Chit Chat Stocks - A Microcap Christmas Miracle; Financial Charlatan Of The Year; 12 Boring Stocks That Outperform

Episode Date: December 26, 2025

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (00:00) Introduction (01:42) Nike Earnings Analysis (14:04) Harbor Diversified Update (28:55) Alphabet's Acquisition of Intersect (40:13) Amazon's Advertising Potential (41:23) Comparing OpenAI to WeWork (44:40) OpenAI's Business Model Challenges (45:56) Boring Stocks That Outperform (52:11) Financial Charlatans of the Year (58:39) Cannabis Industry Insights (01:03:41) Long-Term Stock Picks ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks, a podcast that helps you discover your next great investment. I am one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. Today we have our weekly Power Hour episode. We do these live, usually on Thursdays at 5 p.m. Eastern Time. However, today we are doing this on a Tuesday because it is the holidays. we're getting out in front of it and not to mention there really isn't going to be a whole lot of news this week i assume seeing as it's the holiday break but we've got plenty to discuss so far we have a huge news for my portfolio actually and a stock that we haven't talked about in a long time but it's sort of a liquidation situation and most investors might

not care about this, but it's worth talking about. For us, Alphabet is acquiring a company for just under $5 billion. We've got Nike earnings as well from last week. I don't believe we discussed those, so we can touch on those. And then we've got a few listener recommendations as well. Brett, where do you want to start? Well, I want to say that for those that joined the last few weeks, we did finally, I believe, fix my technical difficulties. It wasn't the Wi-Fi, which we thought it was. It was actually my computer. And I said it on another show, but I think we need to short Intel out of spite. We fixed it. We're using my phone. It actually works quite wonderfully. And yeah, I'm excited to get to it. We're going to talk a little microcap

recap with harvard diversified i have some other news let's see cannabis industry rescheduling someone want to talk about that we have financial charlton of the year can't remember if you mentioned that a little bit of bubble watch and maybe we're going to get your opinion on the new chipotle food item that's going to reinvigorate same store sales but i'll let you go first why Don't we – yeah, let's talk Nike earnings, kind of maybe surprisingly bad, even worse than what investors were expecting. Yeah, let me pull up the Q3 – I guess it's technically a Q2 report and give you some of the headline numbers. Give me one second because – here we go. nike q2 report revenue was up one percent on a reported basis flat on a currency neutral basis

wholesale revenues up eight percent direct revenues down eight percent gross margin decreased 300 basis points part of that i believe is the wholesale shift but maybe some discounting going on there as well and diluted earnings per share maybe i can check my friends at fiscal ai real quick was 53 cents usually i have found that when a company in their press release doesn't say whether they just give the diluted earnings per share figure and they don't give any comp it's usually a bad sign so i'll double check that but yeah it's basically no growth is kind of the story here and it's this is actually coming off of a year of big declines so So it's almost, it looks like an improvement, but you would think after a year of big declines

in discounting, it would actually be an easier comp and you should see some growth. So if I were a shareholder here, I would honestly be pretty concerned. I pulled this stat up because it kind of blew my mind. And if you invested $10,000 in Nike 10 years ago, today you would have $9,860. They have had negative returns for a decade. This is 10 years ago. I mean, this was the premier apparel brand. This is what everyone in the apparel space wanted to be.

So I guess my question to you, Brett, is what went wrong? It doesn't feel like there was necessarily a material misstep that they made. So I'm curious, why do you think they've had negative returns for a decade? Ooh, missteps? Well, they did try to go a little too DTC, a little too direct-to-consumer at one point. They also went on and off on Amazon, I believe. i just think that they lost their touch on basically innovating within the shoe space that people want to people want to wear where a long time ago they were the premier brand

with an athletic footwear and we're still seeing the growth in athleisure at least i think maybe not over the last few years because of the pandemic but over the last few decades clearly there's a growth in athletes who spend and right now there's just more competition coming online they haven't been able to retain that position what's interesting is if you look at the brand surveys from the likes of i forget what it is but they do the teen survey every year Nike is still number one on there by far. It's kind of tough. And I think it's just an example of apparel is a tough industry.

I have that saying, never invest in apparel. What I really think hurt them, at least the stock-wise, is weren't you buying at 40, 50 times earnings for low growth, not the best margins, not the best, you would think, mode. I mean, really, they just have that marketing mode, maybe a little bit of scale. but it's not like they have a distribution advantage it's not like they have a network effect sure you have some partners with advertising that are irreplaceable for example you get the top athlete in a sport you lock them down for 10 years that's an advantage but is it a wide business i'm not so sure let me pull up quickly try to get it up here maybe we can just use pe what are we looking at 10 years ago yeah yeah p of 30 32 now it's up higher but probably because

they're really facing a tough time on the how about gross profit what about that let's get top line figure we're at 4.5 times gross profit even to gross profit 2016 they're at seven so it really wasn't that extreme i mean they only got up there in the pandemic up to 10 or 12 then maybe the business just isn't performing well. More competitive space than people were getting credit for. Yeah, especially in the footwear category, you've seen the rise of both On Running and Hoka, which there's still a fraction of Nike's footwear business,

but they've both, I think, tripled or quadrupled revenue over the last five years while Nike has ceded share. And earlier I mentioned the earnings per share figure. Yeah, adjusted earnings per share was down 32% year over year. It's a good example of two things. One, yes, apparel is just difficult because there aren't massive barriers to entry. And especially in this case, like, brand, I think brand is overrated, where maybe there's certain industries like finance, for example, brand can be helpful, like Standard & Poor's is kind of a reputable brand. Brand is the same for like the S&P 500.

There's probably a comparable index somewhere out there, but people refer to it because it's kind of the standard benchmark and it's built up a brand and reputation. But brand in apparel, brand in retail, brand in – I don't know, kind of you name the industry, software, I think it's wildly overrated. I don't think brand is a moat. Can you think of any examples where brand has been the moat? In apparel specifically or just in general? In general. It usually reinforces with other stuff. I mean, Coca-Cola for sure.

There's other stuff there as well. I mean, there's scale advantages in that industry a bit. Sort of. There's no scale advantage in soda. I can make sugar, salt, bubbly stuff in my backyard. No, but the fulfillment, like the network and being inside all the doors, the distribution advantage. Distribution is what I meant by scale. I mean slotting, for sure.

I don't know if it's scale for the store. Maybe you can negotiate better with each grocery store or 7-Eleven or what have you. But yeah, if you're front and center in the fridge, that's very important. And I think in energy drinks, brands have been solid, or maybe we're seeing hyper-competitives here coming online. I think one of the big things that has eroded brand advantage has been the rise of e-commerce, because if I can research online, all right,

and even now with AI tools, you can go, okay, I look at this Nike, just put a hyperlink into the Gemini or whatever tool you use, say, hey, I got these pair of shoes, What are an equivalent ones with good reviews that I can get at a cheaper price? What other options are there out there? Whereas before, you went to Foot Locker, Dick's Sporting Goods, any other store, and you saw Nikes there front and center.

They had that slotting advantage, and maybe now it's going away. I remember as a kid, now this is aging me a little bit, but go to Sports Authority. I think they're bankrupt now. Half of the wall was Nike. that's what you're probably going to go for especially if you like some of the people that they advertise with as a kid but if we're going maybe outside of apparel i think in general for when someone says this is a great brand to own there's already or there's usually another competitive advantage on top of it for example

let's use the buffett ones american express there's a network effect with the payments network on top of a nice brand if you look at apple there are switching costs and maybe you can argue a network effect but generally i'd say the switching costs would be the number one for apple on top of the brand the brand is always i i can't think of any situation where when i think of a mo and there's brand associated the brand is just cherries on top like i when i think apple i do not think the moat is the brand i think the moat is like you said switching costs you get integrated into the ios ecosystem you get used to it you don't want to switch with american express certainly the network effect and them being able to leverage their own literal payments network

so yeah i agree i mean it's not they have good brands but it's like that is not the advantage it's not the crux of the advantage in my opinion yeah that's what gets back to the only time i'm interested in some of these apparel stocks is when it's trading at for example crocs when i recently bought trading at seven times earnings pot money into the buyback and what i'm not going to sit tight and go oh i'm just going to hold this until it goes into a high multiple i have a distinct trading plan there. That's why looking at Lululemon, neither of us, which I don't think either of us have owned this one. For me, it's been a psychological long. Worked out as a psychological long, but doesn't actually make me any real money. I didn't get interested until it

was below 10 times earnings because that's where with any sort of brand investment. And then look back at Celsius. I think it was earlier this year they were down in the 20s. That was at an extremely cheap price where you go, okay, yes, it's a solid brand, weak moat, but we maybe are getting enough margin of safety when it's trading at 10 times earnings or below or may 12, whatever the range is. But something like Nike that would trade at 30, 40 times earnings, there was more risk embedded into this company than Wall Street was giving it credit for. Now we're seeing the results of that. Okay. When I sell my business, I want the best tax and investment advice. I want to help my kids and I want to give back to the community. Ooh, then it's the vacation of a

lifetime. I wonder if my head of office has a forever setting. An IG private wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGprivatewealth.com. yeah i mean it's rare that i am buying something below 10 times trailing earnings because of the mo if i'm buying it below 10 times trailing earnings usually it's there's no risk yeah there's there isn't much of a mo other than maybe the airports at one point over the last five years but the with nike and apparel in general a lot of the things that you would think are maybe a competitive advantage, like more distribution touchpoints with customers.

Maybe there's sort of a, like, I'm talking about having like multiple storefronts and all that. And maybe there is some sort of a distribution advantage that I'm not giving a credit for. Those end up being the opposite when the brand erodes, or if habits change. All of a sudden, And having a storefront with a bunch of inventory isn't an advantage at all. It's just baggage. So it's – yeah, it once again reinforces for me the never invest in apparel mantra. We do have a lot of questions in the chat here. People are asking about Harbor Diversified.

I think we should – Yeah, let's go through it, Ryan. Yeah. A little HRBR Christmas miracle. Let's go through it. Now, to give context in our relationship to this company, We have finally received some news around what Harbor Diversified, I might say HRBR, Air Wisconsin. They're kind of interchangeable here.

The ticker is HRBR if you want to look up what's happened to the stock over the last five years. For those that don't know, this is a microcab Ryan and I invested in. I believe it was a net net play. Now, for sure, as a regional airliner with a controlling shareholder, a little bit of a strange balance sheet. They didn't have investor relations page. We bought back in, I think, 2021, maybe a difference with the personal accounts in 2022. my cost basis is $1.83. I'm sure Ryan's is similar. Ryan, do you have anything to add from when we started out here? No. For any of our listeners that are not familiar with the

value universe, will you just explain what a net is? And yes, my cost basis is similar. Yeah. So a net, some people have maybe different definitions, but I would say where you're buying the stock on a per share basis, or if you liquidated the company tomorrow, sold all the assets, netted out the liabilities, this is why it's called net-net, distributed all the cash to shareholders, all the cash you raise or you sell, some inventory or property plans and equipment,

it would be worth more debt than a lot. It's kind of the old Buffett plays, Graham plays from the 30s, 40s, 50s, and 60s. Arbor Diversified looked like that. We thought there was probably $3 and maybe or so, three four dollars depending on the outcome here in value per share but again i bought it about $1.83 ryan a similar price what happened here is one company had some contract issues that we don't need to go into the details with with their partners uh for airlines and then the company

given the accounting revisions they had to make it wasn't like they were making mistakes on their accounting they just had to change it because of a legal issue with a contract dispute uh you know receivables and all that stuff. I think they honestly used it as an excuse to not to stop filing. I'm curious if Ryan has the same opinion there, but they went dark, quote unquote, stop filing their 10Q and 10Ks on time, which meant only accredited investors could buy the stock, but anyone could sell. So we couldn't buy more, but we could sell. But what happens there, combined with the uncertainty of what's going on, is that, well, if you can only sell, if a bunch of people can sell, but not very many people can buy, well, the stock's going to collapse

and what the balance sheet uncertainty looks like the stock cratered to below 50 cents that was what earlier this year now they have announced through an 8k they still have about a year or so of 10 qs and 10ks to update us on though but they have sold 25 out of a proposed sale to sell 25 of the regional airline jets for 113.2 million dollars and it goes there's a math year. They had around double that in inventory, so they still have some jets on the balance sheet. They have about 58.5 million shares outstanding. They had $105 million in cash and equivalents at the end of Q3. If you add that to $113.2 million, you have $218 million. So we're adding the cash they had plus what they just sold. Subtract out some burn rate, which generally they had a little

bit of burn, but then they had to liquidate the regional airline, Air Wisconsin. They had to give out a lot of severance payments and stuff like that. So maybe subtract out $20 million or so to be conservative on that front. You have $200 million in NAV before considering any more asset sales above outstanding liabilities, which are pretty minimal. They pay back most of their debt. They only have a small amount of debt, I believe, on their balance sheet. Stock price is $1.75 today. Market cap is just about $100 million. I think it's worth about $3. Full disclosure, I haven't sold any.

And I know Ryan will talk about it here next. He plans to sell at about $1.75. I don't know if that got filled. Maybe he will disclose that for us because he's trading right around there, but it's got a wide bid-ask spread. I haven't sold any, but I plan to sell at around $3. And that's really it. I know we have some questions.

Uh, Ryan, anything else to add before we go through maybe some of these questions in the chat? If you're a regular listener to chit chat stocks, then you know that we love investing in international stocks and no brokerage compares to interactive brokers, otherwise known as IBKR. When it comes to international trading, you can easily trade assets worldwide using a multi currency IBKR account in 160 markets, 36 countries, and 28 currencies with low fees. Compare that to your existing brokerage and its limited trading ability and high fees on foreign exchange. There truly is no comparison. Trade stocks, options, futures, currencies, and bonds globally with IBKR's unified brokerage platform. I wouldn't use any other brokerage for my investing

needs. Switch to IBKR and level up your international trading game today. If you're interested in checking them out for yourself, head on over to IBKR.com. Interactive Brokers is a member of SIPC. Yeah, let me go through my history with the stock. So first off, this actually goes back, I want to say to around 2011, not my history, but the kind of the history of Harbor Diversified,

where this used to be like a defunct biotech, if I'm not mistaken, and they had a whole bunch of deferred tax assets. So, or net operating losses. So it was someone, the management team with Harbor Diversified, they acquired this, stopped filing, went dark, so to speak. And in the meantime, I think they were dark for I want to say 10 years. And when they – at one point, I guess one of the shareholders of Harvard Diversified when it was its defunct biotech found out that the private equity group or whoever it was that purchased the net operating losses also had purchased Air Wisconsin and it was like a fully operational regional airline. Owned by this stock.

Owned by this company that's publicly traded. Owned by this – trading by like five million dollar market defunct yes and he sued them in court for basically them to have to start refiling again and this came public i think it was like i don't know like a 10 million dollar market cap it's like five cents a share because this was all all all the old shareholders knew was this was a defunct biotech which their only assets were like i don't know $10 million or something like that in net operating losses, maybe more. And it was a fully operational airline that I think was probably worth like $150 million

and it had a $10 million market cap. So the stock immediately shot up. We kind of heard about it around this time. I started buying, I think it was like $150 roughly. My cost base ended up being around $180. and then they had the dispute they used it i think as an excuse to stop filing but also keep in mind they were sued in order to come public this is a management team that has not wanted to be a public company like they're reluctantly public and so they've been behind

for about a year or so on their filings this is the first meaningful thing we've really heard in the last year i'd say and i have had yeah well there was some i think fell through of a there was like oh we have a deal they put on aka we have a deal to sell our assets to some other company but i guess that fell through that was in september but nothing no definitive number on that um but besides that i guess they filed like their 2024 q3 they filed that this spring got an update on the balance sheet nothing really new again there was the preferred stock that we got an update on so they converted all of that that got us an updated share count the share count common shares are down to like 40 million then they had this preferred that you had to kind of do your own

math with that all got converted in the spring now it's back up to 58 million dollars but if you look at we were still counting that before in the net asset value if you were going to liquidate this thing, which they have a board meeting planned for. And this is very hilarious timing given they don't want to deal with anyone. December 30th or 31st. So they're going to vote on some stuff there. I really hope they don't try to screw outside shareholders. The nice thing is the investment group that owns this thing, they own most of the common stock. So hopefully what happens to that even if we get a little bit of a take under will be attractive in a liquidation and then if they try to turn into a holding company yeah just get out of there but i'm

hoping for a little more liquidation i'm hoping people do a little more math here hopefully they get current and yeah my plan still is to sell three bucks so we we got involved with this when We were running a limited partnership, and at the time, I had a lot more time to be caring about stocks like this and willing to endure the headache. After about a year of this, I got really fed up, especially having it in my personal account, and it has been a big chunk of my personal account as well. So I, about four months ago, put out an open sell order for anyone that's willing to buy my shares at $1.75. as of 10 minutes before this recording it just did at the close right

yeah I was the 175 mark I was the shares that sold so you can see it there's like 10 ticks on the stock today so you're that someone went out there and got it I am I just want to be done with the headache here

at this point not running the limited partnership and kind of like this is not how i invest anymore honestly i want companies that i can sock away and monitor their progress and and kind of as long as they don't get ridiculously overvalued i continue to own them sort of the coffee can approach that's kind of how i would say i've evolved as an investor so i will say i kind of like some of these but we have different we're not you know we're not going to be the same type of investor i mostly invest like how you just described but you know

these kind of these are a little fun to me you make it as 10 of your portfolio or less of the collection of these type of stocks but i'm i i am happy to be rid of it the uh i do hope the remaining shareholders they get treated well by management i was a little concerned that management was going to try to turn this into some new business endeavor and the value is going to get destroyed so they might they might yeah they will you know they could the thing is they're going to purposely try to destroy value i don't think so we'll see they don't seem like the best operators the cfo left probably to go pursue a new opportunity since air wisconsin is not an operating business anymore we have some questions here in the chat do you happen to know what are

the etfs and mutual funds the hrbr has in its marketable securities i think given how the prices performed in the bond rally, what was that, 2022, 2023? I think the bond yield rally. And when these prices, these ETFs went down on their balance sheet, I think they were just bond funds. It's really not the end of the world. Hopefully, they got a decent return on that. Other question, what do you think HRBR is going to do with the possible 38 CRJ200s left over after the transaction. It seems to me that they're going to scavenge them to sell off parts, valuable engines. Yeah, hopefully they sell them. They've been doing these charter business. They have some things that I'm very, maybe they've been flipping back and forth or

maybe I'm just confused about it. The easiest thing would be to try to sell these jets to either private buyers, whoever, what have you, and get maybe another $100 million. That would be a nice result here. That'd be simple. And I hope they do that. We'll see what happens at the board of directors meeting. I think they're going to have to publish an AK if anything, if anything happens materially at that meeting. So we'll be looking out for that. Last question. Did you know any, did you know, is anything about liabilities from air Wisconsin staying with HBR? It seems to me that HBR has pushed any liability severance layoff costs onto CSI. CSI I believe is the one they're selling to. I'm not sure on that. Again, that's why there's some uncertainty here. And I

think the price is still well below the net asset value. There's uncertainty. I read the 8K. It's about all I know. I honestly saw there's a couple of sub stacks newsletters that follow this, and they came up with pretty different estimates on per share value. So I think there's a wide range of outcomes here. And I'm of the belief, let's just see what happens. If we get any more liquidation i'll maybe sell if it's lower than three dollars but that's kind of my outstanding all right this is when i'll get out of this thing okay when i sell my business i want the best tax and investment advice i want to help my kids and i want to give back to the community oh then it's the vacation of a lifetime i wonder if my head of office has a forever setting an ig private

wealth advisor creates the clarity you need with plans that harmonize your business your family and your dreams get financial advice that puts you at the center find your advisor at ig private wealth.com all right well that is i guess the story's not totally over maybe we'll be talking about harbor diversity again i think about it yeah hopefully not when it's like an agglomerate that goes to $1,000 a share after it turns into the next Berkshire Hathaway. That would be very disappointing if that was the outcome. But I think I need to put out an outstanding sell order because I'm going to be off the grid for three days.

Some of it, the markets are closed, but I don't want to get caught not getting that. I think it's only one day the market's going to be open, but still, I'd like to, I don't know. We'll see what happens. either way for full disclosure ryan's out i have a plan to sell at three dollars hopefully fingers crossed as you're going through the map there i don't think it's a bad choice like on something really illiquid like this and i'm sure there's people listening to

this podcast right now where it's like what are you talking about why would you set a sell order that's like 30 percent higher than the price but you you might be the next shareholder selling if you sell at $250 or whatever. So there's probably other people in between, but there's a chance it gets filled if there's just like some investor that's gobbling all these up. So if I were you, I'd probably...

It's gone up about, yeah, 100% in a week. So yeah, that's fair. Okay. Alphabet. Sure, what are they doing? Alphabet. I didn't really see this. Yeah.

The world's most profitable company, Alphabet, although part of that is because of their mark to market on operating earnings Apple still has them I've been bookmarking little psychological long when Apple gets dethroned because for spite

I've been saying that's going to happen for quite a while now we've got a Andrew Marshall from Capital Mindset in the chat say what's up guys what's up Andrew so we're talking alphabet they are acquiring intersect uh so on monday yesterday as of this recording alphabet alphabet announced that they're

acquiring intersect for 4.75 billion dollars in cash they were assuming intersect's debt as well i asked gemini which this all sound this all feels very circular for me to be asking gemini about alphabet's acquisition anyways the i said you know what i wanted a quick summary why are they acquiring intersect what does intersect do it says intersect develops and operates massive renewable energy plants primarily solar and wind integrated with battery storage systems they specialize in data parks which are industrial campuses where high capacity data centers are co-located directly with renewable power generation so i guess alphabet is a construction company now they've gone for 180 as capital intensive as it becomes if only now that gets disposed of their

assets right now in solar could have been timing yeah intersex has powering ai data centers at scale renewable energy reliable energy oh i mean that's just trendy yeah well you know they want to get as much data centers built as fast as possible i asked why it seems like yeah go ahead i asked why is why are they making this acquisition because i don't think we've seen any of the other hyperscalers make an acquisition like this so it says local power grids in the u.s are increasingly strained by ai demand yes i've noticed that in my uh yeah texas my electricity bills owning a developer allows alphabet to build its own generation capacity rather than waiting for overtaxed utilities to provide power direct to source huh yeah does this make sense to you

sure that's alphabet should acquire oxidant petroleum let's just be a straight natural gas company. Fully vertically integrate oil, petroleum, semiconductors to AI. This makes sense if you are Alphabet, if you're Sundar Pichai, and who I think doesn't get enough respect because people are now saying that Sergey Brin's the shadow CEO. Sundar Pichai has done plenty well, and he's not getting enough respect. But besides the point, you're the top people at alphabet you're the capital allocators and you're seeing usage on gemini right now absolutely sold and you go all right we don't want to hit any bottlenecks we have some good infrastructure but we know what this is going to lead to if this trend of our market share gains keep growing let's

get ahead of this you could see them now i'm not sure what the other hyperscalers are going to do because i think at some point besides advertising optimization meta is just building capex to nowhere right smart smart glasses sure sure we're gonna there yeah but those are gonna have chips on them I guess yeah they're manufactured by a third

party to all right besides the point Amazon Microsoft I don't know what their plans are but alphabet is planning for I think 90 billion plus in capex 2025 2026 you could see them put out a huge number given the demand they're seeing and the vertical integration andrew says in the

chat here i know for a fact google is trying to double their capacity over the next year so this tracks yeah so this i can't imagine the alphabet wants to have to own a business like this like a like i don't think entering this decade they were thinking i want to get into the you know construction business basically or the renewable energy business but it almost is like it almost makes me optimistic about the demand they're seeing with gemini because i imagine they're like a reluctant acquirer for a business like this and they need it as opposed to having to rely on these utilities oh sure oh sure yeah yeah the more i keep thinking about the data center space and the data center build out it's like that meme where where there's all those

military guys behind a wall and then there's that clown and oracle's the clown who's core wave who's core i think you could do like ants on the ground i don't know yeah the uh what is there like the different tiers that everyone the s tier to a through is it a through f you know that that thing that people do s alphabet and then go through you keep ranking them i think probably you put the next one microsoft then amazon then meta then oracle then way down to the bottom core weave and what have you nebulous some people smart people argue nebulous is a good business but yeah alphabet seems to have right now the clearest roi in ai because you can do the advertising stuff the optimization there and you have more and more people paying 20 bucks a month

to use gemini such as myself and i'd be willing especially because they can bundle it in which i think i get youtube premium maybe and i don't even use it there's there's the google drive like two terabytes of storage which is more than enough that i'll ever need but on its own i'd pay 20 bucks off if not more for gemini and their deep research tools i'd be willing to pay maybe 40 bucks a month i don't want people to look at open ai they go well how many people are going to pay this much a month for this stuff i'm not sure but i think alphabet has the clearest path to our positive roi especially because they have the most efficient spend it it seems to me so let me ask you this brit i'm going through physical ai hair shout out to just the best data terminal around

yeah do you work for them or something is that yeah i don't know shameless plug uh google subscription platforms and devices revenue last 12 months they have 46 billion dollars it's a nice chart i think we're 100 billion dollars within a couple of years here yeah that's that's my question to you google subscriptions revenue in 2030 is it above or below 100 billion dollars 2030 above i'd say above a lot can happen from here on to then but again that's youtube premium youtube tv um gemini some of the other subscriptions i may be forgetting the google one i think that's the one i have google one it's all confusing all i know is i pay 20 bucks a month for a lot of stuff and it's work related so it's like technically a business expense let me think of all

the stuff i pay google for uh drive the office google office i don't even know what they call it now g sweet g sweet yeah terrible naming um yeah it sounds like a dirty word the um youtube tv i pay for although that's probably not super high margin i should pay for youtube premium but instead i just eat the ad load um they should bundle youtube premium with google one slash gemini for like 40 bucks a month ultimate ultimate bundle yeah there's a lot there's a lot i'm on a chromebook right now now can we blame the chromebook for my technical difficulties maybe but according to the research i made that was entirely intel's fault and not the chromebook software uh but we're getting around uh off off point here we have a question

from andrew that says interesting question on open ai monetization they're planning to do ads they're going to have to work with amazon's dsp correct they can't use google meta microsoft i'm guessing competitive reasons isn't that going to be a nice tailwind for amazon maybe i don't know the ds demand side platform space that well it's possible so what does ads look like in this uh you say i'm looking for some sneakers can you give me some options and then you have here are some options and here's a sponsored one it's going to be pretty nice google's going to make a lot of money if you were google would you hold out on adding advertisements to gemini as long as you can

yeah and i'd give away the stuff for cheap price as long as possible just to bankrupt open ai the thing is they're kind of doing that because they're deploying gemini 3 across all of their platforms to the billions of users i think it was instantly right once they launched now the pro tier with the research that i think is highly compute intensive is 20 bucks a month but i feel like that is still really unprofitable like i i bet my 20 bucks goes well in like the compute capacity i'm using right now is much higher than uh the 20 bucks per month yeah yeah they're in a good spot i think amazon is sneakily in a good spot because they can be one that's not a direct consumer player and the relationship with anthropic anthropic seems to

be doing quite well at the moment yeah they kind of seem like a neutral provider in this world I don't know a lot about Amazon's demand-side platform, but I guess if OpenAI is keen to not work with any of their direct competitors, Amazon or, Tyler mentions the Trade Desk, it seems like they're more likely to work with Amazon would be my guess, but I guess I don't know the industry that well. So, yeah, I mean – but how much honestly – how much do you think that would actually benefit Amazon? Is that a rounding error on the financial statement? Advertising business is pretty strong. Demand side platform there is pretty strong, especially because now they've combined everything from sponsored listings to premium video to all that stuff. and other things i'm missing amazon music which is a rounding error uh forgetting what else not alexa uh let's see tyler ferris asks do you think open ai will be the next we work

yeah let's say there's a fighting chance but probably not maybe they're clearly like burning money at 10 times the size of we work but we'll see if they lose a bunch of market share yeah i mean it's possible i think there are some some shared character traits among their leaders yeah that's true cult following not afraid to burn a boatload of money but business model wise i don't really see the analogy but all right i want to go through this really quick because i spent time what do you mean selling dollars for 10 cents this is the same business analogy it it reminds me of sorry uh let me finish and then we can stop with ai there was some podcast of an open ai person and they

said hey look if we could get 10x the computing power tomorrow we would utilize it i was thinking yeah you're selling a dollar for 10 cents if i started up a chipotle stand a chipotle location and I started selling burritos for a dollar, do you think demand would skyrocket? Yeah. I'd also have negative 200% operating margins, which OpenAI does. So unless your subscription goes up to $100 a month,

okay, then would your compute capacity be up to 10x? I mean, look, like, I just hate it. That's just something I've got to get on my soapbox quick. All right, folks, before we move on, we need to tell you where we get our data. fiscal.ai fiscal.ai is the complete stock research platform for fundamental investors i use the platform pretty much every single day you'll see the charts in our podcast you'll see it in our newsletter this is our one-stop shop for stock research they've got up to 20 years of financial

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stocks, then we know you love analyzing individual companies. We do too. That is why I, Brett Schaefer, co-host of the show, decided to start writing the Emerging Moats Stock Research Service. Emerging Moats produces regular stock research reports on companies with emerging competitive advantages, regular updates on stocks I own and on my watch list, and has full transparency to my portfolio transactions and returns. I cover under the radar emerging mode companies with prior research reports on Oscar Health, Kraken Robotics, The Real Brokerage, and much more. Emails will be sent out on a weekly basis. Explore the service today and find your next great stock by going to emergingmodes.com. The link will be in the show notes. Okay, when I sell my business,

I want the best tax and investment advice. I want to help my kids and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivateWealth.com. But the operating, the operating margins don't have anything to do with the compute costs well yeah i mean when you have negative margin it goes down to that yeah yeah okay but i mean the only way to get positive gross profit is to have open ai raise their subscription price to 100 bucks a month 200 bucks a month

given their you just think the compute is that costly i mean i would assume a lot of that operating losses coming from developers like opex no no no it's all compute really yeah i find that surprising what so then what is the idea here if put yourself in opening eyes shoes is the idea that the cost of compute just comes down that they don't have to like don't know what their idea is just keep dancing while the music's playing i guess yeah yeah i mean they plan to lose like 40 billion dollars burn 40 billion dollars in 2028 so that's the base case okay on the exact opposite side of the world or of the investable universe i put a thread together called 12 boring

stocks that crush the market these are they could not be run differently in the open ais of the world i want you i'm just going to rip through these really quick and this is it really didn't require that much work honestly it was just stocks that beat the market over the last 10 years that i thought were boring there's really no criteria cookie are they in there the biscoff cookie they probably could be but i did not add them in here so companies for me were united rentals much better performance than i realized they were a 10 bagger over the last decade 12 bagger actually amphinol which is like i feel like they're an exciting company that doesn't want to be exciting like they're you should look up amphinol headquarters on google and it is the

most depressing image you'll ever see it's like just the the they are like the least exciting business of all time, but they are just catching a tailwind with data centers. Caterpillar, Syntos. It always surprises me that Syntos is such a large business, like uniform rentals, basically. They're trying to acquire the second player in the space, too, create a full monopoly. Yeah, it honestly looks like it's worth spending some time on. MSCI.

investors might think that's a little more exciting but i think maintaining maintaining equity indices is not like the most sexy business in the world but the returns are probably great it's very capital light curtis wright old dominion freight line arthur gallagher ww granger i almost laugh when i say that because it seems what is ww granger they are an online distributor of like industrial parts they have like literally 30 million products so it's like motors wires i think i used to use them back in the day yeah yeah it's basically just have a ton of suppliers they're one of the since they're the leading distributor they've kind of got a cost advantage a bunch of distribution centers and they ship faster than others rollins

O'Reilly and waste management real quick going through that list I did notice that physical networks like Old Dominion Freight Line O'Reilly Cintas waste management waste management these are basically physical networks that have just developed over time those I mean that'd be Granger too they turn into massive not only massive cost advantages but that you can do You can provide a better service to customers. So I think that's something like an asset that people should pay attention to is physical networks. And operating leverage at scale, yeah. Yeah.

Do any of the stocks on this list interest you? Maybe WW Granger, honestly. I can see the value there. Waste management at the right price. O'Brien Lee at the right price. Nah, nothing else. I get it. The physical networks make sense.

Fastenal has always been a good business. There's some other ones out there. Yeah. Let's do a little Granger analysis, shall we? Sure, sure. A little live Granger analysis? Okay. With our friends at Fiscal.ai,

which I'll say while you're looking at the numbers, use our link, fiscal.ai slash chitchat. Link is in the show notes. 15% off any paid plan. You know them by now. You should be signed up if you aren't. All right. What is Granger looking like?

WW Granger, is that what it's called? Yes. Which just almost looks like the UFC logo almost. Okay. Revenue has grown at 6% a year for two decades. Diluted earnings per share, 12%. That's a good sign. But moment of truth here.

free valuation let's go yeah i can do that in a sec i'll look at free cash flow while you're talking ev to ebit 20 and a half i know free free cash flow positive every year for the last since 2015 doesn't look like the best cap cash flow conversion though let's check yeah yeah not the best cash flow conversion i would imagine there's some capital intensity there just in the distribution working capital intensity right yeah i'm curious how much is like supplier financed like or if they're holding holding the inventory themselves kind of thing um the one that i was maybe the most excited from on this list honestly was msci Why? What's not to like about that business? I can't think of a simpler business to run. You're

basically just creating and maintaining an index, which can't be that hard. It requires probably like an hour of some analyst time per week and you've got a whole bunch of asset managers that just have to default to using you as their benchmark and they pay you licensing fees because they in order for them to be able to sell it they have to license the reputation of msci so it seems i don't know i really like it but um we'll see i kind of have a financials preference. I like financials. You want to talk, speaking of finance, financial charlatan of the year. Did you vote? The voting has been done and the winner has been cast actually today. So we can get a little live update on this. I think I voted, yeah. I don't know,

I always feel this year, who won? Well, let's go through the candidates. And you can maybe say any you disagree with or any that should have been added. It's kind of hard to think of everyone at once. Howard Lutnick, Peter Navarro, Anthony Pompliano, Bill Pulte, Michael Saylor, James Fishback, who wanted to come on our podcast. Sorry, James. Bill Ackman, the all-in crew, Larry Summers, and Mike Green.

Let me find who I voted for. Why is Mike Green on there? Yeah, I thought that was a bit unfair. I think he's trying to do good stuff. It's just controversial. A lot of people disagree, but I think that's not, you know, that happens. That happens. All right, this is my vote.

So you can tell me if you agree or disagree with any of these. One, fishback. Two, sailor. Three, Pulte. Pulte. Pulte. Whatever you call him. What do you think?

So the only issue I have with this is the fishback guy. It's like we're giving him more attention than he deserves. Feeding the devil? Yeah. There's no reason that he should have this much attention. Isn't he running for Congress in Florida? I don't know. I don't know.

I'm pretty sure he is. I don't know. Look at his Twitter right now. No, he's running to succeed Ron DeSantis as Florida's next Republican governor. I can't – I just don't care about that guy. Sorry. Sorry, James. It's just you don't – I don't know.

None of my investing work overlaps with you whatsoever. The one that I was personally triggered by is Bill Pulte. So that's your number one? Yeah, I agree. I was just so constantly frustrated with him this year. And I can't remember his exact title. Yeah, but it's basically like housing development director or something with housing. Did he keep yelling that the Fed people should be fired and that he was just trying to yell mortgage rates down?

Yeah, he's basically – he just wants – he wants to prop housing prices up. Which is – it's a very easy thing to – I always think when people are dying to have like housing prices up, you're just catering to make people – make homeowners happy, which is like kind of a way of like currying favor with their vote I guess. But it's so – like he was just calling for Jerome Powell to be fired over and over because Powell was reluctant to drive rates down and it – Now he did, and now he hasn't talked. All right, do you want to know, drumroll? Can you hear that? I can't hear it, but who won? All right, I was hitting my desk.

I guess the mic's good. I'm not putting that. Number one, Michael Saylor. Number two, James Fishbeck. Number three, Howard Lutnick. Hey, I got close. I kind of do this to vote who I think's going to win. I had Fishbeck one, Saylor two.

I had a flip there. I think that's not a bad outcome. sailor deserves it yeah i guess i remember i actually technically listened to sailor this year at a conference and i was just lost and everyone in the crowd was too like there's it would be one thing if they were just like if he just got up there and was like bitcoin's gonna go up you know i think people would be excited about that but then he went into like details of the bitcoin yield and how you can just kind of forever dilute shareholders and buy more bitcoin and i think he started to lose if i were him i would stop doing the press tours i think

it's hurting more than helping oh yeah but if you don't do the press tours how are you gonna have a premium to nav and your whole business model works in that regard yeah uh do you want to go through the let me read out the previous winners for you 2024 akman the general maybe a little unfair but i think he he kind of got ahead of himself in 2024 really out there 2023 all in crew 2022 sbf 2021 chamath two-time winner kind of like one of those uh musicians that does the group and then they do the solo the solo album that's unpopular opinion i don't mind chasing jason kalachnis yeah he's at least i say genuinely a nice person yes you know you can just more optimistic than i would be on some stuff but yeah he just said this week that robots are

going to take every job at amazon in a warehouse by 2030 but he is he feels more genuine than some of his uh than the ais are some of the other people on his podcast all right 2022 or sorry 2020, Raul Pau. I'll admit, hand up, I subscribed to Real Vision for a year. Yeah, it's embarrassing. 2019, Larry Kudlow. 2018, Ross Gerber.

Remember him? 2017, Jacob Wall. I don't know him. 2016, Trump. 2015, Skreli. 2014, Keith McGillihue. And 2013, Keith McGillihue. I wonder what happened to him back then. Yeah, what a list.

Honestly, I I hope I'm not on it someday. I don't know most of those names. There are some of them. Ackman kind of feels – I know he's kind of shot himself in the foot a number of times and says some – kind of goes outside his circle of competence. But he's a pretty – I don't know. It feels a little unfair to have him on that list. Sorry, who?

Ackman. Yeah, I know. Yeah, I know. All right. do you want to talk uh listener suggestion some guy julian who pitched himself to come on the show julian i gotta say i'll investigate uh your work and we'll see if we can work something out here but cannabis got rescheduled i don't know if you saw this it's kind of a kind of feels like a boy who cried wolf situation with cannabis i don't know if it's maybe that's the opportunity

yeah it's it's almost like all right it's illegal but no one really cares it's not Not everyone's going to use it. It's a way smaller industry than people thought. But here's his pitch. So rescheduled cannabis, you have innovative industrial properties, a REIT for cannabis growers, 14.6% dividend yield. They are positive operating profit and cash flow from operations for the last five years. Not a terrible amount of debt versus their earnings power. They recently tried to diversify out of cannabis and into life sciences, maybe to get some sector diversification.

market cap of 1.5 billion dollars 1 billion dollars in total dividends since inception which is not that long ago since they went public feels interesting there's a lot of pushback saying look all right banks won't deal used to not be able to deal with cannabis growers there's a lot of really distressed customers of innovative industrial properties and that's maybe what you would expect with a 10% plus dividend yield. So this could be some deep value dumpster diving. There's also some people arguing that rescheduling actually hurts them because now more people can associate with the industry. You can get bank financing and all that good stuff. It could be an interesting situation, but that dividend yield, it's spicy and it's been consistent

over the last few years. Okay, when I sell my business, I want the best tax and investment advice i want to help my kids and i want to give back to the community oh then it's the vacation of a lifetime i wonder if my head of office has a forever setting an ig private wealth advisor creates the clarity you need with plans that harmonize your business your family and your dreams get financial advice that puts you at the center find your advisor at igprivatewealth.com what is their coverage of that like what percentage of their cash flow is that uh i'm pretty sure it's below their cash flow let's let's check you want free cash flow per share i don't know if that's the right one for a REIT

but we can look that up maybe we'll just do total on nominal um the cash flow from operations how about that cash flow from operations versus total dividends okay let's see 2024 258 million cash flow from operations 212 million dollars in common share dividends it was higher every year going back since inception last 12 months no but maybe that's a one-time blip on a quarter so what's the idea they just sell them or they just lease them land here that's it it's a re yeah for cannabis growers i mean the good thing about like a re like this i can't imagine once you've set up your area for growing cannabis that you're like super eager to relocate it so even if there is more

competition from other players in the real estate space for this, it's not affecting their existing cash flow, right? It's more so just affecting their growth. What if none of their clients pay them and go bankrupt?

In this scenario, if it got opened up, it's less likely, right? Yeah. Yeah, maybe. that's yes but maybe that's why the stock didn't react like okay you still have distressed customers i've seen a lot of cannabis pitches that i just have a hard time

getting behind with there's two there's two parts to it with cannabis the regulatory environment is difficult to predict and what impact on consumer demand is the regulatory decisions actually have I think is a separate question that people should be asking like does this mean there's more customers I don't know I feel like from what I've seen if you want cannabis you you get it right now already in a world where it's maybe not available in every area but people find it I don't think it's like alcohol

no I don't think it's I don't think it's a secular growth trend there's just not pouches are better it's just not that attractive to me yeah one quick question before we sign off here

because I know we're running up on time i put this one down and i was thinking about it for myself because i've got these harbor diversified funds now that i need to redeploy if you could only own one stock for the next five years what would it be if i could only own one stock for the next five years yeah it has to be my entire portfolio or is it or we're just saying a investment Let's say it has to be 20% of your portfolio at all times. Nintendo. Interesting.

If we're talking the highest upside, that's not it. In my portfolio, I'd say Coupang, Remitly, The Real Brokerage, Airbnb, Interactive Brokers, Oscar Health. but they have a little more risk, a little more meat on the bone. Nintendo, $15 billion in cash. They're just running the numbers today. $70 billion market cap, so $75. So you have a $60 billion enterprise value. I think they probably, over the next five years,

generate $30 billion in cash. So you're going to have the current enterprise value, half of it generated in cash. You have the assets there. I think the downside over the next five years for Nintendo is minimal. And especially the margin of safety with their balance sheet and entertainment IP. All right. I like it.

Anything else? Anything else to add or are we signing off? I think we're signing off. We have our actually pre-recorded since we're taking the next week off 2025 year in review, portfolio review, predictions review in 2026, stock market predictions, fun episode coming out next week. Tomorrow, as we're recording this, we are doing six stocks we like for 2026. A lot of stock ideas coming out there for the new year. There are a lot of ideas getting thrown around. I'd say listen to that.

Check out the Emerging Moats newsletter. And I think that's it. I'll hit the disclosure and get out of here. We are not financial advisors. Anything we say on this show is not formal advice or recommendation. Ryan, I, or any podcast guests, may hold securities discussed in this podcast, may have held them in the past, and may buy, sell, or hold them in the future. Thank you, everyone, for tuning in.

And we'll see you next time. We'll see you next time.