Investing in Royalties and Similar Models (Value Investing FM)

invest in royalties

In this episode of Value Investing FM, Adrián and Paco will analyze the royalty business model.

Specifically, we will talk about:

  • What are the royalties or regalia?
  • Why is it interesting to invest in royalties?
  • Tips if you want to invest in this type of business
  • Dozens of examples of royalty businesses or similar models

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Listen to the program: Invest in Royalties

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What are royalties?

According the Wikipedia, la royalties o regalías son payments made to the holder of Copyright, patents, brands o know-how (the know-how) in exchange for the right to use or exploit them.

In the program we will analyze business models similar to royalties, which give continuous income in an almost passive way and which are leveraged on the efforts of third parties.

Regalía can be understood as the a royal right or royal prerogative, which included the inherent and exclusive rights of the sovereign power of the king.

Why is it interesting to invest in royalties?

  • Not very intensive in capex (there are exceptions)
  • Operating leverage (there are exceptions)
  • They are usually simple businesses (there are exceptions)
  • Very profitable
  • If you have good assets, business goes alone
  • Almost free option

Examples of Royalty Investments and Similar Models

  • Royalties mineras: Franco Nevada, Abitibi Royalties, Sandstorm Gold
  • Copyrights: Warner Music, Sony, Vivendi, Walt Disney, Sanrio, Netflix, One Media IP Group
  • Comida: McDonalds, Domino’s Pizza, Wingstop, Restaurant Brands (Burger King, Tim Hortons y Popeyes ), Yum Brands (KFC, Pizza Hut y Taco Bell), MTY Foods, Coca-Cola
  • Farmacéuticas: Royalty Pharma
  • Stock markets: BME (acquired by SIX, the Swiss stock exchange), MSCI
  • Air transport: Trasdigm, Heico, Amadeus, Aena
  • Road transport: Highways (Ferrovial)
  • Gas Transport: GTT
  • Consumo: Visa, Mastercard, Paypal, Stripe
  • Hotels: Marriot, Hilton
  • Emisión de deuda: Moody’s, S&P
  • Indexes and financial information: S&P, BME
  • Present: FICO, Verisk Analytics
  • Fracking: Texas Pacific Land, Rail Heritage Royalties
  • Website creation: Verisign
  • Niche Business Management: Constellation Software

Recommended Royalties Investing Links