Chit Chat Stocks - 15 High Quality Small Caps; Reddit, WeBull, and the Rebubble; Celsius Stock Rips Again $CELH

Episode Date: March 3, 2024

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks YouTube channel. This week we discussed: - Ryan's small-cap quality screener - Reddit and Webull IPOs: is it the full rebubble? - Celsius can't stop growing at 100% - Is Bumble stock a buy? + much more ***************************************************** Subscribe to our YouTube channel: https://www.youtube.com/@ChitChatStocks  Follow us on Twitter/X: ⁠https://twitter.com/chitchatstocks  Follow us on Substack: ⁠https://chitchatstocks.substack.com/  ********************************************************************* ⁠Public.com⁠ just launched options trading, and they’re doing something no other brokerage has done before: sharing 50% of their options revenue directly with you. That means instead of paying to place options trades, you get something back on every single trade.  -Earn $0.18 rebate per contract traded  -No commission fees  -No per-contract fees  By sharing 50% of their options revenue, Public has created a more transparent options trading experience. You’ll know exactly how much they make from each trade because they literally give you half of it. Activate options trading at ⁠Public.com/chitchatstocks⁠ by March 31 to lock in your lifetime rebate.  Options are not suitable for all investors and carry significant risk.  Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the Characteristics and Risks of Standardized Options to learn more. For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the Fee Schedule. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See public.com/#disclosures-main for more information. ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use. Use our LINK and get 25% off any premium plan: ⁠https://finchat.io/chitchat/?lmref=J3bklw  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. take four let's see and yes it is live so go ahead ryan welcome to chit chat stocks this is our 100th investing power hour episode so we're celebrating here brett's got a beer in hand uh it's 9 30 over here on the west coast so i do not have a beer in hand but i've got my uh morning coffee so i guess toast to that

ryan's a big partier if anyone hasn't figured that out yet yeah and for the 100th episode we decided to take four tries to get it to go live using our new streaming software so apologies for being 12 minutes late here but riverside so i know get your act together but ryan i guess let's get things right and started we're supposed to we've read that we're supposed to start out quickly to entice new listeners so what's the question you got this week rebubble are we back because we got ipos we got spax we got stocks hitting all-time highs are we officially in our rebubble for the 100th episode to celebrate yeah i agree i agree you think we're there yeah yeah i think seeing weeble going public through a spec with john boehner on the board of directors who

was like a old politician at half the market cap of robin hood i think yeah the rebubble is back weeble is i guess we haven't seen their financials yet but i'm looking forward to reading them yeah just and it's weeble w-e-b-u-l-l for anyone who doesn't know which anytime you have the word bowl in your company title. It kind of tells you what investor sentiment feels like when that company is going public. But before we get started, we want to talk about our sponsors. You might know public.com as the all-in-one investing platform. Now they've launched options trading. And with it, they're doing something no other brokerage has ever done before. Public is sharing 50% of their options trading revenue directly with you, the customer.

So whenever you trade options on public, you get something back. And of course, there are no commissions or per contract fees either. By sharing 50% of their options revenue, you'll know exactly how much they take from your options trades because public is literally giving you half of it. So in other words, it is a more transparent approach to options with no fees and you get something back on every single trade. So go to public.com and activate options trading by March 31st to lock in your lifetime rebate. This is paid for by public investing. You must activate options account by March 31st for the revenue share. Options are not suitable for all investors and carry significant risk. Full disclosures are in the podcast description, US members only. With that said, let's get into

things here. I've got a couple, I guess it's not really news. I got some topics that I think are pretty interesting, but there is plenty of news this week. We've got a Reddit IPO, a Webull potential SPAC. We've got Bumble earnings. We've got, what other big earnings were there? Celsius earnings this morning, which looks pretty good by the way. The stock is up 12% this morning. Where do we want to start? I think you have a great small cap one, and that can be the meat of the episode, but let's do something more catchy first. What were your thoughts on the WeBull news? It seems like things are getting chaotic again. I can't keep up with all the stuff going on, but I'm curious your thoughts on it. yeah it's i don't know a lot about webull but purely based on the name it sounds like

a platform that encourages active trading which certainly elevates or escalates when markets are doing well people are more excited more people are involved they're trading all that stuff so uh it's kind of maybe a sign of the times and it does just anecdotally in the market it feels like people are extending their time horizons again people are willing to pay a little more and i'm doing it as well where you're talking about just buy winners don't i mean just buy winners you can haggle over valuation but in the end at the end of the day you just want to buy the winners now i will say i've moved more and more towards that side of things but some of that might just be the all-time high speaking and i would bet a lot of it is so uh

it feels like yeah we are at kind of the the beginning maybe of a re-bubble here hopefully uh for my for our listener engagement people listen to the show more when they uh when stocks are doing well because it's it's i don't know just more exciting so yeah i think if we bull is gonna kick things off kick the re-bubble off right i'm i'm happy about the spec that's a great way to put it i will say do you know where the digital pet rock the he who he who will not be named uh or sorry the crypto who will not be named is trading it oh do you know oh i don't want to we're talking about btc for code word yeah okay yeah uh i read something about it which that's another sign of the not necessarily maybe we can call it the

re-bubble but i don't really hear much about it my timeline isn't filled with it i don't really follow a lot of people that are crypto investors and then it really i just don't see that much news about it but when i am seeing news it's because it's soaring so i'm gonna i remember someone saying it was above 64 000 what's that now that's i believe yeah it might be hidden all time highs here pretty soon well if that's not a sign i don't know i don't know what it is here's a fun question for you ryan and obviously we have no idea either way because it is pure gambling sorry for the the core believers there we're not going to be your crypto uh crypto believers on this show by the end of the year is bitcoin above a hundred thousand or below a hundred thousand

gun to your head i know i i always do these to you gun to your head what one do you choose Does it go above $100,000 one time for a single moment? I want to re-bubble. I think it'd be fun. So I'm going to say above $100,000. People care more in a bubble. And as value investors, we can shrug it off and complain about people that haven't done as much research making money, but it's more fun.

pet rocks soaring photos of what what were they nfts just going for unreasonable amounts i miss those days i want them back so i would be killing the shorts i've seen lemonade investors talking about ladder attacks coordination by short sellers on finn twitter i mean it's just fun times it's great reddit is ipoing it's not i don't think these things are always coincidences right rivian ipoed at the 100 billion dollar market cap right at the top bitcoin similar time period i mean when all these things move together you can see the animal spirits like you can just feel it yeah there's always something to be excited about i have that feeling again i don't want anyone to get hurt though right it's it's it's like you know what

i mean it feels good but it's like being at that party you go to a fun party 11 o'clock 12 o'clock it's it's a good time you show up at that same party at about 4 a.m well you know hopefully everyone's gone to bed yeah let's i want to talk about this uh maybe it's like the only real topic or something with substantial takeaways from today's show but i kind of ran a screener i've been doing this a lot lately which i feel like everyone does this when they first start like using screeners it's like oh look at look at all these and that's me right now but i ran a screener and my goal with this was to find some high quality small caps So first of all, I'd probably define small caps a little differently than most.

I would – I say basically below $3 billion. I kind of consider it a small cap. I know a lot of people say $1 billion to $3 billion is kind of mid-cap. But in my universe, I think below $3 billion is a small business. So at least in terms of the companies I'm investing in. Here was my criteria. So when I ran the screener and plug, I used FinChat. they have a really good screener, and they actually added something that kind of spurred

this idea for me. You can now filter by 10-year average return metric. So the average return on invested capital over the last 10 years, you can use that metric, and that's kind of what encouraged it for me. So here's the criteria. The market cap has to be between $50 million dollars and $3 billion. The average return on invested capital over the last 10 years has to be at least 15%. And then there's a lot of companies where they've had good returns on invested capital, but the business isn't growing at all. So I try to filter those out by doing earnings per share growth and revenue growth, both above 10% annually. And that certainly narrowed it down. Still plenty of companies on that list. And then there's some companies that

are just really over levered that are in that group too. So I did net debt to EBITDA of less than five times. That's not, I mean, five times net debt to EBITDA is still a fair amount, but this just got rid of any of the ones that were like really bad businesses that were still showing up on the screener. So that's my criteria. It's kind of five metrics or five qualifications. There were only 15 companies from the United States. I narrowed it down to the US, by the way, because if you do the whole globe, you got to filter, you got to find whether or not it's just like showing up there and shouldn't really be there. And it just makes it more complicated. So I did US only. 15 companies met this criteria. I don't know if all this is, maybe I'll just go through all because people might recognize the names, maybe they like them, whatever. So the first one, and this is in order of largest to smallest, Fox Factory Holdings. I think you'd like the brand Fox, you know what I'm talking about? I think it's like related. Oh, yeah. Okay. Yeah. Winnebago Industries, they do RVs. IES Holdings, Expel, which some of our small cap

listeners, people that like small caps, you've probably heard of Expel. They've had remarkable returns over the last decade. I think it was 41% annually. Probably one of the best small caps over the last 10 years, 20 years maybe. American Woodmark, Simulation Plus, OTC Markets Group, which i believe operates basically the otc uh uh electronic exchanges um kind of a bizarre company though metafast which might be a ponzi scheme or a pyramid scheme it was they they said they used multi-level marketing which every time i see that i just picture like the always sunny episode where they're like oh okay yeah you know we just gotta pass this to the next guy Anyway, Metafast, Mastercraft Boat Holdings, Samaro Enterprises, DLH Holdings, EcoCorp,

Vertra, Nobility Homes, and Corkart. Now, I looked through all this list peripherally, kind of just looking at them from afar, and there were three in particular that stood out to me, and they were actually the last three on that list, so the three smallest ones, and it made me want to dig a little deeper. But before we get into those three, discussion question for you, what do you think of the screener? And then what do you think of screening in general for finding new ideas? I like screening. It helped me find Sprouts Farmer's Market four or five years ago. So I guess it can be useful from time to time. I think using a screen and kind of coming up with

the ideas yourself can be helpful because you can find as organically as possible an idea you know we're not going to be like none of us well maybe very few of us are going to be like buffett and read through every single public company it's just not going to work that way we're not you know we're not built like that but you can use a screener to hopefully find stuff organically and you know when you're seeing stuff on twitter you're seeing stuff written online you're seeing stuff in the newspapers or on chats or wherever reddit you can uh like you know value investors club that reading a write-up there means that someone else found this idea before you so if you can be for like closest to the first person finding this idea then the opportunity might be

so that's why i like screeners then looking at this yeah market capture roic i'm sure it's just standard right just yeah i would look at that plus maybe include a positive free cash flow thing if you can include that there right because i like yeah i like high roic combined with positive free cash flow generation because i think sometimes companies can tout good returns on invested capital but they're not really converting stuff into cash flow but i like the other yeah i mean Revenue. Revenue is good. But I think the earnings per share might... Sometimes I like to just look at something like revenue or gross profit, because if you can find companies that are breakeven and about to see a profit inflection, I think I'm stealing this from Ian Castle, the guy that started Microcap Club. But those can be fantastic opportunities as well. Yeah, that's a good point. The only issue is that when you do – if you don't include the earnings per share growth rate, there are a lot of bad businesses that have grown revenue really quickly. it's just unsustainable or maybe something happened in the short run that just made the

business explode. And so it's kind of just a qualification check of, are they profitable? Are they consistently generating growing profits? But I get what you're saying where you might be missing out on some even bigger opportunities. I'm going to talk through the last three companies I mentioned that are interesting. And just to be clear, I had not heard of any of these businesses before i did the screener so the first one is vertra v-i-r-t-r-a this is they sell immersive training simulators for law enforcement military educational and commercial sectors globally it competes pretty closely with axon and they're pretty well known for having this like 360 degree trading simulation. And I haven't done that much in-depth research. One red flag that showed up to

me was I looked up Virtra Investor Relations, and they were paying to promote their investor relations page on Google. So a bit of a red flag that tends to tell me that they're eager to sell stock or that they want- Or not frugal. Yeah, that too. But when we look at the financials, the enterprise value of this business is $98 million. And it's a little below its market cap, so they have a net cash position. Revenue over the last 12 months was $37 million, and that's grown pretty quickly as of late. And they generated $9 million in operating income on that revenue base. So the EV to operating income, which is kind of – that is, I believe, the acquirer's multiple, and I think it's a very useful metric to use, is about 11 times. So very reasonable. They've grown their revenue consistently over the last decade, I believe, at 14.4% annually. It's exploded lately because of, I believe, just kind of heightened spending on this.

And more and more law enforcement agencies needing this. There's a bigger focus on it. But I haven't done that much digging. I'm still pretty interested, despite the fact that they promoted their investor relations page on Google. Maybe that's just an oversight. Does this stand out to you? Does it excite you at all? For me, I like the tailwinds in this industry.

I think it's something that law enforcement agencies are going to have to spend more and more money on. What are your thoughts? I like it. Yeah, it could be something to look into. I was someone that liked Axon. I wasn't a fan of their management team, Axon's management team, just from a governance perspective, but clearly that they've done quite well as well.

And if I look at their revenue chart, you can see an inflection over the last few years. It reminds me of the opportunity that there was with Axon and probably with this stock as well during 2020 when there was all this stuff about defund the police and stuff like that, if you kind of faded that and thought, okay, hey, this is just short-term blip, hey, these are just, you know, kind of news

or, excuse me, noise, not news. There was a fantastic opportunity for Axon shareholders there. In general, these seem like good businesses, but obviously, you know, you got to look into more management, what they're doing, stuff like that, because Axon

And as people can look at that stock chart, it's done quite well, but I don't, I've still failed to really trust management just given that they pay themselves so much and focus on the justity, but doesn't have bad governance issues. And that matters to me at the end of the day, but the underlying businesses seem quite strong. Yeah. And especially with small caps, the management is so important because if they start to get a whiff of success and they just start paying themselves a lot of money. That can be very common and quite risky. And I think, what's his name? Mike, he runs the non-gap sub stack. He

talks about it all the time. He loves how many small cap companies have just huge governance issues. So you really want to keep a close eye on that for a lot of these businesses. But the second one I'll talk about here is maybe the one that excites me the most. this is nobility homes so they design manufacture and sell manufactured and modular homes you love the homes huh you love these well what's you got you got like a an addiction to these stocks now well yeah i think i do and there's a couple reasons for it first of all we all talked about the real estate apocalypse that was coming in 2021 right rates shot through the roof mortgages were I'm pretty sure home transactions were down like 60% year over year at one point. I mean,

they're a fraction of what they were in 2021. And yet home builders continued to grow their home sales. So it kind of, there was all this talk about there being a home shortage. And some of the people were like, well, there's always a shortage at kind of the top of the bubble, but is there really a shortage here? It just goes to show that for me, if you're in geographies with positive net migration trends and the shortage seems to be pretty real, that the home builders are in a pretty good place and they can continue to sell even if overall home transactions come down a bit. So I do like the home builders. And then also most home builders, I haven't done this check for notability homes that much,

they are very different than what they were 10 years ago the biggest ones are mostly using the land option model the just-in-time purchasing that like the inventory on their balance sheet is way smaller as a percentage of revenue than it was or overall assets uh than it was 10 years ago so they've done a really good job kind of implementing this new model and they're a lot of them are just much more capital light which means better returns on on uh assets and equity and returns on invested capital. So, Nobility Homes, they design manufactured and modular homes and then they sell them through their own retail centers throughout Florida. And it's primarily cities around kind of central Florida. So, between Gainesville and Orlando. I'm not 100%

sure on the migration trends there, but they've had success revenue-wise. So, that tells me they're probably selling more and more homes. The retail prices for these typically range from $70,000 to $220,000. So picture your manufactured homes. It's kind of your standard modular homes, if you will. Revenue over the last 12 months, $65 million. Last 12-month operating income, $14 million. Their enterprise value is $87 million. So one big thing with home builders is if you get caught with your kind of pants around your ankles in a bad real estate market, you can go bankrupt pretty quickly because you have a whole bunch of land or whatever. That's not typically the case for manufactured homes. So either way, it's good to kind of have that net cash balance and that's

what they have. They've got, I want to say like more than $15 million in net cash. So EV to operating income six times. And then the other part that excites me here is over the last five years, they've repurchased a lot of shares and brought their share count down by three and a half percent each year, which tells me that even though management's being maybe a little conservative here with the net cash balance, they know they're willing to reward shareholders with the share repurchase program. So I like that, consistently grown revenue. I do think there is a home shortage across the country, and that's been proven out over the last year. But yeah, this business certainly excites me. What do you think?

I like some of the stuff. Seems cheap. Seems like it's a decent industry. I like the cheaper end of the market better than kind of the standard home builders. So these, I wouldn't say it's an exciting one for me, but I think it's interesting. And the shares outstanding coming down is also nice that shows that they understand you know returning capital to shareholders um yeah i think with these companies i wouldn't i don't think anyone out there knows whether there's an actual shortage of homes because we don't know what you know selling rates of existing homes are going to be in five years we don't know what there's so many factors that can go in whether there's you know actually a shortage or not um right now it looks like it is but you know stuff can change

immigration could change all that good stuff over the next say five to ten years so that's something from a macro perspective that could totally change um i think that's the uncertainty there but given their cash position they seem to you know be ready to weather out the the full business cycle yeah seems like a good one seems like a decent biz yeah i'm sharing my screen here for any of the people watching on YouTube. I am pulling up the revenue chart for Nobility Homes. Looks pretty solid, 14% CAGR over the last 10 years. Net income has also, it's been a little lumpier,

but growing in the right direction as well. And then let's maybe hit some of the ratios so we can show some of the valuation metrics. Let's go EV to EBIT. And what is their, yeah, well, you got a lot of stuff on the chart there, but what about cash conversion or free cash flow? Yeah, EBIT, EBIT, it's in the single digits, right? Yeah, which is below its historical range, which is nice, but EBIT's also accelerated a bit here. Let's go to free cash flow, which, by the way, shameless plug here, I'm using FinChat, which is very nice.

yeah it's been a little lumpier um let me go ahead and pull up net income and free cash flow so we can compare yeah while you're pulling that up i will just say the closure of the ad you can use our website or our link finchat.io slash chit chat link in the show notes for any podcast listeners and we'll toss that up on youtube once the recording is done as well i do know i believe this person one of the one of our listeners contacted me on twitter and said they used our code so much appreciate it and they use it because the platform is so nice so there we go thank you for that yeah that's a nice way to bring in the 100th episode right there yeah 100 the uh let me just give a quick shout out to the link if you're interested in using fin chat if you've seen us use

it which we do pretty much every day and they're making constant changes by the way one of the big ones which we really wanted was real-time prices for the watch list they rolled those out so it can really be pretty much your research place your dashboard all of it if you want to use finchat go to finchat.io slash chitchat that is finchat.io slash chitchat it gives you 25 off at checkout and it helps us so you're supporting us think about it that way anyways all right oh you have something else on nobility no i'll leave it there the problem my only problem is and there is one more company but after i kind of looked at it i was a little soured on it so i'm gonna scratch that one but i just have been burnt with small caps every time i've tried to invest in them

and there are times when it looks good it looks promising and then it's just like they don't have the resources to grow like i would hope they could and that seems to be i i just feel like that's gonna happen again if i try to try to pick one of these what are your thoughts on small caps overall generally i think it's higher risk high reward and you gotta let your winners run it's if you make 10 investments maybe a lot more of them compared to investing in blue chips are gonna do poorly but the winners are gonna hopefully be quite big like an x bell like a celsius like a whoever yeah speaking of another small cap and i was able to pull this up quite easily with the good old fin chat tool

can you guess what bumbles enterprise value to gross profit is right now hmm four times 3.3 stock is collapsed after the recent earnings report and yes they have a lot of spc but we're looking at a market cap here of about let me just hold up right now about 1.6 billion and they're generating over probably gonna do 200 million maybe in free cash flow and they just did a big reduction in the workforce because their earnings you know like yeah it was a lot of spc and stuff like that their earnings are not that great they're expecting to grow revenue about 10 this year they brought in a new ceo to replace the founder who seems focused on generating profits

i don't know i think it looks interesting i think it's market cap one more time 1.6 billion Yes, they have a big EV, though. Big net deposition? Yeah, remember when we looked at them, they had some slight ownership governance issues with Blackstone and the required payments they had to make out to them and Whitney Wilford? Do you remember that? Yes.

So those are still there. Hmm. Okay. Well, I'll tell you, the biggest thing for me, looking at Bumble, and how much are they doing in revenue it's it's over a billion yeah that i think they hit a billion this year but i let me just get a quick confirmation yeah over a billion in 2023 every time i've looked at bumble my biggest concern was governance whitney wolfer did a phenomenal job growing the business she

also did the same phenomenal job while she was at tinder growing the business but i didn't think she was focused on shareholders which is just kind of a different i mean she's a great operator but i'd like to invest in companies that are focused on returning capital to shareholders and prioritizing shareholders um i didn't see that this change could put bumble really on my radar here's the other thing if we just look out big picture so clearly first of all everyone thought match groups problems were solely their own and they thought well bumble's doing well why is a match group doing well there's there's been some saturation slow down and it seems like online dating overall if you looked out 10 years do you think online dating makes up more relationship

formation or less relationship formation i i'd be hard-pressed not to say more yeah i would bet yes but i think one caveat is that there is a potential if these pure plays don't execute that the format you know the finding dates finding romantic relationships moves to different platforms right or you know it could be a snapchat could be an instagram people have talked about that before i still think these apps have their place but there is that risk because you know they haven't really executed that well but i will say and they're buying back stock as well bumble is bought back a bunch from blackstone haven't looked at this one too closely but i mean look you're buying back 100 million stock 100 million dollars in stock a year plus you know

your market cap's already this low people are really down on it they said that they made some stupid errors in 2023 with product uh placement and they're doing a revamp in q2 of this year which somewhat is a red flag when you just pump that all the time but uh you know they stabilized the the legacy app that they had called badu it's it's it's fairly stable now which is nice and they should see earnings rise as you know they uh the workforce what do they call it you know after these layoffs let me give you a scenario almost a good app almost a good app let me give you a scenario six months down the road bumble has cratered even more stock price it's sitting at a billion dollar market cap as opposed to whatever you just said i think it's

1.3 or 1.6 6.6 it's cratered even more match group makes a bid for two billion dollars to acquire bumble do you like it or not i would like it but it wouldn't get passed right no way you don't think so no yeah it's probably that's probably right the uh and i mean mash group has said they don't intend on buying any more making any acquisitions for the time being but and bumble has always held out they've been very reluctant to sell to match group i think they've been given offers but a lot of that was just whitney wolf her they don't want to she had bad blood with the team there and and she was avoiding it it feels like those management teams the drama the history between those two is moving out the door there are new management

teams in place elliot plans to i i imagine sober up the entire dating industry and and uh online dating industry and make it a bare bones cashflow machines, hopefully. And once match group does it, it almost feels like Bumble has to follow in its footsteps. So I would say they are both in a good spot right now. If I'm betting on one horse, it's probably match group, but Bumble may be more upside if they decide to get really profitable. The other thing for me is what are the odds that this slowdown in dating is really just everyone migrating to Hinge slowly

and they aren't paying users yet. Possibly. Possibly. Yeah, I've thought about that. There's a bit of a lag. At least in the mature markets. Yeah. It's TBD on that one. I think it wouldn't be

the worst idea if you're betting on the big three and their continued dominance and it's going to be really tough for a new entrant to step in there given reasons we've discussed before you can go back to our podcast we've done i believe it's a little less than a year now on all these companies maybe a basket approach of both bumble and match group works you get exposure to bumble hinge and tinder and you kind of just go for the whole sector there i don't think that's the end of the world are not not a dumb idea if you're bullish on this because you know maybe one of these stocks is or excuse me one of these apps is overrated right now maybe it's even hinge maybe they're just on a nice little you know growth trajectory here and it's going to slow down a bit tinder and

bumble are going to regain who knows but if you invest in all it could work i think it would be a nice one to look at again maybe this summer bumble if it gets cheaper got some questions We also have people saying congrats on 100 episodes. Appreciate it, everyone. One question. Can you guys explain the unwinding of the derivative portfolio at Nelnet and how that came about from the Silicon Valley bank collapse? I'm not as versed in analyzing financials.

Yeah, so they did have their annual letter out this week, and they did talk a bunch about that. I will say Nelnet is not the best at inspiring confidence from clear writing. I think you might agree with that, Ryan. um so but that's a good question and we are going to do a full episode actually on nil net in two weeks so we'll cover it then sorry to give a teaser there but don't have any notes prepared on that other person says uh unless you have anything ryan that you want to hit quickly no it was a little bit confusing i guess i'm not sure why they felt they needed to unwind

a bunch of the derivatives because of the Silicon Valley banking collapse because they don't have like a depositor problem. That's kind of... If you were at another bank where you're afraid that all the depositors are going to flee,

that's kind of a different question. But unless I'm mistaken, Nomad doesn't have that issue, so I was a little confused. They weren't talking about their bank. It was... Yeah. And so why did they feel compelled to sell the derivative book? I think they were worried about a liquidity crunch and the need to finance their, you know, they do all these securitizations with the loans and all that stuff.

I'm sure we can kind of look into it on the annual report and try to figure out exactly what happened. But I think from reading the letter, they were worried after raising interest rates and seeing the banking panic that was going on. they're worried about a liquidity crunch and you know with their balance sheet which is you know they have those old loans from student loans that are you know kind of guaranteed payment but there's also the all the stuff around that as well with you know the politicalization of that i think they were just worried that it could be yeah like i said twice already a liquidity crunch but we'll cover that for sure fully uh in episode two weeks from now another person says congrats on 100 episodes thank you any thoughts on him's and hers earnings up 40 this week seems like they

keep growing i have worries long term about the viability or excuse me some concerns about management and just regulatory risks of essentially as we talked in our podcast episode on hims and hers using social media ads to convince people that they need all these pills to take and then they can get them by talking to a doctor for 10 minutes online it seems like a scandal could form here and i would be worried about that but the company is executing i mean they're growing quickly they're gaining market share they're doing phenomenally i'm not surprised to see it up So Google, this is the Google apocalypse. Gemini was too racist, I guess, was the big concern. And people are now calling for Sundar to be fired. So actually, Tyler Ferris in the comments here asks, he says, congratulations on 100 episodes, gents. How much do you think Google stock goes up if Sundar is fired? For context, for anyone that doesn't follow Google, the CEO is Sundar Pichai.

and he's kind of not i how do i describe this i don't think he's that important to the business i don't know if anyone there is that important to the business it seems like it pretty much just runs on its own like at this point it's yeah he doesn't seem to have he doesn't make any big bets right it's not like zuckerberg where he's making huge capital allocation decisions himself they're not making giant bets at least they have just an operator he's not i don't think they put him in there to be any sort of visionary so but anyway basically to provide some context gemini which is their new language learning model it's meant to compete with chat gpt is apparently not putting out prompts for certain races or basically there's been some flaws with it where

everyone seems to think it's racist. Yeah, everyone is upset. They're making historical Nazi soldiers diverse just because they're trying to program that in there.

Who knows? I guess there'll be an investigation. It obviously turned into a giant political football, but yeah. The thing is, the product works well. That's not bad. Good AI, i guess yeah so yeah there's some flaws some huge flaws that were pretty laughable online

some of them were just like yeah not making vanilla ice hilarious that was funny one that was that was a good one yeah they wouldn't distinguish certain colors anyway the stock actually sold off on this and now people want sundar to be fired here's what i think is going to happen. I don't think Sundar will be fired. And I think in four quarters, maybe even in less two or three quarters, people are going to go, well, I mean, yeah, Google search is just such a good business. So the stock did fine, but there's still cultural problems and Google search and Google AdSense are going to deliver 10% plus revenue growth because they're the most important advertising businesses in the world and but yeah search double click

what is it isn't that yeah that's not even an important part of the business anymore honestly yeah you know the ads and websites i think that's a huge revenue driver uh no it gets lumped into the advertising it's a big part of the advertising services that isn't search yeah but it's like i mean i guess for google that's not sorry for any company other company it would feel big but for google it's not it's like 10 billion dollars or something i believe let's see if we can confirm see if i'm wrong it's on finch google network last quarter 8 billion 8.3 which i believe is that's what we're referring to here youtube ads 9.2 google search 48 but but but i believe search has much higher margins than uh those other two by far

that's just my hunch i guess they don't they don't divvy it out but yeah oh yeah dang it is a smaller piece of the pie i mean just because search is so good still 30 billion right 30 billion in revenue either way search it's going to have another great quarter it's going to grow because the world needs it and if you're in if you're any business on the internet it's the probably the most valuable real estate on the internet so and crypto revenue is back and they've got crypto back it up a little bit so that's my hunch people will in a couple quarters be like google's reporting let's see if sundar is fired and then google search will be like yeah we generated more revenue and then everyone will be like yeah

well you know gemini there's still cultural issues but the stock's fine yeah what is the famous buffett quote if you have a bad manager in a good business or a good manager in a bad business usually the business wins out so even if you think the management here is so bad the business is so strong that i think like you still have youtube and google cloud growing with huge runways for reinvestment way less mature than the google search or double click business the question though was if sundar was fired how much do you think google stock goes up i think it goes up but i don't know if it would deserve to depending on who they bring in because there's really only i think the stock would deserve to go up a lot if they brought in someone

who says i'm gonna run lean i'm gonna run like you know do a 40 000 50 000 person layoff kind of deal Yeah, and that's just not going to happen. Yeah, the business could be much, much more profitable, but I'm not sure. Yes. Is that realistic? I don't know. It's not going to happen, in my opinion. So who do you replace Sundar with?

Someone that walks in and lays off half the workforce? Yeah, sure. Google could have – they could probably do $150 billion annually in operating income. But is that the best for the company? is that the best for employee morale is that inspire good engineers to come work for you because there are products where listen google cloud probably doesn't do as well if it doesn't have such good engineers if it isn't seen as such a good workplace there are businesses that have they've launched lately and i'm not just talking about rebranding work suite but youtube tv

very successful. I don't think they do so well without being known as such a great place to work. Counterpoint. Yeah, we have someone let Ackman run it. Let's have Ackman run it or have a run at it.

No. We need an activist man. It is his largest position, so I wouldn't be surprised if he said something shortly, but counterpoint here, Ryan. Sorry, I got distracted. Let's bring up the old ratios on fin chat operating margin at meta let's do quarterly

okay loading is above 40 they seem to do what you are implying and their businesses are continuing to improve so i don't know sometimes leaner is better yeah i would i don't know if they've my argument here is that there are other businesses that google can succeed in by having the best engineering talent i don't think meta's launched any really successful businesses unless you consider reality labs a huge success what about the ray-ban glasses those are going viral i mean yeah they're improving you know some of the core businesses Maybe they can work cleaner. This business, Google could have whatever, 60%, 70% MasterCard, Visa-level operating margins. But they could also just get there incrementally and get there slowly over 30 years and do it as they choose.

i it also invites regulatory scrutiny they're definitely not acquiring anyone if they're that profitable i mean think about all the shit that mastercard visa gets for having that that level operating margin yeah operating margins still there and stocks still at all-time highs yeah we'll see like i mean i guess every business they could always be leaner yeah i think they meta is an example of leaner can even be like you can get more production out of less people when there's not just this you know 20 product managers and all these you know whatever like non-core yeah the bureaucracy the you know dei people or not some people say they're 100 of the problem like yeah it's probably overrating it but yeah yeah i got another

comment here from tyler saying ackman's still typing his tweet just a few more days to go yeah no one's reading those uh do you want to talk celsius i haven't looked at the results hell of a quarter okay great got any numbers for the listeners revenue is up 102 percent year over year i want to say okay i'm trying to find them i'm actually pulled the exact numbers up here with my friend finchette shameless plug uh okay segments kpis total revenue by geography this year 1.3 billion dollars 1.32 billion dollars last year 653 million. So steep growth. The CAGR compounded annual growth rate since 2015 is 72%. It gets even sharp. It's like 90% since 2018. Wow. That is remarkable. That's got to be the most

impressive growth story over the last five years. That or more so than Alpha Beauty. anyway um yeah staggering growth operating margins went from minus 24 last year to positive 20 this year they've done a great job getting into more storefronts the partnership with pepsi seems to be working well they are the number one market they have the number one market share on amazon i think just over 19 that's ahead of monster and red bull they're the fastest growing in the category by a mile. Costco, as a percentage of overall revenue, which is kind of cool, FinChat has this, went from 17% last year to 12% this year. So kind of reducing some of that customer concentration. That's nice to see. Same with Amazon. That's come down a bit as well.

So, they're getting more spread throughout. I really like to see that. Yeah, solid quarter all around, and they're seeing that operating leverage. But here's the question. Is it a buy here? Probably not. Probably not. Market cap's approaching 20 bill, right?

Yeah. Yeah, 19. Wow. Up 21% today, and it's still climbing. Yeah, it's really hard to make that valuation make sense. This business could double revenue each year for the next three years again, and it'd still be trading at probably six times gross profit in that scenario. So, and it'd be the same size as Monster, which unless it just eats Monster's lunch entirely or carves out an entirely different market, which is, that's possible. Maybe it's converting some people that weren't energy drinkers to begin with to become energy drinkers. I just have a hard time making this evaluation make sense.

Yeah. But damn, they've done a good job. Yeah. Revenue keeps growing at 100%, but the stock's going to keep going up. But they cannot do that in perpetuity. So you got to, I think, have a level set. A level head here. Can't let the stock get a hold of you. And yeah, if you bought it a long time ago, just keep holding it. But that doesn't make it a buy at these prices. Over the last five years, it's up 6,700%. That is incredible. It's a single product stock.

It's in a single category that's not that large. It's fairly large, but it's not that large. So how much bigger can it get? I'm not sure. They have. So, just to be clear, we said, and keep in mind, they're starting to become a significant piece of the pie market share wise. But in 2014, or not 2014, 2019, they had, I think, doubled revenue year over year. You could have said, yeah, I mean, if they grow 100% over the next five years annually, it could work out.

And that is what happened. What was their revenue? 75 million it gets a lot harder the bigger you get the the markets like the energy drink markets what like 20 30 billion globally i mean yeah it's a huge market opportunity but now that they're doing one and a half billion okay you really got a steel share to to make this work what kind of profit margins do you think Celsius could get to? It's not software.

There's still a steep cost to serve every customer. There's some economies of scale. But you're not going to get 90% gross margins. What do you think they could get to? 25% probably.

That's what Monster has been at. I just look at Monster. Pricing power. There's pricing power here too. Yeah. Well, same with Monster. Yeah. I don't know if there's that much pricing power, though. What do you think of Monster?

It's not like the 70s when you're like, whoa, Coca-Cola cost this little? Wow, we could raise prices for the next 50 years. And now today you're like, yeah, it's kind of, it's not that cheap anymore. I mean, you go to Costco, you get basically a dollar a can. i think that could go up but that's buying in bulk the yeah um yeah monster seems like a honestly probably a pretty good comp the there they actually reported as well this quarter did a pretty good job results were solid they're launching they're launching their new uh nasty beast twisted tea you buying that no that's probably a sugar bomb

yeah i mean they did well or they seem to like the results from the beast unleashed which is their like malt uh their malt drink but the alcoholic category that could be big for them yeah maybe celsius needs expanded alcohol do seltzers you know quote unquote healthy seltzers get that brand going just like there's healthy energy drinks right now the other one which quite the uh ninja move by monster they acquired bang after suing them into bankruptcy and that seems to be progressing well also open the door yes not bad a little bit do you think they have any opportunity to revive the bang energy brand because there was a point when bang was like five percent of the market share in energy drinks

say that again bang at one point had like five percent market share in energy drinks they were kind of the leading third player i think so it was monster red bull and then well fourth fourth rock star rock star but bang was growing and then they sued him for saying they contained super creatine in their drinks, which is a thing. They won the lawsuit. They were awarded the damages. Bang went into bankruptcy.

They couldn't really fill the shelves the way they were before. And they lost a ton of market share. Do you think there's any chance that Monster can revive that brand? Because not only did they – I mean, they lost – I think they also lost share because Celsius did well. people stopped drinking Bang and they started drinking Celsius. Yeah, on Celsius, you used to have some claims

that their product helped people lose weight, which they stopped doing. I think probably concerns over that as well because I'm guessing the product doesn't make you lose weight. New idea. Ozempic in your Celsius. That would not be bad. I'm in on that.

I mean, that's a trillion-dollar market cap right there. I think they could revive Bang. you look at c4 that had a resurgence there's a bit of a nostalgia factor with some of these for people in their 20s 30s 40s um but it's more of a novelty in that regard and i don't think that's as durable where you could say someone could be sarcastic oh i got bang you know throw back what are you gonna do that one time yeah it's not it's not as durable like yeah they could they could do well with them i guess they killed them and acquired them for scraps but it doesn't excite me there's a comment here which is have you guys talked about or have we dunked on wendy's

yet tell me you saw this i did yeah yeah i mean it was all over there's me and memes galore people people can't stop making them for anyone who didn't see it wendy's is considering what do you call it flex pricing maybe surge pricing surge pricing on their burgers so basically that means prices can fluctuate as demand is hot for the burgers which how bad of an idea is this honestly yeah i'm all i don't you know if you're a customer going to a fast food joint you probably want to have an idea of what you're going to pay yeah personally i i hope they all go out of business so i have a tough time analyzing them i uh well i think no one's forcing me to go this is only helping if they if they actually roll this out this i think helps every other

fast food competitor yeah so i think the market will take care of itself if it's a terrible idea there's plenty of competition out there i don't think there's a burger monopoly you know if you look at like local players as well smaller chains yeah if it works everyone will start doing it but it's like when people are complaining about this 20 minimum wage thing in california you know yeah i guess that sucks but these companies were already pricing these fast food a lot and it's similar to these pricing power with consumer packaged goods and i worry that it's one of those things that everyone thought what or sorry it was true for 50 years that there's just incredible pricing power with consumer packaged goods and fast food quick

service restaurants and i don't have 100 confidence that that's going to continue and what are you getting a mcdonald's can cost a lot now right you've seen you know seeing the numbers yeah average ticket has grown considerably at at McDonald's part of that is because they've been able to do been able to drive volume they've actually had I think there was an article that came out about it this week just phenomenal execution on their app and being able to drive incremental purchases with buy one get ones all that kind of stuff and it's been able to really choose the average ticket that people pay yeah it's worth it gets people to come back yeah i guess they've gamified it quite well kind of depresses me now

if i'm being serious but yeah okay here's your value tip value tip for all the listeners if you like drinking black coffee mcdonald mcdonald's black coffee isn't bad and it's a dollar telling you not bad yeah but at home it's about 10 cents so if you get yeah don't be one of those guys if you saved every if you put six dollars into your roth ira every day instead of buying starbucks it's like yeah all right yeah no start away mcdonald's is much cheaper than starbucks and yeah i guess it's just black coffee we have one more question did you guys read the berkshire letter and have any thoughts i did read it don't have too much thoughts kind of basic stuff i guess the utility business is terrible and honestly thought maybe

he was being overly pessimistic to try to temper expectations especially because the stocks run up so much but no that was the only surprise for me is the utilities guess it's an industry i don't follow but utilities apparently might be shit goes uh not a whole lot of thoughts i thought it was another really good letter uh he's he is still a phenomenal writer i assume he still writes his own letters uh he never really and he had he's had the journalists help him for years uh edited right yeah yeah he's just sending it to him they're just sending back edits I don't know. I remember from the snowball. It seemed different. The letter to the obituary for Charlie seemed like it was him, but yeah, he's definitely had the help, but clearly, either way, as a team, he's obviously part of it. yeah no thoughts that are that much that much more valuable than anything anyone said had great

words for charlie uh look forward to hearing about the meeting i don't think i'm going to be there but listening to it and hopefully the three uh agi greg and there's another one i think i thought there was they mentioned maybe another one being up there i hope they start to give greg going to specifically achieve more airtime to talk because if you're a Berkshire shareholder and you want to keep holding, you got to get to know those guys pretty well. That is true. And insurance is an important part of it. Yeah. Sorry, Geico. Yeah, kind of in a tough spot. I think that's a good place to end it. Thank you to all the listeners for taking us to episode 100. Had a good little live audience today. If you want to watch these live and

comment for any of those questions that we're referring to in this episode. You can join us on YouTube, on the Chit Chat Stocks YouTube channel every Thursday at 12.30 p.m. Eastern Standard Time. If you enjoy these episodes, give us a follow on either YouTube, Apple, or Spotify. That's the best way to keep up with any new show releases. Give us a five-star review on either Spotify or Apple to help us grow. Subscribe to the newsletter, Chit Chat Stocks. You can find it over on Substack or right in the show notes. And I think that's it. Let's hit the disclosure.

We are not financial advisors. Anything we say on this show is not formal advice or recommendation. Oh, what's the last part? Oh, yeah, yeah, yeah. I always forget. Ryan, I, or any podcast guests may hold securities in this podcast. I'm sorry, not in this podcast. Wow, I'm totally screwing up.

May hold securities talked about on this podcast. may have held them in the past and may buy, sell, or hold them in the future. Got through that. All right. Thank you to everyone again, and we'll see you next time.