Chit Chat Stocks - OpenAI's Mounting Losses; Mark Walter's Crumbling Empire; Copart's Transformative Acquisition?

Episode Date: August 21, 2026

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (00:00) Introduction (01:58) Copart's Acquisition of CCC Intelligent Solutions (08:04) Industry Trends and Market Headwinds (09:22) AI Revenue Growth and Profitability (13:07) Valuation and Profit Growth of Big Tech (18:52) Future of Meta, Microsoft, Amazon, Google, and Nvidia (22:00) Private Equity in Sports Franchises and Insurance (30:07) Quantum Computing ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.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.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* 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

Trade, election, climate, and economic outcomes with IBKR Prediction Markets right alongside your stocks and options. Earn interest on your position and receive $1 per contract if you're right. Learn more at ibkr.com slash predictions. Welcome to the Chit Chat Stocks podcast. I'm one of your hosts, Ryan Henderson. On this show, we talk all things financial markets. I am joined as always by the one and only Brett Schaefer.

this is our investing power hour our weekly investing power hour where we talk news we talk earnings we talk any headlines and it was a bit of a quieter week but we've got some interesting stuff from private companies open ai uh reported their i guess their revenue and financial statements got leaked we have a big acquisition for uh that maybe the value investors out there might care about with copart we've got cancer being cured potentially uh saw a lot of headlines like that but there was some big advances in uh apparently a phase three trial from moderna and the stock a stock that uh doubled in a day so there's plenty to talk about there um but i will let you lead in here brett where do you want to kick things off today

why don't we talk about our good friends Fallen Compounder Copart what are they buying I didn't even see this the fact that Twitter doesn't really give you any of the news anymore

replicating that and trying to find the news funnel has been quite difficult but yeah let's hit right into it anyone that's listening to the live show hit us up with any questions in the chat we have plenty to discuss but copart what are they buying some software i thought they weren't this is kind of out of

their wheelhouse now what uh sort of uh i think it's pretty tangential maybe it would be the term to describe it copart is in late stage talks to acquire ccc intelligent solutions uh they are a chicago-based insurance software provider so bloomberg apparently broke the story yesterday and ccc's stock popped eight percent on the news copart stock also jumped on the news apparently other private equity firms were interested in purchasing ccc as well maybe still are interested in trying to purchase them prior to this news i honestly didn't know much about ccc uh but they reportedly control about 50 of the u.s auto claims software market so pretty much every big insurance company uses them i did a little uh ai research here and

i guess i'll just read the quote when you get into a car accident a massive chain reaction happens involving insurance companies repair shops part suppliers and car manufacturers Instead of these businesses calling and emailing each other manually, they all log into CCC's cloud-based platform to handle the entire lifecycle of a vehicle claim. Apparently, they've got a big network effect because almost all the major insurance companies like Geico and Progressive use CCC, and auto body shops must use CCC to easily get repair estimates approved and paid. so it's a tie-in between the auto body shops the insurance companies and it's sort of the stage before the copart button so like you get in an accident the car moves to a temporary lot and insurance is trying to assess the damages they try to assess they use ccc to help assess the damages once they determine and i'm probably getting some of this wrong i don't understand

exactly everything that's included here but once they determine that it's lost that's when it kind of shifts from ccc software to using the copart api to find the nearest lot to to automatically schedule a pickup to that lot from copart that kind of stuff so it's essentially the stage before copart receives the totaled vehicle which everybody has essentially said that this would allow copart to kind of own the entire life cycle from the moment there's a car wreck to the moment there's the settlement payout essentially so they would be they're already the dominant player but this would allow them to own even more of that life cycle again don't know all the synergies here uh i'm not sure what benefit there is to having this under copart's portfolio necessarily

but ccc looks like a pretty impressive business very predictable very sticky they are expected to generate about 300 million dollars in cash this year the enterprise value right now is just under six billion which it's up a little bit because of this these acquisition rumors so if it were bought at this price copart would essentially be paying just under 20 times cash flow i don't know what to think of this i actually made copart like my fourth largest position i think a month ago uh this was not on that podcast yeah i was looking right now it came out july 8th and it looks like the stock bottom right around then so nice timing on that yeah that worked out the uh well worked out so far i should say the this kind of throws a wrench in things it's not

at all it feels different even though they're kind of both part of the same uh sort of transaction life cycle so i'll do more reading on it not totally uh don't have any hot take at the moment but what are you thumbs up thumbs down thumbs middle why you think this is good it smells like good acquisition vertical integration yeah i'd say the same exact thing smells good it's kind of weird to describe it smells good but it's um i honestly don't know enough about the business to have a real hot take either way okay we have a question in the chat how are they paying for it debt cash mix i'm assuming debt uh stock sorry i meant debt or stock i don't know um it's um i'm assuming maybe it's a mix they don't seem like the i'd be surprised if

they were using a whole lot of stock here because they just got really aggressive with their buyback so it seems like a weird time to potentially use equity as the the way to buy it but um i'll look at i don't even know if bloomberg reported it again this is still a leak it's not got an official press release yeah not official press release yet okay final talks yeah according to people familiar with the matter as they like to say aka ccc intelligence solutions um all right anything else on that one no not a whole lot there the copart this whole industry kind of seems to be like a slow period um and i i was looking more into this the reason there has been less totaled vehicles like so there's been a slowdown in totaled vehicles uh in the united

states which is primarily where copar operates and it's also going to affect ccc a little bit i guess is because auto insurance prices got really high the premiums got really high and like coming out of the pandemic and now like it's it's a notoriously cyclical thing where premiums get high the um loss ratios improve for the insurers and then they reprice to become more competitive because insurance obviously super competitive so you can't just have all of them earning record losses or someone's going to come out and offer cheaper premium so uh yeah i think this is something temporary it's an industry with a temporary headwind but long term i don't think much will change here so i would say this industry copart specifically still seems to be in a pretty

good spot okay do you want to talk should we get right into bubble watch uh i only have it's kind of a serious topic uh it's really the center of the market i know we almost end up talking about this every week. I think there are, just every week in my feed, of podcasts, Twitter, Wall Street Journal, CNBC website, everything. It's all AI, and it's getting tiresome. But I think in this instance, there's maybe, not actionable for individuals like us, some interesting data points that i think shows open ai's uh lead i guess has been squandered according to i think it was the wall street journal that had it first either way we're miss we're miss sourcing someone sorry about that but let's get into it open ai the revenue growth

is slowing open ai told investors its revenue grew by 18 percent from the first to second quarter while its losses deepened, results that disappointed some shareholders who had hoped the startup would show more progress, catching up to rival Anthropic. Now, expectations have to be high when 18% quarter-over-quarter growth is not good enough. But the thing is, is how aggressive they are with spending. Apparently, their operating margin is getting worse. It was at negative 122% as of the last update, which I think was Q1 or maybe Q4 2025. So it's getting worse on that front.

So you're spending a lot to get this up front revenue or to get this revenue. Whether you have long term return, good returns on invested capital, we will see. But what I was surprised to see is the Q2 revenue figure was only six point seven billion dollars. And we're that's twenty six point eight billion dollars. If you're going to annualize that to an ARR figure, I know a lot of the times these AI companies will take the last five minutes of revenue and then annualize that for a full year. i'm serious they do this for like the final day of the month it's uh a little bit disingenuous but you see things tossed around about how they're going to get to 100 billion dollars in arr soon i kind of think they're way farther off than i assumed i thought that we were like oh both these

companies were just going into the stratosphere trillion dollar valuation i was a bit underwhelmed by that figure yeah the i believe they reported i think it was like a 9.2 billion dollar operating loss for the quarter um i might be off on that number a little bit but that would make them i believe the most unprofitable company on a gap basis in the world last quarter it's not i think microstrategy has weird accounting so they might be up there too but the i mean the growth is still there right the 27 billion dollars in error granted maybe there's some fudging of the numbers there i just i question and it's hard to do this without having like a true open look at their financial statements i question how easy it would be for

them to turn off some of the spending like if they i don't think open ai is going to go public in the next couple years it seems and if anthropic goes public and now i think the odds are like 82 percent or whatever on the prediction markets that anthropic is public this year not i'm not getting sourced there was a reporting that by the end of august the s1 will be out for anthropic I think once Anthropic releases the S1, and from what I've heard, they are profitable on a gap basis, not significantly, but they are. And I believe they're at something like a $60 billion revenue run rate, so more than double what OpenAI is at. I feel like it will be harder for OpenAI to follow that. Like, if they're going to go public, I think OpenAI needs to get in front of Anthropic or delay it for a few years because it feels like the race is leaning more and more towards Anthropic and harder.

there's been a lot of public backlash on open ai and it's there's kind of a corporate disdain for using open ai in a professional setting i think now maybe i'm wrong maybe maybe codex or some of the coding models that have been released have sort of got you know a lot of adoption but you hear Chachi Beteer you hear Claude Claude just seems way more acceptable in a professional setting which

seems to be where all the money is yeah that sums it up if OpenAI doesn't go public though I don't know how they're going to keep raising money so we will keep keep our eyes sharply following that and

their and their losses but that's who here's a question knock on effects if open ai if open ai does not go public what who are some of the companies maybe suppliers customers whatever to open ai that get hurt the most nvidia it's hard to say because you have there's so many variables within for example you you have elon throwing in the we're going to toss on 15 to 20 gigawatts which would equate to hundreds of billions of dollars spent within the next few years on infrastructure spending for ai so and nvidia is now their exclusive partner that they matched up with you have the tpu tranium stuff or what do they call it amazon graviton and tranium i'm not

exactly sure but i don't think open ai from a supply chain standpoint is as important as people think we have someone in the comments here tyler said oracle maybe that's quite important that's probably the number one because they have that long-term partnership for the cloud agreements that oracle is building seems haphazardly uh there's reporting about how inefficient they are just creating the, I think it was called the Stargate complex, but essentially cloud infrastructure specifically for open AI. And if open AI's demand doesn't show up, they slow down, they stop the spending, they try to get to profitability. Well, Oracle's backlog might not be as big as we actually think. And I think the rest of the industry, Microsoft probably saw

the writing on the wall a few years, what was that, like last year or within the last 18 months or so, they saw the writing on the wall and said we can't just be solely focused on open AI. We have to diversify. They ended that exclusivity contract and now it'll be fine. They're kind of just doing their own thing. And then Amazon and Google will also be, I think, immune to that from cloud spending perspective. I honestly think the only real companies that could get hurt, maybe Microsoft a bit and Oracle, but open AI across the supply chain, less important

than people think here's a topic i want to talk about the because you mentioned meta there you mentioned a lot of the big tech and i think we have a question in the comments unless i'm missing yeah meta microsoft amazon google which goes up the most over the next 12 months and which has profits go up the most over the next 12 months i want to do a quick little sanity check for everyone on current valuations because sometimes this stuff can flip flop pretty quickly Yeah, make sure to not use PE because the stakes are driving up – the stakes in SpaceX and Anthropic are driving up net income. Okay, so I'll use – this has its own flaws. I'm going to use forward EV to EBIT. This has its own flaws. Well, depending on how you view the depreciable life of GPUs. Yeah, they also could be understating it, and they also could be entirely wrong.

Can you rank the big tech valuations from highest to lowest on a forward EV to EBIT? I am going – they've got to be fairly close now, but I think highest, so highest number, right? I'm not going to go Google today. Is Google now officially the most – the highest valued? But Google is not, no, not on a forward EV to EBIT. Well, yeah, I'm seeing in the chat here, someone's telling me that Google's number one with 30. And then the rest are kind of in the mix here. Or is Fiscal AI saying different?

Fiscal AI is saying different. Again, this is using consensus analyst estimates. So people might be a little more aggressive. Maybe analyst estimates are a little more aggressive for Google here. but i'm actually seeing a forward remember forward ev to ebit for google of 21 okay what's the rest i would have thought those were around there the rest are around that the highest is apple at around 29 times the apple wasn't on his list right what's okay sorry just all of big tech all right all right i guess you can make apple its own thing whatever uh the second highest

amazon now granted they i think could earn more in margins than they do um what's the number 23.6 so it's apple amazon google microsoft just just under 20 times for microsoft nvidia and then meta meta 15 times forward ebit so let's go back to his question here meta microsoft amazon google which let's start with which will have profits go up the most over the next 12 months i guess we have to define profits because it can change pretty wildly net income yeah okay operating earnings which will grow the fastest over the next 12 months world events unfold in real time and now you can trade them with ibkr prediction markets you can trade election climate and economic outcomes alongside stocks options and bonds all in one

integrated platform these are simple yes or no contracts priced to reflect the market's view of probability if your prediction is right you'll receive one dollar per contract and earn interest on your position while you're invested ibkr prediction markets turn market expectations into actionable trades. Prediction contracts are not suitable for all investors. Learn more at ibkr.com slash predictions. I am going to say Amazon. They probably have the most juice in the operating leverage left to pull.

AWS will keep becoming a bigger part of the story, and retail should probably steadily have operating margin expansion unless we see energy costs just totally blow out for their supply chain. Advertising keeps growing. There are ambitious bets like, what is it called, Amazon Leo, the old Kuiper satellite Internet business. There are some things that are dragging down the income statement. But I would go for profit growth, Amazon number one for sure, probably Microsoft, then Google, then Meta, because I think given the CapEx plans for Meta, their earnings might go down.

Their earnings fell last quarter. So I would just assume that trend is going to continue for the next few quarters. Yeah. Meta. I agree with you. I think the trend could continue there. Microsoft could be a dark horse on this list. I think top line, Google might grow the quickest, but Amazon probably has the most margin improvement or room for margin improvement over the next four quarters. so i would maybe uh give it to amazon as well my hot take everyone sours on meta it seems like every three years people sour on meta and it's all based on whatever zuck is doing at the time so and zuck he shoots himself in the foot with investors i get that he he doesn't seem to care what investors think but he has had moments where he's kind of rationalized costs before and done it well uh granted he hasn't really done that with the reality labs as much as you would

hope but there was cop service yes but there was a lot of cost optimization on the personnel side i think what was it 2022 2023 you saw that big margin improvement i i just i feel like zuck tends to get more hate than he should and i would bet meta does pretty well from here over the next five to ten years yeah if you look at the question like what stock could be up the most over the next 12 months could be meta because at some point if there's an indication that there's going to be a slowdown in capex spending the stock's going to rip am i going to based on that no but there's also things like the lawsuit that could turn into the tobacco one of a trillion dollars in expenses over the next 50 years so you have that kind of looming in the

background the i really do think you could have stock could be up 40 percent in a day if zuckerberg said we're raining capex spending significantly like if he just went out on conference calls said that you'd get massive appreciation overnight we've got a lot more comments here long-term thesis though no i don't think so no but i think that uh i think all the platforms are well positioned long term like the capex if it's right now if it's a negative him saying that him him flip-flopping on this potentially reigning those expensive in i don't has i don't think it has much of a bearing on the actual underlying businesses like instagram whatsapp facebook i don't really care about the capex men frankly so if he says

we're going to lighten it up a little bit i see it as at least at least a positive um we've got a lot more comments here let's look through some of these um we had one that was netflix versus uber which would you rather own the acmen it's a tough acmen on acmen crime that is they're kind of in similar situations where there's some sort of looming threat to the core business that people are starting to slowly get worried about i think i would lean uber but i've also seen i like yeah netflix too i think the valuations aren't that different i think maybe uber's a little cheaper if you kind of assume more operating margin expansion um netflix probably a little less of that left but i like both here i just don't love them all right let's pose it this

way which business could you has the highest chance of being obsolete in 15 years that's a great question i think uber has a higher chance just because the threat to netflix is within younger cohorts and i think the let's call it the 35 or maybe the 40 plus they are locked in on netflix the hbo's and stuff of the world for drama tv stuff like that and even if that's where netflix kind of struggles to expand beyond i think they'll still be relevant within that i do not think everyone's just going to be sitting around watching instagram reels there'll be other stuff yeah i and to be clear i don't think i'm actually very confident maybe i shouldn't be this confident but i i would be very surprised if either of these businesses were obsolete in 15 years

but if ryan didn't you hear anthropic is going to be the only business in the world did you hear that's what the c the founder said he's worried this is what these tech guys get in their brains he's worried that anthropic is going to be the only business left rci hospitality might have some things to say about that yeah i was joking to say he's gonna the anthropic claude's gonna run baggage at the monterey airport in mexico yeah the man that guy's had a pr crisis over the last couple months the uh back on the netflix discussion i agree it seems like if netflix has a collapse over the next 15 years it feels like it would be gradual you know more competition eating away at engagement flatlining subscribers maybe like gradual nation almost it would be

that would be the risk the for all the bears with uber the big threat is self-driving or whatever now i think you can pretty i think you can quantify that risk pretty easily actually like if waymo is a massive success maybe it processes i don't know five percent of rides you know tesla finally does what it says it's going to do something like that sure that would be the doomsday scenario for an uber investor there's a lot of reasons why i don't think that's all that likely uber also i mean first of all uber eats people seem to forget like that's that's a different business entirely um are they sending in robots to pick up the food what's the process there like that's that's a different business the international side is a totally different

market and a lot of uber's trips are are facilitated you know outside of the u.s the like i feel like people forget that waymo waymo was commercialized in 2018 waymo was has been on a big spending ramp since for five years like adding more cars and in that time uber has doubled tripled rides that it facilitates like i just it seems really unlikely to me that either of these are obsolete i would have a hard time choosing between the two probably would go netflix but i i think both these perform really well from here okay we have one other question uh that i want to hit what do you guys think about quantum computing i would say full disclosure i'm short some of the quantum pure plays uh i would like to see a company

actually prove they can commercialize anything within quantum computing it's all been research for the last 50 years 40 50 years and you have tens of billions in market cap now on pure play quantum companies that really don't have much of a business model if you look at their income statements most of the revenue it's a little bit of an accounting mirage they're all hemorrhaging money um the comment here says it could match the growth of the semiconductor industry someday yes if they can solve some of the huge physical problems here it's astronomical how literally how far the the problems with this sector uh maybe an alphabet amazon was the big research teams at the big tech companies could do it maybe the u.s government chinese government something

like that but i do not think quantinium is going to be the stock to do it and i would bet i am betting against those full disclosure so but what about the name brett the name quantinium is a nice name isn't it it sounds like um i always think of c3 ai didn't didn't win ai once they pivot to c3 quantum now that's that is going to be the pivot yeah do you do you have any thoughts on quantum honestly no i don't think about it much at all uh and i don't feel qualified at all to to really talk too much on it you know brett we should be talking about cancer being cured yeah do you have any notes did you actually read about this at all yeah i didn't know psyched this is the one i might get so in the future not now but yeah no i you and me are fair skin i mean this is

this is probably helpful to us oh that's great uh okay what uh what happened moderna they're not dead yeah i always feel like i'm kind of outside my circle of competence when talking about uh biotechs in general but apparently merc and moderna have been developing this uh or trying to develop this uh cure drug i'm not really sure process uh technology yeah i guess vaccine almost for targeted melanoma treatment it's for if you get one and then it like make sure you don't doesn't come back something like that i'm sure yeah complications than this but i guess there's always yeah there's always so much language in these that i don't really understand but they had phase three trial data that came back very positive moderna stock was up uh maybe i'll just

double check it i believe more than 100 it's down 20 today but it's up 60 in a month something like that wow yeah it jumped 157 a day the kudos to anyone who had call options on this thing uh you may you may have just made life-changing wealth um also if you had call options on this thing i you might be getting a might be getting a knock on the door here soon uh korean day traders yeah gonna get a call from the scc well maybe they don't have jurors jinxing over them but whoever the korean scc is and they're gonna go hey what happened here like i do this every week on random companies yeah um but the i mean yeah this is totally positive and the other i saw this meme and it was kind of that that uh anakin skywalker meme where it's like

we're gonna like we're investing in data centers because apparently this was like uh ai really helped the development process for for drugs and i know i'm kind of speaking vaguely here about it but according to reports ai was helpful in this process and it was that meme of we need to spend more on data centers it's like for ai it's like oh to cure cancer right and it's like yeah actually this time it is to cure cancer so uh i bet the stock going up is less of the specific drug which i'm sure you know is going to do probably a few billion a year always hard to tell i think that's a fairly sizable population of people that could you know, get this, but it's more the fact that they have these one, I believe it's targeted

cancer treatments, as well as the fact that you're seeing potentially an acceleration of drug development and personalized treatments due to AI. Now, it sounds like a bunch of, it's about all the high-level thoughts I have. The only other thing I know is that phase three is the most important trial, but I can understand why people say that there is going to be a massive acceleration here because if you can really target and test everything virtually or just come up with different variations virtually that's going to be quite fascinating and if you can do that for tons of different specific treatments you can lower the cost of development you can allow for a good roi yeah it all it all works out well data centers aren't evil who knew

yeah the uh a couple other headlines here and then we we do have some questions in the chat that we can get to uh base 44 hit 200 million dollars in arr for those that don't know base 44 was acquired by wix in june of last year so 14 months ago for 80 million dollars in cash with uh like i think i can't remember how much in potential earn out compensation but some little cherries on top if they meet certain hurdles yeah i don't even think everyone knows it's not Well, it might be in the acquisition document, but it's not fully disclosed, and we don't know. It kind of depends. If they go to a billion in ARR, it's going to be high.

So at $200 million in ARR, again, private companies that use ARR – ARR is not the best metric in the world. It's dangerous. It can be manipulated very easily. based on july 31st numbers yeah but that would account for roughly 10 percent of wix's overall revenue the when wix bought them they were doing three and a half million in revenue so think up like 60x in 14 months it was five months ago they announced 100 million in arr So they've doubled the last five months. Shares of Wix are up 93% in the last two months.

So my question for you, Brent, Wix, AI winner or AI loser? I guess it's an AI winner now. I think that's what I wrote for my Emerging Votes newsletter on them. I honestly, something along those lines for the title. It's been quite an interesting journey, especially for my own portfolio unfortunately i did sell this earlier this year for tax loss harvesting uh after like when was it in february or something like that it jumped up a bunch on earnings plus the announcement they were doing that huge buyback um i sold then and i went down

to four i got i got back in down to like 50 and then i sold a little bit lower maybe it was like And then I sold kind of near the bottom for taxless harvesting to move into another position, which has done well. But unfortunately, I haven't gotten back in, and the stock has pretty much doubled from there. It's not like my own portfolio has been doing fine, but I'm kind of kicking myself seeing it hit above 80 this week. It's always funny when you – It's an interesting position. It's such a – because it still looks cheap, but the convoluted accounting, I don't know what exactly they're doing. um base 44 in the mix and then you have the core website business which is okay

yeah it probably does fine i wouldn't be surprised if it had new lows if there's a different kind of ai theme trade coming our way but at least so far over the last year it doesn't seem like the entire website building business and industry has been disrupted uh contrary to it it is funny to do a little tax loss harvesting and you think well what's going to happen it's not like shares are going to double in a month sometimes that happens in this case shares have just about doubled in a month the it is they're in a weird spot it's an extremely volatile stock and another example of one where management tends to shoot themselves in the foot a little bit but yeah i think base 44 again we don't know what the margins are here on their revenue but it seems

like a platform that they've spent a lot of time trying to integrate into the core wix business and uh or at least some of the tech and that they have um is actually impressive in its own right I think they're in a much better spot three years down the road than they are today. And I would be – I think the demise of the drag-and-drop website building platform is way overstated right now. people like if you were to build a website tomorrow you had a new idea brettchafer.com whatever it is how are you how are you doing it well yeah probably going to wix yeah me too like even in the even in the ai world it a clean drag and drop like website building and hosting platform where all the securities you know done and there's like you kind of have the confidence that it's a it's a great platform to host for a non-dev

it still seems the most compelling option at the moment um okay let's take some questions from the chat here uh kelby says i was listening to some old episodes and you guys talked about starting a fund what are your challenges associated with that that was a few years ago there's expenses uh we did okay didn't have that much aum so we decided to focus on the podcast instead and our personal portfolios that's about it yeah uh yeah we're subscale like we just there are lots of uh like not registration but uh formation legal formation costs with uh like a limit of partnership and costs associated with the accounting which if you're subscale it's kind of hard to do um or it eats away at any any money that you have so um yeah that was part

of the issue something else i would mention for anyone that's thinking about starting their own fund the advice i would give is start a fund when you think the opportunity set is rich because it really helps to get off to a good start uh it helps with the fundraising process helps investors feel more confident um it just managing a fund is not necessarily always ideal because you don't have consistent income coming in right if you want to raise money you got to go out there you got to ask investors for money and coincidentally when when your portfolio is down even though that might be the most opportunistic time to buy shares it's also one of the hardest to raise money so yeah that would be my uh piece of advice there someone says grab versus uber i don't know grab

well enough but i like both are probably fine and where's grab trading at is it down i haven't followed it that closely the uh yeah it is down it could be opportunistic here the the issue for me with grab i like the business i think at one point i even owned some shares But they are really leaning heavily into the financial services aspect. So they're trying to be all in one, essentially a super app in Southeast Asia. They are the leader in ride sharing and food delivery. And I think everywhere except Malaysia. and there is uh rumors about a potential acquisition with the biggest player in malaysia i might be i might be getting the the country there wrong but the i have issues i'm always worried about fast growing lenders and grab is kind of turning into one uh which you know could be good and could be a missed

opportunity for me but it's the same concern i have with sofi same sort of concern i have with new bank uh you know fast-growing lenders there's always risk that that's kind of hard hard to know uh in real time so yeah that's that would probably be my hiccup there all right other questions opinion on uber short well it's done well so far but uh i would not be shorting uber here margin expansion revenue growth buybacks and it seems like a tough one to kind of get into but hey if the narrative shifts there could be some if you want to bet on that narrative for um self-driving if waymo keeps scaling at a rapid pace they throw out some scary numbers it could do well uh but besides that i'm not sure all right here's another one you kind of

teased at what actually might make this list of every company and this from the sub stack chat people should join ask questions before the show can be very very helpful and we talk a lot within In that, of every company you've ever researched, what is one that stands out for snatching defeat from the jaws of victory? Basically, a good business run by absolutely incompetent management. Wix maybe is not absolutely incompetent from a shareholder perspective, but the stock price seems to indicate that sometimes. I would add here Zillow and Autodesk.

I think those are great assets that aren't managed very well. zillow certainly up there basically any any management team where they've had a lot of success in their core business and they've made stupid acquisitions like yeah or the compounds with high high great unit economic revenue compounds and then the stock goes nowhere why like how are you you're such a good underlying business and you can't get it to go anywhere that's crazy oh someone says match group yeah yeah yeah for sure somewhat yeah i mean the product just got no updates for 10 years like i don't and that is that is an issue with management to be clear yeah yeah that's true what do you think they were doing at tinder r&d for 10 years

just nothing i think that now that is probably every quarter that is one of the companies i am the happiest not to own like i'm so happy to not be involved with match group in any way anymore they were it was constantly infuriating the way they just changed their they would change their reporting to make you feel a little better yeah spin uh spin the narrative yep the the whole dating app complex seemingly other than grinder seems to be mismanaged uh someone says warner i don't want anything to do with it warner brothers that's a good one as well but i don't think that asset is that great people toss out disney that's a little better of an asset than warner brothers but i don't think it's a great asset anymore i'm gonna be honest

to the listeners over the next 30 years i do not know if disney is that great of an asset yeah that's my hot take it's the companies that made acquisitions that like were not helpful to their existing business like thought they were thought they could run any business so they launched into other stuff and zillow i really do think is kind of a prime example of that it's a good question though yeah i like that um can we talk uh this insurance scheme unfolding with the la dodgers and la lakers and other sports franchises a little bit chelsea football club as well i don't know let me read you let me read you one one quote first okay tell i'll let's see if this inspires you uh to take any new positions this was a quote from the ceo of diageo ah another

incompetent that's that's an incompetent culture management one of the i think maybe the largest spirits company in the world um can't remember all the brands off my head but one of the largest alcohol companies in the world. Here's a quote from the Capital Markets Day. People on GLP-1s spent 2% less on spirits than people who weren't on GLP-1s. That corresponds to the four on beer, the five on wine. I think to understand this one, it's also helpful to take an edge case. Humor me for a moment. Assume 100% of the population went onto GLP-1s in the U.S. tomorrow. That would mean all those people spent 2% less than they do today. That is a one-time level effect, doesn't compound. Realistically, one number I'm definitely confident to say

is it will not be 100% of people in the U.S. So what he's saying, if I'm understanding this correctly, if 100% of people went on to GLP-1s tomorrow, the U.S. would spend 2% less on alcohol do you believe that figure maybe there's a lot of it's kind of an all else equals thing and the the real world isn't all else equal uh i think people are gonna keep spending on spirits maybe the beer consumption goes down because you're not getting i don't know the problem with the agio is maybe less of the core business which i think will be fine versus the management team prior i i don't know about this new one but the management team prior was quite incompetent in my humble opinion they didn't do much and that's about that it's

not like it's that cheap uh i'm seeing and there could be something clouding the numbers EV to EBIT of 23 and a half. EV to sales was historically, it's loading. Thanks to our friends at Fiscal.ai. Use our link, fiscal.ai. Get 15% off any paid plan. EV to sales was historically more in the 5 to 7 range. Yeah, 5 to 7 range.

Now we're down to 4. it's is it i don't know where i stand on alcohol is it screaming cheap no no this is not altria at a 10 dividend yield yeah i i really don't know where to stand on alcohol because one if 100 of people went on glp ones tomorrow in the u.s i i i can't imagine alcohol sales would only drop by two percent i just would i can't believe that but also there's been sort of persistent volume declines for some time even though it's also one of the most durable industries of all time so i just i'm stuck in this i have no idea where volumes will be in 10 years yep which makes me not want to own any of them yeah i still have it on yeah just just watch list

it's not the best it's not my favorite i like a lot of other stocks before i like some of these alcohol companies all right do you want to hear about the uh crazy man mark walter who is trying the warren buffett strategy kind of roulette style 10x leverage style without disclosing anything to anyone else uh yeah let's do it like if how about i paint an analogy for people that might know berkshire hathaway very well it's like if geico took its insurance money and sent out a loan to seize candy at a high yield rate and then See's Candy took that for some expansion plan, but they didn't tell anyone that they gave the loan to them.

All right, this is a bit of a complicated story, so I'm trying to simplify it, but some analysts are calling this the, quote, canary in the coal mine for insurance and lending practices operated by private equity funds. This may be or not be the, quote, unquote, canary in the coal mine.

It could be a really bad systemic thing or not, But this story in isolation is still fascinating. It's ongoing. It's very complicated financially, I think likely on purpose by the people involved in these deals. And we're not going to be able to cover everything on the podcast today, but there might be more news that comes out. Also, as a side note, it's a classic. You see tweets from random accounts that say, yeah, look, everyone's getting this wrong. This is a simple financial analysis.

Here's my one, you know, five steps, and it's just like, yeah, they took out loans and gave them to themselves. Fascinating. All right, well, let's talk about Mark Walter. He is the primary owner of the Los Angeles Dodgers baseball team. He founded Guggenheim Partners, and I guess I didn't know who founded Guggenheim. Always on analyst calls. In 1999, for asset management, investment banking, and insurance services

in the great financial crisis, the firm bought up insurance operators and bought higher-yielding debt with the float. I think they replaced it. A little different than the Berkshire Hathaway Treasury bond model. Yeah, a little riskier. In 2012, Walter and others bought the L.A. Dodgers for $2.15 billion.

People at the time were surprised at how they could finance the deal. Guggenheim Tide insurers were used to fund the purchase, essentially taking the float to help finance the purchase, according to the sources, I think the Wall Street Journal here, which even hedge fund manager Steve Cohen, who was a part of the bidding process, objected to. I think as a side note, if Steve Cohen objects to what you're doing from a financial engineering perspective,

you maybe should think twice about it. Fast forward to today. There's a holding company for Walter's Enterprises named TWG Global. It has taken insurance float and used them to finance deals for Walter, including things like home purchases, But more importantly, it was recently used to fund a purchase of the L.A. Lakers for $10 billion, who I think he would be the majority owner of. It's also complicated with the old ownership group, long-term family there, but we don't need to get into that. However, the relationship to the insurance companies giving out loans to Walters-owned businesses,

which are self-dealing, were not properly disclosed. It's not technically illegal if you do this and disclose this from time to time. I think you can't do it for your entire insurance operation, but there's some rules there. But they were hidden with pass-through LLCs essentially saying, all right, the insurance company is going to loan the money to this LLC who's going to give the money to the business who's going to buy the L.A. Lakers classic, trying to hide your financials. He's now being investigated by federal prosecutors over improper dealmaking. He is unwinding pretty much the L.A. Lakers deal by selling it to, as we talked about previously. uh josh kushner of thrive capital bob eiger and maybe we don't know yet abu dhabi fund might be in the mix there also might be potential fraudulent deals between the dodgers and a media company for

local sports rights and you'll never guess they own the dodgers walter owns both companies so they just essentially made it so they had a really attractive media deal uh for tax purposes which I think that could be where they get into actual legal trouble, I'd say, if you went to court. This is why the Lakers are being sold, and the Dodgers' stake might have to be sold, too, because regarding from a financial standpoint, there might be $50 to $20 billion in insurance loans that need to be quickly unwound and sold, or basically they've got to get rid of these deals that were done improperly, and they have to do that by the end of this year. Could have a huge liquidity issue.

And I will mention, not that, you know, this story is popular because it's with some primetime L.A. sports franchises that a lot of people know. You know, it's not just the financial world. It's the sports world as well. But with this insurance, private equity, asset manager combination, you can see how when you don't have someone like a Berkshire Hathaway that acts very conservatively and things of that nature, that things can go wrong and now there are estimates that 25 percent of u.n's insurance policies are invested in private credit and it's growing i feel like this is just caught it's it's it's just asking to to not end well yeah i would have thought there's more constraints yeah yeah there should be more constraints dealing with giving your own insurance company

money well i just mean like companies you manage i mean that's like an extreme case but i feel like there should be very like very strict constraints on where insurance float can be allocated to i i honestly would have assumed that there was uh you mean you don't like putting it into distressed auto i don't know what the hell it is auto manufacturing supply chain something That's what they're getting put into. Private credit is high yield. It's very distressed. And we've seen a lot of the fraud.

I don't want to say fraud. I don't want to say the F word. But there's been a lot of bad deals that have blotted. Do you remember the tricolor? Yeah, there was some stuff. Basically, hidden liabilities, things of that nature. The companies were pretty much bankrupt, and they weren't telling people. But I could totally understand how insurance regulators, which are at the state level, probably very bureaucratic, calm people, not doing much, just going about their day-to-day basis.

Insurance is usually boring. You have these Wall Street hot shots coming in, throwing things for a loop, moving quickly, and they could probably not see something going wrong for years, I would say. Yeah. Yeah, this is – it makes me want to, as a policyholder, hold policies with public companies. uh i don't know how much that would really save me but at least then you have it's not like every insurance policy i buy i i'm like checking their financial statements to see where all the floats invested but but they said they want to get these done because they're worried about people concerned uh kind of in the news getting concerned about almost a bank run situation oh pulling pulling their policies yeah yeah uh yeah we have a comment that says will nvidia

step in to backstop this deal and provide additional financing i do like yeah you never know they might be doing that if the dodgers commit to 10 billion dollars in gpu purchases nvidia will help out here yeah honestly that could be the answer all right i also like how bob eiger is getting tossed into this when apparently he only may be contributing to the deal it's a name you got to throw a name on there yeah um all right any other topics before we close things out here brett uh someone said in the chat well let's let's look at uh high volume substack chat user kender he made a nice post uh i think it took some time he used some of the fiscal AI KPIs as well. So shout out again to our sponsor. Essentially what he did here

is he wanted to dollar cost average into high quality companies using the old dogs of the Dow or the lag seven strategy, but with his own portfolio. He had Google, Meta, Amazon, Microsoft, Nvidia, Visa, Netflix, MercadoLibre, ASML, Ferrari, Irmaz, TSMC. And he looked at kind of ranking on who is the cheapest on a forward earnings multiple, biggest drawdown, and kind of using that as a matrix to say, all right, I'm going to dollar-cross the average each month, and then, or maybe however long it is, two weeks, two months, whatever it is,

and then I'm going to choose what company I'm going to buy based on kind of its lagging indicators, you know, biggest drawdown from all-time high or biggest drawdown from the last 52 weeks, forward earnings multiple forward ev to sales maybe a combination of everything i think this is a pretty you know solid strategy but what do you think ryan and what metric would you use if you were going to build your own dollar cost averaging kind of lag seven custom index what metric would i use um

maybe well yeah maybe just draw down from highs i feel like it's high quality and then you just have draw down yeah you'd have to look at you still do a little investigative digging to the business but for yeah you don't want to be like hermes right now all right maybe just doc was stabbed a little bit into that yeah the i i love this term lag seven the lag seven strategy You're a big proponent of the lag seven. All right, here's another one. Someone just wrote, threat to NVIDIA. I hope the person is not threatening NVIDIA.

I just thought it was funny the way they said it. I believe they're talking about the chip providers from Amazon and Alphabet. I think that's probably a growing risk, but as long as SpaceX is spending that money, which I do not think is sustainable, but we will see, nvidia is going to be doing just fine all right here's another one though curious if any recent guests maybe we'll say in 2026 have persuaded you to start a position in a not well-known company such as d local or sezzle you remember sezzle ryan it's up it's up quite a bit

since yeah it was a good pitch actually monu invests i think was the yes guy that came on um let me check my portfolio like see if anyone's inspired me i'm a new bank dave ahern so we talked about new bank i guess i made it into the portfolio although we've kind of both or two two people that looked at it simultaneously he was definitely one of the people that inspired me to look at that d local i like but i like addy and better i don't think we have time to talk about why but i do um i think d local is fine though I ended up – I've ended up buying several of my own research episode companies this year. All right.

Lay it on the list, Ryan. What have you bought? Copart. Probably going to take a position in CoStar at some point here. Adobe I did I think this year. Wix I don't remember if I did them. i can't remember who else we did but the other one that i did end up buying and i sold it really quickly and i feel like almost ashamed to admit this

ryan o'connor came on the podcast and pitched ast space mobile and i thought it was kind of crazy i don't really like not crazy i thought it was a good pitch high upside very high risk yeah and I don't usually invest in that kind of stuff but I was I thought the pitch was compelling and I bought it and it doubled in like a month and I just couldn't feel comfortable I could not feel comfortable

having a stock do that well so I sold it and I think I I sold it at like $50 a share and today it's we're back down to $65 alright about at the same spot slightly higher

anyway that's it I think all right yeah we like bringing on interviews for people uh but usually when we talk to analysts or something like that they always say well i like this stock looks interesting it's down a lot and they go well i kind of look like an idiot right now for for talking about this so usually if someone comes on it's like been a big winner for them that may not be the best time to buy but i kind of like when someone comes on and hey this i like this stock it's down a bunch i like it even more um yeah yeah there are interviews like there are probably some that started with an interview and i didn't end up owning them right away but have kind of spurred

us on to the idea and then you kind of get to know it over the coming months that kind of thing but yeah i i every single company in our portfolio we have done an episode on at some point in our history so yeah guess so i think that's going to do it though uh thank you everyone for tuning in uh thank you for listening thank you for the comments in the chat we want to remind the listeners that brett and i are not financial advisors anything we say or discuss here on chit chat stocks is not formal advice or a recommendation we may buy sell or hold any of the securities discussed on this podcast thank you all for tuning in we'll see you next time We'll be right back.