Chit Chat Stocks - IPH #97: $ARM Short Squeeze; a New Sports Bundle; Is Big Tech Still Cheap???

Episode Date: February 11, 2024

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks YouTube channel. This week we discussed: - $ARM's stock going through a short squeeze? - The new sports streaming bundle: will anyone sign up? - Earnings, earnings, earnings - Adam Neumann is BACK - Is big tech still cheap? (no, really) ***************************************************** Options are not suitable for all investors and carry significant risk.  Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the ⁠Characteristics and Risks of Standardized Options⁠ to learn more. For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the ⁠Fee Schedule⁠. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See ⁠public.com/#disclosures-main⁠ for more information. ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use. Use our LINK and get 25% off any premium plan: ⁠https://finchat.io/chitchat/?lmref=J3bklw  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. this is chit chat stocks uh formally chit chat money my name is brett schaefer and i'm joined as always by ryan henderson we are testing out a new video streaming software or just recording software in general so i'm actually not sure if this is going live to youtube right now but I think it is. If not, we are going to just pause this and redo it the old way. But

Ryan, I guess you're the one supposed to be checking here. Do you see it on the page yet? See a little refresh? Anything showing up? Yeah, it's showing up. I am a little worried that, well, first of all, short zoom. We're officially no longer customers, so adjust your models accordingly um but yeah we're trying out a new we're experimenting with a new technology here uh you can see how tech savvy we are it says not so deep dive oh that's the title so really we retired that that must have been an auto thing but it is still maybe it's what the customers want our listeners have told us don't get rid of the not so deep dive so maybe we have to just this is them speaking to us yeah all right i don't know how to change the name on

that but i thought i changed the name to the investing power but let's just get to it the name is going to call it weird i'll change it after i think people understand uh when they join what it's going to be so let's go through my little intro here welcome in to the investing power this is number 97 two more and we're going to hit 100 still got to figure it out we've been procrastinating what we're going to do to celebrate episode 100 on these episodes we talk about anything in financial markets could be earnings could be something any news story i mean we might talk about the sports streaming thing today we got a lot of earnings this season spotify disney i got meta amazon there's really an endless amount of things i have a winner and loser this week

Winner, Adam Neumann. Loser, Arm Shorts. I don't know if you saw that, Ryan. But before we get started, I want to say, if you enjoy these episodes, the best thing to do to support Chit Chat Stocks is to give us a review on Spotify or Apple Podcasts and subscribe to our newsletter. The link is in the show notes. Name Chit Chat Stocks as well. and i think we may be going live on twitter at this very moment ryan but i haven't checked i clicked the button and i think i connected but are you seeing it or not because i know twitter their tech stack might not be as robust as the old youtube i'm not seeing it but i say we just get into the show and uh kick things off and if twitter's behind and so be it it's not a change

from the past so uh it'll be live on youtube though i am seeing us there so before we get into things, I do want to talk about our friends at Public. You might know public.com as the all in one investing platform. They have now launched options trading and with it, they're doing something no other brokerage has ever done before. Public is sharing 50% of their options trading revenue directly with you, the customer. So whenever you trade options on Public, you get something back. And of course, there are no commissions or per contract fees either. By sharing 50% of their options revenue, you'll know exactly how much they make from your options trades because public is giving you half of it. In other words, it's a more transparent approach

to options with no fees and you get something back on every single trade. So go to public.com and activate options trading by March 31st to lock in your lifetime rebate. Guess verbal disclosure real quick. This is paid for by public investing. You have to activate your options account by March 31st for revenue share. Options are not suitable for all investors and may carry significant risk. They do carry significant risk. Full disclosures in the podcast description. This is for U.S. members only.

With that said, shall we get into the content for this week? We've got a lot on the docket. Maybe you can start with your winners and losers. Who's been a winner this week? Who has been a loser? yeah maybe let's do that second because i'm tweeting out the show link but why don't do you have any winners or losers or maybe you can even talk about one of mine because i have the notes in there i don't mind you stealing the intro information on any of these i guess mark

zuckerberg's a winner in a way i saw this they he is officially so into mixed martial arts that they had to add a risk factor on their 10k that if that he could get hurt and uh it could drastically affect the company so he's been really pumping that whole mma thing for himself and it sounds like he's officially included as a risk factor because of it um kind of just funny to see that included on a risk factor i can't say i've ever the only one that's kind of similar is when we looked at shift floor payments and they're like our ceo is an astronaut and things could go badly and so just be cautious about that and he's very important to the company so it's kind of funny to see some uh see executives with other hobbies disney reported this week always kind of

controversial slash entertaining i think our regular listeners here know we are maybe i don't want to say haters but not the biggest fans of bob eiger uh and mostly related to the turmoil that went on with the executive suite last year however it seems like things are improving there and there's a been a huge shake-up in the media industry overall over the last week because we're going to talk about it here but they are teaming up with fox and warner brothers discovery So, kind of, I don't know if you'd call that arming the rebels, but joining armies with some competitors in a way. Did you hear about that? Any thoughts? I did, yeah.

Thoughts are that these traditional players are still in a tough spot. The rumor is that these will, excuse me, the subscription will be $50 a month. So not too much cheaper than the traditional cable bundle. And I think the reason these traditional players that host these sports rights are going to be in a bit of a bind is because typically, or excuse me, historically, you know, they've had such a cash cow with these sports leagues and the fact that everyone had to pay for them through the bundle is getting eroded. And in order to just simply replace the old revenue, they're going to have to charge quite a bit to the sports fans. And I'm still, I don't know whether it's going to be successful, but this app feels desperate to me. And you still have Amazon, Apple, YouTube, and then possibly Netflix, depending on what, they kind of got one toe in the water so far. And I think, look, these guys can outbid you. And I think it's kind of changed the game for these.

I am really interested what happens to this market over the next five years or so, because it seems like a lot is crumbling. And I don't know. I agree. I don't know what the end state is going to be, because how many people are going to sign up for this? Yeah. Do we need a new app? Is that going to solve all our problems? I don't think so.

uh if you're disney i don't think that's going to solve everything uh to kind of give some context here here's a quote from the wall street journal it says espn fox corp and warner brothers discovery are teaming up to create a supersized sports streaming service that will offer content from all major leagues a deal that will reshape the sports and media landscape now i think there's something important to distinguish there content from all major leagues is not all content from major leagues it is individual games get the odd game here and there and i don't think that's what people are looking for in my opinion i think they want services where it's simple you get all the games access to everything within one spot whereas this sounds like the same issue

that they had previously where people are fleeing the service because or maybe not fleeing the service but they're getting the odd game here and there and that's not the same as having access to all the games in the league so uh i think i prefer apple tv strategy same with youtube in a way where they've gone after sunday ticket i know it's hard to get all of the nfl league rights that's probably never going to go to a single uh a single service um but like i just like having it all in one place and i think youtube tv is still going to be the ultimate winner in sports streaming even though they are not like they seem like the catch-all yeah whenever i think about who wins it feels like it's going to be youtube tv and i know that the content might actually belong to the espns and

the foxes and the warner brothers discoveries of the world but unless they take it off of youtube tv it seems like all the eyeballs will be there yeah economics might not be which doesn't really matter to youtube what does youtube tv cost right now i think it's like 60 bucks a month uh i believe that is too low but it is 73 normally it's just cable all over again well yeah i mean that's that's what it is i mean and it works really well it's simple it's not like they're not trying to pretend they're anything else no i guess i guess with the sunday ticket it might change things a bit but yeah decent yeah yeah it's it's interesting but the the reason i wanted to know

So the price of YouTube TV is because, okay, 75 bucks for YouTube TV, or I can get $50 for this new streaming app from these other two companies. Is that going to move the needle for the sports fan that's younger that can afford these things? I'm not so sure. And it's not like you get all the channels anyway. You're missing the stuff from Comcast and Paramount. Yeah. So half of the NFL games, I think, are not on there. Yeah, it's tough. Who knows? I mean, maybe this is the better strategy than the ESPN Plus, but it does, like you said, it feels like kind of a last-ditch effort to put something together. And I'd be surprised if it ended up really successful and kind of pulled Disney's sports business into profitability.

Want to talk Disney earnings or unrelated? unrelated this is an anecdote i'm a netflix ad supported subscriber now no longer reaching the parents account they got me but it's like i think because the ad business is so nascent for netflix the ad load is just tiny so you get like in an hour-long show you might get 30 seconds or a minute of ads right in the middle and then it's like that's it you compare that to a service like peacock it's like just 10 times better um so if there is ever a time to get the ad supported tier for netflix it's before they've scaled up their ad business anyway disney earnings let's yeah let's look at um revenue was slightly behind expectations but

there was an earnings beat so earnings per share came in a little better than wall street was expecting disney plus subs fell quarter over quarter so there was a sequential decline however they raised prices substantially or by a decent amount in north america i believe so the price hikes offset i think average revenue per user was up like a dollar which helped really basically total revenue was up for the service so i think it's probably the way to go uh i mean that's gonna help them get to profitability a little quicker the uh the only concern i guess for me well for one there was a lot of news around like the streaming efforts with fox and warner brothers they also invested a billion and a half in epic games not sure where

they're going with that it says the media giant will work with the fortnite gaming studio on new games and entertainment unit for them i don't know these feel like side bets where it's the kind of thing they can do when their core business is humming but right now it doesn't feel like maybe the right thing to do feels distracting yeah yeah i i still am left thinking disney's in a difficult place they're planning to or they're on pace to cut costs by seven and a half billion dollars in 2024. The parks business is still wonderful, but I worry about the streaming operations. The runoff in linear networks is quick. Revenue is down 14% every year there. So I guess I'm just not sure exactly where they go from here. I do think there's a path to

profitability within direct-to-consumer or their streaming business. But I also think they might be redirecting some costs within there, which this has been a red flag for me, is that while they've been transitioning to streaming, their KPIs, and part of this is frustrating because I can't post a decent chart, their KPIs keep changing. How they label things keeps changing. And so it feels like they might be reallocating some costs and saying, oh, our segment profitability is improving when maybe we don't really know what the true cash flow is in that business. So obviously at the high enough price point, I think they can be profitable, but it seems like they're going to have to keep taking prices up a bit. You look at a competitor like Netflix who has raised prices a number of times, subscribers continue to grow. Disney, in their case, they're seeing quarter over quarter declines because they chose to

raise prices. So every time I look at Disney's earnings, I think I should just own Netflix. Yeah. And the price on Netflix might be a bit, for the stock, might be a bit tough at the moment. But I agree with you. I don't see where the endgame is. i mean look it's all about family-friendly content that's the moat that's where they're supposed to have the bread and butter but i see engagement growing within gaming among kids still

you see roblox their engagement continues to grow around the world yeah that's not going to affect the theme park business for a long time but i just think within the the immediate future what are kids using youtube roblox it's youtube it's gaming it's youtube in a huge way and roblox probably bigger but roblox on youtube yeah it's a combination all that stuff minecraft i don't does the situation get better over the next five years where like if you look at amazon's call you look at google's call youtube whatever they they just wrote their annual letter so it kind of reminds me apple's a bit secretive so it's hard to tell are they going to get less aggressive or more aggressive in sports i think more given what they're saying and it's like okay

well where does espn end up that business looks really bad right now i just don't understand where they're going to go from here and then you just throw a billion and a half dollars at epic games if gaming was the future you should have invested into this 15 years ago yeah they uh and there's no idea like there's no context on what that stake is worth or well the stake is worth one and a half billion but uh there's no numbers on how much of epic games they buy with that so it's kind of just they're throwing money at the wall here and it sounds like hoping something sticks every single quarter i look at disney and i come away thinking there are easier hurdles or that there are easier investments to make because like you

said it's just an engagement thing like they could still create really good content but if engagement is elsewhere if competition for engagement is high and coming from all sorts of different mediums not just content players like the foxes the warner brothers discoveries of the world but people like roblox and youtube it just feels like the moat kind of gets eroded for disney and even if they produce good content it just might not be as valuable and the problem is there's a lot of reporting on how pixar has lost its mat like maybe not fully lost its magic but they they're not the same the the culture is worse apparently marvel's culture it's just just reporting so who knows on the inside but marvel's quality apparently has

gone down and people are complaining about the culture there lucasfilm same thing so yeah all right we can't talk about them forever we got a lot of topics here anything else before we move on ryan well adam newman news but i'm gonna let you talk about that here in a little bit spotify seems to have found religion they are showing pretty strong cash flow at least significant improvements in their free cash flow the layoffs hurt gap profitability this quarter relative to what they said they were expecting last quarter so it was still better than wall street's estimates but if you looked at it at q3 and you looked at their earnings guidance and then you saw their Q4, you'd be like, this is horrible, but there was a big severance chart. So

I guess don't focus too much on that. It feels like, to me, Danielek, the team there, have come around to the idea that maybe generating cash is a good idea. And here's my concern. And I don't know if it's a concern. I just want to get your thoughts on this. But But it seems like their approach to investing versus showing cash flow ebbs and flows with interest rates. And they've been kind of more forthright about this, I think. They've literally said here and there that when capital is cheap, we're going to invest. And now it seems like investors want cash flow and cash flow today or capital is more expensive. So we're going to make layoffs and start to show profits.

But I've never really seen – a lot of companies do this, but I've never seen companies be kind of so direct about investments are going to change. Like we're going to invest more on Capital Street and then we're going to show cash flow today. Do you see or do you think that is the strategy for them? And what do you think about it? In Toronto, every arrival is a statement, and nothing says it better than this. Cadillac Optic was the number one selling luxury EV in Canada for 2025. Find your rhythm across a seamless 33-inch display and an immersive 19-speaker AKG surround audio system. This city demands agility, and Optic delivers with precision to make every drive

extraordinary. Let's take the Cadillac. Find out more at cadillaccanada.ca. Luxury sales claim based on S&P Global Mobility Canadian New Vehicle Total Registrations for calendar year 2025 for the Cadillac definition of luxury. I don't know if that was my takeaway from the call, but I can see that being a takeaway. I don't think that matters over the long run. The music business has shown to be much better than I even thought, and I thought it was pretty good. It's highly profitable. If you look at the numbers, you're going to see negative consolidated margins right now but you have to deconsolidate to the separate segments and the user numbers continue to climb subscriber numbers continue to climb they're crushing

the direct music streaming competition so that's much better than you thought and it came with a price increase churn stayed the same growth was phenomenal you're seeing revenue growth be quite strong but then the music side advertising and podcast worse than uh we thought so it's kind of a tale of two thing uh things there yeah right for the wrong reasons the yeah we basically came to i think the estimate of around we were like this business could generate 10 or 15 percent free cash flow margins in the wrong in the long run they if i'm doing the math real quick this quarter doesn't count the working capital change was not normal they've gotten much the improvement has been much steeper than i was expecting you gotta yeah this quarter do not any

listener do not get misled a lot of its working capital gotta love trailing 12-month numbers for them i would say the yeah but they do have a permanent working capital advantage uh yeah i think 10 even operating margins if you want to should be fairly close over the long term what do you think we were wrong about on the podcast side the ability to convince advertisers to get over quick enough because i don't they got the supply there listenership is there but we've seen with ours we we use the automated ads along with organic ads and what is the like fill rate we get on a listen like 10 20 globally if you kind of work through the cpm they give us versus the you know on the

impression versus the listeners it's just not very high so they need to get more advertisers because the supply is there yeah i think that makes sense they just haven't yet maybe i just overestimated the market potential for podcasting revenue yeah but radio is so high that usage should follow them i think they're just not executing yeah i would have thought that if they owned the distribution for podcasting it would a be more profitable and b be larger in terms of revenue so and they're taking a 50 cut right i mean 50 percent's bigger than a lot of like uh smaller networks what they take so it's surprising to me that they haven't been able to grow that business a little more quickly.

Spotify, I don't know. We could talk about them all day. Do we want to hop to anyone else? Philip Morris. Yeah, why don't we do my winners and losers, huh? A little fun stuff. Us losers,

we were stolen from when Swedish Match was sold. Yeah, we can't talk about that anymore. We banned ourselves from talking about that, right? I think we did, yeah. but a little uh teaser i know ryan you had notes about philip morris here but i don't want to spoil everything for tomorrow we're recording a don't know the exact title but basically we're

going to look at stocks either on our watch list or that we own that have done their earnings or really could use an update we're going to do five of them ryan has three companies coupong harbor diversified and philip morris international yes i got those right i have spoiler spoiler and ally uh we don't know hey we're gonna go through them kind of get an update what we think of the quarters and stuff like that so we're not going to talk any of those today but we're going to do a full show with hopefully better more less what off the cuff analysis as these shows kind of go i bought a new position this week by the way hey and i'm not going to talk about it on this next week's show but i think at some point maybe in the next month or so i can do

a little research report on them i'll just disclose it here dream finders homes i like the business i think they've done a good job and the model's pretty simple i also reached out to ir and the cfo got right back to me via email which was very nice nice to see also shows me that maybe there aren't enough shareholders and she isn't that busy but that's besides the point okay all right well yeah let's hit winners and losers my what i call it yeah i called him a winner this week adam newman he is the tech exec that never dies uh we can't get rid of him the startup guy i guess uh here's a quote from the financial times adam newman is trying to buy we work out of bankruptcy claiming he has wall street backing

to take control of the company he was ousted from after racking up billions of dollars in losses. I believe tens of billions, over 10 billion, if I remember correctly, if we total it up here. WeWork is essentially filed for bankruptcy. It's worth nothing now. Still got a bunch of loans and leases that they're sitting on that, to be fair,

Adam Neumann put them on. But, and here's the other exciting part from the second quote, executives from Third Point, Japanese conglomerate, SoftBank and Neumann last held an official meeting to discuss a potential bid for the company in October. People familiar with the process

said he can't quit them. SoftBank Masasan cannot quit WeWork. It's destroyed so much of his company's money. He just can't quit. But not his.

I think it's not his. He's fine. But not his worth. he in fact quite the financial samurai adam newman is because he juiced some money out of soft bank before getting out if i'm not mistaken now some of that i think might have been in stock so maybe it's not worth as much anymore but he got like a massive payday to leave the company he's using that payday to come back buy him out of bankruptcy that is some nifty uh some nifty financial moves i don't like the guy but he's done well for himself yeah he's rides the line of not actually being a scammer so closely because he's not technically

like doing anything illegal i don't think from all the stuff i've read he's just very good at convincing people to give money for for bad ideas the best part is you know what that's that's an important skill set is that salesmanship um he he went on an interview at one point and said i can't remember who it was with they said profitability is a choice well this just goes to show that they are incapable of generating the profits they need to stay alive and they are we we visited we work as a potential i think it was a not so deep dive about two weeks before they stopped file or stopped shares were no longer

traded the they could not generate profits and they were trying as hard as they could so profitability I don't think it's a choice and Adam Newman might have been wrong on that one

or maybe he just took him so far down the wrong path that he kind of come back from it yeah now speaking of my loser of the week remember when we looked at the arm s1 and said why is this valued at 50 billion dollars

well masa sun said two words for you ai and he also said i got a low float stock for you they okay so if we look at their numbers they reported earnings i think yesterday or maybe this morning revenue is growing 14 year-over-year trailing revenue for the last 12 months about three billion dollars pretty profitable at about a billion dollars actually not even up there it's like 800 million dollars in trailing 12 month free cash flow but but ryan is apparently the backbone of the future of computing i read their presentation got a little masa sun touch in there they today are up 60 percent and have a market cap of 126 billion dollars So if you were shorting this based on fundamentals, I think it's a lesson.

You do not go into something that's low float controlled by someone that's not afraid to pump stuff. And do not short anything related to a bubble or kind of hype cycle theme. Because you can get absolutely blown up. 100% totally agree. That's why you can't short companies like C3.ai, even though maybe they're not stellar businesses, but they literally just, I think the ticker's probably worth their entire market cap or worth more than their business as a whole. But you also can't touch anything MasaSan's affiliated with. It's important to know who you're up against. And in this case, it seems like MasaSan has access to more capital.

maybe the right word do you think it is immoral if he dumps his position yes yeah should he dump his position though yeah he probably should that would be the fiscally sensible decision however i yeah i think it's immoral and it's i mean it's tough because buffett's kind of had this problem throughout his past as well right if he takes a position if he speaks positively about a business it affects the stock sometimes so much so that it gets a little ahead of itself i believe most of the time he tends to just keep holding there have maybe been certain situations where it didn't happen i think wells fargo was it wells fargo or walmart at one point he talked positively about the business and then ended up selling but

you're referencing the ProPublica one yeah there was a couple times I wonder if people ask him that at the annual meeting which Ryan is confirmed going I'm not sure Ryan's going with our friends at Finchette

there's been a cancellation I should have said that but maybe if you want to go we can still go I'm not sure yet but side note how happy were you about the world cup news oh yeah i don't know if our listeners will care that much but for context 2026 world cup is in the u.s mexico and canada there are going to be six games

in seattle which is where we reside actually brett does not reside there currently but typically he resides there pretty exciting stuff i'm ecstatic and not to mention vancouver is a host city which is uh close enough for us to drive to so i'll probably be hitting some games there as well and the big surprise we got a u.s national team game true what's the maximum price you would pay for a ticket to that game to the u.s to the u.s game in the u.s game yeah because you're going i know you're going yeah i would probably spend 300 or 400 i don't think it'll be that much you don't think no maybe on the secondary markets but they uh they give out like whatever fan club members like they give you access to tickets

at whatever their price is, which is usually lower than that, I think. Damn, you're lucky. I don't have that luxury. It might be... I don't know. Maybe I just... I think it's going to be more than that.

I'll choke when the moment comes, and I'll spend more. I think it's going to be... I would guess it's going to be more than that. I think I'd probably just pay whatever the cheapest one is at that point. I just don't care. all right there might be a cap who knows there's gotta be a cap somewhere right

okay before we get to our nice mid-roll ad let's try to hit some of these questions will arnold says how do you feel about uber's 150 billion dollar valuation compared to lift at five billion dollars that is an interesting way to put it that divergence is strong i actually wrote an article on uber and i did a little double take when i saw that market cap i mean it is absolutely soaring but the earnings have been quite strong i i don't know if i touch either right now lyft is just in a tough spot because uber kind of controls them but the fact that uber is raising prices in the united states or north america where where lyft operates they if they streamline enough they can be fine if they can maintain

that market share without spending too much on market on you know sales marketing with lyft i remember looking at them and thinking god it's it's a name that like there's some brand notoriety in the world with lyft in the real world however i just remember thinking there's no way they can get to profitability because and maybe they were there but there was no way they could generate like consistent profitability because they were at uber's whim and they had done a lot of kind of cost cuts and got to like what was left and it just wasn't profitable so i i came away pretty pretty much thinking it was unownable uber i think has become essentially a monopoly and And I do – I'm impressed by the improvement in profitability.

However, someone raised this point this morning. They have done the easy stuff. Like they've kind of raised the take rate. They've raised prices here and there. It seems like they're not really that forthright about it. And they are generating $900 million in advertising revenue. So how much, like, have they gotten the low-hanging fruit? How profitable could it really be?

Does it warrant a $150 billion market cap? Yeah, I'm not buying here. I mean, it doesn't make much sense. I will say on Lyft, though, still maintaining, according to this data aggregator, 25% market share in the U.S. So we'll see. I haven't looked at their numbers in a while. So maybe it's because they're still spending like mad on market. It seems like, to me, that when you want a ride share, at this point, you either just go straight to Uber, or if you're still in the process of doing this, you go to Uber, and then you check Lyft.

And then the only way you take Lyft is if it's lower cost, which puts them at a disadvantage. Their estimate on cost per ride is pretty much the same on this study. remember at one point they tried to go like premium service yeah i mean that was a mistake i think but they said there's the observed sale per customer is about the same lifts just a little bit lower i think five billion dollars i don't know what their balance sheet looks like so that could really screw things up but if uber raises prices and lift can just follow it might work but it's not a high quality business i don't think got some more questions here tyler asks uh do you think the sports jv kills the tv subscriber companies faster i think we already

kind of addressed that a bit but you want to touch on that i think it helps yeah but like i think the key is the price point has to be way different than the traditional bundle for it to make sense for for like a new subscriber to hop on for example like us you know like okay we didn't subscribe to youtube tv or we didn't subscribe to the traditional bundle but now that it's 50 are we gonna subscribe maybe it just isn't that much big of a difference no but i think the bundle was collapsing because of this anyways and this might not be the final nail in the coffin but there's been a lot of nails in the coffin and once because of the fixed cost of these content providers once the subscriber levels of the traditional bundle go below a certain rate

your operating leverage reverses and it gets really ugly really fast so i think that's what they're getting a little desperate about okay that makes sense yeah i'm just looking at some of the other questions here um well someone's talking about the finder's homes but or what's that yeah talk about that separately someone said that if they were shorting arm they didn't listen to our interview with upslope capital so i'd say that's true go listen to that if you want to learn how to avoid, as best as possible, the perils of shorting stuff that could go up

100% because Masa-san owns 90% of it. Okay. Do we want to talk about some hidden Canadian compounders? Ryan, go right ahead. And maybe just mention our sponsor here, another sponsor for the episode, FinChat.io,

my place of employment, I guess. I'll just kind of ramble about why I like FinChat and then give you the link to check out. And Brett, you can cut me off when you want. But FinChat is, for those that don't know, a stock research platform. There's like 57,000 stocks, basically all the stocks that are actively traded and some that have been acquired or no longer traded. You can see all their financials, generic financial statements, as well as KPIs, which I think that's probably the part that I like the best about the platform.

Basically, if you want to see Match Groups users, Philip Morris's Zin volumes or their Icos volumes, stuff like that, very specific segment data, they've got it on more than 1,500 stocks. So go ahead, check them out. The link, which is very important because it gets you 25% off, is finchat.io slash chitchat. So if you want to – it's free, but if you want to get any paid plan, you can get 25% off by using finchat.io slash chitchat. The link will be in our show notes. I was working on a content piece for them this week. If you're looking for a way to

drive engagement on the old Twitter machine, I highly recommend doing threads like this. I said, Canada has produced a lot of good businesses that don't seem to get a lot of discussion. Some do, Shopify, Constellation Software. It seems like everyone talks about them but brookfield yeah brookfield there are some hidden gems so it might take me a second to pull this up but did you see the thread that i was talking about i did not but i will pull it up right now have you you know not surprised yours this part of your job is to get the followers there have you passed 10 000 followers over at finchette yet getting close i've seen getting close. Very close. Oh, wow. Only 30, 40? No, 32 away. All right. I'm going to pull it up. I'm

going to find it. So a couple good ones here. I basically filtered for businesses that outperformed the market. And by the way, use FinChat Screener for this. So that's another thing that I think is useful. Just whatever. Do whatever screen you prefer. I looked up earnings per share that had grown by 15% or more annually over the last 10 years. And that ended up being a pretty decent filter because if you grow earnings per share by more than 15% a year for a decade, you're probably a decent business. Anyway, go easy was number one. It's like kind of payday loans or people that are trying to finance furniture purchases or stuff like that. So it's really high APRs, pretty high default rates,

but they've grown like gangbusters a lot of logistics companies a couple logistics businesses in their uh dollarama which is a business we've looked at before it's the dollar store of uh canada and 22 percent uh total return annually for the last 10 years for dollarama we did a full show on them i'd go check that out and i will say an emerging dollar store down here in columbia dollar city really dominates does quite well yeah totally a lot of people there have you been in one i have not visited it it's uh shall i say what i want to spend with my time but i walk by one sometimes and it's always busy so you know wouldn't you worry too much dollar end of shareholders here's another one i like thought this one was kind of unique salvaria it's an

850 million dollar market cap has compounded its stocks a total return at 21 and a half percent annually they just build like wheelchair lifts and elevators stair lifts stuff like that for physically challenged people and it's it's grown in a huge way over the last decade but But I've heard there's some kind of barriers to entry with their extensive dealer network. So, potential little small cap worth looking at there. I also hear that there are a lot of boomers that are getting old. So, could be quite the tailwind. True.

That is a big tailwind. Similar to the retirement community thesis, all that good stuff. Any in here that interests you? That one definitely does. Dollarama does. I know that it's just more expensive. I like that there's just some terrible names, which is interesting. I also thought it was interesting that Fairfax showed up.

Fairfax, I believe the day we're recording this, had a short report come out. From Muddy Waters. Potentially from Muddy Waters, which is quite spicy. But let me confirm that it's them. And for those that don't know, Fairfax, yes, it was Muddy Waters, Fairfax. It's all accurate. Fairfax is sometimes I don't know if I sometimes think like management teams try to perpetuate like rumors like this referred to as the Berkshire Hathaway of Canada, which I bet the executive team loves there. but uh huge property and casualty insurance business they are a lot of insurance businesses

which is by you know like very low risk investments and you know focus more on the underwriting and less on the investment side of things it seems like fairfax is more of an opportunistic investment management team so for example i think they bought credit default swaps before the financial crisis um however they've made some other macro bets that haven't turned out as well or turned out quite as good in the years succeeding it but yeah it is i don't know it looks like they've done a decent job compounding book value per share although muddy waters had some criticisms of them lately there's another business here that i like uh i can't i can't remember what the acronym is for but it's brp basically they're the manufacturer

of ski do and see do and i think like can am so power sports vehicles things like jet skis snowmobiles stuff like that they have grown earnings per share at 38 37 percent over the last 10 years pretty impressive that's good huge yeah maybe they're smart but consumer discretionary stuff like that worries me yeah that's fair that's not my favorite type of business but that's a fun one all right i think we try to make these interactive ads you know useful to the listeners quite easy with since fin chat we use them all the time really for every episode so anyone who wants to go check them out, go to finchat.io slash chitchat. Link is in the show notes. If you sign up for a premium plan, which is extremely useful, you get 25% off your annual rate. Or if you sign

up monthly, I'm not exactly sure what all the different divvy ups they have there, but that can save you a ton of cash. So yeah, go check that out. All right. Next topic. I think I want to discuss Amazon earnings simply because I sound right on this one because it makes me look good I don't own it anymore

I should say but it makes me right for my takes for 2024 it makes me feel good about it that we can't just hold on to it but I have a question here that's more maybe interesting so let me go through the numbers for anyone that didn't see or was interested I can just get really some of the

key KPIs here North American net sales accelerated to 13% growth in Q4. Operating margin was 6% in Q4, 4% trailing 12-month. International is getting close to break-even operating margin. AWS revenue accelerated to 13% year-over-year with expanding margins. Third-party sellers grew 19%. ARR to 100 billion. Almost.

I think it's at like $97 billion in ARR for AWS. Perhaps next quarter, I will say last, I don't want to throw out too many numbers here, but third-party seller services, 19% growth, ads, 26% growth, and subscriptions, 13% growth. I say those three because they're getting larger as a percentage of their overall revenue, and they are higher margins, so can help with the margin expansion as they go more quickly than the consolidated numbers. my question is do we see 100 billion dollars in earnings soon for amazon if so when and is the margin expansion just green-lighted to continue going forward i'm not sure on the 100 billion uh in earnings i think probably within the next two or three years seems doable uh depends i guess it depends what number you use because they have like they have like four different earnings figures that you can use there's like

true free cash flow minus uh what is it at least uh yeah so i would say do net the finance leases just because i can mess with things but i think with them operating income is fine yeah it's fine their ebit if i remember correctly was that what 13 billion dollars this quarter yeah something like that yeah it's really impressive i yeah we we got this one right feels good to say we got this one right i will also say the And that period was one of the most fun times I've had as an investor, where it was like Google, Amazon, they were trading so cheaply, and the outlook was so bad. As long as you just ignored any of what investors were saying, because the consensus at the time was that retail is structurally unprofitable for Amazon, they are screwed there, and they generate all their profits from AWS, but cloud is going to stop growing or it's going to hit maturity quicker than everyone thinks. I think I'm just going to start buying Fallen Angels.

if something's on my quality list and it drops more than 30 i'm in yeah that is interesting what is also interesting and maybe i'm remembering this incorrectly but it amazon seemed much easier than google from a like i don't know just the conviction i had on amazon was much higher than Google from just the uncertainty around all the stuff that could potentially disrupt Google's core profit engines. I had some uncertainty around Google's management team, like whether or not they would really continue to grow earnings, or they would start investing heavily to compete with ChatGPT. But I never thought that the large language learning models were going to like replace key search so i thought that part was a little easier and that seemed to be consensus

at the time that searches moat was just like gone which i saw someone said this if google doesn't have a moat no digital business has a moat and i think that's accurate yeah because i think like how many people just live on google every day in their workplace most would be my guess. Oh, yeah. Yeah. I thought both were pretty easy. The only unfortunate part is that when those

become easy investments, it's like everything is. The market as a whole is usually down because of it, and there's mispricings galore, so you kind of have to pick and choose. So it turns out that those were probably

the easier investments because the quality is so high, but It felt like everything in our portfolio was kind of down when those opportunities came up. Yeah. What was that, end of 2022? Sorry? That was end of 2022, right?

Beginning of 2023, we invested in Amazon. I had to force your hand a little bit. A little bit. But it's all right. You had to force my hand on some other stuff. That's how it goes. the stock today is at a 1.78 trillion dollar market cap what do you think i think i i'm not gonna i'm really tired of hearing their market cap to be totally honest because it discourages me

whenever i hear any market cap above a trillion dollars i just think like it's too large like we're you know how's it going to be able to give a better than market return from here however the growth rates are better than market so i just want to ignore that and i just i constantly think law of large numbers whenever anyone quotes a market cap above a trillion However, Google, Amazon, maybe less so Apple today, they seem to defy that and continue to grow at will. So I'd rather just look at the multiples and just pretend that I don't know what the market cap is. When we bought it, it was below a trillion-dollar market cap. Yeah, $900 trillion.

Yeah, and I think – $900 billion, yeah. Yeah. I mean, look. what's interesting is at the time it felt contrarian to get along those two but i think today it's i don't know how to think about big tech let's ignore tesla and nvidia because a little more uncertain but let's stick with the core ones that have been around a while you got facebook or meta alphabet amazon apple and microsoft i think right now

if i'm looking at the sentiment online stuff i read in wall street journal wherever people are saying that's just a big tech party like you're really gonna join in now but if i look at this tweet from modest proposal it has now this has uber and doordash and netflix in there let's ignore them they're a little smaller and yes these are estimates but if i look at apple the 2025 free cash flow multiple estimate is 24 microsoft 29 google 16 meta 20 amazon 22 they don't seem that expensive to me yes it's 2025 yes that's not like dirt cheap but i kind of think and i'm pretty bearish on apple but who knows i heard they're gonna come up with a flip phone like samsung and i

i gotta say i think a lot of people would buy that i think they might as a group still outperform my guy tells me that as a group that they're gonna still beat the market how many times have people sat down and had this exact conversation over the last 10 years the multiple is slightly above the market can they continue what they've done can they continue to grow as a percentage of the s&p 500 like yes i suspect they will i here's yeah here's a question for you you buy a small cap factory tf standard factor or equal weight these five i was thinking about this a lot the other day actually

and this idea of like micro cap especially that you know their day will come like a small cap value their day their day will come this is kind of galaxy brain thinking here but how much of it just has to do with the fact that so much of business today is done digitally and it's international and having scale and the money to like just exorbitant resources to win it constantly favors the big tech companies whereas maybe back in the day if it was you know largely physical businesses micro cap or small cap value could have their day and large cap could have their day. Whereas there's so many, I guess, just like increasing advantages to the big tech companies. It just seems hard to kind of slow them down.

Yeah. I've thought as someone who's in Latin America right now, if you're bullish on basically Mexico and South of Mexico, every country South of there, that kind of whole region, however you want to define it, including the Caribbean, if you're bullish on that region you think gdp is going to go do well and this could be any other region outside of the really developed economies it's going to be good for meta because instagram and whatsapp is where life will run it's going to be good for google and or alphabet and their associated services it's going to be good for apple because they're going to grow their market share as people get richer and who are my other ones microsoft yeah maybe a little bit less direct

but i still think so yeah business formation in those economies favors microsoft and then amazon's cloud definitely will be helped out by that i guess probably microsoft as well amazon maybe less so because they can win anywhere like yeah and maybe that's what everyone said back in the day when like ibm was the largest company in the world i don't know if they ever were but like you just think that the competitive advantages are all these businesses are impregnable but i just look at i look at it today and i think apple and google and amazon are much better businesses than sears in the 80s true true now with that being said i don't own a lick of big tech same my mag seven score is

a whopping zero no no it's two it's two your mag seven score is two it's one we own big tech for like six months i guess eight months no that's not true google and amazon google is longer than a year amazon was like 10 months okay all right i'll take it too but you may have seen since you share that account david gardner's mag 7 score 103 that's incredible what a dog god the older i get the more and more my philosophy just aligns with david gardner yeah just make sure you buy at the right price yeah and don't like don't sell just don't ever yeah i think well people today meta you know it's up 300 in the last year or maybe a year and a half at this point a lot of people are debating on whether to sell or the trim down their position

i can understand if maybe you got an option position or something or it's becoming a very large position in your portfolio maybe trim it down you know maybe turn it to like a giant percentage of your portfolio you trim it back down to a normal size position but typically when a business is really strong if you look at it like it pays to just never sell unless you think the business has just gotten out of hand and all signs point to meta's business getting better so i don't know if you're going to sell one of these companies because it went up 100 i'd really think about that now yeah if it turned into a giant bubble and it went up 500 percent in a year that's a different story yeah but yeah i don't know i feel like we talk about

that this too much but maybe we talk about it every year earning season i think to revisit big tech um i think that's gonna do it we're usually try to go a little over an hour to get an hour of content inside the advertisements but for anyone listening our next episode is going to be covering five stocks that are either on our watch list or that we're buying right now. It's a little tease. Like I said before, it is Coupang, Nintendo, Ally, Harbor Diversified, and Philip Morris International.

So a good mix, small, large international companies. It's going to be a fun mix, I think. We're going to cover five of those, hopefully give some good insights into what we're thinking, what kind of we're seeing, and hopefully people can come away. We're not recommending people buy them or anything. It's just what we're looking at.

You can kind of read it, agree, disagree, maybe give us some feedback, all that good stuff. We're all trying to learn together. Thank you, everyone, for listening to this episode. And for reference, I'll come out next Wednesday if you're listening to the Power Hour podcast right now. But yeah, 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 guest may hold securities discussed in this podcast, may hold them in the future,

and may have held them in the past. Okay. Thank you, everyone. And we'll see you next time. Don't you wish you could just hit skip on the worst parts of your life? You know, the same way you can skip an ad? I get it.

I'm Siyaya and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem.