H&R Block, Inc.
Thesis
H&R Block is an attractive investment trading at 11x earnings with an 11% free cash flow yield. Misunderstandings about its core business and excessive fears regarding liabilities from a discontinued subsidiary create a dislocation between price and intrinsic value. The company is expected to achieve significant earnings growth due to regulatory changes in the assisted tax market and plans to re-lever its balance sheet to return capital to shareholders, presenting a favorable asymmetric risk profile.
Did it work?
The long thesis in H&R Block clearly played out: the stock returned +250.8% over roughly 14 years (~9% annualized price appreciation, higher with its substantial dividends), validating the claimed dislocation at 11x earnings and an 11% FCF yield. The thesis's key dynamics also materialized — the company did re-lever its balance sheet and return significant capital via dividends and buybacks, while fears over discontinued-subsidiary liabilities never impaired the core tax business. With far more than any reasonable stated horizon elapsed and the return strongly positive in the pitched direction, the verdict is high confidence.