Chit Chat Stocks - Amazon's Most Powerful API

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 investing power hour number 105. And we've got a lot on the slate today. For anyone that doesn't know how this show works, it is a live show on YouTube that we record every Thursday, typically at 10.30 a.m. on the West Coast, 1.30 a.m. on the East Coast, or 1.30 p.m., sorry, on the East Coast. And we talk anything financial markets. We've

Starting point is 00:00:57 got some news this week. We've got some requests from listeners to talk about as well. And we go for an hour and just riff on the world of investing. So with that, Brett, how are you doing this morning? We are talking some retailers, which I know you have a distaste for. So have you changed your mind at all? Yeah, I think the question I was going to ask you is long Lululemon or nike both are in a drawdown we've had a lot of people as we've i don't know i like to toss out questions on the old twitter machine right before we start see what people want us to talk about and a lot of people are talking about those so those are in a drawdown they seem like they're getting fairly cheap if you believe in the long-term growth story still so yeah i don't

Starting point is 00:01:45 typically like apparel i would say i don't you said i don't like retailers i don't like specific retailers, which is apparel and fashion retailers. But excited to talk about it. We got other stuff this week. We have some Amazon news I thought was quite funny. And then I left myself a note last year that I think maybe around the AI bubble that maybe we could discuss, but that won't take too long. All right. Before we get to things, I want to give a quick word from our friends, our sponsor at Public Options Traders. Listen up. I want to tell you a little bit about public.com. But first, have you ever actually thought about all the fees that you're paying to trade options?

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Starting point is 00:03:19 us members only with that said how about this spotify up eight percent today price heights price i was a doubter across the board and it uh a shareholder for a long time and i should have known that as soon as i grew too frustrated it would uh turn things around so hey hey i i can i can miss you we we bought back uh after we sold for some tactics we bought back in around 100 and uh at about 160 or 170 you got very let's say antsy to to get out of it but you know you're still open-minded i'd say fairly yeah i was just i don't know i was not expecting danielek to kind of pivot as quickly as he did danielek the ceo of spotify went from really growth mode to the suck mode pretty quick and i think honestly mark zuckerberg maybe inspired him

Starting point is 00:04:29 to lean up the operation there a bit and i think they are friends if i'm not mistaken or at least buddies in the tech world so remember that snoop dogg photo classic what zuckerberg danielek and snoop dogg and the napster guy who oh gosh what's his name sean something sean park parker yeah i think so i think so anyway uh they are raising prices it looks like now my first thought here i think it's one to two dollars i'm not sure how it'll shake out because there's different plans in different countries and all that. But I think the word is that they will raise prices one to $2.

Starting point is 00:05:07 One second here. Sorry, I've got a sneeze that's right on, right about to come out. Yeah, I can go. I think it's subsided. It looks like they're going to raise prices one to $2 across their North America plans. And my first thought was,

Starting point is 00:05:27 oh, great, like as a customer. And then I thought for a second, Would I switch? I'm like, absolutely not. I probably use it two to three hours a day. So if I'm paying $12 for a personal plan, I really don't think it's the end of the world. Yeah, I agree. And there's a lot of family plans. There's a lot of all that good stuff. I thought they were going to go more of the route of raising it by one dollar or say five percent something like that every couple of years but they didn't raise it for i think 10 to 15 years at least in the united states maybe they have a lot of catching

Starting point is 00:06:12 up to do we'll see i mean the thing that's different between them and netflix is there's not operating leverage on the price hike so it's not as big of a deal so i think some of it people might be getting a little aggressive with bidding up the stock here but what about 300 again today so for anyone that's held for the long term congratulations uh hasn't been me but it's finally finally doing well again i think it ipo'd at like 150 160 so you know it's been a long time coming do you think there's any world in which 10 years from today spotify's gross margins are above 35 yeah but also i think 10 years from now they can be generating whether how low the margins are i think they can be generating 10 12 15 billion dollars in gross profit fairly easily now i don't

Starting point is 00:07:03 they're they're 100 billion dollar revenue big goal thing that they toss toss out there i don't know if that's realistic and i like that they have a goal of becoming 100 billion dollar revenue new business um over you know extremely long term that's great but might be a bit ambitious so we'll see hey media the media entertainment music audio industry is quite large and if they're the dominant player if they're the youtube of this market who knows who knows but that's not what we're planning on talking today ryan what was your first topic you had it that's disney nelson peltz the activist investor that uh stepped in on disney and he's been kind of running this proxy battle to d not even dethrone bob eiger necessarily but just be a

Starting point is 00:07:56 voice on disney's board of directors that isn't just a bob eiger best friend because just to be clear every single person on the board of directors for disney was appointed by bob eiger except for one and i would not be surprised if it's just a bunch of yes men around him and like pelts might not be the right guy but at least he has a better incentive than the rest of them so yeah true it surprises me basically he lost this morning no one oh he did yeah came through they are not going to vote him to the board so and bob eiger was going around you know patting himself on the back finally this he's like finally this proxy battle's behind us so now we can focus on the business like oh that's been the problem yeah you haven't been focused that's concerning um yeah it

Starting point is 00:08:49 hasn't been you it hasn't been youtube roblox netflix everyone staying ahead of you well i am going to say it right like i'm a bob eiger hater i don't love the way i just i think he's focused on his own reputation and how he's perceived as opposed to actually generating value for shareholders i agree he wants to i mean you've seen it he has like political ambitions you've kind of seen that expressed before he wants to be sort of this cultural icon beyond just a chief executive at disney right i i don't i wonder whether creating shareholder value is one of his primary goals now with a ceo we don't need someone that's you know from an investor perspective we don't

Starting point is 00:09:52 to need someone that's saying, all I want is to create shareholder value. I'm going to squeeze, squeeze, squeeze, and just ruin everything for everyone else in my ecosystem. But you have to have some focus on shareholders. And I don't necessarily think Iger does. I think he cares about empire building and like you said, fame. I wonder if we're going to look at Iger in 20 years like we do with Jack Welch. I guess the story isn't over, but I wonder if it's going to be similar sorry i was on mute yeah i think there's probably a good chance that that happens also we're not over yet though story's not over they could totally turn things around i could that could be completely wrong but i think it's a possibility that any investor should consider

Starting point is 00:10:41 yeah and people want to talk about the marvel acquisition star wars acquisition which i don't even know if that's a great pixar acquisition those are great but in terms of scale of the business he basically erased the value of some of those acquisitions with the uh what is it fox acquisition five years ago now six yeah i also think that there's a risk they i don't know juiced these acquisitions pretty aggressively with low quality content and now people are sick of it like the return on invested capital quote-unquote from the acquisition might decrease over the next couple of years because we've seen a lot of pushback from the core fans i mean we even have an investor focused audience and thank you for

Starting point is 00:11:31 the people commenting today a lot of people just go they single-handedly destroyed marvel and franchises what Bob Iger has done I'm reading this from the comments right now has done to Star Wars and Marvel is reason enough to hate the man and you know personally I have some of that feeling as well and I think as an investor you can't

Starting point is 00:11:50 really ignore that because when you looked at say five six years ago you could have said well the financials look fantastic like they're putting up such records at the box office but then when people get tired of this stuff and the quality is actually not there eventually that comes home to roost

Starting point is 00:12:06 Yeah, it's a little bit of – it gives me a little bit of confidence for investing based on gut feel because there was a point with Disney where sort of after Endgame with Marvel, I started to get the sense that the quality was deteriorating and it felt like it was high volume, not as much time spent on the production. and maybe that's not the case but for me and i couldn't tell if it was like am i just getting old and the content isn't meant for me or is the content getting worse and you know all my friends are saying the same stuff like the content's getting worse but they're my friends they're my age you know maybe it's just not meant for me but now we're seeing the numbers in the box office they have put out so many low quality films that they the marvel there used to be something about releasing a marvel movie where if i didn't know the character at all i'd still go to the theater just because it was a marvel movie there was the brand there it was worth going that just

Starting point is 00:13:14 doesn't exist for me anymore yeah we have one comment that said most of disney's wells which i think is a um comparison to disney or excuse me buffett's analogy of disney where they have the well the oil well that basically you can keep regenerating because you're just making up franchise characters that are popular over and over again he said most of disney's wells have been poisoned which i think is a good analogy here but maybe there's a cure somewhere along the line um my hot take and this is entirely different topic is i have the same feeling about chipotle but i think i'm probably wrong or i think the quality's gone down but the numbers haven't shown it yet but i think i think i'm probably wrong i mean i wouldn't bet against the stock

Starting point is 00:13:59 or anything there's no chipotles in costa rica right no i mean they're not gonna have latin america is probably their toughest market i don't think they're gonna yeah you know if it's like we have an america you're a lot of your guys's type of food or we just made it american style you like it right yeah that would be a little bit of a tough transition i don't know i mean i think part of it might just be for you chipotle fatigue and the same for me i never i didn't some people have it like every day i had it like once a month twice a month here's the thing with chipotle for me it still is even with the introduction of other concepts like sweet green and kava and these other sort of uh what do you call it uh factory line type uh quick service restaurants fast casual

Starting point is 00:14:53 it's still one of the only places that i can get a healthy meal at a decent cost that's actually quite filling right no i agree with that and i can't believe no one's ate away at that like market panera almost had it and they kind of went the wrong direction it seems like so yeah i don't know here a subway revamp thoughts is this can they rise to prominence again no they i think i read they have way too they still have way too many stores i think they got to work through that but maybe they have the right leader at the helm now i'm not sure but they they overbuilt their stores just so much that yeah i i would be worried about well i guess i don't know the exact price difference but them versus jersey mike's

Starting point is 00:15:49 because jersey mike's is making a real national push to become the subway or excuse me the sub shop place but with danny devito at the cultural icon there they're doing a lot of advertising the brand ambassadors we have a comment here from tyler says do you think starbucks customers have fatigue i don't think that would be necessarily my worry is a starbucks investor because i don't think so they seem pretty darn good at refreshing i'd say maybe i mean people laugh at when you say ozempic risk for stuff but given the sugary drinks and the high margins they get on that type of stuff i maybe worry about that but that's at the edges right now but do you really they're really good at refreshing the menu they're very very good at that i guess i don't really know

Starting point is 00:16:42 what changes when people take ozempic but i would guess that more people are going to starbucks for the caffeine over the sugar so it reduces your say cravings for addictions so sugar fat possibly caffeine although i don't know for sure but it makes it easier on average to like resist anything you're kind of addicted to that's bad for you well maybe good for you too but so that's why i would think about with that yeah i just i'm skeptical that people are getting starbucks fatigue you could have said that 10 years ago and they've been raising prices mid-single digits for a decade the i got a starbucks a block away i mean everyone could say that seattle area but i've got a starbucks a block away and every single morning the line

Starting point is 00:17:39 is packed it's people it is a part of their day it's a part of their daily routine so i don't think at all i i don't see the starbucks fatigue occurring at least that's that's my anecdotal evidence yeah i wouldn't yeah i would not be worried about that either but who knows who knows okay let's go through i think you have three topics that maybe hit yours first and then we can do lulu and nike i think that could be a fun like middle segment especially we can toss up some good charts here and we'll get to some other stuff at the end uh you read some hedge fund letters i'm curious why uh was this for work what were you doing yeah it was the i wanted to make i don't know i wanted to highlight different part of our platform i still haven't done it yet so i i'm

Starting point is 00:18:33 working on a piece that basically goes through there's a on you know what i'll just use this as a chance to promote fin chat there's a hedge fund letter aggregator on fin chat where if you like reading hedge fund letters it basically compiles all them into a single list and it's pretty nice just directs you to their different pages so i was going through and just looking for the best ones from the quarter. And I realized that there are some cliches that every one of these hedge funds seems to toss out. First of all, I'm blown away by the amount of hedge funds

Starting point is 00:19:11 that are in business that have underperformed in total return since inception. Lots. Secondly, basically every single one that I read was like... Yeah, we underperformed, but the S&P is being driven by the MAG-7, which is unsustainable. And they're just saying it accounts for 35% or whatever, 30% of the S&P 500 that's unprecedented. And if we look back at 1990, the top 10 companies versus today, obviously that's not going to last. I'm like, everyone's just rationalizing their underperformance.

Starting point is 00:19:50 And all it did, reading all these hedge fund letters, was make me more bullish on the MAC-7. Yeah, of course. Yeah, I threw out a chart, or excuse me, I think a tweet about Google. I think Google's PE is still slightly below the S&P 500 average. I believe it's at like 27, and the S&P 500 average is at like 28. and then i i toss it out there and then someone responds classically you know they they say well if you exclude mag seven it's above and i was like but then it's not the s&p you know what i mean like i i don't get it um i think if you took the mag seven one by one

Starting point is 00:20:39 i think for just about everyone you could sit there and say you could make a case for why it's one of the best businesses in the world and why it's going to grow a double digit earnings for the foreseeable future. Maybe you could make the case the other way, I think for a couple of them, but everyone puts the mag seven in this box, like it's an overvalued cohort. But when you look at each one, you say, wow, these are the best businesses in the world and i could see how each one could perform well yeah when what's interesting is i think people don't really look under the hood yes we've talked about this plenty of times where nvidia and tesla might be rough like that's tougher because you know tesla's in a cyclical

Starting point is 00:21:25 market nvidia is also i guess in a cyclical market and could be over earning tbd though but if you look at amazon it's pretty clear their margins are going to expand to 10 or higher and that's not being shown in the trailing evaluation whatsoever so i think yeah it's i guess i don't read many hedge fund letters but i've always seen a lot of people joke around about you know online and stuff uh how like oh just read another leather letter from this person and they're complaining yet again about magnificent seven like blah blah blah it's been 10 years in row and maybe you're right i always thought that was kind of a just a narrative out there that but my biggest pet peeve is people looking at their returns relative to other funds

Starting point is 00:22:20 yeah so focusing on their own stuff yeah what yeah exactly even even john hempton did this to some degree this year and i like john hempton i like the way he invests i think he's pretty um fun guy to read his research and stuff because he's very frank but he said something along the lines of our short book performed this well which look at all the other short there's a lot of other long short companies that have gotten destroyed and we didn't that's like it doesn't i don't i hate that just like yeah well look at all the funds that blew up this quarter we weren't one of those so we did good that's like okay but what returns did you give for i could have gotten 20 out of the s&p this year true yeah and we have a comment here that says funny the hedge funds

Starting point is 00:23:12 didn't mention their outperforming it's meg seven in 2022 it's like yeah that it's true and i i have some sympathy for that if we're in a big market bubble or something like that and maybe people argue we are right now i don't think it's nearly as bad as 1999 but that doesn't mean there can't be a you know a little pop here what just irks me when reading stuff is again what you mentioned not focusing on like time and time again just complaining about other stuff coming up but not focusing on what you're actually investing in and like oh okay we invested in this like it's been flat this year but we still see good fundamental performance blah blah blah blah blah

Starting point is 00:23:56 and at the end of the day your job is to make money for your clients so like either you can admit that you're doing poorly which it's just a weird world because if you admit that you're doing poorly i guess you risk redemptions it's it's it's it's a tough it's a tough market out there gotta look pretty for your investors that's true yeah and the you know a lot of people like um you know portraying confidence and all that good stuff false confidence yeah exactly exactly but do you want to talk nike and lululemon or do you have anything else here let me kind of blend this into the uh the fin chat ad that i should was supposed to talk about i'll pull up nike right now actually sorry i know you guys can

Starting point is 00:24:46 all hear that typing so pulling this up on fin chat this is our shameless plug to go out and check it out. It is a stock research platform. We use it every day. And frankly, it just keeps getting better and better. Full disclosure, I do work there, but I'm seeing these improvements day to day. And I really do feel like it's one of the fastest improving stock equity or equity research platforms out there. Nike, let's see here. Let me pull up their price to earnings or last three years well it was about 44 in 2021 47 and today after a let's check out the drawdown here it's a 49 drawdown from its most recent highs 49 drawdown and still trading at 27 times earnings oof all right that's yeah that is really staggering yeah let me let me go in and

Starting point is 00:25:44 share the screen here i know for some reason ryan you're uh you know i don't know why you're always scared to share the screen or maybe you just forgot there but you'd be very nice for the youtube audience i'll uh i have nike pulled up with a couple things here we can start out with them and we had a comment that said don't sleep on ulta either i saw they're in a drawdown as well so maybe we can look at all of those even though ulta is a little bit different so first thing yeah i see in the chart here in the top right corner 50 basically 50 drawdown for nike and let's actually look at total return over the past five years only 11.5 cumulative so pretty flat um i guess just just look at sales we did this on the rapid fire stock pitch one two

Starting point is 00:26:28 what's interesting is that sales keep climbing higher yeah there's been a little bit of a slow down here. But if you look back over the last 10 years, I'm in 6.5% growth. I don't think that's very surprising to me because we get, what do you call it? Consistent, just like slightly above inflation. I'm not surprised about that. And how do I even say this? Okay, maybe here's a good way to start and i should say that but neither of us follow nightly very closely we're not writing conference calls transcripts we're just kind of looking at the numbers and what we feel do you feel like their moat has weakened or widened over the last five years i'd say it's i'd say it's about where it was i don't think it's widened for me i was thinking

Starting point is 00:27:26 about this yesterday. If you gave me two athletic shirts, and one has the Nike logo, and one does not, the Nike logo, the one with the Nike logo is worth more to me because I have the trust in that brand. I would pay more for that one. So I do think, and even with all the new ones popping up with lululemon and all these others i still think nike has a lot of trust in its brand i i wouldn't say that the moat has necessarily shrunk yeah i agree i mean it's still strong i still trust them to build a high quality product i'm seeing earnings yield it's not that high compared to pre-pandemic but i guess a lot of you know comparatively to other stocks it's a little bit better we're at a 3.8 percent earnings yield

Starting point is 00:28:16 um i don't know what are your first thoughts on them like i just don't love apparel companies in general the free cash flow is constantly lumpy there's always inventory struggles even for a company like nike there's inventory struggles well it's earnings yield 3.8 percent no i don't think that's attractive but oh right right okay uh I don't really want to own it. I mean, the issue and it's kind of a paradox is that I don't want to own an apparel company at an expensive multiple because things could go wrong. I don't want to own an apparel company at 10 times earnings because I think it's in a downturn. I think it's a business that's failing. so it's like i don't want it cheap i don't want it expensive i'm just not going to own it because i can't i feel like with most of these brands i have zero visibility into what the next 10 years looks like okay let me share with some lululemon here and see what maybe it looks better oops

Starting point is 00:29:29 all right i'm sharing the screen for any listeners i'll try to work through it and look talk through it a little bit but anyone can look on youtube or spotify and you'll get the video and the charts all come from FinChat user code. 15% off any of your premium price. So I'm seeing here... We got to say our code. FinChat.io slash chitchat. Oh, yeah, not code.

Starting point is 00:29:51 Link, thank you for the correction there, Ryan. I'm seeing pretty strong gross profit growth. I don't see really any slowdown here. I mean, we're at a 22% CAGR over the last 10 years. um seems like strong growth again last month or excuse me last fiscal year if you look at operating income also at an all-time high 2.2 billion another 22 percent cagger and then if i look at the ratios of let's see earnings yield 3.3 percent trailing what do you think there ryan i like that one a little better i like that a little bit i like this one a little better

Starting point is 00:30:39 but let me show you share another kpi with you that i don't think you'll like okay uh sorry just yeah i'm just there clicking around i'm gonna share my screen so it makes it just easier for everyone lululemon if we go to their segments of kpis here brett can you see this uh yeah i can okay china people people's republic of china company operated stores 127 total stores 711 so roughly 15 of their stores come from china is it a little bit of a starbucks story where a lot of growth is supposed to come from asia from east asia yes specifically china yeah it sucks yeah and what percentage of total revenue

Starting point is 00:31:33 yeah this is perfect way to use the KPIs what percentage of total revenue is from China roughly do they break that out oh here yes they do let me get rid of some of the old ones here people's republic rest of the

Starting point is 00:31:51 world Canada US I can just stack this here it looks like well just just a little under 10 as a percentage of total yeah roughly 10 that's not the end of the world but but growing up but it is growing as a percentage that is a slight concern i just I would like something like Lululemon at maybe 5% earnings yield. I know that's asking a lot for investors that have seen it at PE of 50, right? That's a big difference. But that's what

Starting point is 00:32:34 I'm personally comfortable with, with something like this, where you're taking a little bit of trend risk. I get that they've had a long-term popularity trend, but I think that's where the risk reward makes sense to me yeah i mean the chart can look like the prettiest thing in the world i'm looking at right now they have oh it's great grown total revenue by nearly 10x over the last 10 years but that's the trouble you get in with brands like if if consumer sentiment around a brand sours you are paying a pretty penny for something that could go the complete wrong direction this is not software the customers are not locked in here so there is competition coming from across coming from other brands a lot like this athleta i know within women's

Starting point is 00:33:30 apparel is very popular aloe for some reason i get a bunch of aloe ads on youtube they got the targeting off but they're plowing they're plowing money into that but i can seriously see a situation where this is this continues to compound revenue at 15 for the next five years and we're like damn we could have had this at 20 times whatever exactly yeah i will it would be unsurprising to me if earnings were double in five years there was an analyst out today though now this is kind of showing maybe the sentiment has turned to negative on lululemon that they said that under armor risk is there now which i think might be a bit of a stretch because under armor did commit accounting fraud and clearly like

Starting point is 00:34:21 well i guess at one point the brand was pretty strong but that wasn't for very long that was the third pillar for a while it felt like to me here in washington it felt like it was like the third brand behind adidas and nike for a while yeah i guess puma and niche there's some niche ones out there for specific sports but general apparel general athletic apparel yeah i agree that i don't know if it would go the way of under armor because that was like you said there's accounting fraud i thought at first when you said there's under armor risk i thought you meant the under armor brand is being revived and there's oh yeah no no threat of competition what about now i'm gonna pull something up here we had some comments here ulta beauty i'm gonna

Starting point is 00:35:13 share my screen again so i know they said something at a conference yesterday that basically guided for no growth yeah now yeah they may have done that and i will say that you know this fairly well but you're not i don't follow it very much at all you follow it slightly or i wouldn't you know not an expert on it since last 10 years i'm seeing 15 revenue growth um and i guess if you believe that's going to continue let's kind of look at the valuation here and see how attractive If it looks trailing, let's just do earnings yield again. Now, see, this one's at a 6% earnings yield. I can even compress that so people can see how much it's changed in the last couple of years.

Starting point is 00:35:59 It's gone from like 1%, 2.5% to 6% earnings yield. So that's, if we flip that around to a PE, about 17, according to Finchev here. Of the three that we have discussed here, I like Ulta the best. I think they are – there's less brand risk because it's not – they're selling a whole bunch of different brands. It's something that's pretty immune to online competition because people want to try the makeup on. They want to see what it looks like on them. They want to smell the fragrances. They trust Ulta, and they've done a really good job with their omni-channel efforts.

Starting point is 00:36:39 but i think store growth is going to look very different over the next 10 years relative to what it looked like over the last 10 they're gonna have to kind of pull i think a home depot where they really increase their per store productivity as opposed to just growing footprint so i mean for anyone that hasn't followed home depot their store count is basically flat to what it was in 2009. They have done a phenomenal job generating higher sales per square foot over the last 10 years and really improving the operating margins and unit economics at the store level. I think Ulta is going to have to do that, and I'm not sure they're going to be able to. Yeah, we'll see. It's a big transition to go from a capital grower to a capital return story. But

Starting point is 00:37:32 so far, I think Ulta has some good signs they can make that transition where we're seeing consistent share repurchases. I just pulled up on FinChat. Total shares outstanding have declined at a 3% rate since 2015, which is not bad. Actually, I think that's 2014 really, so at least the last 10 years. I like that. I could see like, okay, hey, we're going to grow a little bit less, invest a little bit less for growth here. We're going to have more cash coming in and hey we'll just return it to shareholders and if it's at a six percent yield and it can still grow that's that's not a bad formula to me no and there is some economies of scale here where they have so many stores the brands have to be in there i think it's not necessarily to

Starting point is 00:38:17 the home depot level where they have all the negotiating power because you think about like the big cosmetics brands i think rihanna has a huge one they can go get sold on it you have amazon Amazon, there's, you know, you can still sign up on Amazon or your D2C website. Yeah, but all the big brands choose to go to Ulta. And I have to imagine that that's because people want physical proof of concepts before they purchase online. So, plus, if you've ever bought any sort of cosmetics, whether it's fragrances, anything on Amazon, it's not always great. There are a lot of bad. If you're trying out something new.

Starting point is 00:38:57 yeah diluted fragrances stuff like that so bad sellers with ultimately you know you can prove it first you can go in there you can try it and then you can be like okay yeah i'm gonna keep it uh i'll buy it so i think they do have some economies of scale probably some negotiating leverage and i imagine that'll grow over the next decade um but i do think there's still some risk that these big influencer cosmetics brands go direct to consumer and have success with that, especially with their huge social presences. Yeah. I like Ulta more than Lulu and Nike here too.

Starting point is 00:39:45 Not buying either though. Neither of the three. i'm behind uh gogo internet yeah and uh and harvard diversified but which we did have this week yeah i did end up buying more i should say a couple days ago um yeah someone must have blown out there volume was quite high and microcap it went down but i think someone was saying we to talk more about gogo on this episode i should say we just posted one yesterday as we're recording this but on sunday it'll be from this wednesday a stock report on gogo which i think is i think it's pretty cheap ryan hopefully gives some pushback on there it's an interesting setup

Starting point is 00:40:29 either way i think it's a very informative episode um but i think one indicator i have that a stock might be interesting is if we actually don't get that many listens on the episode so the listens were down slightly than average i kind of think okay people really don't care about this thing that could be good because it's not like sexy at all or it's bad for listeners but compared to like hymns and hers or uh elf beauty or what are some other ones we've covered where people seem to be really excited about it i actually tend to fade that even though hymns and hers is actually crushed it okay before we move on let's talk about our friend and our sponsor, new sponsor, firmreturns.com. It is a stock research blog that covers companies all

Starting point is 00:41:15 around the globe. And actually he is typically pretty active in the comments here. So if you see him, feel free to talk to him about some of his companies, but he really leans more towards the UK, which I can honestly say, Brett and I do not discuss companies from the UK that often. So that's his home market. And he finds a lot of gems there. There's a lot of free content on his site. He provides ongoing updates on the companies that he's already invested in. And there's an archive of other long form write-ups. To give you an example of how thorough he is with this research, he was recently digging into a company's accounts. And for one company he wrote up recently, he actually managed to find a material misstatement that had been missed by the

Starting point is 00:41:57 auditors. And he reached out to management and they confirmed the error. So he is digging pretty deep um he's also size agnostic he'll cover companies with market caps from 10 million to 40 billion it's really all over and it's just global value so um check him out and you can use our link to get i believe it's 15 or is it 20 off right 20 off sorry i should know that uh it's firmreturns.com slash chit chat that's firmreturns.com slash chit chat link will be in the show notes exactly anything else any other big news items from the week did you see the leak about um amazon and the just walk out technology did you see this all right let me pull it up right here it is funny but also i think insightful for the company and how they're trying to get a little

Starting point is 00:42:52 bit more profitable so here is a i don't know what news site it was but i'm going to read a screenshot from twitter just over half of amazon fresh stores are equipped with just walk out the technology allows customers to skip checkout altogether by scanning a qr code when they enter the store though it seemed completely automated just walk out relied on more than a thousand people in india watching and labeling videos to ensure accurate checkouts the cashiers were simply moved off site and they watched you as you shopped and the guy said the tweet that one viral sounds like amazon relied on an api a person in india technology that's pretty good that's a good joke um they're apparently they're shutting they're trimming this stuff back

Starting point is 00:43:38 and what's interesting with that that that company is there's still a lot of trimming that can be done like let's get rid of the we don't need that that that stuff never worked it's been 10 years it doesn't work have you been to any of those before because they test them all around seattle yeah there is some stuff that they're doing uh whole foods that i think works well um you just swipe your hand and it once you've got it set up it'll just pay automatically with i think your amazon prime account um or whatever cards on file there so it does speed it up i like that but to just walk out i mean i've never been to an amazon fresh store i don't see myself going anytime soon so the technology sounded cool obviously when they're relying on this api

Starting point is 00:44:32 uh maybe it's not as revolutionary as we thought yeah there's just they were just in so many things that they gotta yeah it's gonna it'll focus up on a couple of things yeah i'm okay with them trying stuff to be honest i maybe give more leeway to it than other people but i i think as long as they can continue to manage their e-commerce and cloud businesses i'm okay with them experimenting somewhat maybe not with uh 20 billion dollar experiments but small ones yeah how do you think they've done on the video content side of things

Starting point is 00:45:26 i mean fairly well where yeah people just say it's pretty boring you know what they their original content spending is but they're building i think the advertising technology that that can really make it profitable where they're going to license old movies. They're going to have the free part where I think it's called freebie or IMDTV or something like that. And they're adding the ads for every Prime member, unless you pay more, you have the sports content, which will have a lot of advertising and then it connects to the e-commerce ads as well. So I think that is where they're going to make their money. And it's not necessarily going to be as much as the Netflix model, but it's more of going to be, okay, you can go to Amazon, you can watch anything, you can pay

Starting point is 00:46:09 for any movies you know you can rent stuff it's almost an all-in-one hub for your video stuff um as you connect to fire tv but i would just be a little bit disappointed that they weren't roku they let roku be roku and they didn't they didn't become that dominant player and in the north american market that would make them just much more i'm okay with that yeah i'm okay we got um let's see roku do still not profitable it it's that income statement's ugly yeah i remember i think maybe two years ago we had a discussion with alex morris and it was basically just around platform uh power like like who has the leverage in those discussions and he's like you know i think this can be a product that continues to grow and people enjoy

Starting point is 00:47:05 it and they stick with it but he thought the unit economics would accrue to the content providers and i think he's been totally right it's just a business that's hard to get profitable uh tyler asked do you guys think airbnb will start having internal advertisements like amazon sponsor posts so like airbnb promoted listings something like that i believe is what he's referring to here eventually they i think he was asked about this on a uh investors ask constantly yeah yeah it was one of those analyst calls um and he said something that i really liked which is i think that's the easy way out it's an easy way to improve margins but it's not necessarily the right way i think that's totally spot on it's some it's a lever that can be pulled for any

Starting point is 00:47:56 scaled marketplace but is it always the right thing to do i kind of have my doubts yeah and it'll have this like you don't have to start it today and then if you're doing so what are they doing like i think 100 billion dollars in gross payment volume but either way if you do it then and then you get like a billion dollars in ad revenue you that doesn't mean you can't turn it on when you're at 500 billion and hit five so yeah i think they'll do it and their margins are already great i mean they'll have i think incredible margins going forward once they add that but i wouldn't expect it for a while unless unless things go poorly yeah and they are they try to be very host friendly i wonder if hosts would have some pushback

Starting point is 00:48:43 to that true true yeah they would i mean they've had pushback on plenty of things especially during the pandemic when they're refunding customers and yeah i don't know um let's see we have some other topics we got hey a prior another prior guest uh interview guest joining rod allsman who covered allison transmission stocks actually i think doubled maybe give or take since he came on uh that was a what do you call a boring business that's actually turned into quite a combat and he said missed the beginning but loved the go-go review hey that's another go listen to that episode guys uh he thinks it's good um but yeah so you can so people can get on board with the the value trap yeah yeah we'll see that's true that's true um let's see another

Starting point is 00:49:43 person said would you be willing to look at otcm on a future episode seems like a reasonable price for a potential long-term compounder with wide moat comparable to nasdaq msci and ice yeah i think that's otc markets that could be interesting as well if they're the dominant player in that really big household name very profitable if it's run well let's let's check out the margins right now i'm gonna pull up finchette what do you think ryan that sounds like a good business i've looked at them before yeah it is a pretty good business if i remember correctly um i remember being traded weird like it's uh listed on something funny i don't know maybe i was just maybe it was just i was having a hard time pulling it up that's part of the branding you know it's it's on a

Starting point is 00:50:36 funny market right it's not it yeah it's not quite what i mean i can't remember what it is uh let's see you might run into the same problem as me 19 ev to ebit 19 here not bad not bad especially if you think it's grown a lot let's let's check out the growth it's super illiquid which is okay for the right person yeah again that's part of the brand yeah decent growth but I

Starting point is 00:51:11 well I'm seeing a big jump during the pandemic so I'd worry about that a little bit but this is not a whole episode on that okay we've had two people mention this Eric Paul says I came in late so maybe you addressed it already but any thoughts on Google wanting to buy HubSpot

Starting point is 00:51:27 we haven't addressed it yet I'm curious what Lena Khan's thoughts are I as a shareholder think that Google needs to be responsible and I agree with Lena Khan no more acquisitions buybacks only apparently it's 32 billion dollars Ryan

Starting point is 00:51:44 whoa yeah I don't also I'm not actually a shareholder I'm a psychological shareholder as let's check that premium yeah if google just plowed money into buybacks they could i know they never would they would never take on leverage and care about shareholders

Starting point is 00:52:12 but my god the returns would look great in the next couple years yeah and they still have room to get rid of a lot of and whatever fat yeah would it be would it affect the business that they're not investing in that you know i think search would do just fine and they can still invest in it because right now it's a lot of i don't need to go into the the stuff that musk seems to be tweeting about every hour of the day but it's like that type of stuff where it's not actually focusing on making your business better it's everything around the edges you know managers hr all that all that stuff um have you taken your victory lap yet on tesla deliveries oh that's right low yeah that's uh yeah another bad quarter i think it was do you see what he said

Starting point is 00:53:10 he's like all ev manufacturers are struggling it's like byd he said byd's deliveries were down 42 percent quarter over quarter i was like no one was talking about quarter over quarter just cherry pick some random point it's like oh okay then that makes your shares worth more i would recommend any listener that likes tesla to read the capital cycle theory book because it's textbook yeah yeah it's i mean it doesn't mean it can't be a good business over the long term but right now that that's clearly what's happening and it's why price like they're lowering prices and they still can't spur demand because it's it's a highly cyclical industry and may be getting flooded with supply but who knows maybe it normalizes over the next year or two who knows

Starting point is 00:54:03 the thing he did that was classic that textbook elon musk material and i don't know if someone told him to do this like 10 years ago but he's been doing it religiously and it's worked great he said we're gonna have our chat gpt moment in uh with self-driving in one year one more no longer than two yeah no that is his like go-to it'll probably be here in one year no longer than two it's like one year comes recycle the same old material i think in 2017 it was full uh automated drive from new york december new york to la is happening within a year and then he doesn't say this one anymore but he used to go yeah i think two years flight to mars you'd say then like 2016 it's like am i maybe 20 um yeah no they just need more data they just need more data for

Starting point is 00:55:02 full self-driving then it'll finally arrive hey last uh last point before we go we do have to talk about one of our sponsors as well. We mentioned here earlier in the show, you heard us talking about the investing platform, public.com. That's where you can trade options with no commissions or per contract fees, and you get a rebate of up to 18 cents per contract traded. NerdWallet recently gave public five out of five stars for options trading. If you want to see why, go to public.com and start getting a rebate of up to 18 cents per contract traded. This is paid for by public investing. Options are not suitable for all investors and carry significant risk full disclosures are in the podcast description us members only

Starting point is 00:55:44 all right we have a question here that actually relates to something uh if you um if you see our little doc here ryan you can click on it too to see the chart someone says what are your thoughts on online gaming companies uh flut which i believe is flutter as an example now i had this chart here where now the person that tweeted this said their opinion sports gambling is a complete and utter mistaken you can probably apply this to online gaming as well where you have gross gaming revenue from legal sports betting in the u.s in 2019 it was 0.9 billion so 900 million dollars 2023 ryan 10.9 billion dollars absolutely soaring i think this is one of those industries like at first you're like oh it's great by these companies like it's just a combat or secular grower but this is

Starting point is 00:56:35 one of those industries that actually it's dangerous if it grows too quickly because then it becomes a societal harm. So. Yeah. I suppose it's the bummer for me. I've seen it get bad. I've seen it personally get bad with people. So it's,

Starting point is 00:56:55 it's. Yeah. It can become an addiction for sure. The bummer really is that it doesn't feel like there's a real way to benefit as an investor aside from obviously the society mgm potentially but it seems like most of the value here accrues to the sports leagues in terms of engagement and interest fair and there's not really a great way to be able to invest in sports leagues here in the united states as a public investor and if you buy the oakland someone will sell you the oakland athletic shrine for

Starting point is 00:57:36 they just moved to a minor league stadium that's going to be that's a value play right there i do think there are i mean there are ways you can invest in the braves liberty i think still owns the braves maybe maybe maybe who knows they spin it out yeah i guess formula one No, it feels like a lot of the value is going there, and it feels like kind of a crapshoot in terms of who wins most of the customers for the gambling, like the online gambling. Also, there's huge regulatory risk that becomes like – I compare it a lot to vaping. I'd be surprised if they unwound a lot of the decisions, though, that quickly. Well – The states.

Starting point is 00:58:26 I think they would regulate it where if they, again, I compare it to vaping where I don't think people that are very old understand what's happening among younger people, specifically men. Like it's so prevalent and it's not legalized in every state yet either, I guess. Where would those assets, where would that capital be flowing if it weren't flowing to pointless gambles? i don't know i don't know yeah where it's gonna go next probably maybe robin hood i don't know would be buying harbor diversified if it weren't for the sports gambling it would be benefiting me yeah i'm not sure well i don't know like what this is i don't got the answers from a societal perspective but i just think as an investor that's a risk that makes me a bit squeamish investing in not squeamish from a moral perspective but squeamish from a

Starting point is 00:59:22 like downside risk perspective of investing in these gambling companies because the governments can have an iron fist with these you know historically they have a lot of times aside from evolution which isn't really it's not in the sports gambling side of things but as far as i know i don't think they have any sports gambling type uh games i don't really know a picks and shovels provider that seems to be doing really well. Yeah. And

Starting point is 00:59:59 I know there are huge fans of Evolution out there. I remember I said some negative ones and there was a lot of hate. Wow, EBIT down to $20. What do you think, Ryan? Very profitable business.

Starting point is 01:00:14 That's true. Did you hear that though? 20 times earnings. It used to be like $50. Does that intrigue you at all? Yes. I remember being kind of – I remember not understanding the competitive landscape very well, so I would have to do some more digging there. Is this something people can – casinos can build in-house kind of thing? And I would just have to have a better sense of that before – because, I mean, if this is something where big casinos start spending lots of money –

Starting point is 01:00:51 that's potential you know you could have a cheap multiple for evolution but they could still struggle the uh there was something else that i wanted to talk about now i'm blanking on it okay well as you blank on that i have one thing um well we try to do losers and winners of the week and i had a loser this week as myself because i forgot that i made this i hope i made it for myself um one year ago i sent a future calendar event to myself on april 1st of this year so a couple days ago and all it said with no links no anything else was was it an ai bubble i was very i was very perplexed when uh and the verdict in my calendar well am i right i don't know it was kind of like the i i don't know i i was confused because i

Starting point is 01:01:49 totally forgot making it and then i was like what was i even trying to say because i think it was i was i believed a year ago that we might have been in an ai bubble but i should have been to my past self just wait dude just wait it's gonna get even crazier three beers deep like in your google calendar like sending yourself reminders yeah i see someone hyping up nvidia at a party that doesn't know stocks and i'm like yeah send that to myself tyler says that i need to renew that one for next year i did renew it but the thing is if nvidia is at a five trillion dollar market cap next year and you know i'm gonna sit there and have the uh that same thing gonna be like i don't know because i have no idea whether we're in a bubble right now i think we

Starting point is 01:02:40 probably are if i leaned one way i would say yes but nvidia's number is still great all right we have been we started streaming 61 minutes ago so probably time to wrap yeah i do like yeah do i have to go a little over so we have 60 minutes minus the ads which we gotta have people because we try to make a living here, but appreciate all the comments to everyone. Thank you for all that. You can join these live every week, Thursday. Well, it depends where you live,

Starting point is 01:03:15 but Thursday morning, mid-afternoon. It's about 12.30 p.m. Eastern time typically. Today we were at 1.30 p.m. Eastern time, but about midday Eastern time typically is when we go live. Do these for an hour and then they get uploaded onto your podcast player of choice. That's the Chit Chat Stocks podcast. As a disclosure, we are not financial advisors. Anything we say on the show is not formal advice

Starting point is 01:03:38 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. Give us a five-star review on Spotify or Apple Podcasts. Subscribe to our sub stack and follow us on Twitter. That's chitchatstocks on both. Thank you everyone again, and we'll see you next time. We'll see you next time.

Chit Chat Stocks - Amazon's Most Powerful API

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