TIP820: WIX: The Most Asymmetric AI Bet? w/ Daniel Mahncke & Shawn O’Malley

**SPEAKER_1** (0:00)
You're listening to TIP.

**Shawn O'Malley** (0:03)
How are you feeling about today's company?

**Daniel Mahncke** (0:05)
I'd say it's a controversial one. It doesn't help that earnings actually send it down 30 percent last week.

**Shawn O'Malley** (0:10)
Does that mean the thesis is broken?

**Daniel Mahncke** (0:12)
No, I don't think so. I think it's a hit or miss case. If Wix is still relevant in, let's say, five years, I think it will most likely have been a multi-bagger from today's prices.

**Shawn O'Malley** (0:21)
It doesn't sound like you'd be surprised though if the company is just completely gone then either.

**Daniel Mahncke** (0:25)
No, I wouldn't be. Got to be honest there.

**Shawn O'Malley** (0:29)
When you first told me you'd cover Wix, I thought I would never make it into the portfolio. But I mean, some of the stats you send me are impressive.

**Daniel Mahncke** (0:35)
I thought so too. But if you just look at the numbers and also the business case that I'm going to make, hopefully, I think it's a pretty interesting idea.

**Shawn O'Malley** (0:42)
Okay. Well, should we do it? Let's do it. Let's get into it.

**SPEAKER_1** (0:48)
Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you.
This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now, for your hosts, Shawn O'Malley, and Daniel Mahncke.

**Shawn O'Malley** (1:34)
We usually cover companies that are either well-known compounders or companies that have the potential to become well-known compounders. And obviously, the latter is even more attractive in some ways, but we've also bought some value plays for our portfolio before, like companies like Crocs and Ulta come to mind, and the hit rate on those hasn't been too bad. And as far as I know, today's pitch, Wix, sort of sits somewhere in between, right? Danny, I don't think you're pitching it because you think it's a buy and hold compounder. It's also not an asset-heavy, cigar butt type of business either. And in fact, when I look at the financials for Wix, they look more than solid. And it makes you wonder why this business is trading at one of the most depressed levels it's ever traded at.

**Daniel Mahncke** (2:16)
Yeah, Wix is a pitch that is somewhat out of the ordinary, I can say that. And it couldn't come at a more, let's say, controversial time because at the time of this recording, Wix actually just released earnings last week and they sent down the stock by 30%.
So that was quite a brutal market reaction. But it's also good for us because it's, you know, strengthening the value case of this pitch. And as I mentioned to you before, I don't think the earnings were thesis breaking, but you know, we're pitching 70 companies a year. So I thought, why not go with an opportunity like this one today? And you know, sometimes listeners ask us for process of finding companies and also deciding which companies we're actually going to pitch on the show. And I think in this case, Wix has loosely been on my radar for quite some time because Robert Vinal actually had it in his portfolio for quite some time. Funnily enough, though, just a couple of days ago, I checked and I saw that he sold his stake, which was also quite sizable at about 7% of his portfolio. On the other hand, though, Henry Ellenbogen just invested in the company. And as you can guess by the name of his fund, which is Durable Capital, he only invests in companies that he sees have long term value and an opportunity for let's say the next decade. So I think we'll see who is right in the long run. And on a more personal level, I saw my friend, Manuel Cunha, pitching the stock more recently. And I respect him as an investor. So I thought, you know, if he brings it back to my radar, it's probably time to look at the company. I've also linked to his research on Wix in the episode Show Notes. So if you want to check that out, you can do that there. And also as a former user, and then someone who has had the company on his radar for a while without doing any research, though, I just felt like maybe now is the right time to look at it, especially after, you know, the stock pretty much beaten up this year. So but as you said, before we do that, I want to give the disclaimer this time that I see this as a value opportunity. Of course, you know, things can always go well for Wix, just like, you know, for any other company, and then becomes this, you know, more entrenched ecosystem player that actually starts compounding. But if I look at it today, I would mostly do that through the value lens. So this company, I think I can say that has no moat, but I've made good money before on businesses or companies that don't have a moat. So yeah, I think if you know what you do, I wouldn't say that's a kill quaternion for me.