Chit Chat Stocks - Chemed (Ticker: CHE) with Chadd Garcia

Episode Date: June 8, 2023

Chemed Corporation (CHE) is a diversified company offering hospice and palliative care services through VITAS Healthcare, as well as plumbing and drain cleaning services under the Roto-Rooter brand. Listen as Brett and Ryan ask questions about the company, its business model, and valuation. Enjoy the show! ***************************** Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney  Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Interested to see more of Chadd's work? Check out their Twitter here: https://twitter.com/SWFLWildcats Contact us: [e-mail] Timestamps Chemed | (2:14) Franchise vs. Corporate | (14:01) Management | (33:14) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is our Thursday deep dive episode where we interview an investor or another analyst to discuss a single stock or industry. And today we are talking about ChemEd. It's a little bit of a misleading name. They are the parent company of Roto-Rooter, which might be a brand people are more familiar with, and Vytos, which is maybe a less known brand, but an intriguing business on its own. And we're talking with Chad Garcia. Chad is the portfolio manager of the Ave Maria Focus Fund. We've had Chad on twice now, and I really like his investment approach, his style. He looks for true compounders, and usually it's companies that are, I'd say, overlooked or kind of lesser known. And those tend to be, I think, a lot of the

investments that do the best. So I think you'll enjoy this one. The company is called ChemEd. But without further ado, here's our interview with Chad Garcia. Welcome to Chit Chat Money. On this show, host Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode.

All right. Welcome in. Today, we are joined by now second time guest, Chad Garcia. Chad is the portfolio manager of the Ave Maria Focused Fund. Last time he was on, we talked about eDreams. So feel free to go check that out if you want to hear more of him. But we're talking about probably a company most people haven't heard of today. I certainly hadn't heard of it until you kind of brought it up. And the name I think can be maybe a little misleading, but it's called ChemEd. So I guess before we get into the business, how did you come across this to begin with? I think I would see it on Twitter occasionally, a couple of posts here and there. I mean, certainly not too often, but somebody mentioned ChemEd and one of their two

underlying businesses, which is Roto-Rooter, which is a brand name that's well-known to everybody. And, you know, I think when I when I would see it, I would I would look at it and I would glance at the financials really quickly and do a cursory look and and think it's a little bit expensive, you know, interesting, but but but expensive. But, you know, as often the trick with quality compounders is just getting on the train and never getting off. But the disruption that happened when COVID was first starting gave a little reprieve in the stock price. And as it went down early February of 2020, it gave me the opportunity to do a hard look at it. And I did a hard look and liked it. We launched the Auburn Maria Focus Fund in May of 2020, and it was still trading at an attractive level. So it was one of the first inclusions in the fund.

Oh, okay. So you've owned it for a couple of years then. I guess, can you, you mentioned Roto-Rooter. Can you provide some, maybe some history behind the business? How did they go from kind of this seems like unrelated name to being an owner of two separate businesses? Basically, how did they come to be who they are today? Well, looking back at their history, it was a spin-out of W.R. Grace, the chemical conglomerate.

And when it was first spun out in the early 1970s, it had two businesses. One was a specialty chemicals business, and the other business was a healthcare business that became Omnicare, which was a pharmacy that was sold to, I believe, CVS maybe six or seven years ago. and grace kept their ownership in this in the spin out or held a lot of a lot of the stock and then they ultimately sold it and in 1980 1980 the company started getting very active um they ended up buying roto-rooter in 80 in 81 they spun it out omnicare so that left them with Roto-Rooter and their flagship business, which is the chemicals business. They operated those into the 90s. They got busy again in the 90s. Somebody came along and offered

them a price that was too good to pass up for their specialty chemicals businesses. So they ended up selling the specialty chemicals business. Around the same time, a private equity firm came to them as they needed a deal financed. And so they ended up buying 20% of VITAS, which is the leading hospice services provider in the country. And so they financed that deal through a convertible preferred, which gave them about 20% of the business. Fast forward another decade, the private equity sponsor came to the company and said, hey, get ready. We're going to sell this business. And so you're going to get a check soon. The company said, well, what's your sale price? And they were told the sale price. And the company

said, well, we're not sellers at that price. We're buyers. And so they ended up buying the 80% of VITAS that was outstanding for $431 million. So a long history of very large kind of transformative transactions so yeah and that leads us to where we are today uh we we do want to talk about later i know a lot of people like kemed because of their um capital allocation skills the you mentioned in the and your write-up on them which we'll link in the show notes that you want to include them in the next edition of the outsiders but first let's talk about the two business segments they have today first is roto-rooter for anyone that doesn't know because i'm sure a lot of people like us we've heard the name before what services

does rotor router provide and who are their main competitors well let's talk about the history of rotor router real quick because this is relevant to kind of how the business is set up today rotor router was founded in 1935 by a gentleman named samuel blanc and he created a machine to to clean drains and so what he what he did was he attached a cable that had some blades on it to a maytag washing machine motor and that allowed somebody to clean their drains without having to dig up and replace the pipes which was the practice prior to the invention of this machine and so he in order to sell this machine he created what he called you know franchises, which is one of the first franchised business in the country.

And he basically gave people the right to operate within a territory for a fee that was predicated upon the population base of that territory. And then presumably they would buy these machines from him. And fast forward to today, ChemEd is the leader in emergency essential plumbing services. So think drain cleaning, or if you need a toilet fix, or if you have a major leak that you need fixed, you call them. You don't call them when you want a faucet installed or a shower installed. So it's not it's not. The results are kind of predicated on building, building new houses or household formations were predicated upon just standard use and emergency services. Their competitors would be, for the most part, local plumbers or regional plumbers. There's not too many national competitors.

They have about a 15% market share in drain cleaning services and 2% to 3% market share in same-day service for emergency plumbing services. A couple of follow-ups. So, first of all, is that how the royalty – I think royalty is the right term – the royalty fees still get paid? Is it just based on that population of various territories? Well, they have three different types of businesses within Roto-Rooter. So they have the legacy franchisees, and they're really not like a franchisee that you would think that, you know, compared to like a McDonald's. They're more just they have the right to operate in an area. They receive no support from Roto-Rooter.

they benefit from the name and for that they pay a fee that's based on population just as it was set up in the in the 1930s. This type of business is operated by usually like a mom and a mom-and-pop so you have a husband who's a master plumber he he'll have some some plumbers that work underneath them the wife typically operates a call center and then does some of the back office functions and then you know they do their business and they pay a fee to Rotorooter. There's about 369 of those So, Roto-Rooter overall has around 500 territories. In those territories, if it's a large territory, Roto-Rooter will operate those territories themselves. If it's a small territory that they control, that they've bought back from their franchisees,

they may set up an independent contractor who, like the franchisees, may be a husband and wife team, And then they would operate in that territory. They would receive support from corporate and pay a 28% royalty to commit. What is the incentive, I guess, from corporate to operate those large territories themselves? Is it basically just like they think the economics would be better if they're doing it on their own as opposed to maybe those smaller territories are higher risk? Is that why they kind of avoid those? i think there's been it's a scale if you're if you're operating in a large market so like chicago is one that they would that they would operate and so having a corporate structure in such a large market makes sense whereas bringing like a corporate overhead structure to a rural market probably doesn't make sense um the they'll in a market where they have an independent contractor set up they control the territory and if the independent contractor

is not doing a good job, then they can find a new one. But the independent contractor in those territories, they have their plumbing business and they can sell that business. They just can't sell the territory. And you can see people get rich that are set up by Roto-Rooter operating plumbing businesses in smaller markets. Has Roto-Rooter historically gained market share? What have been those trends over time? Because I I know you mentioned the 15%. Is there a path for them to getting to 30% over the next couple of decades, or has it been fairly stable over time?

Well, I would think that they're getting market share, particularly in markets where they're buying franchisees out and converting those into corporate-owned territories. So you usually see a large pickup in growth in those markets because, as I said earlier, franchisees receive minimal to no support from corporate. And corporate is much better at doing some critical functions, particularly with respect to marketing, than a franchisee. A lot of their marketing is digital-based and search engine optimization, and corporate's just set up to do that a lot better than a husband-wife team. I was about to ask, are there any other – I guess you mentioned that there's the competition in this space and a lot of kind of mom-and-pop shops, people trying to do it themselves as opposed to any big competitors. aside from more money to spend on marketing are there any big advantages that roto rooter has over kind of those smaller players i would say technology is probably a pretty good

um a pretty good differentiator that's harder for mom and pops to get in so you know i i tested them out when um i i had a plumbing issue i ended up fixing it myself but you know they'll if you if you call broderia they'll come out free and they'll give you an estimate and they you know and so you know they have their ipad and they type in their estimate you get an email it's very standardized and i think that's a pretty high level of customer service that you would that you would get and and follow up and feedback where they can refine their service that you're not going to see at a mom and pop plumber plumbing business what what are the differences in like the margin profiles of franchise dollars coming in versus them kind of running their own corporate

stores or locations or is it not broken out yeah no they'll they'll break it out um the the royalty from franchisees are 100 margin because they don't they don't do anything there um you can you independent contractors would be in the middle because again they're just getting a royalty now there's some expenses that are that are associated with that um and then a corporate owned would be the lowest um i tend to track acquisitions that they're doing and like how fast are they acquiring franchisees and then i just attracted the margin profile over time And so presently, the EBITDA margins for Roto-Rooter is around 30%, whereas a decade ago it was around 15%. And so you've seen them grow margins over time in a time when they are bringing franchisees in-house, which means that the mix of the margins are going down.

So you're really just seeing the benefits of scale. Yeah. You mentioned, we were kind of talking about that before the show and you mentioned that. And I think intuitively, most people would think it's going the other way as they kind of move into more of a corporate owned location base. But yeah, that's really impressive. I guess I'm blanking on my other question. Oh, on the purchasing franchisees, you mentioned that they've done two big deals as of late. Do you expect them to continue, maybe not at the pace they did lately with the two big ones, but do you expect them to continue kind of eating up or acquiring some of their smaller franchisees? Well, aside from these two deals, and this is with their other business too, they've spent maybe $7 million a year on average on acquisitions. So the acquisitions tend to be very small. There were a couple of large Roto-Rooter franchisees that they purchased within the last five or six years.

I don't think there's going to be another opportunity to do large acquisitions like that going forward. So just think about, you know, maybe smaller acquisitions on a go forward basis. You know, what's interesting to look at, too, with respect to this business is just the resilience of it and their pricing power. And so when COVID hit, you know, they have residential customers as well as commercial customers. So think hospitals and restaurants, anything with, you know, lots of drainage pipes. The hospitals business got decimated because anybody who wasn't essential wasn't getting into the hospital. The restaurant business got smoked, but the home business went through the roof because obviously, you know, More people were cooking at home and, you know, using their kitchens.

So they ended up doing quite well on the Roto-Rooter business during COVID. And then if you look at post-COVID during the inflation period, their same-store sales or revenue growth has been, you know, well into the double digits. And that's a reflection of their pricing power. So a lot of that is just they're taking price to keep up with inflation. and they've taken it because they have price and power and they can do it. Is there anything that you see as a risk to Roto-Rooter's business? I mean, they've obviously been around for a long time. They seem super durable.

Is there any kind of competitive threat that could hurt them down the road? Well, I think if there's any risk, it would be in two areas. One, if the brand name got damaged. And I don't think there's going to be like a Bud Light situation where there's some brand manager who's going to go crazy. I mean, again, these ads are mostly digital marketing and search engine optimization. So it's not like you're running commercials or whatnot. A couple of commercials may be on billboards or ads on billboards, but not marketing ads. There could be a situation where within one territory, a franchisee does a bad job.

Maybe the brand name gets tarnished in that area, but that would be isolated. I don't think there's too much risk there. The bigger risk would be more of a long-term risk. The business is driven by new household formation and new business formation. So, as long as we're growing new households and new businesses are being developed, then there's going to be plenty of drains out there to get clogged. All right. That's a great overview of Roto-Rooter. We're going to transition to the second business here.

Apologies if I mispronounce it. I always do. I'm going to say Vitas. How do you say it? Vitas. Vitas. I don't know. Vitas.

We'll stick with Vitas. I think it's life in Latin. All right. That's a, that's a good name then. Let's explain, you know, the basics of the VITAS hospice and care business. What's the typical customer here? What does the business look like just from a broader overview? Right. And so I think I, in my mind, there are a few customers, but let's start. So VITAS is a, is a hospice care provider. And so what happens in hospice care? And in medicine, you have curative care, so they're trying to cure disease. In hospice care, what they do is if you have a terminal illness in your latter days, you stop doing curative care, which curative care in the final days may have minimal efficacy and could often do more harm than good.

and so the focus is is on managing pain and and the patient's comfort you know during their final days so that's that's palliative care and if you look at the customers obviously the customer would be the patient would be the primary customer that's that's you know in their final days and need of care and comfort. But the other, there's probably two other important customers. So one would be the government. 94% of palliative care is paid for by Medicare. I usually stay away from from healthcare investments, if there's a large government risk. But, you know, after looking at this, I got, I got comfortable. And the reason why is that 30% of every dollar spent in Medicare is spent in

the last year of a patient's life. Most of that is in the last six weeks of a patient's life. mostly on curative care that doesn't cure and paying for er visits for episodic episodes that somebody may go through in their in their final days and you know when i look at if you look at what's going on with this week with the fight that we're having over the debt ceiling and the strains on the federal government, and you look at the aging baby boomer population who are going to be using these services in the next decade or two in high amounts, then I would imagine that Medicare is going to get strained even more. And palliative service providers like VITAS

is a pressure release for them because it saves them money on care that is not going to cure the patient and may do more harm than good. The other customer would be some of their channels. And so the way that they get customers would be from hospitals, skilled nursing facilities, so nursing homes, and then assisted living facilities. And then after that bucket, everybody else. The government has caps on how long a person can stay within a hospice program. And this is applied to a population the population base so not on an individual program um so you have to manage your populations that their that their stay in the program is not going to be too long

additionally if the stay is too short it's it's very expensive and you can actually lose money on on a stay that's too short because it's expensive to intake a person into the program and fill out paperwork and order the necessary medications that they're going to need. So, if you don't, if you have too short of a stay, it gets expensive. Hospitals sometimes have their own hospice programs. If somebody comes from the hospital, their stays tend to be short. So, there's a little of a pressure release there that they can send some of the patients over to to VITAS, it'll alleviate some of the expenses of running their program. Skilled nursing facilities often have a, or nursing homes,

could have some conflict with regulations of recommending patients go to their own facilities. And so it's good for them to send some off to, to VITAS and then assisted living facilities, their patients tend to live longer within a hospice program. And so they may be hitting their Medicare cap and we'll need to send some patients off to, to VITAS as well. what's the rationale for like what why do they why does the government limit hospice days in hospice maybe it's a prevention to to put people into it where if they're not terminally ill okay um what are vitas like costs what are their biggest expenses their biggest expense would be skilled medical professionals. So nurses, nurses that work on the intake part of the business and

nurses that actually, you know, provide the care. And post-COVID, the healthcare industry lost 20% of their workers. And so the business still is not back to its pre-COVID levels. And the The hardest part for them was to retain the workers, which they've done a great job and they've done a better job than I would say that their competitors are doing. And they're seeing that as an opportunity right now to recruit more nurses from their competitors and grow their business. Oh, Brian, you have one? Or do you want me to go? I was just curious how COVID affected this business overall. you mentioned that the obviously coming out of it nurse or health care workers maybe didn't want to be there as much but how else was the business impacted let's let's uh 96 of this of the care

for vitas is done in a patient's home okay uh so i as you think about the cost of the business again very like there's some there's some there'll be some medics and that that's that's that's used and you know given to the patient so that's definitely COG but it's a small amount the biggest expense would be the health care workers they do have some facilities for high acute patients or sicker patients but that's maybe about one and a half percent of revenue Yeah. Another one and a half percent of revenue would be like 24 hour oversight in a home. The rest of it, 96 percent, is just kind of routine coming to a person's home, checking on them, training their family, you know, overseeing what's what's going on and then and then leaving. So, we'll talk later about the return profiles of both the businesses, but there's not much fixed expense in the business, very minimal PP&E.

Gotcha. That is quite important. We want to transition to close out kind of the last section of the episode is going to be on capital allocation and your thoughts on management and the valuation. But the final question, I think, to wrap up how these businesses work, what are the or are there, you know, durable growth prospects for these end markets and how durable or not is customer demand is? I know you mentioned it's tied a bit to the housing cycle. So I guess, you know, what do you think of the industry durability and growth prospects for both the VITAS and Roto-Rooter to close things out here on this section? Well, with Roto-Rooter, I would say that they have a long history of generating organic growth and they have a runway to acquire franchisees and they have a history of accelerating growth once they acquire a franchisee.

And so other than that, it's going to be what's the overall economy in the US and population base of the US doing. And if we have problems there, then there's going to be problems in a lot more places aside from Roto-Rooter. respect to vitas this is one that excites me the most with respect to the future because of what i mentioned earlier the budget is not the budget challenges aren't going to get any easier in the next decade or two and you have a massive population base that's going to be a user of palliative care services that are you know within that age demographic in the in the next two

decades and so there should be some massive growth there with respect to i mean if you look at how they've grown VITAS, most of it was grown organically and through greenfielding new areas as opposed to acquisitions like they've done in Roto-Rooter. They have done a couple acquisitions in the past within VITAS, but it was mostly to acquire some licenses in a certain region, and then they would just greenfield the rest of the business. If you look at their margin profile in VITAS, their margins are about 18% to 20%, call it 15 and a half, 20% EBITDA margins,

you know, make quarter to quarter and move around a little bit. Right now they're at 15% because of investments that they're making with hiring nurses to get gear up for growth. The margins of their competitors

are probably about five to 7%. So, you know, they definitely do benefit from scale. one interesting thing to to note here is that the government sets the the reimbursement rate and so the reimbursement rates would be for kind of low acuity standard care on a per day basis and then a higher rate for high acuity care on a on a per day basis and right now it's averaging they're getting paid just under $200 per person per day in the program. The government adjusts this based on a basket of various costs, but the government has been

very slow to adjust up the reimbursement rate to keep up with inflation, which is hurting the entire industry, which is why there are margins for 15% right now, as opposed to 20%. It's hurting the smaller ones even more. And, you know, KMED has been very vocal to the government saying you need to increase the rates, not just for us, but if you don't do it, what you're going to do is you're going to put smaller hospices out of business. And, you know, that's not going to be good for you because you need the hospice providers to as a pressure release for medicare expenses so you know they can complain about it or they can use it as an opportunity

and so they're using it as opportunity they've invested 40 million dollars into retention and recruitment bonuses for for vitas they've spent about 36 million of that 37 billion of that to stabilize their workforce the rest of it they're they're using to recruit um new new nurses i think they've picked up in the last year 450 new nurses their earnings their earnings that they're going to get from the from the nurses that they've hired um they told me that they would pay about 80 million bucks for that so for a single digit millions investment they they're they're getting revenue that they would pay for they're getting earnings that they would pay 80 million dollars for so that seems

like quite a nice way to return and they also noted that you know while they haven't done too much acquisitions in the past on vitas this this location um that the government is causing may allow them to go out there and buy some distressed hospice care businesses that they can later use as platforms to build off of. That's a very interesting industry backdrop. We have a lot of questions here about generally what management is going to do, what or what they're thinking about, what their strategy is. I think the best way to maybe go about this is what is your general thoughts on the management team? Well, the CEO and CFO have been in the business for decades with ChemEd. Both of them came through Omnicare. So they were

they were part of the business that was spun off in in 81 um the ceo is a lawyer by training i think he was a general counsel for a little while and he's been president and ceo of kim ed since the mid 90s and early 2000s respectively um this the cfo has been cfo since the 2000s and And, you know, it's been a while since I first spoke with them, but so I don't want to put words in our mouth, so I'll summarize it. But when I first spoke with them, they came off as having an agnostic view of both the businesses. You know, they viewed the businesses as vehicles to grow free cash flow per share. And, you know, when I asked them about dividends, you know, they gave me my preferred answer with, you know, what kind of dividend do you pay? A de minimis dividend that's growing.

And the reason why we do it is to check the two boxes for investors that care about such things. A, that you have a dividend, and B, that it grows. But it's de minimis. So if you look at their capital allocation, you know, they have a nice chart that goes back to 2007. I probably should just pull up the filings and update it for myself going back to 2003 when they had both of these two businesses. But since 2007, they've generated $2.8 billion in cash. about a third of um about three quarters of a billion went to the combined dividend payments acquisitions and capex 2.1 billion of that

were used in share repurchases in lumpy fashion. So they'll build cash. And when the share trades at a level that they think is a good deal, they'll come in and they'll come in strong and buy back shares. You mentioned that they have disposed of business or sold businesses in the past.

A friend of the show, John Rotonti, wanted us to ask this question and we were kind of messaging about it. If they were to sell one today, what do you think management would do with the cash? Well, if you look at the slides, at the end of each of the businesses, they talk about this. And they do it because they don't want the company to ever trade at a whole code discount. And so their philosophy in keeping it from trading at a whole code discount would be to over-disclose the KPIs of each business, be willing to make a transformative transaction such as spinning one off or selling it, and then finally to buy back stock. And so with, you know, if they sold off VITAS, which at this point is unclear whether having a hospice business that's independent, such as VITAS, or having it as part of another health care system like a hospital is the way to go.

If it ever looks like the hospital way is the preferred way, you know, they would sell VITAS to the hospital system. system. But if they sold off Mitas, maybe they can do something that's tangential to Roto-Rooter. There's an American League detection, which is a franchise business that seems to be complimentary, but maybe that would work. But what I would think they would do is they would look at it agnostically. They would go and find a business that they believe would help them to grow their free cash flow per share. So they would find a business that had a higher OIC. They would find a business that has a longer opportunity to grow

and a business that they can get at a reasonable price. And if they can't find that, I think that they would do a massive share repurchase. It feels like we did kind of two mini deep dives on very separate businesses. are there any synergies or like are there any benefits from having them both under one roof i don't think so but i don't think there's any disenergies in having them both under one roof it seems like it's the management teams are just competent so you know they're going to run them both well um i guess maybe last couple questions uh we've mentioned kind of the margins and the character the good characteristics of each business in terms of numbers what do you think

of the valuation today can you maybe paint or can you give some context on like the size of each one They're about equal in size with respect to the EBITDA, though VITAS isn't back to pre-COVID levels. So VITAS should start to overwhelm Roto-Rooter on the earnings front. It obviously does on a revenue front, given its margins are lower. The valuation is low force, free cash flow yield, and both these businesses have long history of mid to high single digit organic growth, and then the ability to redeploy capital at good rates of return.

When I look at the valuation, I go back to that slide that they have in their deck that has their history of share repurchases since 07. I put that in a spreadsheet and I update it every quarter so I can see it on a quarterly basis. This is probably one of the more astute management teams when it comes to repurchasing their own shares. They didn't repurchase any shares in Q1 of 23 because they did take some debt

last year when debt cost them 1%, and they bought back a lot of stock. It now costs them 6%. So why have that outstanding? So they paid back their debt, plus they're building cash because I think that they are going to gear up for some acquisitions in VITAS. But if that doesn't come, they'll repurchase shares. That's the highest average price in the quarter that they paid for stock was in Q4, which is around $519 per share. It's a little above that today. So I'd like to buy the stock personally, lower than places where management has bought it. But that said, the opportunities in VITAS are something that's new. So you may see some accelerated growth out of ITOS. So maybe don't, maybe, you know, maybe don't get too cheap if it gets, if it starts to

get near 519. Yeah. So I think what you're saying is that they're not the management teams that do the anger inducing quote of we're repurchasing shares to offset dilution. Sounds like they're on the complete opposite end of that spectrum, which is a very good thing. Let's close things out here. This has been a great overview. And we asked this question on every episode. I'm sure we and on the eDreams episode, which again, if anyone hasn't listened to that one and enjoyed this interview with Chad, go listen to that one.

It was a few months or maybe- November, yes. Six months ago now. The business is doing really well over there, but that's a whole nother episode. Let's hit the pre-mortem. Why could an investment in ChemEd with a great management team,

good business execution, great capital allocation, what do you see as the biggest risk here for this investment turning out poorly for shareholders? Well, we talked a little bit about Roto-Rooter. So I think the biggest risk there would just be general economic growth of the country, household formation and business formation.

With respect to VITAS, I think the risk there is more short, can be more short-term than long-term for them. Long-term, the government should be quite rational with respect to this business because it saves them money. So they have a very large interest in making sure that this industry does well and that VITAS does well. But in the short term, they can act irrationally, as they're doing right now,

and not taking up the reimbursement rates in line with inflation, and that's putting stress upon the industry. Okay. I think that's all the questions we have. I guess for anyone who wants to keep up with you, maybe follow along, see any more of your work, your thoughts, what are the best resources for that? Sure. Well, they can visit the firm, Ave Maria Mutual Funds at avemariafunds.com. Additionally, they can follow the funds that I'm on, which would be the Ave Maria Focus Fund, ticker A-V-E-A-X and the Avi Maria Growth Fund, A-V-E-G-X. All right. Well, we'll look through those and maybe have to have you on again for any of the other companies in there. That is going to

do it though. We should remind listeners that Brett and I are not financial advisors. Anything we say or discuss here on Chit Chat Money is not formal advice or recommendation. We are, however, general partners at Arch Capital. So clients may have positions in the securities discussed in this podcast. Thank you all for listening. Thank you, Chad, for coming on again, and we will see you all next time.