CMPR’s largest business, Vistaprint (accounting for 70% of CMPR’s sales), turned in a solid year with key metrics improving across the board: customer loyalty strengthened, average order values grew, and net promoter score increased. Robert Keane and team are large owners and long-term thinkers, focused on reinvesting capital to expand the moat and grow intrinsic value. We’re thrilled to be co-owners and support the heavy spending and long-term focus. It’s worth noting, even amid aggressive spending, the Vistaprint business sports healthy margins and attractive returns on capital.

In addition to large outlays at Vistaprint, management has ramped up investments in the Upload and Print space, acquiring a handful of companies of late. This market caters to higher-expectation customers and looks like an attractive fit for CMPR. During CMPR’s annual investor day in August, management laid out their long-term plan to create a Mass Customization Platform built upon CMPR’s network of businesses and third party affiliates. The goal is to leverage CMPR’s strengths (production, technology, and logistics) to create an unmatched value proposition serving the print marketing needs of small businesses worldwide.

CMPR is chock-full of business qualities we crave: dominant and durable businesses in niche markets, run by owner-oriented managers who are laser focused on growing intrinsic value per share. We’re confident that CMPR’s powerful competitive advantages, attractive underlying economics, and long runway ahead will produce growing earnings and shareholder value.

Additionally this year, we decided to sell a large chunk of SNE as the price rose significantly. While SNE’s management is executing well, they compete in fiercely competitive markets that make sustainable strong returns elusive. We sold as the price approached a more reasonable representation of value and the margin of safety shrunk. We also exited Allegany and BAC after nice gains to reallocate the proceeds elsewhere.

[us_separator]

The above commentary has been excerpted from the annual letter of Arlington Value Capital.

The information contained herein is a reflection of the opinions of Arlington Value Capital (Arlington) as of the date of publication, and is subject to change without notice at any time subsequent to the date of issue. Arlington does not represent that any opinion or projection will be realized. All the information provided is for informational purposes only and should not be considered as investment advice or a recommendation to purchase or sell any specific security. While it is believed that the information presented herein is reliable, no representation or warranty is made concerning the accuracy of any data presented. This communication is confidential and may not be reproduced without Arlington’s prior written consent. Indices are provided as market indicators only. It should not be assumed that holdings, volatility or management style of any Arlington investment vehicle will, or is intended to, resemble that of the mentioned indices. The comparison of this performance data to a single market index or other index is imperfect because the former may contain options and other derivative securities, may include margin trading and other leverage, and may not be as diversified as the S&P 500 Index or other indices. Index returns supplied by various sources are believed to be accurate and reliable. Past performance is not indicative of future performance. Inherent in any investment is the possibility of loss. This performance reporting is not an offer to sell or a solicitation of an offer to buy an interest in any Arlington investment vehicle. Such an offer may only be made after you receive the investment vehicle’s Confidential Offering Memorandum and have had the opportunity to review its contents. This reporting does not include certain information that should be considered relevant to an investment in Arlington’s investment vehicles, including, but not limited to, significant risk factors and complex tax considerations. For more information, please refer to the appropriate Memorandum and read it carefully before you invest.