due to competitive pressures may be overdone
I don’t believe it’s unreasonable to rely on ~22x (especially given $LULU return metrics, balance sheet, & strong history of growth — $LULU has grown its revenues ANNUALLY since 2007 🤯)
Today at $300💵 $LULU appears to be a worthwhile consideration for investment — albeit with several competitive risks (and how $LULU responds) that should be monitored closely”
*The analysis on $LULU was met with a -20% downturn shortly after. However, investors who maintained conviction in the company's strong foundation were ultimately rewarded. This serves as a reminder that, despite market fluctuations, well-researched investments with strong fundamentals can yield long-term success
A sober valuation analysis on $LULU 🧘🏽♂️
•NTM P/E Ratio: 21.14x
•10-Year Mean: 35.94x
•NTM FCF Yield: 3.80%
•10-Year Mean: 2.16%
As you can see, $LULU appears to be trading below fair value
Going forward, investors can receive ~70% MORE in earnings per share & ~75% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $LULU is a good business
BALANCE SHEET✅
•Cash & Short-Term Inv: $2.24B
•Total Debt: $1.40B
$LULU has an excellent balance sheet
RETURN ON CAPITAL✅
•2020: 32.5%
•2021: 23.8%
•2022: 37.4%
•2023: 40.4%
•2024: 39.0%
RETURN ON EQUITY✅
•2020: 38.0%
•2021: 26.1%
•2022: 36.8%
•2023: 29.0%
•2024: 42.0%
$LULU has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2014: $1.59B
•2024: $9.62B
•CAGR: 19.72%
FREE CASH FLOW✅
•2014: $171.93M
•2024: $1.64B
•CAGR: 25.33%
NORMALIZED EPS✅
•2014: $1.91
•2024: $12.77
•CAGR: 20.92%
SHARE BUYBACKS✅
•2014 Shares Outstanding: 146.04M
•LTM Shares Outstanding: 127.06M
By reducing its shares outstanding ~13%, $LULU increased its EPS by ~15% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 58.3%
•LTM Operating Margins: 22.9%
•LTM Net Income Margins: 16.1%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~70% MORE in EPS & ~75% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $LULU has to grow earnings at a 10.57% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over next few years to be slightly above the (10.57%) required growth rate:
2025E: $14.16 (10.9% YoY) *FY Jan
2026E: $15.86 (12.0% YoY)
$LULU has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $LULU ends 2026 with $15.86 in EPS & see its CAGR potential assuming different multiples:
25x P/E: $396.50💵 … ~19.2% CAGR
24x P/E: $380.64💵 … ~16.2% CAGR
23x P/E: $364.78💵 … ~13.1% CAGR
22x P/E: $348.92💵 … ~10.0% CAGR
As you can see, $LULU appears to have attractive return potential IF it can demand a >22x multiple
However, it’s important to keep in mind that it’s difficult to maintain a strong competitive advantage (over long periods of time) in the athletic apparel space & recent growth concerns amid increased competition is why $LULU stock is trading near the lowest end of its historical multiple range
$LULU can demand a >20x multiple IF it beats growth estimates over the next few years, signaling that the sell-off due to competitive pressures may be overdone
I don’t believe it’s unreasonable to rely on ~22x (especially given $LULU return metrics, balance sheet, & strong history of growth — $LULU has g[...]
8 months ago I stated:
“Today at $300💵 $LULU appears to be worthwhile consideration for investment”
Since then, $LULU shares gained +37% ✅*
As I suggested in the post attached below👇🏽
“$LULU can demand a >20x multiple IF it beats growth estimates over the next few years, signaling that the sell-off due to competitive pressures may be overdone
I don’t believe it’s unreasonable to rely on ~22x (especially given $LULU return metrics, balance sheet, & strong history of growth — $LULU has grown its revenues ANNUALLY since 2007 🤯)
Today at $300💵 $LULU appears to be a worthwhile consideration for investment — albeit with several competitive risks (and how $LULU responds) that should be monitored closely”
*The analysis on $LULU was met with a -20% downturn shortly after. However, investors who maintained conviction in the company's strong foundation were ultimately rewarded. This serves as a reminder that, despite market fluctuations, well-researched investments with strong fundamentals can yield long-term success
A sober valuation analysis on $LULU 🧘🏽♂️
•NTM P/E Ratio: 21.14x
•10-Year Mean: 35.94x
•NTM FCF Yield: 3.80%
•10-Year Mean: 2.16%
As you can see, $LULU appears to be trading below fair value
Going forward, investors can receive ~70% MORE in earnings per share & ~75% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $LULU is a good business
BALANCE SHEET✅
•Cash & Short-Term Inv: $2.24B
•Total Debt: $1.40B
$LULU has an excellent balance sheet
RETURN ON CAPITAL✅
•2020: 32.5%
•2021: 23.8%
•2022: 37.4%
•2023: 40.4%
•2024: 39.0%
RETURN ON EQUITY✅
•2020: 38.0%
•2021: 26.1%
•2022: 36.8%
•2023: 29.0%
•2024: 42.0%
$LULU has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2014: $1.59B
•2024: $9.62B
•CAGR: 19.72%
FREE CASH FLOW✅
•2014: $171.93M
•2024: $1.64B
•CAGR: 25.33%
NORMALIZED EPS✅
•2014: $1.91
•2024: $12.77
•CAGR: 20.92%
SHARE BUYBACKS✅
•2014 Shares Outstanding: 146.04M
•LTM Shares Outstanding: 127.06M
By reducing its shares outstanding ~13%, $LULU increased its EPS by ~15% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 58.3%
•LTM Operating Margins: 22.9%
•LTM Net Income Margins: 16.1%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~70% MORE in EPS & ~75% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $LULU has to grow earnings at a 10.57% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over next few years to be slightly above the (10.57%) required growth rate:
2025E: $14.16 (10.9% YoY) *FY Jan
2026E: $15.86 (12.0% YoY)
$LULU has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $LULU ends 2026 with $15.86 in EPS & see its CAGR potential assuming different multiples:
25x P/E: $396.50💵 … ~19.2% CAGR
24x P/E: $380.64💵 … ~16.2% CAGR
23x P/E: $364.78💵 … ~13.1% CAGR
22x P/E: $348.92💵 … ~10.0% CAGR
As you can see, $LULU appears to have attractive return potential IF it can demand a >22x multiple
However, it’s important to keep in mind that it’s difficult to maintain a strong competitive advantage (over long periods of time) in the athletic apparel space & recent growth concerns amid increased competition is why $LULU stock is trading near the lowest end of its historical multiple range
$LULU can demand a >20x multiple IF it beats growth estimates over the next few years, signaling that the sell-off due to competitive pressures may be overdone
I don’t believe it’s unreasonable to rely on ~22x (especially given $LULU return metrics, balance sheet, & strong history of growth — $LULU has g[...]