Chit Chat Stocks - Power Hour #10: Potential Roku Buyout, ZM discussion, Anti-ESG ESG

Episode Date: June 12, 2022

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Welcome to Chit Chat Money. On this show, host Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or a recommendation. Now, please enjoy this episode. This is the CCM Chit Chat Money Investing Power Hour. I am Ryan Henderson. I am with Brett Schaefer. And today, well, I guess anytime we do this show, the only rule is that we are not allowed to

prepare anything. So all topics are fair game. It's been a bit of a quiet week in the world of finance, I guess. Would you agree to say that? I agree. Yeah. Outside of the continued Twitter drama, which is hard to follow, I guess. It's so confusing, but yeah, we're winding down earnings season. I mean, I guess this morning I watched the Spotify investor day, which was quite long, but lots of good details there. If you're interested in that company, definitely kind of watch it, but I think it was three hours and 40 minutes. So took up all the morning so far. Do investor days ever bother you? Like with the length? Come on. Yeah.

Give us like the slides and I don't know, maybe an hour spiel. Yes. A lot of it was like products day combined with investor day. I wish they would separate it out because there was a lot of stuff that was interesting around their new product features, but that might've been more relevant for, you know, users and well i guess it's kind of relevant for us for maybe potentially you know as podcast hosts but besides that yeah the investor stuff was kind of crammed into the last hour so that they always save the best for last the financial projections all that good stuff what was your biggest takeaway

from the day uh that they have well i think the biggest takeaway is that they have very large long-term ambitions that no one believes they will uh achieve so their their goal is to hit 100 billion dollars in annual revenue by 2030 that's their big target uh which will require some hefty growth i'm not sure i believe they will be able to do that but that is their that is their target so yeah and the i guess the other big takeaway is they confirmed that audiobooks are the next big they basically said that audiobooks are their next big uh category so that is the two things i kind of like them for you get for them to get podcasts right first yeah it's hard to i think yeah it's still super early days in the audiobooks i think they were just

throwing a bone out to people because their acquisition of that distribution platform hasn't even closed. And they gave no details on anything for audio books, but they just kind of gave a stay tuned over the next, say, five years. They said that's when they're going to start their investments heavily. Going into the investor day, what were you looking for? What were you hoping to hear? I was just looking for some more details on numbers surrounding their anecdotes. And I think we got them. um hard to remember all the exact numbers but yeah and it's a bit of a whenever they give out numbers you when you kind of a lot of people interpret them either bullish or bearish you

know they're the exact same number so i don't really want to say no it's hard it's so hard to come up with any analysis because it is very complicated business do you know what i'm saying so they gave out a lot of numbers but it'll probably take a while to digest and it's not a company it's a company that's still on a lot of flux so what uh what are your thoughts on coupang like coupon coupon i believe is are you sure about that i've heard so many people call it coupang lately uh i think it is coupon but i i also could be wrong and i think is because it's like Coupon because they used to be like a Groupon type style thing.

Yeah, Coupon, I've been following them since the IPO. It's pretty interesting. Putting up some strong growth numbers. Margins are pretty low. They're copying a ton of Amazon's retail strategy and prime strategy almost to a T, which could be a good thing. But I was wrong.

I said it's been a quiet week in finance. we've got the rumor that uh or maybe it's official i don't know that netflix is exploring buying roku oh yeah i just saw a tweet on that did you see any details i haven't but i have to imagine all right so roku's up 10 today stocks trading at 100 bucks the market cap is 14 billion let me do some let me try to do some valuation stuff real quick i believe it's doing like yeah about a billion and a half in gross profit

well that's a decent multiple uh i don't know you're more the expert roku so do you have any thoughts there i think it's a good i like roku's business i think it's a good uh thing for netflix to do and it kind of builds them into a streaming powerhouse that goes beyond purely their service and it allows them to monetize the success of other streaming services i just don't know if netflix has the is in the position to do it yeah and i don't know if roku would want to do that given their potentially increased competitive positioning in the industry although they are also in a state of flux just because the there's so many changing variables within that market

if however i think if netflix wants to accelerate its advertising goals or advertising um segment that they're supposed to roll out by the end of this year correct correct me if i'm wrong there this would be a good way to do that because roku has a lot of that technology built out uh i don't know if it would would it well it would definitely pass antitrust it's not like if anything it would be an antitrust one if they're antitrust uh risk if they succeeded really well with an acquisition but i don't think would you know there wouldn't be any antitrust now i don't know if you can call any acquisition of a company that competes with apple amazon google

uh like anti-competitive exactly they would have to succeed a lot with the acquisition there there wouldn't be any risk there now it would draw i don't know how beneficial it would be to netflix or roku what are where this just maybe the advertising stuff if you wanted to supercharge netflix's advertising tier and get like netflix free for a year with the roku os yeah or the ad supported one i think the old the only way it makes sense is if they really supercharge the advertising uh segment and this could this could accelerate that although parts the other parts of the business. I don't know how much it makes sense, but we'll see. We'll see. I doubt Roku will sell

because it seems like Anthony Wood, the CEO there is really... I bet he's entertained a lot of offers. Comcast was entertaining an offer for like $20 billion back when Roku's stock was much higher so i doubt he's in he wants to sell i don't think that's his mode of operation right now but high enough offer i don't think they'd sell yeah i don't think they'd sell below like 20 billion dollars i have to imagine that and i saw someone on twitter today estimating that i don't know there's just an estimate but he's like and no way anthony wood sells below like 180 a share which was like i don't know it's pretty open cherry yeah he did some he backed in some math to it but the uh the other thing i saw is that trading has been trading of their stock has

been stopped at the company for all employees because of this potential news so it seems more real than just rumors gotcha okay it's kind of like a leak from the company yeah and we'll see if it goes through we'll see what price it's at but i don't know the price roku is willing to sell i don't know what kind of return on investment netflix will get it the other rumor was it would be a stock deal oh okay well tougher for netflix now right now yeah but what roku's down 75 too they're both down like yeah let me let me get the old let me get the old motley fool wide charts up here and see who's down more year to date the thing is anthony wood what he worked at netflix right he uh roku was spun out yeah it was incubated there real early and then spun out

I think Anthony Wood and Reed Hastings are pretty close. I don't know. It feels like a power team to me. I've been wanting this to happen for a while. I thought Roku was a prime acquisition target for a lot of companies. Yeah. Okay. Here, I want to go more deep into that thought.

What do you want to guess? Who's down further year to date? Both are below 50% or down 50%. year to date year to date netflix correct netflix is down 66 and a half percent and roku is down 55 speaking on that saying that it was a great acquisition candidate i'm not a giant like john malone expert i just i read the cable cowboy and i don't I don't understand the Liberty Complex too much, but one of the big takeaways I got from reading that book and studying their strategy and why they've done so well over the... How long has it been now? A few decades. is they've looked at stuff not necessarily as how much cash flow it generates,

but a strategic asset within an industry. And Roku, it might have just been as simple as Roku is a really strong strategic asset for any sort of company that wants to win in video streaming and connected TV in general. Yeah. I mean, it's a what? Four out of 10 households in the US? our roku streaming devices or four out of ten households with a smart tv i think maybe it's three out of ten but it's i don't know that operating system whatever smart tv operating

system you have you're probably on there for a long time i would think i'm probably not going to change from roku after i'm done i mean it's not as sticky as like your mobile phone operating system but i have no reason to switch and i'm on roku now and you see a lot of investors say i things like i don't see a reason for roku to exist or what's the point of roku and i i simply believe that's not true um it provides a ton of value to me as a consumer and you can see when studying the business i'm no expert on it i've just kind of followed it lightly for a few years it provides a ton of value to advertisers and streaming services in general and not even some of it's like the in-app uh ad inventory that's whatever i know a lot of people

are moving their ad budgets to ctv but also like the the whatever i don't want to call it a billboard but the ad that they have on the home page is super valuable digital real estate like i saw the obi-wan disney plus promoted the obi-wan show on the roku home screen yeah immediately came in it immediately went and watched it And I mean, it seems super valuable. If you have a new show, it seems like a perfect place to promote it. Yeah. Side note, you said the Obi-Wan show was bad.

I watched it. It's not bad. I didn't say it was bad. All right. Well, I thought that's what you said last week. I thought the first two episodes were underwhelming. Third episode was great. Okay, fair.

You hadn't watched the third episode yet. But I think it's solid. It's got some promise there. Definitely better than the sequel trilogy. you triumph book your stay at lq.com but back to broku yeah i agree with all those points it's not um yeah it's not as valuable as a smartphone operating system or the hardware software combination but you can see the potential and there's not even it's not even potential anymore their gross profit growth has been very very strong and they're getting

held down by super bad gross margins on their hardware stuff right now because of supply chain issues. If they work that out, then consolidated financials are going to look a lot better than people think. I know this sounds like a pitch for Roku and I haven't, but I don't think either of us have owned it either in the fund or individually for a long time, but it's one that's been on the watch list for a while. Yeah. I want to pull up the shareholder letter because Anthony Wood said something good recently about, gosh, let me find it. The discrepancy between the amount of eyeballs on smart TVs versus the amount of ad spend. And, all right, I think this is it.

Okay. It says, according to Nielsen, in Q4, adults aged 14 to 49 spent 45% of their tv time streaming up from 40 in the prior year yet it is estimated that advertisers spent just 18 of their ustv budgets on streaming in 2021 i have to imagine that converts over time and anthony wood thinks that 100 of uh time spent watching tv will be streaming eventually you know what else i think is ironic i moved away from cable i guess i never really had a cable package but i moved away from cable and the one thing i was craving the most was a cable like package and so i just got youtube tv it's basically the exact same thing just on a smart tv

oh yeah you didn't you were unaware of that yeah it's just a copy same with fubo shout out to those free trials oh yeah thank thank god for unlimited emails yeah that's that's google providing a lot of value right there um yeah anything else on roku i don't really have no i'd like to see i don't okay does it is it worth owning now do you think given that the acquisition is kind of on the horizon i mean it's only up it shocks me that's only up 10 today yeah it's a lot of people don't like roku um well maybe that tell that's your answer there it seems like if the acquisition is on the table the margin of safety could be a little bit high but optically it's still expensive that's why um no it no one cares about gross profit right now they care about their earnings

and cash flow and it doesn't look good but the long-term growth has been phenomenal and they're comping 2020 or kind of the 2020 early 2021 period with a phenomenal growth due to the pandemic and the numbers personally looked a lot better than i expected it's still a bit expensive on a gross profit basis yeah i agree so balancing those two items i'm not exactly sure but i also think gross margin i don't think gross margin will on the player side will stay at like negative 30 or whatever it's at i have to imagine that they either raise prices eventually or um find a way to manufacture it in-house cheaper true true and a lot of that yeah supply chain stuff will roll through but it's affecting them

right now so a lot of people extrapolate that that one quarter out forever and see that those player revenue the hardware revenue is down so much or sorry not revenue margins are down so much there could be opportunity there yeah i don't know maybe it's just maybe i'm just a user and i like it for that reason i'll also say uh mario super strikers expected to come out i believe in two days for the nintendo switch i am heavily or eagerly anticipating you're along by our super strikers yeah a lot of buzz for that game seems like a good one my roommate just got a uh new nintendo switch the oled model so how does he like it you're welcome for us uh keeping up the top line

uh he likes it the oled difference is only in the handheld display obviously so and we don't use it like that very often um you're not going to yeah because of the it's like yeah gotcha you know yeah but i don't i think i think it's good it's fun the content is like I don't know It's just timeless Yeah We still play Mario Party Which was like a game

From three years ago Whenever like The Whenever like The roommates play That's the game of choice That's how it goes Alright

Moving on Here's a nice headline From Wedbush What do you think about this? Sell now Buy later Underperformance For

Under Initiate underperform At a firm is that a good headline or what that's a wonderful headline what do you think about the apple pay later uh irrelevant i kind of someone said i was just being um i don't know how to i'm lost for the word here like uh yeah i just think the apple's developer conferences i've watched those before and i'm like okay these things they're making these things sound exciting but most of it's just like okay cool new computer new chip wow okay new software thing great i know

i don't know if it's designed for you yeah but a lot tons of people watch that uh the buy now pay later from apple no thoughts could that be interesting maybe but there's a lot of i don't have the actual data but there's i've read some articles from and these aren't just like blogs it's like the financial times and some other stuff of buy now pay later um what are they called the secured ties loans are not performing very well which indicates that maybe they're being a little loose on their lending standards but we'll see apple can obviously um it doesn't it's not going to affect them given how large their balance sheet is but who knows who knows yeah the uh it's irrelevant to their business all that matters

is the continued growth of wearables app store um stable iphone revenues and then the next thing which is the AR, VR goggles. Yeah. I always have a hard time with Apple between, all right, in an inflationary environment, so over the next two years, let's say, I think the upgrade cadence on iPhones would obviously be slower. But I also think it might be the best business in the world when i look around and see everybody staring at their phones like i have that epiphany probably

once a day where i'm like all right everyone's glued to this thing they probably spend i don't know five to seven hours a day on it it's the most valuable real estate in the world i don't see yeah anytime soon i'm pretty much locked in for life i think yeah unless there's a new unless someone innovates on because okay someone innovates on the next key computing device for people besides a smartphone because like wearables and stuff that's not or even an ipad is not the key computing device

if something replaces an i uh smartphones eventually sure but yeah i think a lot of people realize it's a darn good business but okay what price is it trading at you know what i mean fan mag versus berkshire next five years next five years fan bag yeah are we talking well same netflix is in there equal weight i guess it's cheap it's cheap enough and the n is fluid it's either nvidia or netflix whichever i don't know nvidia i've tried to understand but i cannot uh what is that so it's facebook alphabet amazon microsoft uh no you're gonna have to be man mag here soon because of meta yeah why they have to go and ruin the acronym i definitely take big tech yeah

From these prices I can't think of a better Like I can't think of a better Risk reward bet For the next 10 years Than just Fan mag

Businesses are all Okay We'll see what margins are I'd say Forget about price Apple Amazon Microsoft

Google Meta's Hard to interpret what what's going to happen with their capex but the uh you take those five businesses they have the most resources in the world they all pretty much have a sizable moat and they can kind of grow at will and they just so happen to be trading on average probably i want to say around 20 times cash flow cox panoramic wi-fi includes advanced security to help protect all your connected devices.

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Restrictions apply. I'm guessing. That's kind of a guess. But I think, I guess Amazon's is going to seem more expensive because of the recent quarter. But Google and Facebook are obviously optically cheap. And then… Well, Google's are right. Facebook's optically cheap.

Google's right around, I think, slightly below. Well, it depends. A little less than 20 times. Yeah. I mean, you put up a good argument. I don't know. Is there a better bet? I saw Gavin Baker say that recently, too.

Big tech seems like such a great opportunity right now. Yeah, it's a good argument. There are a few companies that I'm way more confident in the non-cyclicality, durability of either industries or their certain business model within that industry. I think all of them, it's not – well, Netflix you can exclude because it doesn't really need to be included. But all of them have strong competitive advantages. I think you just have to ask how much cash are they going to generate versus the price you pay.

All right. Well, here's two anecdotes. Actually, one anecdote. The other day, I saw a bus, a Microsoft shuttle going from Seattle to the Microsoft campus. If they have the room to do that on a regular basis, I think they can easily pick how much cash they want to generate each year. That's an interesting anecdote. If AWS runs city bus advertisements, I think they can pick how much cash they want to generate.

Yeah, but sometimes spend is hard to peel back. uh yeah the they're obviously giants so if yeah so are you saying it like in a sense that if they hit a little bit of a macro headwind they'll be able to peel back expenses and still generate a ton of cash yeah some of the completely unnecessary expenses that they have i think they'll be able to peel those back on a side note This is totally different. But I was watching an interview with the CEO of Upstart yesterday, Dave Girard, I believe is his name. And I do like him.

And at the end, the interviewer asked whether – basically a question about, like, what's your advice for stock pickers in today's market? And he's like, I don't really buy stocks individually on my own that much. I'm not really into it. Um, he said, occasionally I'll do it if I just like, really like the tech and know how hard it is to build. And he said that he took a big position in zoom and he said they were working on a product like that at Google and couldn't do it. They couldn't make it that good.

And he's like, well, I, I just liked the management and they were able to do what we couldn't. So I took that. So I don't know. That was like the most bullish zoom commentary I've seen in a long time. That's interesting. Yeah, the product's nice. Never breaks on us. Fingers crossed.

It's not going to happen right now because we're on Zoom. But yeah, it's great. We're on gallery mode, right? Yeah. Okay. All right. We always make that mistake.

It makes the YouTube worse. Speaking of that, if anyone has any comments, go in to the chat, ask them up. And if you're listening to the audio format, which the majority of you are, you can join us.

well today's is on wednesday but we typically do them on thursdays around lunchtime on the pacific coast um noon noon to be specific it's noon pacific time three o'clock eastern time yep all right any let's see yeah i mean what are your thoughts news here zoom i could see it working i don't know i haven't looked at the price for a while we did that updated we did another show on them i remember coming away fairly pleased uh not pleased because it's like they're not trying to please me but like uh fairly impressed with how they've executed through the pandemic yeah software's a much easier business to manage than peloton but they've done quite well with it uh what are they trading at now like 30 times cash flow

i'm sure it's a little either a little bit more a little bit less i'm gonna do the math right now You need a solid amount of growth over the next, say, 5 to 10 years, top-line growth, or free cash flow growth, whatever you want to use, to get some solid return targets at a 30 times free cash flow multiple. It looks like there was some times. Actually, it could be cheaper. EBITDA free cash flow is 18.8 times. Okay. I was looking at trailing EBITDA. So I think it's possible they may be over-earning on free cash flow right now,

but I don't have any of the numbers in front of me. So if taking that at face value, yeah, it could be cheap if you think it can grow at 10% plus and sustain the margins. I see no reason for us to leave, and we're on a college account that's going to expire eventually and then we'll start paying.

So it seems... It's sticky. It is sticky. Yeah, it could definitely work. I could see the stock working. I don't know that many people that have made the transition or actually once they're on Zoom

or something like that, made a shift away as a personal decision. maybe if they had to like if their work has a different system they'll use it but i don't want to switch because it's just a hassle to relearn it yeah and it and the nuances with them there's just little i don't know enterprises yeah a lot of enterprises use teams just because the bundle it seems like going live on youtube that wasn't easy i don't want to have to try to redo that with uh some other system which by the way youtube if you're listening uh you got to fix that make that a little more seamless the other thing uh did you see youtube's comment today the the co-founder

of youtube his comment to elon musk yeah are you hearing any echoes from my voice okay that's on my end if anyone's hearing that i don't know why it's happening it's only happened a few times but yeah to your comment yeah that guy i don't he doesn't work at youtube anymore i guess after that buyout he got that nice cash out cash out from google um yeah what did musk say about the spam right spam ads yeah something like that honestly he's not wrong yeah well and that's not or he said not spam scam scams right yeah scammy ads and you know what just because you have youtube premium as an offering doesn't give you the right away to get to just shell out scammy ads uh i find it interesting that a man worth 200 billion dollars or whatever it's down to 100

something now doesn't pay for youtube premium so what is it like 10 bucks a month yeah i know it's a little ridiculous it's way cheaper than that too if i'm not mistaken but hey that i think it's a good testament to google's algorithm because we all know elon musk likes scams so you just there oh there goes half our viewers yeah yeah what do you think the uh what what percentage odds would you give the twitter deal going through at the current price that is an impossible question i have no clue i'd say 60 60 chance it goes through at the current price all right you're you're very confident what's your thesis he's walked himself into a situation he can't get out of

that has not stopped mr musk before he is he seems to just be teflon elon uh i mean it's a it's a great spread on this little arbitrage opportunity here what is it like 30 something like that yeah uh price is 40 42 as i'm looking at it right now if i think it's a great way if you are uh never invest like this but if you want to spite elon this seems like a great way to do it because you can buy twitter shares and he can pay you a premium so you're getting money from him and and making a little bit of cash i wrote that on our sunday newsletter but obviously don't invest like that i'm not doing that but um yeah seems like the bloomberg writer matt levine is quite an

expert on these type of things and he seems to think that Musk has no standing here so I kind of just defer to him I would read his updates I thought I had a good joke you know how everyone says like do your own due diligence and Musk waived his due diligence

I was like that's a big win for the do your own due diligence guys yeah I'll never wave it always do your own yeah there you go d-y-o-d-d That's what everyone says. We say that all the time.

It's like the BYOB for finance. True. God, what was I going to say? Oh, I was looking at the top 10 games on the mobile phone, and it's pretty much Diablo Immortal. The only two that I thought were relevant were Diablo Immortal and Apex Mobile. those are kind of the two games that caught my eye

do you think downloads is that what it is do you think that all the mobile because all the big publishers are spending a ton on mobile obviously do you think the spend is worth it

yeah I think so pretty profitable mobile is very profitable even with app stores taking 20-30% so yeah i think it's worth it and it takes a lot less resources to spin up a game than and maintaining a game on a triple a console or sorry not on console or pc

yeah and they can be really really additive to a community or a franchise um call of duty has executed phenomenally with that even though the stock went into a bit of a tumble and you know they had that the allegations at the company are kind of a separate thing from this but they executed really well in call of duty mobile making its own thing that thing's got great reviews i think it had a billion dollars in revenue i would be hard for me to believe that it's not profitable do you think that the okay one pushback i always hear from a lot of investors in the gaming space is that these games don't translate to mobile well do you think that is people with consoles that are saying that the ones that can experience a sort of a higher

more immersive version or i don't know i mean they need to translate it for god i feel like there's a large cohort of gamers that don't have the money or the resources to be able to buy a console and so they this is their only access point yeah two things there i think uh developers are learning how to make say shooters more they're better for mobile from the reviews kind of show that Call of Duty mobile and Apex both have solid reviews

is there any other shooters that are untraditional going there right now Diablo Immortal seems to have great download numbers and that's a really traditional PC game the reviews I think they do yeah the developers have solved it to making it more simple but staying true

you might not have the same intense graphics And then I think the second thing working in mobile's favor is compared to even five years ago, the phone processing power and screen size and whatever, all the tech around the phone is much, much better. So that's a benefit as well. Yeah. And then once we get into streaming, watch out. Then it'll be very strong. Yeah.

So I think a lot of things are moving in mobile's favor. Obviously you can't repeat, you can't replicate exactly what call duty looks like on the console, but I don't think that's what they're looking for or sorry. I don't think you need to do that to succeed. No. Yeah. It just, the thing is like there are certain games that just simply don't do well on mobile. Yeah. Sports-based games to me seem to struggle.

Yeah, they can't be. Well, I say at a conditional, they're sports-based simulation games. It has to be something just slightly different. And that's, again, you have to have the form factor correct for mobile. And I think the evidence shows so far, I mean, Activision Blizzard has been pretty good with it. It's there. We'll see, though. It's still a little bit up in the air whether a lot of the franchises can succeed and win on mobile, the legacy franchises. But it looks like they're making progress. I think five years from now, we'll know for sure whether all the investment was worth it. All right. Question for you. Do you know what the 10-year yield is today on U.S. Treasury bonds?

I can look right after this, but probably 2.9% to 3%. 3.014 so close in 10 years will the 10 year yield be higher or lower you're asking impossible questions today Ryan that is so

impossible I have no clue I have no clue I'm going to go lower you think the yield will be lower yeah I do I believe in humanity

I think we'll have enough Deflationary services And Solve the supply chain enough To Warrant Lower inflation Or create lower inflation

Which will hopefully decrease yields There's a lot of variables there There's a lot of variables That's a whole decade A lot can happen What was the yield 10 years ago? I bet it was higher Well

Who knows, GFC Right around the same If we're looking Well In 2013 the average yield was 2.35% Yeah I guess it jumps the year after that We have no idea

We could go through a whole new bubble and we could go through a whole new like there could be so many things that happen in 10 years so much stuff we have no idea like we could I'm trying

to think okay governments can make giant mistakes governments can make great progress and finding kind of inflation stuff like that we could also invent something like nuclear fusion I think it's fusion is the one that was potential breakthrough who knows i think there's a lot of unknowns but yeah in general i think

you're right that there's a lot of deflationary forces out there which is basically technology in general uh and that's a definite tailwind for society but we'll see if it gets counteracted by anything else can you guess the top five arc holdings without looking uh one's roku now two is tesla no roku's not number one across all of their funds oh okay well tesla roku coinbase they love them they love coinbase they also like block is block in there yeah they love they love some block man these are these are big bets the risk reward on these things well that's why it's a guaranteed 50 kegger well the uh what's the other one based coinbase is wrong ah i don't know i don't know

then there's a biotech zoom number one wow okay something below it too i think it's zoom tesla roku block ui path ui path well that is which is like the robotic process automation thing yeah software robotic process automation we covered that i think a year ago we chose that not so deep dive and we're like all right he's literally trading at 70 times sales when we looked at it it might have been higher it was yeah and it's trading at 10 times sales now so congrats to them got a nice ipo yeah honestly is it worth do you think it's worth the ipo to i mean i guess the answer is yes but do you think it's worth it in the long run do you think it's better in terms of sustainability to have a two-year period after your ipo where your stock

drops 80 to 90 percent if you're you pay a lot of sbc possibly not what i would love is if they would do a you know a huge raise and then pay everyone cash kind of a little buy low sell high thing but that's possible that's a lot of hindsight bias there i don't know it's definitely ui path new come on it was 70 times sales or whatever like come on let's look at the peak let's i mean that is great in terms of raising money but if you're able to raise money and then tell everyone hey we just got a whole bunch of money but it's going to be a rough next two years i think it's the right way to go obviously you got to know in advance but i mean come on there's no way that they were going to sustain eight-time sales

yeah okay slightly above 60 let's be fair but still that's that's crazy another company i've been looking at is dutch bros oh yeah your anecdotal evidence you love I'm not interested in the stock at all everyone should know that Ryan only can buy stocks that he can feel in his hands you know what I mean

like my Roku remote yeah what have you been looking at just the earnings yeah just like how egregiously priced it was basically the it's still not great

if I remember correctly let me pull it up the uh they're just there's no way they're going to be able to grow store count that fast and i know a lot and a lot of people it's it's like pretty much only on the western market so it's funny to listen to like east east coast investors talking about it because they call it dutch brothers i'm like yeah it's just it's dutch bros but yeah anyway the uh six billion dollar market cap coffee company 500 million dollars in sales what's the price of sales so 10 ish if i'm yeah 12 margins or if they get software margins negative that more golden

uh god i it's just the thing what's interesting about a company like that own stores too like you can't grow that fast like it's not like it's a franchise mom i don't know yeah and like train your uh managers yeah what's interesting about a company like this a restaurant trading at that high of a sales multiple is you know it's not going to have software margins so i just it's like almost guaranteed they won't Cass coffee as a service yeah

punch card is that recurring revenue is that recurring revenue and they also do one of the best combinations sugar and caffeine it's true firing on both cylinders there

the if Alright I'm going to go long dated Because your caffeine and sugar combo Just got me thinking this 100 years You can only own one stock Who are you picking

Oh It's got to be one that was around One that's been around For 100 years I think I'm debating on yeah i was gonna do excuse me i had to move my mic there i'm debating on whether you're hershey or an alcohol company

what about jp morgan nah crypto crypto is gonna uh that's been around 100 years yeah john there's john pierpont Jay Isn't that his name John I believe it was John Yeah Pierpont Morgan

But then there's Yeah There's JP Morgan Jr. As well You know what other companies Have been around For a hundred years How many

How many can you name That have been around For a hundred years Hershey Coca-Cola Nintendo A lot of the alcohol companies I'm not sure the exact ones

JP Morgan Goldman Sachs General Motors Ford Altria in some way right Philip Morris good point US Steel

US Steel I don't think that's my choice for the next 100 years Ford Ford is there I said Ford I would have to do either Hershey or another candy company

or one of the alcohol I think candy has less terminal risk because alcohol, there's a lot more anti-alcohol sentiment lately. Do you know what I mean? Yeah. But there's a lot of anti- It's hard to say that there's more than prohibition. I think there's always going to be anti-alcohol sentiment. Yeah.

Compared to 40 years ago, I think it's just increased slightly. But there's also a lot of anti-sugar sentiments. There's a lot of anti-tobacco sentiment. These are the companies that have been around for 100 years. Yeah. It's got to be one of those, though. It's a fun hypothetical. I love when people do one of those and they say some SaaS stock.

Oh, God. I can't. Yeah. Or they do even Amazon. They just don't know Anything about the history of retail The disruption is constant Anyways

That's a whole separate conversation Here's something I saw Sorry? Have there been any retail stores that stuck around for 100 years? Sears Until lately Possibly some grocery stores Walmart was when?

Walmart's only like 50 years i think maybe 60 yeah berkshire hathaway no no berkshire hathaway has been around oh well sure okay i was saying it's not one of my candidates it has been around for 100 years but i just want to put as the candidate just because it's management risk it's all about management but yeah i don't trust that executive team they say the culture will never know management successor risk. They say the culture will be

embedded and I hope it does but it's still a risk. I think there's a very good chance that Berkshire Hathaway in some capacity is still here in 100 years, assuming that the world still exists

and because there's so many things Every business within it would have to die Seas would have to die True The MSF would have to die Yeah, railroad's a good bet Railroad's a good bet for the 100 years

Yeah, but those are cheating answers Conglomerates are a cheating answer Oh, I was going to say Another candidate for the 100 years I don't know Have you seen any of the news Uber Robinhood

It's my number one Yeah. Okay. All right. Did you see any, follow anything on the new golf split with the Saudis, the league? Kind of. So rumors are that Tiger Woods was offered a $1 billion flat deal to come over to the league, which we don't need to talk about the return on invested capital there. It should be quite low, I think. but is there anyone here's a fun question and you don't have to answer

if you don't want to get in trouble is there anyone any person in history that you wouldn't take a hundred billion dollars a one billion dollar payout from to do

to play golf to do something legal not obviously murder anyone do something legal I think I would take it from anyone in history

there's one billion dollars it's a lot of money Tiger Woods passed that up. So your your morality has a price tag. I don't think it's immoral. I would take one billion dollars. What if they're immoral people?

This is not in relation to the situation, but the it's just money. It's money. It's money's money. If I'm not getting paid to do something illegal. You can use it to counteract. I don't see the moral

aspect there. Did Tiger take it or no? Oh no, he didn't take it. He's already he's already worth a billion dollars so I guess he doesn't want it but

Good for that man. If Kim Jong-un wants to give me a billion dollars to play golf that's a billion dollars less than Kim Jong-un has. I think it's

it's similar to like You don't think you're worth the investment? You don't think Would there be a good ROI on your golf game? Yeah, that is true. It is pure hypothetical. I guess you don't want a monetary relationship with a dictator,

but it kind of reminds me. What if he says he's going to pay you over 10 years and you have to live in this country? Well, then no. But I don't think it's immoral to take the money. similar to the anti-ESG ESG theory that I have

where I think the most if you're anti-cigarette, if you're anti-gun if you're anti-whatever you should not be avoiding the stocks you should be buying them taking the profits and

going after the causes to kill the companies I'm surprised there's not more activist ESG If you get what I mean Like a group What's the publicly traded gun company Smith and Wesson I don't know

Like taking a giant stake in Smith and Wesson Maybe it's too large of a company But ESG just seems to Did you listen to the Oswath Demateron Interview On Invest Like The Best I did yes

Yeah I think he gives a good I really like that guy And everyone like bags on him for some reason. A lot of people didn't like were critical about the interview, but I feel like he does a really good job articulating like everything I'm thinking. And then he's obviously good teacher. It seems like a great professor and he loves sharing all this stuff for free,

which I'm grateful for. And it seems like a pretty rational guy. And he seems to be pretty anti ESG. Yeah, I would. maybe there's something I'm missing there yeah maybe there's something I'm missing here but I honestly think

if you're ESG and you hate like a certain industry you should be buying the stocks so you're the ones that are earning profits because money it's a legal dollar it's not like you made it illegally and you can take all those profits and try

to kill that industry yeah it's not how you earn it until you spend it yeah you can own our art i know i've heard this argument made so many times but your let's take being anti-cigarettes for example which i am yeah like i i don't know i'm not that fond of cigarette smokers but to each their own i guess if you're anti-cigarettes Your incremental demand on Altria's stock price will not change the outcome of the amount of smokers in totality, unless they're issuing new shares. And even then, it's probably still not. But they're not issuing new shares.

They're buying back. So it's actually beneficial to these evil corporate people that are profiting off cigarettes for you to be the non-incremental buyer. So all the profits are going to the people that apparently, you know. Then use those proceeds. Yeah. To fund anti-tobacco ads. No, there's no way. You could never own.

I mean, cigarettes, a lot of people don't. We've got tobacco companies, nothing wrong with that, but big gun companies, people, no one would be okay with that. Where do you draw your line? Personally, I don't draw, I don't draw my line anywhere, but I understand. What about the, the, the ticker that's currently in high controversy? Oh, the, the strip club one. Oh, no, no.

there's a difference between what we would buy in the fund from what investors are comfortable with and what I would personally buy. Yeah.

And there's very, very few companies. It's not a giant difference that really doesn't mean anything. But there's a difference. A slight one. Yeah.

But to each his own. That's the advantage of being an individual investor. That is true. But there's also nothing wrong with having morals as an investor because there are tens of thousands of stocks out there. So if you're avoiding a hundred of them, it's not a giant deal. Although some of them have done quite well. The ones that you may avoid have done quite well over the long term.

Who knows We've got about one minute here Any closing thoughts No chat today Is the market up or down By the time we talk next week Oh man Again that's the third impossible question

I'm going to say Don't we get inflation this week So I guess it could move If people send in a change I'm going to say down and that's another coin flip for you but if anyone's listening to this you want and you're you're at work or whatever you want to watch us uh join us at 12 p.m eastern usually on thursdays if we have to push because i'm flying tomorrow sometimes on wednesdays uh

but yeah live on youtube you'll join the less than 10 people watching right now but hopefully we'll build it up over time and make it fun with people asking questions. And it's also a great place to do any sort of, what were they called? Ask me anythings that we don't really, we've never really done. Yeah. We've never really done. So yeah. All right. Well, I'm going to wrap it up with our disclosure. We want to remind listeners or viewers that Brett and I are not financial advisors. Anything we say or discuss here on Chitchat Money is not formal advice or recommendation. We are, however, general partners at Arch Capital. So clients may have positions in the securities discussed on this podcast or the show. Thank you all for listening or watching. We'll see you next

time.