Jeff Smith 5.0 3 ideas

We're buying into CarMax at tangible book value... they have the benefit of the omni channel footprint... they need to fix the digital experience for the consumer... it's fairly easy to fix and takes some prioritization. CarMax possesses an irreplaceable physical asset base but has been penalized by the market for a clunky digital interface compared to digital-first peers. Activist pressure will force management to modernize the digital front-end, unlocking the full value of its omnichannel model and driving multiple expansion from its currently depressed valuation. LONG. Buying a market leader at tangible book value with a highly achievable, activist-driven operational catalyst provides a strong margin of safety and significant upside. Prolonged high interest rates or a macroeconomic recession severely depress consumer demand for used vehicles, offsetting operational improvements.

They've announced that they can reduce their overhead by about $250 million. We think they should be able to do twice as much, and we think they should look at their international operations and rationalize those. Lamb Weston operates in a stable, oligopolistic market (French fries) that is highly insulated from AI disruption. Starboard's involvement will force management to double their cost-cutting targets and optimize underperforming international segments, leading to rapid margin expansion. LONG. Acquiring a fundamentally stable business at a mid-single-digit multiple with a clear, activist-enforced roadmap for aggressive cost reduction presents an asymmetric risk/reward profile. Agricultural issues (potato crop failures), supply chain disruptions, or entrenched management resisting the activist's deeper cost-cutting demands.

We get to own this whole thing at like three or four times EBITDA... the growing assets of Viator and The Fork which are actually marketplace businesses are worth way more than three or four times. The broader market is heavily discounting TripAdvisor due to fears that AI will destroy its legacy review business. This fear completely masks the standalone value and rapid growth of its Viator and The Fork segments. Activist pressure will likely force a spin-off or restructuring to highlight and monetize these hidden gems. LONG. This is a sum-of-the-parts value play where the market's AI-driven pessimism has created a severe mispricing of the company's high-growth marketplace assets. AI search engines (like ChatGPT or Google Gemini) cannibalize the core TripAdvisor traffic so rapidly that the legacy business collapses before the growth assets can be spun off or fully valued.