Chit Chat Stocks - IPH #92: CEO Mt. Rushmore; Debating The Widest Moats; Are We In 1995 or 1999?

Episode Date: January 7, 2024

The Investing Power Hour is live-streamed every Thursday on YouTube. This week we discussed: - The iRobot/Amazon Merger Arbitrage - Our Mt. Rushmore of Management Teams - Sectors we like for 2024 - The impossibility of knowing whether a bubble is ending - The most unassailable businesses in the world ***************************************************** Subscribe to our YouTube channel: https://www.youtube.com/@ChitChatMoney/featured  Follow us on Twitter/X: https://twitter.com/chitchatmoney  Follow us on Substack: https://chitchatmoney.substack.com/  ********************************************************************* Chit Chat Money is brought to you by Public.com*. Sign up for a high-yield cash account today: ⁠https://public.com/chitchatmoney⁠ *A High-Yield Cash Account is a secondary brokerage account with Public Investing. Funds from this account are automatically deposited into partner banks where they earn a variable interest and are eligible for FDIC insurance. Neither Public Investing nor any of its affiliates is a bank. US only. Learn more at ⁠https://public.com/disclosures/high-yield-account⁠ ********************************************************************* Disclosure: Chit Chat Money 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

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advice or recommendation. Now, please enjoy this episode. This is the Investing Power Hour, number 92 on Chit Chat Money, soon to be Chit Chat Stocks. My name is Brett Schaefer, and I'm joined, as always, by Ryan Henderson. Today on these episodes, we talk anything financial markets, whether it be a specific stock, whether it be investing analysis, whether it be philosophy, whether it be some sort of interesting tidbit we found. everything's up for grabs ryan we are a bit farther away from each other uh than usual

usually we're actually in the same city little fun fact for the listeners but i am on the other side of the world now so ryan how are things back up in seattle things are good same old same old here in rainy seattle i'm curious columbia you're just not to not to oust you to the listeners here but you're in Columbia. I think a couple of months ago, maybe it was about six months ago, we did a segment about how cheap the economy was and how it seemed like there was a lot of bad narratives out there. I'm curious, first impressions from you, does it seem like a reasonable place to be or are there some truth to the narratives? yeah so three days in i'm going to be the foremost expert on the entire columbian economy no that's

a joke but you know societal collapse is not doesn't seem imminent people seem to be going about their days and the stores are crowded whatever you know but yeah i think that's it yeah if you for anyone that's joining us on the live stream which for the listeners these go live every thursday 9 30 a.m pacific 12 30 eastern you can watch the replays on youtube or the replay will also come out in your podcast player of choice on sunday mornings but yeah i am in a little sunnier spot i think that's maybe the big difference uh for anyone watching the doesn't help with my my pale skin but let's get right into it before we get to it we're going to talk about this basically for the next month i think for the next eight episodes straights give a

reminder at the top of every episode we are doing the name change so we're going from chit chat money to chit chat stocks not much is going to change but that's the slight change we're making it again chit chat stocks uh so yeah and then if you like this episode give us a review on apple or spotify as well as if you like it share it with someone you think would be interested in the podcast ryan do you want to talk about some of these apple review amas we missed maybe give them a shout out before we get into the topics today sure yeah so i guess just for context for listeners that weren't here last week we didn't ask me anything or ask us anything and there really wasn't um there's a decent amount of inquiries from people i mean every power every power hour

we do is kind of an ask us anything, but we did a little more of a formal one here and we asked people to give us questions through reviews. However, Apple reviews loves to take too long to process. And so we got some after the show last week. And so we're going to go through some of those and just kind of give a shout out to the people that reviewed the podcast. So Charles B one-on-one says good stuff, really enjoying the show. It offers a ton of value and has been helping me to be able to form a structured qualitative thesis for whatever equity I go up against. Love that, by the way. That's hopefully the goal of the show here.

He says, I am curious what industry or sector is interesting to you guys the most going into 2024? I say we just take this here before we talk about the next review. Sure. Go ahead. Kind of. Well, I will say I don't usually look at it as industry that excites me unless there's something that's been just bombed out. So, I mean, financials I thought was pretty compelling last year when after the Silicon Valley banking crisis, it seemed like valuations had just gotten pretty depressed. So financials across the board seemed pretty compelling.

So I don't really know if there's any individual industry that I see that same thing with right now. I mean, financials does still seem pretty attractive, but with the recent news about interest rates coming down, stocks have kind of reacted more so than I would have hoped since I didn't have a chance to buy stocks yet. But then I'll give some themes maybe that are attracting me. So M&A, it feels like last year we had Andrew Walker on the show and he talked about the opportunity in mergers and acquisitions right now and merger and acquisition arbitrage because there's so much lawsuits and regulatory kind of antitrust concerns. And maybe the concerns were always there, but now they're actually suing to block and it's leading to these big spreads between acquisition prices and quoted prices.

So I've been looking through those a lot. It's hard not being a lawyer, but sometimes it's hard not to be attracted to them. So for example, I'm going to talk about this one a little bit. iRobot is supposed to be acquired by Amazon. And there's this interesting paradox where I think it's the EU is saying it's antitrust concerned, monopolistic, whatever. But on the flip side, if the deal doesn't go through, people are concerned iRobot's going to go out of business, which it's kind of a little ironic. They could go out of business if they're not acquired, but they're a monopoly. So I think you have to be profitable to be considered a monopoly, in my opinion. But anyway, so there's just situations like that where, and I think there's like a 25% spread between the acquisition price and the current price. So it's just kind of attractive somewhere. I've been looking a little more and more.

Other areas, last one, oh, I guess Latin American stocks. It feels like a lot of discounts still in that area, same as last year, and some pretty high quality businesses and a lot of government headlines have led to big swings in valuation. So I'd say M&A, financials, and Latin American stocks are kind of three themes I've been looking at. Yeah, I think for anyone that's been listening lately, they know that I agree with the financials too. But the other ones, one connects to Latin America, I guess, from something I've been looking at, is anything connected to aerospace or airlines.

Not necessarily bullish on that, but I think it's quite interesting just studying that industry. I think I want to research at least a couple of those stocks in 2024, whether it's an airline or an airport or anything connected to the airline or aerospace parts market suppliers like Boeing Aerospace. and all the other ones. For example, I was just reading on Value Investors Club, I believe it's the Panamanian airline that also owns or is, not owns, but basically controls the Panama City Airport, which I thought was quite interesting.

And according to this write-up, I haven't looked at it any further. It trades at about five times earnings. So the amount of discounts you can get there could be quite interesting. So yeah, I think Latin America as well, something I want to learn more on. And hopefully I can help with little boots

on the ground if possible, but yeah, that, and then along with anything connected to the aerospace industry. Yeah, I think Latin American related, I'm probably going to veer towards companies that pay a dividend, that pay a bigger dividend, because one, it gives you, you can take the money back in dollars, so it kind of gives you a hedge against any sort of currency risk. But on top of it, I just, I think sometimes I worry, I still worry about the regulatory environment with some of these. And I know that things can change fast in some of these economies.

So having that dividend, it just feels like a little sense of security, the fact that it's going to be paid out to you on a continuous basis. Yep. I agree with that one. Okay. Why don't, you already teased it. Why don't we hit the iRobot merger up first? then i got some fun topics one little tease uh a viral headline that i want to hit from

rich dad poor dad but yeah you go ahead on i robot yeah not too much here for me to talk about i just vaguely have follow the headlines i don't own stock and i robot or anything like that but basically the eu has cited antitrust concerns that i guess somehow i robot has a monopoly over luxury robotic vacuums uh to me well it just feels so stupid the whole thing feels so stupid to be honest i mean what is amazon i think part of the concern is that Amazon will have data around your floor map, which to me, it's like, what are they going to do? Advertise me new rugs? What could they possibly do with that data that's going to be so bad? So I just think it's dumb. It feels like a huge waste of time and government resources

to be going after this when the business could literally, it might not survive on its own and we're worried about it being a monopoly. So it feels strange to me. And I think purely based on that narrative, and I know this probably isn't a good way to allocate money, but purely based on the narrative that if this doesn't go through, this quote unquote monopoly might not exist anymore. Makes me feel like courts are going to be like, okay, yeah, I guess it's not really a monopoly. Plus the market share for iRobot, it's at worldwide, its share of the luxury, so $200 or more vacuums, robotic vacuums, because keep in mind, you could get an actual vacuum that's nice or whatever. It's at 46%. It was at 64% two years ago. I think it's very possible

for people to compete with them it just seems to me like i have a hard time believing this is going to get blocked purely on common sense grounds but if uh i don't know you have any thoughts there any any uh concerns that this is monopolistic or no no concerns that it's monopolistic yeah there's there's it's a funny one it's quite a funny one it's sort of like the big sandwich monopoly stuff, where it's shocking. The regulators across the entire world are focused on certain things, but not other stuff that, well, it's just one man's opinion, I think are clearly anti-competitive, especially some of the big tech stuff out there. But yeah, if you look at iRobot, I will say when I started out investing, this is one of the stocks

I absolutely loved. And luckily, only for a short while, it did have a dominant market share, as Ryan looked at here, and it was pretty consistent for a few years there, but they have a very compelling investor relations page. And they talk about this ecosystem that they're building. And I got caught up in the hype there. But it is just not a good business. And if you look at anyone that has a Roomba, it either sits in its little corner thing, or it really doesn't do anything. They're kind of like these novelty gifts where you might even compare it to, now it might not be in the future for this product but some of the old oculus or vr products where people get it as a gift they think it's interesting and then they don't they stop using it but regarding

the merger arbitrage it's a decent spread when do you know when it's supposed to close or is it just unclear no it might be out there but i i don't know specifically when it's been kind of under investigation. I'm putting air quotes here. They've been looking at it for a while. And I think the deal was announced, I want to say like over a year ago. So I would imagine that it's going to be, it's got to be somewhat soon. The other thing that I think is interesting here is there is a Chinese basically discount provider of these vacuums called Ecovacs, which has just been eating share so i think when you can get i believe it's chinese i could be wrong on that when you can get a brand like that to just eat share that quickly

there's no monopoly here just just no way i mean it was it feels like it was just kind of the first to market basically yeah we have a fake alias joining the show yet again in 2024 thank you One of the few recurring listeners on the actual live stream says Microsoft can get Activision Blizzard, but Amazon acquiring iRobot is a concern logic. I assume that he's saying that sarcastically. I agree with that. I think the only concern I have for the investment case is the downside of iRobot. Because I think if the deal doesn't go through, this thing is, that's a lot of downside. I think compared to some of the other merger ARBs out there, there was Activision Blizzard.

We were looking at Silicon Motion this summer. We actually own that. We, what are some other ones? Can't think of it off the top of my head. There was more of a floor, I think, from a fundamental perspective from those cases. They weren't getting bought out at an extreme premium. And unlike an iRobots case, they actually had a somewhat sustainable business that you say okay there is a low risk of losing money here and a high risk of getting a pretty good return

over the next year or so with irobot i think the concern for me is just that downside the potential downside i mean this thing could be worth zero yeah that's i think why the spread's probably so big. For context, the deal was announced on August 5th, 2022 was when the deal was initially announced. It was valued at $61 a share, but they revised the deal down to basically $52 a share because iRobot had to take on a $200 million credit facility just to continue operating essentially and then november 27th the eu said the deal raises antitrust concerns and that's 2023 so it's been a year and uh what four or five months since this deal was initially announced not sure on any of the court dates unfortunately these things tend to move slow

and i have no idea when this would potentially close if it did but like you said yeah the risk that there's massive downside risk i thought with silicon motion that if the deal broke before was pretty high still and that's just not the case at all here which maybe tells you that the market thinks this will probably close yeah it's like one of those even though it's a 25% spread. Yeah. Yeah. It feels like everyone's like, come on, this is closing.

And if they decide to make a point out of this case for big tech and say you can't acquire stuff like this anymore, then yeah, iRobot could be worth very little. Yeah. Headline 2024, Lena Kahn. Is Amazon too competitive? Is that? No, that's a bad joke. All right. It is.

So she went on a podcast recently. lena khan i think it was oddlots maybe oddlots yeah yeah they have they have a good bloomberg connection yeah jealous lena if you want to come on an even bigger show that i mean that's a fantastic show you know come on uh come on this niche one and we'll we'll talk it out but sorry go ahead yeah uh and she basically kind of was like whatever they're losing a bunch of cases and they were she was kind of asked about that she's like yeah but we are we're hearing that people are afraid companies are afraid to do acquisitions now because of the scrutiny they might face so we're we're being more effective but that's like that doesn't like if it feels

like a bad goal to have like we want people to fear doing acquisitions because we will sue them like that's yeah and she also said i don't mind that where i don't know if that's she has also talked about how she's not afraid to lose cases because she wants to bring stuff in and fully investigate it, which I don't mind. I think that should happen, right? There's nothing wrong with that. I don't think an FTC's track record should be on blocking cases. It should just be of managing stuff properly, being a proper regulator. But from an investing perspective, I kind of like it where companies aren't going to acquire because a lot of times when most acquisitions destroy value. And then second, it can lead to these merger opportunities where

we've seen tons of stuff. I'd really recommend going listen to our show with Andrew Walker back in late 2023, where there could be this change here and there could be a ton of just a lot of potential because of the uncertainty and this kind of new regime of antitrust and regulation coming through. Okay. Do we want to touch on this second one here, this review? uh oh yeah yeah do it yeah um you go ahead yeah okay here we go so will underscore arnold six says great value investing pod i love how ryan

and brett break down the fundamentals when researching a company makes things easy to understand for those with intermediate knowledge of the investing landscape appreciate that's what we want that's what we want so expect more of that 2024 and beyond he says regarding my question for the ama episode who are your top five management teams today amongst the companies you researched i think you mentioned netflix being up there i would be interested on how companies like adian coupong autozone and airbnb stack up in your opinion you want to take this one first sure and you have this as a topic here too i think he asked in on the power hour last week but i can't remember we may have hit it but let's just hit it again i believe it did but

Yeah. But we can prepare more for this one. I think there's two type of ones here you have. And I see it in your list here. You have kind of the founders versus the managers and a lot of the mercenary managers, the ones coming into older businesses. most of the time, those can be frustrating because they just follow the, maybe how I describe it, the just MBA consultant kind of speak playbook where it's just extremely cliched. All they talk about is in analogies and they just say what investors want to say. And some of them are actually kind of the, you know, people hate this, the outsider-esque CEOs, the ones that are actually focused on, you know, they understand how to create value for shareholders. And there's the founders some of which famously are frustrating because they may be a bit crazy risk-taking you know that's part of the nature there or they may be a little bit misleading right i think that's

a concern for founders but sometimes founder-led companies can i mean just be fantastic investment there's some founders that one they have the ownership stake in the business two they understand business better than anyone and three it's really their passion project where it can lead to an alignment when they understand creating value for share value for shareholders and care about it that can lead to some great outcomes so with that being said i think addion's management team is top-notch might be my number one currently two coupon talked about that a lot recently and And it's one of my favorite stocks at the moment. I do own it, have been buying it, bought some in December.

I think the founder, while the track record is not as long as, say, an Adyen, as a publicly traded company, I mean, their execution has been great. They talk about long-term free cash flow. They really care about the right things. They're not just talking in analogies on every single conference call. um and then i'm gonna take all right i have two maybe maybe you go and i'll i'll think i'll think on a little bit more yeah so i talked about this a bit last week but companies

different managers are required depending on where a company is kind of in its life cycle so for example i don't think brian chesky would be that valuable at autozone i don't think bill rhodes which was the former ceo of auto zone would be that valuable airbnb so it just requires a different kind of skill set um i do like auto zone ceo bill rhodes but he's stepping down so i'm not sure if i can really call that put that on my mount rushmore if you will this is the last actually i will say a lot of times managers can't leave a company we've seen that with starbucks Disney, Bob Iger and Howard Schultz, I think the last test of a great CEO is leaving and then passing on that same culture that doesn't get broken when you leave.

So, but sorry, continue. Yeah, a hundred percent. And Howard Schultz is, I mean, maybe Bob Iger is probably the worst example of that not going very well, but some of the other ones I really like, I've been impressed with American Express's executive team lately. It feels like they've really turned the business around since Stephen Skerry, I think is how you pronounce it, stepped in as CEO, which I believe was in 2018. So he's done a good job.

I really like Michael O'Leary from Ryanair. He's kind of not only do I think he has a good kind of strategic vision for the business, but he's kind of a company spokesperson. He is almost the PR department, it seems like, where he goes out and he does these big interviews, these big kind of, it used to be more so, but he would just draw so much attention and eventually it would kind of lead to people realizing that, okay, Ryanair, cheap product, but my God, $20 airplane rides is quite impressive. So being the low cost provider, he just seems to have the right approach. He talks about this, that at the business, at Ryanair, it's a culture

of no frills. It's a culture of being the low cost provider. So yeah, I think it's really hard for a lot of companies to do that. Coupang, I really like Bombsuit Kim. And the other thing is that that's kind of the ideal situation. One where it's the founder operator because their incentives are obviously aligned. You don't have to read through the proxy to get a sense of what's this guys you know what are his payout hurdles what does he need to do in order to reward shareholders i mean bum suit kim is the majority shareholder i think it's 75 ownership uh oh i think that's class b but that's voting power voting power 75 voting power so he owns a ton of the stock you already kind of know that he's going to be doing what's also in your best interest because

you are directly aligned um i'll kind of leave it there that's four that's that's here yeah he asked for five but oh well you said you said mount rushmore but we can do five i guess i might have trouble coming up with five but wait no you have five right autozone american express coupon airbnb right now five oh autozone doesn't count sorry yeah but it did i also like home depot's management team feels like they have a really good sense of the like the customer they're serving and ways to add value to them so probably them as well okay i was trying to think while you were talking what do you think about zuckerberg it feels like my opinion of him swings with the stock price which typically means that

uh that means he probably shouldn't be on my mount rushmore but like i think zuck it's what it's another one of the situations where he's clearly aligned but he has he has a little more of a willingness to spend on random things than maybe i would prefer like the capital allocation too yeah but it's it's another example where he's it's it's almost like the bezos he's trying to keep it day one kind of thing where he's continuing to invest in the business opposed to whatever trying to turn over to a capital returns type business he's trying to reinvest but i just worry that like great operator seems like he's done a phenomenal

job i just don't know if he's on my mount rushmore yeah here's uh i said capital allocation i think i meant capital returns i think if they weren't historically atrocious with buybacks and maybe that's not his fault but he should understand that he's a smart guy i think that's if they he would they he would be on my mount rushmore if they properly understood buybacks or maybe they do but they probably cared about it i like him i mean he's he's up there just this whole bet on reality labs feels misguided to me i mean he obviously is closer to it and has better understanding but feels like he's trying to build his own he's trying to brute force his own competing platform to market when there's just kind of no demand for

it so i worry that it's like this self-mission like it's his mission but it doesn't seem like there's any demand for it so i worry that it's just wasting capital okay now my other ones i want to i think they show as an example and i don't know if these are on my mount rushmore because it's more of management teams that we own obviously bezos nadela bill gates tim cook steve jobs are you know some of the best ever but that's boring but some of the situations that I try to look for, I know Ryan does as well, is you have a stock that's been down in the dumps for multiple years. Its fundamentals look fine. It's trading at a cheap earnings ratio, which probably means below 10 times earnings, but about the same

for cashflow, maybe below 10 times cashflow, give or take. And then they either get a new management team, or maybe they get a new CFO and they have a whole change of heart on how to run the business. And they start taking that cash coming in and just consistently buying back stock. And two examples I have would be Dropbox and Sprouts Farmer's Market. I think those, while not sexy picks, and you wouldn't say that they're the most innovative companies in the world, I don't think there's a lot of venture capitalists that would say these are on the Mount Rushmore of management teams, but in creating value for shareholders, I think, and with Dropbox, that hasn't shown up too much in the stock price, but over the last couple of years, it's been done fairly well, even though it's still at this IPO price. I think that is a great example of what it means to be one of the top managers for shareholders, as opposed to being just the most famous one and trying to be the next Elon Musk. Yeah, I might push back on Drew Houston and Dropbox.

It does feel like he's kind of found religion on returning capital, but it also kind of feels like it was his last resort. like he tried he tried all these ambitious things and he's like okay actually we're not that like we're we're not a big tech company even though we want to be so i'm just going to start laying off and trying to generate as much cash as possible and returning that to shareholders which he's done a pretty good job of but to call him kind of a top top top manager i might say no i'd say for me sprouts though is buffett he's not eligible obviously number one it's kind of like michael jordan you know the top of the list uh i guess lebron could be there too someone said rno at lvmh yes that is good that obviously good listen to the show we did on them uh tyler

also said flat at brookfield i know some people absolutely love him if you're canadian you absolutely love him i am not the biggest fan as opposed to some other managers in the conglomerate space although the track record is of creating shareholder value with that stock is quite good Now, one I think that I would replace is Costco in my list. I think, and it's not even the current CEO, it's more of the culture around the executive team is so good. I mean, the guy that's the CEO now was, what, a warehouse guy at the start? I mean, they just have this culture of treating everyone and generating win-win-win situations. It's no wonder the stock's at 40 times the ranks.

yeah that might be the best all-around culture i mean they do such a good job and they've been the fact that they could have started to ramp up store growth and chose not to and chose not to lever up and do it that way like i think is a testament to their culture where it's like they i mean maybe it's just the fact that they couldn't they couldn't find that many good warehouse managers like it just wouldn't be possible but i think charlie talked about that on a podcast he did before he passed where he's like everyone asks why don't you grow it's like to get the right people in there to do all the training to have like a well-run store takes a ton of time so it's actually really hard to grow that fast so

which kind of makes a lot of sense but that also shows the way they nurture their culture so yeah they're definitely up there as well all right let's move to my topics did you see the rich dad port i think i did throw out a tweet on there but i you know you never know if you actually you see it i saw the headline oh that's all i saw too the he might be bidding getting misquoted but there is a quote here so i i'm gonna say what the quote is it might have gotten take it slightly out of context, but for context for the listeners, the Rich Dad Poor Dad author is, well, you'd call him a perma bear, right, Ryan? He's been calling for a bust every year since 08. And he said he's $1.2 billion in debt because, quote, if I go bust, the bank goes bust,

not my problem. I did not see this in one of the chapters of Rich Dad Poor Dad, which I did read long time ago the do you think that's going to be in the updated version chapter 23 banks hate me kind of you know that would that would be funny but what did you think of this what what happened to this guy he the book was solid and then man maybe he was just pretending yeah it really was a good book and i wonder how much he can do like how much he can tarnish his reputation before it affects what people think of that book. Obviously, if I knew about Kiyosaki and some of the stuff he said before reading it, I probably wouldn't have felt that inclined to read the book. But the book itself, if someone wants to get interested in finance or investing to begin with, it feels

like a great book to recommend to them. Here's another tweet from him. I'm not sure on the date here, but he says, best investments, cans of tuna fish. Inflation about to take off. Best investments are cans of tuna and baked beans. You can't eat gold, silver, or Bitcoin. You can eat cans of tuna and baked beans. Food most important. Starvation next problem. Invest in the solution. Take care. To be fair, if someone was preparing for the end of the world, I like his strategy of buying a giant bag of rice instead of gold bars, but he's obviously quite worried about the state of the world speaking of though another book that has gotten maybe our opinion of has changed uh there's one right behind you i think by an old guy named ray dalio i think i see it

oh yeah yeah the the old book the old book yeah yeah oh my god i gotta take that down i know after reading the fund which we are going to do i think next week we'll it's it's based off of the book we're both reading it right now we're going to do a review on the book it's called the fund it goes over bridgewater associates which is the number the largest hedge fund in the world or if not one of the largest hedge funds in the world it was for a long period of time the book was wild we're probably going to do that along with an overview of that not necessarily the business because it's private but you know some of its aum trends the fees it's earned all that good stuff and yeah

that's just the teaser for next week Ryan do you have any other teaser for that until I move on to this next question which I think is going to be quite fun it's funny I think there's a quote where it's like first I can't remember the exact

quote but it's basically like if you have a lot of money people think you're smart basically people will listen to you if you have money despite you probably not, you could have horrible opinions, horrible takes, but people might listen purely because of your money. I think there's a lot of that going on here. And it is a really interesting study of how, first of all, how much you can do with PR, with like really good PR, how much of a narrative you can craft as opposed to

the way this business is run it sounds awful it sounds super dystopian but we're gonna talk about that in a later episode so i'll leave it there it's next it's really fascinating yeah next wednesday so for any listeners that'll be sunday that you're listening to this on either sunday or monday um a couple days from now we'll be doing that yeah absolutely fantastic and man can the guy raise money that really really good at that but let's go to one that i think will be more interesting for this episode i think we have a good conversation on this i basically come up with topics by if i put out like a tweet on twitter or x whatever you want to call it and it gets a lot of engagement i know hey probably people on the show would like to as well so i had a list

back in 2022 uh after we did one of those old q1 roundtables with ian gray and brad freeman the stock market nerd, and we ranked the top five businesses in our opinion of all time. I said Visa, Hershey, Philip Morris, the New York Stock Exchange, and LVMH. Now, over a year later, I've revised my list, and maybe this is a slightly different definition, but I called it the top five most unassailable businesses right now. i would say that probably is another way to say widest moat i think but i hope people understand it's it's maybe slightly different there is some nuance on how people define some of these things but my ranking was visa ferrari amazon fico and hermes international that's

i guess one of them was the same there but maybe i'm being biased after we studied the luxury companies uh but yeah ryan what do you think there and you have a list yourself yeah i think i think that's a good list i have been going over some businesses where they are just oddballs like i found a blog called i think undervalued shares and that that list that was a michael mobson list of like wide mo businesses throughout the world had some just kind of gems in there where the returns have been okay, and I'm not sure the returns will look that good, but they are basically impossible to replace. And so I've got a list of them.

I mean, a couple of the ones you mentioned, yeah, they're up there, but this one's interesting. I'm going to mispronounce the name, but the ticker is B-A-I-N. It's a French listed company, and it's like Societe de... I'm going to get it wrong. But essentially, it's a company that's sort of a pseudo-government where it owns the exclusive casino rights in Monaco, and it has 52 properties that include hotels, casinos, the Monte Carlo, some high-end restaurants, some bars. It's almost like Monaco is publicly traded. Basically, the results fluctuate with spending at Monaco. so and there's a quote that says it's the acronym for the company is sbm sbm is monaco and monaco is

sbm i think as long as monaco is a well sought after city and a place where people want to go gamble or dock their yachts uh this this company's gonna do pretty well so i would call that unassailable yeah formula one uh yeah there's actually the the ferrari driver is from monaco So that's got to be good for them, I think. Yeah. I mean, there's a couple. The French lottery, the French national lottery is publicly traded. It's like La Francaise de Joux.

And we actually did a show on them like three years ago. Aaron Edelheit came on and pitched them during our 25 Stocks of Christmas. us. And I mean, it's pretty, I mean, they have the, they are the exclusive operator of France's national lottery game. So quite the valuable spot there. I'm just kind of going through this list. I realized there are literal government monopolies that had basically over the last 10 years with whether it was kind of a new president that came in or something, and they wanted to privatize a bunch of the businesses they're now publicly traded i mean echo petrol for example is columbia's literally like a state-run oil company they also own like toll roads they own most of the

transmission pipelines and uh like 99 of the refining done in columbia so it's like it's basically it's one of those situations where there there are a lot of these that i'm kind of coming across where the government, maybe it doesn't run it, but for example, the government owns, I think, 88% of Ecopetrol, the Colombian government. Obviously, they are going to act in that company's best interest most of the time because they get paid out that dividend. It's huge for the country's revenue. So it seems like situations like that, where they're just like all all the incentives kind of align for them to get favorable treatment uh those are unassailable in my opinion as long as the country remains intact the uh the business will yeah that's what

i was going to say where i think those are lower on my list than what i put on because i yes the governments have a lot of power but i'd say the the business is at the whims of the government and in a lot of these countries really any country there can be the winds can change on what people do but also the question here or excuse me from tyler saying asml would be an unassailable business i also disclude or discount a bit anything technology based because i have no clue whether over the next five or ten years someone's going to come up with some crazy innovation to get 0.001 nanometer uh semiconductors but i think that amazon is a bit different than what rest of these on this list i guess fico somewhat has government relations although i have to listen

to our interview again with buyback capital because i'm not an expert on the business but i just know after listening to it i was like wow this is pretty unassailable but you know visa ferrari amazon hermes i i don't think a government could take them down china doesn't want china doesn't want their uh and south korea and all these other east asian countries they don't want their citizens wasting money on these frivolous luxury items but they can't stop them even in like with the chinese communist party and i think visa is the greatest example and mastercard as well i just put visa in there because i don't want to put massacre twice it's boring there are probably a dozen countries around the world right now trying to kill them

in their markets and they can't do it because they are like visa is basically globalization they're they're i don't know i i just like india has tried to kill them and they've they've just grown in that market and if you want access to payments from anywhere payments yeah exactly payments from anywhere the us north america south america um japan and europe i mean you need to accept that and i think with if international travel remote work i mean look at me where i am right now if that only grows that moat is only going to widen and then uh what was going to say with with that yeah so i think that's why that's my number one is oh oh i think some of these travel little teaser for for what you're going to be researching this month i think

booking and Airbnb also have that potential of ish, not as strong, maybe in 10 to 15 years, but there's that potential there to turn those into unassailable businesses as well, where you have to kind of, again, there's a long ways away. It's a long ways away. I think for me to call it unassailable, it has to be a moat that is based on physical assets just because it feels like anything digital can potentially be replaced. It doesn't seem likely. I don't think Visa will be replaced.

I don't think Google will be replaced. I definitely don't think Microsoft is going to be replaced. But there are, whatever, technological innovations that can change things pretty quickly, whereas with physical assets, it's tough to do. I might put Coke on there. yeah i think coca-cola is like a brand that will just never disappear yeah it's it's it's i guess yeah the investment case is more of

like maybe in question but within its category yeah pretty unassailable pretty unassailable are anyone else in your list some of those airport operators i mean there's a of publicly treated airport operators um yeah but come on mexico what happened to the mexico airports well recently the government can decide what they want but yeah it's just tax treatment i'm not saying they're good investments but they're never going to go away like they okay the companies could be fair yeah nationalized but the assets themselves are unassailable like at this point it doesn't make sense to put a most people just can't put up a airport next to an existing one the i'm trying to think if there are any other ones where it's just like well

railroads the the big railroads oh those are yeah 100 canadian pacific i think canadian national railway to a couple of those union pacific what are the big three i believe there's four bnsf bnsf union pacific canadian pacific kansas city southern i don't know much about these railroads they're too they're too boring to talk about on the podcast so uh we'll let that leave that for other people um anyone yeah i i think i i get the infrastructure one and yes the government can throw in some weird mix there where it's like okay well there might be a risk to the stock like with the airports but the actual business is going to be intact i think i value a combination of brand and network effect a little higher simply because it's like for example this is

the classic buffett saying that everyone steals from you can't give you 100 billion dollars you can't dethrone coca-cola it's been a century of brand building yeah and some of these we look especially with the luxury brands the heritage there you can't rep if i gave you unlimited money you can't replicate the heritage ferrari is like the history in in a big way and that's just you can't go rewind the last 50 years of lamont's and it's it's just something that can't be replicated so yeah the uh yeah there was a lot of people that didn't like the armez pick but i'll go listen to the some of the stuff we did last month and maybe that'll change your mind because they're like well it's just one of a few brands but i mean i just don't unless

you're a time traveler i unless we invent time travel i don't think you're disrupting these things yes they can be mismanaged but no whatever all right anything else on that uh if not i have we got about 10 minutes left i think this one could be a fun but also sobering uh topic yeah go for it okay this is from value stock geek has been on the show before talking tractor supply he basically is the anti i call him like anti-clickbait person because he absolutely just loves going through what matters with the business you'll never see him just hyping up stuff and he just cares about putting out good information and it seems like he's a great investor i like like his strategy there was let's see okay the original he quote tweeted something

the original tweet was basically my highest three to five year conviction idea is that ai will accumulate in a bubble bigger than the dot-com boom and he basically the guy was saying we're basically in 1995 not the year 2000 um and then value stock geek tweeted it and he said the problem with bubbles is that it's really hard to figure out if you're in nasdaq 1997 or 1999 or if you're in japan 1985 or 1989 when things are crazy there's nothing to prevent a bubble from getting even crazier i think that's some great context for anyone trying to predict the end of a bubble because i think it's basically impossible that virtually impossible yeah that's a good point and it comes back to i think like the bill gates quote where it's like

people tend to overestimate the power of technology in the short term, but underestimate it over the long term. My gut would say that AI over the long term will be really powerful, have a lot of implications, we're maybe underestimating its impact over the ultra long run. But over the short term i am very confident that it seems overestimated in terms of its influence and impact on society possibly but is that do you see any scenario do you think it's possible that this is more japan 85 or 89 where it's like uh 85 than 89 you mean yeah let's call it the japanese bubble where things were basically flat for 30 years right the is there any risk that ai were over estimating it in the short term and the long term oh oh

well from a stock market perspective maybe because it could be proved to be highly deflationary but who knows there's a lot of smarter people or more people that get more compelling pitches on that i would say i don't know but i think what the one value stock geek is totally right here we don't know but i think what the one person that did the tweet is missing is that bubbles are always kicked off by some sort of catalyst and i think that catalyst was nvidia's q1 or q2 earnings i think it was q1 earnings right that kicked everything off into high speed after we saw the virality of chat gpt from a consumer side of things from the stock market side of things was more of that i think it would have been may or june earnings report from nvidia

that went over their q1 stuff when it was just they hit it out of the park I think it was the chat GPT launch. Yeah, but that didn't really create the stock market boom. I don't really remember on the timeline, but I remember everyone started spending to, whatever, build their own version. And that led to the revenue increase from NVIDIA, right? Wasn't that a big driver of the...

Yeah, but if we look at... Let me pull up the stock chart. Let's see if, or the past year. Yeah, I mean, yeah, you're kind of right too. I guess we're both right. Basically just steady rise. But the biggest one-day jump was that Q1 earnings report. But it had been, NVIDIA had been soaring before that as well.

What I'm saying is from anyone predicting an AI bust or an AI bubble to continue, what is going to be the catalyst for, because bubbles kind of pop those are very uncertain you never know it seems like when looking at history things just kind of end and it's weird but what's going to be the catalyst for the next leg of the ai bubble because if we look at technology the original dot-com bubble the first one was netscape 1995 um and i believe there was a few others in kind of 1998 98 99 from company specific stuff i wonder what's going to be the next catalyst for that if there is going to be one because i i just don't i guess we don't know could be anything

yeah all right i'm going to put you on the spot you have to predict what the nasdaq does performance-wise throughout 2024? What's your gut check feeling? My gut check feeling is slightly down.

Yeah. It is funny how it's like... I think it's just easy to go for a reversion to the mean. It's easy to just do that. That's the most likely thing, although there are a lot of scenarios that could play out. I constantly think

like you see all those quotes of no one can predict the short term and i'm like yeah that makes total sense no one can predict the short term but i always have a gut feeling about and it's it's probably not right most of the time but i always have some sort of a feeling either way what's going to happen usually in the short term that like i can't help but feel a certain type of way short term and when that's a good lesson that it's really hard to learn but it just takes a lot times actually investing to do it and then when you make the mistake coming back and learn like trying to look um rationally at what you did historically is the best stock buys you have feel terrible

yeah a lot of uncertainty yeah i hated i hated sprouts farms market when i bought it i was like this does i mean comp sales are just declining declining declining well i think one of the things that the whole time in the market versus timing the market i think it got lost for me over the last couple of years but we looked back at a portfolio given the volatility kind of yeah and maybe just with the fund and stuff and having to kind of mark your own performance on a regular basis. But we looked back at our little hypothetical portfolio thing that we put together in 2018, and we did not really know most of those stocks that well, or whatever. We had a general idea of what the business did, but we even probably, if we went back today, we'd probably

say veto for most of them. Just holding onto those, we would have outperformed, and a lot of them hate it and it's like just owning stocks for the long run whatever it's four plus years five years that kind of thing it's uh i think you're bound to do pretty well assuming it's it's a broad basket with some some businesses with big upside and you know what the best performer was shopify no tesla yeah oh yeah yeah i remember that um i think i think it would have been 2019 yeah um yeah the investopedia simulated portfolio i did back in the day probably crushed it just because i owned mongo db and shopify i didn't know enough about those businesses uh to know but here we got a comment i think we can cover for the last part

here from tyler on a catalyst says virtual reality such as metas ray-ban glasses might be a catalyst Now, we were just talking about how it could be a dud from a generating value perspective, but those Ray-Ban glasses seem to be taken off. I think it's possible. I also wouldn't discount maybe. No, this is a big maybe because I don't have much confidence in this. It's just a potential scenario.

It is the Vision Pro. When WestJet first took flight in 1996, the vibes were a bit different. People thought denim on denim was peak fashion, inline skates were everywhere, and two out of three women rocked the Rachel. While those things stayed in the 90s, one thing that hasn't is that fuzzy feeling you get when WestJet welcomes you on board. Here's to WestJetting since 96. Travel back in time with us and actually travel with us at WestJet.com slash 30 years. Yeah, I don't like, I don't like any of that. we're not talking about i'm not talking about actual like fundamental case you know what i

mean like generating value for shareholders i'm talking about a catalyst for bubble or boom if you want to call vision pros the apple one yeah those the three thousand dollar one i'd be very surprised if that were a catalyst for any of them i'd be surprised if any of them took off did well yeah maybe it's the one that i like the uh that i think has the most not potential what makes the most sense to me is just the people that discuss indexes driving prices or excuse me sorry sorry index funds and it flows just driving prices given the growing market share of passive vehicles yeah you've got i like that i like that one i like that one sorry go ahead uh so we've got

some more comments here john galagos recurring listener here says love the show gents like the new look on your podcast yeah i forgot to mention that if you've checked out the show recently we've got our wonderful faces now on the cover um soon we will be changing the logo to chit chat stocks but we want to be giving people fair warning so it doesn't surprise anyone we don't lose anyone in the process he says my 2024 favorite companies aer cp now that boston omaha i'm not sure what some of these are and a large amount of canadian oil and gas basket do you have any takes on the oil and gas space for this year no something i shouldn't learn about over the long term but i know i don't think i'm going to get to a 2024 i think aerospace and

airlines and i think aer is connected i believe that's aero like air cap or something air cap holdings yeah that could be one to look at um i was also looking at gogo which is the uh in-flight wi-fi company that seems to have a little bit of a competitive advantage but one that's also interesting related to aerospace slightly that uh actually seems to be turning things around is boston omaha really sat on them that uh spac they did the uh what is it the private aviation hangars is fine harbor harbor something uh sky harbor group yeah yeah it seems to be doing quite well really um at least after launching their first few or maybe it was their first two or three the revenue seems pretty good from each of these and they have quite a pipeline so i've been a

bit of a vocal boston omaha skeptic slash hater over the last two years i would love to change my mind and go the other way because i i thought their uh thought their annual meeting was a lot of fun so love to get back there yeah it was and uh yeah the interesting thing is stocks kind of like $15 a share. Now they're kind of like price to book value, which it's, yeah. And then we have a comment here from Tyler who says, be careful with GoGo.

I imagine that Starlink or Amazon's version could kill that business. That is interesting, but I haven't investigated the whole thing here, but apparently that, and that's what's driving the stock down. Apparently, according to some of the investment reports I've been reading, that is misguided.

So that's what's creating the opportunity. um but yeah i guess only 30 of private aviation vehicles are enabled for like modern wi-fi so as that gets upgraded over the next 15 to 20 years like there should be a consistent tailwind for this business but who knows maybe i'll research that uh for the podcast and we'll talk about that later but yeah i think that's gonna do it one about two minutes along there but it's all right thank you everyone for listening uh as a disclosure we are not financial advisors anything we say on Chitchat Money is not formal advice or recommendation. Ryan, I, or any podcast guest may own stocks or securities discussed on this podcast. We may have owned them in the past and

we may buy, sell, or hold them in the future. Again, thank you everyone for listening. And as a reminder, we will be changing our name from Chitchat Money to Chitchat Stocks. We'll see you next time. you