PORTFOLIO UPDATE
Exiting Mobility Global to initiate CPRT
Dear Subscribers,
We have executed a strategic transaction within the portfolio, completely exiting our position in the recently distributed Mobility Global (MBGL) shares to initiate a new position in Copart (CPRT).
As a reminder, our Mobility Global shares were received purely as a spin-off distribution via our long-term holding in S&P Global (SPGI). Because we never actively allocated capital to or bought Mobility Global, we view this “clean slate” event as an opportunity to recycle these accidental shares into a high-conviction, compounding business that aligns with our strict investment criteria.
Business Overview
Copart operates a dominant, two-sided online marketplace for the auction of salvage and used vehicles. Serving as the primary intermediary between major automotive insurance companies (who look to dispose of totaled or recovered vehicles) and a global network of dismantlers, rebuilders, and used car dealers, Copart operates at the absolute center of the vehicle lifecycle ecosystem.
Much like our positions in Broadridge or Verisk, Copart functions as a mission-critical infrastructure provider. When a vehicle is declared a total loss, insurers do not have a discretionary choice on whether to liquidate it; they must clear it through specialized salvage channels. Copart’s auction network and expansive physical yard footprint are deeply integrated into the regulatory and claims processing workflows of the entire insurance industry.
Why We Own It
Copart exhibits the exact structural monopolies, high-barrier moats, and robust cash-flow characteristics that anchor our long-term portfolio strategy:
Physical and Network Moat: Copart’s competitive advantage is defended by a powerful combination of a global digital network effect and a localized physical moat. The company owns thousands of acres of strategically located land near major metropolitan areas worldwide - real estate that is virtually impossible for competitors to replicate today due to stringent environmental and municipal regulations. This unmatched land footprint draws the largest inventory from insurers, which naturally attracts the largest global pool of buyers, creating an unbreakable network loop.
Counter-Cyclical and Inflation-Resilient Economics: Copart possesses a remarkably durable business model. During economic downturns, vehicle repair costs rise relative to residual values, driving up the frequency of “total losses” by insurers and funneling more volume to Copart’s yards. Furthermore, because its auction fees are tied to the final selling price of the vehicles, Copart naturally scales its revenue with the rising nominal costs of used vehicles and salvage parts, providing an exceptional structural hedge.
Elite Capital Allocation and Fortress Balance Sheet: Copart is a premier compounding engine, sporting a pristine, debt-free balance sheet and generating exceptional ROIC. The management team has a proven track record of prudently reinvesting free cash flow back into land acquisition and digital infrastructure, compounding shareholder value with minimal economic friction.
Portfolio Fit
This transaction optimizes our portfolio construction by replacing an un-vetted, non-core spin-off with a highly predictable, wide-moat compounder. While S&P Global remains an elite core holding that we continue to own with high conviction, keeping the spun-off Mobility Global shares would have meant holding an asset outside our core expertise and risk framework. Swapping into Copart allows us to rebalance our capital into a highly resilient, asset-right infrastructure business that improves the portfolio’s aggregate drawdown control and long-term cash-flow stability.
Risk Considerations
While Copart is a premier franchise, its business model is subject to specific structural dynamics that we monitor closely. The primary long-term risk relates to the evolution of autonomous driving technology and advanced driver-assistance systems (ADAS). If vehicle accidents drop materially over the coming decades, total salvage volume could contract, though this is heavily offset in the medium term by the rising complexity and cost of repairing modern ADAS-equipped vehicles, which actually increases total loss frequencies today.
Additionally, as a heavy land-owner, Copart faces ongoing localization risks regarding environmental compliance, zoning restrictions, and the execution of international expansions where land dynamics differ from its core North American strongholds.
Conclusion
Our decision to immediately trade our distributed Mobility Global shares for Copart reflects a disciplined adherence to our investment philosophy. We do not hold assets simply because they were handed to us via corporate actions; we allocate capital strictly to where it can compound with the highest predictability and safety.
Copart represents a rare combination of defensive resilience, high capital efficiency, and secular growth (the structural rise in total loss frequency). This trade hardens the portfolio against macro shocks while ensuring our capital remains fully deployed in an entrenched, wide-moat market champion.
Sincerely,
Stiliyan Loukanov, Feather Fund
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