Chit Chat Stocks - IPH #93: Match Group Activist $MTCH; Wide Moat Stocks You've Never Heard Of; Is Boeing Fixable $BA?

Episode Date: January 14, 2024

The Investing Power Hour is live-streamed every Thursday on YouTube. This week we discussed: - Elliott Management taking a big stake in Match Group - $AMZN Layoffs and new technology development - Ryan's group of underfollowed wide moat businesses - Boeing's new 737 Max debacle with Alaska Air ***************************************************** 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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or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. my name is brett schaefer and i'm joined as always by ryan henderson welcome in to chit chat money soon to be chit chat stocks although i'm sure people are tired of us saying that by now but we will make the slow but not monumental transition on february 1st this is the investing power hour number 93 we're closing in on 100 and we did mention doing probably not a real power hour the drinking game but maybe we'll have a celebratory drink uh although ryan is at where he's located it's about nine in the morning but i'm rambling ryan how are we doing today uh before we get started well uh yeah 9 a.m drink might be a little rough but uh gotta

celebrate somehow so i'm up for finding something maybe i could have like a non-alcoholic beer or something the uh wow huge wow you're a real party over here yeah well it's 9 a.m on a thursday the uh but yeah no we got a lot of good stuff to talk about one of my new year's uh 2024 predictions may be coming true so i'm like a market profit now i'm pretty i've been crushing it which is dangerous i'd rather not have good short-term predictions because then i might get confident in my own abilities um but yeah there's lots to talk about there's an interesting wall street bets thread they're back uh which raises kind of an interesting question so we can talk about that as well but uh what do you have on the agenda for today yeah i got some amazon news but they're

just walk out technology you have some amazon news as well so we might hit that as a fun section and i also have rent uh costs going down in the united states plus the inflation report which are both related so i think i'm going to do that topic and then if we have time i have some fun charts about India. But before we get started, I want to say as a reminder, we are changing our name from Chit Chat Money to Chit Chat Stocks, and that will be in approximately 20 days on February 1st. Second, if you want to subscribe to our newsletter, you can do so at the link in the show notes or by searching on Substack Chit Chat Money. And then if you enjoy these shows, please if you want to help us that's the best the best way to do it is to give us a review

on either spotify or apple podcasts ryan is there anything else you want to remind the listeners before getting started i guess these goes live every thursday if anyone doesn't know uh usually 9 30 a.m pacific time although ryan had a meeting uh some of this works we had to start a little of late today but yeah i think that's it we're talking anything yeah any else anything else from you the uh we just recorded a podcast about ray dalio and bridgewater associates it's gotten some pretty good feedback i think people i was kind of curious how it'd be received but uh it seems like people enjoy kind of i don't want to call it investigative work because we did very little investigating but almost a book review in that way so maybe it's a format we'll replicate

in the future but i think we start with my prediction which was that match group and i said that you can go back you can run the tape i and i stole this take from someone else so no credit to myself but i said match group would be acquired if it stayed at its current price some point in 2024. There has not been an acquisition, but Elliott Management, founded by Paul Singer, famed activist investment firm, I think the second largest head fund in America right now, took an activist stake in Match Group, a billion dollar position. It's about 10% of the market cap. And there were some rumors circulating on the old Twitter X sphere that this could be a full-on takeout totally speculation and could be uh bogus but

if i'm right there goes my uh one of my 2024 predictions so i'm uh excited by that one what did you think of this news i gotta say so we've been talking about how we're moving our savings over from the fund and putting it into i mean it's already it's already that's been done for a month i don't really know what you're delaying ryan but what's happening at your end but i it's been like a month now i haven't taken the time to go through all the positions or i haven't added back all the positions that were in the front and some of them i've been kind of maybe in my head back of my mind not wanted to do it i did not buy match group but after this news i fomo bought and it's back down so

totally totally misread that situation and I'm hoping that Paul Singer and Elliot management have some some plans beyond just a 10% position yeah I will say I do own match group as well

full disclosure so if I sound bullish I am and I am biased in this situation but I thought it was an interesting investment because i don't know exactly what they plan to do they seem to have done an activist to themselves by gutting the management team what was that two years ago now probably not not two years ago coming up on two years this summer and they they're trying to fix stuff i guess that's that went wrong at tinder and then they implemented a buyback program and they seem to be pretty

rational on their costs. So I don't know exactly what they're going to plan to do, but we'll see. I think it makes it more exciting. And it's a small enough company where a company, or excuse me, a fund like Elliott can take a large enough position to start gaining some significant control here. So we'll see what happens. But I don't know if it changes my thesis too much. If it keeps them in the straight and narrow with not making dumb acquisitions and consistently repurchasing stock, that's good but I think they were starting to do that anyways so yeah

there's I guess I disagree with all the bear cases about a decrease in payers after they jacked up tinder prices in the US by 50% because as we went through on our match group podcast which I forget

we did a full overview on them I believe sometime this spring maybe Ryan can look up the exact date here that is not really a concern for me and uh yeah i think they're doing a fine job the new management team i agree that's kind of why i thought this was maybe a better signal than just an activist stake is because there isn't it doesn't feel like there's a lot you can do here it doesn't feel like the company's really that bloated they do generate a lot of cash they've been they revamped the executive suite it sounds like and they did a number of layoffs

i believe without kind of it wasn't any big announcement but it sounds like they restructured so i'd be curious i don't know if they could just walk in here on cut costs it feels to me like they're potentially building out a position to take this out outright because it doesn't i just don't see how they could like juice this for more than it's already got maybe they have some ideas strategically around what they could do with tinder but i don't know yeah it did seem a little weird to me it doesn't feel like it needs an activist maybe selling off the legacy no growth slash declining stuff could be in the cards then that could be that sounds like like something private equity wants but private equity likes that type of stuff right so maybe

maybe that could be there um maybe divestitures could be in the cards i'm not exactly sure but i guess to be fair elliot didn't put out any presentation usually they okay it's always in the wall street journal so they're like i don't want to say their mouthpiece but they use them to communicate discreetly what their plans are sometimes and it doesn't seem this time that it's an activist at this point because usually they put out some sort of leak or presentation that says this is what's wrong and they're pretty blunt about it but we'll see i guess we don't know yet they're not always activists blunt it's it's actually it feels like it's quite vague and it's just that one what's his name jesse cone just putting out a tweet that says we look forward

to working with the company to improve operations or whatever and it's like every single time that happens the ceo is either resigning or fired within a couple of months it seems unlikely that that would happen with bk bernard kim ceo of match group just because to me it felt like it was the right fit like uh resume wise what he did with the zynga it seems like he's made it took a lot of the right steps so far in his time there so it just maybe he could bring someone in but i don't know if there's there that many people out there that are better suited so we'll see uh divestitures yeah i guess that makes sense but i just wonder like who the hell buying it we looked at spark networks and it feels like those businesses the the legacy apps

for match group are probably better than sparks but they're still they go through a lot of the same problems and it didn't seem like anybody wanted to touch spark networks so yeah it's hard for those things to generate a lot of cash would be my uh my take there without doing a bunch of performance marketing which means they're not generating cash anyways yeah and i think with this will be interesting as a match group shareholder because there's a big debate well it's not that followed of a stock but within the people that follow the stock there's a big debate on whether the the payer declines at tinder are really that big of a deal i am in the camp that it's not that big of a deal since they jacked up prices by 50 and that they're going to lap that

and everything will be okay as long as they continue to improve the actual Tinder product for people. If Elliot, like, okay, if you're a big activist fund and you take a 10% position in a company, they're going to ask for data behind your reasoning of raising prices.

And if they show that, like they're going to be able to see whether the emperor has no clothes with these price increases, right? If it's actually worse than we think and there is you know the apps in terminal decline so if nothing what i'm saying is is if nothing comes out around that from an activist perspective around tinder then it gives me more confidence that the company is on the right track because if there was something wrong

then an activist would be loud about trying to change shake things up yeah what would concern me is that so the stock elliot announced their stake the stock jumped like 15 then it dropped to like five percent and then now it's below where they announced their stake at if they sold their position around these prices i would be concerned because it feels like they probably got a glimpse at better data and were concerned with what they saw so oh you mean no no there's no way they you mean to that volume now come on they wouldn't do that no i'm not talking i'm not saying that they're the one selling but i'm saying if they announced if they announced that they got rid of their stake without any big strategic changes without the stock price having jumped then i'd

be concerned say like we hear about this in may or june when their 13f comes out yeah or yeah that would be whenever we get an update i can't do the math correctly yeah i think that makes sense but match group is so interesting people seem to like it i know as something that we cover i i seem i like to cover it i think i understand the business fairly well though doesn't mean like you know we've lost money on it so far doesn't mean you should buy it you probably shouldn't listen to us about it because I think I might be a little bit too biased with the company. But when they come out with their new earnings, I think we'll probably cover them on the Power Hour again. But I think that's it for now on that topic. We have a question from John Gallagos. Hey, thoughts on

doing an episode on the Swedish serial acquirers? You list off five companies here that I've never heard of, so I don't have any opinion on them now, but they could be very fun. I do like the nordic markets there seem to be a lot of high quality companies there i would say uh john who hit us up with that question shoot us a dm on twitter or the email that we have in all of our show notes and we can maybe get the ball rolling there because i don't know much about these companies other questions do you guys think anything could disrupt matches user value proposition it seems like they just need to compete against other apps but apps are still the best quote-unquote dating product that is from tyler uh recurring listener ryan anything

on those i guess questions well to go back to john's question you mentioned the serial acquirers like brett i don't know any of them but sometimes doing like an hour-long episode or even shorter on a serial acquirer can be quite boring just in the sense that like the blueprint is pretty like straight cut you know they just acquire especially if it's like a conglomerate where there isn't any structured strategy like match groups technically a serial acquirer yeah but it's all there's all one theme around it so if it's like just general conglomerates sometimes they can be a little boring to analyze because it's like all right what are they going to do next with their cash i don't know they've they've just acquire stuff and they do a good job of it

So it's like a pretty short episode, but yeah, it's not, it's not, it could be interesting. Yeah, it could be, it could be depending on what their operating companies are.

But when you go into an episode and say, all right, well, we like management. Okay. There's the episode. It's like the ass. Yeah.

It's like the allocators like Brookfield shows, shows on that stuff. It's like, you're basically just saying they've done a good job and they'll keep doing a good job. and they'll collect a whole bunch of assets or capital in the process and it's a little bit of a boring episode so anyways let's uh yeah let's take some of these questions from tyler do you guys have any thoughts on if we might get a re-acceleration of goods inflation due to well

i said i was gonna hit that in the inflation section but sorry i wrote that um yeah the uh yeah i mean we can we can touch on that in a second the other thing that i thought was kind And, well, he asks here, do you guys think anything could disrupt Match's user value proposition? It seems like they just need to compete against other apps, but apps are still the best dating product. I still think they provide a ton of value to users. I would say the biggest headwind to Tinder, aside from them maybe just reaching scale quicker than people thought, like they are kind of the go-to app around the world and maybe people thought they had longer room to grow is hinge cannibalizing a lot of the users or hinge at least cannibalizing some of the

payers i think they're even though match management for match group says they're not like eating away at their own market anecdotally at least here in the u.s it certainly has and i would say the biggest competition is really just hinge and bumble basically yeah and it's not the end of the world if because the venn diagram of overlapping users isn't it's not a circle so if they eat you know some if one of their apps competes with it you know and then you have those like the chispa blk uh what's their christian focused one upward i think and then a few others though those might eat into you know the corners as well but it's not a giant people what what's the one for like single parents the single parents one is stir uh as not a single parent i don't know

much about that one uh yeah i don't think there's much to be worried about outside of the dating app universe because we all know like it's it's weird it's you can't there's no facts around this but we all know that's a it's romantic relationships are a nuanced place and you don't put that on your you know you don't advertise that on your instagram page or facebook profile you might like meet someone on an app and then message off but the value is like there's a reason facebook dating failed because you can't really mix social and kind of searching for romantic relationships with something else these pure plays it but i don't think there's much to worry about from competition anywhere else it's really the other day i agree and it'd be so difficult to scale

a dating app today and it's kind of such a it's random to me that Hinge has been able to do so well Wow, it's because they're owned by Match Group I know

but it would be very difficult if you're starting from square one even with a bunch of capital to draw people away from those apps today. What do you think? Like Bumble, Tinder, Hinge you have pretty much everything you're looking for unless you want a really niche one to be like in a catch-all type of app like those i just don't

see how you scale one a day because it's so hard to get that network effect going yeah i agree and no one's gonna have like 10 that's very chaotic or maybe the vast majority of people won't have 10 downloaded you might have a couple but yeah i see your point i don't remember that one that tried to do it with the whole uh the peter teal backed one oh yeah well that i mean like all those types of political style ones they're doomed to fail from the start but the with i think hinge innovated a bit and you've seen out tinder copying all of their product features that they should have copied right away, even if they didn't own them.

The other question, let's see. Did you see the debate between the Ricks CEO and Twitter? Did not. I saw a little bit of it. I think if I'm thinking of the one, if you're referring to the one I'm thinking of, it's someone basically

called them out for not being a great capital allocator which we've had him on the show and there are some flaws or some difficulties in that business but i would not call him a bad capital allocator it seems like he's done a really good job choosing when when it's worth trying to add new stores and when it's worth acquiring their own stock yeah i mean he actually i believe there's a quote where he says The worst thing we can possibly be is approximately fairly valued because then I can't make a decision. I don't know what his capital allocation is like in terms of operating the restaurants, operating the new locations, and allocating capital there because that kind of requires a different skill set.

But in terms of understanding what his stock is worth, I think he does a pretty good job. yeah i don't keep updated with the business but all i know is we recorded that interview with him i will go listen to that if you want more insights don't know much about this twitter thing uh other questions do you have any thoughts in berkshire now owning close to 40 percent of occidental petroleum uh he seems to like it i didn't know it was 40 i thought it was i looked up on whale wisdom was 25 but maybe they have that preferred thing i'm not an expert on that at all so no thoughts he seems like energy yeah fairly cheap stock but not yeah whale wisdom certainly has some flaws the uh it's yeah it doesn't account for a lot of things uh

which not not always their fault sometimes it's just not accounted for in the 13f but 34 the only thought i have here since i don't follow oxy in any way is that i now see the struggle of him trying to buy things because he started buying oxy like three or four years ago i remember like i want to say a year and a half ago he was at 20 percent and he's just been buying like on a regular basis and he still is taking some time to get his ownership up there so i feel so bad for him yeah terrible i don't feel bad but it's uh i always thought that was kind of a miss like people are like oh it's tough to manage so much capital because it's hard to get into things but now you see it like how much time it really does take to

get into something if you want to the uh the other part here is do you see this becoming a subsidiary i don't have any take on that maybe but he shied away from owning things that are anti-esg because i don't think he wants the trouble of having that fully owned in a world where people don't treat oil companies like they're evil maybe well hold on i don't think he's shied away from owning them because no owning them outright i mean berkshire energy i know i know but he has a big esg spin on he just he just doesn't want the questions that he was getting in the mid-2000s the electric the energy company is much different i would say than an oil company from an esg worries perspective obviously he probably doesn't care uh but i think he shied away from that he hasn't owned tobacco

for for reasons there's the famous story of them shying away because they just didn't want the trouble of owning it so i think yeah that's probably why and maybe he won't own it outright but not sure i have no clue so uh ceo of twilio stepped down do you see that yeah bullish the i found it interesting that the ceo of box kind of backed him up and said this is a mistake he's such a good entrepreneur and i think he mentioned something about being a good developer and it kind of got to my point Or it kind of got me thinking, like, there seems to be a misnomer among, especially people in Silicon Valley and very developer-centric businesses, that the CEO is just the head developer. True, yeah.

Because he was like, no, this is a mistake. It's like, you know, he has drastically underperformed the market himself, like you showed. But it's not, as a CEO, you have a fiduciary responsibility to do your best on behalf of shareholders and other stakeholders as well. And he has not done that well on behalf of shareholders. I think they probably got this one right. Yeah, let's run the numbers.

Last five years, total return, S&P 500, 100% box, 30% Twilio, negative 26. so yeah look maybe he has created good products that doesn't mean he's the right guy to be the ceo maybe he's a great cto yeah for sure for sure yeah and i think it's a example of what we've not we've but what you see from reading stuff historically is it's there's some managers or founders that are perfect for a company that's 100 to 500 people but then once it gets to 2,000 to 3000 people in your public company, you got to start generating cash, you got to be a little bit of a capital allocator, or just understand that type of stuff, you might not be good at that. And it just might not be the role for you anymore. There's only a few that can seem to go from the

beginning to being a large cap company and do well in all arenas. We all know them. You know, Bezos, Bill Gates, Elon Musk, you know, I don't like the guy, but his track record is, you know, indisputable. The, and others, I guess, Zuckerberg, but a lot of people just aren't men. I mean, it makes sense, right? Like, you go from 10 years, you have probably a team of 10 people to a team of 2,000. That would be very overwhelming.

That's probably what would happen here. You probably want a professional coming in, a mercenary, obviously not someone that's just going to spout out adjusted EBITDA stuff. But yeah, I agree. Yeah. I want to talk about this because it got circulated around the Twitter sphere as well this week. But as a lot of people know, there was that flight. I think it was an Alaska Airlines flight on a 737 MAX 9 where the door blew off. They safely landed the plane.

there weren't any deaths. I think two people were injured. One person was injured, but everyone is alive. And someone put this up on WallStreetBets on Reddit. And he said, is it insider trading if I bought Boeing puts while I am inside the wrecked airplane? He says, purely hypothetical, of course. Imagine sitting in an airplane when suddenly the door blows out. Now, while everyone is screaming and grasping for air, you instead turn on your noise canceling headphones to ignore that crying baby next to you calmly open your robin hood app or whatever broker you prefer i don't care and load up on boeing puts there is no way the market could have already priced that in it is literally just happening would that be considered insider trading

i mean you are literally inside that wreck of an airplane on the other hand one could argue that you were also outside the airplane given that the door just blew off i read matt levine answered it and said no it wouldn't be but i think it's kind of just a funny uh good how do you see it yeah i mean i don't know how that it's a good joke but i mean it's pretty clear it's obviously not insider trading it's just a good joke the what do you think of boeing though it they got problems we did that episode and that ceo shouldn't be there blackstone absolutely not yeah absolutely not i am yeah i'm a bit of a we got it it's dave calhoun right dave calhoun yeah yeah and we got inside sources too so yeah and the cfo i remember reading

that wall street journal article about how the cfo just they built like basically like a little satellite office for him so that he could keep living at his house in connecticut and he walks in sometimes with sandals and shorts on they have strayed so far from the 60s and 70s boeing management team where they were excellent engineering excellence engineering focus it was the pride of really the northwest largest employer for a long time the it just feels like they just keep moving further and further away from that the other part is people i've seen people with takes that say like oh okay if they just go airless for a while they stop shooting themselves in the foot boeing will be a great investment from here i don't agree i do not agree i don't

They're too big to fail. They're too important to fail, probably. And they'll always get really cheap debt from the government. But it is priced well. And this is a business now that is going to be chronically slower. The FAA is going to interject in every decision, in every little minute detail. They're going to walk in and they're going to need to have to check on everything. It's going to operate slower.

they're not going to ramp up to production just because Dave Calhoun says a target to reach back their previous deliveries levels it's just not going to happen and if they do cut corners

it's a problem, if they don't cut corners they're not going to meet the numbers that are required to get a good return on the equity so I think they're in a very difficult spot I don't get owning Boeing it could work but all evidence points the last 10 years ever since well we have a comment here that reminded me they moved the headquarters to chicago the uh that was in 2000 i believe but we

don't really see the results of that move and the culture changed until probably the 787 which was just a total cluster blank then we've seen ever since then ever since the 787 debacle they've shown time and time again that they are not say Lockheed Martin-esque anymore they just don't have it and

I don't know how that changes unless they go through a bleak bleak period yeah it's tough I mean there's such a good chance that things do go wrong yeah and

a lot of it is out of their control I mean a situation like this it's I don't think it has that much to do with like the procedures not being great at Boeing

would be my guess there's so many rooms there's so many room for errors so much room for error and so many ways that this could go wrong and it's like it just feels like such a hard business to run and

yeah I don't know it's well I guess we don't know whose fault it was yet and part of it could be the outsource supplier I believe so we don't know the full investigation I guess but my hunch

is that Toyota or Danaher wouldn't have let this happen so i think it's the productive the culture of manufacturing yeah i imagine there's a lot of pressure to hit numbers as opposed to purely the safety focus but i don't know it's like with the faa involved now in every step if something still goes wrong is now on the faa too no i don't think so the their checks don't go right whose fault is that you know yeah i don't

get that if boeing said that i would be like get zero all your equity that's ridiculous the it's look i i will not defend boeing it's it's uh yeah i don't i think a lot of the boyan can be put on them for all this stuff and arabus is gonna eat their lunch i think on the flip side yeah unlimited delivery or unlimited demand right now i know people still gotta go to hog is enormous yeah people still gotta go to them so hey it's it's it's a bit of a conundrum of stock but good comment here from tyler why buy boeing when you could buy lockheed martin at a better valuation return on invested capital long-term trend etc i totally agree share just goes to show comes down dividend per share

consistently goes up uh way better culture of innovation way more diversified cheaper yeah i agree just goes to show for me that just because something is a monopoly or a duopoly and demand is guaranteed that doesn't make it a good investment yeah what's our three tenets uh management business quality cheap or whatever price you pay yeah you need all three boeing arguably great business monopoly right um some points would stock was cheap but management no i mean that executive team here's what they did and i would really like us to get back lou whiteman on i'm sorry that's how you pronounce his name right whitman or what yeah because he knows as well he had a tweet out there that reminded me of this calhoun was the chair of

the board during the max deadly crashes like how would how is that gonna fix things he was the chair of the board they gotta got everyone here i remember listening to interviews with him and it's just so it's not he's not an engineer maybe he is i actually don't know he could be engineer but that was not it didn't seem like that was his focus and it's just uh they gotta have someone else they have to have a lead engineer it's like the opposite of uh the developer companies needed a head developer you need someone where that is their primary focus yeah and at this time like at some points in boeing's history maybe it you don't need someone from manufacturing or engineering but at this point in time all of boeing's problems are from

manufacturing and engineering so you probably want some people that know about that fixing the company okay there's all right i was gonna say a couple things i didn't put this in our notes for today but i ran i'm a thread boy now i ran a thread of eight companies with big moats that people don't pay attention to i guess it was like whatever i made a little more clickbait um but i will go through some of them i want you to tell me if you find any of them interesting did you see it you see the uh i retweeted it but i don't remember all the companies so i will find it and follow along with you let me look real quick i don't remember all of them either but okay number one is i'm gonna have trouble pronouncing this society de baines de

mer is sbm it's basically the exclusive casino operator in monaco um they own 52 properties including the monte carlo some of them are casinos some of them are big hotels restaurants stuff like that and there's like a saying that sbm is monaco monaco is sbm basically it's the company performance tends to trend in line with uh money being spent in monaco and traveler visitorship to monaco so that's number one trans urban this is a toll road operator uh they're australian but they also have property like they have the i some of the i-95 express lanes on the east coast they operate those uh there's built-in premium and there's built-in annual price escalators with that the third one here fdj this is the exclusive operator of france's national lottery games

fourth one is right move this one's a little different it's a little maybe a little more interesting a little less like a infrastructure mode it's the leading online real estate portal in the uk they have like nine out of every 10 homes are listed or advertised on the platform 86 percent market share the fifth one is aena aena sme they basically are the entire spanish airport base they account for 99 of spain's commercial air traffic six mexican stock exchange seven echo petrol the uh state-owned oil company in columbia your your neck of the woods yeah i'm helping them out right now the uh eighth one here is jumbo interactive it's an australian digital lottery they are state-sanctioned reseller of australian

digital lottery tickets do any of these interest you i already knew about the mexican stock exchange i like that one haven't researched it yet maybe that could be a fun one uh i like the airports in spain although spain companies this is a generalization but seem to not put a huge amount of emphasis on per share value creation but i like to see this company specifically doesn't mean they are specifically bad and i like the real estate portal in the in the united kingdom but i'm not a fan of say a company that gets government rights or things that can get taken away fairly easily like if you have the airport okay they can nationalize the airport but the airport's still going to be there it needs to be used the

casino rights i i sure um doesn't interest me too much but toll roads are not necessarily my favorite because there's always a chance that the government could say actually no toll roads anymore maybe in the united states it's more fair but in australia it'd be more fair but i know that brookfield has run into trouble in south america buying toll roads and i think part of the problem with those is that yes it's all you know it's the definition of a good business but not my favorite i like the other ones better yeah i think that's fair it's also yeah i think in the u.s they'd probably have to pay out whatever some sum or they'd have to buy the business or something like that, because I'm sure there's a contract in there

that states they get to operate it for however long. The other one I saw, and this is kind of interesting, it's not publicly traded, but in 2008, kind of the depths of the financial crisis, Chicago was looking for ways to raise income, the city of chicago and they had explored like and raising their uh like property taxes or something like that but given all the difficulty around real estate at the time they didn't want to do that so what they did is they sold their parking meters to they basically had an auction for it and someone uh i don't know if it was an auction or how it necessarily worked but some consortium of investors bought the parking meters for can't remember the price and instantly just started

jacking up the prices of all the parking spots or uh all the parking meter rates so kudos to whoever built that investor consortium because that is some valuable assets yeah although from a personal perspective i would say there may be some things that i'd rather have the government run and the parking mirrors might be one of them but it probably worked out pretty well as an investment yeah those are interesting

I think the stock exchange could be fun we haven't really done a stock exchange I think the New York stock exchange and Nasdaq I think both are publicly traded we haven't done those but probably boring for the podcast because it's covered so much

I think maybe the Mexican stock exchange could be a fun one to do this year to research yeah apparently there's like another competing exchange that's trying to become more popular there but has failed that makes it a more uh fun podcast for sure so maybe not a monopoly yet but an emerging one i'm also working on a bit of a new a new thread so foreshadowing here on brick and mortar retailers with better than 20 percent roic can you guess who would be on that list i only have like nine there's probably more but you're still working yes costco um nope home depot costco's not uh roic's been like just home depot yes home depot's there lows then

or no just under i did like the last 10 year average roic and it's like just under 20 Well, I'm looking at your tweets on FinChat, which for anyone, go follow them on X slash Twitter. It's probably part of Ryan's KPIs. Get those followers up. Ulta, I'm seeing you tweeted here about Ulta, so I think that might be in there. Ulta is in there. Tyler mentions that in the comments here. Ulta's in there.

Williams-Sonoma, I think, was just short. Their ROIC has kind of skyrocketed as of late. But earlier this decade, they were not generating such good returns on the capital they invested. All right. Fun teaser. Any other teasers? One that surprised me was Hibbett. Alex Morris, Science of Hitting, wrote them up this morning.

Apparently, John Hempton owns like 5% of the company. He did a write-up as well. John Hempton did. They have had impressive returns on invested capital. the number one is kind of cheating because it's a franchisor win mark yeah those let's say that doesn't count you gotta own the real estate well it's a bad business a lot of the companies don't a lot of the companies don't own the real estate but they lease it yeah the okay you have to lease the real estate there has to be some capex

well i'm not ready the way the uh yeah there's got to be something there um yeah it got me thinking there really aren't that many like brick and mortar retail franchise concepts that i've seen what do you mean i mean restaurants you mean you mean excluding restaurants i'm talking like retail stores like specialty retail like ross lululemon a lot of them own that whole experience yeah i wonder why food it's with restaurants and fast food it's more i don't know people lean into that more all right other topics do what do we want to hit here we got about 15 minutes left i think although because we didn't start right on time inflation came in maybe we can talk about that uh hi lo it if you can see the chart here

a little higher than expected nothing crazy uh here's the cnbc article uh we have a chart here it was basically on a month over month it was 0.3 percent when which is much higher than october or november but still below august and september so we look at kind of the last 12 months there's been a huge difference after the ukraine and oil price shock in early 2022 um after that it's kind of been more normalized at this three three to four percent range but it hasn't really gone down uh which may be concerning to people but here's the quote from the cnbc article much of the increase came due to rising shelter costs the category rose 0.5 for the month and accounted for more than half the core cpi increase on an annual basis shelter cost increased 6.2 percent

or about two-thirds of the rise in inflation and quote fed officials largely expect shelter costs to decline through the year as renewed leases reflect lower rents and we are seeing continued uh slight decreases but for all intents and purposes stagnation in rental prices for, say, people renting apartments or something like that, Redfin has an estimate that the median U.S. asking rent fell 0.8% year-over-year in December to $1,964. Let's keep it going. Yeah, let's keep that stagnation going. Supply, we talked about this on our show with Lance Lambert, that supply and multifamily

was absolutely booming, and it could have a major effect on all parts of the residential real estate market. I think it's quite interesting. I guess I hate making predictions about inflation, but it seems right now not very much surprised. There's not very much surprise here where if you X out the rent, the shelter costs, which people will complain about, but if you X it out and assume that these ones without a leg, because the one in the CPI has a leg when you're analyzing the shelter price increases. And if you go on the more real time data that places like Redfin and Zillow have, it seems like inflation will come down over the next six to 12 months. But who knows? Oil could be at $120. Food costs could be soaring. We had that question

earlier that Ryan teased that Tyler just asked again. Yes, thank you, Ryan. Thank you, Tyler. Didn't forget about the Red Sea stuff with those terrorist groups bombing ships. And I don't know of the exact details. So people are going down around South Africa instead of through the Suez Canal. That could definitely be inflationary. But TBD, I think in general, things look fine from what the Fed maybe can control. But again, I have no confidence in having any take care. It seems like, hey, nothing to be concerned about right now. But who knows? The consumer could fall off cliff by the end of the year um and yeah i have i really don't have a take with the shipping stuff i haven't really followed the panama canal i heard about the red sea

i've seen some articles about that in the wall street journal but how big of a chunk of that like how big of global shipping go what percentage goes through those channels i'd be curious probably what a good idea probably quite a bit how's my voice you said you sent a message that it's robotic is it fixed a little bit i don't know it just keeps coming in slightly uh something we'll just keep going if someone if if anyone in the comments or if anyone listening thinks brett's voice is a little off let us know somehow whether it's yeah because whatever you never have any idea it's hard for us to tell unless we listen so and sometimes it's a little cringy or difficult listening to ourselves over and over so uh i don't know if it's as

cringy as it used to be but it's just tiresome so i got tyler saying it sounds normal to me so maybe it's just on my end i'll leave it yeah my internet seems fine but hey hopefully the mic is okay um but let me look that up for you ryan keep going i'm curious i was gonna say how have you gotten any anecdotal evidence on columbia yet after a week there week and a half two weeks i remember we covered dollarama saw dollar city and a lot of busy it was busy a lot of big buildings going up i'm not in one of the big cities though i'm on the coast so i'm visiting bogota uh for a weekend so that's the biggest city so maybe i'll get better anecdotal evidence there banco columbia it's one of the big banks people seem to be going to the bank

when i walk by yeah i think some of these grocery stores could be interesting um yeah i'm going to a gym that has a that seems to be a chain but i don't know if they're public and the economy hasn't collapsed i guess as some people might see in the media right but i'm glad i'm not in ecuador where they seem to having be having a coup right now the uh all right well that's good that's good anecdata where uh it's like every time you say something like if you just said like oh there's a gym like this is gym stock in the u.s but like uh no thanks but you're gym in columbia i'm like oh okay that could be investable uh yeah but yeah bengal columbia i don't know how's the cost of living in columbia tyler asked in the chat pretty cheap

pretty cheap although i am in the most expensive city because it is kind of the vacation town so it's very cheap and part of it is because the dollar is appreciated so much so it depends i I think on where you're from, but yeah, if we look at it, okay. Are you using a wise card or you stick, can you use Amex down there?

Actually, you can use a lot of Amex. I've been testing it out. Yeah. But I just use the credit card typically, although I use wise for taking out deposits and it's sort of a backup. But yeah. Okay.

Panama canal, 40% of all US container traffic goes through there according to Google so now we're experts we know all about it let me look up the Suez Canal wait what have the shipping issues been in the Panama Canal

they have a drought low water levels so not every ship can go through there okay let's look up the Suez Canal we're becoming experts in real time here folks but that's sarcasm I think Suez Canal is probably

much much bigger yeah okay well that last one is u.s but egypt's suez canal handles about 10 percent of international maritime trade and is one of the world's busiest waterways so 10 that could have an effect but is this going to be an inflationary like catalyst maybe slightly but think about that 10 okay the other 90 isn't going through there and shipping costs are a small percentage of overall inflation so no i don't right just do the math there i don't think it's gonna other things would have to happen for it to turn into the same thing that happened in 2021 with the shipping crisis and if you look at shipping rates they're nowhere near they've spiked a little bit i think they

doubled but they're nowhere near where they were in 2021 and early 2022. yeah i'd be curious because this can impact a lot of retail companies i remember looking at i mean even amazon they their retail profitability in north america and international when all their input costs had shot up to 2020 just really faltered now everything's kind of come back down and they've They've been much more profitable since, but other companies, anyone that's sourcing a lot of their goods internationally, which I think is like most retail companies these days, they're going to have a hard time with that.

Yeah. Some, but it depends on what company, because some companies are probably going from East Asia and Southeast Asia across the Pacific ocean to Long Beach. not surprised if those rates spiked yeah there's not exactly um but who knows who knows i i have no clue i think it's something it's fascinating i think it's fascinating to watch but it's an example also maybe i want companies in my portfolio that are insulated from the potential of these type of things happening

where I don't want to worry about this at all. Yeah, that's very true. My conclusion on everything is just own Visa and MasterCard. That's the conclusion on every investment, right? The best gross profit

royalty. Inflation side? Own MasterCard. Yeah, shipping costs go up, own Visa. Blah, blah, blah. Alright, last topic, Ryan, what do you want to do? Do you want to do this Amazon stuff? More layoffs, Yeah, I don't know. It's kind of boring. There's layoffs. Seems like they're old jassies finding religion around cost controls here. All right, I got a fun question. Okay, say it, but then I'll maybe something that can be more of a fun topic related to Amazon.

yeah just uh layoffs in the streaming division and the twitch division which uh so prime video and twitch which i think is also kind of interesting because they raise prices on prime video i believe or prime or they added advertisements and if you want to avoid them you can pay extra right that's correct that's correct i'm not a prime subscriber so i was not checking the loop on this are you on a family i'm a moocher i'm a moocher yeah okay what's your question yeah so related to these layoffs related to the layoffs last year and the margin expansion i believe we're getting we're about five percent uh operating margins in north america aws is higher international is basically like negative one percent

by q3 2024 so a year from now versus what we've seen reported they haven't done their q4 report yet are amazon's operating margins below or above 10 in that quarter uh like total holistic operating margins like across the entire business consolidated yes i'll go below i think they will get above 10 over time and ed chang came on our podcast and pitched amazon last year and he said he thinks it could be even 15 or higher i think he's probably right but i don't think there's any incentive for them to really push the operating margin that quickly they throughout history time and time again have often foregone short-term margins

to deepen their moat and i see no reason why that won't continue i think that's a good point but on my investing unscripted prediction for amazon to finish the year is the largest company in the world i would probably need this to be true so i'm gonna say yes it's above 10 i think there's a world where it's true and i think that's why it's a fun question yeah it's certainly possible do you own amazon now i don't which is conflicting yes i know it's one of those things doesn't make any sense it was in the fund but for some reason when we redid it we just mentally avoided it have you to gripe about stuff that goes up that uh we don't own for stupid reasons have you seen what the nintendo adr has been doing yeah it's awesome

look at look it up right now uh in us dollar terms it's not at all time high because of the yen but look at that nintendo adr right now do you want to guess what is up in the last three months the royal canadian legion is celebrating its 100th anniversary and now our change has a two dollar coin to mark this milestone. Honor the Legion's mission to carry forward stories of service and sacrifice to new generations, and their dedication

to supporting veterans and their families from coast to coast to coast. Celebrate this enduring legacy. Find the 100th anniversary of the Royal Canadian Legion $2 coin today. 15%.

27.3%. For what? Just good data coming out about video game downloads? I'm not sure, actually. I'm guessing Switch 2 rumors are materializing, which I've seen, and possibly the Yen. Let's check the Yen. The Yen recovered a bit, but not that much.

all right yeah yeah tyler says the nintendo cfo finally found their robin hood password yeah maybe they're buying back yeah but i think they have to announce that first in japan but not an expert on the rules anyway okay uh i think we have a minute to go i will say i've been researching booking holdings like the business although i listened to an interview with Glenn Fogel, CEO. If I'm betting who takes more share over the next five, 10 years, it's Airbnb between those two.

Little tease for the episode, huh? And it's a good example of the kind of CEO that's required depending on the company, the company's stage of the life cycle. So for me, it feels like Chesky is able to move faster

there's less bureaucracy he can make changes quickly and he's an owner operator so it's kind of nice when you're trying to move fast to have an owner operator at the helm

because he can really kind of make the decisions I don't know if he does make all the decisions I'm sure he delegates some autonomy to different divisions below him but at booking there's so many divisions there's separate companies there's probably a lot more float i would imagine airbnb continues to grow share all right well don't go too long i'll still spoil the whole episode but yeah ryan's researching that right now i'm researching hens and hers which is going

to be a fascinating one i i think it's a fascinating company i'm not sure if i like the business yet but i haven't finished my research sorry guys and hi for everyone watching um go ahead right and we're going to be doing a show on wednesday so this is coming out sunday on the podcast or if you're listening watching it live on youtube it's on thursday next wednesday the what is that like the 16th 17th they will uh we'll be doing a show on norbert lou the best investor you've never heard of maybe some people have probably heard of him but we're thinking about giving it that catchy title we're going to talk about his portfolio and his performance yeah so i think that's the pretty much locked in schedule next week punch card capital

norbert lou uh week after hims and hers week after that i believe we're doing a netflix and streaming wars update with alex morris from the signs of hitting and francisco olivera from rv low capital and then booking holdings who ryan is researching although the exact order of these not exactly sure, but that's the schedule, so hey, watch out for those in your podcast players of choice and every Thursday, we're still going to be doing these live

apologies to everyone for going 15 minutes late, but I'm sure it's not that big of a deal, thank you for the people that joined us live let's give a disclosure, we are not financial advisors, anything we say on the show is not formal advice or recommendation Ryan, I, and any podcast guests may own securities discussed in this podcast

may have owned them in the past and may buy, sell or hold them in the future if you want to watch this episode live and comment or ask us questions you can join us at 9 30 a.m pacific time 12 30 eastern time on our youtube page which will there will be a link there in the show notes okay thank you everyone we'll see you next week going on vacation we're here for it with kids who turn the backseat into a courtroom drama over whose tablet is louder whose charger is faster and why watching the same cartoon for the hundredth time is a human right yep we totally have vehicles to handle that because

whether it's a road trip or a business trip where your flight's delayed your phone's at two percent and your dinner is whatever is open yeah here for that too enterprise we're here for it