Chit Chat Stocks - 6 Growing Stocks With a 4% Dividend Yield; Dollar Tree and Celsius Stock Collapses; Have We Entered Founder Mode? (CELH, DLTR, ABNB, SMCI, NVDA)

Starting point is 00:00:00 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. Welcome to Chit Chat Stocks. This is our weekly power hour episode where we talk all things financial markets on a live show on Wednesdays at 10.30 a.m. Pacific Time, 1.30 p.m. Eastern Time. It also goes out on your podcast players of choice if you like to listen there. I am one of your hosts, Ryan Henderson, and I am joined as always by the one and only Brett

Starting point is 00:00:56 Schaefer. Brett, how are you this morning? Doing well. We're wrapping up earnings season, but luckily, we have some fun reports from the likes of Dollar Tree. Not maybe so fun for Dollar Tree shareholders, but I think it's going to be a fun one to discuss. Discount retail is in a very strange moment. And hey, we've covered Dollar Tree before. Could be an interesting opportunity, but I guess I haven't looked at the report yet. We're going to kind of do that live. Yep. And I am going to be talking through six dividend growers, which are kind of right in that sweet spot for me. I've warmed on dividends in general, the whole dividends versus repurchase debate. I've started to warm up to the dividends idea. But obviously, finding high dividend yields isn't always easy because it means you typically have to find an undervalued company. But we'll get more to that in a second. First, I want to talk about our friends at Public. If you want to earn a 6.9% yield for the next four years or more, you need to check out the bond account at public.com.

Starting point is 00:02:01 It's a new way to invest in a diversified portfolio of bonds and receive monthly interest payments. The best part, if you act now, you could potentially lock in a 6.9% yield until 2028. In other words, no need to worry about the Fed's upcoming rate cuts with a bond account at public.com. you can earn a 6.9 yield even as rates fall it only takes a couple of minutes to get started but you have to act fast if you want to take advantage of some of the highest bond yields in years discover how you can lock in a 6.9 yield until 2028 at the new bond account only at public.com forward slash chit chat stocks with that said brett where do you want to start you want to start dollar stores in turmoil? Yeah, let's do that. But first, maybe a couple of

Starting point is 00:02:47 housekeeping items. First, we dropped an episode on, well, I guess maybe I won't spoil it yet. I guess the recording will be out. Not that many people watch this on YouTube. So it is an episode called A Hidden Fintech Stock That I Am Buying. It's maybe a little tease, a remittance company that I am buying. And I did a full hour-long research report for a podcast. And that will be in your feeds already. It was out on Wednesday. And then Thursday, tomorrow, as we're recording this, we're going to be recording a discussion with Travis Hoyum on electric vehicles, Rivian, Tesla, and the entire automotive market. He said when I sent over his notes, well, that should be a good two to three hour discussion. It should be about an hour, but we'll try to hit a lot of

Starting point is 00:03:31 things there. And that'll be in your feeds next Wednesday. And the last thing, we never really do this too often. But we do like when people give us reviews on Spotify, Apple podcast, it's a great way to, you know, help us grow as we as we're a free show. We got this really nice Apple podcast review. I won't read the whole thing. But they said, I look forward to the Sunday weekly power hours because I'm not able to watch it live. We have interesting perspective and help helps us listeners from getting trapped in whatever investment is quote unquote trending. Well, I think we could try to do a good job of tempering expectations on the hottest sectors out there. Second quote, I have learned better ways to look for companies and a better understanding of the

Starting point is 00:04:13 fact that just because something is today high fire doesn't mean you can't receive market bidding returns. The new small cap of the week segment is especially interesting. It has me looking for companies outside of what Wall Street typically recommends. And through this, I have found what I believe are quality companies for the long haul. All right. Sounds like that's a good segment that we should keep doing. And the good thing is there are thousands of small cap and micro cap companies out there. So we're not going to run out of any, any ones to do each week, but yeah, you can give us any suggestions, any, you know, questions and stuff like that. And hopefully it'll help us drive what we should do on the show. All right. That's, I think that's it. I appreciate the review and it

Starting point is 00:04:52 encourages us to keep trying different segments. The small cap of the week has been fun to do. it's forced me to look at stuff I otherwise would not. And I will say last week's small cap of the week, it's probably the most, I hate to use the word interesting because it's so overused. And I say that all the time when stuff isn't interesting, but the most unique situation we've looked at because of that insider buying where the CEO and founder literally picked up 10% of the company in the open market. I've never seen that before. So it was fun to look at, but I've got another good one for this week. So we'll get to that as well. Brett, are you in founder mode? yeah that was a well are you referencing the blog post or are you referencing the video because

Starting point is 00:05:41 that was a tough video for a company and a management team or a founder that i've tried to defend but my price target might be a little lower after seeing that clip and i will say i don't even care what and this is the airbnb ceo brian chesky was saying in that clip i honestly don't even know what he was describing as founder mode it might make sense but i watched it on silent and that video was highly concerning for reasons that people can watch the video and make their same judgments themselves yeah this is just one of my news of the week segments so i'll just maybe skip to it right right at the start here the uh paul graham one of the co-founders of y combinator and very popular figure in the venture capital realm sphere, had a blog post this weekend

Starting point is 00:06:32 where he talked about, and I guess coined the term founder mode and says it's kind of the right way to grow a venture. And I actually kind of, this got blown out of proportion because it becomes a meme typically, but basically Graham thinks founders should be involved in the minutiae of running their business and not become like the conventional manager where you just delegate different roles and functions to other managers. So I agree with that. I think founder mode, especially at the certain stage of a company's life cycle, you really need someone who's very bought in and dug in to the product and understands, like it says, the minutiae of running a business. However, there was also a speech that Chesky gave and then there was

Starting point is 00:07:19 this video i don't know if it was a podcast or what was happening but probably a podcast yeah he looked like he was i don't want to make any assumptions yeah just make your own assumptions watching the video yeah we definitely don't want to make those allegations uh publicly fidgety uh and uh just really excited i guess you could say and it just coincided with the whole founder mode thing. So yeah, I recommend watching the video. It's pretty funny to watch, but yes. So that knocked down your price target. Yeah. I was going to ask you, I think for Airbnb, and I'm not sure, I know that they have that weird tax thing that's inflating their net income. So on a normalized kind of EBIT, EBIT, I was thinking maybe something around 20

Starting point is 00:08:07 is what I would be interested in. Maybe that video itself knocked it down to 15. I think maybe that risk i want a trailing you know uh normalized earnings multiple of about 15 before i buy i think that might have sent it down quite a bit that's that video was and you know i i wrote about this on sunday for our newsletter where management teams can be guilty until proven innocent in our light because you know we're just trying to have as high standards as possible for the portfolio companies we have this is definitely a major it's hard to call it a red flag because it's working yeah it's producing results yeah exactly it we don't have any context there but i would maybe in almost in between a yellow and red flag it's it's it's not it was not great

Starting point is 00:08:58 i would say that it tempers my expectations a lot or maybe not tempers my expectations it raises my caution levels with this company yeah we don't need to go too long on it i recommend anyone doesn't know what we're talking about just go ahead and look up the video probably brian chesky uh i don't know what you'd title it clip brian chesky founder mode founder mode i bet it's up there bet it's up on youtube right now i want to go through i kind of want to kick things off with my dividend growers. Thoughts? All right.

Starting point is 00:09:38 Yeah, go right ahead. It's perfect timing. I think we also had a question from Tyler on Twitter that relates to this about in a falling rates environment, would you rather own stocks or bonds? I think I might just answer that. For us, we're so young that we solely focus on stocks, but for someone that is older,

Starting point is 00:09:57 maybe the 50s, 60s, or even older, you might want to have bonds instead, But we're not going to really talk bonds on this show, although our sponsor does have a nice new product that you should definitely go check out. But yeah, why don't you go through these? These are probably – I think they've been doing quite well because people are signaling that interest rates are going to fall, and this is where you can search for yield. Yeah, and I actually like – I've never really given that much consideration to fixed income products until we actually had that bond account launch from public. And I'm definitely considering just moving some of my cash position there. But anyways, yes, let's talk dividend stocks.

Starting point is 00:10:40 So for context, I was always on the fence about – people always talked about how they love dividend stocks. And some people get very married to the idea that a stock has to pay dividends for them to be interested in. And I get it. They like the continuous payments. But I always had this kind of purist idea that repurchases are better. It's the exact same form of capital allocation essentially and – or capital returns and it's more tax advantaged. However, I've now kind of hopped over the fence into the dividend camp where I appreciate companies having to pay a dividend because it forces them to work with less cash. It forces them to have that recurring payout.

Starting point is 00:11:33 If you have just a repurchase, an open repurchase authorization, you can always pull back on it if you want. You can say, we saw other areas to invest that capital this quarter, whereas I kind of like the consistent capital returns. We're going to buy a cannabis company for $10 billion. Yeah, and if you don't know what Brett's referring to, that was Altria, who they actually had the dividend mandate, but they could have been buying back stock, and instead they invested aggressively. And it just goes to show – it was Altria you were talking about, right? Well, it's kind of theoretical, I guess. Oh, I was thinking about Juul acquisition, but otherwise. Yeah.

Starting point is 00:12:17 I think that's just kind of a good example of targeting some very risky cannabis companies for your capital allocation instead of a dividend. Maybe it'll work, but the more consistent thing to do for your shareholders is to return that in a dividend. Yeah. So anyway, I'm growing more and more fond of dividend payers. The difficulty for me is I don't know – I don't want to just reach for yield. I don't want to reach for the highest dividend yield possible because typically – and I say this as – it's generalizing and there might be exceptions to the rule. But if you have a dividend yield that exceeds the current treasury rate, what you can get with 10-year bonds, it's probably a company that's not expected to grow its dividend very much. And so I went through and I looked up, just did a screener for companies that have grown earnings over the last five years.

Starting point is 00:13:23 And it's just literally grown earnings. It doesn't have to be like a certain rate. It's just more than 0%. and grown revenue over the last five years and have a current dividend yield of more than 4%. It's tighter than you'd think. There's a lot of REITs and stuff like that, but if you strip those out, it's really tighter than you'd think. A lot of the most attractive looking ones were more in the 4% range, like the 3.5% to 5% where it's paying a good dividend. Investors have soured on it a little bit, but it's still a growing business. And so I'm going to go through six

Starting point is 00:14:00 of those that I find pretty interesting and the ones that kind of caught my eye. So number one, this is my largest holding. So I guess no surprise it caught my eye, but Philip Morris, they pay a 4.2% dividend yield as of when I wrote these notes down. May have changed a little bit today. I don't know. It used to be a much higher dividend yield. The Of the reason for that is that they have kind of returned to growth. Volumes are growing for them. Well, I would say it's – this summer it's because of interest rates. But they've been growing the whole – the last few years.

Starting point is 00:14:40 So that hasn't changed. Yeah, for a while the aggregate volumes were in decline. I'd say from – I'd say over the last five years it was either flat to down, the aggregate volumes. But as the mix shift has moved towards reduced-risk product, you're starting to see more and more volume. Yeah, maybe I'm assigning too much. You could see that coming. Yeah, maybe I'm assigning too much intelligence to Mr. Market that everyone could see that. But I guess a lot of people just look at headline numbers, so who knows?

Starting point is 00:15:15 Yeah. But 4.2% dividend yield. I expect this is a business that can grow their earnings in double-digit percent range for the future, foreseeable future at least, but kind of remains to be seen. I've talked about them on the show a number of times, so I'm not going to go too long on them. Second one here is a name I have followed, but not really looked at that much. I've just vaguely seen it throughout. So it's PACCAR. They design and distribute commercial trucks and parts all over the globe shout out puget sound area did you know they're from seattle you know what there was

Starting point is 00:15:55 a point when i was looking for jobs and paccar had like tons of job listings so uh that would make a lot of sense sneaky big company yeah yeah they uh they sell primarily through independent dealers um some of these are familiar names to me kenworth peterbilt daf i'm not really sure what dafbiz but i know the other ones uh 4.6 dividend yield roughly however they kind of have a wonkier dividend payout so if you can pull up paccar on finch app uh okay yeah i can try that i was pulling up one of the next ones uh cme group but i can do paccar as well what do you want to look for go to the dividends tab which is at the top on the company page and it's uh if you have any trouble finding it what is it what do you want dividend per share dividend yield no i just i

Starting point is 00:16:50 just want the actual payouts and you'll see what i mean with like the quarterly payouts if you scroll down uh so it's like not something a lot of companies will pay out like the same amount each quarter and then increase it and keep doing that but packard does it really weird where they special dividend i think like once every four quarters essentially um and so it you have to look at it on a trailing basis because if you just annualize the latest quarter it's going to look a lot lower but paccar actually does a good job really returning capital to shareholders you're sharing your screen there so if you scroll up to the top right and go to dividends on the Right. Yep. And then scroll down. You'll see that it goes $0.30 a share, $0.30 a share, $0.27 a share. I'm working backwards as quarters. And then $3.20. It looks like every four or five quarters, they pay out a big kind of chunk of a dividend.

Starting point is 00:17:48 So it's a little inflated here because they paid out a big one four quarters ago, but still good capital returners and they have grown earnings at 16% a year over the last five years. I'll go a little faster through the rest of these. Third one, I don't have quite as much interest in, but CVS Health Corp. Nope. Nope. Nope. Zero. It's a zero.

Starting point is 00:18:11 What don't you like about it? the visiting them in cities on the west coast of the united states there looked like a call duty map it's not good it's not good at all it's it's really i don't know why anyone would buy these so here's here's the thing i've seen cvs tossed around as kind of like a really bad business And it could be, but the metrics, it's a growing business. Revenue has grown at 10% a year over the last five years. Earnings per share, 9%. They pay out a 4.6% dividend. So yes, I realize that it's not a great consumer experience. I've experienced that here in Seattle, but there's the potential for returns here. too hard pile for me okay i don't see why this needs healthcare space so yeah they have some i think they own something besides the pharmacy now like they moved up the chain i'm not exactly sure but i don't know why i don't know why this company needs to exist

Starting point is 00:19:24 all right all right i'll skip to the next one here cme group cms cme is the world's leading digital derivatives marketplace and clearinghouse uh they facilitate the trading of futures and options for like tons of different markets um and it's been this is kind of when you look in like the wide moat list for a lot of companies um or for a lot of like funds you see any wide moat list tossed around cme group is one of them uh so if you they've got a four point almost seven percent dividend yield right now they have grown revenue at five percent a year over the last five years but check out this free cash flow per share yeah not bad 11.6 percent cagger since 2014 yeah i'm not sure what's going on there with the half chart but uh i'll send a message to the team

Starting point is 00:20:24 there because it's leaving all that white space anyway um yeah cme group's probably one of the most attractive ones on this list. My fifth one here, and we're working up in terms of dividend yield. That's kind of how I'm ranking this list. And I guess I'll just maybe blend these two segments together because this is also going to be a little spoiler alert here. My small cap of the week, OTC Markets Group. OTC Markets provides critical infrastructure that broker-dealers rely on to facilitate trading on over 12,000 US and international securities. Basically, they operate the OTC markets. So I've got a quote here from a Value Investors Club write-up. And there was also another good write-up on Yellow Brick as well. It says, through OTC Link ATS, which I'm not really

Starting point is 00:21:21 sure on the ATS acronym what that means. It says, the company connects a diverse network of broker dealers that provide liquidity and execution services. Overall, OTC markets generates about 85% to 90% of its revenue through a subscription-based sales model. This is the OTC markets. Typically, when you're a market operator, it's a pretty resilient, durable business. They are somewhat cyclical because IPOs help them. And so they've actually been growing despite little IPO activity. And so pretty impressive results. I've got a chart here pulled up on our notes page,

Starting point is 00:22:02 but it's 10.3% revenue CAGR over the last 10 years. It's been just steady growth up into the right. I like exchanges, marketplaces, whether it's OTC markets, It's derivatives like CME Group, whether it's the New York Stock Exchange, which is owned by ICE. What's the full name? I think the ticker is ICE, but I can't remember what that is. An Intercontinental Exchange Group, something like that. And if you look at – I pulled up OTC markets, and I'm sharing this here.

Starting point is 00:22:35 But for the listeners, earnings per share and free cash flow per share have both grown at over a 10% compound annual growth rate since 2014. And as you can see, you're right. It can be a little cyclical, that IPO period in 2020. in 2021 gave them a boost, but maybe I would have to investigate this further. We're at a somewhat of a trough. It's weird saying that because the market seems like it is potentially in a bubble, but there have been so few IPOs. So that's such a conundrum for me right now is identifying what sort of normalized earnings power this company has. And maybe you just have to be conservative, take a long-term view and be confident in that mode. And you can see with

Starting point is 00:23:18 like historically the durability of these these um exchange businesses there are clearly competitive advantages if you run them well so maybe this is one to check out yeah and if you scroll up there brett it'll show the market cap which i believe is just over five yeah 577 million so under a And it's – I find it quite rare to find a small cap with like a true moat, like true network of fact, whatever. Been around for a long time, yeah. Yeah, durable. But OTC Markets Group certainly is one, and they don't really get a lot of interest from the investment community it seems like. They trade at 17 times EBIT. So reasonable valuation, especially considering that they

Starting point is 00:24:12 grow pretty consistently. And keep in mind, you were mentioning that it feels like we're kind of in a bubbly period with some of our valuations right now. The companies listed on the OTC markets are not really where the bubble exists. I think it's kind of more centered around big tech. Maybe people trade down. If the bubble pops, hey, We can't really list you on the NASDAQ, but we've got these nice pink sheets you might want to be interested in. Yeah, and then it actually pays out a 4.7% dividend yield as well. So you're getting those payments along the way. I think they have a founder, sort of owner-operator at the helm as well.

Starting point is 00:24:50 So I think there's a lot to like there. I highly recommend checking that one out. That is my small cap of the week. The ticker is OTCM. Then the sixth company is one I imagine most Americans at least will be familiar with. It is the United Parcel Service, ticker UPS. UPS, most people know what they do. They provide letter and package delivery, transportation, even logistic services as well.

Starting point is 00:25:18 And there are some other services that they have in there also. They've added stuff over the years. And they do so in the US as well as internationally. And if you actually pull up their segments in KPIs, Brett, they have like number of parcels they're delivering, price per parcel. And it's over the last couple of years that they lost some big business with Amazon. I can't remember when that was. And so there was a big decline because of that. But it's still a fairly resilient business.

Starting point is 00:25:52 It's certainly hard to replicate. you have to have tons of CapEx in order to do it. That's why Amazon's one of the few that has actually been able to. I'm pulling up daily packages. Yeah, it's barely above 2019 levels. And yes, I think, sorry to interlude there, but I wanted to just explain the chart I'm sharing here.

Starting point is 00:26:14 It's definitely one where you have to identify is, you know, it's an Amazon risk. They're entering your business. They're competing with you now through this vertical integration. and you have to ask, is this a Bed, Bath & Beyond or is it a Best Buy? If it's Best Buy, you might make money. Yeah, it's – I mean you would think this is a wide moat business

Starting point is 00:26:38 and it's trading at one of its highest – pretty much the highest dividend yield it has in 10 years, 5.1%. So if you think this is a business that can actually grow at all, you're probably going to get a decent return from here yeah i like it better than cvs for that amazon risk i think cvs is likely a zero unless they get some crazy good management team because there's just no there's nothing working in its favor real estate's too big sector's moving online you have competition from all over the place from any of your profitable segments where like you're even getting competition from door dash and uber eats right so yeah i don't like it

Starting point is 00:27:25 but all right that segment's been going we went plenty long on that segment let's move into something people want to talk celsius and dollar tree two stocks that are falling a lot uh maybe we hit some of those real quick of the six which one did you like the best otc markets okay and then second cme group cme group might be a bit too complicated for me might be in the too hard pile because that's just a tough derivatives are hard to understand like who's winning who's not but otc markets i can understand that one and you could see and theoretically without there's moat there there could be a moat there but obviously i'd have to investigate further yeah surprise it's not talked about more but anyways uh all right let's talk you want to

Starting point is 00:28:09 start with dollar tree and dollar general or celsius we got a comment on celsius someone says Celsius, what is happening? Three exclamation points. I have no clue why it's falling like crazy. I think this does indicate that I should do my next stock research report on Celsius. There's a lot of interest in this company. I do think it's an interesting company as well. Maybe I'll pull up the stock. I have been doing a little tweet quote thread of, whoa, I did not see that down 10.7% today. Well, you know, that is a big drawdown. Yeah, it was down to like 37 yesterday draw down 66 percent from its highs uh i wonder what caused the drop today maybe some sort of analyst downgrade not exactly sure but i know why it's

Starting point is 00:28:57 been falling this year and it's because the energy drink market has gotten shall i say more competitive say monster and red bull are kind of counter positioning themselves versus celsius where Celsius started out with a great counter position versus Red Bull and Monster with the sugar free stuff focusing on fitness. Now Monster and Red Bull are leaning into that a little bit more. You also have the fact that Celsius sold too much inventory to Pepsi as they stocked their new distribution deal. And that led to a huge surge in revenue growth in the first parts of that deal. But now they're working through that. And that's why revenue growth is tabled off a bit. And then there has been a ton of alt data. I think I'm just seeing screenshots online

Starting point is 00:29:42 of Celsius market share stagnating at about 12% in the United States. So when I add that all together, you can see why people are nervous about the stock. And if you look at the, why don't we pull up a forward earnings ratio? I guess I don't have to pull it up. I just want to find it. Forward valuation, PE, I'm still seeing 31. So the stock is not, it's not like it was trading at dirt cheap. It was at a PE of something like 50 or even 60 earlier this year. If we look at those forward earnings multiples, and when you buy a stock like that, you have to be either ready or expect, honestly, a 50% drawdown because that can happen. Even if you're confident in the long term, you know, durable growth, dominating the category, a great stock

Starting point is 00:30:29 to own. Even if you're confident in that over the long term, a stock that starts out at a very high valuation can go through pretty extreme drawdowns. And that's just something you have to, you can't be afraid of embracing if you're going to buy a stock like that. Because if you aren't, and you're like, I'm going to buy a 60 times PE stock, and well, it's never going to go through a drawdown, it's just going to keep going up and up and up forever, you're guaranteed to be disappointed. but i want to say celsius i don't know why it dropped again today but wow looks it looks more interesting here doesn't it ryan it looks like pepsi said something about it in their report probably about it's slowing down or something like that yeah looking through

Starting point is 00:31:11 here uh says sorry i'm doing this research kind of live well here's here whatever they say if you are like companies always go through short-term stuff like this it could be a quarter it could be a year that this happens if you are confident in the brand which i'm not sure about yet if you're confident in the brand durability if you're confident this can be the third energy drink player along with monster and red bull around the globe hey like it looks bad right now but maybe it's a buying opportunity i would say i don't know i'm gonna do a full research report on for the month of September. But it's interesting for sure. And you maybe just go back to some basic stuff. On days like this, if you own a stock in your portfolio and it goes down 10%

Starting point is 00:32:06 and it's in a 70% drawdown, just stop logging in at that point. You have to trust that the business is fine. And if you're confident in the business, you got to let it play out. And if it doesn't work, hey, look, hopefully it wasn't 100% of your portfolio. But I did see yesterday, and this made me so scared to look at the stock. Someone said that they had a portfolio that was 33% Celsius and 66% lemonade. And that was their entire portfolio. So that made me think there might be some lower, the price might move lower. At some point, I didn't think it was going to be the next day.

Starting point is 00:32:46 but that was some fortuitous timing i would have a hard time sleeping at night if that were my portfolio but to each their own i will say this it's not like celsius is alone is being hurt here the energy sector overall has had a slowdown and there's actually um our friend alex morris had a wonderful write-up on both monster and celsius and the energy sector broadly and as part of that the co-CEO of Monster came out in the conference call for Q2 and he said, historically in the United States, we have only seen volume declines during the financial crisis and during the COVID lockdowns. The current situation is relatively unprecedented. So they can't really explain why there's been this secular slowdown or this slowdown across the industry. But Celsius is

Starting point is 00:33:38 still a market share taker. Even though they're growing slower, they're growing quicker than their peers still. Now, the market share growth isn't as quick as it once was. And this is what happens also when a company that's growing triple digits slows down. Peter Lynch talked about this in his book, which is that's really the situation you don't want to be in because expectations will change fast and uh looks like celsius is in what now 70 percent drawdown give or take yeah something like that so pretty rough but again look this is the time here's what i'll say it's not going to be the end of the world if you keep holding on to this thing and then take a tax loss if it's a total loser but if you sell now and it's a big winner you'll you'll the risk reward you know

Starting point is 00:34:33 you know what i mean ryan like there's nothing that has been definitive within what's happening with celsius to say that the company is way worse than it was two years ago but i'd say if anything it's better exactly so going through accounting issues and they were i think they had internal control weakness in their internal controls um so yeah it's definitely a more professional business today yeah and someone in the comments said that uh i think reference to it being a small part of the portfolio that they have five stocks in their portfolio and i would say if you have five stocks and you have a large position in celsius and this drawdown is making you stressed emotional it's really causing you pain you know it might you might want to research portfolio

Starting point is 00:35:28 diversification. I think that would be my personal finance tip of the day. But I think that's enough Celsius. You want to talk Dollar Tree? Very interesting report as well. And I woke up and saw the stock down 20%. I was like, wow, what is going on? So yeah, why don't you take us through some of the numbers? Before we get to that, I do want to mention one of our sponsors and someone I already mentioned earlier, which is Yellowbrick Investing. Join yellowbrick.com. It is one of the best ways to find ideas on the internet. It's an aggregator of the best stock pitches. We just talked about Celsius and we're about to talk about Dollar Tree. I guarantee if you just go to joinyellowbrick.com, type in the ticker for either of those companies, you are going to find a high

Starting point is 00:36:12 quality write-up from somewhere across the internet that you can read and get up to speed on the idea. They track thousands of blogs, newsletters, fund letters, podcasts, even smart twitter accounts as well um and and brings all the ideas into a single place so if you go to join yellowbrick.com slash chit chat you can get a discount as well on the paid plan which gives you access to investor returns and also gives you the most recent ideas um instead of a month delayed but i highly recommend just checking checking it out it is a repository of high class stock pitches dollar tree well i did not read the whole report but i read i went through some of the segments and kpis and i guess the thing that surprises me yeah it's down 64 percent

Starting point is 00:37:04 wow from uh drop drawdown of 60 yeah 65 basically and the drawdown started at the beginning of 2022 too so that's been a rough and extended drawdown for shareholders yeah and i guess the thing that surprises me is that dollar tree for me seems the stock sold off on dollar general's report because dollar general had a rough quarter as well and i kind of thought that was misplaced because i don't think dollar tree and dollar general necessarily attract the same businesses We went through and did a deep dive on each – or a not-so-deep dive, as we used to call it, on each of those businesses, and Dollar Tree was much more – felt like – I don't want to say discretionary items, but if I remember correctly, it was attracting a different customer. It was a lot more kind of arts and crafts type of items as opposed to like grocery and critical like necessity type items. Am I summarizing that correctly?

Starting point is 00:38:14 Is that kind of what you remember from that? Yeah, I do remember that as well. And they owned Family Dollar, which was more of a direct competitor to Dollar General that was struggling a lot. But Dollar Tree is more of a traditional dollar store that's not going to be the durable consumables, as they might call it, which is food. stuff like that, you know, household items that you need. And it's more of, oh, this is a cool knickknack. I need to find a discounted birthday present or something like that. You can go there, kind of do a little bit of thrift shopping style. And I'll look at, just so the people watching on video can see this chart here that I'm sharing from our friends at

Starting point is 00:38:50 FinChat. Look at this customer traffic chart, Ryan. July of last year, it grew to 9.8% year year growth. And each quarter it's gone down essentially. And last quarter that ended in July, we only saw 1.4% growth in traffic. Do you, I mean, obviously a decline isn't concerning on its face, but if you look at this, do you think this was just a tough, tough comp in traffic? Maybe. I'd be interested to see the commentary from management. The, i guess what this highlights to me is it makes walmart's quarter that much more impressive because if you think about the exposure to the customer base as sort of similar which i i would say between dollar general and dollar tree it's probably somewhat similar decent venn diagram

Starting point is 00:39:42 yeah and they've put up 40 quarters in a row of positive comps and they continue to accelerate their comp store sales like i think it just goes to show the economies of scale at walmart the other part is there isn't that much family dollar and dollar general there's some geographic overlap not as much with dollar tree like you mentioned it's more knickknacks more urban areas if i'm not mistaken so um yeah i wouldn't i wouldn't lump the two together part of me it's just unattractive to these businesses i don't know why but just there's something that doesn't really pique my interest about either of these yeah buy amazon instead that's kind of what i think when looking at any retailer where i'm very very confident in that platform these ones

Starting point is 00:40:33 i kind of have to make a lot of assumptions all right what am i what do i have to bet on are they going to be smart with their retail footprint is their threat from timu like is that legit or not uh i don't know i don't know we have a question here that relates to this do you guys have any thoughts on the idea of a k-shaped economy where the poorest americans are struggling while the richest americans are doing okay i think that is showing up a lot in earnings reports look at american express thriving look at dollar tree and dollar general not so much doesn't that always describe the economy though i think people argue yeah a bit but what's interesting is that 2021 2022 2023 we actually saw for the first time in a long time

Starting point is 00:41:23 the uh lowest 25 percent of wages were growing the quickest so i think that maybe helped some of these companies and now that's more you know quote-unquote normalized because none of it's normal it's kind of just how the economy is working together there's also arguments i see that these are the first indications of a recession and if things get worse then everyone starts to struggle all the cohorts start to struggle except for the extreme you know 0.1 You know, I think I would take the flip side of that, which is we have seen consumer spending grow really – and discretionary stuff grow really quickly following COVID. You look at the comp sales at companies like McDonald's and Starbucks and dollar stores and trying to think of some of the other ones that had big headline numbers coming in. The home retailers, Home Depot, Lowe's, right?

Starting point is 00:42:26 Yeah. And then you look at it, now they're starting to revert a bit. I would say that's pretty healthy consumer behavior. Like if there's no longer spending on some of the discretionary stuff that they don't need, while we're not seeing like a sharp decline in some of the necessities. like Target, for example, Walmart, they're still reporting relatively strong comps in their durable or necessity type goods. I think that's just fine. I would not say like, oh, that's very concerning if some of the discretionary spending pulls in a little bit. Yeah, those stocks will get hurt, but- More of a normalization.

Starting point is 00:43:10 That's way healthier than some sort of abrupt cutoff. I would be more concerned if the grocery providers or the big grocers were saying like, yeah, we're seeing minus 10, minus 20% calls or something, then that's a concern. And it's strange because dollar general is supposed to be counter cyclical. When consumers are struggling, people are supposed to trade down. So maybe that K-shaped recovery is playing out. Hard to tell. I would also say that when you look across a lot of the financials companies, and this

Starting point is 00:43:42 could obviously age poorly because things can change in a dime. loans are performing relatively fine so don't know don't know dollar tree might be interesting i don't know why i don't like it but it might be interesting it's cheap and they're potentially spinning out family dollar so that could be a nice little catalyst yeah i think i would we have seen tough quarters out of a lot of companies in the retail space lululemon nike uh starbucks mcdonald's starbucks mcdonald's yeah you name it i think delinquency rates at the big banks is a much better indicator for economic health than starbucks traffic numbers so and we're not seeing any concerns there like you said so it seems healthy to me i would not be too

Starting point is 00:44:38 worried about recessionary fears yep i agree all right and you saw that kpi chart make sure you go check out finchat.io slash chit chat new version came out i believe today ryan is that correct slated to come out today slated well it's coming out very soon and the there's just wonderful charts on there. So go check it out. Finchat.io slash chitchat link in the show notes, get a discount on your paid plan. Ryan? And while we're talking about one of our sponsors, we should also mention another friend of our show, Public. Again, heads up, the time may be running out to lock in a 6.9% yield at public.com. When you invest in a bond account, you can lock in your rate until 2028, but with potential rate cuts on the horizon, you might want to act soon. Discover how you can

Starting point is 00:45:26 lock in a 6.9 yield until 2028 with the new bond account only at public.com forward slash chit chat stocks what are the news items you want to hit this week super micro they they responded yeah let me do we can do nvidia first not the earnings i know everyone talks about that ad nauseum and then we can do super micro computer because i think their letter was let's tease it uh interesting you know but there was the nvidia earnings watch party how do you feel seeing that stuff and how nvidia earnings felt like that it felt like the trinity test from the manhattan project i actually i was a fan of this i saw that there was this watch party for nvidia's earnings which is just it's outrageous but i think that'd be kind of fun

Starting point is 00:46:22 to like not more as a bystander like still it's kind of cool like that's fun it's yeah i think it would be fun to go to but it also i think is topish behavior and a lot of people that were around during the dot-com bubble said they have the same feeling as cisco i feel like more people probably attended that watch party like knowing it's topish behavior like kind of ironically going to that maybe maybe the but people the stock is still the company is still at a market cap of 2.6 trillion dollars so clearly someone still wants to own it yeah i mean yeah it's the results are still incredible my i kind of i kind of just say fade nvidia the hype i kind of shrug it off because the results are really really strong and you could if you believe but so were cisco's so

Starting point is 00:47:31 were cisco's yeah and they overbuilt for 15 years or over right you know built way too far ahead from what the demand was yeah and this is around the dot-com period yeah so you think this has a it smells like cisco do you think it has i don't know if it tastes like cisco but it smells like cisco do you think nvidia's results actually have bearings on the economy that's a good that's a good question yes because spending i think the wealth effect is real with how much people are tied into index funds the 401ks target date funds everything is tied to the s&p 500 and in nvidia is a big part of that so yes i do think it has an effect on consumer spending, consumer optimism, and that wealth effect. Now, how large

Starting point is 00:48:34 is that wealth effect? I'm not so sure, but I have a big hunch that it is real. And especially today compared to 40, 50 years ago with how our financial markets are set up, you don't have the pension. You have the 401k and the index fund. And that's what you see on your bank account or on your brokerage statements that's fair the i still think a watch party for my company's earnings would be kind of fun i do feel like you'd get there maybe a bar would have it on the screen whatever almost ironically and probably only in manhattan uh but it would be super underwhelming yeah like there's no point where you cheer like like there's no touchdown or whatever home run like it's just something like yeah it came in slightly better than expected the stock hasn't

Starting point is 00:49:29 really moved at all oh it looks like it's going down a little bit okay yeah i think it'd be funny it's like all right we're connected to the live stream and then you just see some ir person go all right now our safety is close whatever the safe harbor disclosure let's go through none of This is financial advice. These are projections, blah, blah, blah. And then you get some really bad audio. So, yeah, I am one that never listens to conference calls unless I really want to hear a tone of the management team. Just read the transcripts.

Starting point is 00:49:59 Just read them. Saves you so much time. All right. You want to look at this Hindenburg response? The response to Hindenburg? Yeah. Oh, yeah, yeah. Sorry.

Starting point is 00:50:09 Yep. Thank you. Super microcomputer. There was a short report last week from Hindenburg. A lot of damning allegations. Now, none of this has been proven in court, so we should all say these are just allegations. But, and I'm stealing this from, since we're getting ready for the NFL season, I listened to the Bill Simmons podcast, like I think a million other people in the United States.

Starting point is 00:50:31 And he had a thing about what, not companies, what teams have a bad odor coming out of them, where you just, something doesn't smell right. And I thought that could apply with companies and stocks. And I think super microcomputer, it's stinky, I would say. But here's what they said. So in response to it, they had a letter. I think it was framed as putting like a letter to their customers, but they posted as an SEC filing.

Starting point is 00:51:00 And one little indicator I like to look at for whether a company actually wants people to read what they put out is that they put out the SEC filing, the 8K, but they do not list in their news releases tab. And this is what happened there. So I don't think they actually wanted people to read this, but they said, quote, You may have seen our recent announcement that Supermicro will be delayed in filing its annual report for the fiscal year ended June 30th, 2024, and separately, a report published by a short seller. In terms of our annual report, the audit committee of the board of directors decided to delay the filing and, as we shared publicly, has also formed a committee to review our internal controls and other matters. The board committee is working diligently on this thorough review. separately you may have also heard about a recent report from a short seller hedge fund that contains false or inaccurate statements about our company including misleading presentations of information that we have previously shared publicly we will address these statements in

Starting point is 00:51:56 due course as you may know short seller reports are designed to drive the stock price downwards to serve the short seller's interest to the detriment of the company's shareholders Now, rating a 1 to 10, how for or against are you of buying Supermicrocomputer after reading this letter? In terms of response to a short seller report, I would give this – and 10 being Reed Hastings back in the day when they responded to one because I thought that was as perfect as it can be versus – who was it? Enron. Yeah, maybe Enron yelling at the guy on a conference call. I would give this a three or four. I didn't mind that they approached it kind of customer first, like this isn't going to impact how we run our business, that kind of thing.

Starting point is 00:52:53 That's okay with me. The fact that they didn't actually address any of the real allegations, that's usually a sticking point. That's the first thing I look for is do they address any of the specific allegations? right not just say there's misleading statements well yeah one of the things might have been misleading but there was 20 others and are those correct yeah i'd give this a three or four it doesn't make me any more confident no i thought it was fairly weak definitely red flags across the board they kept highlighting something like our liquid cooling technology is ready to ramp and i felt like i was listening to the wizard of oz like don't listen to the man or don't look at

Starting point is 00:53:32 man behind the curtain don't look at this this stuff we have an audit committee looking at our annual report and we are finding no issues even though this was the same people that had an accounting scandal in 2018 yeah i mean super microcomputer the quintessential stock of a boom period that you want to avoid it's the one that just has the name in it that makes a lot of sense super microcomputer for the ai and semiconductor boom like it just it it is pretty obvious that this is a really risky stock with maybe a lot of upside but just so much downside potential it just it's it's it's just read financial history these things pop up time and time again yeah the that was you're thinking there was exactly what i was thinking

Starting point is 00:54:23 our committee is reviewing these allegations our committee oh boy very confident that we didn't have anything wrong with their annual report and that that committee is the same one that was rehired after three months after being charged by the sec for significant accounting violations so yeah putting the term committee on anything makes it sound like it's a team really working hard to do it but it's the same people that committed yeah it's like when boeing was like yeah boeing we're forming some safety committees with some people that they don't know anything about manufacturing or engineering but we we're confident that these ex mckinsey employees that they'll really lock things down for us they got a game plan they're going to work

Starting point is 00:55:07 through this game plan and form some stuff okay great slideshows ready to go yeah we got a lot of slideshows we got a lot of 21 year olds that have stayed up all night working on slideshows it's great. Do you want to talk about what was maybe one of the most interesting little tidbits from a random news article that I saw pop up online? And I'll read the quote for you here. I think you probably saw it because I went a little bit viral. It said from a Financial Times article for OpenAI, investors are currently required to sign up to an operating agreement that states, quote, it would be wise to view any investment in OpenAI's for-profit subsidiary in the spirit of a donation, and that OpenAI may never make a profit.

Starting point is 00:55:53 Now, is this a company you want to pour $100 billion into, Ryan, or not? Yeah, it's really, I'm rolling my eyes for anyone that doesn't watch the videos. the i just think sam altman i think the team at open ai is just they they think their mission is more noble than it is and it's what they are doing is really powerful stuff and i you know what people make comparisons about open ai and sort of early days of the internet i think there are certain analogies you can make where they are powering a lot of more domain specific ai applications so for example fin chat built on the open ai architecture and it addresses an actual need and not the chat gpt doesn't but it addresses a more specific need there's the

Starting point is 00:56:48 same thing thompson reuters has an ai project called co-council which helps with uh like legal offices it's ai for that once again put on the open ar open ai architecture so they're doing something that could power a lot of future businesses usage is high yes you do not need to be a non-profit to do that in fact actually i think in most cases i kind of stand with bill ackman on this because he's made this case before he says i think oftentimes for-profit businesses can be much more influential and impactful than non-profits and for me that's there's nothing wrong with being a for-profit business when you build something this powerful exactly you generate the profits you give it back to your shareholders and they can do whatever they want

Starting point is 00:57:34 with it they can build their whole charity donations whatever you want and it's kind of like when we saw in the 2020 2021 spac nonsense all these companies coming out and bragging that they're a b corporation and they're like well we're going to donate some of our profits to charity i'm like great i'm never investing in you so good luck good luck with that if you drive a car if you are the ceo of the company and you brag about being a non-profit and you drive a car that costs more than a hundred thousand dollars you have lost any sort of credibility for me yeah i think is that you're this person that gives back and you're not this not this horrible consumer like exactly just taking all the whatever like the nice things in

Starting point is 00:58:20 life it's you're lying yeah okay well what do you think about this in general like that's it's dumb no sorry sorry what do you think about open ai open ai in general right now seems like chat gpt is having another little boost of usage it seems like they keep growing but the expenses have got to be high and we're seeing rumors about a new funding round that needs to be very very high yeah it has probably high capital intensity a lot of compute costs yeah but you know i i just said it i i really do think they are positioned well to power a lot of to be a really good b2b company like to power the language components of more domain specific ais which is like that's a really nice place to be in and they have pricing power

Starting point is 00:59:30 like it's not easy to switch your uh llm that you're built on right makes sense that's intuitive Yeah. So I think it's a promising business, probably very costly to run. I bet people are – I don't believe some of the valuation – or I don't think some of the valuations that they are putting out there in the world, the $100 billion, are justified yet. But we don't have that much data on them, so how can we really know? Yeah, that's true. That's true. There's a lot of variables at play, though. You have the computing costs. Okay, how does that shake out? You have supply on that side. You have the competition. You have so many, so many things that, yeah, maybe Microsoft, it won't affect Microsoft, I don't think, unless they pour $100 billion into this company. But I got to say, I don't necessarily understand the risk reward of Microsoft in this case, but maybe I'm looking at it entirely differently from what I mean is pouring all this money into this one company and not trying to build slash buy it yourself. Did you see what Salesforce or Mark Benioff said about Microsoft's AI? The copilots, it's just a narrative and it's not actually that useful. Yeah.

Starting point is 01:00:55 Well, I think, yeah, I could bet on that. it's a microsoft consumer product so or sorry like those products are never that useful it's it's the same thing it's excel and word that's what people use yeah also i'd be surprised salesforce is having way more success in ai either like i bet people are a little reluctant i don't know yeah it's kind of like stupid stuff as well yeah they i'm not necessarily sure that they have the solution everyone's looking for. But hey, all right, we're going over an hour here. Let me close things out. Let me hit the disclosure. We are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan, I or any podcast guests

Starting point is 01:01:41 may hold securities discussed in this podcast. I've held them in the past and may buy, sell or hold them in the future. These episodes go live Wednesday, 1030 a.m. Pacific, 1.30 p.m. Eastern time on the Chit Chat Stocks podcast YouTube page. Thank you for everyone that joined us live. We really appreciate it with all the questions. Hopefully we had a good discussion and we'll see everyone next time.

Chit Chat Stocks - 6 Growing Stocks With a 4% Dividend Yield; Dollar Tree and Celsius Stock Collapses; Have We Entered Founder Mode? (CELH, DLTR, ABNB, SMCI, NVDA)

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