TIP649: Owning Stocks for the Long Run w/ Pierre-Olivier Langevin

Episode Summary

Executive Summary: Pierre Olivier Langevin of Medici explained how the firm’s committee-based, bottom-up investing process has helped Medici compound at 16% annually since 2009. He detailed their philosophy on moats, compounding, valuation, and independent thinking, then walked through key holdings—Dollarama, Meta, and O’Reilly—showing how durable advantages, reinvestment, and disciplined debate drive long-term returns.

Main Topics: Medici’s origin and investment philosophy (Priority: 5/5): Pierre described joining Medici early, when the firm had little track record, because of shared views on businesses as long-term compounding machines rather than pieces of paper. He emphasized learning from great investors and managing personal money as a sign of true investing commitment. Committee-based decision-making and research process (Priority: 5/5): Medici uses a five-member investment committee to review analyst research, challenge assumptions, and make buy/sell decisions. The committee is designed to balance decisiveness with error-checking and to avoid both groupthink and dictator-style decision-making. What makes a durable moat and a compounding business (Priority: 5/5): Pierre stressed that moats matter only if a business can reinvest capital at attractive returns. He argued that investors should focus on compounding power, not just historical cheapness, and that exceptional businesses often deserve higher valuations. Dollarama vs. Dollar General (Priority: 4/5): Pierre contrasted Dollarama’s high-margin, low-complexity general merchandise model with Dollar General’s consumables-heavy, promotion-driven, grocery-like format. He argued Dollarama’s structure, direct sourcing, private label mix, and simpler operations create a stronger moat and better margins. Meta’s recovery, AI opportunity, and capital allocation (Priority: 5/5): The discussion covered Meta’s 2022 slump, its operating leverage recovery, and the company’s long runway in AI-driven advertising efficiency, content recommendations, and new business tools. Pierre argued Meta still has a deep moat through scale, multiple platforms, and the ability to adapt to product shifts. O’Reilly Automotive as a market-share compounding story (Priority: 4/5): Pierre explained why O’Reilly can keep growing despite a mature market: superior distribution, store density, and service to repair professionals let it take share from weaker competitors. The business benefits from urgency-driven demand and strong recurring share gains. Talent and perspective from outside the traditional finance industry (Priority: 3/5): Medici values employees who did not come from conventional investing backgrounds because they may be less anchored to academic orthodoxy and more likely to question assumptions. Pierre said that in Canada especially, many industry participants are better at selling funds than investing in businesses.

Key Arguments: Exceptional returns come from buying great businesses with durable reinvestment opportunities, not simply buying statistically cheap stocks. An investment committee improves decision quality by forcing written theses, adversarial questioning, and disconfirming evidence searches. True moats are not static; the best businesses are those whose moats expand as capital is reinvested at high returns. Discounting valuation alone can be misleading for compounding businesses; a higher multiple may still be cheap if growth and reinvestment remain strong. Dollarama’s business model is structurally superior to Dollar General’s because it emphasizes low-cost sourcing, private label, no promotions, and operational simplicity. Meta’s core moat comes from scale across multiple dominant platforms, making it extraordinarily hard for challengers to compete on content, monetization, and safety/security investment. Meta’s recent spending on AI and infrastructure should be viewed as strategic capacity-building rather than waste, because it supports efficiency, monetization, and future product opportunities. O’Reilly’s edge is logistical and operational: fast parts delivery to repair professionals matters more than the lowest price in this category, enabling share gains from weaker players. Investors should be skeptical of businesses that everyone on the committee cannot independently challenge; lack of challenge may indicate the idea is too hard to understand. Buying winners and holding them through temporary overvaluation or volatility can be more profitable than prematurely selling great compounders.

Data Points: Medici annualized return since 2009: 16% - Firm performance cited at the start of the interview Benchmark annualized return since 2009: 11.3% - Comparison benchmark for Medici's track record Committee size: 5 members - Medici’s investment committee structure Full-time analysts on committee: 3 analysts - Of the five committee members, three focus mainly on stock research Typical portfolio size: 15-20 stocks - Medici maintains a concentrated portfolio Dollarama net margin: 7.17% - Referenced when comparing Dollarama to Dollar General Dollar General net margin: ~4% - Used to illustrate Dollarama’s stronger profitability Dollar General revenue from consumables: 81% - Explains lower-margin product mix Dollarama revenue from consumables: 46% - Supports higher-margin business mix Dollar General direct imports: 4% of revenue - Compared with Dollarama’s sourcing model Dollarama direct imports: 50% of products - Key operational advantage in sourcing and margins Dollarama Canadian store growth: 4-5% annually - Current organic store expansion rate in Canada Dollarama + Dollar City growth (pro rata): 7-8% annually - Includes Dollarama’s share of Latin American expansion Cost to open a Dollarama store in Canada: < $1 million - Illustrates low capital intensity Meta position contribution in 2023: 6 percentage points - Contribution to Medici’s returns in 2023 Meta share price in Nov. 2022: < $100 - Referenced as the low point during the downturn Meta share price today: just under $500 - Illustrates rebound in stock price Meta decline in 2022: 3 straight quarters of revenue decline - Context for investor concern during the downturn Meta employees laid off: 20% - Used to illustrate operating leverage and self-correction Meta cash balance: $46 billion - Cited alongside heavy spending and still-strong balance sheet Meta annual R&D spend: $37 billion - Used to show discretionary investment capacity Meta metaverse losses: $16 billion - Part of the spending discussion Meta CapEx: $27 billion - Infrastructure and AI capacity investments Meta EBIT margin pre-R&D and metaverse losses: ~80% - Shows underlying profitability before discretionary spending Meta return on capital: 15-20% - Pierre’s estimate of the business’s capital efficiency Meta buybacks: $63 billion - Zuckerberg’s repurchases during the period discussed E-commerce share of U.S. retail sales: 10% to 16% - Used to support Amazon’s long-term growth opportunity Dollar Tree stores in Canada: 250 stores - Compared with Dollarama’s much larger Canadian footprint

Pivotal Quotes: "The research is done by analysts... The reviewing is done by the committee and all the buy and sell decisions are done by the committee." — Pierre Olivier Langevin: Explaining Medici’s committee-driven investment process "If you want to be good at hockey, you should watch Connor McDavid or Sidney Crosby. That's the same thing for investment. You should watch Warren Buffett." — Pierre Olivier Langevin: Describing how Medici learned by studying the best investors rather than relying on theory alone "I don't believe in just sitting down and trying to dream it all up yourself. Nobody's that smart." — Pierre Olivier Langevin, quoting Charlie Munger: Used to justify collaborative investing and skepticism toward solo decision-making

Implications: For investors, the episode reinforces that durable compounding, not low valuation alone, drives exceptional long-term returns. It also shows how disciplined debate, independent thinking, and patience can help identify and hold rare businesses through volatility.