Chit Chat Stocks - IPH #95: $TSLA Stock Collapses; A $NFLX Spiffy Pop; Are Mexican Stocks Cheap???

Episode Date: January 28, 2024

The Investing Power Hour is live-streamed every Thursday on YouTube. This week we discussed: - $TSLA earnings and the stock drop - $NFLX spiffy pop for David Gardner - A list of cheap Mexican Stocks - Winners and losers, including the pastor who got his followers in a crypto scam - Hilarious small-cap corporate governance ***************************************************** 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

Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Anything discussed on Chit Chat Money by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome in. This is the Investing Power Hour on Chit Chat Money, soon to be Chit Chat Stocks, officially next week. So excited for that. Going to make the name change to Chit Chat Stocks. My name is Brett Schaefer, and I am joined as always by my co-host Ryan Henderson. On these episodes, we talk about whatever we want for an hour about financial

news, investing news, earnings reports, investing philosophy, anything. Sometimes we bring on special guests. Most of the time, it is just us. Let's go through some housekeeping items. If you enjoy these episodes, if you are a fan of the podcast, the best way to support us and say thank you is to give us a five-star review or really any review on Spotify or Apple Podcast, hopefully a five-star review. I will say that again. Give us a review on Spotify or Apple Podcast. If you are interested in even more of our work, follow us on Twitter or subscribe to the free newsletter that will be changing to Chit Chat Stocks. The link is in the show notes. On this episode, we got quite a few topics. We got some fun winners and losers of the week from the financial world.

We got an interesting one. I'm going to try to share a video with the audio and we'll see if that works, but if it doesn't, then we have a fun one as well. We have Netflix spiffy pop from the Motley Fool founder, David Gardner. We got Tesla earnings. We got a nice thread from Ryan on Mexican stocks, plus other stuff like the Vision Pro launch and some of the complications with that. But before we get started, Ryan, why don't you talk to the listeners about our friends at public.com? Yeah. Public.com has just launched its new high yield cash account offering an industry leading 5.1% APY. That's no fees, no subscription, and no minimums or maximums. That means you can grow your cash with 5.1% interest with no strings attached. It's as simple as that. Again,

that's 5.1% interest with no fees, 5.1% interest with no subscription, 5.1% interest with no minimums or maximums. And one more time, 5.1% interest with up to $5 million FDIC insurance, just 5.1% interest straight up, no strings attached. Sign up today at public.com slash chitchat money. This is a paid endorsement for public.com 5.1% APY as of December 20th, 2023, and is subject to change. Full disclosures and terms and conditions can be found in the podcast description high yield cash accounts are available for us members only with that said let's uh get to the content for the week where do you want to kick things off well we already got a question about tesla and unsurprising everyone's interested in that company it's the most popular

stock i think in the world there's a lot of thoughts every quarter on this company when the earnings release comes out twitter is almost unusable because it's just screenshots screen grabs sometimes i'm part of that problem just thoughts from the quarter did you read the report at all i saw the results on fin chat i just looked up like the main segments the basically deliveries auto gross profit automotive revenue all that stuff but i did not actually read the report no i can say i don't have any interest in tesla stock either way so i have no interest in reading the report i don't have a sense of whether it's going i think my gut tells me i wouldn't want to own it but i don't really have a sense of ever wanting to short it or

anything like that so i don't read the reports did you read the report i didn't read the whole thing but glanced at some of the stuff i thought it was interesting that operating margin i thought was a little higher than i would have expected it recovered from last quarter which was a little bit surprising just because they've been decreasing prices again i also thought it was interesting that they said to expect volume to grow at a slower clip in 2024 than 2023 and for example Total production grew 35% in 2023. So it's not like it was slow, but they have been expecting or guiding for 50% production growth. So I guess they're going to come in a little bit lower there.

They are talking about the next-gen model in 2025, which in Musk time probably means 2027. But that's how it goes. I think the stock is at whatever. It's down like 12% today, but where it's trading is $600 billion market cap, or actually no, closer to $550 billion right now. Whatever you think about that, I think it's overvalued. A lot of people do, but a lot of people think it's undervalued given the long-term stuff. I think more fascinating is to talk about the actual business.

and the biggest concern i saw from the report and it's kind of small in this earnings thing but maybe let me try to zoom in here is the market share i think it can be a bit of a rorschach test where it depends what kind of lens you're looking through here but let me share my screen and for any of the listeners they give a chart every quarter of their market share of tesla vehicles by region over a trailing 12-month basis, and they do North America, Europe, and China. Now, U.S. and Canada, this is total vehicles. U.S. and Canada, they're at about 4%. Europe, they're just a touch below 3%. China, they are probably closing in on 2.5%. Now, all three of those, except for China, have stagnated in recent quarters. And I think the

big concern for me at least is that this is on a trailing 12 month basis so when you look at the last couple of quarters though they might have even seen some market share losses um but that was probably the biggest concern for me is when you have um never owned or shorted but you know actually i did own a put option once 2020 that's just i guess that technically counts that technically accounts is short, but not an insignificant amount of money. That was just for fun. I think the biggest concern for me would be

you got a niche car coming out, Cybertruck, maybe. You have these older Model 3 and Model Ys and they're decreasing the prices on these a ton and the market share is kind of stagnating. That combination of lowering

prices to increase volumes, but we're still not seeing that much progress on market share for you know a short period of time it could it could improve in 2024 that would be the biggest concern for me regardless of what current margins are at because if they force everyone else to be unprofitable that could be honestly a smart move all right well i have zero uh zero to contribute to the tesla discussion he does mention here one of the one of our commenters and uh mentioned stalantis have you looked at stalantis at all never looked at them i know they are a bit of a conglomerate of car companies so i honestly don't even know what brands they own so i guess because speak about

them at all but let's look at the old google look at them a couple times and they burry owns them they're like one of the cheap they screen insanely cheap they own chrysler fiat dodge okay interesting part of the uaw uh debacle if i'm not mistaken gm it's ford gm and stelantis right yeah yeah the i think the labor unions pretty clearly are going to hurt all the auto companies because you saw the ones actually have labor unions uh general motors stelantis and ford they sign their deals and you can think, okay, well, that's an advantage for Toyota, Tesla, whoever that doesn't have these large union contracts, but these workers are all competing

with each other. They can move to a company that pays more. And you saw that with all these competitors raising their wages across the board. So I think that's going to bring more pressure on stuff. And yeah, it's not their best period. It's probably unsurprising the stock's down 10%, But if you've held Deslove for the last five years, I don't think you can be complaining. It's probably still up, what, 800%, 500%, something like that. So, yeah. I don't like the stock, but that doesn't mean it can't work for other people.

And I know a lot of people love it. They've been right for a long time. This could be a short blip. It's an interesting one where I kind of honestly think they're being smart decreasing prices if they can keep up the quality and get enough out to consumers because they could really price out a lot of the competition um in north america if they can do it profitably yeah makes sense if i was trying to go through some of the numbers and just looking at the trailing 12-month figures,

the gross profit is down substantially from its highs. Automotive revenue is still up, but it's basically flat, if I'm not mistaken, on a trailing 12-month basis. And then deliveries, we've got to say, and I know there's probably ways that they massage that number, it's a pretty staggering chart to see the deliveries increase over the last three years.

That is not the most important metric for the business, I should say, because you can deliver a lot of cars at very little profit, but pretty staggering chart. I want to shift gears though. Mexican stocks. I wrote a thread this week. I've become thread boy. That's apparently a way to boost engagement.

But I wrote a thread this week about Mexican stocks and the Mexican equity market overall. So I talked about the Buffett indicator briefly. It's not – so it's a useful metric. I think in the US, it maybe doesn't have as much usefulness in certain markets because a lot of services are nationalized in different countries. What is the Buffett indicator? The Buffett indicator is the total market cap of stocks in a country divided by the country's GDP. So in the US, I think it stands at around 180%. And there's like 7,000, there's even more, I think most publicly listed equities of any market

overall, I believe. um and then there's other countries where if you apply it it can be useful in determining kind of what people think of the equity market there but you have to keep in mind that in the u.s a lot of the gdp or our output comes from publicly listed companies that's not necessarily the same everywhere so i don't know how much it applies to certain markets but i think it's still like a semi-decent barometer. And so for Mexico, it stands at 32% roughly. Keep in mind, it takes a while to update these numbers because the GDP reporting isn't always perfect. So 32%, that's really low. I think it was like 39th out of 67 countries that I saw.

For reference, Colombia is in the same realm. I think it's slightly higher. So it's getting but kind of a discount to some economies where you think this is more a place I'd be willing to invest. At least as an American, I think I'd be willing to invest in Mexico over some of the economies that report higher Buffett indicators. But I just think it's a good place to fish. We've talked about it before on the show. We've talked about kind of nearshoring and the fact that people are starting to relocate a lot of the supply chains into Mexico, and there's a really strong demographic tailwind that there's such a high percentage of the population is turning into the family formation age and potential homeowners,

and I just think it bodes well for the country's income. Anyway, six stocks that I thought were interesting i can go through these but were there any that stood out to you i think the mexican stock exchange again but as well i liked a lot of them honestly i think i liked all of them let me go find the tweet because our friends at fin chat i don't know when i can i can run through each of these quickly here so the first one and i did this in order of basically I wanted to find businesses that I thought were high quality that had an EV to EBIT below 15 times. And there are a lot in Mexico with an EV to EBIT below 15 times. Takes a little longer to figure out whether or not they're high quality, but I came up with this list of six.

And so the first one, and this is in the order of cheapness, is Grupo Herdez. They are a processed food manufacturer. They sell beans, salsas, canned mushrooms, ice cream, basically tons of different processed foods, and they distribute them all across Mexico. Six times EBIT, roughly. The second one is the Mexican Stock Exchange, a little under nine times EBIT. We've kind of talked about that business before, but obviously pretty wide moat there in that people really have to go through there.

if you're going to register your security and they help transfer custody and all that. So third one here is ASR, essentially. It's one of the two, no, is it three or four? There's some publicly listed airport operators in Mexico. I think three. OMAB, ASR, and Pacifico. Yeah.

And so this is the one that owns the Cancun airport. That's kind of its main, I would say it's primary traffic driver. And then G-Mexico Transportes, this is the largest railroad operator in Mexico, 11 times EBIT. It's grown really quickly over the years. And I've got a map here basically of all the routes that they have, but it's like six US border locations, or maybe it's five.

And then they have a bunch of port terminals as well. And so it just covers a lot of the Mexican landmass. And it is, as with most railroads, I think it's a pretty high quality business. And then Pacifico Airports. And lastly, Alsea. Alsea is an operator of fast food and fast casual restaurants. They franchise and they operate some of them. So it's kind of a mix of both.

But the big brands are Domino's, Starbucks, Burger King. And then they have like a bunch of smaller ones as well, but all pretty interesting businesses and they all trade really below 13 times and EV to EBIT. So EV to EBIT, any of those stand out to you? Well, I kind of like, I think the full basket does well. What stand out to me is Alsea because one, we had an interview with Ian Bezic, I think maybe two years ago at this point that covered that one. he really liked the business he really liked the management team and i think there's probably a

long way for them to run especially taking some of these american fast food brands into latin america mexico and you know places south of there and then also the railroad i've looked at that before if we're thinking of the near shoring opportunity that seems like a huge beneficiary because it's not necessarily like a bunch of technology companies are going to get started in mexico maybe they will be but with the manufacturing stuff if there's a deliberate push to shift that uh to mexico well the railroad's gonna benefit i would say uh oh ryan you're sharing your slack message there i'm sorry i'm sharing my screen now here uh total revenues has been pretty solid for the railroad nine percent kegger over the last

nine years the eps also a nine percent kegger for a business like this to be trading at i think it was like nine times ebit i find it pretty staggering like you don't find like it's such a good place to fish assuming that you can build confidence in investing in mexico which for us i think we i think we have that so um yeah i don't know just thought it was an interesting dividend yield five percent there chart there uh let's i think i saw it in the top part there yeah yeah looks like it yeah there we go all right well for anyone watching that uh you could see

some of those beautiful charts over at finchat.io so ryan why don't you go through there they are are an advertiser with us now full disclosure ryan does work for them as well uh just get that out of the way but why don't you go through that advertisement and talk about the wonderful data that you can get at finchat.io yeah we use it here a lot and i use it a lot for our research for these episodes but for anyone that doesn't actually know finchat formerly known as stratosphere FinChat.io is a stock research platform that has not only standard financial data, but also company-specific segments and KPIs on over 1,500 stocks. So if you want to see Amazon's AWS revenue over the last 10 years, you want to track match groups paying users, or you want to see how many

cigarettes Philip Morris sells every quarter. These are the kind of KPIs that FinChat tracks millions more, actually, literally millions more KPIs. Millions. Yes, to emphasize millions. You really can't get anywhere else because there really isn't a platform like this. And so you get all the standard data that you need, all the financial statements, but you also get all this extra data as well. It's also really cleanly designed and the data's all institutional quality, double-checked for accuracy. It's pretty easy to use. You recently started up on it, so I guess you can probably attest to it. Have you found it

pretty easy to get started? It's very easy. And why don't you tell listeners where, I mean, I was using it for Hymns and Hurts when we did that research report. I think people should go check out that episode for sure. Uh, spend about a month researching them, but yeah, I use that data a ton for that, for that episode. And why don't you tell listeners where they can go find yeah. And a discount with our specific link, which will be in the show notes. Yes, that is correct. So if you want to upgrade to any of the paid plans, they do have free accounts. So you can sign up for free toy with it a little bit. Uh, but if you want to sign up for a paid plan, you can get 25% off using our link. And that link is finchat.io

slash chitchat. That's finchat.io slash chitchat. And you'll get 25% off any paid plan. As Brett mentioned, that link will also be in our show notes. Let's keep rolling with this episode. Do you, here's a question as we've been trying to do, we're doing the individual stock research shows for a little teaser ryan uh has been researching booking holdings which we're going to be recording tomorrow and that'll be a very fun one do you think one of these mexican companies could be a fun one to research for one of those yes the thing i will say and i'm not trying to re-up our sponsor here but this is where i find the aggregators fin chat very valuable is because going through the reporting from some of these Mexican companies is a pain because the investor

relations sites are not always that intuitive. So yes, I think we should do one, but it's a little more of a homework project because it's a little more cumbersome finding all the documents and stuff like that. All right. Well, maybe next one, I'm doing elf beauty for this one. It's actually done quite well over the last few years, and we'll see why. And for anyone that's in this thinking, oh, why aren't they talking Netflix earnings? We might talk about David Gardner's Spiffy Pop, but we just recorded, I think it was hour 20. It was definitely over an hour, a full discussion with two experts on Netflix stock, Francisco Oliveira and Alex Morris over at the TSOH Investing Research Service

that will come out next week. So not talking Netflix, then tease it, a little suspense, it'll come out next Wednesday. Okay, got some questions here. Should we hit these, Ryan? Sure. Yeah, all right. From Tyler, thank you for joining every time.

Do you two think small and micro caps will permanently underperform large caps due to companies staying private for longer and private equity buying the best small and micros? Well, I think to answer that question, you have to ask, do you think companies will continue to stay private for longer? And do you think private equity will continue to buy the best small and micros? Will that trend ever change?

I think it's hard to see how venture capital, the genie gets put back into the bottle. I don't know how that gets significantly smaller. I don't know how private equity just totally becomes significantly smaller 10 or 20 years from now. But I think with small and micros, they get zero flows. They have been, they've underperformed generally as a factor, I think, although no factor expert. I think for us, we want to target companies in small and micro land that are buying back stock.

That's the key. Because if you have a permanently undervalued stock and you have some management team buying it back, that's where the returns can really come from. it can mitigate the flow risk i would say what do you think ryan it makes sense that small and micro cap businesses don't really want to be public as much anymore because it's like it is costly to be public you have to file the reports and there is i think an extra kind of layer of work that's required whereas if you if you look at some of of these real micro-cap businesses, I am surprised that they exert any resources,

stay in public when they could be investing that money into the business and they need the money. So it makes sense to me that venture capital and private equity has had such a run when it comes to kind of eating these small micro-cap businesses. um i've been burned i think probably twice on micro cap or small cap stocks and really once what was the other one i know one intellichek i was in that oh intellichek was ever loose nah we didn't get burned ah i wouldn't say burned that was we just didn't make any money. It's just that it's really easy to tell a growth story. And especially when these businesses are small, if you buy into it, you think there's just so much upside. But the reality

is mega cap stocks, big tech, anyone that's not small cap, a lot of them have, there are inherent advantages to being a bigger business in that you have more resources, more money to throw at the wall, more money to throw at new investments. So most of the small caps are fighting an uphill battle, which I tend to try to avoid fishing in there. If they're just repurchasing stock, and I think the business is sustainable, then you don't have to underwrite all that upside to be right, hopefully. And that's a situation I would be more comfortable with than something where i'm betting on big success because with intellicheck there were like there were the downsides i didn't even think about like during the conference call they're like we we

hired two new sales reps and that was like a big thing and it takes so long for them to get going that it's just so much more difficult for a small business like that to grow than obviously the mega caps of the world. So it, I don't know. I think it kind of deterred me from a lot of the small cap growth stories. Yeah. But look, we'll talk about the Netflix spiffy pop later. That's where you find the biggest winners.

Every company starts small. But I agree with you. I think when you have to bet on maybe an unprofitable or break-even small camp company to get bigger, that can be really difficult because if they're that small, usually it's for a reason. So it can be really hard. So I'd rather look at something that's already profitable or trades at kind of a net-net basis in that regard. I have a comment here to add some context from James Goodwin, says we have sub $20 million or 20 million British pounds companies listed in the United Kingdom. That might not be in the case in the US. Well, I think it's less common in the US. And then he says it costs around 500,000 pounds a year to be public. I think

that's similar to the United States. The United States may be a million dollars given Sarbanes Oxley. Okay. We had a question on LVMH. I didn't look at the numbers. Did you look at them? They were this morning. Apparently, this is the only number I have. And we just looked at them back in December, so I guess we kind of have some knowledge on the business now. They had 13% organic revenue growth. Keeps chugging along.

I'm seeing 10% here. No. Well, maybe that's constant currency or not. Hold on, let me double check. A commenter said 13% organic growth, so I wouldn't say, you know. No, you might be right. I'm looking at whatever.

Good businesses. yeah i don't know why i'm overlooking it and i don't know why i haven't tracked it a little more closely because it literally we went through the whole show and i thought damn this is a really good business and i didn't look at the valuation and i thought don't worry valuation will keep me out of it and the valuation was not that crazy especially relative to we looked at aramez and ferrari after that and it's like half the valuation or half the multiple of those businesses but there's something that's like just keeping me away i don't know what it is hermes and ferrari are i would say higher quality businesses although i had i said ferrari was

extremely durable as a business i had a lot of people saying they were going to go out like go extinct in like five to ten years which i thought was fascinating i don't know what what just because of electric vehicles i just that doesn't make much sense to me yeah comment here from tyler lvmh hermes who performs better over five years and he says lvmh has stuffed the channel a bit possibly and they the worry with lvmh is why i think it's a little lower quality and still a good business obviously given the stock returns and the management team is you worry that there may be oversupplying and the brand the part of the brand is exclusivity and you know we had that debate during the show

but you know the airmen's performance is ridiculous the what the airmen's valuation is ridiculous i wouldn't necessarily say it's ridiculous but your forward returns are basically i actually maybe it's the right multiple it's the right multiple but i don't think you see absurd returns going forward yeah you probably get similar to treasuries which maybe it's so high quality that it deserves that's what it's it's a stick it's as predictable as u.s treasuries probably not but uh it's kind of what it seems like so i would prefer lvmh seems like they have a higher chance or a higher probability of generating better than treasury returns for shareholders and betting against

bernard arnault has not uh worked out well over the last decade and i don't see any reason why his success won't continue let me i don't know his son or sons his daughter's actually isn't kind of in the she is the next in line i believe now i don't know the answer to this so this either is going to be um i want to say a dunk but uh let's let's see we have 10 years okay what stock do you think has performed better on a total return basis over the last 10 years lvmh or ms LVMH no it's probably close no

it's close LVMH 427% cumulative total return and Hermes 572% wow I'm not complaining about either of those returns from a shareholder no what's the S&P 500

300 let me add that in there 225 and that's i mean that's some records some really great 10 years yeah all right we're halfway through do we want to do winners and losers i have what potentially might be a very fun one did you see the pastor that that may have been the most absurd video I've watched this year so far okay I'm gonna try to work some zoom magic here

we're gonna share the screen but I'm also gonna but I want to figure out how I can share the audio I don't know if you can no you can you can should we be doing this on the fly yeah let me see if I can figure out in five seconds here

just give some of the quotes that he said I know it doesn't do it justice but let's see alright okay this is good audio where is the

I'll give some context before you yeah try to find my notes here so this pastor got I don't know if he created it or perpetuated it But essentially pushed this crypto scam to his churchgoers, and he is being fined by – he's being fined, I think, like $1.3 million.

And basically, he said God told him to push this crypto scam to everyone, and then – I don't want to spoil the whole video, but it was some outrageous takes. I think I figured it out. Okay. Give it a go. Yeah. For basically $700 worth of cryptocurrency that is deemed worthless by the state. Now, the reason that they're seeing that it's worthless is because there is no exit for people who have bought. We launched an exchange.

The exchange technology failed. Things went downhill. And from that point forward, we've just been waiting on the Lord literally for a miracle. Did you like that part? And he just posted on there, you know, we locked you into this scam, but we've been telling, we've been waiting on the Lord. And, you know, okay. So the charges are that Caitlin and I pocketed $1.3 million.

And I just want to come out and say that those charges are true. So there's been $1.3 million. I don't think we have to watch the whole thing. It's two minutes. We can maybe, you can find it. it's a two minute video that's WallStreetBets mod made

I think my favorite quote was when he said 1.3 million that is true we stole that from you guys but no my favorite part is when he says the lord then told us to do a home remodel with that money and they did

they remodeled their house and he's like well the lord told us to so yeah tough look for pretty much all around but

gosh it's so go ahead be wary who you take financial advice from I suppose is maybe the takeaway here is the base rate on anything crypto that it's a scam because 90%

turn out to be oh we're just stealing people's money yeah and this is where every time i see people especially people in the financial world intermingling religion with it it more often than not is like they're using it as a part of their sales pitch like we've seen kathy would do this at times too. And I just don't like to see it. Now, if you're using it as, I know people that use it as like they're religious and it's a part of their principles and they don't want to invest in things that kind of go against some of their principles. That's a different situation. But if

you're using it to raise money, I just think that is the worst kind of situation. I really don't like that. Yeah. Like telling God told me that you need to give me this money and then, oh wait, you're locked into this and i'm gonna take it all and remodel my house sorry guys it was weird in that video is how honest he was he i think he might just not be aware that he's a criminal i think it seemed like he's lacking awareness or he probably wouldn't have made that video that is wild stuff that is wild stuff well i think the share something worked someone commented it did but i think that can be useful i saw that you can do that on zoom we're very technologically advanced here so i think in the future there's a little button there that i found that you can

share the sound i think that can be quite helpful for these power hours but uh james goodwin said the righteous gemstones yeah i watched that show kind of a good one got the guy from workaholics in there very funny on hbo uh but now that was my well i don't know if you call the pastor a winner but definitely his investors were losers. But I have a winner this week, and it is the founder of The Motley Fool, David Gardner. I said we weren't going to talk Netflix earnings. We are going to talk that with Alex Morris and Francisco Oliveira next week.

But I did want to mention, I threw out a tweet that it was possible that David Gardner hunter-bagged on his cost basis in Netflix, and I did at him on the old Twitter or X machine, however you want to call it and he actually responded and he said not a hundred bagger but a 28 pop spiffy pop which means i think 100 uh a double in a day so 28 bag in one day a 1.86 cost basis based back in 2004 um so yeah he definitely mr never sell definitely was a big winner what was that yesterday after the the netflix earnings but if or when the day comes that he 100 bags his cost basis

in a single day that will probably be the most impressive investment achievement I've heard of how about this century that would be the best single stock investment

that I've witnessed yeah it might be right now obviously they're like okay Monster had better returns than Netflix not by a considerable amount, but Netflix isn't that far behind them in terms of ranking stocks with the best returns. But I don't know if I've ever seen anyone hold something through all those total returns. Yeah. And what's interesting is that

a lot of people think they are better than someone like David Gardner, right? There's a lot of people that are very smug about the Motley Fool style. I should say, full disclosure, I write for them, so I might be biased. They think, ah, but I'm way better than this. Like, they don't do that strong of analysis, blah, blah, blah, blah, blah. And then he doesn't care

because his returns are better than you. And he's going to do this. He does not care if people think it's a simple strategy. He bought Netflix. He's never going to sell it. And it's going to be one of the best investments ever yeah and it's actually his strategy is so much more replicable for the individual than some elaborate dcf that takes two bits from like every single every single tigas call on

planet earth or like going and talking to people at the company or you know having all this like informational advantage. David says, what's his rule? It's that if I snap my fingers and this service and it were gone, it's the snap test, how much would it impact people? And that's been a guiding principle for him while he's been investing. And I think it's served him really well and you can see it everyone you know kind of shits on the strategy but it's produced remarkable returns and i think it's replicable for the average investor yeah and what's interesting is that a lot of people do that right i mean we see it constantly but his returns are better than most of the people that are saying that so at the end of

the day the numbers speak for themselves here's people talk about the strikeouts i see a comment here and tyler provides great point people love to highlight the strikeouts where it's recommending open door or something yeah yeah recommending something that's gone to zero close to zero and the it's it's not one-to-one like if you recommend five things that go to zero and you recommend netflix four go to zero you have netflix your returns are as good as both yeah it's uh i think people don't appreciate that that is going to be a part of the strategy that he will have zeros and that these are a bit higher risk higher upside type situations i agree okay speculative question

by the year 2030 let's give it a little more time 2032 will Netflix close at a market cap above a trillion dollars on the spot

what do you think yes or no what's it at today 250 2032 is that what you said yeah I think so

and we just had this discussion with Alex and Francisco, but they are in a position now where I think they are so advantaged that the cashflow is just going to fly in where they don't have to increase spend anymore to keep winning. And they might, but they don't have to, right? I mean, if they held their spend steady, they're still spending more than everyone else and they're just raking in cash flow

on top of it and there's just such such scale advantages now for them where they could produce something that's not Apple TV might have a higher quality show but Netflix is going to get 10 times more views

on a lower quality show yeah four bagger though still have to outperform most likely i agree with you though all right all right new topic you got anything else for us what do you think no i mean it's earnings season there this is kind of the uh like calm before the storm when

big tech starts rolling in next week uh i usually put these questions in here kind of discussion questions for us have we made any changes to our portfolio have we do we have anything on the watch list so i guess for you any portfolio changes over the last week nothing nothing anything that you're thinking about changing no what would be your next buy if you got cash in the door tomorrow probably coupon keeps going down so i saw four pretty insane stats actually or facts about coupon if i can find it here and i want to share these so i'm sorry if you can hear this scrolling on my mouse. This is four wild facts about Coupang. 99.3% of orders are delivered in less

than 24 hours. That might be higher now. Half of the Korean population has downloaded their app. 70% of the population lives within seven miles of the logistics center. I think it's actually higher now and then this one surprised me and this is from a 2018 interview with bombsuit kim he says it is not an exaggeration to say we are in every single apartment complex or apartment building in korea every day yeah pretty pretty astounding stat they are i think a better e-commerce business than Amazon. We're talking the pure play e-commerce

economics and moat. Amazon has other stuff to add on top that might expand the moat but Coupang and Coupang is in a smaller market right now. They do a really good job and their customer

value proposition is insane. I wish I could have it. Do we know when they're investor day is, we got to go. I know. I know. And we missed the Costco one. I should have. Apparently, it was recently. So, maybe next year.

I'm going to start going to these things. The ones in Seattle? Yeah. And there are a lot in Seattle. I know. I know. I'm going to just pop right in. No, I don't know what it is, but I'll... We're not Costco shareholders, though. Yeah, but you can... Oh, yeah. Well, it's kind

of an expensive one. I guess you have to buy one, but you just sell it. after, I guess, just to go to the meeting. Yeah. Okay. We talked small cap oil. We had a comment here that says, consider that South Korea is the size of Georgia. Yes. And the population is 50 million. So the population density makes it much, much easier to run a highly profitable e-commerce operation. You don't need the a hundred billion dollars in CapEx that Amazon spends. You may might need 10 to get the same result or even better. And your delivery times can be that

much better and their tech they're insanely tech savvy so it's like 50 million people that maybe not exactly 50 million people but around that that are using mobile phones and are actually potential customers other than like the kids i'm talking about the households are all seems like pretty tech savvy true true okay we were talking small and microcaps did you you might have seen this, someone was talking about governance at a micro-cap stock. This is a company called SmartRent. Yeah, that is the ticker. Okay. So this is just some anonymous account said, are any other SmartRent investors somewhat concerned that one, the CEO earns over $750,000 a year as a salary, 50% higher than peers. The CEO has hired his wife as chief of staff

who earns more than the chief financial officer, but her resume doesn't seem to be anywhere. She doesn't have a LinkedIn. The acquisition that they did for $135 million in 2022 was a company that was part-owned by one of their largest shareholders and two of Smart Rent board of directors, and the CEO and three of the directors all worked together at prior companies. I think that is just an example.

Yeah, nothing. And yeah, I think small cap and micro cap land, the governance issues, just because no one's investigating them, there's less scrutiny on them, is really prevalent. There's a lot of companies that are built to take the money and give it to the board of directors and the executive team. And the frequency of that is high in these companies. And I just, that's something you got to look through. and it's got to be it's for me it's a okay if i see that type of thing i'm not touching this at

all it is and and you probably have read more proxies than me because you were doing the proxy work on our old not so deep set not so deep dive shows but every time i read one i think what is going on like this is a disease and you'd think like some of these okay we looked at booking and or I looked at booking and I guess a little foreshadowing, they got paid very well. And if you, first of all, I think shareholder activism is kind of low in general. I think a lot of shareholders are either intimidated by the process of participating in votes or just don't care enough that it always seems negligible, but executives should not be taking 50 million dollar base salaries and it's you can always say if you're like why do you take

50 million it's like well our peers also take 50 million okay that doesn't mean it's the right thing to do uh i don't know it's just gets gets me frustrated looking at it every time i read a proxy i can't help but think like it's such a waste yeah the guy that runs the non-gap newsletter said he quote tweeted this smart tweet smart rent thing and said death taxes and i'm using small cap proxy disclosures ceo spouse gets paid 750 000 in target comp to serve as chief of staff yeah she makes apparently also and this is from the proxy he had a little quote tweet here miss no way this is miss rowdy bush okay that's that's her name is also entitled to receive a target bonus equal to 50 of her base salary and an annual equity award equal to three hundred thousand

dollars great perfect that's what you want your chief of staff that's that name is i can't be real but that's besides the point um yeah i also thought it was funny one time when someone said they invented chief of staff so they didn't want to call people secretaries anymore uh males secretaries which i thought made a lot of sense because i never really understood the chief of staff role uh but we're getting off topic no it good it's so rare that you see like a great proxy and i think a lot of the the easiest way to resolve it it's just to have an owner operator but you know when you're looking at businesses that are 50 years old yeah typically sorry it's not going to be the founder so that part's unfortunate but well stuff that's founded

the last 10-15 years I don't know we just looked at hims and hers and that proxy was a huge concern and it was founder controlled, founder led and started less than 10 years ago I wonder if it's a mistake

to care too much about the proxy statement is it going to hurt my returns in the long run to be like this guy takes a little too much money yeah i don't think that is like the end of the day i don't think that should keep you out of something like booking but it's the other stuff like related party transactions gummy deals with

uh a spouse terrible bonus metrics i think it's less on the amount getting paid unless it's gonna it's a company generating 10 million dollars in earnings and the ceo is getting paid five million dollars. I think it's more on the incentives like, oh, with hims and hers, the big concern was they have a negative adjusted EBITDA target. If they hit a negative adjusted EBITDA number, they get a fat bonus. I think it's that would be the more concern for me versus the nominal amount, the nominal dollar value. Especially when, so if you're shooting for an adjusted EBITDA target and you're an executive and you get a huge payout, especially if it's negative, to hit that adjusted EBITDA target, a lot of the time you're backing that out of next year's

adjusted EBITDA because you're adjusting out the stock-based comp that you are granting yourself. It's this horrible self-reinforcing cycle where it's like, I'm getting paid more and more and the adjustments are getting bigger and bigger. Oh, yeah. But some companies back it out or some companies add it back. Like they don't include their own compensation in the adjusted EBITDA.

Yeah. You just use cashflow typically. Okay. I guess I should ask you, have you made any changes to the portfolio this week? Anything on the watch list? Anything you're buying? Do you have any heroes and zeros?

every i always get like this sense right before earnings where i'm like i need to own this one thing like it was just a it's a horrible characteristic to have but uh philip morris i'm like i just feel like zen which by the way do you see all this stuff about people are thinking about banning sin oh yeah or shimmer whatever those overdoses on dinner really what's the problem in american cities yeah everyone's overdosing on that yeah that's definitely the drug to focus on the uh but anyway the i really think philip morris is something i want to get own again i don't have a whole lot of like just cash right now so i probably have to sell something don't really want to do that it feels like they're gonna have a good quarter i think

that is going to be one of the most underrated growth businesses of the next decade philip Morris International. All right. You heard it here first, guys. We did do a show on them some point in 2023. Go listen to that for the full info.

I do like the company as well. But Zen is just so... Why'd they take it from us? Yeah, I know. I gotta see... I gotta forget. You know, go through the five stages of grief

and we gotta move on. But with where the market's trading at and where these... the big three tobacco companies have just fallen and fallen, and I believe Altria fell below $40. British American Tobacco is below $30. Philip Morris International is pushing $90 a share.

Do you think equal weighted those three don't reinvest dividends, let's say, and it's in a tax-free account, total return better than, say, S&P over the next five years? What do you think? I think they'd win, and I would adjust that strategy.

I would not reinvest dividends for Altria Altria and British American, but I would take the dividends and invest them into Philip Morris. It just, I like, I see a question here at current levels, which one has the best forward risk return or maybe that's rate of return. I like Philip Morris the most. And when it's a business that's growing in volumes, which they've kind of, they plateaued total volumes. So that includes the Icos machines, Icos heat sticks, cigarettes, and Zins. And I think there's probably some other stuff in there, but those are the big three. They are growing volumes again. I don't see really a world in which British American and Altria begin growing volumes anytime

soon. So I just feel like Philip Morris is going to be facing easier decisions and could surprise to the upside as opposed to kind of this concern about how quick are people going to move off of cigarettes. I don't want to have to constantly face that, but I'm okay taking a 10% dividend yield in the meantime. Yeah. I like all three, I guess, versus the S&P over the next five years, but who knows? I just saw a clip on CNBC that said we're pricing companies on a P to I, which is price to innovation so the bubble's back and we're cooking no all right speaking of rose-colored glasses the apple vision pro is launching seems like they have pretty low supply but they're selling them all out which i think they were targeting like a hundred thousand i was

saying isn't like 20 of that just the product testers that there's a million of those now there's so many of those across the internet it's just influencers they like give it out to right yeah and journalists yeah stuff like that okay but the big I think story and I don't think it's underrated it's been reported everywhere

is that a lot of apps are not joining so Netflix Spotify and YouTube are not joining as apps you have to go through a web application or excuse me a web browser to use them do you think Apple's incredibly

restrictive and kind of I don't want to say stealing but value extraction from the apps. Let's put it like that. Over the last 10 years it's going to bite them in the butt with this new platform. I don't

know if that's why these companies aren't adding it. I wonder if it's because they just don't think it's worth the effort right now. Well, here's not a lot of people would it be zero effort to get on that platform oh because they they made a thing to make it seamless for people to trans they have a like a button that you click

on your developer thing or maybe it's not a button that says translate my ipad app to a vision pro app um then yeah that's seems like probably the big reason why they don't want to do it i was talking with friends about this like oh you hear about the apple vision pro thing and i don't know when it was coming out i'm like uh yeah i guess like are you gonna buy one they're like no but they're so cool i was just thinking like are they no one when the iphone launched it was like this very useful thing like you could listen to your music you could go on the internet you could call people you could text people all from one device very easy very useful i don't see the usefulness here and i just don't see this getting off the ground now yeah especially at

three thousand dollars like who's maybe if it was critical and really usable people would be buying it but i just don't see it happening yeah that is an interesting point the customer value proposition for the iphone and even the stuff before that the ipod touch the first ipod the forgetting some of the other ones the value proposition versus the technology at the time was a huge step up and And yeah, I don't really see it for this one. Who knows? There's a lot of talk about how it's like the technology is so great,

but so is the stuff Meta's doing. Doesn't mean you're going to get a good ROI. I really struggle to see how many people are going to use these things. They talk about watching movies, but I'm going to watch a movie. man i'll spend three thousand dollars on a nice home theater i guess and there was also the comments about how your neck starts hurting after 15 minutes

so like it sounds ideal for movie watching that's what i was yeah i was i think a lot of people had that comment uh when i tweeted that out the if it gets uncomfortable after 15 minutes I think that's a huge issue and not to state the obvious but if we're going to make this

a mass market product yeah I think it's dumb I think it is dumb I don't think it's going to be that useful don't think it'll be that well adopted

and I think Meta's wasting money too yeah so that's that's where I stand but we've gone for longer

than an hour so that is well we did start late so actually this is exactly an hour 149 yeah so good timing on that though thank you everyone for joining i think this was a very fun one earning season always fun we could talk for hours we'll be talking more earnings next week i'm assuming some of the big tech stuff

probably some updates on companies that we follow we got remember the interview coming out with alex and francisco so that'll come out on wednesday the week after we're gonna have ryan's booking research report. And then after that, TBD. We'll be doing some fun stuff. I think people have liked our investor-focused interviews as well, the one on Norbert Liu and then the Ray Dalio one. Okay, let's hit the disclosure. We are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan, I, or any podcast guests may hold securities discussed in this podcast, may have held them in the past, and may buy, sell, or hold them in the future. Thank you everyone for the nice comments. You can watch these live Thursdays, midday,

1230 PM Eastern time on YouTube, or listen to the podcast recording wherever you get your podcast. Again, thank you everyone. We'll see you next time.