Chit Chat Stocks - EMERGENCY PODCAST: We React Live to The Tariff Pause; Plus, One Stock We Both Bought The Dip On

Episode Date: April 10, 2025

We are releasing this Investing Power Hour the day after recording due to the market's tariff rollercoaster. In the future, we plan on recording the Investing Power Hour Thursday afternoon and releasing the podcast early Friday morning. On this episode, we discuss: (03:36) Portfolio Impacts of Tariffs (06:32) Direct and Secondary Effects on Companies (09:23) Market Reactions and Predictions (12:29) Analyzing Company Resilience (15:29) Investment Strategies Amidst Uncertainty (18:23) Sector-Specific Impacts (21:29) Recent Portfolio Changes (24:21) Final Thoughts on Market Trends (34:38) Shifting Focus: The Importance of Timely Analysis (35:21) Airbnb: Growth Potential and Market Positioning (40:25) Philip Morris: Evaluating Investment Decisions (43:08) Google: A Steady Performer in a Volatile Market (51:52) The Impact of Tariffs on Global Trade (57:33) Tesla: Demand Challenges and Future Outlook ***************************************************** JOIN OUR NEWSLETTER AND CHAT COMMUNITY: https://chitchatstocks.substack.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.  ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use. Use our LINK and get 15% off any premium plan: ⁠https://finchat.io/chitchat  ********************************************************************* Bluechippers Club is a tight-knit community of stock focused investors. Members share ideas, participate in weekly calls, and compete in portfolio competitions. To join, go to ⁠Blue Chippers and apply! Link: ⁠https://bluechippersclub.com/ ********************************************************************* 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. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome to Chit Chat Stocks. This is our weekly Power Hour episode. I am one of your hosts, Ryan Henderson, and I am joined as always by the one and only Brett Schaefer. This week, we have the tariff tantrum. Is that what we're calling it, Brett? I know you've been using that lingo. So probably one of the biggest news items we've seen in maybe more than a year

in financial markets. We talked a little bit about it last week, but we're going to dig into the actual implications, the details, companies that are both in our portfolio and not in our portfolio that are going to be impacted by this, as well as those that have maybe been sold off, but shouldn't be too impacted. We've also got some other pieces of news for the week. harvard is uh taking out some debt which is a bit bizarre given the they have the largest endowment fund in the united states but we'll talk about why that is we're going to be talking through some other news pieces as well apple's uh potential ramifications and then what economies benefit from the recent news but i guess brett how has tariff tantrum treated your portfolio

I think better than most. I haven't been immune to any pain, gone through a slight drawdown. But as we'll talk about, I think not having the giant exposure to big tech, Magnificent Seven, having a little bit of international diversification, small versus large cap, gross stocks versus value stocks, it can help you in an environment such as this. and the counter cyclicality of some of your holdings, or at least some of the holdings in our portfolios, it can give you much more flexibility to be aggressive during bear markets and buy some of the stocks that we're going to talk about today. So exciting times, chaotic times. Maybe by the time we record this, we're going to be at war with China. No, that's a bad joke. But things are escalating quickly. And from my standpoint, I'm excited to talk. Before we do though, we want to talk about Interactive Brokers. Interactive Brokers is the professional's gateway to the world's markets. Interactive Brokers offers commissions starting at

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through good and bad times. We use IBKR here at Chitchat Stocks for their best-in-class international coverage, and you can too by heading on over to ibkr.com. Interactive Brokers is a member of SIPC. Well, I think the place to start would be maybe go through our portfolios. What have we been buying and selling? And maybe we can rip through and talk about the implications of each business. I've listed out what companies I think are the most affected, what companies are the least affected, and also been buying a little bit, which I'm happy to talk about. Where do you think we should start? Yeah, let's start there. Who wants to go first? i can i can rip through some of the companies that i think were most impacted so and i'm splitting this into two sections direct impact and secondary effects because if what has been quoted last wednesday actually gets implemented goes into effect there isn't these delays which

we're seeing and we see like truly just direct implementation every business is going to be impacted on some level. But the direct impact, those that get hit the hardest for me are A, D.R. Horton, largest home builder in America. They're getting hurt for other reasons as well. Home supplies are available. Home inventory is starting to grow. So that kind of affects them being one of the only providers of new homes or purchasable homes, I should say. But the other part is even though some of the major input costs like lumber were excluded from the tariffs, there will be other input costs that rise and any sort of pressure on the consumer in terms of like – my assumption here is that this is sort of a consumption tax across the board. And this will potentially hurt how much money consumers have to spend on different goods. So affordability would come down all else equal.

If prices are the same, interest rates are the same, consumers can't spend as much on homes, obviously affordability is a little more difficult. So that puts pricing pressure on D.R. Horton's homes. I think we're seeing that in the stock reaction. I would guess that given a lot of people have equity in their homes or a lot of built-up equity in their homes, there's actually a great article in the Wall Street Journal this week about that. If there is pressure on the wealth in other parts of someone's personal balance sheet, you could see more incentives to sell your existing home and downsize, whatever the case may be. So that could increase inventory as well. second company that would be quite impacted is amazon 50 of the top sellers on amazon come from china read that little stat this morning cost of goods sold will go up consumers will likely be

forced to eat the costs which i assume will just hurt overall volume for e-commerce aws i think should be largely unaffected, but I think a slowdown for consumers means there's probably going to be a slowdown for all the AI spending that we're seeing and possibly makes it that much more a risk of overinvestment on that side of the business. At least AWS isn't directly affected outside of any dire stuff that could happen with the semiconductor industry. Yeah. I mean, maybe it's a little more expensive to prop up a data center, but the semiconductors, I imagine, are one of the most expensive costs of propping up a data center, and those have been left out of the potential tariffs.

The third one here for me is going to be Ally. I think this might be the most impacted, actually. So there was a 25% tariff on imported cars that's already been implemented. On May 3rd, this will also apply to imported car parts. So there's really no way around it. Cars are going to be more expensive. Now, aluminum, steel, I think we're both left out of the tariff, so that might help a little bit. But I mean, some of these – and I know Canada and Mexico have sort of their – they've been excluded from what was talked about last week. Oh, yes, yes. Yeah, there I read that Mexico's blended tariff rate, and actually for automotives, it might be zero, but the blended tariff rate, as we'll talk about later, is maybe only 8% versus China at 100%, so not nearly as impacted. Yeah. So, I mean, kind of my thought process here is cars are more expensive. Loan originate – the number of people buying new cars will probably go down. And I'm actually going to talk about O'Reilly here in a little bit. It benefits O'Reilly. But number of new car purchases I expect will go down if these tariffs are implemented or when these tariffs are implemented, I should say. Implemented today, as of this recording, right? most of them yeah we'll see if anything gets walked back my assumption is that something i

don't know we see either more delays or some something pushed off i could be totally wrong on that but assuming that this impacts the car companies today car prices are going to go up like i don't think there's really any way around that dealerships that are porting these in it's going to go up. If that happens, loan originations will go down, the number of loans being issued by Ally. And unless the interest rate drops too, I think it's going to be hard for their net interest margins not to contract because they earn the best spreads on their auto loans. So Ally sold off pretty hard. I think, well, it's been obviously a crazy week, but they got sold off pretty hard i suspect they will be impacted by this yeah i don't know if i agree with

you on this one as hard as they can be flexible right with what they're originating and if used car prices go up they benefit they can like their existing loan should be fine and it's over a multi-year period so the loan book doesn't get recycled every month it's on a three to four year time horizon. And the only thing I would be concerned about, I think, is if loan loss rates go up. Because again, if there's a consumer pinch, and people have less funds available, things are getting more expensive, blah, blah, blah, blah, blah. But aren't they the one like, I would be worried about a dealership, but Ally can – they can get through this a little bit better, I would think, especially if they can pivot pretty flexibly. I mean they made some mistakes in 2022 around their lending, and they pivoted pretty well.

I mean they're still recovering from that, but they've been profitable the whole time. I would think – I don't know. They're going to be impacted, but I don't think it's a dire situation for them. No. Yeah, I wouldn't say it's dire. But I think what most people expect – and this is why O'Reilly stock I think has gone up over the last week. I could be wrong on that, but I know it's been less impacted – is anyone that's got that five-year-old, seven-year-old vehicle, if they were considering a purchase, even if it's a used car, even if it's a new car, they're pushing that off. And they'd rather just invest in improving their existing car for the time being, which benefits, obviously, O'Reilly. If people are spending more money on their older cars, that's beneficial for O'Reilly. If they're deferring – if altogether car purchases declines, Ally would be impacted, even if it's used versus new. Yeah, somewhat.

But they take in – I think they only take in like 10% of the loans that they see. So I don't know. If they have to take in fewer loans and they're just sitting in treasuries for a little bit, yes, their margins are going to contract, but I don't know. That's my thought is basically you'll see some net interest margin contraction. It's not the end of the world. It's not like they go bankrupt because of this, but they're already seeing a lot of net interest margin pressure. But if they have to buy treasuries and interest rates don't come down, which so far it seems like the Fed is waiting, then net interest margins potentially contract. But yeah, I don't know.

We can – if the impact is interest rates here, if that's how your company is impacted primarily, I kind of think that is a second order effect. like if it's not pure tariff increase then i kind of say like i would not call that a direct impact because okay well you have to see what happens with interest rates okay i'm getting a comment here again this is i think less than 10 minutes into recording uh thank you for the anonymous guy evergreen here says hey guys trump just announced that 125 tariff is only going to be applied to china while the rest of country should only be at 10 over the next 90 days markets are ripping crazy times let's walk up spy wow whoa yeah that happened right as we started recording uh guess what the s&p is up ryan today five percent seven seven percent let's find some walter

bloomberg uh tweets which he's getting some slander this guy just copy and paste bloomberg headlines uh so don't blame the messenger when all these media outlets are taking his step but that's another story let's let's uh do a little live digging here ryan walter bloomberg okay i appreciate the comment here here's the other thing the situation is so fluid it's changing every day my biggest concern would be if you have a huge chunk of your costs coming out of china that's a business you should worry about and i don't know part of me just thinks like fade all of this i know that's lazy thinking but i think if it made everything but china fade everything but but any anything with huge exposure to china do

should i read the headlines first before we get into it because i think go ahead honestly you got proven right here in about 10 minutes on the the pauses okay walter bloomberg i think it's either tweet it's either the truth social stuff or some sort of uh news conference trump raising china tariff to 125 effective immediately trump authorized a 90-day pause on tariffs applies to reciprocal and 10% tariffs effective immediately. So I'm assuming, yeah. Washington AP, so the Associated Press, Trump says he's backing down on most nation tariffs

for 90 days amid market meltdown, but he's raising China tariffs. All right. Well, there you go. I talked about this a bit, I think when Trump first came into office. Maybe it was when the tariff situation was just starting, But he – and I think this administration overall cannot experience like a 20% drawdown in the indices.

They don't like it? You mean they don't enjoy it and they get scared by it? I think – and maybe it's any administration today. like it's such a barometer for people's approval of of a president which even though it shouldn't be it's like i saw stuff like approval ratings have plummeted since this happened and i would bet you if markets didn't change at all nothing would have happened to approval ratings so i just don't think an administration can weather a downturn in an index like that especially when it's self-inflicted so that would be my guess for the i guess what inspired the pushback or the

delay because maybe but the china one is going to impact the markets either way if the 125 percent stays intact i guess maybe in an election year but it's just too big brain thinking to believe in i mean the market went down what a significant bear market in 2022 and no one talked about that when it came to the election, it was more of inflation. Now, that was an inflation-induced downturn, but I think cost of living is much more important, which, well, depending on how much of your lifestyle is financed by cheap Chinese goods, that could get more expensive here. The way, and maybe we are getting into the country-level stuff, the way I like to look at it Because it seems like they're targeting China aggressively, but everywhere else, it's probably not going to be as bad as people think.

Yeah, I think that's fair. I think that's probably the easiest and most helpful way to think about it in terms of like, if you just think about it that way, over the next five years, you will probably make actions today that serve you well over the next five years. If you start to overthink every single country's implication, you start to think, oh, how is that going to have an impact on Google's advertising revenue? Every headline. You're just going to get overwhelmed and make bad decisions. Exactly. Let me just fly through a couple of the other ones because here's just how I think about it overall. The secondary impact, all the software stocks, I think the biggest impact that they would see other than I own Paycom.

So if there was like big mass layoffs, they'd be impacted. But for most of the B2B software, I just think if the cost of goods, cost of labor, cost of whatever goes up, budgets tighten, potentially you start to see slowing growth rates across some of these software businesses. Maybe you start to see companies being a little more discerning about their software spend. Kind of applies the same for remittances. So I own Wise and Remitly. I think if consumers are a little more pinched, if inflation – like here's my thinking. You add a bunch of tariffs, inflation goes up. Consumers don't have as much discretionary income.

They can't send as much money back home. Remittance services are impacted by that in terms of volume. But I still kind of think of that as second-order impacts. Like every business is impacted if American – every American business is impacted if American consumers don't spend as much money. Yeah, and there's a lot of factors with Wise and Remitley. You have the devalued dollar potentially that they've been talking about. You have the immigration stuff. That's a whole other political football that's kind of been something new with this administration.

So what I've thought of or what I've realized or maybe it was just a nice reminder is market share gainers, market share takers is a good place to be. Where I look at Wise and Remitly, okay, if the remittance market takes a tumble, they're taking so much market share within remittances that I think they'll still grow. Yeah, anti-fragile companies. that's kind of the you know they benefit in situations like this i'm going to go quickly through four companies that i don't think should be very impacted at all you tell me where i'm wrong the mexican airports i don't see the biggest impact now once again second order of facts consumers can spend less money maybe they go to less trips and you have less tourist volume through the mexican airports but yeah but most of the mexican airports their volume is domestic so

So even though international, they're big spenders, they can help with commercial activities, the majority of their volume is domestic. So even if the United States traveler is a little poor, that's not going to affect them that much. And we've seen their traffic numbers hold up through March. Who knows? Maybe we'll get rug pulled in April and May, but the numbers look okay for now. Second one is coupon. Maybe I haven't thought through it at all, but I don't really see how they're impacted. They don't do business in the U.S.

They don't acquire goods from the U.S. They're just a totally separate business. So I don't really see how they would be impacted. So the stock has sold off, which is kind of just funny. Maybe it's just the general correlation to indices. Yeah, there's – well, right now – well, maybe it's ripping now because the South Korean ones are off. Again, trying not to overthink this. Yeah, I mean it's up 4% today now.

maybe because there's a lot of south korean car imports to the united states they're thinking is okay that economy could go through a huge recession if that goes away entirely which it seems like an overreaction but again coupang is a market share taker there and i will reiterate this, the administration wants a devalued dollar. So any company like Coupang that has seen major headwinds over the last few years by the Korean won and other countries, you know, applies to the local currency getting devalued versus the US dollar. If that reverses Coupang's earnings in US dollar terms are going to see a massive tailwind. So again, maybe they're a beneficiary who knows third one here philip morris i don't really see how they would be

too impacted they don't sell cigarettes in the united states so that part won't be impacted i try to do some research on the zin production or zin supply chain and it looks like synthetic nicotine it's just made in colorado yeah it's just made in labs local to the market so if they're selling zin in sweden i assume there's a sweden lab that produces the synthetic nicotine but But most of the business is in the U.S., so it's all localized here. It's not crossing borders. I just overall don't really see why there'd be too much of an impact to Philip Morris, plus Zinn's still a very small part of the business. And the last one is O'Reilly.

I think if cars become way less affordable, people will spend more on their used cars already, which benefits them. All right. Yeah, I agree with that one. Hard not to agree with. Philip Morris. Well, why don't we go through mine? I made some buys and sells this week and I guess I can go through those and then we can talk about anything that interests you. Maybe you can ask any questions or if you're curious about my decisions, I guess, yeah, my portfolio as of this moment. Well, let's just talk about what I bought and sold. So I bought some Airbnb,

one tranche at tranche. Sorry, that's a fancy word. Watch the big short too much. one purchase at $114, one at $106. I also bought some Alsea, $45. Added a little bit to Coupang, GoGo, Nelnet. But the big decision I made, and it looks okay right now, not sure if it will be the right decision, but I felt good about it at the time because I felt like there was... Stock was getting pretty fully valued. And I, again, with the Airbnb purchase, I'll say a purchase and some ads to some other things. I felt there was a lot of other opportunities in my portfolio. I sold out of Philip Morris International entirely at $161. It looks good now because everything fell right after that. But I'm out of, I guess, not never selling Philip Morris,

still of the business, but I outlined it in the newsletter, which again, check that out on the Chachette Stocks newsletter on Substack. Just did some basic analysis and thought some other ideas look better. I bought some more Mittley, bought a little of the TLT, long-term treasury bonds, to basically have a cash position, stuff like that. And then I sold a little of the Mexican Stock Exchange as that had done well to find some other purchases. So not too much activity, but the big one, selling out of Philip Morris and adding Airbnb. I will say another, the last thing is what's frustrating is these brokerages not giving instant access to your funds. When you have to wait a week and you deposit cash from that high yield savings account, feels like forever

during a market crash yeah yeah which with ibkr our sponsor here you get 3.6 percent uh interest on your cash no matter what when it's sitting in ibkr so you basically have sort of a high yield savings account within there um for me i only bought two things i bought google and i bought airbnb i've wanted to own airbnb for a long time if the if the worst thing that comes of these tariffs are that people aren't able to travel as much like airbnb is going to be impacted it's not going to kill them so i think this is a fine entry point and looks like uh that might be the best best performing stock within two days of buying that i've ever had yeah what's what's that now is it i'm sure everything's just ripping

100 oh yeah 116 wow that is really who knows when we release this on sunday the markets could be crashing again so i i i don't know i mean look i i i was on twitter i said something along the lines of apple nike and tesla are going to get hit essentially the china risk right these countries or excuse me, companies have huge exposure to China. And that is just a crazy situation at the moment with both countries putting 100% tariffs on themselves. Someone said, it looks like they're right now that that's not going to age well

because they're going to capitulate and they have. But I look at it, let's say, what's Apple going up today? Apple is already up like 5%. It's up 11% as of this writing. Are the tariffs going down to 10% on countries not outside of China? Is that really going to help Apple that much? I would still think they're in a pretty bad spot. Am I wrong?

Am I looking at this wrong? I don't know. I know they have – I'm not totally sure where the bulk of their supply chain is. I have heard it's in China. It's mostly China. But aren't there – isn't there some in India as well? They're trying to diversify. a little bit it's gonna take a long time yeah i on this downturn on on over the last week

the last thing i would have thought is now wow i should buy apple like that's what i think they are probably one of the most at risk of of a big increase in costs and they aren't that cheap to begin with right trailing p is like 28 probably 30 now after this rip yeah i went through maybe i'll actually share this i went basically through the magnificent seven and i wrote a piece this weekend just called what's the cheapest magnificent seven stock and i just looked at three metrics uh let's make sure i get them right ev to i know none of these are perfect you got to look at forward results all that stuff ev to free cash flow ev to ebit in forward ev to ebit those are the three that i looked at i think not any one of them is going to be perfect but you can get

some semblance of a valuation there uh if you kind of triangulate and combine the three can you guess what the cheapest was on every single metric trailing trailing ev to free cash flow or it's on all three ev to free cash flow ev to ebit and forward ev to ebit google or alphabet correct yeah long shot you know what was second well not ev to free cash flow because the cap x but meta yeah which is wild after such a big jump for them they had quite the sharp drawdown um after the inauguration yeah alphabet looks interesting people are pretty bearish on them so if you think everything's going to be generally as it was despite some you know pretty pretty tough ai competition things are going to work

out just fine yes they are at this point tied to global gdp growth and if there's a global recession or even a u.s recession they'll get hit in the short run but that doesn't affect their moat or lack thereof or if it's weakening or strengthening over the long term and you have that google cloud division just growing like gangbusters but apple before these tariffs there was no growth I don't get it. Same with Nike. Nike is probably even in a worse spot. Nike and Tesla are both in a worse spot than Apple with declining revenues.

And that China market, might as well kiss that goodbye. I mean, they are, and China may not retaliate this way, but they are right on the chopping block if they want to. Just look at what they did to H&M that one time. They just wiped them out from the entire country. I don't understand. And you have the Treasury Secretary of the United States saying that they might ban or – let me get the full quote of what was said because this would scare me as an owner of Chinese stocks specifically. Which, to be clear, you are not an owner of Chinese stocks.

If I was, if I was, yeah. This is from – I can never pronounce her last name. Kyla Scanlon's newsletter. Scanlon. Yeah, yeah. Good newsletter. very, very popular, like, I'd say economist, writer, something like that. Okay, a lot of people are saying the ultimate endgame here is to decimate China. Treasury Secretary Besant said

that they could remove Chinese stocks from US exchanges because, quote, everything is on the table. I don't want any exposure to China that regardless of whether those stocks are ripping today i mean my god why why would you take that risk even if it works out there is so many risks here and you can just play different games yeah i just think there's okay coupon for example like you want to get away from all of this coupon is a way to do it uh you want to get away from all this ulcea like i don't think this is gonna affect mexican fast food franchises that buy their goods in the country like i think there's ways to make money where you don't have to bet on this i recommend looking at companies that you think are going to be insulated and have no impact

no no supply chains nothing involved in china that might be hard maybe i'm underestimating China-U.S., right, because Coupang is definitely China, South Korea. Sure, sure, sure. But yeah, anything with China-U.S. relations, I'm kind of just staying away. Maybe I'm underestimating how many of my own portfolio companies have some impact there, have some sort of supply chain. Most companies – for example, let's look at American Express. That's one that's flying at my watch list. Will they be impacted by a recession?

Yes. If spending goes down, sure. Yeah. If travel spending goes down, especially they will get impacted, but they are not going to be decimated by tariffs. And I think they can come out strong on the other side. This is also another example of why caring about a conservative balance sheet, it sounds suboptimal to have a conservative balance sheet for about 9 out of 10 years. But every 1 out of 10 years, maybe even less, you go, oh, it's nice that we have $5 to $6 billion in net cash. Okay, I'm not concerned about Airbnb making it through to the other side. whereas if airbnb had was levered three times to their ebitda i would be concerned let me ask you this am i dumb for not buying amazon through all this well you probably look like it well i'm not sure how they're reacting let's i'm just pulling this up in real time uh i guess thank you trump for making it newsworthy as we recorded this episode

Thank you for that commenter because we could have looked like total idiots. They're up 9% today, so I guess right now it looks dumb, but I don't think so. They could get impacted really badly by this. They're someone that I would like to see how it shakes out. Sure. All right. We should also mention here, we are going to be moving our power hours to, what did you say, Thursdays? thursdays maybe later in the day just to give us as much of the week's news as possible to hit yeah we'll do thursday maybe the same time maybe a little later kind of we'll have to work that

ourselves and we're going to release it like friday at midnight just so we don't get like last week we had just totally stale news on sunday and it probably works better to just release it on friday morning either way yeah we're gonna have we're gonna stop having such uh enormous lag time between recording and production because last week was a perfect example of how stale everything becomes let's we didn't talk we didn't talk airbnb or philip morris let's let's talk through those because those are probably you know we made some trims around the edges but airbnb we both bought them i'm assuming a full position for you maybe no just a little bit i made it a full position pretty much i'm pretty confident

in the company here if we pull up maybe we can just pull up some fin chat charts here i guess i should have had that loaded up what's our market cap as of now ryan let's see here this is before i think this actually might be inclusive 65.7 it's probably after today i would assume it's around 70 low 70s let's just go the the 65 is probably right around where we were buying so if 65 billion now you have i think i wish i had the numbers in front of me a lot of net cash on the balance sheet so let's say that enterprise value has fallen below 60 billion now if i look at their revenue figures and i think i remember this correctly. They are at $11.2 billion in revenue. Given their growth rates, given

their geographical expansion, we can't go through the full thesis in this episode. But I think that there's a pretty clear path to them, unless we go through a global depression, for them to hit $20 billion in revenue over the next five to seven years, maybe even sub five years, if the economy keeps growing at a good rate. Again, I should say, I don't know whether that's going to happen. But they can get to $20 billion in revenue. And I think given this is excluding any benefits they'll have from the net interest income from the interest income they hold on customer deposits, I think they have a path to 30% operating margins if they want to. So that it turns into about $6 billion in earnings.

And we're already at, I think, 22. Is that 22% right there, Ryan? Yeah. Offering margins? Yeah. So again, I'm saying a sub $60 billion enterprise value. We get a path to, I think, $6 billion in earnings. Really attractive working capital dynamics.

So the cash flow is going to look even better. For a business, I think, that can widen its moat. High quality. Great brand. Global diversification. strong network effect, all that good stuff. And they keep buying back stock. So I'm seeing a good positive indicator on their capital allocation strategy, whatever, just how good they are at that. I mean, it all adds up to me that I think, look, cheap stock, good business,

good management team. I like it. Yeah. I think EBIT's a reasonable metric to use for them here. and ev to ebit uh basically 22 times when we were buying this i mean if you offered that to me i don't know a year ago two years ago i would have been very happy taking it i think so um yeah i mean that's very reasonable price last year it was trading at 60 times he bet so um yeah i think for some reason I really don't know what this is I look at Airbnb and booking holdings and I think both will do fine

but you look at them side by side booking is larger and they're growing even faster and they're cheaper and I think why should I own Airbnb but for some reason I just think Airbnb has a brighter future

younger people and again the bookings they are trying to make their for uh their location or sorry their uh whatever it is their units their sorry what can i think the the places where people can stay their stays the people that place about they're trying to make it more affordable which is going to impact gbv even though they should grow and i think they have more room to grow in many more markets as booking is probably much more globally diversified for example airbnb is pushing heavily into latin America, Germany, Japan, South Korea, where I think booking probably is much more saturated

in those markets. And Airbnb has not done nearly the adjacent revenue opportunities as booking. So I think there's just a lot more easy hurdles to climb for Airbnb. And I think they're a better brand. They're competitively advantaged. I mean, it would be so hard to amass this supply of homes on a marketplace today, especially when Airbnb is already available and they do a good job taking care of their hosts. So yeah, I think there's a lot to like. I think they can grow booking volumes probably 10%, maybe 10% plus for a decade. I hope that's not too overconfident, but I mean, obviously part of that's dependent on the average daily rate. But I think they can really continue to grow like nights booked at a really solid rate for a long time.

So I like it. Reasonable valuation. They can be extremely profitable and they've got that cash flow advantage as well. So yeah, I'll leave it there. You sold Philip Morris. Give me your thoughts. Well, it comes down to this. The stock was ripping when everything else was falling.

And again, I looked at Airbnb. and I said, okay, in five years, I think in an optimistic scenario, Philip Morris can get down to an EV to EBIT of about 10, but maybe they probably need some foreign currency help. I'm not so sure if they can do that, if they're not going to be as fast of a grower. And I thought, look, this is a giant business. Market cap is about $250 billion.

This is not including dividends. maybe that could double within five to 10 years. And I thought, yeah, look, Philip Morris International, I think they'll do fine for shareholders over the longterm. But I saw that, and I just saw the valuation got really, really stretched and some other things on my watch list,

specifically Airbnb, I thought were much more attractive. And I just switched it and it was in a non-taxable account. So taxes were not a concern. and it's just the fact that phil morris international had gone up almost 100 in a year when a lot of stuff had fallen i would love to own phil morris again but as of now on the watch list okay before we move on and i want to talk about why i bought google

but before we do i do want to mention there was we always talk about finchette here on days like this last week or weeks like this last week i should say it is so helpful to have all this data at your fingertips to be able to do your work quickly and go from idea to actual investment so much faster than if you're tracking this data manually so we use it here finchat.io slash chitchat will get you 15 off any paid plans recommend checking it out and blue chippers club It's also a nice time to be in a community of stock-focused investors because you A, get good investing ideas. You can get feedback on your current ideas. You can break down your portfolio. You can talk to other investors, see what they're thinking about stuff like this.

And Blue Trippers Club gives you just that. They are building a tight-knit community of stock-focused investors. I really love the platform and I recommend checking it out. we're in this community ourselves we talk about stocks we own changes that we're making all the time and it's bluechippersclub.com if you're interested in joining check it out hit apply we look forward to seeing you in there the link is in the description do we want to talk about uh google sure first we had a comment that said neither of you pulled the trigger on new holdings during the downturn. New Holdings, New Bank did not. I do like the business, but I guess it wasn't on the top of the watch list. I will say this, though. I'm seeing this

on Twitter as we're recording because I wanted to check people's reaction to these new announcements, and I'm seeing it in the comments here. People seem to be thinking this is the bottom, and I we'll say it might be. Who knows? I have no idea. However, historically, the biggest up days, and we just saw QQQ go up 10% today. Historically, the biggest up days are in bear markets. So call me crazy for thinking I'm not 100% certain of what comes next. I am just waiting patiently. And yeah, most of my portfolio is invested in stocks, but with the cash I have, I'm waiting patiently for any new opportunities that I think may arise, regardless of where the broad market goes. Is this the only recession in history that could be changed with a tweet?

I think a lot of people think that. I don't know whether it's true. Because the uncertainty around all this, that is not helpful. Sure. Yeah, it's really not helpful for businesses that transact globally like that. We're already seeing airlines really reduce their guidance. I mean, there's just a ton of stuff here that is showing in recession may be out there. And this was before.

Again, that's not including anything after the tariff implementation, which has only been the last few weeks. And let's not forget that China has 125% tariffs on it. And that is the second largest trading partner with the United States. And the only reason Mexico is number one is because China routes through Mexico to avoid the previous tariffs. So, again, call me crazy, but I'm not saying that's a guaranteed bottom there. Yeah. Yeah, it's – I don't know. On the one hand, it feels very self-inflicted. But at this point, I think a lot of damage has been done that is not reversible, that may have tarnished relationships with important trade partners. And who even knows if it is done? It's a 90-day delay. A lot more can happen. Trump pushed off tariffs with Canada and Mexico for a month, and everyone thought the world was coming back together again, and look what's happened.

Snip, snap, snip, snap. It was like Mexico and Canada were right in the crosshairs. Now they're not. The uncertainty I think is the biggest concern because if you're a business, what do you do? You don't know what's going to happen. It can change next week. Manufacturing plans take years to really finalize. You pull back on your investments, which a lot of companies have. A lot of companies that were planning to invest abroad have stopped doing so because they weren't sure. You create this cautious environment. People don't know what they can do. They don't know how much something's going to cost, how much a project's going to cost, so they stop. Okay, I want to talk about Google. This is maybe the most boring stock to talk about, but I don't see how it doesn't work from here. Maybe I kind of put my brain in a pretzel there. It should work from here is what I'm trying to say. 14 – I think it was 15 times trailing EBIT. And even with the – they doubled CapEx last year, which keep in mind, that is a decision.

that that's it it's not like oh they can't control it that's a decision they can pull back if ai spending is down and yeah that's going to affect cloud revenue growth but it's not something that is most of it is not uh what is it maintenance capex yeah it was only 25 times i know that doesn't sound that cheap 25 times easy to free cash flow So – but they did that on the most elevated CapEx they've ever had. So I think it's a very reasonable price and I think it's one of the best digital businesses in the world. I don't think that's a very controversial statement. And cloud feels like the sky is the limit there.

And anecdotally, and I get kind of a sneak peek into this through FinChat working there, Gemini and Google Cloud have tons of enthusiasm around developers, the development community. If you're doing any sort of AI-type development, Google Cloud is like a premier partner, and they give a lot of discounts for AI-type projects. cheapest infrastructure right just because of the internal stuff they built and the 10 yearly they have with the tpus intensive processing units so i think they have the cheapest uh whatever they're the most efficient compared to someone like open ai who people have talked about are not as efficient what i'm realizing is um so different cloud i kind of had this like i didn't totally understand how the cloud industry worked a year ago i probably still don't but I used to think it was just like self-serve you get started, boom,

you're going, you're up on the clouds and then you can change. There's maybe some development switching costs, but it's not a big deal. You're sorry. You're up. You're, you're running workloads on the cloud, but certain cloud providers are obviously better for certain use cases. And then on top of it, you actually are kind of just negotiating this with some customer support rep, like some customer success person who's like, you're saying like, what's the lowest rate you can give me so i don't have to shift this to aws and google offers a ton

of like discounts for ai focused uh companies and so it's and i don't think that's like it's not secret knowledge you could just look that up and they have the capital to do so they have the balance sheet to do so where open ai i don't know if it's coming from a desperate standpoint but they have to raise 40 billion dollars from softbank and softbank and others but it's just an entirely different competitive set yeah anyway i just think cloud continues to be in a good place especially for google youtube youtube at this point feels undisruptable like you had probably the biggest guy of all time in tiktok and they just copied it they just copied shorts yeah youtube will be okay i don't know if it'll ever be a large and important part of

the business but who knows and google search keeps chugging along huh google search does well they're buying back stock they consistently buy back yeah i know management like is chronically frustrating because they don't totally optimize the pnl for shareholders but they continue to be on the at the forefront of innovation like they have so much talent you see i think you're seeing this in waymo today if they just purely optimize for shareholders i don't know if you get the successes that they've built like a waymo like a gcp like it's a balance it's a balance yeah we have a comment here that says spotify is on a collision course with youtube yeah i mean they're both competing with each other, but YouTube is in the better spot. I think both

will succeed and probably push out everyone else within kind of the self-serve and do-it-yourself videos and podcasts and audio and whatever. But yeah, Spotify and YouTube, it's almost that old Netflix versus HBO analogy. Netflix is trying to become like HBO before HBO becomes like Netflix. Spotify is trying to become more like YouTube before YouTube becomes more like Spotify. but i think they unlike the hbo situation they will both win now i agree with you right i like i like the alphabet pitch it's on my watch list i could see myself phoning it i guess i just like airbnb more yeah yeah 13 times forward ebit that 40 that can change you might revise that 40 but let's say you once you have a longer time horizon than as we're

seeing with the literal one week later you have a longer time horizon than the president yeah yeah apparently i do let's is there can we talk about anything but how much time do we have what what's our time what's our 10 minutes probably 10 minutes oh okay we're almost well here's something i think is again comes back to my uncertainty we have a comment here that says i wonder if the impacts of the tweets which i'm assuming he's saying is the president will get lower if things keep changing every day. Trust is going down with every tweet. Yeah, that might be at this point the number one concern because there has to be some form of whatever the number is. There has to be some form of stability or else I have no idea what to

do. And you can just ignore it, but I'm sorry, I'm saying not me, but like a business has no idea what to do and at some point i guess you could ignore it but it's the uncertainty is the biggest thing i would say yeah i used to tell people especially whenever anyone talks politics and they say oh this president would be better for the stock market or whatever i used to always try a button and say there's actually historically no real correlation between uh political party and stock market returns i don't know if i can say that anymore there no one impacts it more than the president apparently at this point yeah yeah so i guess let's summarize according to the walter bloomberg tweets and the press conference that is going on as we're

recording this china tariffs remain but there is a 90-day pause on the reciprocal tariffs on all the other countries go through what that means for the cost of an iphone you've got a great uh display yeah i can and this was in the wall street journal and i believe this would apply for the China tariffs and it's probably even more because they doubled the tariffs coming in. So this is the cost of an iPhone, not for you to buy, but for Apple to make. Now the old pre-tariff cost was about $550 estimated by the Wall Street Journal. Let's just say this is directionally correct. Now with the new tariffs, and this is probably even before that boost, that was going

to add almost $300 to the cost of importing the iPhone. So you get a total of $850. Now, if Apple wants to maintain their margin, they need to probably raise the price of, what does an iPhone cost now? A thousand bucks. So let's say before their gross margin was 50% or maybe 40%, maybe a little bit lower. If they want to maintain that margin, they need to sell an iphone at fifteen hundred dollars and they're that's just maintaining the same margin so again why are we buying apple now i will say from this chart that you've got here the processor is made in taiwan the display is made in south korea the memory is made in the u.s storage made in japan

the only costs here are the battery and i believe the main enclosure so what sorry it was made in where are made in japan or sorry i made in china the battery and the main enclosure made in china it looks like are the two the only two i'm seeing so if the terrorist tariffs are brought back on all the other uh components maybe it does make sense that apple's kind of trading up on this but i think it's it's the again i this can change but i think it's the in like the fact that it's the final assembly is in china so it's made the iphone is made in china and then imported to us that's going to now have 125 here's a tweet from i don't know who this guy's ernie ted is shy uh i follow him maybe that's he's an economist of some sort

He seems to be someone who keeps pretty well up with this. And here's what, again, is like what this new update as of this recording is. It says, folks, a 10% broad tariff on everything, so every other country, plus 125% on China is a 25 percentage point increase in the effective tariff rate, even accounting for the U.S.-Mexico-Canada trade agreement. That's almost exactly where 2025 tariff policy was this morning. It was just less concentrated on China and more weighted overseas. That's what I think I'm trying to say here is that it's getting more aggressive to China.

But if you're thinking about just as, you know, U.S. versus ex-U.S., it's still the same. Now, personally, I like this strategy because China is an unfair player on the global scale. so maybe over the long term the allies the u.s allies in asia europe and latin america maybe they take on all this stuff that's not going to be cheap that's not going to be cheap and it's china's not going to sit still and let this happen to them yeah we've got a little under five minutes i think we have an ad we have an ad to read right before we get out of here well yeah we already mentioned uh fin chat but like i said we use them for all this recommend checking it out finchat.io slash chit chat we did interactive

i thought we had a third one we already talked about them blue chippers club as well okay i must have been reading walter bloomberg either way this is a great time to talk with and i'll be probably posting some stuff i've been posting like the airbnb stuff maybe talk about the philip more stuff and any decisions i've been making it's fantastic to have that community during times like this as opposed to just seeing all the manic stuff on twitter yeah especially as twitter seems to be imploding with bots at the moment it's always nice alternatives that is a fun that's a fun part i thought they were acquired by xai couldn't the ai all these bots say the exact same thing can't they whatever that's a whole another thing what i have a different question for you i have a

question for you okay in calendar year 2025 will in calendar year 2025 will tesla buy out x and xai the combo company no they won't have enough money well all stock deal ryan it's all stock and it's going to if they do this musk's ownership stake of the whole company will increase because he owns so much of x and xai i don't think he'll be able to get it across the finish line and i think tesla shareholders would be upset if it happened while tesla is down 50 from highs yeah let's see how they're reacting today wow up as of this writing uh 20 percent ryan oh my gosh oh how to again well the the tariffs are worse on china am i again i feel like i'm taking crazy pills to use that to use that meme yeah

Yeah. We'll see what happens. You know, what's the most concerning thing for Tesla is the deliveries figure. That's the biggest issue. It doesn't, like forget about the supply chain for a second. Like demand, there is a demand issue. That's a huge problem. And you have an extremely costly business to run. You need demand to keep growing. So yeah, and if they're saying, well, demand is not an issue, then why are they producing less cars? If – and I know he loves to say demand is never an issue, but you should produce as many cars as you possibly can then. And you've decreased prices and you've decreased production. So anyways, all right. Let me ask you this. We have another rough week let's say ahead. Tomorrow, something changes.

Yeah, who knows? Who are you? What stocks? are you would you feel most compelled to add to okay yeah this is a segment we didn't even get to american express is on the watch list i'm watching for them to get cheaper didn't pull the trigger on them yet obviously i already pulled the trigger on airbnb and i'm gonna say ryan this is one you own and you're a little bit pessimistic but i'd say pretty neutral and like they will get affected we kind of had the discussion earlier

analyte financial 0.8 times book value 668 million dollars in net income on i think trough earnings versus a market cap of sub $10 billion. I think they can get back to over $1 billion in earnings at some point in the future. You know, 2025 might be rough, but I think they're in a good spot. And if they can start returning cash to shareholders through buybacks,

this thing will do quite well over the next decade. I like that. I'd probably add a little more to Airbnb. And then I think Coupang's up there for me. It's already a large position, but I think they're at a very reasonable price right now. I think they're trading at their cheapest gross profit multiple they've ever had. Did you see the bio on the big VC that invested in Coupang?

I did. How much he said he loves BombCoup. That was quite optimistic, right? Yeah. Makes you think. Seems like one of the sharpest VCs out there. I forget his name. And bested in Coupang and just had glowing remarks on Bombsuit Kim, the founder, which made me feel quite good as a shareholder.

We are running up on time. To bridge the gap of China and US trade relations, we are going to be talking about Li Lu next. That's true. Good. Yeah. Good timing on that. But yeah, funny timing for an investor who spent his early life in China, had a very – had an insane story I was reading about this morning and has now become sort of – people thought he was kind of a glue between American business and China. We'll see how that take lasts over the next few months.

But anything else you want to – I live about 20 minutes from their offices, Himalayan capital. I don't think I'm going to be let in if I go down there, but anything else you want to mention before we close this out? I don't think so. If you want, you know, we'll have consistent amount of shows. The power hours we're going to be talking about all the craziness, like the one we're recording right now, we're going to be talking about all the craziness, but any sort of long

term stuff, you know, the Leloo bio, any sort of deep dives on companies, interviewing analysts, that'll be on our Wednesday morning episodes. We might change up the schedule a little bit. might change it to Tuesday or Monday. Who knows if we make the power out released the day after we record it. But either way, the two type of episodes we do every week is not going to change. All right. As a disclosure, we are not financial advisors. Anything we say on this show is not formal advice or recommendation. Ryan, I or any podcast guests may hold securities discussed in this podcast, may have held them in the past and may buy, sell or hold them in the future.

thank you everyone for tuning in for the live stream today and for listening wherever you get your podcasts and we'll see you next week