Chit Chat Stocks - Berkshire's Alphabet Buy; Buying The Dip On Fintech Stocks; Coping With The AI Mania $LULU $SPCX

Episode Date: June 5, 2026

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 (03:22) Google's $85 Billion Equity Raise (09:11) Comparing Meta and Google: Future Prospects (12:15) Home Builders: Berkshire's Acquisition of Taylor Morrison (15:11) Trouble in FinTech Paradise: MasterCard and Visa (18:58) Celsius Stock (21:43) Wise Group and Regulatory Investigations (36:55) The Impact of AI on Financial Data Companies (40:25) Evaluating Ratings Agencies and Their Future (42:29) Concerns Over Index Fund Integrity (44:39) SpaceX's AI Revenue Projections and Market Reactions (47:29) Analyzing BlackRock Coffee Bar's Market Position (51:05) Lululemon's Growth Challenges and Market Dynamics (54:59) Victoria's Secret's Brand Revival vs. Lululemon's Struggles (58:55) Diageo's Turnaround Potential in a Tough Market ***************************************************** 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

For the past three years, IBKR individual clients averaged 24.3% annually, beating the S&P 500's 23.1%. Lower costs and 170-plus global markets matter. Interactive brokers, member SIPC, visit ibkr.com slash performance. Welcome to Chit Chat Stocks, the podcast that helps you find your next great investment. I'm one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. Today, we've got our weekly investing power hour episode. We do these every Thursday live at 5 p.m. Eastern time. If you ever want to tune in, go to YouTube, look up Chit Chat Stocks.

You can ask us questions there. We got a whole bunch of questions this week from the audience in our sub stack chat, which again, plug, go check it out. Totally free. It's just a way for everyone that is a fan or likes watching Chit Chat Stocks to converse. But on these episodes, we talk all things financial markets. We've got news. We've got a little bit of earnings, Lululemon reported about an hour ago, bad report, spoiler

alert. We can talk about that. And then we've got Google raising $85 billion. I feel like maybe this news got overshadowed by, I guess, I don't know what the other news was, but you look at SpaceX, SpaceX raising $75 billion and it gets all the headlines and here's Google raising $85 billion. So we've also got some potential stocks going on sale here, once-loved stocks, I will add. These are some quality businesses.

And we've got Berkshire getting a little active with capital deployment. But I'll leave it there. Brett, how are you today? Where do you want to start? I'm doing great. I messed up the time by an hour prepping for this episode, so I might be a little more off the cuff. I was planning to research the hour before finalize my notes, but I realized it was actually happening at 15 minutes. But we're here. We're recording other things I have that we may or may not talk about, depending if we have time.

You know, we got a lot of bubble watch, of course. A company called Quantinium is IPOing at 20x oversubscribed, which I think is just hilarious. We have a small cap of the week from a listener, Black Rock Coffee Bar. new bank had some news and then there was a very hot topic especially in our part of the world talking about stocks on the internet is the conviction of andrew left i'll tease that maybe we can discuss that but ryan i think we start with we get a little ai out of the way google raises 85 billion dollars part of it comes from berkshire take us through the notes and then we can give our opinions yeah i think this caught everyone a little bit off guard maybe because well for starters google is one of the most cash generative businesses in the world

so the fact that they need to go out and raise another 85 billion is kind of a surprise and maybe you could say they don't need it but the fact that they did is a little shocking Yeah, for headlines, last week, maybe it was earlier this week, Alphabet announced that they would be conducting an equity raise for an estimated $80 billion. That issuance was going to include a $10 billion private placement deal with Berkshire Hathaway, a $15 billion convertible preferred stock issuance, a $15 billion raise of Class A and C common stock. both of those are primarily sold to institutions they usually have banks lined up that you know have said they're going to purchase them and then a 40 billion dollar at the money offering which will be sold gradually into the market so and aside from the 10 billion dollar stated private placement from berkshire everything else was apparently oversubscribed so that 80 billion

became about $85 billion in equity that they're raising. I put in my notes here, this would be notable for any company, obviously, given the scale of it. But the fact that a business that you wouldn't think needs the cash is doing it is maybe even more, I guess, controversial. We've seen a lot of other companies raise primarily through debt. So Amazon's taking on some debt more than they have before. I'm trying to remember. I think multiple big tech companies have done convertible offerings. I'm not sure about convertible, but I know Meta has done debt as well.

Microsoft may or may not have. Again, we're turning from taking all the excess cash on the balance sheets, which most of these companies had a lot except for maybe Amazon. They're stopping the buyback. they're using the excess cash and then now they're going to the debt markets and the equity markets. I think this makes perfect sense for Alphabet for many, many reasons. I would say that they're, I don't know if running circles is the right term, but given the need for capital allocation connection, all this AI stuff, they, I think have done the best by far. For one, we look at one, they're getting ahead of the anthropic open AI IPOs. There's only so much

capital out there so they can get in first for a ipo of 80 billion dollars quote unquote that's nice second their pe is what 30 so invert that you're at a three percent yield you would much rather raise equity at that rate versus whatever you got to take out in the corporate bond market right now which would be five percent maybe they could probably get just above treasuries and then third they are getting ahead of the other ai infrastructure players because they are saying look our capex is actually our plan now is that capex in 2027 is going to be even higher than 2026 and we need the cash now i think this is given where the stocks are trading a much better move than taking on debt and kind of getting a little more levered here i mean it's

not the end of the world for either of these businesses to do either way they can i mean all of these mega cap tech companies can so could absorb 200 300 billion dollars in debt at a five percent interest rate that would be just fine but you know they're not a oracle which is a little bit riskier but yeah i like the move we can maybe talk on the berkshire piece later it's probably good branding for uh both sides there yeah that's i guess the question i was going to ask is what think of this move from greg abel because this is not i don't think this is something buffett would have done most likely a 10 billion dollar private placement at virtually all-time highs for google but i saw a lot of takes about how

So, Able has this extensive history on the energy side, and Berkshire Hathaway Energy has big ties into some of these data center buildouts and how it might sort of be, in a way, vendor financing, which I guess I don't know if I love that as an investment thesis necessarily. Wait, is it vendor financing because what? Berkshire gives them $10 billion. They turn it into data centers. uh they use berkshire hathaway energy to uh power those data centers but i don't draw that connection that doesn't that doesn't make sense to me yeah it the one thing i will say and we got some other news from berkshire hathaway this week as well with a big acquisition big's kind of maybe overstating it there but it greg abel is not sitting on his hands

he's that he's doing something with the cash balance which i kind of like to see yeah sure i bet they're getting a discount to apple stock or sorry not apple stock excuse me alphabet stock i don't know exactly what the deal is here they get the preferred uh i i guess i should say i did not look at the details but it makes sense because of berkshire's history i think there was a it wasn't a viral tweet but there was someone from bloomberg that was using an ad to like find out exactly what type of deals haven't done like this in history, where you get the stock at a discount and then also the preferred. And pretty much all the other examples in the 21st century were only Berkshire Hathaway. So they love these type of deals. It makes sense. I think

it's going to do better than cash over the long term. And if they can become, look, the funding aspect may become an issue for these companies in the next few years. And that could help determine who is leading in the AI race. And if Berkshire can be the backer for Alphabet, well, that is a huge, huge cash pile that they can target. And Alphabet also gets the branding to say, look, all right, Wall Street, all right, every investor out there,

Berkshire is betting on us. They believe in our AI build-out. They believe in our business. So why don't you toss in another $100 billion? And I think that's what's happening right here. And I also like, as well, the ATM offering. Perfect name because it's just going to the ATM. If they can get $40 billion out of that, yeah, I mean, why not do it?

I think, in general, they want to go a little bit scorched earth and try to gain as much market share as possible in AI. And it's going to be fascinating at the same time that OpenAI and Anthropic are heading for IPOs. We're going to see what their businesses look like. We're going to see what their audited financials look like. We're going to see how much capital they're going to raise. I'm not going to invest in any of this. I'm totally just watching from the sidelines.

But from an entertainment standpoint, I love it. Yeah, I didn't even think about the part of them basically front-running these SpaceX and Anthropic IPOs. And OpenAI? Potentially. I have some doubts about them being able to make it public. I think the odds have flipped on them substantially. Are you on Team AI WeWork? Let me double-check some of these betting odds, but I remember they kind of fell off on whether or not they would IPO this year.

Maybe I'll find it in a sec because it takes a while. But here's my question to you. Google feels like everything's going right. It's great to have the brand association with Berkshire, obviously, in this equity raise. Which company would you rather own over the next five years? Which stock? Not company. Meta or Google?

Meta for context is trading, let's pull up Fiscal AI real quick, 18 times EV to EBIT. Google's at 32 times EV to EBIT. So significant differences in the trailing multiples again. I think we're getting much closer to fair value on those, at least from my standpoint. I know there are a lot of fans of Meta out there that would say they loved it at 30 times, they loved it at 18 times. This is a much harder question than when it, I think, maybe was reversed. I don't know if you're looking at the charts right now. But I think I might, 18 times EBIT versus 32 times EBIT,

I might lean slightly towards meta. But it's pretty hard. It's very, very close for me. I just don't see where meta is winning at all in AI. Besides their advertising, of course, of course, advertising efficiency. Yeah, careful. Targeting is getting good. But Alphabet has that same thing. They have the same one. And if you look to the future, I think Meta has much more risk. Hardware, the wearables, the AI stuff with no direct revenue. It's tough. It's much harder.

Yeah, I think the counter there would be, again, and this seems to be pretty much what the bull case rests on, which is the advertising efficiencies. And yes, Google does benefit from the same stuff, but Meta has taken share in the advertising space relative to Google. I would not be surprised if Meta was generating higher advertising revenue than Google, at least on the search side versus family of apps in three, five years. but again both i think both are going to benefit i think i might take meta there i honestly i think this you look at meta you look at google microsoft amazon and i think i'll throw apple in there too these are all still very very high quality businesses that have i was thinking about this with microsoft i i heard recently a conversation with uh like a company that basically does consulting for ai consulting for basically teaching buy side firms how to like prompt better

like how to use ai in the research process i know you shrug your shoulders but there's some value in it the and they said they're shocked by the amount of firms that have to use microsoft copilot that for what reason don't use cloud because it's bundled in or they've got all the security compliance security okay and all their data is already layered onto microsoft or whatever and it's like i'm sure those analysts if they had the choice right out of the box would pick claude or codex or whatever but they're stuck taking copilot and it's just a testament to how i think integrated or embedded microsoft is and some of these massive companies but yeah similar to oracle i think this strategy as simple as it is of anytime one of those five

companies apple maybe a little less so gets below 20 times earnings it makes a decent investment like google is the same i don't know if microsoft's been there in a long time apple obviously hasn't been there in a while but when they used to trade at eight times or whatever amazon it's kind of hard to value but basically anytime they're in a reasonable drawdown it seems to work yeah it'll work until it doesn't no i like it it's not bad maybe meta is the one at this moment we have a comment here that said people have been saying that meta is not winning for years but the numbers keep showing up yeah the financials look good but i think right now it's pretty clear that all the ai initiatives that they're doing outside of advertising have been mounted to nothing they

have rounding zero market share right in the on the model side like the yeah yeah competing against i mean correct me if i'm wrong or whatever no i mean llama if it's still called llama is let's be honest no one uses it i think it's called muse spark actually i have i mean people use ai search when it's like embedded into instagram or whatever but it's yeah uh there any of the ai benefits are happening in the back end where people don't really see it so that's kind of why i think it's probably hard for a lot of people to get behind it is they just have to wait for the prints and i will say i mean last quarter they grew i think at impressions like high teens and price per ad high teens percentage which is pretty

astounding usually those two kind of can't remember what the shape is called but they're kind of inverted in terms of prices going up impressions kind of go down a little bit or don't grow as fast and now they're both growing mid-teens it's nice that's nice yeah i mean free cash flow is still positive what it will probably change this year i think free cash flow will probably go negative would be my that is something people are probably worried about and again the market isn't trailing it's forward looking what is the next five years going to look like for meta family of apps is rock solid but we're worried about them increasing ai capex to nowhere and that's what the market's worried about we've talked about this maybe it's at

fair value now but why was it at 30 times earnings earlier when there's when alphabet was at 20 it makes much more sense given the current state of the ai race for alphabet to be at 30 of them to be at 18 yeah people forget reality labs still a thing that is still going on uh and it's still hemorrhaging money let's shift gears to nowhere yeah yeah you research your investments you analyze markets you manage risk but did you research your broker for the past three years ibkr individual clients averaged an annual return of 24.3 percent compared to 23.1 percent on the s&p 500 ibkr's lower trading cost competitive rates efficient execution and access to more than 170. Global markets helped investors keep more of what they earn and put more capital to

work. Over time, the broker you choose matters. Interactive Brokers member SIPC. If you care about performance, find out why the best informed investors choose Interactive Brokers at ibkr.com slash performance. Do we want to talk trouble in fintech paradise or should we stick with the berkshire thing well they bought a home builder yeah let's hit this quick maybe home builders are a buy i kind of i kind of like some of these players here it could be a nice upcycle theme for the housing market um i guess i'm reading your notes here ryan but who's done it less than 10 times earnings maybe trough earnings only six and a half billion dollars what was the company here taylor morrison yeah pretty good yeah taylor morrison i think they're

a little more on the premium side in terms of like who audience that they cater to I guess yeah so Berkshire is acquiring Taylor Morrison for 6.8 billion dollars all cash transaction is also there's some

debt on there so transactions valued at about eight and a half billion that's going to come out to an EV to EBIT of under 10 just under 10 so they are buying a leading home builder not one of the largest but still a leading home builder at less than 10

times earnings and you could argue potentially trough earnings because earnings have come down for those that haven't don't follow the home builder space pretty much all of them over earned during covid when interest rates plummeted and now they've come back down to earth transactions have declined by quite a bit so that's actually benefited them to some degree where when rates spiked no one was really no one was really moving out of their house because then they got to go out and find another home so a lot of the inventory was new builds so companies like taylor morrison kind of benefited but at the same time you've got you know rising rates impacts affordability the thing i like here and this has kind of been the thesis for a while i guess but

But I think homebuilders are very different businesses than they used to be. I mean if you look at the market today, it's not that favorable of a market to be a builder and they're all earning. They're all still fairly profitable because they've moved – most of them have moved to this land light model. Taylor Morrison is one of them where they're optioning the land. They're not buying it outright. So a bigger chunk of their land on the balance sheet, quote, is just options, which they can forfeit if they're not able to get buyers. So I've got a chart here. The gross profit per home sold prior to the pandemic was about $70,000 in gross profit for each home they sold.

It got up to $220,000 during sort of the peak. but it's now today there's for every home they're selling they're generating about 160 000 in gross profit which is double what they were earning pre-covid i think this is sort of a fundamentally different business and berkshire has other uh i guess layers of the real estate market here they've got i think title services berkshire hathaway realtors as well so they i guess can own the full stack so to speak sure vertically integrated i think this definitely works out and especially for them where they can absorb through the cycle they don't need to worry about oh do we have liquidity we have to take out debt to get through this working capital cycle

berkshire doesn't have to worry about that and they can just keep doing what they're doing it'll probably pump out cash uh over the next 10 years that's well above its current market cap that's kind of how they are able to look at it and yeah it was one of this it's one of those where looking at it now you go oh yeah this is an obvious 10 times trough earning hiding in plain sight the question is do you have any interest in the other home builders i i just don't because i don't see them as a permanent holding for me but i know that stocks like nbr and dr horton have done fantastic over the long term yeah i would be okay with it if like i wouldn't i actually recently sold dr horton not for any reason specifically to dr horton but i just opportunity

thought there are better opportunities in my portfolio so if everything else in my portfolio is kind of getting stretched or seeing bigger valuations than than i see currently and dr horton stayed the same i'd be interested but yeah there's there's other businesses that i like speaking of maybe some of these would qualify trouble in fintech paradise mastercard uh it might have moved up today as we're talking but they are basically trading near their lowest multiple in almost a decade it's it is their lowest multiple since the pandemic I could – an EV to EBIT of 21 times. Visa has fared a little bit better, but even Visa I think is trading at an EV to EBIT below their historical average, kind of around 23 times, so a slight premium to MasterCard.

American Express, which I know is a stock you like or own. I don't own it. You don't own it. Watchlist. Watchlist. Never owned it. What do you call it? Psychological long.

Psychological long. Yeah. Forward PE of just under 17 times. And then Adyen is trading at its lowest multiple ever. Forward PE just under 21, which Adyen has traded at kind of ludicrous multiples for a long time. Adyen I do own, full disclosure. Nice. It's a tiny position for me, but yes, I'm a shareholder as well.

Well, it hasn't been nice the last month or so. I'm speaking into existence here, Brett. Sure. All of these companies, I mean, American Express has kind of had its troubles. But all of these are probably considered high-quality businesses by most. And I think especially when you talk about the payments processors, Visa and MasterCard, I guess American Express too, but kind of different audience. i i don't see how these generate bad returns like i there's no world for me where these businesses generate negative returns over five years unless it's just pure multiple compression but it seems

super unlikely to me what are we at pe for mastercard says 28 i think you get a multiple compression there's cash in that right ev ebit is i think the middle use there okay okay i'm trying to i was trying to figure out while you were talking and i was using the good old powered by morningstar bulls and bears bullet points on fiscal ai those are lovely to get a little nice introductory introduction to a stock uh i should say use our discount link fiscal.ai slash chit chat get 15 off any paid plan here are the three bullet points mastercard is a distant number two in a scalable industry i don't like that one new payment options such as stable coins could steal volumes from mastercard is it is the stable coin narrative back

i don't think so like people talk about it but there's no world where they're really still like i remember i saw a figure it was like stable coin volumes are up to like 70 million or something like that uh it's like okay the american express master brand visa processed 30 trillion dollars a year it's crumbs like there it just isn't happening i felt like that was the narrative two years ago i would have thought that died down by now i agree uh yeah i'm trying to get But any sort of reason here, like I guess Berkshire left, Berkshire exited these stocks. Maybe that – but those are probably Todd or – yeah, Todd investments. I don't know.

Yeah, the one – I mean maybe the concern is that there have been big institutional sales. Ockrey Capital Management has kind of trimmed both Visa and MasterCard. They've been longtime shareholders. There's Berkshire sold, but yeah, those were notable Todd Combs investments from back in the day, and he's kind of out of the picture now. So it doesn't surprise me that they would sell his positions down. I just think these both work out. You're not going to get astounding returns, but I think you get good returns from here over the next five years or so. You're saying Visa and MasterCard.

Yeah. Yeah. Question for you. You got to pick one today to add to your portfolio as a core holding. MasterCard Visa, American Express, or Adyen? Well, it's the one that's already a core holding, Adyen. I think that one, it's pretty much the same earnings multiple as American Express, give or take. We're fairly close here. I mean, it looks like MasterCard and Visa are actually a little bit more elevated here. And they're the one with a clear path of 20% revenue growth over the next decade. Visa and MasterCard and American Express don't have that. I think that's the answer for me. Yeah, I'd probably be there too.

Maybe American Express, honestly, would be sort of my second, but I would be comfortable owning all of these. Let's shift gears. I want to, before we hit another topic, really quick i don't know if you saw this news bill ackman placed a bid to acquire all of universal music group the bid was rejected and he sold his entire stake it got me thinking this unrelated whatever he's a big uber shareholder i had a little anecdotal evidence for you that i thought you might like recently took an uber ride uber driver was uh a guy and he as soon as i got in he's like how much did uber charge you for this ride i don't know i've had this one yeah the uber executives are listening i'll be i'm not gonna say his name but he's like i was like i don't know

like 42 bucks or whatever he's like whoa he's like if you cancel that right now i'll give it to you for 25 or whatever and you just go now i don't think that would work for like female riders necessarily because they're safety concerns but i took them up on it and i i honestly do think we'll see what kind of a dent it can make oh i think that's a one-off that's like the airbnb house or i know i know that specifically is not driving it it's not gonna have any impact But there is a growing aversion, I think, to Uber's fees at the moment, and we're seeing it with that company, like you mentioned, in New York, who's basically trying to be the anti-Uber. Empower. They're empowering the drivers. Maybe this does start to become a headwind.

There's growing alternatives in Austin here. um it's it would take time i imagine for anything material to happen but i think they've kind of invited more competition yeah it's it's the age-old question where if you flex your pricing power the more you widen your fees uh for example software providers that we've talked about before autodesk adobe what have you the more you flex your pricing power the wider your operating margin the wider your moat needs to be that's kind of the rule of thumb i use where uber's flexing their pricing power here and could people leave if they want now this is the big test yeah and there is there an improvement in the service no there's been zero improvement in the

service obviously it may be the network density has improved so you're not waiting as long for right that's that's a benefit but i'd say in general the service has declined dirty cars yeah uh talking on in a foreign language the whole time it does best yeah i've had some weird uber rides myself let's uh let's shift gears do we want to take any audience questions from the chat that we had sure well what about celsius apparently uh and thank you for the question here sandeep thoughts on the celsius stock price drop today due to the investigation being opened by the doj on marketing to teens well energy drinks getting marketed to teens that's gotta be a nothing burger but i was pretty disappointed in the core celsius growth uh when looking at

their revenue last quarter stocks back down to 28 a share it's gone on what do we call this the the mountain over the last year it's gone up and down uh the stock was at i think 25 early 2025 they acquired alani new alani news growing quickly but their international expansion's not that great it's still tiny energy drinks are still competitive uh maybe we can look at the valuation i mean specifically on marketing routines that's nothing like i don't see it feels like there should be um so i've got the gutter pulled up here on june 4th 2026 reports emerged that celsius is facing an investigation by the texas attorney general the inquiry centers on the company's marketing of its high caffeine energy drinks this regulatory development

marks a new challenge for the company as it continues to navigate its growth and market An unrelated news monster has donated $5 million to the campaign to reelect the senator. Now, that's the only explanation here, right? I mean, who cares, right? It's caffeine. It's not like drugs. I mean, I guess caffeine is an addictive substance, but it's like, is it really hurting anyone? I feel like there's some other things we could go after here.

Stocks below five times gross profit. Looking at our friends at Fiscal AI here. We have our friends, Capital Mindset, in the chat says, Guys, I think what is going to have a continued impact or something to look into is Bloom Energy, which is the drink. I know there's actually Bloom Energy, the company, too. There's more competitors popping up. And it's hard to get a grasp.

What is Celsius and Alana News Market Share going to be 10 years from now, five years from now? I have less confidence. Hard to say. I – yeah, I live in Austin, which seems to be like the center of a lot of these energy drink companies. Bloom Energy is headquartered here. That tracks. C4 as well.

It feels – I mean maybe it's because I live here. It feels super competitive. Like Ghost. I mean you name it. Rain. Ghost. Now, a lot of these are under similar umbrellas. they've all got some influencer at the as either a brand ambassador or some sort of

involvement and it just feels like the barriers to launching one continue to come down now there's probably scale advantages in the distribution we've talked about this celsius being able to latch on to pepsi's distribution networks nice but it just i have I'm having a hard time imagining that Monster and Celsius and their – whatever, their constituent brands have higher market share in five years. It seems unlikely. Yeah. In the US. That's a fair point.

Yeah, sure, sure. I think it's a good business. The unit economics and energy drinks are good, but it's not a great business like when it was the Red Bull Monster duopoly. or close to a duopoly i don't think it's the same all right we have another question here thoughts on the wise money laundering probe ryan did you look into this i did not uh probably should have i'll pull it up right now i'm sure it's just they're under investigation like yeah i mean criminals are maybe using their platform it happens you gotta have know your customer roles Because until you're able to have an outcome from this, there's not much I think to digest from an investor's perspective because if it's an investigation, that's all it is at the moment.

It says, yeah, Wise is facing an investigation in Europe related to potential criminal usage of its services. Kind of the cash app situation here it sounds like is what's being investigated. In response to reports of the investigation, the company stated that it is cooperating with the Brussels prosecutor's office. So to be clear, it's not wise money laundering, but wise being used as a vessel for money laundering is the concern here. It happens with banking institutions from time to time. If you make a mistake, you pay a fine, you move on. I don't think it's going to ruin the business. It's not like they're – yeah, they're not laundering money.

It seems like they're pretty unhappy. they released a press release that a belgian newspaper published allegations we take these allegations and our responsibility to prevent and commit financial crime including money laundering and fraud extremely seriously yeah who knows we'll see what happens um but this this shouldn't be unsurprising i guess maybe europe they just they get into a whole they get into knots over regulation so nothing to add now here's shortly after bailey gifford reduces holding in wise group now like it's tiny fraction that they sold off but it would it would be just the most european thing some of the european asset managers care we honestly i i'm sorry if you're european

listen to this and disagree they seem to care way too much about uh some of the esg related it's all fake yeah yeah i mean they're paying hundreds of millions to msci for these esg business that it's like i mean you could just msci could be fudging a lot of those numbers frankly anyway uh okay there were some other questions from the substack chat maybe we can hit some of these someone asked about s&p global and msci i think this is kind of an interesting one i actually have some thoughts here and it's financial data space has kind of been sold off as well along with probably unrelated to the fintech but it's your fault ryan fiscal ai is growing too quickly too many people are signing up with our link they uh it's we've been like shadow mentioned in some of

these analyst reports honestly which is fist pump yeah yeah that's part of me's rooting but i i would actually i like mci and i like s&p global because like i think the important thing to distinguish here is what are the companies actually selling so in the case of fact set for example they're selling a research terminal which is primarily public data so it's used for fundamental analysis that to me is at risk because a lot of on the data aggregation side that's where the ai threat is so uh new companies like fiscal ai have been able to automate some of the data aggregation processes and build out databases that mirror some of the fundamental coverage of an smp global uh uh fact set msci is a little different but you look at smp global's business

only a small chunk of the earnings actually comes from distributing like cap iq seats or cap iq data licenses a lot of it comes from ratings which i don't see any disruptions to the ratings business to be clear like why do you go to s&p or moody's for a rating you go there for the stamp of credibility so that investors will buy it that's not going to change the msci with the indices it's the same right you want the stamp of credibility that it's an msci index if you're an etf issuer you want to track the right index which is msci usually for certain global markets i think those businesses will not be impacted so smp global moody's msci i think there's honestly a chance to pick up really high quality businesses with low low variable costs

at potentially reasonable multiples. I haven't checked it in a little bit, but... Let me pull it up right now. EV, what is this, MSCI? EV to EBITDA 25. Not the best. What about S&P? S&P, maybe it's cheaper?

All right, let's load that one up. And for a little, not tease, pitch, Ryan did an episode on MSCI two weeks ago. So if you want full details on the whole business, go listen to that should be right there in your feeds s&p global ev to ebitda 17 and a half a little better three-year revenue growth eight percent 10-year revenue growth 11 percent can they just grow in perpetuity there's the famous maybe it's maybe it's famous to me but i forget i think chris hone was on the that norwegian sovereign wealth fund podcast and

And they asked how – what Moody's revenue growth rate was over the last century, and it's like 8%. So you go 11% over the last 10 years. Can they continue that? It's such a mature business forever. Possibly. They've done it for a century. Yeah. I mean it would take a massive disruption in Moody's credibility, which to be clear, they got through the GFC.

So that didn't seem to impact them. With S&P, I mean, yeah, I think they can continue to raise prices on the ratings business and some of their other proprietary data feeds. The other part, I mean, the costs to serve a new client are extremely low. I mean, margins should go up over time. They're also divesting their – what's it called? Carfax business. So they've got an automotive – They own Carfax?

They own Showman to Carfax? They have an automotive data segment and I believe Carfax makes up the majority of it and they're divesting it, which could look – honestly, it's a burden to profitability. So profit margins will go up once it's deconsolidated. That's nice. all right i have i know you fundamental analysis all that good stuff i have a take on the you mentioned the ratings indices ratings businesses out of Freudian slip there yeah you mentioned them in the gfc the housing bubble what are your odds one through ten or what are your thoughts on the indices being the ratings agencies of the ai bubble because they're just flooding everything

and they're going to ruin the index fund business by stuffing spacex i even had a lot of friends that aren't even in not a lot a couple that aren't even in the investing world worried about this that spacex is going to get stuffed into their index fund brand risk that's all so yeah the one that concerns me is nasdaq because it feels like they're maybe doing this so that they can also get the exchange i feel like maybe exchanges and indices should not be under the same umbrella honestly yeah fair point fair point it presents incentives for malpractice uh so i would be nasdaq concerns me msci it's kind of unless they've no new york stock exchange yeah yeah i guess they're competing on the on the index side i don't see yeah i don't think msci

It would be too impacted since the bulk of their revenue comes from like Europe and Asia indices. But it does feel like a cash grab. And if you're the index provider, like if you are the S&P 500, I don't think anyone is really batting an eye at anything you've included. because i mean they included some crappy companies that no one has cared about because we're trying to been washed out by big tech like big tech takes over now this will be i think more of a challenge i've seen that uh some of the investment banks are lining up to help people short spacex as soon as it comes out i think that was jeffries and they were the one that was not included in the the ipo route the only one yeah maybe we could talk about this uh at this point

it was going to be in bubble watch but you might as well get to it in the episode this is a headline uh that really helped at the molly fool i will say thank you goldman sachs for this one this is from walter bloomberg uh i think reported by navy reuters uh sorry reuters i think it was you goldman sachs sees spacex ai revenue exploding to 322 billion dollars by 2030 it was 3.2 billion dollars in 2025 i have no words andrew left might go to prison for saying he was short something and then covering yeah this is prison this this is they should they should be okay that's a lie well if andrew lives in prison everyone should be in prison this is ridiculous

it's yeah sometimes i feel like it's just whoever can say the biggest number with some of these analysts or banks this is ridiculous how as goldman do you like with any sleep at night they don't it's fine yeah they make millions they're gonna get i think like the fees on this the raising oh 75 so i think you can get 750 million dollars in fees then say the biggest number yeah that's a good margin 20 30 that's a ridiculous time frame but uh revenue don't say but revenue will explode for xai how much does it cost to create that revenue that's a completely different question like and does anthropic get rid of the contract in 2027

we will see yeah if you're just whoever can give you the cheapest compute like if you're anthropic or open ai and xai comes in and underbids to offer you compute for whatever generic workloads you're probably going to take whoever provides the it's got to be xai and oracle like battling it out to give you the cheapest quote maybe it does lead to revenue growth but this is just going to destroy margins you almost if you are a spacex shareholder that should concern you a little bit. The division you want growing revenue at the moment is not XAI. That's probably the least profitable division. 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. 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. When you're a mid-sized business, you need every competitive advantage you can get. Like an AI solution that works for you, not against you. SAP Grow is built with AI embedded at its core, working across every system. And it's ready to go from day one, so you can hit the ground running bring it with sap grow ai cloud erp for any size business couldn't have said it better myself okay should we do a small cap of the week

we have a list of recommendation here from black rock or for black rock coffee bar i believe it was i think it's an anonymous name kenneth in the substack chat uh either way thank you for the recommendation. I didn't, as I've mixed up the time zone, I didn't get any notes on this one, but I think it'll be fun to look at. First off, the name, tough. All right. BlackRock, like it's not well-liked. I know it's really stupid, those conspiracy theories, but it's the truth. You don't want to be associated with BlackRock. Let's pull up their investor relations page. It says our mission to fuel people forward. one connection one moment one cup at a time that's nice there we go uh they do drive-through

coffee bars offering premium caffeinated beverages and an elevated in-store experience crafted by our engaging baristas it was started wow just like dutch pros beaverton or beaverton oregon 2008 it was a single 160 square foot coffee bar they now have 158 locations spanning seven states as of june 30th 2025 from the pacific northwest to texas i was hoping to be a little like when they had bar in the name i was hoping it would be more like those european bistros where you do coffee and then you know an actual bar serving alcohol that would be nice but i guess i'm a little concerned on differentiation here uh let's look at the numbers i guess the sales multiple is not bad. EBITDA sales at 2.8. Price to free cash flow is negative. PE is like 400,

so they're at close to break even. Maybe we can look at a gross profit figure. I think they just went public. It's grown at 33%, $62 million in last 12-month gross profit and the market cap. Just for some context here, $141 million. what do you think i i i was hoping for a little bit of differentiation from like the dutch bros concept it's more elevated it's not for kids here but it looks like this mirrors more of a starbucks in terms of like layout yeah walk-in plus uh old school starbucks a little more drive-thru heavy though yeah dutch pro is more like an espresso stand almost it's only drive through i believe the i worry a bit about differentiation as well 62 million dollars

in gross profit versus an enterprise value today of just under 600 million it's not super cheap maybe there's something that makes them stand out i have seen these there's a couple around my area but i've never gone in i think you gotta go potentially yeah i don't i feel like coffee's pretty crowded uh it's i mean there's endless espresso stands and endless chains as well so i my new rule of no never invest in restaurants i'm gonna go with it yeah here's the thing small business like if you if i were to pick a small business or whatever to run an espresso stand seems like the economics would be really good like your inputs are not that expensive takes a couple baristas machinery there's probably biggest

cost is depreciation on the equipment and you can sell it for five bucks a cup or whatever yeah but low overhead yeah low you know uh footprint needed as well so yeah there's not much cost but that's why there's a million of them there's a lot yeah yep there's so many out there i don't know if i'm i'm in love with it let's keep going lululemon earnings should we talk about this Sure. My other rule that has served me well in the last few years, lessons learned the wrong way, although I have owned Crocs in the past, never invest in apparel. As I'm looking right now, stock is down to 111 after hours. Do we get China retail for free at this point? Are you in the China business for free? Buying China at this point, that seems to be the growth vector.

China now accounts, I think three years ago, China accounted for 7% of sales. Today it accounts for 21%. For context, I believe the United States accounts for just over 50%. So it's almost half, not quite, but almost half of the US business. Revenue in total was up 4%. Comp sales increased 1%. That was driven almost entirely by China and international. So comp sales have been negative in the United States for some time.

Did they give a bad guide or something? This feels like what they've been doing. I think the concern is the demise of basically their American brand. Revenue feels like it's peaked in the US. I don't know if this was what their US guidance specifically was. They repurchased 358 million worth of shares. The other part that happened, there was sort of a proxy battle, I think. The founder came back and wanted to take over or wanted to hire someone else and the board just ignored him.

And I think a lot of people got this like sided with the Lululemon founder because – He's kooky, but in this situation – He's a little crazy. I want to be – like people want the old Lululemon brand and they think like we need to get the founder back. The guy is a little crazy. Yeah, it took crazy maybe to get there, but yeah, look at what he said about his Asian customers. It's not the nicest thing. Yeah, which is going to be a bit of a challenge seeing that China is the biggest growth market at the moment.

Yeah, I'm sure no one in China knows about this, but compared to the management over the last five years, they seem to be – it reminds me of the match group management that would just do nothing and never update any of their products, kind of just ride in the tailwinds, and then eventually your brand gets stale. yeah it is it's kind of interesting because if you have so much success in such a niche market which was like athleisure focused on people in that you know do yoga people that are going to the gym they expand don't beat around the bush ryan no i know what you're getting at what's what's the next logical thing you do you want to expand the tam and make it inclusive for everybody well that ruins the brand for other for kind of your core customers in a way because it's no longer seen as this like yeah like a premium exclusive good looking yeah yeah so i get sort of the the fallacy of of like feeling like you have to go after every customer but

and it probably led to growth for some time but yeah it does risk ruining the brand long term Guess what stock is up? Well, I might be on the wrong exchange here. It all auto-populates to the market you're in, so it'll put on the Brazilian one. Guess what stock's up? Let's try to work Yahoo Finance here and see what they can do. Okay.

It went from, over the last year, it looks like 20 to 80. Guess what retailer or apparel brand? I already know it. Victoria's Secret. Yeah, 40% this week? oh maybe that lululemon went a certain route inclusivity victoria's secret went a different route it's hard you hate to say it but that's what kind of leads to success in that world didn't victoria's secret change their ticker to vsxy yeah that's the bull market but

do what you want i still think never invest in apparel yes chris in a comment says never invest in apparel everyone take a drink yes it's like maybe i'll just start shorting uh i mean well you get into like a victoria's secret situation where that's fair brands have bizarre revivals Can you guess how much Lululemon has reduced share count over the last year? 9%. About half. About 5%. I would have hoped for more.

Yeah. Did you know that we now have a Nebius guy? 100% Nebius. Do you know about this meme of people going 100% into a stock? I won't say who it is. That's a sad meme. I'm not familiar with that meme, no. You know that there was a 100% Google guy.

There was a 100% – We had him on our podcast a long time ago. Remember? He was like 120% Google. There's been other ones. I think maybe Adobe. It's hard to remember. Twitter is a mess.

But there's a guy. I guess I won't say his name, posted this on Twitter slash X, so he's good with the whole world learning about this. It says, I have four investing accounts, individual, Roth, public account, 401K. I am now 100% nebulous in my individual taxable. As of $245 a share this morning, over the next 24 to 48 months, there's nothing else I'd rather own. This is like the European core weave.

and it feels so frothy right now look i would never do this with my own money but if you don't have life like if you don't have a life-changing amount in your accounts and you just really want to go for it i see what entices people to do this kind of thing the downside is extreme it's literally lose all your money but if you don't think that money will be meaningful to you in 10 years anyways, whatever. Yeah, it's fair. Well, the stock over the last five years is up 1200%. Last year, 600. Those are usually bad indicators for forward returns. Oh, look, I write like updates, all sorts of articles tracking all these, like how much the stock's been up in the past year for the motley fool there is quite a few stocks almost all of them

unprofitable up 300 400 a thousand percent in the last year makes me nervous i've said this for like five straight weeks but it makes me nervous bubble watch is getting from watching the bubble to getting extremely nervous about it yeah it is uh it's weird how many of those companies seem to be popping up a thousand percent out of nowhere i'm going to take a couple questions from the chat and just mention them as we're running up on time here we had a comment that said i know alcohol stocks are in a general downtrend but any thoughts on diageo as a turnaround play the new ceo drastic dave as he's known which got a great name great nickname does that give you more more confidence bring him in with dives are tough the first sentence i was like no interest but the name

drastic dave that that reeled me back in he has done a board reshuffle signal the pivot to offer more ready-made drinks strip out the non-profitable assets still a strong demand in africa and south america could be interesting so stripping out the or getting more into ready-made drinks all right i was also preparing put up or brought up the brand list at diageo i'm gonna read these off for you not not all of them but the main ones and see whether and collectively you think good or bad sorok smirnoff kettle one gordon's tango ray captain morgan uh johnny walker they also got a lot of different scotch brands yeah a lot of scotch a lot of scotch uh bullet crown royal don julio casamigos baileys guinness smithwicks and then guinness 0.0 that's those are pretty

good brands in alcohol but there's so many alcohol brands it's hard to say yeah and the i kind of have a hard time with alcohol brands right now the only one that i liked for a little bit i never even owned shares with constellation brands just because they had the tailwind of latin americans and uh moving to the u.s yeah but even then they're seeing beer volumes decline my revenues flat over the last five years it's actually down probably five percent or so over the last five years i really do think glp ones are going to be a headwind to alcohol companies for a while i think yeah i get that i get that diageo though maybe we're at the point where it's getting priced in and they're gonna i think the alcohol brands especially i mean you look at

these guinness you know as beer but the rest of them if they are selling into a bar and their bottle goes from it because it's not their fault that the bars charge 20 bucks at richer cities in the United States for a cocktail. I mean, that's the bar's margin. That's their choice. But if they're selling 40 bucks or maybe a discounted with a large batch, 30 bucks, and that goes to 40, $50 over a couple of decades, I feel like no one's going to bat an eye. And you're at EBIT of 11, PE of 18. I think if I was forced to either go long or short, I'd go long Diageo. I think you do a fine owning this but i i don't love it like i i like it but uh i don't love it here the uh there's distilleries breweries these things are expensive to run so if you start

losing volume you start losing some of your production efficiency because there's not as much demand it really starts to work against you on margins like let's see if they have any volume KPIs EV to free cash flow still 27 I think that's probably off because of the inventory EV to EBIT

does 11 I know but there's a lot of maintenance capex at a massive distillery that's fair maybe EV to EBIT what do we got I was trying to pull up a volume number but I don't have it 16 EV to EBIT says the last 12 months 16

would I rather own american express out of 4p of 16 or diageo at trailing 16 i think i'd take american express that's a good point that's a good point um yeah rad you're at 20. yeah how many english companies do you own like british yeah none i don't think i've ever this could be your first yeah no no i this is far from the top 10 of my watch list but if i was forced to go long or short i think i would go long all right i think hey as a segue we're going long here ryan do you have anything else before we get out of here no i think it's well someone asked in the chat i just want to respond said and this was the sub stack chat

again totally free go check it out i'm trying to get more active there says insurance slash brokers are all beaten up copart as well any interest uh i don't have maybe brett's got some on oscar health but i don't follow the other ones too well yeah that's the only one i know oscar is doing well one of my best performers this year but besides that yeah tons of volatility outside of anything that's ai trade feels like just a lot of falling knives that if you want to take the risk goes down another 20 30 percent feels like there's some very interesting opportunities out there at the moment. All right. That is going to do it. Thank you, everyone, for tuning in. Thank you for all the comments and questions in the chat live. We want to remind listeners that

Brett and I are not financial advisors. Anything we say or discuss here on Chit Chat Stocks is not formal advice or a recommendation. We may buy, sell, or hold any of the securities discussed in this podcast. Thank you again for tuning in. We'll see you all next time. Thank you.