Chit Chat Stocks - 2024 Hot Takes + Podcast Revamp...And We Are Changing Our Name!

Episode Date: January 3, 2024

Happy New Year! On this episode of Chit Chat Money, we discuss: - Changing the name of the podcast - Changing our release schedule - Our favorite podcast episodes from 2023 - Brett and Ryan's hot takes for 2024 ***************************************************** Subscribe to our YouTube channel: https://www.youtube.com/@ChitChatMoney/featured  Follow us on Twitter/X: https://twitter.com/chitchatmoney  Follow us on Substack: https://chitchatmoney.substack.com/  ********************************************************************* Chit Chat Money is brought to you by Public.com*. Sign up for a high-yield cash account today: https://public.com/chitchatmoney *A High-Yield Cash Account is a secondary brokerage account with Public Investing. Funds from this account are automatically deposited into partner banks where they earn a variable interest and are eligible for FDIC insurance. Neither Public Investing nor any of its affiliates is a bank. US only. Learn more at https://public.com/disclosures/high-yield-account ********************************************************************* Disclosure: Chit Chat Money 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

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found in the podcast description. High-yield cash accounts are available for U.S. members only. Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Anything discussed on Chit Chat Money by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome in. My name is Brett Schaefer, and I'm joined, as always, by Ryan Henderson.

As you may have noticed here, I didn't say welcome in to Chit Chat Money, which is a little tease that we'll talk about in a couple minutes here. But we're doing our 2024 prediction show. i guess we're calling it hot takes because that's not really everyone does predictions so we're trying to make it a little bit more fun and unique but we're going to do um kind of an update on the show some changes we're making for 2024 reviewing 2023 giving our highlights for uh the show in 2023 some of our favorite episodes going through our predictions from 2023 seeing what we got right what we got wrong, and then making some hot takes for 2024, as well as some of our favorites

of 2023, including blogs slash substacks, books, and investment pitches. Ryan, am I missing anything before we get started here? No, I think that covers the basics. we uh we're trying to do a little revamp a little rebranding of the old podcast and so we've got some some new initiatives but for all our mainstay listeners or people that have been around for a long time we're we're going to try to announce these changes in advance so that everyone doesn't get confused uh especially with the name change which will be coming uh hopefully everyone can continue to listen and won't be so turned off by the name change i don't think anyone's going to

be turned off by that but we don't want to confuse anyone i think that's the big thing before we get into it housekeeping items as always if you enjoy the show give it a review on spotify or apple podcast that is the easiest way takes you about five seconds and it is a great way to support the show tell us that you like it follow us on substack twitter and youtube that's the other places you can find the stuff that we put out you can listen on youtube or watch on youtube you can follow the twitter for clips highlights and other stuff and then the sub stack will have the newsletter which sends out emails on a regular basis and i think that is it if you enjoy this episode that we're doing right now i would recommend sharing it with someone that is the

best way again, along with the reviews to help us grow and make this into a, you know, so more people can enjoy this stuff. All right. We're going to get into or calling the podcast revamp for 2024. There are not giant changes here, but I think there's a couple things that are important. We'll go, maybe this will probably take about five minutes or so, depending on how long it takes we want to get through these things first uh the first one is a name change and it's not a general please drumroll please yeah exactly exactly it comes it is going from chit chat money to the wild name of chit chat stocks so there we go huge name change but pretty underwhelming announcement there uh yeah it's it you gotta with a little more enthusiasm chit chat stocks and uh

yeah do you want to explain why we're doing this sure so it's simply for the searching purposes and to have a name that more reflects what we actually do on the podcast the logo is going to day, fairly similar, which we'll get to next. And we're keeping chit chat in there. So I don't think anyone will get too confused. But we're going to start that I think February 1, we'll give a warning on every show from here on out through January in the intro. But yeah, that's really it. I mean, we're still focusing on the same type of content, business analysis, investing philosophy, investing news markets, blah, blah, blah, all that good stuff that we're still covering here but we just wanted to make it a change from chit chat money to chit chat stocks

because we think that a lot of the shows that have money in the title well they're more of a personal finance show and that's not really our style we're more stock analysis and that's what we want to reflect in our name anything there ryan before we move on no i mean i think people that don't know who we are and click on the name Chitchat Money probably are thinking it's going to be personal finance related. And we talk very little about personal finance here. So yeah, it's just a little more indicative of what we truly talk about. And then it's also hopefully going to rank a little bit higher in searches. So if people are looking up podcasts about stocks, hopefully over time, It should begin to show up a little more as opposed to getting like just lost in the array of shows that have the title money in them.

So hopefully it makes us stand out a little more. But that is purely the name changes primarily for discovery and hopefully to help kind of organic growth as opposed to anything. I don't know. It's not too big of a rebranding. Exactly. It's just a slight name change, and I don't think a lot of people probably won't notice for a while until we say it on our show. I'm sure that we're going to accidentally say Chit Chat and Money a lot, but it is officially

going to be Chit Chat Stocks in your feeds on February 1st, but we're going to make that change, and we'll give a fair warning there. The next one is a slightly new logo. We're adding our faces to it, and why are we doing this? just because, again, it's a lot easier for searchability purposes. I think there's just some studies out there about how if you put your faces on the logo, people are more likely to try out your podcast.

So we're going to do that as a little bit of a growth hack. And I don't think anyone should really care too much, but if it looks slightly different in your feed, that's why. And we just want to give a quick warning about that. we will also have a public advertisement on the logo for q1 that is not that's the company public who you'll hear about as we do some advertisements for them uh throughout 2024 we're really gracious for them to be joining the show as a sponsor and you can watch out for that definitely go check them out public.com i'm sure you're going to hear an ad for them in this episode as well so if you're

scrolling your podcast feed and you say wow who are these two handsome young fellas that's still us the chitchat stocks podcast host brett and ryan now we're just putting our faces on it like you said to make it seem more relatable more personable and does it have any bearings on listenership i have absolutely no idea but there have been those little growth hack studies that say they do and also can't hurt yeah we're just experimenting with stuff some of the stuff might stick some of the stuff might not so we're we're trying stuff out and the name change the logo change or adding our faces are two of the steps in that process yep okay now the name the logo doesn't really matter to the listeners too much especially if you're listening to this now you're

probably an existing one but the one that what does matter is the actual shows we're doing a slight change here as well we are going to have new episode release days and that is wednesday and Sunday, only two a week. First on Sunday is the Power Hour, which is recorded live on YouTube on Thursdays and then published to the podcast platforms, you know, Spotify, Apple, Overcast, Google Podcasts, Amazon, etc. on Sunday morning. And that's going to not change. That's going to be the same thing we've been doing. We think people enjoy that format and it's not getting stale at all. But Wednesday is going to be our analysis and research show, which the question I put in here is, do we need a nickname for these episodes? Because I haven't

thought of one, but it's going to be combining sort of the interview type shows we do, the not so deep dives type shows that we do. But we're not, the big change is not having a set cadence of the specific style of show we have to do on Wednesday. We want to do stuff that has basically two criteria. Having great quality analysis and then releasing things that listeners will enjoy, but not forcing it as we felt we did a little bit in 2023 and 2022.

We'll be doing interviews. I mean, right now, I think we're focusing on kind of trying to get some of these sector interviews in there. We still want to do stock research. I think we have some interesting ideas there. And then timely topics and updates on companies we follow. For example, the first show we're actually going to do is a book review on The Fund,

which is a book about Bridgewater Associates and Ray Dalio. And we just want to do stuff that listeners will enjoy with only one of these a week instead of two. We think we can improve the quality. and hopefully you don't listen to anything where you think they kind of just we never phone it in but where it's not maybe the best podcast you'd ever listen to we want to make sure we improve the quality there and we know that two shows a week we're still not slouching on you know consistently putting stuff out for the listeners yeah and for the people that really enjoyed

us having three shows a week. I'm sorry, but I do think this will help with the content. Unless you're a huge organization like Wall Street Journal or some sort of news organization, it's really hard to produce three or more shows a week that are ultra high quality. So this will allow us to actually spend more time not only researching, but talking about something that we know intimately well, as opposed to our not-so-deep-dive approach, which a lot of people love the not-so-deep-dives and we appreciate everyone that's listened to those. However, there's times when it's a company that just, frankly, no one cares about, but it might be a stock that we're really interested in researching. Maybe that could be something

that's done on our own independently. And then we're presenting whatever, once a month, our best research or the stock we like the best now, that kind of thing. And then we can also So parlay that into, or not parlay that, but shift the show into other stuff that is worth talking about. So whether it's portfolio management, so how are we adjusting our own funds, answering important investing questions like how do you size positions, having specific investing themes that we talk about, I think is going to be valuable to listeners too, beyond just the actual stock research.

for people that have listened to us forever which i imagine there aren't that many still left we used to do this way back when where it was basically just timely and from like timely news items so uh let's think of a recent news item the adobe and figma deal broke there uh they had to pay a billion dollar kind of breakup clause and and part of it was due to the regulatory environment. That's something we could talk about at length if we have the format to do so. But by having the interviews and the not so deep dive structured in the way that we do now, it's hard to really talk about that other than through our power hours. So it's giving us a way to really dive into actual news items and present our best stock analysis as opposed to just doing

one once a week. And sometimes if it's a company we know we don't care about kind of going through emotions so hopefully this will allow us to provide the absolute best content for you guys as listeners yep and the key difference for anyone that's thinking okay well what kind of stuff should i expect on the power or what kind of stuff should i expect on the wednesday episodes on the wednesday shows it should be a more it's going to be almost always just one topic but an extended research on it and that could be a scepter interview like the discussions we've been doing with you know we had the luxury one we've had the housing one we just had the advertising technology one come out last week it could be a stock we've researched for a month one of us or

it could be like you mentioned that merger thing but it's an extended discussion and then on the power hour for people that listen i know a lot of people listen to those episodes that's a lot of quick hits people interacting and it's more fun entertainment um kind of just what's on our mind and we probably hit like five to 10 topics every episode. Less research. That'll stay the same. What? Less researched on the Power Hour for the most part,

because it's a lot of it's ask me anything type content. So we're kind of responding quickly. But to your point here, it can be interviews. It can be stock pitches. So something where not only have we researched it, but it's something we're actively buying. And now that we're not running the fund, we feel a little more comfortable being like,

hey, we're doing this in our personal account. Here's why I'm doing it as opposed to kind of a cursory overview of a stock we kind of know. It's something more intimate. It's providing more value for hopefully listeners because we know the business a little better and it's maybe more actionable as well because people can say like, oh, it's an attractive price today, that kind of thing. Maybe it's not. Basically, we want people to take more away from these episodes than what we've been doing with kind of the three shows a week would you agree with that yeah and it's not like all of the not so deep desert interviews were bad i'd say most of them were good and it's just that sometimes we would hope or we wanted to have more time to research for both of these and we

didn't want to we sometimes forced ourselves to do things that we didn't necessarily want to cover at the time so this will help us not do that i hope people understand if you have any questions we have our email in every single show notes so email us there dm us on twitter give us any feedback we'll listen now the other thing is for anyone that wants to know and then we'll get into the kind of highlight show for 2023 and 2024 if you want to follow the show at any other distribution outlets the three main ones are twitter where we'll be posting consistent video clips from the show, we're doing threads, any show updates, other interesting topics, you know, anyone that's listening should go follow us there. And I think you should, because that's how you get

the best updates on the show. That's where we're posting on a regular basis. Then we have the sub stack. Sorry, I got to sneeze a little bit here, trying to fight that. We'll be sending out newsletters to the subscriber base on a consistent basis when there is something interesting in addition to the podcast for them so for example on this show we'll probably send out uh some written stuff on our 2024 predictions or hot takes as we're calling them reviewing the 2023 ones and then posting some links to our favorite episodes of 2023 as well which we're about to get into and then on youtube it's the other place that's where we post basically every podcast there unless a guest does not have uh want to do video for whatever reason which is up to them if you like

the videos instead definitely subscribe there too ryan and then we should move on to the next segment unless you have anything else you think the in the listeners should uh should know as we go into 2024 no i would just say to our longtime listeners thank you so much for listening through all this time. We hope to provide another year of really valuable and fun investing content. It's going to be Chit Chat Stocks. From here on out, you're going to see our faces a little more, even if you just listened to the podcast through the logo there. And then the last thing I'll say is we are going to try to do more interactive type stuff. So we're working on, I don't want to call it a merch line, but some items that'll just be branded with the Chit Chat Stocks logo.

So it'll have, whether it's mugs, Getty type of stuff, shirts, hats, whatever. We haven't decided yet. If you have any ideas, feel free to send them to us. But we're going to be giving away some items as well to kind of reward the listeners that have been with us for a long time. So that might not come too quickly, but we hope to get that out, maybe kind of end a Q1. with that said with that said let's do i think before we get into our predictions we should start with our three favorite episodes from this year and this is relating to our own podcast so listeners that haven't heard some of these episodes maybe this will uh funnel you back to

our own shows here but what were your three favorite episodes we did this year yeah and i will say we'll post these links on the sub stack as well but it should be very easy to this either search on spotify or apple or wherever you're listening you can find these or just keep scrolling in our feed do a little ctrl f as i like to say first one and this is a fairly recent one is the state of the luxury industry which we did with sleepwell capital and leandro that runs the Best Anchor Stocks newsletter. Really enjoyed this one. We got a lot of great feedback on it. And I think there's just a lot to learn about this market. And it's very unique. And they just did a great job explaining the history of the industry, who are the key players, why each

player is different, all that good stuff. Second is the state of the housing market with Lance Lambert, who is the ex-editor at Fortune. I believe he was an editor, but more importantly, he has just started his own housing research newsletter called Resi Club, and he's just so good at following the housing market. Anything real estate related is just like an encyclopedia on that, and I thought that when we asked him any question,

he gave a detailed but concise answer and had just all these stats to back it up. I thought it was absolutely fantastic. And then the third one that I thought we did a good job on ourselves was a Rocket Lab, not so deep dive, because this was a very interesting company. It was very complicated. I know a lot of people like this stock because people seem to love space economy stuff. And I just thought, I just came away thinking, okay, that episode, we provided a lot of value

to the listeners here. yeah there's there's definitely some episodes that we've done over the years where it's like i feel really proud of it and it might not even end up getting that many listens but it's something where it's like i learned a ton and hopefully or i think i was able to translate that we were able to translate that to listeners that they learned a ton my three favorite episodes from this year we did an arch capital episode which we were doing like once a month on why we don't own coupon i ended up buying coupon shortly after this and it forced it forced us to do some research and then i was like why at the end we basically asked ourselves why don't we own this and i said

i don't know it checks all the boxes that i'm looking for and it seems like an attractive valuation so ended up uh actually buying some and i own some in my personal account now so that was the inspiration for that. Yes, Brett. I would say we are still going to be doing these type of episodes in 2024. This is the type of stuff you should expect instead of the not so deep dive format, which worked sometimes. We want to keep things fresh and we're doing stuff more in that light. And especially because we're not professionally investing anymore. One key thing is we don't have to pretend to be aligned on everything anymore, I think. So Ryan could pitch something, I could have some critiques on it and vice versa. I think that'll be quite

fun and interesting for the listeners. Yeah, I agree. The second one for me here on my three favorite episodes, I was a little torn here between Visa and American Express. I felt like I got a lot of value out of both of those episodes and hopefully we transfer that value to you guys as listeners, but are not so deep dive. I'm going to go with Visa. I thought going back through the hit, Visa strikes me as one of those businesses that everyone kind of knows what they do, but doesn't deeply know what they do. And I was definitely one of those people, but it felt like after going through this episode and really visiting the history of Visa, I got a much better understanding for the value they provide to both merchants and customers. And also gave me a little more solidified belief around how difficult they would be to displace as the network between – well, network basically facilitating payments globally. So kind of just gave me a better appreciation for their moat.

My last one here would be our merger arbitrage discussion with Andrew Walker. However, I remember walking away from this episode thinking there wasn't any other episode that made me want to change some of my capital allocation strategy as much as this one. So Andrew basically talked about the fact that given sort of the regulatory environment right now and some of the antitrust pressures to try to break up a lot of mergers going on that otherwise maybe wouldn't have received as much scrutiny, it's presenting a really good opportunity for investors that are able to parse through it. And Andrew's really, really good at this stuff. We've had maybe some failed experiments with Activision merger arbitrage, but we've also had some call it victories, I guess, as well. But it's something where this opportunity set hasn't been that available up until the new administration for the FTC. Plus the EU and the UK one. Right. And so if you're able to follow it and you're able to have basically a well-informed take on whether or not something will go through, it seems like some of these are getting sued to block without a whole lot of substance behind them, which is presenting a lot of big pricing discrepancies between stock prices.

So anyway, it just, I came away really convinced that it's something I need to focus more on and potentially use as a part of my, uh, use some of my money for in the future. Those are my big three. Do we want to review our predictions from last year? Sure. Yeah. Let's, let's go through it. Let's go through it. Uh, we got yours pasted here first.

Maybe. Why don't you go through it? Then I'll go through mine. Let me take you through the environment going into January 1st, 2023. So there was talk of a soft landing. Rates had risen pretty sharply. The NASDAQ had closed the year down 33.4%. The Dow Jones Industrial Average had closed down 9%, and the S&P had closed down 20%.

So rough year across the board. And home prices were at record highs. So my big three predictions for 2023 were we will have a soft landing. I describe that as the increase in CPI by the end of 2023 will drop below the current federal funds rate at the time, which was 4.5%. This total CPI for November was 3.1%, so I got that one right. I don't mean to brag here, but some of these predictions were, I wish I had trusted my gut with these. My next big prediction was the average U.S. home price measured by Fred's U.S. National Home Price Index will decline by more than 10% from the January 1st, 2023 levels. the median sales price of houses sold in the US has declined by 10%. The average sales price for new houses in the US has declined by 14% through November of this year. But the average sales price of houses sold in the US has only declined by 7% so far this year. So I was technically wrong.

That was sort of the metric I chose, but directionally correct, wrong on the actual number i don't think it was very much i don't think it was a very contrary take a lot of people were kind of uh believing that real estate couldn't stay that elevated for a while and i will say that there's data out there like he's using fred some data sources have different numbers out there so if you see something different it's because you probably are using a different data source my last one here i said that the three major indexes nasdaq 100 s&p 500 and dow jones will finish in reverse order to how they did in 2022. So last year, Dow Jones performed the best, S&P performed the second best, and the NASDAQ performed the worst. This year, NASDAQ up 54%,

S&P 500 up 25% roughly, and the Dow Jones up 13.5%. I do feel validated on this one because i got it right yep that was pretty good the thing is it's also when i just took me away when uh yeah true true that's it's not it seemed a little more likely than i wouldn't say that was extremely bold but i think a lot of people wouldn't have agreed with you there were so many people at the end of 22 that said oh this is just like the dot-com buzz qqq is over blah blah, blah, blah, blah, blah. But Ryan, it took me so much convincing to get you to buy like Amazon or something like that.

And you were still very hesitant to quote unquote, maybe load the boat on that one at the time. You were conflicting for yourself. Well, these are my gut takes and I guess maybe gut feel matters more in investing than I initially thought. The other thing I will say here is at the end of 2022, it felt easier to make predictions than it did today. I agree.

It had just been such a rough year, and it felt like there was a lot of overcorrections with equities especially that some of the predictions felt a little easier. Whereas it seems like we're more in kind of a limbo period right now, like rates, we don't know exactly what's going to happen. It wasn't as well telegraphed as it was at this time last year. And I mean, housing has come down a bit. So how much of it is priced in kind of thing. It just, it was a little easier to have bull takes this time last year than I thought it did, thought it was today. yep and i think we may be having the opposite overcorrection you know in the pot in the positive one which will lead into mine but i had two bold predictions i will tease it one of them was a stock ripping and one of them was a stock going down so you can tell i got i didn't get the ripping one right but directionally i was right on the one that went up and wrong on the one that went down so my first one was these are perhaps a bit bolder than ryan's i will say mine was amazon ends the year 2023 is the largest company in the world by market cap the reasoning was

the cloud transition uh slowdown does not materialize there's i don't know like i just thought that that was getting overblown. Perhaps it was, but they didn't really see the growth still slowed down a little bit and we didn't see a re-acceleration in growth. So I think that was wrong. The second reasoning was that the non-AWS part of the business gets back to profitability because of advertising and normalization of the e-commerce market and then cutting the fat on all the employees they hired in 2021 and 2022. That one was definitely correct and then since they had to catch up to some other stocks i thought that apple would continue to fall uh because there's a down year for the hardware market and the chickens finally

coming home to roost on anti-competitive behavior what's interesting is the reasoning happened but apple is the teflon stock and it just trades at 30 times earnings even though revenue is going down actually you know what's kind of funny here i would say the antitrust was more in apple's favor than amazon's and true google's like apple seems to be the one that's kind of snuck away from a lot of the antitrust scrutiny although they're still in these things and yeah i guess the stuff hasn't come home to roost if we're going to use that analogy that i put down there but the risks are getting worse i'd say third fourth one was that microsoft uh will go down a little bit because of a revenue growth deceleration big miss there yeah just

really nothing else and then alphabet and google uh slash google excuse me it was trading up the same market cap i think as amazon i said it will do good do fine but amazon has more upside that one did fairly well i think amazon's up 75 this year but did not uh become the largest company by market cap in the world i think it would be more reasonable maybe here's a fun question what do you think the likelihood that they finished 2024 as the largest market cap in the world is i think it's unlikely unlikely microsoft do you think too much yeah it would take another well it would it would take all these things to go right again Well, some of them didn't go right, but it would take a more meaningful correction in Apple and Microsoft, as well as, I think even, would it take a double from Amazon here?

I'm not sure what today's market cap looks like, but I think a double from Amazon here is quite unlikely, unless the profitability, the margins really start to inflect quickly, which I don't think has ever been Amazon's MO. So year-to-date, we're up 77.5%. Market cap is $1.6 trillion. So yeah, roughly right there on what you were thinking. I would think that retail, yeah, non-AWS margins would have to go well above 10%, I think, by Q3, Q4 of next year for people to get that optimistic. Which I don't think is impossible. Well, I don't think long-term non-AWS margins could be that far away from that figure that you just quoted, more than 10% profit margins.

However, I don't know if it'll happen in a year. It seems quick. Yeah, I agree. I agree. That might be too quick. Let's go through your second prediction here. Second one, as I said, was quite wrong. I said that Tesla would finish the year at a market cap below $200 billion, which would be a 50% drop from where it was today.

My reasoning was near-term domain and backlog indicators are very pessimistic right now. That ended up being true, I guess, because they ended up having to cut prices by so much. I said supply and commodity costs were extremely elevated. That ended up not being true, as we saw a lot of the commodity costs come down in 2023. three. I said more competitors have come onto the market, the F-150 and Rivian. I said used car prices are falling three times faster than the overall industry right now. That did continue. But then I said there would be a revenue decel plus margin compression leads to the stock falling further. I guess what's interesting is that a lot of these things

ended up happening but it's pretty hard it's a lesson in that you can't predict what a stock's going to do in one year with any sort of certainty even if you have decent reasoning on it yeah it's so hard to it's if you told me what like if you told me what happened to tesla this year not the stock like what happened to the business what some of the struggles they were facing were, I would have guessed there would be some difficulty for the stock as well, but like you said, it's impossible

to predict within a one-year time frame. Margins contract, too. Margins contract significantly. What's funny is this is why shorting's so hard and why you probably need a really good catalyst if you're going to short or

be externally diversified. The stock is up 100% this year, but if you look at their quarterly revenue growth, It went from basically three years ago, 90%. And last quarter, we're down to 8% or 8.8%, so basically 9%. And if we look at operating margin, it went from a peak of maybe 16% to 17%, and now we're down to 11.2% on a trailing 12-month basis. But on the quarterly number, it's significantly lower,

so that should continue in 2024 unless they can stop cutting prices so yeah stocks up a lot i don't know i mean it's a hot take so it's not like it's anything actual investing advice but i think it's an interesting lesson when you're younger you probably get confident in these type of things like hey look i'm seeing this could happen why don't i short this why don't you know it's pretty clear it's like okay look sometimes it's just flows that matter and if people love the stock it like it can go up it can keep going up but people just love it all right let's do our hot takes for 2024. you want to alternate here how do we want to do this i think alternate makes sense all right yeah kick things off sure these are maybe less sexy than last year but i have

I think it's kind of, you know, last year, it's kind of the opposite environment. Now, I think the predictions will kind of tell here. So my first one, which kind of relates to last year, is that the big three tobacco stocks, Altria Group, British American Tobacco, and Philip Morris International, on an equal weighted portfolio, so 33% each, will outperform the magnificent seven equal weighted in 2024 on a total return basis. I have four pieces of reasoning here. First is the earnings ratios of British American Tobacco and Altria Group are pricing in the accelerated volume declines that occurred in 2023 and may occur for the foreseeable future. We're seeing the PEs came down so much last year.

And then Fillmore is international, still an elevated PE, but it has a much better mix for the future of the nicotine space. I think they should see solid, durable revenue growth, foreign currencies excluded, Russia and Ukraine kind of excluded because they have tough, you know, that's been hurting them. And then I think the Magnificent Seven now generally are overvalued. They have an average P.E. I did last night of 50. And this is equal weighted, so we're not market cap weighting or everything. I just added up the seven P.E.s on a trailing 12 month basis and divided by seven. And I think only one, Amazon, is under-earning today.

And I think Nvidia and Tesla may be both over-earning on a trailing basis. So I think that's part of my reasoning. And then I think in 2024, the fears over-accelerated volume declines for tobacco will ease because there's just the sentiment around these things are really, really bad right now. And then we also have kind of a weighted dividend yield in the stocks of about 7.5%. So nice little real return now with inflation down. So I'll take yours maybe a step further and say U.S. Treasuries will outperform the Magnificent 7. Now, if rates come down by a little bit, one-year U.S. treasuries might actually have

similar returns, I'm guessing, to tobacco stocks or the tobacco basket that you chose there. So the one-year U.S. treasury yield right now is about 4.8%. I think rates will continue past what has currently been telegraphed, which means they should appreciate in price as well. So basically just, and, but if it's one year, you're holding to maturity. So not, not too big, you know? Yeah. You're basically getting 5% would be my guess here because it's literally stated, but also, yeah, I don't know. I guess I've seen a lot of rate takes and who knows, and I'm not going to give one here, but let's say you get 5% with us treasuries.

I think you're going to beat the Magnificent 7 because like Brett just said, it does feel overvalued. To put some perspective on this, from January, 2023 to today, here's what has happened to the price to sales multiple of each stock. Now, people are going to hear price to sales. They probably think, well, that's a term I haven't heard since 2020. The reason I'm just using that is because there can be big earnings discrepancies in any given year and so this is video's margins are unsustainable frankly yeah a lot of the margins are going to be between apple and amazon and microsoft and google you would think margins have been somewhat consistent metas actually have doubled which is kind of insane but you would think it's going to be

pretty close to what it was last year over the next year so price to sales multiple i don't think it's that, it's not the perfect metric, but it is useful to see how much sentiment has improved on these businesses. So Nvidia's price to sales multiple has gone from, and this is trailing, 12 to 27 over the last year. Tesla's has gone from five to eight, Apple, five to eight, Amazon, two to three. This is a business that, I mean, it's not, it's a 50%, a little more than 50% actually sales multiple expansion, but it's sales multiple because the margins can change pretty quickly and have changed pretty quickly for that business. Next three here, Microsoft sales multiple has gone from nine to 13, Google's four to six, Meta's three to seven. So across the

board, there's been 50% plus multiple expansion in all these companies. Hard to imagine that happening again. A lot of them have also expanded margins over the last year. I don't think that's going to be sustainable. Well, I don't think companies like Meta is not going to double their margins again. So I just don't see that repeating. I see them having a tough year, especially being weighed down by NVIDIA and Tesla. It feels like they've had a lot of momentum lately, NVIDIA's business specifically, but Tesla more so in the stock price. So I'm just going to go out on a limb here and say U.S. Treasuries helped reform. Magnificent 7 has a down year. All right. That's a fun one. Should be easy to track. And let me pull up because this is the three-year anniversary

of a tweet I did back in 2020. So three years ago, December 31st, 2020, I said, starting on January 1st of 2021, what will have a better three-year performance? First was FanMag. So Meta, Apple, Netflix, Microsoft, Amazon, Google, equal weighted, or Berkshire Hathaway. Just Berkshire Hathaway

The B shares 82% Of the poll voters From my Twitter following Said fanmeg And that was one of the worst times to Invest in fanmeg Do you want to guess, maybe, did you see the tweet

I did a follow up or not No, I didn't see it Okay, who is your prediction of who won I'd say Berkshire would be my guess when when was the starting point january january 1 2021 closed yesterday okay fan mag average total return so basically we're doing equal weighted just a total return from the start of 2021 who's that end of return the end down fan mag is that netflix or nvidia netflix because at the time nvidia was done

it shows that it shows how well NVIDIA has done as a stock average total return 35% Berkshire 57.6 the buff dog wins again

I said long live the king yeah and there was someone that responded zoom that was tough that did not work out well there was a lot of the replies to that this shows the sentiment at the time it was a bubble you know that's kind of the phone call

from the big short right uh but let's keep going let's keep going i thought it was fun because you know i think this will be a similar type one where we can just easily track it and the next year we'll see what happens because i think this is a lesson for the listeners last year there was no optimism whatsoever on the magnificent seven. Everyone hated him this year. You can't not be in it apparently. And I would just fade that entirely. I like some of them, but the group, I, I just don't see why you would own those over treasuries, at least right now. God investing last year was so fun because you can look at a business like amazon and google which check the box on quality and basically all the qualitative characteristics you're look you're probably looking for in a

business it checked the box and you're buying them at reasonable multiples so it yeah 100 it was it was so fun back then because you could finally get in and now i'm just on the sidelines being a hater for fan mag all over again or the magnificent seven it's been a while i mean the last few years have just been wild it's funny okay my second prediction now i think this is a fun one it's a bit of a more of a stretch but i see a scenario and a little teaser we're going to do a very fun sector overview of the media sector uh that'll come out in january my prediction here is that the KVIL TV bundle finally collapses in 2024. When, what does I mean by collapse?

I'd say the business model finally breaks for all the channels and networks involved. Disney, Fox, Paramount, Warner Brothers, Discovery, et cetera. And the business model breaking, I think what was a big highlight here is when Disney showed ESPN's financials and how much they've deteriorated in recent years. and that's supposedly the best model here.

So, or the most profitable one or the one that has the highest fees. My reasoning is that the only thing holding together the traditional TV model is sports and Disney is seeing the light here or not seeing the light, they're seeing that it's ending with ESPN and they're coming out with a true D2C application

for that channel and all the sports content they have, which will leave even less of an incentive for sports fans to go there to the traditional one. The NBA is about to renegotiate its TV rights deal. The regional sports networks are dead and going to get picked up by someone, possibly streamers. I mean, they're all going bankrupt.

And then even if tens of millions of people over the age of 50 still want to subscribe to the cable bundle, which I don't really see changing next year, right? They can afford it. It's what they've always done. Prices aren't going to go up astronomically. The costs are going to be so overwhelming.

because especially because of the american football sports rights which i think cumulatively which includes amazon prime are 11 billion dollars a year i guess we'll save the implications for another discussion but what do you think about this i may be accelerating the timeline a little bit i think i would have much more confidence in this on a three-year time horizon that people may be actually underrating the collapse of the cable tv bundle right now but curious your thoughts yeah i don't know because i do think you maybe accelerated the timeline here when i think about people that are no longer that haven't switched it's all the really old folks who just don't want to and it makes me feel like we're gonna have kind of a

a pretty stubborn remainder of people that don't want to switch to connected TV. So I don't know. I could, I could totally be wrong on that. I agree with you there. I agree with you there, but that doesn't mean the business models don't break.

I think you can continue to raise prices on those people. Yeah. But isn't that your argument against tobacco? yeah yeah i suppose but those ones might die off quicker like the i don't know there's yeah i guess there's there's more leverage here like the unit there there is a lot of operating leverage in these models because it takes they have the fixed costs look you're paying the nfl 11 billion dollars a year yeah i i think it's in a tough spot but what what do you define as collapses like the business model basically they all go from i think espn was decently

profitable over the last 12 months they all start having like losing money and the you know they're all they all become unprofitable aren't they already mostly all losing money no i mean the parent a lot of the parent companies are but the truth and I guess I am NOT an expert in all these financial statements but a lot of the traditional models for the channels you know are still profitable because they just have some basic content and charge the cable providers you know four bucks a month And the cable companies are already basically not making any money from the cable TV bundle, but they have the internet stuff and they'll be fine with that. Yeah, it's hard to see.

They want it to go away. They don't care about it anymore. It is hard to see how this model exists five to 10 years down the road, but I just don't see a monumental shift happening in kind of the next year. I do see them continuing to, like the parent companies here, shifting their resources to connected TV and trying to move everyone over. But you've got so many just old, stubborn customers that want the cable package and they're pretty much willing to pay whatever because it's a huge part of their life that I can see them finding a way to generate cash in those businesses.

Maybe. maybe i just don't know if let's not talk in circles i think we've already covered everything implications though i think this just accelerates the share gains for youtube and netflix yeah it's hard to see how they both get in the united states at least it's it's hard to see how they both don't go from around 10 where they are today of viewing time on tvs to 20 not not next year but over a couple years i think youtube tv is really really well positioned because it's such an easy transition for a lot of those remaining stubborn customers a lot of the parents grandparents as long as they can click in as long as they can find a way to click into youtube tv it feels like

the same layout and i think that's a huge advantage for them and probably why it has had so much momentum already yeah youtube's already what eight nine percent of streaming between youtube and youtube tv and i think it's just tv share in general like this is including traditional tv oh i didn't know that yeah i think youtube's a big winner there netflix and it's actually excluding youtube tv so we're just talking like there's different ways this is what one of our favorite analyst alex morris who will be coming on to do a media overview covers i should look at the data specifically because there are some interesting sees there but either way youtube dominates yeah i don't know how i feel about netflix the i am growing more convinced that

their push to gaming could work but they have to do it maybe but yeah it feels like the relevance and streaming is declining. Let me look at the data. Pull your reasoning there. Let me find the data. It's not about data, Brett. It's about anecdotes. And for me, the anecdotes say that they are not as relevant

in my day-to-day watch hours. So that's going to be what I'm going to extrapolate based on. Let me move to my next hot take while you find the data. Go ahead. I think part of it is because they don't do sports So let's do a year over year November 2023 They were

So it's a streaming share of US TV time So this is overall TV time In the United States Thank you to our friend Alex Moritz At the Science of Hitting Research For compiling this every month They were 7.4% Share November 2023

That is Netflix now if you look at november 2022 7.6 right so not gaining share youtube is the one that went from seven and a half percent to nine they went 7.4 to 7.6 it's i went backwards i went backwards so okay yeah yeah so i'm right my gut my gut feel is right but i think that's not the if you're netflix you're kind of saying this isn't the worst outcome after the password cracked out right no yeah i think you're right i mean it's a huge shift for them and something that they had to bite the bullet on for a while so if you're losing point zero point two percent market share in that process i think yeah that's that's probably a victory my second hot take is that the consumer

discretionary sector will have negative returns for the year. And I'm just using, I think it's XLY, it's like the consumer discretionary sector ETF. It was up 39% this year. Now, unfortunately, after I wrote this prediction down, I looked at the hold-ins and 22% of it is Amazon. So we're kind of having to bank on the fact that Amazon has a rough year. But the other names in here include McDonald's, Nike, Starbucks, the Pepsis, Hershey's of the world.

And every time I visited and looked at those companies, it has seen great multiple expansion. And they're businesses that have seen accelerated revenue growth trends. So McDonald's is a good example here. They are growing revenue a lot faster than they have been previously. And they're taking a lot of price. Yeah. And a lot of it is coming from pricing. Pepsi was in the same boat. It, to me, feels unsustainable. And then on top of it, it feels like it's been a flight to safety for a lot of people this year. And that's maybe gone out, maybe hasn't been as popular in the last kind of four months. But earlier this year, every consumer discretionary stock we looked at, I sat there and thought, this is not going to do better than Treasuries.

There's no way. Because even though it's been over-earning that year, the growth over the long run has not been that quick. At least not as quick as it's been kind of the last two years. And a lot of that came from price increases. And they're going to have input costs continue to rise. So I don't know. It just feels to me like it's kind of a recipe for negative returns here. So my bold takes so far, consumer discretionary sector, negative returns, and basically Magnificent

7, worse than treasuries and or negative returns. Here's kind of a hot take that came to mind related to your consumer discretionary stuff. I think we may be underrating the weight loss drug risk for these companies in 2024. So we've seen the survey data, which you shouldn't trust with 100% certainty. But if that is directionally correct, people that are on these drugs stop really going to McDonald's a lot. They stop whatever, Hershey's, Pepsi products, Coca-Cola products. They stop those bad habits. and if we actually see that materialize there's going to be panic i think my hot take might be

fatal something fatal something yeah why why it's too many believers i just don't think it's i don't think it's the end of coca-cola you know well we got the uh hey i don't know i don't know I have no data to support that. Obviously, Coca-Cola is in a better place without Ozempic in the world or the other weight loss drugs, but it feels like it's already affected the pricing for a lot of these businesses or the stock prices for a lot of these businesses. Let's wrap it up here. What's your third hot take? right now this one would have been because i was i was thinking of this a month ago too this would have been a lot better a month ago but i still think it'll work i say financials are the best performing sector of 2024 reasoning is pretty easy stable interest rates mean they're likely under earning compared to last year just because of that interest rate mismatch and the net interest margin compression blah blah blah consumer is fine like even if the sentiment out

they're as low. If you look at the discrepancies between what people are earning, real wages are up and people's sentiment about the economy and stuff like that are down. So there's a giant mismatch there between people's feelings and the underlying reality of their situations, which means they will be able to pay back loans, even if they are upset because whatever political person's in power. And then they generally are trading at discounted earnings ratios at least a lot of them are and i don't know what there's probably an etf we can track we'll be able to easily go back to this but yeah i think they're the best performing sector of 2024 obviously energy is a wild card if oil prices go up a lot well shoot that one's going to be

the best performing sector but i think financials have a really great opportunity at the moment Yeah. I totally agree with that take. And that would have been my other... If we're going best performance sector, worst performance sector, I think consumer discretionary will have a rough year, but finance would be my top dog for best performing sector. My third hot take, last one here. I've said this before, either match group gets acquired or the stock is up 50% by the end of the year that's that's my as for me you like the stock correct and i like i said i've mentioned this before but i'm bringing it back up i think it's quite cheap if it's run correctly and it doesn't have big one-time impairments or charges i think it can generate a lot of cash i could

certainly see a world where match group is generating 1 billion to 2 billion dollars in cashflow each year, maybe not this year, but over the next kind of two or three years. Today, it has an enterprise value of $13 billion. Bernard Kim, the new CEO has been in place for a little over a year. He turned Zynga around and had it acquired by Take-Two. It feels like a kind of asset that could fit into, I don't know who the acquirer would be. Maybe it's private equity, but it feels like a valuable durable asset that oh yeah private equity right for an acquisition yeah yeah and i don't know if it fits into any of the big tech but it's kind of a unique asset yeah sorry yeah i think it'd be blocked by

i think it certainly receives some scrutiny from regulators if meta or google or really any of big tech tried to acquire this just because it seems so personal. But yeah, I think it's either a private equity takeout or the stock's up 50% by the end of the year. So that's my bold take. Also talking my book there since we are, or I am a shareholder.

I'm a shareholder as well. Yeah, my bold take is all the stocks in my portfolio are up significantly by the end of next year. All right, let me sum these up then we'll go through our recommendations and get out of here one for me big three tobacco stocks on an equal weighted basis outperforming the magnificent seven on an equal weighted basis in the year of our lord 2024. two the cable tv bundle model finally collapses which means for my definition as i wrote down here they go from they all start the hemorrhaging money

Three, financials are the best-performing sector of 2024. All right, now to Ryan's. U.S. Treasuries outperformed the magnificent seven. Two, the consumer discretionary sector will have negative returns for the year, but it's not because of Ozempic, which I think is quite funny, Ryan. Three, match group gets acquired, or is up by 50%. Yep. Let's do the best of for the year, best of 2024.

Starting with best book, what was your favorite book you read of 2024? Could be finance edition, could be fiction. Yeah, so this is definitely not my favorite, although it's good, but I would recommend it to anyone following the semiconductor sector. I think my favorite book was probably Skunk Works, but just read that if you want any history of Lockheed Martin. I don't think it's relevant from an investing perspective, but maybe. locking martin but chip war which goes through the semiconductor geopolitical stuff and how that's kind of grown from a small industry to one of the most important in the world i think it people always call stuff required reading i would recommend reading it if you are interested in

this sector uh which i am so yeah chip war also is the title you'll be able to find it also fun for understanding the role of taiwan in the global semiconductor industry and how it got to where it is because they go through all the history there and it was pretty fascinating my favorite book non-finance related i like killers of the flower moon talked about that before the movie came out i haven't actually watched the movie but i'll wait until it's out on apple tv or something finance not good you're gonna be underwhelmed ah bummer all right finance movie or not finance finance book and this isn't it's more just a biography made in america sam walton pretty interesting parallels between him and oh some other great founders today i think the customer

centricity, the focus on customer and just being very detail oriented. And it kind of reminds me of the executive team at AutoZone that we looked at this year, where they're just maniacally focused on the business and serving customers correctly. And even though it's such a simple formula, people tend to overlook that in corporate america and i thought the fact that sam walton even though he wasn't this brilliant guy by just being able to focus on the customer and was really passionate about retailing he was able to build this massive empire so i thought that was a really fun book to read and kind of gives you a glimpse into economies of scale for one but also walmart's advantages

i was on mute excuse me now let's go to best investment pitch i guess i'll start mine was edward chang who is i should say for a little pitch here founder portfolio manager at pledge capital uh he came on the show to pitch this but he did the pitch beforehand uh which inspired us to have him call on the show and discuss kind of an updated part of the thesis and it was his pitch on Amazon. It ended up being very right. And I think it was just a high quality one. I learned a lot from it. Yeah, I really enjoyed that one. And I think at the time the stock was trading around low 100s, if I'm not mistaken. So it was very timely as well. My favorite investment pitch, and this was not done on our show, but I'm a big fan of Ian Bezek's sub stack where he writes a lot

of his blogs. He covers the South American economies and stocks that he finds undervalued there. I believe it's called Ian's Insider Corner. I thought his pitch on a number of different Colombian names were compelling, particularly the Bank of Colombia. The stock's up a little bit since he pitched it, but just the investment pitch itself has been, I thought it was really well articulated and made a lot of sense. And it seems like there's a lot of value there, despite a lot of the narratives around various South American economies. So he's my people into everything South America. And it's refreshing to read his works.

He kind of thinks like us, but he has a much better view of the economies down there. Okay, to wrap things up, as the show always goes a little bit long, but I don't think it was crazy long. best sub stacks or blogs from 2023 or not even best more of what we'd recommend for listeners to give a follow i got three ryan has two here i have invariant which is a sub stack from our uh recurring guest devin lasar brooklyn investor and then lewis enterprises i think all three different types of work different types of writing but all three high quality and i learned a lot from all all of them yeah my three i mentioned ian's insider corner there that's

one of them second one would have to be our friend alex morris the science of hidden substack i really enjoy all of his work we own a couple of companies that he also owns so it's always Sometimes I just wait to read his reports before taking any action after an earnings update or something like that, because it's always refreshing to get his thoughts. And then the last one is Buyback Capital. He's been on the show, I think, a couple of times now, and he has a really good substack. I believe he came on and pitched FICO, which has been a really strong performing stock. So he always has witty and I think he spices some humor into really good analysis, which there's a lot of dry, dry investment analysis out there. So for him to have just the humor included, it's always nice to read.

Nice. Yeah. And he also came on and talked Verisign. Interesting company as well. okay i think that's going to do it ryan anything else before we sign off and go for you know i don't know the rest of 2023 2024 2024 i always make that mistake chit chat stocks it's the new show that's uh that's the new name remember it and grant in your minds yep and there will be a transition period so we'll be probably saying chit chat stocks but also chit chat money and then rough timeline. Officially, everything will be Chit Chat Stocks in February. Give it about a month of a transition period. Let me hit the disclosure and we'll get out of here. We are

not financial advisors. Anything we say on the show is not formal advice or recommendation. We are, oh, excuse me. That was the old disclosure. Ryan and I may hold securities discussed in this podcast. We may have held them in the past. We may hold them today and we might to buy, sell, or hold them in the future. Thank you everyone again for listening in 2023. We hope to keep putting out quality content and improve the show in 2024. All right, we'll see you guys next time.