Bob Moser's core investment thesis, developed in college, is to identify fragmented real estate sectors at the inflection point when large, institutional investors begin to consolidate them. This strategy allowed him to get in early on manufactured housing and self-storage before they became mainstream, capturing significant upside.
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The REIT market transformed from four highly correlated sectors (office, industrial, retail, residential) to a diverse universe including data centers and towers. Secular risks like e-commerce mean subsectors no longer move in unison, demanding specialized analysis rather than general real estate knowledge.
Unsexy markets like plumbing or law have less competition, higher profit margins, and customers who are more receptive to expertise. This creates an environment for faster growth, akin to driving on an empty road.
The best consolidation returns come from identifying a fragmented industry before it becomes a popular PE theme. Entering in the "first inning" avoids competing with dozens of other platforms, which inevitably drives up acquisition multiples for both platforms and add-ons, eroding returns.
Resist the common trend of chasing popular deals. Instead, invest years in deeply understanding a specific, narrow sector. This specialized expertise allows you to make smarter investment decisions, add unique value to companies, and potentially secure better deal pricing when opportunities eventually arise.
Brad Jacobs's mentor taught him that correctly identifying long-term trends is paramount. You can excel at execution, but if you're swimming against the major current, you won't create significant value. This principle guided Jacobs in selecting industries for his eight billion-dollar companies.
Companies like Amazon (from books to cloud) and Intuitive Surgical (from one specific surgery to many) became massive winners by creating new markets, not just conquering existing ones. Investors should prioritize businesses with the innovative capacity to expand their TAM, as initial market sizes are often misleadingly small.
Despite 70% of the market being controlled by HOAs, the advice is to focus on "scatter" individual homes. The HOA market is an auction where the lowest bid wins, destroying margins. By focusing on individual homeowners, the business can control its pricing, maintain higher margins, and avoid a race to the bottom.
Genuine passion for a sector like consumer goods isn't a soft skill; it's a competitive advantage. It allows an investor to develop an intuition and flywheel for identifying great opportunities, building ecosystem relationships, and quickly discerning serious players from industry "tourists."
Significant change doesn't come from the established core of an industry but from the margins. This is where smaller, private companies and overlooked founders operate, making private markets a crucial hunting ground for the most disruptive investment opportunities.
Top compounders intentionally target and dominate small, slow-growing niche markets. These markets are unattractive to large private equity firms, allowing the compounder to build a durable competitive advantage and pricing power with little interference from deep-pocketed rivals.
