Chit Chat Stocks - Drafting Our Dream Portfolios; 6 Quality Stocks At Record Low Valuations; A Friday 8-K For The Ages

Episode Date: December 5, 2025

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (00:00) Introduction (01:48) Dream Portfolio Game (03:05) Criteria for Selecting High-Growth Companies (06:17) Drafting the Best Companies at 15x Earnings (24:17) Final Picks and Honorable Mentions (30:39) Rick's Cabaret Collapse: A Cautionary Tale (37:22) Michael Burry's Insights on Stock-Based Compensation (44:30) Quality Stocks at Record-Low Valuations (50:25) Consumer Spending Black Friday (53:25) Meta's Reality Lab Spending Cuts ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks. This is 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. Brett is now our Latin American correspondent. He is in Argentina, and maybe he can get some boots on the ground research for us there, but we've got a full slate for the show today. This is our Power Hour episode. For anyone who's unfamiliar, we do these live on Thursdays at 5 p.m. Eastern time. And we talk all things financial markets. So whatever is in the news, any audience questions, any latest AI bubble news, it seems to be a recurring theme recently. We talk about it all. It's live on YouTube, and then we turn it into a podcast as well.

So if you ever want to ask us questions, feel free to tune in live Thursdays at 5 p.m. Eastern in time. But I'm going to stop right there. Brett, any anecdotal evidence for us? Let's see. Long Newbeg, long MercadoLibre, I guess, would be the number one thing. There is a lot of work to do, even just for some short experience here on the personal finance stuff, payments. Let's just say they got a long road away to reinvest in a lot of these things. And then on the other hand, it makes you appreciate some of the big box retailers that are reliable in the United States, Costco's, the Best Buys, that stuff. People take it for granted back there, but they do have an insanely good value proposition. And I got to say, the airport was quite busy. Long line at passport control. Those are some high international fees coming in for Corporation America airports or otherwise known as CAP. So, so far, that's my anecdotal evidence for you. I think it's about what listeners might expect. He says, we basically asked for things to talk about or things that the audience wants us to discuss on this episode. And he said, maybe a hypothetical game where you both build a price is no object portfolio of the fastest growing, widest moat, longest runway names, completely ignoring valuation.

I love the idea. Although simultaneously, I sometimes hate building these hypothetical portfolios because afterwards I always think, I don't I just own those. But anyways, we're going to play a game. I've set some criteria here, set some parameters. So Brett, here's what I'm thinking. The game is you get to buy any business in the world at 15 times, quote, normalized earnings, which I guess is subjective. And you get to pick five, five companies, snake draft. You can start. You can't repeat any names. Already, I got 10 loaded up just in case we all choose the same one here. It was, there was a question there that usually gets asked, not usually, it gets asked all the time, like, oh, what's your favorite company at any price? And people kind of understand what you mean when saying that. But when you actually try to make rules about it, you realize the question is a tiny bit flawed.

No fault to the listener who asked that question because I've asked it plenty of times before. But when you say at any price, well, what does that mean? One dollar, one cent. It's kind of hard to determine. We put in a earnings multiple barometer for the rankings here. And it's not necessarily the earnings they have today, but potentially what you think they could earn. Maybe if they weren't spending so much on marketing, maybe if they were in a normalized era. And what stock do you buy there?

So I like it. It's a great recommendation, but it's a surprisingly hard game to actually implement because you have to have a starting price. So it doesn't like, or else you can't really determine what are the, you know, if you could buy any business for a dollar, you're going to buy the biggest business because you can resell it. Anyways, how did you look at the criteria for this? What was kind of your thinking in looking for whatever the best businesses are, 15 times normalized earnings? I think what I really wanted to look at was high quality, high growth. So where I was, regardless of what you think they could earn, because margin doesn't really come into the equation here. Like, oh, do you think they could expand the margin? Well, it's kind of factored into the normalized margin equation. So it was really why does quality moat combined with runway to grow? and I think people understand what I mean when I put this list together

and I think and I really wonder if we had an overlapping list here because you can kind of go many different directions but I will as a spoiler say a company such as Visa which we talk about all the time as a wide boat stock it's already got plenty of high margin it's already so large

that it actually didn't make my top 10 although I didn't spend hours and hours making this I'm sure some stock fell through the cracks no I'll just pause you right there and say i have basically the exact same framework i think for me if i was given the opportunity to buy any company i wanted at quote-unquote 15 times normalized earnings i would want a combination of growth and a moat i wouldn't just want purely the absolute best business if it can only grow the top line five percent a year this is a good example you you're not going to get significant

margin expansion either. And just by the fact that they are so large already, it's unlikely that you're going to get, well, I could be wrong here, but extreme top line growth. So I tried to do the same thing. Whichever company I think has the largest moat and will grow by at least 10% annually on the top line. Those are sort of my two criteria. So you're going to kick things off, snake draft. Who do you have first pick overall? Okay. Before we get into it, I want to say, I think given that I just purchased a new one. It was actually part of my anecdotal evidence for the difficulties of paying for things in Argentina. I got a new mic and I know we had trouble the last few episodes, so apologies for that. But let us know if it's still not fixed.

I think the audio is going to be significantly better now. And when we have both two good mics, two good internet connections hopefully from here on out will be all good um first one here this is one i own i tried to put one that i actually own first on the list because you don't have if you don't own one of your favorite stocks on one of these criteria what are you doing it's interactive brokers it's currently training at i think 35 to 40 times normalized earnings and they actually might be over earning a bit at the moment but if we go to say bring that down a little bit for a non-extreme bull market that's getting them to have a little higher trading volumes 15 times earnings for a company that has just keeps growing its users

some highly valuable users by the way at 20 30 40 percent year over year with a long runway to reinvest i believe they have about 4 million active accounts right now and if you look at the amount of brokerage accounts around the world there's probably 100 million 200 million something like that. And if you can keep expanding that, and if you look at it, the amount of people that invest, especially with mobile internet taking off, all that good stuff, there's probably going to be a growing amount of people that have brokerage accounts over the next 10, 20 years. So they can take a ton of market share. They still don't have that much access under management. I think this is my number one pick by far, given the fact that I'm very, very confident

in their growth characteristics over the next 10 years. i will say that was on my list as well all right that's why we make backups yeah the only i guess the only hiccup i had was that i don't expect a ton of margin expansion so my guess would be you're basically getting a similar earnings growth to top line growth but you know you could get buybacks in there as well potentially at different prices um but yeah i think 15 times earnings. It has all the characteristics of a high quality business and probably has one of the largest reinvestment runways of the companies on my list. I've got two companies back to back here. And this first one, I've got a feeling is going to be a little controversial. I'm going with

Airbnb. It to me, I think it has a very wide moat. And actually, I don't think a lot of people dispute that like some people don't like the customer experience or they question its ability to grow and those are valid concerns but i don't think a lot of people question the moat because in north america the majority of their listings are not dual listings this is i think in north america you could truly call this a monopoly because they have such a unique supply that is very much unique to them. So that to me, I deem it high quality. The question would be, is this going to be able to grow more than 10% on the top line for the foreseeable future? And I think that is possible. I think there'll hopefully be a reacceleration in North America. There's been

a little bit of a decline in the growth rate here as the market has matured. And they've also reduced the average daily rate, but I suspect the average daily rate won't go down forever. So Airbnb is up Fair for me. It's number one. I think it's high quality. I think there's a large reinvestment runway, especially internationally, for them to go out and get more and more listings in these other markets, Asia, Europe, Latin America as well. I guess, Brett, you've maybe got some Airbnb anecdotal evidence internationally down there. That's true. I'm a customer. I guess it's a good product. I'm helping with that GPV growth. I like the pick. I do own the stock, so it is one of my largest holdings. One thing I think people forget about with Airbnb and businesses that are

take-rate businesses such as American Express, Airbnb, Uber, stuff like that, is that they are permanently, the business model doesn't change, inflation protected. And my question with Airbnb for you, Ryan, is do you own the stock? And if so, why not? Or if no, why not? I do. I do own shares. All right. Beautiful. I think it's in my top five largest positions. So, and that's happened as of late. I guess I should say I have been a buyer.

What do you think the historical track record is of when both of us buy stocks? I'm concerned that it's really bad. I know. I'm concerned that it's not as good as I would have hoped. I had someone ask us about Harbor Diversified today. That one did end up well, but there's been some other ones that have done fine. Now, net coupon, at least when we were buying. Yeah, I think the issue is that we talk to each other about this stuff all the time. So we just convince each other. But let's go with my next one here. It's not, I guess I don't have these in any particular order. Actually, you know what, I think you won't guess this one. So I'm going to move this one lower.

The next one for me is Coupang. I think it's a large reinvestment runway. They're having a lot of success beyond South Korea. For anyone that doesn't know, Coupang is the leading e-commerce provider in South Korea, and they have a significant chunk of the population using them basically monthly, if not daily, for a lot of their customers. And it's vertically integrated much in the same way as Amazon, where they have their own fulfillment, their own trucks, their own delivery employees. It's a much more densely populated country. So the delivery times are really impressive. You can order stuff before midnight and it gets there before 7 a.m. So I really like the business model. And it's one of those where you see like it's not a TAM company. I see this all the time. Like people constantly talk about the TAM. South Korea's population has decreased, if I'm not mistaken, in recent years. It's going to get cut in half over the next 50 years. Yeah. Yeah. It's going to be a slight headwind. And they are still growing the top line in Korea at a healthy clip because they're delivering more and more value to their customers over time. And they're continuing to take wallet share. you have all the amazon of blank companies that have tried to copy that model coupon is the most direct comparison where it has very much employed the same what's the uh nick sleep saying scaled economies shared scaled economies shared where there needs to be some cost savings there needs

to be some parodies on that i think we should make one i can't come up with any off the top of my mind but uh i i feel like there's a lot of good jokes you can make uh using that i think with coupon i like the choice as well one thing they i think doubled something like that and in korean won their subscription fee for their prime like subscription they call it something else but think of it like the prime free delivery uh network no nothing really happened no one batted an eye so i think there's a lot of pricing power there it's a great business long run one way runway for growth. And when you talk about normalized earnings, actually, this is one that trades at about 15 times normalized earnings, if not lower, and the price has gone down a bit

here. So that's why it's one of the largest positions in my portfolio. And I think Brian is as well. The last thing I'll say, someone mentioned this in the Substack chat, which if you haven't, you should join. It's free. It's great. We do a lot of conversations there. There was a data breach they had with some of their customers in South Korea, and they're very strict with these type of data breaches in that country. So I think the stock might have gotten hit a little bit because of that. And I looked it up. They may get fined a couple hundred million dollars because of this. But given the size of the business, that's not going to affect the terminal value that much. Yeah. Would you rather not have

it happen? Sure. But there's no reason to sell. And yeah, someone in the comment here says that data probe news was hurtful. Yeah, it is. And if I'm missing something on that or the fine could be larger, let me know. But typically when data breaches happen, it doesn't really affect the underlying business performance if you just mean a government fine yeah i don't i actually didn't see that so uh i should look into it but it's pretty rare from what i have seen and this is actually flawed thinking but you see it all the time where people overlook these things so easily because businesses are consistently analyzed on future earnings and you just one-time everything like this is a one-time expense like remember when this one probably is this one probably is

meta and alphabet they get fines every year so maybe you should include a couple three to five billion dollars for that each year but i agree with you it generally it generally is one time and when you look at something like okay maybe a marketing blunder where people say they're going to boycott a certain brand almost every time it doesn't happen where it's like bud light or anheuser-busch but something there this is a one-time an app and hurt the business maybe that is what's happening with the coupon, but as of now, I'm not too worried. Yeah. All right. That's my, I guess, second and third pick of the draft here. The total second and third pick, my first two. Brett, you've got two picks back to back here. What are you going with? Okay. First one,

and it's kind of a insight into what I was looking at for kind of inspiration for companies to pick here. And it's one that has a high current earnings multiple, but I do think has a long runway to grow take market share and would be a very attractive stock with a wide moat if it was trading at 15 times earnings i think it's probably on your list as well and if not you're going to be kicking yourself for not taking this brian it's adjunct adian without the dutch accent oh that was the one i pushed down because i thought you might not take them can't forget the dutch i think that the dutch is if not they're from the netherlands yeah them and asml driving that economy. It's a great business, inflation protected, similar to an Airbnb, which I mentioned

with those payment companies. I was trying not to spoil it when saying that, but they keep growing at a very steady clip. They have walked in enterprise customers, minimal churn, extremely profitable, even though that doesn't necessarily matter here. But I think that their ability to take their revenue that comes in and turn it into cash flow is just not unmatched, but top class worldwide fantastic business and if there was an opportunity to buy this along with interactive brokers at 15 times earnings i would make them large large positions in my portfolio yeah this was uh this was the one i thought you would not go with so i didn't say it but i love payments processors especially one that is not riddled in fraud like a visor or something but the i shouldn't

say fraud riddled in accounting gimmicks but alleged alleged just say alleged in front of everything you could say anything yeah it it is so sticky like it is such a pain to switch payments processors once you've scaled a business on an online payments processor like i would i like stripe too i really like stripe as far as the product goes and i just keep thinking because i deal with this on a regular basis for my day job it would be so cumbersome to try to switch because there's so much data on there there's so much that you rely on for those payments processors so i really like that one and this is basically the public uh equivalent of stripe and has three times the operating margins if i'm not mistaken so good choice i

would love to own this but aside from that like one month period where it dropped we have not I had an opportunity to buy this at what I would call a reasonable multiple. If you're a regular listener to Chit Chat Stocks, then you've probably heard us talk about Interactive Brokers. Here are three reasons that Interactive Brokers is better than any other brokerage platform. One, they've got it all. Stocks, bonds, ETFs, options, crypto, you name it, 160 markets, 36 countries, 28 currencies. They are the absolute best platform for global investors.

Two, best in class pricing. They have zero commissions on U.S. listed stocks and ETFs and offer margin rates up to 54% lower than the industry. And three, you can ditch the separate high yield cash account. Interactive Brokers offers up to 3.37% interest on cash held in your investment account. Head on over to IBKR.com. Restrictions apply. Interactive Brokers is a member of SIPC. Yep. Okay. That's going to be hard to pick my third one. There's a lot of choices here. I'm going to go with, I think I'm going to go MercadoLibre. Not just because I've got anecdotal evidence here, but there's been plenty of good, I think, research reports out there recently.

I know that Ian Bezek, the guest on the show from Ian's Insider Corner, has covered them. Plenty of other people have looked at them. We've had Brian Stoffel on the show. Lots of good analysts follow them. And I've been doing a little bit more research just simply because, and maybe this is a bad habit, the stock's been flat over the last five years. I think people still really underappreciate the runaway to grow. It's not apples to apples because they have some third-party stuff versus first party, but MercadoLibre's revenue is actually lower than coupons. It's only $26 billion.

They also have the personal finance stuff on the side that's massive with tens of millions of users. And if you look at the Latin American countries, Argentina, Brazil, Mexico, some others their e-commerce penetration is like half the level of the united states maybe a third of the level of east asia i feel like there's room for i mean over the next decade especially if they invest in their internal delivery stuff for revenue to probably not 10x for a decade but maybe the next 10 20 15 20 years they could tax their revenue i feel like that wouldn't be surprising and if you could buy that at 15 times normalized earnings with the wide moat they have and in these nations, I feel like that's a great pick here. Was it on your list or not, Ryan?

I feel like it was kind of a curveball for this draft. That was on my list as well. And it's hard to imagine that a only public company in the world that has grown 30% year over year on the top line for more than 22 consecutive quarters. I mean, they're the only one. It's hard to imagine that they still have a massive reinvestment runway, but all those data points that you just showed and the customer experience that you're seeing, there is a massive reinvestment runway. They can continue to drive down delivery times. I imagine they can continue to put first party goods on there, make it more competitive on the marketplace and just attract more spenders. Not to mention if there's a positive economic environment in Latin America, it helps consumer spending in

those countries. And so far lately, it's been looking good for them. I guess, yeah, politically it's gone from less socialism, leaning to more free markets, which is probably nice for the business. Ryan, what do you got for your, what is this, third and fourth? Yeah, third and fourth picks. Yeah, I'm a little worried because you did take two of mine and I did not put 10 on here. So I was playing it a little dangerous. I think I'm going to go with Taiwan Semiconductor. This is a little heavier on the moat side maybe a little lighter on the potential top line growth side that is normal normalized earnings to x out the ai bubble right that then you're safe that's the only thing that kept me like from saying this number one overall because it's big business

it's huge if they fulfill what management expects which i believe they said 40 annual growth rate for their high performance chips business if that happens over the next five years uh this will work out and the moat is massive so i do think if you can get this at 15 times normalized which that's the big question is basically is normalized earnings higher or lower that's kind of my concern than the current earnings i would be buying it uh i i worry that there's some over we're in a period where there's a lot of spending from customers i don't think that would come to a grinding halt because chips will continue to be needed and they at the worst unless i'm misimagining this like they're still going to have the lower end uh chip demand

on a regular basis even if gpu demand isn't quite as high now i know high performance units has helped margins quite a bit but it they are still from everything you hear capacity constrained so my only concern would be that they invest in all these facilities abroad in the u.s and and i think japan europe yeah japan maybe europe maybe and then they invest in all that and you get a three four year slowdown in high performance gpu demand and suddenly they go from capacity constrained or supply yeah i guess it's capacity constrained to being having a glut of machines that aren't being used as much that's why we have the loophole normalizing the earnings there i think that's it yeah it's a good choice the only thing i worry about is the size but people

could have said that $50 billion in revenue ago. I am my last two here. I'm going to maybe put in my two honorable mentions. I got one more, right? Yeah. I've done what? Airbnb. No, I did not do that. And I did Airbnb Coupang, Taiwan Semiconductor. Okay. So you have your, I thought I was going to go one more. Yeah. One more for you. Then I go. So I'm a little hung up between two. I really like American Express. I wanted one of the card networks because I think they're very good business models. And I think it's a wide moat. And I think if you're looking at all three of the card networks, MasterCard, Visa, and American Express, sorry, Discovery, I'm not including you. I would think that American Express has the highest growth rate of those three over

the next five years. So I'm going to go with American Express, but my honorable mention here, and I'm curious your take, because they're kind of in the news right now. Would you buy Netflix at 15 times normalized earnings. I saw Tyler put, one of the Tylers put it in the chat. He said Microsoft, Netflix, Hermes, MasterCard, NVIDIA, TSMC, ASML, Uber, Booking, which I think is a good list.

I don't know if it would make my top five for Netflix just because of the size. And I will worry that they don't have an extremely wide moat given the competition that's not apples to apples, like an add-in and a stripe where it seems like it's going to turn

into a duopoly. But they have the competition from YouTube, even stuff like Instagram, what have you. I mean, but it would be up there. I mean, I think it's a pretty darn good business. You know what I missed? Google. I would buy Google at 15 times normalize their hands.

It would be ahead of me for American Express. Yeah, I like your pick, though. It's more inflation protected. I do think that's underrated over the long term. Maybe I'm just turning into a macro bear here, but inflation could be persistent. It has been sneakily persistent since it kind of came off that 8%, 9% boom. Well, we go through mine. And so we got other topics here.

We don't want to take up the whole episode. I have two here. I'm going to go, I'm not going to explain it, but I have my honorable mentions. I have the two luxury giants, Hermes, Ferrari. I think those are permanent growers. I have Autodesk, I have TSMC, and I had ASML. I think those are good ones, but I'm going to have two.

Well, one you actually own. One of these other ones are on my watch list. My first one here, and it's stock's been down. So maybe it actually is getting closer to 15 times earnings. It is wise. I think they're building a moat. It's a perfect emerging moat stock. and they have a long runway to reinvest.

Pretty much put it as simple as that. And given the stock, I think I saw a friend, we should get back on the show, Luis Sanchez talk about how the stock's in a 25% drawdown. I hadn't been following it closely. I feel like that's a very good pick. And I'm noticing here, I have a lot of financials in my list.

Interactive brokers, Ian, Cotto Libre, which is half financials, and Wise. And then I'll put on my other honorable mention, new holdings but i wouldn't keep that as a pick because i don't know if banks they kind of deserve to trade it 10 times normalized earnings 15 times is not some dirt cheap multiple for them all right let's shift gears wait what do you want to do my last one i have my fit okay this one's a sneaky one real quick and yeah i think wise belongs on there that's a good call i think i'd include uber on this list i know you hate that i think i'd include them yeah i not on my list we talked

about that, though. I hope all the Uber shareholders prove me wrong. Some of that Weibo data, it just keeps getting scarier and scarier, at least for me. 10% of reds in San Francisco now. Something like that.

It's pretty high. All right, my last one. This is one we covered this year. This is one where is the moat super wide today? No, but I think it is wider than people think just because it's a small cap.

But they have a very, very long runway to grow with, I think, no competition. Again, people are going to be surprised, but I think it's cracking robotics. If you can buy that at 15 times normalized earnings, the amount of basically booked runway for earnings growth,

where I think they can grow revenue five, six, maybe even 10x in a short while. Yeah, I mean, the stock trades at, I think, what was it, 10, 20 times sales right now. So I'm not buying, it's on the watch list, but in a crash, I feel like this is a great one to pick up. We just had someone comment, either of you guys consider Axon.

That would have been a good one as well. I like that business model. That's a great one. And my biggest gripe with them has always been the valuation true and the spc but we include spc in the in the valuation so that that'd be fine i just don't like them because i missed them 10 10 bagger ago so i get frustrated and i just stopped following them yeah that's a common issue for me as i hold a grudge when i miss the boat so there's one that i've been looking into over the last couple days since we did the chris hone

episode that ferrovial company they've got some phenomenal assets the highway if you live in ontario highway 407 they own that and it's got like 80 ebitda margins and they've just been jacking up prices and people still pay them and i with a literal toll road you gotta yeah you have to go yeah and they've got some in texas here too the he put it in my company internal communications because most of the people are from ontario and they say it is it is it actually ontario Ontario, Ontario. I don't know. I don't know. Well, you hang out with the Canadians. I don't know. I think it's Ontario. Well, that's how they say it. I've always said Ontario. Maybe I'm saying it completely wrong. The Canadians are laughing at me. Yeah, they were surprised to find out that it is some Spanish company that has just been jacking up prices because apparently that's a sore spot for Ontarians because they said the tolls have been getting more and more extreme. And I put that meme of Mac from Always Sunny of like, oh my gosh, that's disgusting wear because it's literally a toll road jacking up prices, which as much as people hate it, it's irreplaceable.

asset that you're going to have to take irreplaceable roads well i mean i don't know it's hard to build a highway across the the province yeah i get what you mean it's not quite as hard as like a railroad but yeah i thought it was an interesting business any more honorable mentions or should we shift gears then we got to shift gears we're about halfway done here hopefully people like that one thought we went a bit long but i think it was a fun one and thank you simon long time listener for giving us a shout out there all right i'm gonna give you a choice for first ryan do you want to do an 8k story for the ages for a thanksgiving friday 8k or do you want to do michael burry again and historian spc which i think is more of a eat your vegetables

educational stuff for the listeners we absolutely have to do rick's cabaret collapse yes yes the The only episode I think we've deleted, sorry to the CEO or ex-CEO now. Full disclosure, let's maybe mention this for any listeners today. We're about to talk about a company that was a publicly traded gentleman's club roll-up, and we had the CEO on the podcast, I think, three years ago. And honestly, there was a pitch to be had. a lot of value investors were actually like the pitch because it's sin stock and there was sort of a repurchase story and we after this news came out because he's been accused of fraud and bribery

if i'm not mistaken or actually alleged oh alleged oh always say alleged alleged accused we took the podcast down not to save face although maybe there's an element of that but i don't really want to be giving if people are going back and listening to that i don't want to be really yeah Without knowing that the indictment was there, yeah, three years ago. And it's not like, it was probably like one listener a week at that point. But still, that's the context there. We've, I don't think I've ever owned it, Ryan. You've never owned it.

But, or actually, I should have flipped that. I know I've never owned it. Ryan, I don't think you've ever owned it, but he's nodding along with me. Ticker's Rick. And I guess we're bearing the lead here. It has had quite the interesting last few months. A lot of strange 8Ks without press releases, kind of trying to hide the information in the 8K.

So there's three big ones here that I think people have to understand. First up, I was reading yet another value blog, nice sub stack. He was writing a lot of good stuff about and summarizing the situation, which kind of helped me get up to speed for someone that doesn't follow it very closely. So on September 16th, the company, Rick's Cabaret, put out an 8K saying that they were being indicted by the Supreme Court of New York for tax fraud and bribery. I believe we covered this at the time. They were taking accountants, I think they're auditors, to allegedly the gentlemen's clubs and giving them, say, $10,000 worth of services. And then, oh, okay, hey, we don't have to pay too much in taxes. That's like a movie, like the tax fraud there. Now, on November 24th, now right around Thanksgiving, right before Thanksgiving, it executed a buyback with ADW Capital, and this is in the 8K, ADW Capital and Adam Wyden for $30 million at a price of $36 a share, which is about a 50% premium to where I think it's trading at today and where the stock was trading at the time.

So it's a huge premium to buy back, buy out one of your existing shareholders who is pretty much stuck in this business. Now, why they did that, I'm not so sure. What's our negotiating leverage? ADW Capital has. Kudos to them for, I guess, getting a really good price on that deal. Then on Friday after Thanksgiving, which is one of the absolute hottest days for sneaky 8Ks for information that companies don't want investors to know because you have Thursday off. A lot of people are taking Friday off. The market's barely open on Friday. So if you file an 8K, it might totally go under the radar. And they filed an 8K on the Friday after Thanksgiving, saying that the CEO and CFO had resigned effective immediately earlier that week. My only question for you, Ryan, is are you buying the dip on the stock that's down about 80% from all-time highs? And is there only path forward to just buy some Trump coin and hope for the best?

Absolutely. Well, so that does seem like the plausible path at this point. like if everything else goes to shambles you just basically become a crypto it might honestly it might honestly be a buy if they buy trump coin i'm not joking like that you're not allowed to say that i just i don't i i refuse even if even if you're right i have no information on that i'm just saying given my morals tell me like i can't make money that way so you have more morals than This thing wreaks obviously a fraud now. I mean, it is a gentleman's club business. So there was always kind of the hint of wrongdoing going on. It's just a type of business that can lead to that. Yeah.

this adam wyden guy i saw a lot of people first of all my i have red flags galore with adam wyden it's like i've seen a lot of stuff historically where it's just kind of it was hard to get around like publicly shamed his dad one time it was just a very weird thing his dad i believe is a senator sitting senator of oregon yeah it's quite the story honestly this could be a movie yeah people are talking about like political corruption as well once again all of this alleged i should say that we know nothing i know yeah am i buying shares absolutely not because there is just you could make money but there's got to be easier places to make money than this like this is if you're right you're you're betting on a lot of things not being true a lot of i mean the ceo and

cfo resigning like come on they they i read somewhere that they are not actually they're not even sure if the ceo can remove himself entirely because he personally guarantees the company's debts. Yeah. And do you want to hear the worst part about it? The CEO is resigning and his pay isn't changing. Isn't that just hilarious? Yeah. Taxless harvesting season. Yeah. Not everything's going to be a winner. I know some smart people that were in that and it's unfortunate it turned out that way. It happens. All right, folks, before we move on, we need to tell you where we get our data. Fiscal.ai. Fiscal.ai is the complete stock research platform for fundamental investors. I use the platform pretty much every single day.

You'll see the charts in our podcast. You'll see it in our newsletter. This is our one-stop shop for stock research. They've got up to 20 years of financial data on all companies globally, including the largest company-specific segment and KPI data set on the internet. That includes metrics like Duolingo's daily active users, Oracle's backlog, Rocket Lab's revenue per launch, and literally millions of more data points they've also got earnings call transcripts ownership data equity research reports and much much more if you want complete financial data at your fingertips you need to check out fiscal ai and if you use our link fiscal.ai chit chat you will automatically get two weeks of fiscal pro for free no card required if you want to upgrade our link will

also get you 15 off again that's fiscal.ai chit chat the link will be in our show notes Okay, where should we go for next? Michael Burry? Yeah, I promised the listeners we're not just going to be a Michael Burry Substack Summary show, although we are giving you maybe some insights

as it is a paid Substack. And I promised not to do this for 20 minutes every episode. We did two in a row and I actually realized I put him in the title twice. The show's got listens, so I kind of feel like

he's a good SEO target, but we're not going to do that every time, just so you know. All right. His latest one, his latest article, from last week was right up my alley ryan knows i'm a stock-based compensation would you call me a stock-based compensation hater i think hater is a fair word

yeah i think so as well i'm trying to think of a better description maybe a sbc now hater is probably the best word downer i think so i think you understand that it has its place Yeah, of course. But as Burry articulated much better than I ever have, the true dilution value of SBC and the true expense of SBC is understated with GAAP accounting, especially if you have a winning stock, which is if anyone says, well, the stock has to go up by a ton if SBC is going to be a terrible expense on your investment. I would say, well, what are you buying it for? Because you think it's going to go up by 10x, right? So Burry wrote about this. He goes into a lot more detail than I am on this call, but he says that SBC needs to take into account either one in your

DCF, this kind of cashflow, setting up a perpetually, perpetually setting aside capital to offset dilution, which is essentially saying we're going to buy back an X amount of stock every year using the cashflow in our discounted cashflow model in perpetuity, to make sure the share count doesn't go up or this is what i like to do counting for the spc by issuing new shares each year in your dcf at a certain rate one percent two percent three percent what have you just peg a rate out there that's what i think to simplify things people should do and just peg what the share count will rise at as a form of your spc now i kind of like when you can paying a discount in the shares, which is where your cash flow is going. That's why we like share

buybacks. That's why we like share buybacks for companies that are heavily reducing their shares outstanding. And I think he had some good quotes here. Well, actually, let me look at this first one, skipping down the list. He said, take two identical companies, company A and company B, wrong at the same rate, and you discount them at the same rate in your DCF 10% a year. Company A pays employees all in cash. Company B uses SBC and it's dilutes owners at a rate of 1% annually. This is only 1%. Mind you, there are companies, some I own, like Vermittly, that can go 5%, 6%, even 10%. Now using a DCF, again, this is assuming all else equal, company A, a fair multiple for them is 20 times earnings. But only 1% dilution a year. Company B is worth 16.4 times. Think about

that. I think that's just so understated. You just go, oh, it was 1% a year. Who cares? Yeah. Yeah. It's a good illustration of it. Anything else that he added here? I see some quotes for you. Yeah. He has some quotes. He specifically, and I think the man knows how to poke the bear because he always talks about the most battleground stocks. And I got to say, Dr. Burry, for someone who says they hate the limelight, why don't you just talk about obscure value stocks? If not, then you're talking about NVIDIA and Palantir. Those are going to get attention. And I think you know that. Quote, such buybacks represent a true cost that penalizes both present value and potential long

term returns. Many of our most popular companies, such as NVIDIA, are engaged in buybacks to nowhere where the cash spent on already purchases does not reduce share count. The original cumulative GAAP SBC expense for NVIDIA, $20.6 billion, is now irrelevant. It may as well be imaginary, never an expense. Replacing GAAP SBC or SBC expense with the $91 billion in buybacks they've had to nowhere results in total owner earnings of $135 billion. So he's saying with a big winner like NVIDIA, the GAAP SBC expense, or I think it was a five-year period, was $20.6 billion.

But in actuality, it took $91 billion in buybacks to offset the dilution. So it actually should have been $70 billion higher. You want to hear something using a big short quote that is going to blow your mind, Ryan? Let's do it. You've seen this tweet? You might have clicked on it in the Google Doc. I'm pulling it up now. Okay.

There are 36,000 NVIDIA employees. There are $630 billion of RSUs outstanding, meaning that's $17.5 million per person. Can we tone that down a bit? Yeah, obviously not how the distribution works out. Those RSUs are heavily concentrated to probably 1,000 maybe. They don't have that many. They don't have Amazon low. like they don't have

the small amount of employees or you know like most of those people at NVIDIA are earning four or five hundred K a year if not significant like on their base salary oh

yeah oh yeah but even if we okay even if you say the median is five million dollars in RSUs still five yeah that's just slow down the SPC I mean for crying out loud I mean

it's got to be heavily concentrated to people that were there the value early those RSUs people that were there five years ago right i agree four years ago five years ago before all this well i guess it's about right when it started to take off but right and how much was how much is jensen that's also a good question it's still quite the stat 630 billion in outstanding rsus for a single company i'm sure the low-level employees at nvidia are wishing that figure

were true for them uh but yeah it is it's an astoundingly high headline figure and i do think it's a good illustration he does a very good job like you well he does a very good job describing all this and it's actually a really good sub stack but i think you're right for a guy who claims to hate being having attention he's had a movie made about him he started a sub stack he had an off and on relationship with twitter over and over yeah and he just did a podcast and then every every time he posts about it he's like i don't usually do podcasts but here's a podcast so you you could just say no yeah he is a not that i don't like his writing his writing's great but yeah provocative guy for sure all right let's go back to one of your topics right

oh yeah we can talk about first and close out with your listicle as a tease for the listeners six quality stocks trading at record low valuations as you can tell ryan's very good this now he does this for fiscal ai and those are the tweets that get the most clicks am i right along with mercado labor that's your that's also the bread and butter can you find did you know one stock has what is it 30 for 20 quarters i mean that's it is impressive that is yeah it's and it gets for retweets cross down and growth rate yeah let's talk we can actually why don't we hit this really quick six quality stocks trading at record low valuations basically all i did was try to find and i didn't have like a screener for this exactly but trying to find

stocks that are obviously quality is subjective but what i deem high quality plus my like only quantitative parameter was revenue has grown over time and profit margins have expanded over time and that's over like a decade or could be shorter as well i'll just rip through these and you tell me if any excite you. I know one of these does. Airbnb, 22 times EV to EBIT. Most of these are all EV to EBIT except for the last two. Salesforce, 28 times. Lululemon, nine times. Adobe, 16 times. And then the last two are EV to free cashflow because they're kind of turning the corner to profitability here. Duolingo, 21 times. Monday.com, 21 times. So one more time. Airbnb, Salesforce, course, Lululemon, Adobe, Duolingo, monday.com, all trading at or near their lowest valuations

ever. Well, let's take Airbnb off the board because people know I like that since I own it. Lululemon does attract me. That's a double entendre. What do they call it? Double meaning there. Nine times earnings is just so damn cheap. And it seems like the brand is going to have at least some form of durability. They'll turn the corner. They'll get around these kind of recent blunders with their product. I don't know why I don't own it. I guess I like Crocs a little more. And the other one I'm very interested in

and where I'm paying this as a tease for your upcoming research episode, monday.com, that growth rate they put in with revenue is just highly impressive. I don't know much about the business. I used it once at a company I worked at. Seems fine.

It's a good product. But curious whether they're probably deemed an AI loser. I'm just curious what – it's going to be a fascinating episode, I think. People should listen to it. Yeah, I'd say from this list, the two that stand out – I mean, Salesforce, 28 times for a business that's basically growing 9% to 10% on the top line. And operating margins could expand, but I'd say my guess, without having done any real digging here, is you get high single-digit revenue growth over the next 5 to 10 years. and mid-teens earnings growth 28 times feels like a fair price to me but it's one that has

historically just traded at ludicrous multiples so it's yeah it doesn't interest me adobe and monday.com are probably the highest on that list i've got nothing against duolingo but i don't think it's actually as cheap as it looks uh on a free cash flow basis so Are they an SBC? Yeah. They've turned the corner to profitability on a gap basis too, but. Remember, we just talked about how gap SBC, you got to watch out for that. It's something, honestly, I learned a lot from that, from that Burry post, but I know

you like Adobe. I know you like Airbnb. The two things for Adobe and Monday.com, and this is, this still gets into the whole, like, will AI kill SaaS discussion? Very different businesses. i think money.com a lot more similar to like a salesforce because they it's more task management work operating system type of stuff as opposed to creative software like adobe but the idea for me that this cannot actually be the bear thesis because people are saying like it's ai is going

to disrupt them i don't get that at all like i do not understand that what i saw that on gemini site's newest developer model you can take a picture you can put it in and say build me the code for this website that's great but that's not like okay great you've got the bare bones for like a basic website you now have to go find millions of customers you have to know how to diagnose any issues you have to know why it was built a certain way like you are so far away from a legitimate business just because go ahead just because you've built the bones for a website does not mean you have a legitimate competitor to salesforce like it's if it's like a meme that people are like hey chat gbt build me a salesforce and 40 billion dollars in revenue make no mistakes

like that this is not happening i think for your monday.com episode you need to try to build a monday.com competitor and test it out and see if you can do it it'll last 30 seconds before i realize i can't do it oh i i want i think you should try because i that's that's fair as you've told me before you are technologically challenged let's say challenged sometimes with computer stuff so that'll be a good test and if you know if you can maybe that is the bare case i think i think you need to try yeah it's not like this field isn't competitive but software is generally sticky especially if it multiple people on a team use it regularly it's sticky they have a high attach rate with organizations and it tends to expand within organizations so i am going to look more

into it the stock has sold off a ton i would say that and then obviously airbnb i'm interested in adobe as well all right we're going to close things out we got a couple of quick segments here first i need to mention uh bubble watch which is really turning to sam altman red flag watch every week. There was reports that Altman is apparently trying to take a stake, a controlling stake in a rocket launch company.

I assumed it was going to be Rocket Lab, but it's some random company that I know this industry fairly well isn't doing anything. He wants to build a competitor to SpaceX. You really? No, I don't love Elon much at all, but are you really going to try to do this out of your spite and your spat

with Elon? I don't get it. just just a red flag again across the board and i feel like this is a total icarus situation getting way too close to the sun gonna burn up it feels textbook like this is the thing you do after you've had a very successful company that's gone public and it it feels like not to say chat gpt or open ai hasn't been successful obviously they have you built what is it eight billion in revenue. But you have a lot of skeptics right now as to whether or not this is a sustainable business model. Why are you stepping aside now? Not stepping aside, distracting yourself, I should say, with this. Prove one business first and then go, I don't know, go the Bezos route.

Okay. When I sell my business, I want the best tax and investment advice. I want to help my kids and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center.

Find your advisor at IGPrivateWealth.com. Yeah, exactly. All right, let's do a little macro. Shopping on Halloween, or not Halloween. Black Friday slash Cyber Monday, I should say, thank you to everyone who did themselves a favor, signed up for Fiscal AI with the double discount for Black Friday using our link.

Quite a few did, so really nice to see that. Nice to have a little holiday bonus every once in a while for the business. But there's been a lot of talk about deteriorating consumer spending. And I think Black Friday is one of the best barometers out there. If you look at the numbers,

and maybe if you divide it by income demographics, it's going to look like a different picture, but I think it kind of always will. Here's the quote from U.S. Spending. U.S. shoppers spent $14.25 billion on Cyber Monday, pushing total online sales to $44.2 billion for the so-called Cyber Week. Spending rose 7.7% from Thanksgiving to Cyber Monday, compared with an 8.2% increase last year. So 8.2% increase last year, 7.7% increase the year before. Things are looking quite i think healthy across the board and any company that you're interested in or any stock that said that blames consumer spending from a macro basis on their underperformance i think

you got to look yourself in the mirror and say it is management trying to pull your leg cough cough paypal they just talked about weak consumer uh you know what else uh let me read you this quote one more time u.s shoppers spent 14.25 billion on cyber monday pushing total online sales over thanksgiving weekend to 44 billion according to adobe analytics reports well that business they haven't gone bankrupt yet and i think didn't shopify go down i don't i don't really yeah what do you mean like there's an outage on their server or something like that all right we got like one minute left let's talk zuckerberg reality lab spending this is not one i i think we can pat ourselves on the back too hard on because it seemed like everyone except the core metaverse

people saw this as writing on the wall but here's a quote from a bloomberg article executives are considering potential budget cuts as high as 30 for the metaverse group next year which includes the virtual worlds products that are horizon worlds and its quest virtual reality unit cuts that high most definitely include layoffs as early as january according to the people so a final decision has not yet been made i saw someone estimate this could save five billion dollars annually that goes straight to the bottom line what do you think ron getting lean get rid of this whole division why not i saw yeah i saw i think an expert network transcript from like a year ago where like this is the big year if we don't figure it out with reality labs in the

metaverse they're gonna cut spending it's like it was like an employee or something so they're going to get on the wall yeah and it's weird to me that maybe they're just waiting for an actual prove it from zuckerberg but i don't know if anyone toys with wall street better than mark zuckerberg yeah i know here's the thing we're going for a spending boom we don't like that all right i'll cut it i think it's going from about 25 billion to like 20 billion dollars in spending so you're still burning 20 billion dollars on nothing right now on science experiments but hey it's probably good for the stock and 25 billion dollars on science projects is it's insane it's insane and i pray well i'm not a amazon shareholder but for the amazon shareholders

out there i hope one day the same thing can happen to you and alexa yeah i think zuck spends more on this than amazon does on alexa but i heard 10 billion or more on alexa i heard more than 10 but that's still like half of what zackberg's doing remember when everyone like had to have a metaverse strategy like every company in the world service now is like what's our meta what's our metaverse strategy work day how are we gonna get people to do their payroll with vr glasses it's like yeah and nothing it's funny how nothing materialized from that really i mean has anything changed like maybe more games have been created no no ai is clearly actually something even though there's probably a little bit of that mixed in but we're going over in time here got to get out of

here uh let's get the disclosure and get out of here we're not financial advisors anything we say on the show is not formal advice or recommendation right i and i are any podcast guests may hold securities discussed in this podcast may have held them in the past may buy sell or hold them in the future. Let us know again if we have any audio problems, but I hope we got them fixed. If you want to check out the Emerging Motes newsletter, please do that. Link is in the show notes. Have something coming out on Crocs the same day this episode comes out. So please give that a read if you are willing. Sign up for that newsletter. It is, well, free to sign up, but the paid service will have the Crocs write up. And I think that's it. Episode's coming out with the Basic Capital

founder, which I thought was a fantastic interview. Episode's coming out with Ryan's research report and a lot of fun end of the year stuff around the holiday season. Thank you everyone for tuning in. We'll see you next week.