My guest on the show today is Sean O’Connor, the CEO of StoneX Group (NASDAQ: SNEX), a $1.2 billion dollar market cap financial services company that generated over $50 billion in revenue in fiscal year 2020. Sean became the CEO of International Assets Holding Company in 2002 and was a key architect of the 2009 transformational merger with FCStone that serves as the foundation of what StoneX is today. During his tenure, the company has been quite acquisitive and has added several new product lines and geographies. Currently, StoneX is involved in a number of businesses, including:

- Risk management and hedging services

- Commodities trading

- Equity securities trading

- International payments; and

- Foreign exchange services

Sean has been a steward of a stock that is now 3.5 times higher than it was when the FCStone merger closed, a period of time in which book value per share is up over 4 times. In this wide-ranging discussion, we cover:

- Sean’s philosophy on M&A and integrating companies

- How StoneX approaches risk management and what the company has learned from prior mistakes

- The process of incubating and funding an international payments business; and

- How financial services companies can distinguish themselves from competitors

This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/

Timestamps for this episode:

1:50 - Introduction to SNEX CEO Sean O’Connor

3:35 - Why even attempt a transformational merger during the Global Financial Crisis

12:04 - The challenges associated with deals where the minnow swallows the whale

19:30 - Deep integration vs. a hands-off approach post-acquisition

23:00 - Building a differentiated risk management culture at StoneX

31:01 - Important lessons from significant loss events

37:11 - Starting an international payments business from scratch

44:04 - How StoneX looks at cryptocurrency as an opportunity

47:37 - Creating a moat around StoneX despite the competition

59:13 - StoneX’s relationship with regulators and becoming good at regulation

1:03:19 - Key elements that have propelled StoneX’s valuation

1:06:27 - The most underappreciated aspect of StoneX: long term-compounding

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All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.