Animal Spirits Podcast - Talk Your Book: Compounding with Concentrated Portfolios

Episode Date: August 7, 2023

On today's show, Michael and Ben are joined by John Neff, Partner and Portfolio Manager of AKRE Capital Management to discuss: the AI investing craze, the creation of fundamental analysis, compounding returns with Warren Buffett, running a highly concentrated portfolio, and much more!    Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Akri Capital. To learn more about investing in the Akri Focus Fund, go to acrycapital.com. That's A.K.R.E. Capital.com. All right, Ben, we had a very interesting conversation with John Neff about the three legs of their stool, how they think about long-term investing, concentrated investing. This is not, this is no closet index fund. They are really going for it. And one of their big things is long-term, moats, sustainable growth, all that sort of stuff.

And I'm looking at a chart from Alex Morris at The Science of Hitting. And the chart that I'm looking at is the Costco annual membership fees, which just eyeball on this. It was about $500 million in 1998. And that line, Ben, has gone one direction up until the right. with very few hiccups. Are you a member? What's that? Are you a member?

I'm not. I'm not. We are. So now that is, so $500 million in 1998, $4.3 billion in 2012. I don't know what the Kager on that is, but it's impressive. Anyway, point is, companies like this exist, they're out there, and it's very, it's very, difficult to do two things. Of course, you know, if you knew this in 1998, you would have put your, you know, you would have mortgaged the house by Costco. But compounding is the point

that I'm getting at. Like it's so hard to really, really, really, really think, not for 20 years is too far, but even like five years, 10 years. It's hard to think about what happens when something grows at even high single digits, right, over time. Well, so we talked to John Neff from Akri about this. And his whole point was, it's much easier to buy and sell stocks than it is to hold stocks. And holding is the hardest part because there are going to be times where the fundamentals of the business could be improving, but the stock price isn't or vice versa. If you overlay the stock, the price over this chart, look crazy, right? The analogy about the economy and the man walking the dog is the stock market. Yeah. I thought the most

impressive thing about their fund is that they hold like 17 or 18 stocks and not one of them is in the top 10 of the S&P 500, right? Or they're not those big seven like tech stocks. There's no Nvidia or Apple or Amazon or Google or Facebook. I'm sure they're not the only mutual fund that doesn't own one of the magnificent seven. But considering that they're not buying small cap stocks, they've got to be, that's got to be a short list, don't you think? Yeah, it's impressive. So this was a fun conversation. So here is our talk with John Neff from Akri Capital Management. Welcome to Animal Spirits, a show about

markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridthold's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Bridholz wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spurts with Michael and Ben. We're joined by John Neff, partner and portfolio manager at Akri. Is it Akri? It's Okri. Yes. Okri capital. I would have got that wrong. I would have got that wrong. You would have said acre, Ben. I know. I could tell. Don't make fun of someone from mispronouncing a word because it means they

learned out how to do it reading, right? Give the proper credit to where that quote is due. I don't know. Yes, you do. That's from Morgan Housel. You know it's Morgan. I know it's Morgan. I know it's Morgan.

Everyone knows it's Morgan. All right, John, welcome. So we, on Animal Spirits last week, Ben and I were talking about the fact that it's, it's highly unlikely that a new investor today would start out educating themselves with a book like the intelligent investor or security in his analysis. If I know you, like I think I do, and I've only just met you four minutes ago, was that one of the first books in investing that you read? Was that your intro into investing, or was it something else? No, Buffett and Buffett's antecedents were my introduction to investing. So, yes, 100%. So

Ben Graham. But Buffett himself, I mean, intelligent investor is a great book because it's so focused on behavior as opposed to Ben Graham's security, security analysis book, which is sort of... Unreadable. Unreadable. And also really quite quantitative in a way that became kind of sort of market efficiency, the market sort of moved beyond his ability to sort of encapsulate value with these sort of simplistic equations. And the intelligent investors, the one that's really kind of continues to resonate

because it's about behavior. And so much of investing is behavior-driven. Actually, maybe this is a good segue. So some of the stuff in securities analysis, in my estimation is data, not just because the techniques nobody uses anymore because obviously it's all in the computer or whatever, but in terms of the way that companies are analyzed and the way that companies should be analyzed, is that timeless? Like, do you all still take lessons from those early days or are we just in a complete,

it just has the game evolved way past how you would analyze a business in the 40s or these. Well, what Ben Graham was doing was trying to buy, for example, in a time when screening and computers weren't used, he was trying to essentially pay less for the market cap of a company than its networking capital. Imagine? So it's, it's pretty easy, no offense. Well, it's a good way to uncover value to be sure. The problem is today that obviously you can screen and opportunities like that are probably few and far between. One of the things, though, that's really a hallmark of how we've always approached the investing process, my own view is that quantitative analysis, while very important, and financial analysis, while very important, is unlikely by itself to uncover

a great business that you are capable of holding for years upon years. The understanding that required to do that and to do what we do isn't quantitative. It's qualitative. And what I say qualitative, what it really boils down to is a qualitative understanding of what makes a business competitively advantaged. In other words, how deep and wide is the moat and how sustainable is that advantage over time. And the only way to sort of screen for that, you can't screen for that, is the bottom line. That requires a qualitative understanding of what makes a business great. And that greatness may or may not show up in the numbers. Has that qualitative piece changed too? Because I don't want to name any names here,

but there's a lot of value investors who had concentrated positions who are still living off of like pre-2008 return numbers. You're talking about Duncan? Oh, number. And since then, I don't know if they've fallen for value traps or just not gotten to some of the growth your names or changed, but the returns haven't kept up. And you're concentrated book looks like it has. And one of the things we look at here is the everything, one of the things people are talking about all the time this year with regards to the market is, the market is so constantly or concentrated in these top seven rate names and they're all these big tech

companies, right? And you have a very concentrated portfolio as well, but you own none of those companies, it looks like. So did you have to change your qualitative framework at all to account for a new market that is more tech-heavy and maybe intangible base and all these other things? We don't think so. But you're right. I think we've had, in my opinion, we've had a good year this year, and we've had it owning none of the names that have really driven the broader indices. AI is essentially the topic du jour. And I joke sometimes that we literally, in the first quarter of this year, we went from fretting about an incipient banking crisis. Three months later, it's all about fear of missing out. AI is leaving the station, get on board now or miss it

forever. And we don't, if AI, I guess my view is if AI is as remotely impactful and meaningful as people seem to think it will be, then the ability to sit here today and forecast, who's going to be the biggest beneficiary for how long, to what extent is a challenging thing. There's certainly some companies out there that are clear beneficiaries today, but we think we own plenty of companies that are going to be beneficiaries to the extent one can be from AI. We own companies like MasterCard and Visa, which have been using AI and machine learning for years and years and years. We own companies like Moody's that has created a partnership with Microsoft to essentially infuse AI and machine learning techniques into basically

every product that they offer. So we own Adobe, you know, which is a clear beneficiary seemingly in these early days, but we haven't had to chase a potential bubble in certain AI names in order to, A, participate, and B, to do well. John, maybe we should take a step back, as they say, in podcast parlance for the audience, and just introduce Ackery. You guys have been around for a long time, have a story to history, just a little bit about the firm for people that are unfamiliar. Sure.

So Ackery Capital was founded by Chuck Ackrey. in 1989. And we started the mutual fund that were probably best known for the Ockery Focus Fund in 2009. And I joined that year to the firm. And essentially, you know, Chuck started this firm with a philosophy that he sort of encapsulate with the term three-legged stool. So what we're looking for as investors are businesses that are exceptional. And by exceptional, it goes back to that aforementioned competitive advantage. What makes this business likely to win today and going forward? How sustainable is that? Can we understand what makes that business exceptional? The second leg of the stool is the people running the business, requiring equal parts skill and

integrity is what we're looking for in terms of our managers. And the third leg of the stool is reinvestment. And that's where the rubber really meets the road in a way that I don't think a lot of investors understand or appreciate. So when we talk about reinvestment, we're talking about what does the business do with this great free cash flow that it's generating? And how does it reinvest it? Does it invest it organically back into the, into the business at high internal rates of return, or does it decide to pay it out as a dividend? And one of the things that we look at is how a company, because the reinvestment menu is the same for every single business. There's five things a company can do. They can reinvest organically. They can make acquisitions. They can

pay a dividend. They can buy back their shares or they can pay down debt. That's the reinvestment menu for every single business. But how a company rank orders that menu, and then has opportunities against those different menu items is going to have an enormous impact on our ability to compound. So one of the things, if you look at probably the greatest example of reinvestment, which is Warren Buffett's Berkshire Hathaway, look at what he's done over the decades. He's never paid a dividend. Yet the common wisdom for investors is own companies that pay dividends.

the common wisdom is, well, acquisitions are often value destructive, and they are. But if there's a company out there that can allocate capital against acquisitions, make the more valuable to them as a buyer than it was to the seller, that's a way of absorbing more reinvestment capital and putting it to work at a higher rate of return than simply paying it out as a dividend. Do you have a good example there of a company that's done that with acquisitions that has done so in a value, a creative way? John, let me step in. I believe you're talking about a company like micro strategy.

In terms of not doing it well, yes. Or putting your cash balance into crypto, absolutely. You know, some of those good investment decisions. But Berkshire Hathaway is a perfect example. They've never paid a dividend. What's he done instead? He took a money-losing textile company, which is the namesake of the entire business, and reinvested it into better businesses. He never paid a dividend. He's made acquisitions and organic reinvestment, and that's been the key to Berkshire's compounding over the decades. And that's what we're looking for.

So we own companies that pay dividends, but what's more important to us is that that dividend payout, which we look at more as a return of capital rather than a return on capital, that that dividend payout is appropriately ranked low on that reinvestment menu from a management prioritization. So I'm looking at your top holdings as of June 30th and concentrated portfolios have more or less gone the way of the dodo as far as I can see. And there's a lot of reasons why a lot of mutual funds just tend to look very similar to the index. So you've got, again, this is as of 630, at the risk of doing quick math. I think it's 75 in the top 10, right? Yeah, I was just saying more than 50 in the top 5. So,

So this is, you guys are going for it in a way that is both refreshing and, and risks being very, very different from how you are judged, which, you know, for better and for worse, it's the S&P 500. And so, there has to be a great deal of communication between you and your end investors as to, and maybe I'm sure they've been trained over the years because you're not, you're not a new company. So how do you, how do you all communicate your value and performance? because that's how you are judged, unfortunately, again, probably of short of time frames

than you would like to be judged. How do you communicate that to your clients? So it's easy. I talk about the three-legged stool, and it's a really clear and simple and fast concept to describe business, people, reinvestment. It's really easy to describe. What's really hard to convey is how discriminating that philosophy actually is in practice. It's really hard to find businesses that we think are exceptional, are durably exceptional, have great people running them and terrific reinvestment opportunity and acumen. Even if we can find a business that meets all those criteria, the ability to buy it at an advantageous valuation is another thing that results in these being really hard to find. So it's why we run a concentrated portfolio. Because if you're

dealing with criteria that are this discriminating, by definition, you're going to run a concentrated portfolio. It would be a complete contradiction in terms if we were talking about how discriminating our process was, and we had 150 names and 60% turnover. It doesn't work that way. I agree with you on the Graham piece that the intelligent investor is all like the behavior. How did you personally get around to that, the idea of concentrated portfolio? because I think the behavioral piece has to be the harder parts of it because by having concentrated portfolio, your range of potential outcomes is wider than the market, right? You could either knock the cover off the ball or potentially strike out if one of your concentrated positions

goes awry. So was that something that you immediately took to personally or did you have to come around to the idea of having more concentrated position? Because me personally, like, the risk factor there is tough not being more diverse. So how do you get used to that as an investor being so concentrated and putting all your eggs in one basket? I think it ultimately boils down to the level of work that you get to do on an individual name because if you look at the industrial logic of a mutual fund, just say an average mutual, just take a mutual fund that has 100 positions and call it 60% turnover or so, which is about the industry average, by the way, of the last 30 or 40 years, call it 60.

And then think about what that requires, what that math requires from the standpoint of identifying, selecting, invest, you know, and then purchasing a new idea. At 60% turnover, roughly you're going to have 60 new names a year in that 100 stock portfolio. That's what the math essentially dictates. Exactly. that's exactly right Michael so what does that mean from the standpoint of the research that's being brought to bear on going through all the companies that one can look at and i purchasing doing enough work to purchase a new one every week there you go so the way we get comfortable ben in terms of concentration is really exercising the maximum discriminatory power of

framework, what really is an exceptional business? What really is an exceptional management team? Where are they demonstrating this great reinvestment opportunity and acumen? And then can we buy it right, such that our starting valuations are conducive to the kind of returns we want to generate over time? Because what we're not is collectors of great businesses. We're investors in them. So we have to buy them right. We can't just identify that this is an exceptional business. So as I'm looking at your top 10 holdings, I guess if I, if I had to say anything that stood out to me, it would be, I would guess the average age of these companies is far greater than the average name in the S&P 500. And I would also guess that while this might be a

value tilted portfolio, these are not, you're not going to find Visa ever trading at a deep valuation. It's not a cigar butt. It's just that's not what these great businesses don't they could be they could be attractively valued but they're not going to screen on like a deep you know they're not going to trade at two times earnings so I guess the question that I have is when you're looking at these so like let's let's flip this a little bit what what causes you because I don't know what would cause visas mo to deteriorate or their brand or their people or whatever when you're unwinding something what are some of the common reasons And I don't know what your turnover is. I'm sure it's quite low. But when you do exit a position,

what are some of the reasons, the most common reasons for exiting? So what we typically will not do is we won't typically exit a position for valuation purposes. In other words, boy, company XYZ looks expensive relative to this year's or next year's earnings. Let's sell it and move on. We typically won't do that. And the reason being that, again, Based on everything I've just described, once we've found a business that we think belongs in our stable for things we own or want to own, the last thing in the world is we don't take a commoditized view of that company. That's a business that we own. It's not a flickering stock ticker somewhere. There's nothing gamified about it. We own a business, and that business

we've deemed exceptional. We expect an exceptional business to periodically look expensively valued. That's not a reason to sell it in our book. What is a reason to sell it is when there's a negative reassessment of either the quality of the business. In other words, it's competitive advantage. The people are behaving in a way we don't appreciate. Or the reinvestment opportunity and acumen get called into question. So in other words, it's a deterioration of one or more of those three legs of the stool. I would guess that there's usually not a single catalyst. where you hear one thing on an earnest call. Maybe there are examples of that in the past.

But is this something that you tend to see deteriorate? Like, I'm, again, you're not making snap decisions. No, we try not to. But oddly enough, give for a port for a fund with the turnover as low as ours is, and it's typically in the low to mid single digits. So which is, which is, or maybe mid to upper, mid to high single digits. when we think there's been a real severe deterioration in either the business, people, or reinvestment leg, we're actually fairly quick to sell, regardless of valuation.

And the fact that our turnover is as low as it is, is not by design. It's an outcome from having more or less done a good job at the inception of identifying businesses that continue to demonstrate being worth holding onto year after year after year. It's not something that we're trying to minimize. We spend most of our time reassessing the names that we already own. And we're very critical. And so the fact that the turnover is as low as it is is actually much more a statement about how good the companies are than about something we're bringing to the table. You also wrote a piece about your thoughts. on holding cash and how it can offer some optionality.

I remember I used to work in the endowment fund space, and there was always a clash there a lot of times with the people of the endowment fund and the portfolio managers, and they would say, we're not paying you to hold cash. We do the asset allocation decisions. You pick the stocks. We don't want you to.

So I'm curious how you decide, like when is the right time to hold or raise cash and whether it's opportunistic based on, like, the market overall or just your portfolio of companies and that opportunity set. And like, what is the most cash that you have all ever held as a percentage of the portfolio? Well, in recent years, I'll take the last one, Ben, we came in, we came in to COVID, so March of 2020, we were about 20% cash. And that was not, and that was a function of inflows.

We'd had strong inflows, but it was also a function of letting those inflows build up as cash. so in other words we weren't taking the sort of in my mind artificial approach of saying well we can only have x% cash that x has to be a low number and we're going to take anything above that and pro rata sprinkle that up and down the portfolio that's not what we do cash is always uh earmarked for the highest best use we don't sprinkle up and down pro rata regardless of valuation in order to minimize cash in an artificial way. So the way we look at cash, as we wrote in that piece, the way we think about cash, the return on cash is not the return on cash. The return on cash is better behavior on the part of us as investors. So if we will put that cash to work at valuations when it makes sense to do so. And if it doesn't make sense to do so, then we're very content to let that cash build. And so it's essentially a barometer of the opportunity set as far as we can see it. I'm doing a lot of assuming here, but just given what I know about the company and the portfolio,

please correct me from wrong. But here's an assumption that you are aware of the macro because you're investors, but it's not dictating how you make decisions. And when I say macro, you're not doing macro forecast. I get that. Nevertheless, you are investors. And so, you know, something as macro as interest rates, for example. Right? They play a huge role in just the cost of capital. I'm going to assume that you have models that are discounting cash flows. And when a variable as important as interest rates change, the math looks a lot different. So could you talk to us about that particular variable in your process? We have very detailed models. We actually don't run DCFs or do valuations on the basis

of DCF. At least not explicitly. But what we are doing is essentially, sometimes I'd look at it this way. If you could get one piece of information about a stock in terms of what it would be, I might say, for me, tell me what the stock price is going to be five years from now. Okay, well, I can't get that. Nobody has got that crystal ball. Yeah, what's next best?

The next best, exactly. The next best is say, okay, well, if I can't get the stock price, give me an earnings estimate and a reasonable multiple, which is essentially how you might deconstruct the stock price one step removed. So we're already forecasting out what we think are the owner's economics are five and six years out. In other words, call it earnings per share for our purposes here. So now the question becomes, okay, well, we've got that half of it. So what kind of multiple do we feel comfortable underwriting for this business looking out five or six years?

What multiple are we paying today? So that's how we sort of back into an IRA in terms of our valuation approach. Everything we're doing is from an IRA perspective, essentially. And we're trying to underwrite to situations where on a low case basis, low case scenario basis, we're getting call it mid-single-digit IRAs. And on a base case, we're getting mid-to-high teens. So you're more likely to say that a company, I'm making this out, Moody's, for example, is training at whatever, 13 times our estimated 20, 27 earnings.

You're more likely to do that exercise than, say, a terminal value like they teach you in the CFA. Right. Yeah, no, I, those assumptions, I've just found those assumptions way too sensitive to sort of to work with. We're doing essentially sort of the same, a similar exercise, but it's less input sensitive. We're really trying to forecast the business, the balance sheet, the demands on the cash flow, their ability to buy back stock, make acquisitions, et cetera, basically trying to come up with our estimate of owners' economics, which we typically think of as free cash per share, and then

thinking about the rate at which that's growing and what we'd be willing to pay for it. How many opportunities did you find in the 2022 bear market? Were you making big changes? I know you don't have a lot of turnover, but were there good opportunities that were thrown up by the bear market last year for you? there were periodically some good things something the thing is we came into 2022 and we did not have a great year in 2022 um our fund was down um i think 22 percent in 2020 to do and i always say that was an unpleasant experience but there was nothing about the experience that was insidious we came into the year with high starting valuations for businesses we owned although we didn't

own any of the bubble type stocks that were leading to some incredible things happening in some pockets of the market in 2020 and 2021. But we did have come in with high starting valuations and interest rates moved higher and we had multiple compression. And there was nothing insidious about that. So sometimes we get asked, well, what did you learn from 2022? Nothing much. It made sense, right? Michael and I have said that the bear market, this is one of the bare markets that really made a lot of sense, that rates go up. Stock prices should go down. It seemed to make sense. Yeah. There was nothing sort of new era anything in my mind.

Interest rates were higher. We can live with that. We're not underwrite. We never were underwriting back to that question of how we think about valuations. But we were never underwriting a situation where interest rates were going to continue to be zero to one percent forever. So what we weren't doing, we weren't putting money to work in 2021. in 2020. In 2022, we got a couple of opportunities that things started to go from to look pretty attractive. But we weren't seeing screaming bargains. And we're not seeing a ton of screaming bargains today. Although I think there's a lot more, some of what we own today, I would call very, very reasonably valued. Are you surprised, again, I'm just asking for your personal opinion. Are you surprised at the strength of stocks this year? I mean, I am for what

it's worth. I think that if I could just do a quick assessment of what happened this year, it was just everybody and not air quotes everybody, like really and truly, everybody from institutional to retail to economists, to strategists, was expecting a recession to arrive. And then it didn't. And people are too bearish and, you know, maybe some short covering or maybe some positioning got off size and our estimates came down and the economy kept chugging along and you're getting a lot of beats and not just you're getting a lot of beats, but you're getting like material beats like, you know, way above above normal in terms of the magnitude of the beat. But okay, so here we are, right? So all of that is in the past and the market is looking

forward. Again, we're just, we're just having fun just guessing. What do you think the market's looking forward to? I think we've had since the Fed began tightening. I think we've had maybe the most widely anticipated recession in the history of recent history of the market, and the consumer continues to be resilient. It just hasn't shown up yet. It's not that there aren't some shoes that could potentially drop in commercial real estate and by extension some of the banks in terms of their commercial real estate lending. But people are working, people are spending. Every, you know, the stock, the housing market, there's no transaction volume, but the low inventory is keeping, you know, a floor under prices. It's very interesting.

I do think the shift in sentiment from first quarter, again, banking crisis, is this about to happen again, to AI-driven market frenzy in a handful of names that are driving index performance. is a pretty remarkable shift in sentiment in a very short period of time. Two of your biggest holdings, MasterCard and Visa, Michael and I are constantly pulling from their earnings calls. And they're basically saying, listen, people are still spending money, our customers at least. So maybe you could talk to how strong consumers are for those two companies. Well, it's one of the things. And it's again, going back to sort of our 2020 experience and our fund, I'll give you some numbers. It's just sort of an interesting dynamic.

And again, why I say there's nothing insidious about 2022, in my opinion. But MasterCard, I'll just talk about MasterCard. MasterCard, so COVID hits 2020. MasterCard's free cash per share per our definition drops 16% in 2020. Everyone is shut down in place. We all understand what happened. Travel evaporates, everything. The next year, free cash flow grows 30% for MasterCard.

Last year, it grows 26%. Stock was down in 2022. It's one of the things that led to our negative performance for the year was MasterCard. But the business was up 26% last year. And this year, we're looking for it to be up about 17% free cash per share. So you've had since COVID, essentially 70% earnings growth. in this business. And with really, there's some headline risk out there with some legislation and everything,

but far as we can tell, this is one of the great businesses continuing to grow at a really high rate of return. And the stock price experience, I don't think the stocks hit a new high in something like 17 months or something like. I'm looking right now. It's on sideway since April 21. Yeah. Yeah.

So what does that mean? If the business has grown earnings per share at, call it, at 70% cumulatively or so over the last three years, and the stock's gone sideways, is something wrong with the business or is it just cheaper? We think it's just cheaper. Ben, do you have anything else? No, no, I was just going to ask if there's any way where we can point people to learn more about your fund and how you guys invest. Oh, sure. our website is Akri fund

A-K-R-E-F-U-N-D dot com Hey, what's the origin of that? I'm sorry. Oh, the origin of... The name. Oh, Chuck Akri is our founder. Oh, my God. Yes.

You know what? I'm such an honorable guy. We're going to leave that in here. I mean, I knew that, but we're going to leave it in here. Unbelievable. Yeah, and OkriCapital.com is our website. Some of the white papers I referenced that we about cash, about compounding.

In one of your pieces about compounding, you gave this stat about like the number of billionaires in the world. And I think it's like less than a thousand. And you said, let's assume a 10% annualized rate of return to the stock market over the last 100 years. Pretty, pretty reasonable. You'd say a family would need $72,000 in 1922 and then leave it alone to have a billion by 2022. Making the, you know, the whole idea here is that holding on to stuff for a long period of time is just very hard to do. And I agree with that. I think buying is easy, selling is easy, holding is really hard.

We hear drawdowns. I hate them. Right? That's 100% right. And it's one of the things I find, I think compounding is a really hard concept to get your head around. And I think the point of that piece, why compounding is difficult, people should be, you know, and even this is interesting, Ben, because you mentioned the 10%. If you look back historically, yes, the last hundred years, the stock market has compounded about 10%. I actually think that as such, and people sort of think of, well, 10% is sort of your God-given right as an investor to expect.

And the reality is that that's just not the case. I even think that 10% is an incredibly amazing number to consider because the point of the piece is that nobody actually did it. Right. Nobody did it. And the reason why they didn't do it is exactly to your point. It's so hard. People get scared. They get shaken out.

It's so important. That's why we have such a concentrated number that we think we understand well. It's so important to know what you own and to be tracking the business rather than the stock, which is the point trying to make about MasterCard in terms of how well it's grown. And all it's done is get cheaper over the last two, three years. years. So compounding is hard for behavioral reasons. People get in, people get out at the wrong time. All you had to do was stay put and you'd be a billionaire, or your heirs would be billionaires a hundred years later. And that 10% that everyone just sort of throws out there is

sort of the easy bogey is in fact so difficult to achieve for all the reasons we all know in terms of whether it be wars, recessions, what the Fed's doing. These are all the things that turn people tactical at precisely the wrong time. And what we're trying to own in a very concentrated way in our fund is businesses that they're not immune to those movements or those pressures, but we know what makes them great. They're compounding real economic value per share year after year. And they're the kinds of businesses that we can hold and compound in for a long time. It's a great place to leave it. John,

appreciate you coming on today. This is great. Michael, Ben, thank you guys so very much. Look forward to seeing the end result. Okay, thanks to John. Thanks to Akri. Remember, go to Akri Capital. It's AK.R.A. AcreCapital.com. Send us an email, Annal Spiritspot at Gmail.com.

See you next time.