Chit Chat Stocks - National "Liberation" Day; OpenAI's $40 Billion Investment; Wait, Trevor Milton Got Pardoned?

Episode Date: April 6, 2025

The Investing Power Hour is live-streamed every Wednesday on the Chit Chat Stocks Podcast YouTube channel at 1:30 PM EST. This week we discussed: (03:15) Elon Musk's Business Moves (06:21) AI Developments and Industry Dynamics (09:38) SoftBank and OpenAI Partnership (12:38) Dollar Tree's Strategic Shift (18:24) Spotify vs. Music Labels (31:45) Market Movements and IPO Insights (33:48) Trevor Milton's Controversial Comeback (40:04) Rocket Company's Ambitious Acquisitions (46:00) Tesla's Delivery Dilemma (52:53) Turning Point Brands and Nicotine Pouches (55:31) Nintendo Switch 2: Nostalgia Meets Innovation ***************************************************** JOIN OUR NEWSLETTER AND CHAT COMMUNITY: https://chitchatstocks.substack.com/  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* 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 15% off any premium plan: ⁠https://finchat.io/chitchat  ********************************************************************* Bluechippers Club is a tight-knit community of stock focused investors. Members share ideas, participate in weekly calls, and compete in portfolio competitions. To join, go to ⁠Blue Chippers and apply! Link: ⁠https://bluechippersclub.com/ ********************************************************************* 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. welcome to chit chat stocks this is our weekly power hour episode i am one of your hosts ryan henderson and i am joined as always by the one and only brett schaefer on these episodes we talk all things financial markets any news any items that we bring to the table and we've got plenty this week we're going we're seeing rocket companies go scorched earth and make some

major acquisitions. Dollar Tree, a major disposition, I guess. They're getting rid of basically half of their business, even though it's not really half of their business. And then we've also got some other fun topics. We're going to be looking at beaten down stocks, what beaten down stocks look attractive to us right now. There's some big Tesla delivery news, Nintendo Switch. I'm going through all of it, but we're going to get into all of it in a little more detail here in a second. Before I do, Brett, welcome to the show. glad to be here ryan how are you feeling on national liberation day we're recording it on the big day i think of it more of a deliberation day for nintendo shareholders

as we've been waiting years and years and years for this new console but how are we feeling uh feeling good markets are fun again is that can we just title the episode markets are fun again sure for trevor milton maybe i think it might just be national liberation day for trevor milton which we'll get into uh i thought that story was officially closed but it looks like we got a sequel And I'm excited because it's going to give us stuff to talk about. But morally, maybe I'm not too excited about it. Yeah, that part was a little disheartening to read. We'll talk about all that happened there in a sec.

Before we do, though, we want to talk about our friends at Interactive Brokers. Interactive Brokers is the professional's gateway to the world's markets. Interactive Brokers offers commissions starting at $0 on U.S. listed stocks and ATFs with low commissions on other products, and there are no added spreads, ticket charges, or account minimums. Clients in over 200 countries and territories trade stocks, options, futures, currencies, bonds, funds, and more on 160 global markets from a single unified platform. Clients earn interest rates of up to 3.83% on instantly available cash and pay margin rates up to 53% lower than the industry. You can also earn extra income on your lendable

shares and IBKR is powerful. Award-winning trading platforms help every level investor succeed from beginner to advanced on mobile web and desktop. When placing your money with a broker, go with a broker you can trust. Make sure your broker is secure and can endure through good and bad times. We use IBKR here at Chit Chat Stocks for their best in class international coverage, and you can too by heading on over to IBKR.com. Interactive Brokers is a member of SIPC. Brett, where do we want to kick things off this week? Can we talk maybe the Elon update? Get it out of the way?

There's multiple things in here. I know it's not stuff that we actually enjoy discussing, but it's things people like to listen to. As much as I want to hear you go through Dollar Tree, I don't know if that's going to retain the listeners as much as XAI and Tesla deliveries. Yeah, there's two things we do on this show, or two things we try to do. Deliver real value and talk about what people care about. So right now, let's talk about what people care about, and then we can deliver some value in a second. Elon's in the news every week, but what's happening this week? Well, did you see this?

XAI merging with X? Did you even know these were separate companies? No clue. No? I have an idea, Ryan. Why don't I – I'm going to – I don't even have a house. Let's say I have a house. I'm going to sell it to you for a billion dollars.

And then you can sell it back to me for $2 billion. And then we're both – well, I don't know what we would net out to. But I think we'd both be billionaires at the end of that, right? Yeah, the only difference here was you would be selling the house to yourself. Yeah, I guess in this transaction, it's even crazier. Okay, here's what's happening. And this is a quote from the Wall Street Journal. Elon Musk's artificial intelligence startup XAI has acquired X, the social media platform he also owns, in an all-stock transaction that fuses two of the billionaire's biggest technology bets and assigns the new enterprise a lofty value. value. XAI is valued at $80 billion in the deal. X at $33 billion. I don't think the people that took the levered buyout on X are doing well at all. On the one hand, Musk seems to like

the letter X. Makes it quite confusing here. The only other thing I thought was interesting, which makes it even worse in the situation, is that the new valuation, this is a quote again, the new valuations were determined during negotiations between two musk arms which both had the same advisors people familiar with the matter said so what kind of negotiation was going on here my uh when i was a kid this is kind of a slightly embarrassing story uh i used to get bored and i'd play board games against myself sometimes just for fun like like i was practicing oh yeah yeah we've all been there bored at the family reunion monopoly i would make trades with myself and i would trade properties this is that at its extreme like they're just

giving themselves their own valuation and does any there's no real value being created here right like there's no investment there's no out outside investment coming into this so it's not like there's it's purely just whatever they want it to be worth right i think so yeah i don't know i think they're merging it so they can probably raise more money not sure maybe they can use all that ai maybe they can use all that ai to get rid of the uh enormous bot problem that they god yeah it's amazing that the platform isn't i mean it's not gotten any better since it's been acquired i'd say it's probably gotten a little bit worse really not much change at all and there's this xai part that's a component of it like this to me is the

epitome of like there's a useful ai which i think is like truly truly innovative and it is changing the world and it's changing the way things get done and then there is bullshit ai frankly i know sorry for any of the parents with kids in the car that are listening to this i think this is bs ai and i don't you can just slap ai on anything especially if you're not a grok guy look i know people like grok and he's got a huge database it's got a huge database to pull from but like okay i asked grok a question about a company that i tweeted about so i tweeted it out and then i asked grok like what were the earnings like for this business just to try it out and it improperly summarized my own tweet and just gave it to me and said source here and it's like

is that real innovation like tweets are already succinct like posts do you really need summaries on it that's why we're spending 10 billion dollars on a super cluster it's going to be fantastic roi and this relates to another maybe we can shift right now into the softbank and open ai partnership that i think flew way under the radar unless i was just off online investing forums while this was going on because i feel like excuse me way more people should be talking about this one did you see this were you largest largest private private investment round of all time by a long shot if i'm not mistaken so it looks like that open ai exhausted microsoft microsoft's kind of done with them they're not going to give them any more money which is funny

because people were talking i don't know they gave them so much money it looks like they just need even more and more. So SoftBank and OpenAI are officially partners, I guess, investment partners. SoftBank is really just their investor. SoftBank is going to be funding OpenAI with $40 billion over, I think, the next two years is part of what the contract says. $10 billion will be debt funded. And if all the money gets invested per the terms of the contract, OpenAI will be valued at $300 billion. And this does not include the $100 billion Stargate investment that both the companies are doing to invest in data centers. OpenAI will be required to turn into a for-profit company while there's, I think on some timeline, maybe it's before the end of

the year. Ryan, when are we going to get the IPO here? And are you buying this cash incinerator? no i'm not buying the on the one hand because the ai like i don't know when we talk about ai it just feels so circular like all the same companies that are supposedly investing in each other yeah doing all the innovation are also investing we saw this with the core weave ipo2 where they got like some big funding from nvidia but nvidia is also their largest like customer or something like that so it's like it just feels so circular on the one hand i feel like open ai has some great technology it's a great b2b platform and it's being used by tons of businesses so there's i think there's

some value that they're creating it's very expensive to do so i think ultimately i see all these numbers and i just think wow this is good for nvidia um dc apparently was able to copy them at a fraction of the price i'm kind of seeing the deep sea talk subside now but it just it's hard for me to see how the they're okay right now there's gemini there's a whole bunch of other ai offerings you've got llama you've got you know gemini is available for everyone for free now it's great it i don't really use the just pure conversational ais but i mean on the business side you get like each ai provider has certain things that they do really well i know google they have like phenomenal

detection models and they're you know each business kind of has pieces of it that serve applications particularly well doesn't this i don't know get commoditized a bit like the only real area where i see this driving just clear value in the short term is the cloud providers giving some sort of an ai type offering so like the hyperscalers giving for example like user detection models kind of thing where companies can leverage that and there's instant revenue for it and that's going to require extra compute but it's just i don't know i i see these huge numbers and i just kind of despite how big they truly are i kind of don't care okay comes down to this question here and this is because softbank is making the investment open open ai are they we

work or uber i'd probably lean more uber between those two uh yeah so long-term leases uh short what what makes them more like uber i feel like the business model is a lot like we work um well i would i would guess that the outcome ends up being hopefully closer to an uber what changes the unit economics here i just don't really understand no one's ever made a good point to me about that like what changes are they just magically gonna hope for more efficiency like how does the capex come down how do they get positive return on invested capital yes are we all going to pay a thousand bucks for this a month no but businesses will pay more than that look they're whatever their revenue is

or whatever their earnings are from what we've seen in sources they're blowing money it's so it's like uber had minus eight i think minus 70 operating margins when they came to mark when they ipo'd so yes but that was because that was not because of the gross margins are the gross margins negative i would say well where's that dna going i i don't know i i'd like before i make any assumptions on whether they're uber or we were here's the one thing you want to see the financial statements that's yes that's fair if i i think we don't give enough credit to how to just how willing adam newman was to incinerate cash i know we want to think open ai is doing the same thing they've they've considered way more

cash way more but i think the light at the end of the tunnel altman altman can see it i don't think adam newman ever could what do you think he can see agi you're an agi guy right i think he can see investments from masa son that like just continued investments that was oh you're talking about sam altman um i don't see the the sovereign wealth fund money it's probably hard for him for sam altman to reel it back in at this point would be my guess like every step of the way they've just been i mean until yeah until he maybe has to but every step of the way people just want to give him more money here's the thing that yeah i think about this all the time there's that whole like joke of a scene in this show silicon valley where they're like maybe i should have taken taken

a lower round there's some real value in taking a lower valuation uh in the private markets than getting an extreme valuation that you can never fulfill like it becomes so hard to operate at the business level the employees all their options are probably underwater in five years it just i don't know i would be worried about a company like if i were running this company i would hate having my valuation and maybe this is why people like me don't run these companies i would hate having a valuation that extreme of 300 billion dollars i think the biggest concern is that they they have no choice but to raise tens of billions of dollars and people act like it's a good business what i mean better business than core weave but core

weave is i think almost a guaranteed bankruptcy but that's another topic what i worry about is the capex treadmill this like when does it because theoretically you could just say all right we're just going to stick to our latest model and not invest in the newest round of chips and not try to like upgrade our model that much but then guess what you have five other real formidable competitors that are willing to throw that cash in the incinerator but they have a sort of a cash flow machine but what i'm thinking mostly about amazon here google microsoft i guess they're kind of a part of microsoft now but amazon was cash uh after the dot-com bubble they were cash sorry self-funding they didn't raise any more money

it's called a good business not a bad business meta yeah amazon apple all of the do they have to raise round after round after round after round in the 21st century no never meta was profitable since the get-go alphabet profitable since the get-go yeah i would not claim this is a wonderful business but i think we work was worse yeah hard to get worse than than we work uh but that's why i think the question is hard are you more we work are you more uber uh i tend to not touch anything that softbank touches and that's not just like it's not like a principle i have like get away from softbank it's just whatever they touch trades at ludicrous valuations now maybe i'd touch uber today but it's a long ways away from

its soft bank involvement yeah i don't even they they definitely invested in them they invested in everything back in the day all right we got plenty to discuss today so another topic ryan you want to talk dollar tree and family dollar the most exciting industry besides ai uh dollar stores yeah so the complete opposite side of equity markets or markets in general the stable honest dollar store so dollar tree this week had earnings they announced that they are selling family dollar which let me give a little bit of history i believe dollar tree acquired family dollar in 2016 might have that date wrong uh brett's nodding his head here so 2016 i think the price tag was around $9 billion. This was a more necessity focused type. They were more on

the dollar general spectrum of dollar stores. So kind of slightly lower income consumers selling necessary goods. Whereas Dollar Tree is more on the, I think 80% of the items they sell in store are discretionary. These are things like knickknacks, arts and crafts, and they lean more higher income. Anyway, since the acquisition, family dollar has just been an absolute drag on margins for Dollar Tree. It's been totally value destructive. This week, they announced that they're selling family dollar for a billion dollars. I think they have to cover some of the corporate expenses even after this, so probably it's going to continue to be a drag. I assume they would have sold it maybe for zero, like maybe as close to liquidation as possible.

And I honestly think they're happy to get rid of it. I mean, they took, what is this, an 85% write-down over the last eight years relative to their acquisition price, and Dollar Tree shares jumped. So it tells you what the market thinks of Family Dollar being in that corporate umbrella. Now, here's the part that I get interested in. dollar tree for the last eight years has been good co bad co you've got great company in dollar tree it's kind of a unique um it's a unique offering that can buy cheap goods sell them to a slightly higher income consumer at great margins we're talking about double digit margins here on on

the core dollar tree banner uh for context the family dollars anyone that's selling like the necessary goods they're not generating double-digit margins that business what's left of that i think is potentially attractive here our friend alex morris uh put together some pretty reasonable figures i would say and actually a really good write-up in general the they are starting to shift all of their stores to really move beyond the dollar price point They're moving to kind of multi-price, up beyond that, and it's just leading to not only are they no longer trapped by the dollar amount, but they can also offer more. They can provide a better service to customers by having slightly higher price points. They can move, whether it's holiday knickknacks, balloons, that kind of thing.

You can offer more packages, different styles, all this stuff if you're willing to move. you and the customer kind of have this unwritten agreement where you're willing to move beyond the dollar price point. That's what Dollar Tree's got. And they're in the process of migrating their stores towards that model. They have an enterprise value of around $17 billion right now. That includes the potential cash inflow from selling family dollar. I don't think it's unreasonable to assume that they can do $2 billion in earnings before interest and taxes in two to three years, a little under 10X two to three years out earnings. Does this remaining Dollar Tree banner, the remaining Dollar Tree company excite you at all here?

Yeah, I think so. If I remember correctly, and I should say, I did read the write-up this week at the TSOH Investment Research Service. So give them a shout out. That's where we got some of this info but go read that full write-up and subscribe to that premium service we love it and he's been on the show plenty of times i if i remember correctly they are a pretty good repurchaser of stock and that's also attractive for a lower growth business model like a dollar tree and if you look at how well dollarama has done in canada and i think actually expanding a little bit outside if i remember that correctly as well uh to latin america stocks can work quite well if you get this business model right don't get too aggressive don't try to do anything stupid

and just consistently go and go and go now i'm getting a something about my stable internet could you could you see me ryan could you hear me i can hear you i can see everything's good so far good good good i got one update but now it looks to be back um but yeah i find this i think i might give sort of a deeper look at dollar tree from here um your next research episode maybe maybe here's what i like and in in general over the years i think i've come to appreciate a business with a singular focus and people talk about optionality all the time and how great that is. I think it's really nice when you have a management team and all your resources and all the employees beneath the management team that can dedicate

their singular, all their focus to one banner, to one business, to improving that customer experience. I think you can get a lot better results. Dollar Tree, I suspect, is going to be in that situation as they move away from this family dollar sale. It's the same with like spotify versus apple music obviously every you know top executive at apple are not worried about apple music they're worried about iphones hardware everything beyond that roku i think spotify yeah you see that with roku versus a lot of the other uh connected tv it's amazing how bad the google interface the apple interface the amazon interface and the samsung interface just as a side note is versus roku when you have some of the best engineers in

the world at all those companies yeah and i think i think that comes down to focus honestly you're even seeing it now with paypal versus a lot of the remittance providers paypal got away from i don't know if it was ever necessarily their core business to be like remittances but it was used for remittances and it was probably a highly profitable one yeah it's probably still quite a good profit driver for them, but volumes pulling away because fees are high. I guess that's maybe more innovator's dilemma, but I don't know. I really like a business where they have a singular focus on serving a specific customer. I think Dollar Tree is going to be able to do that now. All right. I wanted to show this as well, starting a new segment here, maybe. We'll see.

this might just be the fin chat chart of the week yeah brought to you by fin chat well maybe lump in some other uh could be a non-fin providers yeah yeah but this week i saw this and share or are you going to share you can share here okay so basically i took universal music groups and warner music groups free cash flow margins put them on the chart compared them against spotify's free cash flow margins and for the longest time the big labels universal warner um i don't think we're able to look at the sony music operating margins um or at least free cash flow margins because it's a conglomerate yeah but um you actually can look at that division on finch app that's separate anyways they spotify surpassed the labels free cash flow margins over the last

12 months officially this quarter so warner music group has 11 free cash flow margins universal has 14 and spotify officially has 15 is have the tides shifted and the business models are different so and there's some working capital benefits of free yeah they're actually like the working capital advantage that spotify has is a working capital disadvantage that the labels have yeah but is it fair to say now that because for the longest time the biggest hiccup was the labels the labels the labels they're going to hamstring margins for spotify forever have the tides shifted has the negotiating leverage shifted today towards spotify's favor i think it a bit but i tend to and maybe i'm just buying into what spotify

management says but i tend to agree when people say that they they both like each other at the end of the day and they both make money for each other where if you look at the growth rates for the labels i'm not an expert on these businesses but it seems like the apple musics the amazon musics, and maybe even the YouTubes a bit, are really not growing that well for them at the moment where Spotify is giving them outsized revenue growth. They're implementing these price hikes. And the more Spotify grows, the more money now Universal and Warner are going to generate. And Spotify, if they become a larger percentage of the music industry, is going to have better operating leverage or excuse me better negotiating leverage but i don't think this is something that

it's how would i describe it it's not a netflix situation where they're going to start producing their own music the dynamics of the industry are just so different i mean you can't get a beatles and nirvana to just just the lifespan of like artists and stuff it's almost forever but i yeah i do think spotify has more leverage than they did 10 years ago that's obvious but i think they're both going to work in quite the symbiotic relationship over the long term they're going to search for and hopefully open up new monetization strategies tickets stuff like that live events whatever it is yeah the other thing they can both be good business models at the same time yeah i think both can generate good returns for investors the i wouldn't be surprised though

if in 10 years the main hang-up with investing in the labels is they're at the they're customer concentration risk yeah spotify has negotiating leverage because you should be big you should will still be big yeah but not to the same degree yeah it's true it's we're seeing more and more it's been gradual and kind of slow but the percentage of streams on spotify that come from the big three labels continues to decline i think it's started around like mid 80s when they were reporting this figure 80 plus of streams were coming from the big three and i think it's below 70 now i think it's just an inevitability that it's easier now to go from being an artist in your you know house not caring just doing it for fun to people can pick up what you're

working on now easily it's kind of the distribution is somewhat democratized now and you don't need a label to win now if you do gain popularity and you're a big artist and all that it's i think there's some benefits to having a label and that's probably going to be the case for a long time but i just feel like it continues to shift more and more favorably for spotify yeah i agree all right where can any listener find this chart ryan finchat.io we mention them every episode uh because we well a i work there but b uh the charts are wonderful they've got great data they've got great data uh if you want a access to all those charts It is free. They've got a freemium plan. You can also get two weeks free of FinChat Pro automatically. But if you want to upgrade our code, FinChat.io slash chitchat, we'll get you 15% off any paid plans.

We've got plenty of bubble watch topics, Brett, that I think we need to touch on. Newsmax? Should we talk about this? yeah i i i haven't even followed this closely where what's the stocks trading at now 8195 whoa wow down 65 percent today ryan oh but that's still okay 80 whatever 80 dollars call it is it did ipo like ipo at 10 i think two days ago so it's up 700 in a few days the this is a cable tv business it's cable news yeah and it's right the right way one right yes and it does 155 million dollars in revenue and what valuation did you say say for the listeners again well initially it was a 10.7 billion dollar market cap when i wrote this the stock's gone all over the place so i assume it's more in like the seven ish billion dollar market cap we're looking

at a price to gross profit of around just under 150 times when i wrote this so look it's cable news like this should get i don't know half-time sales maybe like three times gross profit maybe i mean i'd rather own some youtube channels honestly yeah yeah no seriously yeah i would the i what are we doing here who is buying i okay i kind of know who's buying low float low float traders it's it's that's all it is it's a meme stock it's just going for the what the moment is yeah that's it sign of the times yeah watch it deserves to be on bubble watch it's on bubble watch yeah for sure uh do you think yeah maybe that's the wrong way i was gonna ask if they're gonna sell before the lock-up period because it seems like securities laws don't matter anymore

with our friend trevor milton uh do you want to talk about that one yeah did you have a smooth it's probably the saddest news of the week pardoned uh by the president did you and i want to I'm going to share the screen here I'm not sure it doesn't matter I'll just talk through it if we can't if none of the audience can hear it but I'm going to show a tweet here

he is doing a documentary of some kind oh my gosh did you see this? yeah let's just talk through this give some context on who Trevor Milton is yeah that's not fair he was the CEO

and founder of Nikola Motors, they were going to start a hydrogen cell fuel truck company. So semi-trucks powered by hydrogen. The technology was not nearly ready for market. There were plenty of kinks to work out and it was not some sort of viable thing. So they faked the product and instead during their product reveal or one of their announcements, They tugged a truck up a hill and then let it slowly roll down and pick up momentum. But apparently he is doing a documentary now, Ryan.

And he tweeted out, you've heard the noise, the headlines, the judgments. Soon, you'll hear my side, the one that's driven by resilience, purpose, and a vision that's far from finished. I click play here. Did you hear this? After you see this truck come to life here tonight, you guys will understand that what we show you, we can actually deliver on. Trevor was a great salesman. That was his goal. Zero emissions.

Call it. You ready? You ready for this drive? So a couple things. A, I hope all the listeners could actually hear that and that wasn't just some gap in the audio. b uh apparently the attorney general has some family relations with trevor milton somehow and he donated he donated to the uh the whatever the campaign so here's my thing yeah okay no one's no one's changing their mind on you i'm sorry like you've you rugged a whole bunch

of investors you lied you were convicted yeah irrefutably lied you rolled the truck down the hill said it was driving okay if i were in your shoes i would just be quiet just don't say anything you've been pardoned like you don't have to and no one's going like you can be this is still the golden age of fraud i think you can still make it as a fraudster in this world but you can only do it once i don't think you get a second bite at the apple you don't think a meme coin is coming ryan i smell a meme coin coming from a mile away he's gonna do some absolute bs and he's gonna make some more money i thought we don't want the full preview there but i watched it a few times to try to get as much info as possible of what this thing is going to be it's going to be free

on youtube so just go watch it i'll probably watch it just for the last one there was a guy that they interviewed no idea what connection is to him that he said there were thousands of people at these factories if it was a fraud what were these people doing i was like yeah that that's not how this works buddy and second and this is on april 1st so april fool's day trevor milton said in that documentary the truth is important to me are we just in alice in wonderland i think we are this is getting absolutely ridiculous rates to 10 this is like it's so discouraging because on the one hand it feels market euphoric it it's kind of weird because there's like i'm seeing in the real world

valuations of some of the biggest companies in the world the ones that actually impact the indexes people's retirements all that stuff trade i'm looking at some reasonable valuations on at least some of them i like to think that's what's going to impact markets in the long run but on the other side the worst companies the not even companies the worst ideas are getting bid up and it just needs like it makes me feel like we still have ways to go before some of this poorly allocated money is being flushed out it does remind me of the nfts it reminds me of the 2021 bubble yeah well you know a functioning society has rule of law in capital markets That's all I'll say.

So I better hope, you know, let's hope we get them, keep them. Before we move on, I want to talk about Blue Chippers Club. Blue Chippers Club was started by two friends of ours with the goal of building a tight-knit community of stock-focused investors. Inside the community, everyone gets to share and break down their portfolios, pitch stocks, receive feedbacks, and participate in weekly calls. Brett and I post on there from time to time. We post some of our show notes, post some of our ideas, try to get some real quality feedback. I really like this idea. That's why we're promoting it on the show.

If you are interested in joining, head on over to bluechippersclub.com and hit apply. The link will be in the description. Let's shift gears. I want to talk about Rocket Companies. Okay. Did you see this? See this news? Yeah, I did.

Giant merger or acquisition. They seem to be trying to acquiring all the assets to make a full vertically integrated home buying, home selling process, which sounds like a good idea, but we'll see if they can do it acquisition wise and duct tape everything together. Yeah, I think that's going to be the tough part. Ideas easier than execution in this industry. Yeah. For context, last week, Rocket Companies announced that it was acquiring Redfin for $1.75 billion in all stock. Then a few days later, announced that it is buying Mr. Cooper Group, which is the largest home loan servicing company in the United States for $9.75 billion in all stock. I can double check, but Rocket Companies has a market cap of, well, right now it says 27 billion, but before this it was probably closer to around 24. So this is huge. This is relative to their size.

These are massive deals. This would, of course, be a decent story. You could say Redfin is one of the largest platforms for buying homes in the United States. rocket mortgage is one of the largest home loan originators in the united states and mr cooper group is the largest loan servicer in the u.s so theoretically they could own the entire life cycle from a home buying or even searching for a home to actually paying off your loan i kind of like that and i actually think they would be fairly well equipped to do it in terms of the acquisitions redfin i believe they were kind of fringe profitability actually lacked profitability

for quite some time but i like the i think the platform as a user is helpful and they actually have real brokers that are uh helpful they they really do help facilitate transactions they're one of the biggest home buying platforms in the united states um rocket companies rocket mortgage they do a good job with mortgage refi and they seem to have built a pretty good business around that and then mr cooper group they're actually bringing names here not just random names yeah mr cooper group great business they i think they do just under a billion dollars in loan servicing operating income nice what one do we do with uh fabio from capital mindset we didn't do mr cooper group but after the call he mentioned that that was a company he was looking at and i think he

might have owned it and yeah they're basically buying this at 10 times servicing revenue which is much more stable than probably the loan originations business so i i think that acquisition makes a lot of sense i think redfin if you can find a way to kind of make that profitable or at least be sort of a loss leader for the rest of your business i think that can fit in there as well the magic will be in whether or not they can actually stitch these businesses together now Now, if you were betting on this company pieced together versus Zillow over the next five to ten years, who do you think performs better? Pass. I don't like this industry.

yeah i wish they had zillow's front end because zillow is just so much more popular for people searching for any type of uh lodging not lodging uh home buying home renting process it sucks all the oxygen out of the room in the united states feels like it's a good idea though redfin just didn't have the front end zillow drops the ball on all sorts of stuff but they do dominate just time spent on the platform yeah it's a shame that zillow's just addicted to operating expenses because they could have a real nice business here um and wasteful acquisitions it's similar to people who are pitching co-star group and their big push to homes.com as a way to disrupt zillow where they're just doing a ton of marketing into

that and all that good stuff i see homes.com ads all the time it's just not going to work i i go on zillow i don't need to go on homes.com and that's not just anecdotal evidence there's some data that kind of backs up what brett's saying there too uh it's my concern i do i like the idea of this i like the acquisition of mr cooper group just in general seems like a reasonable price my concern would be we've seen companies try to go after the real estate the residential real estate market in the u.s aggressively and it like this just isn't a winner take most or even This is not a winner-take-all, not a winner-take-most. I think it's going to be fragmented forever.

So any of the theoretical massive synergies that you're going to have, I just don't see that as that likely of a possibility. I agree. I agree. It could still do fine because as long as they're buying them at reasonable prices, which it seems like they are, I think they're going to be okay. Yep. Okay. I have three topics that I want to get to before we end here. turning point brands which listeners have been maybe not clamoring but multiple listeners have asked us to talk about we actually got sent a write-up that i haven't read yet sorry if you're listening to this but i will read you right up i want to talk about nintendo switch 2 the true

liberation day and tesla deliveries what do you want to do first tesla deliveries i think we got to talk about that that's kind of headline news that is what we put in the title we don't need to we don't actually like to talk about this but it is well we do like talking about this but it's good to put in the titles and i think uh also fun let me pull up the actual numbers here i i got a headline i i'm ahead of you ryan i'm prepped fully prepped tesla the chart for you yeah yeah pull up that chart from fin chat but i got uh the number tesla reported 336,681 vehicle deliveries in the first quarter of 2025, a 13% decline from a year ago. The company's shares, though, are up 4% today, rebounding from a dip because of a Politico report that Elon Musk could

leave his Department of Government Efficiency position. I think all of the political media outlets need to get a lesson from the financial media outlets. Musk uses you for headlines when he needs a little boost because he had this in his back pocket. He knew the deliveries were going to be bad. Is it a coincidence that they announced this on the same day? No, but that's besides the point for the deliveries. Investors were expecting Tesla to report deliveries of between 360,000 and 370,000 vehicles, and they delivered 337,000. So a huge miss, and their production is much higher, so 363,000. I mean, they're probably going to have sharply negative free cash flow,

especially because of all their AI, Optimus robot, data center initiatives, whatever it is. Yeah, the business is not doing great right now. Really not anything else you can say about it. Deliveries declined, as Brett mentioned, 13% year-over-year. That is the sharpest drop I think they've maybe ever reported. Maybe in the early days, there might have been some worse because the volume was so low. But at least on record, from what I can see, that's the biggest drop.

The stock's up, Ryan. It's crazy. That is crazy. It defies gravity. Two things. So first off, I love that this is being painted as people aren't buying the cars because of his politics. Now, that was happening before this. Yeah, exactly.

There was – and I think there was actually a Morgan Stanley report that came out or a sell-side note, which was like there was some brand erosion before anyone – before there was any political involvement. Some of the delivery concerns were already coming to fruition. the other part it's got to be so frustrating if you are one of the higher ups at tesla and you're like because there's look i i know he does a lot of stuff but there's no way he's involved in the nitty-gritty day-to-day stuff going on tesla every day because he has so much things going on especially when everything he talks about is doge doge doge or a xai yeah or xai whatever like you're in meetings and i guarantee there's like you basically just have to re-explain everything to him would be my guess like wait wait what's happening here why is that

factory slow like uh okay so i was explaining this last week but you didn't have time or you know you weren't paying attention during the call scrap it all we're gonna do a fake robot announcement in two weeks okay it's just it's gotta be frustrating because you have someone who holds the ceo seat who frankly it probably he just isn't involved there's no way he's involved in the day-to-day um and just because he steps away from doge doesn't mean it's gonna fix that he's got a lot of other things going on too if i'm a shareholder in tesla aren't you frustrated that the ai quote-unquote bull thesis that you were clamoring about over the last five years is now getting invested in an entirely new company

that you do not own in anything? Am I wrong about that? Wouldn't you be frustrated? The valuation is so blown away that it's holding up. I pulled it up, $900 billion valuation. Excuse me, $900 billion market cap. You buying? PE is about 140 and those earnings are going down

and going to keep going down for the rest of this year. You know what I think is probably the biggest hiccup here is just overall brand fatigue. Like we talked about this, you know, three years ago, which is obviously results have been good since then, but eventually that appeal, the sexiness of the Tesla logo, the new car, the EV, A, it gets competed away because there's a lot of competition that's come online since, but B, it's just, I don't know. It's not quite as, it doesn't feel as cool to drive one. um and we're seeing pretty pretty low volumes out of the cyber truck as well so it doesn't

seem like they've been able to i guess shift away from it successfully yeah and the quality the lack of quality i guess control you can see that in people's opinions i do have some anecdotal evidence on that i went on a date for anyone that's interested didn't work out but i did get some good info on tesla because apparently the person i went on a date with had a friend that was working in higher up at tesla manufacturing over in china and essentially they told them compared to all the other automotive companies do not buy these cars our quality control is absolutely way worse than toyota's the volkswagens whatever so she said all right that's the one brand i'm not buying anymore because the guy that literally worked

there told her yeah we are not following what we're supposed to be doing it's also i could have made this the chart of the week for the first time i think since 2018 byd's revenues have surpassed tesla and over the last 12 months we've seen a stark difference in growth rates we're seeing byd continue to grow revenue while tesla's uh obviously seen some struggles yep okay now a company we might be interested in right in our wheelhouse nicotine nicotine pouches we might be running back the swedish match playbook here ryan i don't want to get you too excited but someone told us that we need to look at turning point brands ticker is tpb we looked at this company a long time ago if i'm being honest because and the listener told us this because they have the

greatest exposure to nicotine pouches as a percentage of their revenue now these are what Turning Point Brands owns. They own ZigZag Wrapping Papers, which is actually a fantastic, neat, you know, it's not a giant market, but that's a good brand within the industry. They own Stoker's Snuff and Chewing Tobacco, also a highly profitable industry. And they owned FRE, I think it's probably pronounced free, nicotine pouches. The modern oral nicotine pouch business is projected to do $60 million to $80 million in revenue this year. Market cap is $1 billion. They're guiding for around $100 million in EBITDA this year. I'd assume that translates pretty well to cash flow just due to the great unit economics of all these

type, you know, the nicotine business, not really concerned about EBITDA to cash flow conversion. Any interest here? The only thing that keeps me held up is that maybe they're getting a temporary boost from the zin supply shortages but besides that this looks like a compelling opportunity yeah i'd like to look at it a little more like see where the modern oral volume is coming from uh like geographically is that international is that in the states pretty sure it's united states Okay. Yeah. I mean, these are categories that are in our wheelhouse. I'm curious on the volumes of the other businesses, like the wrapping papers, the traditional oral tobacco. I believe both grew in 2024. I think the nicotine pouches, when they do revenue reporting, they combine the nicotine pouches and stokers together, but combined, I think they were both growing. I think there's some interest for me here. This would be the only other tobacco business that I

own besides Philip Morris. Did you get rid of BTI or do you own BTI still? I actually do own, I think like a couple of shares of BTI, but man, they're just always underwhelming. Yeah. You know what would have been a funny April Fool's joke, Ryan, is if you said you were buying Altria Group, which I got to say, you are the biggest hater and ultra group stock and it's done quite well over the last year hey i was a hater before a year ago so there's some i feel validated and it wasn't i wasn't necessarily a hater okay maybe i was a little bit but i just liked the alternative in that case which was philip morris and i've been right on that so i'm yeah honestly though total return is not that much

higher than philip morris over the last five years not very much higher philip morris is not much higher than ultra is that you're saying not not too much higher no really yeah that dividend reinvestment and eight percent yield it can be underrated yeah all right any other topics here oh nintendo switch 2 i saw the announcement i saw the commercial for the new mario kart okay about time i actually felt tempted to buy and i know like why would a 25 year old do that uh why would he spend his money on a switch to in mario kart but it's just the nostalgia man yeah i guess we were right in that talk about we just used wheelhouse like five times in a row but again we're in that nostalgic wheelhouse for mario kart given when we were kids

the price is going to be and for anyone that doesn't know they announced the official specs and some games this morning actually so you can go look up a summary online pretty easily or watch the whole thing yourself. The new one will cost, the Nintendo Switch 2, it's going to be launched on June 5th, and it's going to cost $450. So a big price boost compared to the original one. If we see demand, like unit volumes are strong, that's going to be a huge impact to the revenue line. And then you can get a Nintendo Switch 2 plus Mario Kart bundle, that's 500 bucks. You know, makes sense. They always do that. We're going to have pre-orders. uh let's see blah blah switch to as 4k support uh joy-con with mouse controls stuff that gamers

care about essentially it's a better one you can get up to 120 frames per second and 4k resolution on your televisions which again better graphics better gameplay hopefully it's a better experience for the users if we look at the games that are coming this is the there's two important things i saw from like trying to forecast earnings potential one the new mario kart world that ryan mentioned uh that's going to be i think released along with nintendo switch 2 and it's essentially exclusive exclusive to the switch sure yeah exactly and it's kind of a new way to play i guess you can play the old way but i guess you can have 24 drivers and essentially instead of getting like forced back to the track you can go off level and explore so i i don't know what

kids are going to enjoy that or or not but it seems like people were excited about that and given that mario kart sells or excuse me the old one sold i think like 60 million copies this is a huge if they can keep up that momentum with nintendo switch 2 and this new mario kart game there is just huge profit potential and keeping that momentum going uh from an earnings standpoint then the second thing is they are offering like fairly cheap i'm assuming it's about 20 or so upgrades for if you bought some of the like the zelda games or whatever you can buy updated versions for the nintendo switch 2 which i think is great um so yeah no big surprises no big negatives the pokemon game is coming from an earning standpoint you should see a huge boost

over the next 18 months because we have mario kart coming out and a pokemon game coming out later this year here's my question to you what wait what day did you say switch to is being released june 5th so it's their their q1 okay june 5 2026 a year out from launch what number would you be disappointed to see in terms of units of hardware sold um i would it's hard to tell because i don't know if they're they're they're purposefully going to you know just have like 15 million or something like that available and that's their plan and they're not going to be able to go over that but i would say anything under significantly under like 14 to 15 million would be a big disappointment

i'd say about 15 million i wouldn't be disappointed that seems like a good figure 20 million would be a nice uh it's really hard though i would like the thing with this one because it's not a giant upgrade from the from what i mean is like the same type of playing i would just hope over the next three to five years we see consistent upgrades from the first generation switch players so we're getting at least 10 to 15 million units bought per year that's a good sign but more importantly is software software sales because they're still going to have stuff available on the original switch so as long as software sales are fine

unit sales they're good but i we just need active players and active players purchasing games add-on content nintendo switch online things like that okay i think we're running up on time here quick question for you beating up stocks that look attractive right now what are the ones top of mind for you yeah listener did ask this i believe on twitter i usually ask on twitter or substack chat for any topics we can talk about sometimes you know there's people say automotive companies are gonna get impacted by tariffs sorry i we're not gonna talk about that there are some things we might talk about though and this is one of them and i pulled up my watch list in preparation the one that came to top of mind is airbnb now the drawdown hasn't been that severe and i don't

think it's a dirt cheap dirt cheap stock at the moment if you look at the drawdown here on finch at 43 from the ipo but maybe we'll do over the last year 25 i'd say they're slightly beaten down but i like the business i think there's a lot of upside for them to do all this add-on thing add-on content that they are hopefully going to announce sometime here soon so that was the one that came to pop top of mind what about you brian airbnb is up there for me google's been beaten down quite a bit i like sorry it's boring but i like it here and let's say search really was at risk okay for anyone that say that just here's the narrative google's being disrupted google's being disrupted just go read one earnings call read the last conference call and after after

you read it ask yourself does it feel like they're being disrupted my suspicion is that you'll be telling yourself no and i i really think that's the case they have so many platforms that just dominate and have i think they have nine platforms not even including google search that have more than a billion users and by 2030 they're going to be a huge cloud business so i don't know yeah yeah it's i think will be hard to lose money if you hold alphabet for the next 10 years but you know nothing i think it's guaranteed i like that pick as well all right i think that's gonna do it you want to take us out here brett yeah let's do it anyone uh for the listeners i tried to test out that video sharing thing because that preview is absolutely hilarious

If the video didn't play, because I can't tell if the listeners can actually hear that, let us know. I'll probably pick it up in the post-production and check that out as well. But it can be fun to share videos, you know, CNBC clips, Bill Ackman talking, stuff like that. But besides that, let's hit the disclosure. If you like this episode, give us a five-star review on Spotify or Apple Podcasts. subscribe to the show on Substack, get our free newsletter and access to our chat community. As a disclosure, we are not financial advisors. Anything we say on this show is not formal advice or recommendation. Ryan, I, or any podcast guests may hold securities discussed in this podcast,

may have held them in the past and may buy, sell, or hold them in the future. Thank you everyone for tuning in to the live episode or listening wherever you get your podcasts, and we'll see you next time. I'll see you next time.