Chit Chat Stocks - IPH #98: Pat Dorsey Moat Categories; $LYFT Earnings Typ0; Sam Altman is doing WHAT???

Episode Date: February 18, 2024

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks YouTube channel. This week we discussed: - Pat Dorsey's 4 moat categories (plus examples) - Lyft's earnings snafu and whether it was purposeful - Sam Altman's wild semiconductor ambitions - Is TopGolf Callaway turning into a shitco? ***************************************************** Subscribe to our YouTube channel: https://www.youtube.com/@ChitChatStocks  Follow us on Twitter/X: ⁠https://twitter.com/chitchatstocks  Follow us on Substack: ⁠https://chitchatstocks.substack.com/  ********************************************************************* 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

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. 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. okay we are trying again i believe this is live we can cut it for the podcast but we're going to test and see if it's loaded up on youtube for the investing power hour number 98 if not we might have to go back to the old setting so let's see see is it showing up is it showing up hey i think it's there but it's showing up with the old yeah it's showing up with the old name oh riverside what are you doing

all right well it's there okay well let's just get started let me talk talk through the old intro here that we can cut out that old part this is the investing power hour number 98 on chitchat stocks my name is Brett Schaefer and as always I am joined by Ryan Henderson I think the name here maybe I can change it midway through but we have one person joining Tyler as always says it's live apologies to anyone joining the live part but we can't get this naming thing to sync up with the Riverside software otherwise it's been a beautiful new little tool we have so it says number 97 while we're live, but that's really irrelevant for any of the listeners here. It's number 98.

Or excuse me. It says, yeah, it says 97, but it is 98. I guess it really doesn't matter. We'll change that title later. Big 100. 98, 99, 100. Two more after that, or one more after this one, but two more including this one. We're talking a lot of stuff today. Really anything in the financial markets. There was a lot of fun news pieces. Thank you for all the journalists leaking stuff to the public about businesses and their plans. It looks like we got some Lyft earnings. People probably saw that typo that caused some crazy after hours reporting. And we're going to talk a

lot of other stuff. But before we get started, Ryan, why don't you tell the listeners about our good friends over at public.com yeah let's do it so you might know public.com is the all-in-one investing platform but they have now launched options trading and with it they're doing something that no other broker has ever done before and 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 trade because public is literally giving you half

of it. So 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. And it's public.com slash chitchat. Actually, I believe it's been changed to Chitchat Stocks now. If you want to use our code, this is paid for by public investing. You must activate your options account by March 31st for revenue share. Options are not suitable for all investors and carry significant risk. Full disclosures in the podcast description, US members only. Yeah, let's talk news for the week. I think we should kick things off with Lyft because, boy, was that a fun blunder.

And actually, there's some galaxy brain conspiracy theories out there that this was not an accident, and it's an interesting idea. Okay, so let's go through what happened. Go through it, yeah. For anyone that doesn't follow the markets, anyone that didn't hear about this, there was a press release. I guess I should give some context about Lyft. Lyft, part of a duopoly technically in the ride-sharing space in North America, but really Uber has become the dominant player.

And Lyft is – I don't want to say on the verge of – not really on the verge of bankruptcy, but I remember looking at it and thinking they got to get to profitability sooner rather than later and it's tough for them to do. So this year or this last quarter, they put out a press release that guided for 500 basis point, which is 5%, 5 percentage points, margin expansion on EBITDA. So they're expecting their profit margins, however you want to define it. They are using EBITDA in this case to expand by 5 percentage points. That's huge for a company that's priced like Lyft was. And the stock jumped, I believe, as high as 64% after hours. So that tells you kind of how big this news was. In the conference call following the press release, the CEO – it actually took quite a while before they mentioned it in the conference call – said there was a typo.

It's not 500 basis points. It's 50 basis points, which is huge. And it wiped out a big percentage of the after hours gains that Lyft was seeing. I want to pull up the direct quote because the CEO, Risher, I can't remember his first name, the CEO of Lyft went on afterward, went on CNBC to kind of clarify things. He said, well, first of all, it's on me. There are a lot of eyes on this press release, but at the end of the day, my bad. It was a clerical error. The buck stops with me. And to be very clear, it was a bad error, but it was 1-0 in a press release. so this was huge in terms of moving the stock the quarter was still okay for lift and the stock actually still did pretty well after the earnings report however this does frighten a lot of short sellers and here's where kind of the conspiracy theory thinking goes is this accidental typo this clerical error gets rid of a lot of short sellers and potentially i don't know i guess i don't know what sort of implications that has long term but if you're trying to get rid of short sellers putting a typo in there that makes your stock jump 50 and then saying whoops an hour

later it's maybe one way to go about it and honestly props to the team because it was if that was the strategy it's securities manipulation but it's brilliant yeah doesn't change the business at all i did not look at the quarter i guess did you look at that at all seems like they're making some progress but it's adjusting with this stuff i guess they're heavy on sbc so the cash flow is getting a little bit better but how much shareholder value is getting created i don't know hey i we did uh i think we may have called the bottom last week when we were shocked at how different the market caps were between uber and lyft where uber was 150 billion lyft was only 5 billion and since then i think i updated it today lyft's market cap 7.3 or 4

billion dollars which i mean that's a it's a huge change congrats to anyone that's been a shareholder a lift that's all i'll say yeah i mean it was priced pretty poorly and if you're if you're able to really think that they could get to profitability i think the payout was there to be had uh there are some other news pieces some other things i found this week that i think are a little more interesting though i want to talk about dorsey asset management there it's 13f season too aka confirmation bias season and i i actually like looking at 13fs for certain investors i think it's fun it's serves as a decent idea or a decent idea generator for long-term focus funds where they tend to buy and hold things but i love when people look at

michael burry's and they're like look what's going on it's like you don't know when he bought it he could have sold out of it already there's so much like there's so much trading going on in some of those portfolios that it's just i think worthless to look at some of those 13 f's also the like biggest position he uses options and options can really distort your 13 f's which it's i don't know Kind of makes the 13Fs irrelevant, but there are a couple investors that I like to look at. Pat Dorsey is probably one of them. I kind of dug into his background a little more this week. Fun guy to listen to.

Chuck Ackrey. I always like to look at Ackrey's holdings. He's not really managing his fund anymore, I don't think, but I like their approach at that firm. So that's another one I'll look at. Do you look at any and actually use them for generating potential ideas? uh the only one i've been looking at is drunken miller's drug i can never say right drunken miller because i want to see when he's going to sell nvidia so far sold a little bit so i my hot take will be that he is out of the position next 13f but besides that i don't look

him much i guess i look oh wait one more as i look if buffett still owns or excuse me berkshire still owns ally financial because if they sold out of that be quite concerning for me yeah it's probably todd combs would be my guess given that his background is in financials and it's kind of a smaller position it seems like buffett wouldn't really waste his time with it but But maybe. Either way, I think Buffett probably has a good idea of everything they own. So it doesn't really surprise me too much. Yeah.

He's getting old, though. I think he kind of trusts those guys for a reason, right? He's a big delegator when he wants to be. He's got time on his hands, though. I enjoy for the clickbait articles that they sold Apple. So that's nice for some clicks, some good bonuses when writing stuff out there. Yeah. I want to talk about Dorsey Asset Management. We can do that next. Yeah.

I think it's kind of fascinating. I want to get your takes on some of these things. So Pat Dorsey, he was kind of important in forming the Morningstar remote rating. That's kind of where he got his start, his career. And then he ended up starting his own fund, I want to say, in kind of the 2015 timeframe and it's Dorsey Asset Management. And they put out this presentation, I don't know when this was, but they put out this presentation called competitive advantage and capital allocation. And he says the three things he looks for in an investment are economic moats. I think everyone says that, at least the long-term quality investors, runways for reinvestment. I think that's a big part that maybe is less talked about and superior capital

allocation. And that's kind of boilerplate standard for people that are looking for long-term investments. But he goes into what creates a moat. And he says, the primary test of an economic moat is pricing power, generally created by intangible assets. So brands, patents, licenses, switching costs, network effects, and cost advantages. Do you think there's any other ones you can think of that create a moat okay so let me go through them again intangible assets which are gonna be either your brand or government regulation through patents licenses whatever switching i think like a coca-cola it provides it's a lower lower cost of marketing people know who you are you don't have to spend quite as much

it's i think that's what he's referencing when he talks about brands yeah but there's also in that patents and licenses so verisign i i would say is also within that category switching costs i agree network effects cost advantages and these are economic modes so it's not necessarily like you could say there's a competitive advantage for a company given its culture people would we talked about berkshire already this episode people would make that argument for berkshire hathaway and i think we would argue for maybe some other companies out there that have a culture of competitive advantage but from an economic perspective i think these are the big

four you want to focus on and i think now i believe i looked at this a couple years ago because this is old i think he did this as well as a goo at a google talk 10 years ago or something like that but it's still relevant you know today when i'm looking at a company i i like to ask is there one of these present and ideally for something in my portfolio where i'm looking at it I mean, ideally for something that I want to hold for a long time, it has multiple of these because if you only have one of these competitive advantages, well, you could wake up one morning and the entire thesis could be broken because of brand impairment for various reasons. Think Bud Light this summer, or excuse me, last year, although they seem to have recovered with that a bit, or the government license gets lost, or the cost advantage goes away. But if you have multiple of them, which, you know, it's a company that may not be my favorite stock at the moment, but obviously it's done well over the long term. Apple seems to have all, would you say all four?

Yeah. probably i guess i don't really know the supply chain for apple that well i would assume they get some scale advantages with their suppliers just cheaper sourcing tsmc yeah the apple gets priority from tsmc even over nvidia so yeah i think maybe their network effects maybe their weakest but probably with a few of these for the few they're in um the iMessage iMessage Apple Pay a little bit an app store it's probably their app store yeah it's probably their weakest but still still there so I think that's a good example of you yeah that's probably all priced in today I would say maybe not but they do possess probably all of them yeah all four of

Microsoft maybe as well. Maybe all of big tech has at least two to three of these. Maybe one company that I guess is falling away from big tech starts with a T. Did you notice NVIDIA larger than Google? Yeah. That's pretty wild.

I'm going to say something and you can say whether you agree or disagree. Big time Cisco systems 1999 2000 vibes here 2009 is that you said sorry sir 1999 and 2000 vibes sure i mean from what i've heard yes but we were like five years old so i don't think we have a real sense of what was what the sentiment was at the time but it sounds like based on everyone that kind of experienced it as an investor that we've spoke to. It was very similar. Yes. I want to go through some of the other things that he talks about because I thought this was a cool presentation. He says, what's not a moat? He says, dominant market share is not a moat.

So he gives examples of companies that had high absolute market share, General Motors, Dell. Those are two. Technology is not a moat. He says, commoditization and disruption are inevitable absent customer lock-in talks about gopro and fitbit as good examples i think those both age pretty well those takes the other one here is hot products uh and this i like this because i mean he's he's right we see it all the time uh crocs maybe uh celsius it's not saying you they're going to be bad investments but they're not necessarily defensible just because it's a hot product. He says, they can generate high returns for a short period of time, but sustainable returns make a moat. I like that. And then the last slide on this is actually a quote from Bill

Miller, I believe. He says, turn off your laptops. That's like the title of the slide. And in quotes, it says, all of the information is in the past, but all of the value is in the future. Quantitative data is often priced efficiently. Qualitative insight is less efficiently priced. I think that makes a lot of sense to me it's yeah that's i've noticed since we stopped managing the fund and just kind of investing on our own i look at everything even though we we looked at everything with a pretty long horizon i think my horizon expanded a little bit now because there's no one to report to there's no one you don't have to write this stuff up you don't have to have a reason to have a starter position or a reason to have something. You can just invest in something and

see how it progresses and then add over time. And to me, I'm really starting to weigh the qualitative insights a lot more than maybe when we were running the fund. The older I get, the more I want to become David Gardner. Yeah. That also might be the all-time highest talking to you, but I go through that as well. There's less urgency, yes. And there's less barriers to making an investment which is a good and a bad thing i would say there's probably positives and negatives to both it's not philosophies but it's not strategy i can't think of the proper word but i think listeners understand yes i try to think of the qualitative stuff as well if you're only anyone can run a factor strategy well not anyone anyone can set

one up. You know, there's psychological stuff there. There's emotional intelligence, all that good stuff. But if you're going to buy individual stocks, 10 to 12, maybe, you know, even more, even less, there has to be some sort of qualitative insight if you are an individual. I'd say, you know, Celsius, you mentioned that being one of the top stocks of the last five to 10 years, as someone on the old Twitter machine said, the premier growth stock at the moment. You said it doesn't really have an economic moat. I'd say probably right for an established moat. But it's one that could have an emerging brand moat, emerging, not network effects or switching costs, but maybe emerging cost advantage,

just given the pepsi partnership but that obviously that's not why the stock has done well i think for anyone that looked at it five ten years ago maybe not ten years ago but they could have seen the strategy they could have seen it popping up at gyms you could have said okay i can investigate this there's a lot of momentum here this is something i can understand oh maybe i'll take a take a swing here and there's some you know a lot of people could have made arguments against that at the time but it ended up working out and i'd say another way is looking at management for the qualitative insights where i remember we covered rocket lab i've been looking at them again and the company is losing money

and it's in a tough industry but i came away really impressed with the management team and how well they've executed so far. And for some reason, I just believe that they can be the second player there. I haven't bought the stock, but it's one of those, we typically avoid the hyper growth, unprofitable companies that are kind of high risk, high reward. But that's the one that for some reason I'm coming back to again and again. If I was forced to buy a high growth, high risk, excuse me, high risk, high reward stock that may not have a high likelihood of succeeding but could be a hundred beggar rocket lab it feels attractive to me because i feel like i have some sort of qualitative insight that this management team is better than almost every other

space economy startup out there but does that make sense or am i kind of talking nonsense there is that what you think dorsey was trying to get out here yeah yeah potentially i mean there's i was looking through some of pat dorsey's old holdings and kind of what he's gone through over time and a lot of them are moats that aren't quite defined yet so i don't know maybe you could call them like emerging moats potentially but you look through And this is another example of how just buying and holding quality businesses, like the art of not selling, how it can ultimately drive your performance in the long run. He has had a lot of companies that I don't think worked out very well for him. He's owned PayPal.

I don't know how well he's done on eBay. He's owned Upwork. I am fascinated in a way. uh i'm fascinated why he owns smart sheet yeah he owns smart sheet he's owned trying to look at some of the other ones here semrush holdings kind of a recent ipo he owned yelp poshmark chegg and he actually talked about chegg on a podcast publicly and i kind of fell for this too He was a good thesis. There was some brand value with Chegg. They had adoption from a lot of college students, and it has just really – the bull case has not materialized. But he's had all these losers, and yet having Meta, or formerly Facebook, at 20% of his portfolio from the, it says Q4 of 2016, it might have been even earlier, has just crushed.

Google has been another huge holding for him. Wix hasn't been a huge winner, I don't think, for him. but he doubled down on all of these things throughout 2022 when they were kind of at their lows. He really doubled down. And so I just, I think some of my takeaways when I look at Pat Dorsey's portfolio is some of the best ideas you already own. Don't sell your winners. Just don't sell in general and don't be afraid to trim the weeds when they're not working out. because that's kind of what he's done and and i guess i he his performance isn't public but i would guess given that alphabet and meta have basically been the two largest holdings for him

he's probably outperformed the market so yeah hard to tell but i agree i think it's interesting to look at a portfolio where it's focused on moats it's focused on letting your winners ride But when you maybe try to find something that's an emerging moat and it doesn't work out, say something like Poshmark, you can't be afraid to just trim your losses, get out of there, find something new. Not everything's going to be a home run. And every strategy is different. We have a good comment here from Michael says, an underrated economic moat is asset turnover moats, low margin, high asset turnover businesses like the gas stations are supremely underrated in my opinion.

I think he's also referring to here maybe the same moat that Costco has. Walmart, stack it high, sell it fast, sell it often. Yeah, I think that could be categorized as cost advantage, but a specific one, right? I put that in the cost advantage category, but that's one that's important to highlight. It's kind of that scale economy shared idea that you have a cost advantage and you're driving lower prices with it, which drives traffic, which drives further cost advantage. it seems like that's kind of what he's getting at yeah i think with all of these i mean the first 20 lists here in tangible assets there's three different kinds brands patents and licenses but within switching costs network effects and cost advantages there are all these different

subsets that can show up in different ways and i think finding unique moats that are within fit within these categories because because almost all of them fit within these categories but something that's a little different than before. I'm trying to think of a new company. It's hard to come up with on the fly, but yeah, I think that can be a way to find a good investment too. Yes, you said referring somewhere to Costco. Lots of questions here. Yeah, a lot of questions. I see one about Airbnb. Maybe we can take that. Did you take a look at the quarter for them? I did. Solid, but a little decel. I liked the supply growth i am interested to see what they're going to do with the expansion products because

i'm a little bit worried they're getting caught up in the ai mumbo jumbo but i also think there is some potential that for them to build a good product there i would hope they invest more in the experiences because that just seems like a really really great combination for them especially with the growth of viator which is just plastering advertisements at the moment they must have gotten a good VC round. But yeah, so I'd say the supply growth was good. The international growth was good. But I am a little bit worried about the deceleration in growth. Although, I think that was a bit purposeful because they tried to lower their average daily rates a bit. I think they bragged that either foreign exchange or inflation adjusted, their average daily rate was down 2%

while hotels are up 9%. So I think they're kind of forcing themselves to grow a little slower just to make sure their customers are happy. But what were your thoughts on the quarter? I thought it was good. I think you're right. I don't like when companies just kind of follow the trend. We saw this with Spotify a lot where it's like the –

like I saw Chesky's comments around AI And I just don't really think people are going to be using it that much in these sort of scenarios. Like Booking.com, for example, talked about we're building out this AI where it's like you're literally your AI travel agent. You could say like, give me, plan me a vacation that's, you know, to the Midwest or to South America that's under this much per night. And it's like, I just, maybe people do that just to mess around with it. But is it really worth the effort? Because I don't think anyone's booking something like that. Yeah, I think I agree.

It only takes you maybe a minute to click through things and do that. It could be a fun novelty, but I don't know how much different value it provides because all those variables I can filter out through either booking or Airbnb's website. One, yeah, when looking specifically at those AI things, I kind of think you're not in need of public investment. I don't think you need to talk about the product roadmap that much until it actually shows up, but we'll see. specifically an airbnb chesky is super charismatic which is kind of concerning because it makes me want to invest yeah and okay shouldn't be investing purely because of someone's charisma the question here is and maybe this can be a good time to talk about our halfway through ad as we are exactly halfway through on the recording here 30 minutes with our friends at

FinChat, Ryan, at what price would you be interested in Airbnb? You can maybe look at some of their fun old KPIs over there. Yeah. I don't want to click around while I'm talking about FinChat. So if you want to share your screen and show Airbnb, feel free. Okay. I'll try to pull it up. Yeah. Let's talk about our friends at FinChat real quick. FinChat is the sort of all-in-one stock research platform. If you're a fundamental investor, they have financial data on 50 000 plus companies both active and inactive where you get all the standard data so income statement balance sheet cash flow statement and then they kind of go above and beyond with some of that stuff so they've got valuation ratios like net operating

profit after tax they've got some metrics that aren't in your typical income statement And then they've got segment and KPI data on more than 1,500 stocks. So whether you want to look at Airbnb's average daily rate and how that's progressed over the last 12 quarters or over the last, I guess it would be what, four years since IPO, six years, or you want to look at Amazon's AWS revenue, match groups paying users, really I could come up with a new KPI every time we do this ad because it really is a lot of value. I recently looked at PayPal's take rate and got a lot of flack for it, which I was just on the old Twitter machine. That's besides the point, but they've really got all this granular

segment and KPI data that goes back at least 10 plus years if the company has been around that long. So I recommend checking it out. It's free to use, but if you want to do or upgrade to a paid plan, which gives you a lot of quality of life benefits, more years of data, and access to a bunch of more features, use our link. That's finchat.io slash chitchat, and you'll get 25% off any paid plans. That's finchat.io slash chitchat. The link will also be in our show notes. Brett, you're showing the Airbnb average daily rate here. Is that what I'm looking at? That is correct. And what I'm seeing is the daily rate hasn't really changed. It actually is down slightly from March 2021. one. Now, I don't know how much this tells us, but it gives me confidence that the company can

keep growing because they've been able to grow your revenue at a double-digit rate while purposefully trying to keep the daily rate low in spite of high inflation around the world. Now, the question comes back to, I'm not going to share this one because it's just the ratios we're looking here at and again you can look at earnings yield and price earnings a lot differently i'm maybe gonna just do an ev to ebit that's not the best one because i've had some weird funky stuff in there let's just look at the price earnings we're at about 20 it says 20 although i had some they had some gap stuff that's yes yeah i everybody's a little tough to value because the free cash flow is kind of bullshit and because of the working capital

advantage so i guess you look at it on like an adjusted ebit basis maybe but they earn interest on the on the cash that the merch the customers pay them before they pay out the merchant so it's like you don't want to look on ebit maybe isn't the right metric because the interest is real yeah we got a question here that says isn't part of the daily rate not growing for airbnb international growth international is lower price generally possibly yeah that can that can be affecting it as well but i think i don't have the data in front of me but i believe airbnb in the united states the daily rate's not growing that quickly either what price though would you buy i don't know let's say it's a it's a good amount lower than here because i want to

decent discount upon buying something um yeah i think what's interesting is one where i think their moat can expand over the next few years is that someone on the comments reminded me the they got more people going directly to the app to book same with booking but that helps both of those companies individually. Second, they continue to talk about how the supply joining their platform is unique and that they even got a question from it on the conference call. They were like, hey, a lot of the competitors out there are bragging about getting supply on, getting competitive supply on there. And they're saying, look, we're not seeing that in the data. Cross-listing is only on professional listings, which are a small amount of the listing. So I

think if they keep growing supply of unique supply around the world that's just a good way to track the mode expansion but i don't think i'm buying today let me just pull up the market cap because i know they earn about a couple billion a year yeah having had caps 100 exactly 100 billion so we're looking at i'd say low 30s earnings ratio maybe forward you can get it down to the high 20s i don't think that's cheap i'd rather buy it at 20 times earnings yeah i would be comfortable buying here but i think there's better opportunities available today the you really do have to look at this with quite the long-term approach because there can be such variability or volatility i should say in average daily rates potentially or just travel in general

i think ultimately every quarter the most important thing to look at is just supply what happened to supply how many listings do they have on the platform is it growing every listing that they add to their platform that is not added on other platforms is their moat expanding and it seems like they continue to do that having had some time since looking at booking holdings i really think i would buy airbnb before i bought booking i know it's a lot cheaper yeah but this is a better management team in my opinion and i don't know if it's indicative of what could happened to Booking.com, but if you look at the way Booking managed OpenTable, they destroyed a network effect. They destroyed a good business by gouging the restaurants and not providing the

level of service that was needed. It seems like Booking.com is maybe a little easier to run. The network effect is much larger, but I don't know. It just kind of concerns me the way that they failed to take care of open table when it had lots of market share five years ago and was becoming a dominant player in a lot of cities and now they've just been kind of eaten away by resi and some of the other services so i don't know kind of concerning yeah i like that airbnb is not very acquisitive they build a lot of stuff organically they bought some ai company we're bragging about. The guy who made it was the founder of Siri, but they seem to be doing Aqua hires for a small amount, relatively, probably like $50 million, but still a small

amount relatively for them. We got a comment here about overpriced cleaning fees and poor experiences and not from the experiences category that they're trying to build up, but from, I'm assuming, a stay. Yes, that's a concern that people have, but I would say that the cleaning fees has largely been fixed. They talked about this on the call where a lot of people are, when they changed to the total price display, people have found that irrelevant now. So I think that's fixed generally because you can just... I think they said a third of people stopped even charging cleaning fees and just made it a total cost going forward. But I agree that having poor supply could be the one concern when you're talking about tracking supply growth, which I

think is important, but you don't want a bunch of shady, low reviews, bad experiences for people on there right you want to make sure the customer experience is strong so that'd be the one concern to also track i don't know how exactly to track that they prioritize the hosts they do yeah yeah and i think that's probably the right way to go if you're running the business it sucks because i've had some bad experiences as well and it's not always fun but it's if you're running this business sometimes you have to prioritize a certain side of the network to really help it flourish. And in Airbnb's case,

it seems like the right thing to do to prioritize hosts. Okay, we have one more question that I want to hit that I think will be really fun. But we also want to hit some of the, I think I have some fun topics as well listed here, some winners and losers in the week. This is a question from Fake Alias. Thank you for the great one.

Thoughts on only buying emerging companies after they've proven themselves. Personally, I'd rather buy a growing company after 100% run up due to a proven track record, then make the gamble. Yeah, I think that's interesting where if you looked at Celsius today, obviously the stock looks like it's trading at a very high valuation. It's still growing quickly, but it's been, if you looked at the initial bump when they got momentum in their first year starting to gain market share and the energy during space in North America, the stock would have been up 100%, but there was still a chance

to do to get like a 20 bagger if you understood right just because the product's been growing and you can see the momentum it's i think it's celsius is a dangerous comparison because that's one that where it was a hot product that worked i think there's a lot of hot products that did not work that were copied and replaced by incumbents yeah and i think the key is that celsius has an emerging brand i think that's the key where you look at something like crocs maybe it has an emerging brand but that's one i'd be less confident in or some of these apparel brands out there that seem to cycle through i remember seeing some viral tweets lately about how abercrombie and fitch has come back from the dead could i predict that i have no clue yeah there's a little bit of

brand there but it's a lot different than i don't know all birds was a growing brand black rifle coffee was a growing brand yeah you name it yeah there's a lot of these businesses that were they became really hot products that maybe you can just say i don't do apparel i don't care if it's a hot product i just don't touch apparel it's a little bit different when you have a truly addictive product i think we see that with zen we've seen that now with celsius you saw that in early days with monster where if you can actually build some level of addiction like with the caffeine or the nicotine daily and daily habit helps it's a switching cost yeah yes exactly and i think it's a fine line but it's one of those where it can feel daunting or

you can feel like man am i being an idiot for buying something that's up 100 but i think fake alias is right here where it's it's it can be a crapshoot to try to identify like celsius maybe in 2015 when you're like okay i think it'd be impossible to say in 2016 2017 2018 this thing is going to catch fire you have no reason to be thinking that but after it catches fire maybe there's a good risk reward there now celsius wasn't guaranteed to work but i think that makes sense and yeah if you look at the stock price look it wasn't it's not like yeah it wasn't a easy button okay this is the easiest investment ever but it was high risk high reward bet that i think was smart to make at the time i encourage people to look back go just go to google and look

up Celsius original can and look at some of the images and tell me that you would look at those and think like, oh, this is going to be a $15 billion company when it was delisted and Costco delisted them as a supplier. It would have been very tough, I think, to make that bet. I think you're right in the sense that I'd be more comfortable investing in fake aliases right here where I'd be more comfortable investing after there's some proof that it can be sustainable as opposed to pre – you might not get – pre-growth, you might get better upside if you go pre-growth, but I think you're going to have a lot more misses. I agree. Okay, let's hit some other topics. I want to hit my winners and losers. Are you

ready to talk about our favorite guy, Sam Altman? Because he has some more plans apparently. yeah let's go okay so alphabet as we're recording this down two and a half percent today on news that open ai is going to launch a search engine here's a quote from the business insider article i think to be fair first reported by the information quote the new product may be partly powered by microsoft search engine bing per the report microsoft is the biggest investor in open ai pumping in billions quote the development puts open ai into more direct competition with google search and follows microsoft's attempt to boost its bing search engine with the ai company's tech i'm very confused here because you have microsoft azure basically giving open ai the credits and

powering their chat gpt and they have chat gpt powering bing and now bing is going to be powering open ai search it it seems a bit crazy to me i also have the same day this came out which maybe wasn't a coincidence there is a new gemini 1.5 from google and some people were posting about this they were like you know there's a great follow-up they're called alpha betting uh it's a twitter account really focused on alphabet and ai it's kind of a strict account there you can get a lot of good information uh he said you know google's down 2.5 on news of the bing rebrand when this sentence is in their latest gemini 1.5 technical report is hilarious he said 10 million tokens and i was like please explain this to me like i'm five because i did not know what this

meant and he said 10 million tokens massive leap in current abilities opens the possibilities to do much more with data adx the current gpt4 max context window with the ability to do video audio and text i just responded thumbs up i have no idea what's going on but glad the people that know this industry think alphabet's in the lead all right yeah i have no idea i have no idea what that means 10 million tokens i think we're we're back i guess alphabet's good the yeah i don't understand the if google sells off because of this we have seen this story before i think that is an opportunity to buy a toll road on the world's information and i stand by the saying that if google doesn't have a moat no digital company has a moat uh so i find it weird that

this is it's selling off because of this i don't think people understand where google's mode comes from it comes from chrome we've talked about this a hundred times it comes from chrome it comes from android it comes from gmail it comes from drive it comes from everything on top of search that gets you conveniently in general yeah yeah unless there's an ecosystem lock-in yeah yeah that's the whole thing okay also i think this came out right after we finished recording last week i don't think we talked about it but maybe if we did we can talk about it again now i'm gonna also pull up a tweet okay low low load sam altman founder of open ai it seems to be in the news every day is reportedly looking to raise $7 trillion

to reshape the chips and AI industry. Now, there was this, I'm not going to say who it was, I'm sure it's a very smart person, they got tons of followers on the old Twitter machine, says, Sam Altman is looking to raise $7 trillion or nearly 10% of global GDP for an AI chip company. It's hard to comprehend, but no person would even consider this

unless they achieve something that will fundamentally reshape the entire world. And then this last part, sarcastic. And people think AI is in a bubble, LOL. I would recommend these people to read some financial history. Now, I don't know much about AI, but we both, I don't know, are nerds about financial history, market history, business history, along with, I think, a lot of listeners here. And this is the telltale sign of a bubble. like that is like textbook bubble signs now it's not necessary to say that this is a bubble but

doesn't mean it it means it's like it's a sign that it is more than it isn't thoughts there yeah no i think it's a bubble i think to be honest i kind of tune out sam altman now i just kind of it's nothing against the guy i've heard him speak before he seems like fine. It's just all the news around him, I just don't pay that much attention. I don't think anything he's doing affects my investments that much. It might affect the prices. I don't invest in Google, but I would certainly be open to it at the right price. As soon as I hear the name Sam Altman, I kind of tune it out because it feels like there's always news, but the impact on my actual day-to-day work life and my routines hasn't changed and doesn't really impact my

investments. So I say, Sam Altman, if he gets more and more capital, that's fine. Yes, I would agree. We're probably closer to a bubble than the next computing generation or whatever. Hey, look, as an individual, I'm rooting for Sam Altman to raise a trillion dollars from the middle east sovereign wealth funds and created incredible consumer surplus but doesn't mean that businesses are going to create shareholder value like there's a difference between creating consumer surplus and actually creating shareholder value i wonder what world coin is up to remember that oh i follow them on twitter they tweet stuff about progress and initiatives it's classic crypto stuff yeah anyway oh jude uh biden laser eyes you see that i don't know yeah something that was a

very confusing tweet it was i i wonder if he knew what it was i assume he didn't tweet it but yeah he posted a picture of himself with laser eyes and i think it had to do with a joke about the conspiracy theories about the super bowl which i think that's the conspiracy theories we want people to do keep them fun keep them it wasn't it didn't have to do with like bitcoin or i don't think so but that's what it made it confusing because the timing was about the super bowl and how they said that they were rigging you know the government was bringing it for the chiefs because of taylor swift or some weird reason which i think is oh absurd but it's also that's a fun conspiracy theory to have let's you know those are you know not dangerous i don't think i thought it

Bitcoin related. No, no, it wasn't. But let's move to a loser of mine for the week. I have Apple, but with a question mark. I'm curious your thoughts here. Apparently, people are already returning their Apple Vision Pros. Now this is within a window where you can do it for free for Apple within like a 14 day free trial and all the products you can return it without any damage, get all your money back. Here's the quote. Comfort is among the most cited a reason for returns people have said the headset gives them headaches and triggers motion sickness the weight of the device and the fact that most of it is front loaded has been another complaint uh the verge products manager told me that he thought the device led to a burst blood vessel

in his eye at least one other person noted they had a similar experience with redness to be fair uh parentheses vr headset users have anecdotally reported dry eyes and redness for years oh yeah well i think the whole category is it's not there yet it hasn't been here for 30 years people have tried to push these on to people and i think it's not there yet no and mark zuckerberg released a video yesterday that was like just kind of tarnishing the product apple vision pro he's like i think we have a better product it's like mark that's awesome and it's nice to see that you're going at them head on but you have a better pointless product and you're spending more to do it you i just it feels like a waste of money for both companies

and at least in apple you don't really see it in the income statement yeah well to be fair now you don't see it in the income statement for meta maybe you do see it in the income statement for apple because they don't really disclose all this stuff i would like to know how much they estimate went into vision pro development that would be fascinating because they never they never tell us meta's been a little more forthright about it but i mean the name change all of it they've they've gone deeper into this and they're like we're winning it's like it still seems like pointless effort yeah i know it's like we're winning the i don't know something weird something useless okay these are fun the memes are fun but i don't see myself ever having one i can say it

was very different when mobile came out when mobile was first starting the iphone it's like it was obviously everyone wanted one and it was useful and i just don't see the real world application for me yeah well for for most people yeah okay i have four topics that some are more serious than others i got and you can choose with one we do first we got seven minutes herbal life top golf callaway ea electronic arts or shopify and their impressive kpis callaway okay i think that's a fun choice you well there's two things one they invented the term embedded cash flow that apparently takes at all capex interest sounds sounds a lot more useful than it is yeah it doesn't show up on the balance sheet but trust us

but that's besides the point that's kind of a joke their same store sales at top golf are i think down we're down three percent while consumer spending is booming i think and they're guiding for one flat growth flat same venue sales i worry how like the consumer spending is incredible right now what happens if that turns sour i i worry i flipped entirely on this this business i used to be pretty bullish now i don't i i honestly we had a question here about shorting it that uh shorting stocks sometimes when you flip on like a company you're like man i don't really want to own this anymore it's not on my watch list i don't short but that's what a lot of you know experts not experts

people that have you know good experience short selling say that's an indicator that something might be a good short because you already know it well and you can understand what's going wrong but curious your thoughts on top 12 did you look at the quarter i don't look at the quarter i saw what you posted about embedded cash flow and this is one where i'm really glad we ended up staying out of it the i was pretty convinced that top golf was differentiated it was an idiosyncratic business it was unique brand that was hard to replicate good returns on paper for each venue however the two things that concerned me were the earnings weren't showing up gosh that bubble keeps whatever there's a graphic showing up for anyone listening right now every time i do a

thumbs up you always say you're going to change your settings but you forget yeah uh the earnings weren't showing up despite them talking about all these adjusted figures and management was a bit of a red flag and it just felt like they were doing stuff that was maybe a little promotional they were there was some insider buying that they talked about but it was very small and i just this was proof when they said our embedded cash flow which is like the twin brother of adjusted ebita the it's like a they are who we thought they were they they don't measure the business the way us as shareholders do and for me i'm out yeah thank you ryan i don't know if i short it but yeah i don't know i don't short

anything so take any like if i have a question what would you short it's it's kind of nonsensical because i i would never actually do it well never say never i would not at the moment i think the The return on stress is not there for me as an individual investor, but yeah, it's an interesting one. Okay. I want to hit another topic. What are the other ones do you like? You know who I wanted to talk about for a little bit?

I did a little bit of a profile on this guy. Okay. I'll just go quickly through it. There's a guy named Joseph Rosenfield. He was a friend of Buffett's, and Jason Zweig, the famous financial journalist, once wrote an article titled The Best Investor You've Never Heard Of, and it's about this Joe Rosenfield guy. Wow, we stole him. Wow, did we steal his title for the Lew one? Everyone's used that.

But this guy was – he took – he was the head of the investment committee for Grinnell College, which is like a tiny 1,500-student school in Iowa. And they now – it went from – their endowment went from $11 million to just over a billion dollars. Now it's $2.5 billion, which is insane for a 1,500-person school. um i recommend looking up the article from jason zwag i'll kind of leave it there he uh very unique guy just bought and hold bought and held things for a long time uh including berkshire so go ahead look him up best investor you've never heard of joe rosenfield i'll leave it there because i know we're running up on time yeah we can go yeah so a little slightly long i have one more question for you, but I will say people seem to enjoy our investor overview episodes where we kind of look

at a longstanding investor and see how they've done so well. And there's plenty of them out there. Tell us if you really enjoy those type of episodes and what we're trying to do. Plan is to do maybe like five or six for the year. So I think that could be fun. But I wanted to ask you, EA just announced that the college football game is coming this summer, so next fiscal year. Take-Two has announced the GTA 5 will be coming, I think, next fiscal year as well,

but maybe the one after. Nintendo Switch might be coming out. At the right price, do you like these companies, or are you still kind of out on the gaming ones? Because it seems like there's durability there in the brands, but as you've talked about a lot the growth is a concern i'm a hater on ea i don't like that

i think a lot of their earnings growth over the last decade has just them it's been them being well positioned in an industry that's gotten more asset light or less costly right the industry has moved to online game sales, which has been a huge driver of their gross margins. I think their gross margins have doubled in the last decade. So they've just kind of benefited from that. I think Andrew Wilson hits his bonuses every year and gets paid $30 million annually, and there doesn't seem to be real improvement in the business. FIFA continues to grow.

FC, yeah, it continues to grow. players but i'm just i'm not really seeing it in the income statement so i don't like them take two it's a possibility that one seems like it's more you get these big development cycles where you just have to hold through like multi multi-year periods where earnings aren't going to show up and it's just gonna you really have to be a believer in gta6 which i think it's hard not to be because they hit every time they produce one um and they're doing they're basically having the whole thing be florida plus florida man stuff all the crazy things plus the history of you know crime whatever syndicates crime organizations in

that city in miami which seems like an impossible video game to fail at if you spend 10 years building it yeah i can maybe on take two but i'm not really that interested to be honest the nintendo would be the one of the three that i'd be most inclined to buy i think i still don't own it though i just haven't touched it i don't not sure what's holding me back but i don't know yeah same with nintendo i think it's just for me it's not on the top of my watch list at the moment as we talked about in actually that show that came out yesterday before the podcast came out on wednesday it's called five stocks we own a little teaser nintendo was one of them or excuse me five stocks we would buy so it's on the watch list

i've got a comment here that says sega is underrated and undervalued that's interesting have never looked at them before maybe that's a reason why it's because no one's really heard of them and they've i didn't even know they still were cooking out there but yeah i think that may be similar to right don't they own so yeah they have they used to be a game hardware maker similar to nintendo and now they have they still i guess make some of the games but that's all i know So before running up on time, they did. Yeah, I think they're like a similar expansion of the IP strategy, stuff like that. Could be a fun one to study.

All right. Thank you for fake alias for sending that. But we're going to wrap up here. Went a little long. Free two minutes there for everyone. Hope you enjoyed it. But let's hit the disclosure. We are not financial advisors.

Anything we say on this show is not formal advice or recommendation. Ryan, I, or any podcast guest may hold securities discussed in this podcast, may have held them in the past, and may buy, sell, or hold them in the future. Thank you, everyone, for tuning in, and we'll see you next time.