Chit Chat Stocks - SpaceX IPO Predictions; Buying The Fintech Sell-Off; Has The Bubble Reached Its Peak? $SPCX

Episode Date: June 12, 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 (01:47) Fintech Sell-Off: Analyzing Market Trends (13:05) Apple Worldwide Developer Conference: Key Takeaways (22:42) Wix Restructuring: Implications for Investors (29:48) Nintendo Direct: Anticipation and Concerns (35:37) High-Quality Companies Trading Below 15 Times Earnings (39:47) Listener Questions and Investment Strategies (45:05) Contrarian Investment Ideas (47:52) SpaceX and OpenAI IPO Predictions (51:59) Market Bubble Watch and Predictions (56:43) World Cup Betting Insights ***************************************************** 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

For the past three years, IBKR individual clients averaged 24.3% annually, beating the S&P 500's 23.1%. Lower costs and 170-plus global markets matter. Interactive brokers, member SIPC, visit ibkr.com slash performance. Welcome to Chit Chat Stocks, the podcast that helps you find your next great investment. I'm one of your hosts, Ryan Henderson, and I'm joined today as always by the one and only Brett Schaefer. This is our weekly investing power hour episode. We typically do these on Thursdays at 5 p.m. Eastern time, but we're doing this a day early because we got some travel plans. So we do these live on YouTube, typically Thursdays at 5 p.m. Eastern time. So if you ever want to

ask us some questions live, feel free to head on over to YouTube and do that. You can also check out Substack Chat. It's totally, totally, totally free. And we get a whole bunch of questions there. We got a bunch this week that we can rip through as well. On these episodes, we talk all things financial markets, and we've got plenty to discuss this week. Some of these are news headlines. Some of these are more organic content that you and I came up with, Brett. We have Apple's Worldwide Developer Conference. We've got a major restructuring and guidance downgrade at Wix. We've got Nintendo Direct, which feels like the only Americans that follow it really closely are just the investors, it seems.

But we also, and I'm excited to get your take on this, we've got a fintech sell-off, as well as a list that I put together of five high-quality companies that are trading below 15 times earnings. So we'll get to all that, but welcome to the show, Brett. Where do you want to kick things off today? Yeah. Thank you, Ryan. And I want to mention that we also have SpaceX IPO predictions, which will be coming out today if you are listening to the podcast on Friday mornings.

And if we have time, especially with your two-for-two execution on the Premier League predictions, we're going to get your World Cup predictions, Ryan, as well, as it kicks off. But we'll save that for the final part, the final minute of the episode. Let's hit your fintech sell-off. I'm interested here. I'm sure you have Adyen in the mix. Someone thought – I was trying to use the proper pronunciation. Someone thought we were saying it like A-J-E-E-U-N or something like that. They're like, what company is this?

It's Adyen for American accent. I think in the Dutch pronunciation, it's a little different. Yeah, I bet they'll include your list. What made you want to include this? And what's happening to all these fintech and payment stocks? I honestly have no idea what's causing this is the short answer. Because, I mean, I'll just go through this. The year-to-date returns for most fintech stocks, seemingly aside from Remitly, are down.

So Visa is the best performer on this list, and it's down 8% year-to-date. MasterCard is down 14%. Global Payments down 15%. American Express down 16%. Pfizer down 20%. PayPal, maybe a little lower quality than some of these other ones here, down 29%. toast down 29 uh fis which is like it's not pfizer it's always a confusing ticker it's like the it's not there's data right no they've changed it's like fidelity informational services or something

you should look up the full name but yeah fidelity national information services ignore that that one just on the name alone i'm not investing but they are a large payments processor if i'm not mistaken So anyway, I throw them in this list. They're down 40 percent, Shift4Payments down 40 percent, and Addian down 40 percent. Not included in this list is Stripe, whose private valuation continues to soar, I imagine. But again, that's a private valuation. OK. So what's happening? I honestly have no clue. My gut tells me that this is just capital going elsewhere. And I'm starting to wonder if that's some of what the software sell off is as well, because you've got it feels like sort of the AI versus software debate is being debunked a little bit. Yet you're still seeing significantly cheaper multiples, and I just kind of wonder if capital is flowing more towards these semiconductor stocks, more towards anything ancillary to the AI infrastructure build-out as opposed to financial services or software. All these businesses – well, I shouldn't say all these, but Visa, MasterCard, American Express, Toast, Shift4, Adyen. And I would consider all those pretty high-quality businesses. They're inflation-protected.

The sell-offs, though, have been steep, and I honestly have no idea what is causing that. I like Toast as well. I heard a great pitch on them on business breakdowns, and it seemed quite interesting. They, I think, have a – using the term I like to coin, a merging moat in the restaurant payment processing kind of back-end management space. that's another one i want i think i honestly think i'm putting it on the schedule for coverage on the newsletter so that one that one's quite interesting but i don't know the business that well american express obviously like i still think it's kind of at a premium-ish valuation shift four luckily i've never gotten around to liking people say it's dirt cheap now

maybe it is it's kind of one of those where it was at maybe eight times earnings and you go man could he get to four times earnings? And it did. So if they do execute and they buy back a lot of stock and the business quality is there, that could be a phenomenal opportunity. But the one I do own on this list, luckily, I haven't experienced the entire 40% drawdown, but I think maybe 15% a little bit more is Adyen. And we mentioned it last week on the show. I don't think I have to go through it in any more detail, but you look at a pretty reasonable multiple and a 20 revenue grower maybe 15 as they get a little more mature there's a lot to like yeah agreed also not pictured here is wise down 10 and this one might surprise you i forgot to

yeah your your favorite is getting hit uh true the uh the one i forgot to include here block is up two percent year to date but that's off of uh probably a lower starting base valuation than some of these other fintechs. So yeah, I think this is a phenomenal pond to be fishing in. Once you have a payments processor or a payments service provider integrated as a business, it's really frustrating and probably painful to switch. so especially you think about like a restaurant that has toast for example is runner sort of running the operating system beyond just payments processing you know providing a lot of software that helps these businesses run i imagine that would be cumbersome so i i like i'm probably

going to dig in a little more visa and mastercard we already know pretty well they're still somewhat expensive, but MasterCard's getting there. If you had to buy one from this list, not Addyan, Brett, what would interest you the most today? I think Toast, but I haven't done my full research. It's in the queue, but look at their valuation and their growth potential. We have a comment here that said that from Chris, as I also listened to that episode of Business Breakdowns, not our podcast uh the ai integration into toast to give operators kpis for growth seems like a good catalyst can we get fiscal ai integration for for them uh i'm not sure that would be that valuable but you know similar similar for them if you can get all the sort of analytics you'd want as a

small restaurant all powered through toast that feels like much more valuable than even just a payment processor we maybe ryan you there's one more question here about adding but what would your choice be for, I don't know if you own Adyen, but for a stock on this list that you don't own? I do own Adyen. I would say the next closest for me, just because I don't know Toast super well, would be American Express. I think it's actually getting into a territory where I could be interested. I believe it's sort of high teens forward earnings multiple right now, which i think once you get to sort of 15 times forward earnings i honestly think that's uh worthy of sort of entering the portfolio but the other one yeah shift four again sort of a

battleground stock in a way i just i struggle with the inorganic growth and whenever there's a company that where there's a lot of inorganic growth i always kind of question like how what am i missing is there some accounting shenanigans that i don't follow potentially um unless it's constellation software well they report the organic growth that's true i don't think shift four reports organic or split yeah but they're a little more cleaner they're a little more clear yeah shift four i feel like that's high risk high reward for sure i've read some of the theses before and they make sense but yeah it's not my favorite we have a question here can you go into a little more depth on ad yen i've been eyeing it a bit what gives them staying power is it pretty

much just switching cost or anything else he has just a question mark here i would say if you want full research i do have a comprehensive research report for emerging modes but i'll try to do a 30 second pigeon exactly where they get their uh just durability and have stolen market share one given that they built essentially modern payment infrastructure for digital and in-person payments globally uh so this would be online meaning meaning digital or i guess you could have digital in person but any way to pay in person or online for large enterprises think mcdonald's uber spotify chipotle's rolling out with them there's a lot of big retailers lvmh that utilize them the reason they choose add-in is because add-in has the best uh essentially i forget the

exact term always but closing rate success rate of when you try to make a payment at checkout can be 98% success, 99%. And Adyen, compared to the rest of the industry, is the best. Then on top of that, you have the durability from the switching costs once they land and expand with these existing customers. You have these stodgy old systems within the last 20, 30 years for online payments

and in-person payments. And they have the ability to take market share by slowly kind of landing with someone like a chipotle or a starbucks all these are existing customers and then growing with them over time and then as well as that you have the global expansion opportunity to land with these multinational retailers and in person so that would be kind of the growth plus the moat maybe it was a minute pitch but i think that sums it up yeah i think it's a great description we also have a comment here that says i still wouldn't touch paypal i'm probably in the same boat again it continues to be pitched as potential

value play and i think there's a chance that people are right on that because big buyback yield big free cash flow yield but down to 40 to steal uh brett's sort of mantra i i worry that you're picking up pennies in front of the steamroller here i don't know if you coined that i stole that from someone else that one's that one's definitely someone else yeah i think that's a valid concern with paypal is there there's this general trend away from their core paypal button they just but ryan i'm looking at their press releases right now they just launched a partnership with the seattle seahawks did you see this this uh no i didn't but they might be up there they're on the mount rushmore of press release happy companies

who cares if you have a partnership with the seahawks for payments is that an 8k did they drop that maybe yeah yeah that's what uh nine games or eight games it's eight days a year yeah it's not it's not for me would be my answer there let's shift gears a little bit what do we want to talk about next i i saw you have notes on the apple worldwide developer conference yeah ai ai series out it looks like it's a gemini wrapper we'll see what it actually looks like uh of course they touted some features that you know they're going to make look good One clarification, Brett. It uses Apple Intelligence, which is powered by Gemini, I believe. I'm pretty sure Gemini underpins Apple Intelligence. Again, there's maybe more customization or more being built on top of Gemini than we're seeing here. The layer between Apple Intelligence and Gemini, don't know how they're intermingled. but to be clear you can see it in their capex lines they are not building their own llm yeah

it might be the right move we will see but if you're working with your number one competitor who is going to put the exact same tools on android maybe is is there going to be some sort of competitive advantage there i'm not sure but i try to look through all the features that they came out with there is a bill splitting feature now that you can use a photo to take of something possibly that's nice i don't know if that's convinced more people to buy iphones or upgrade i think the big question that's uh something to potentially worry about if you're paypal if they can start to carve into venmo's market and i do think they've actually made some headway the apple pay is they've rolled out some pretty uh convenient peer-to-peer features where you can

just hold your phone up send them money whatever uh that might be old old news but the i do think that potentially eats into some of venmo's market okay and specifically on the ai stuff which is really going to drive the needle for apple if it can do like improve on distinct tasks for apple specific apps on the iphone do you think there's an upgrade in value here because besides that i didn't see anything exciting from their what is called the worldwide developer conference yeah i i think it's a nice quality of life upgrade if you can really kind of have siri be a true sort of agent that can span your entire device and all your files and all that i i think that's nice is it would it compel me to upgrade my iphone no but come next upgrade cycle

when i'm choosing between whatever the iphone 16 iphone 17 whatever and one of them has this compatibility or this feature i think i'd probably be more inclined to go with that one but yeah that's fair. I don't see this necessarily moving the needle, but I could actually totally be wrong on that. I think I agree with you. It seems like when you talk about the Nintendo Direct tier update, people had a question about that as well. It seems like from the hardcore Apple fans, maybe these are just internet commenters and they're always grumpy, but it was the same reaction, kind of a meh. And from an investing perspective, again, I will be curious what the economics look like if you're partnership partnering with gemini if it's hosted on google

cloud where do the economics go and how are they splitting any sort of cost because it's included on an iphone so how are they going to pay for all the inference through google gemini and google cloud yeah i was curious about the economics of that partnership as well the i don't know if you saw this part but at the worldwide developer conference to kick things off they had a like minute long montage of a bunch of different celebrities saying good morning and then tim cook starting the conference with good morning and i just thought what a horrendous waste of for a team for a company that yeah first no one knows like you've got to be living in your own bubble to think like tim cook saying good morning is like an iconic thing it's not it's maybe

Maybe longtime Apple investors are used to it. But yeah, he he literally had I think it was like 15 different celebrities. You should go look up the video if you haven't seen it. 15 different celebrities saying good morning. And then Tim Cook walks on. It's like, good morning. It really was quite quite the cringy moment. But, yeah, I didn't come away with anything – I wasn't too shocked by anything announced at the Worldwide Developer Conference. No, and you can compare it to, okay, what Anthropic announces, what Alphabet slash Google announces, what OpenAI announces, what Amazon even announces. Microsoft, again, I don't follow them too closely, and I guess Meta toss them in there. It's like every month these companies are coming out with new innovations. Apple, kind of slow. You research your investments, you analyze markets, you manage risk, but did you research your broker?

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If you care about performance, find out why the best informed investors choose Interactive Brokers at ibkr.com slash performance. You mentioned Microsoft there. So I want to derail our conversation for a second. I was on, I don't know. i might have already mentioned this to you but i was on a i was in a call with this company that does basically like prompt help for buy side companies so they'll go to fun it was it was

either offline or online i can't remember if it was on the show or offline right yeah and if it was on the show and you already heard this sorry i'm going to say it again but The, they said they were shocked. I said, what is the most common model that you see banks, funds, buy side firms using? And they said they were shocked. But unfortunately, the answer is Microsoft Copilot. And it just got me thinking, like, in a world where Cloud is so commonplace, Codex, these are like household names, very useful tools. Everyone's testing them. People are still using Copilot because it's just what's mandated by their company. Like the Microsoft lock-in is so powerful. uh and you've got all these companies claude cheap gpt co-pilot building on top of sheets

still or sheets or excel i feel like the lock-in is just so strong with microsoft and that got me thinking i looked up the recent valuation multiples i did something similar i think last week microsoft now trades at an ev to ebit below 20 times so my question to you google or microsoft which has better returns over the next five years google i believe is trading out about 31 times microsoft's now below 20 yeah i think we did this last we'll get meta and google we're gonna keep going through all of them versus google now since they've been kind of the top dog i'm gonna choose microsoft because i think cloud they're probably neck and neck it's a bigger part of the microsoft business and yeah office 365 will keep chugging along i don't love the growth

potential over the long term versus the multiple but i like it it probably does just fine like 10 10 returns going forward like over a decade i have no idea what the next year will be But long-term, yeah, I think you're rocking and rolling. Yeah, I think below 20 times, you're probably good. Again, every time I quote EV to EBIT multiples, anything that's using GAAP metrics, which I guess EBIT is GAAP, same with PE, whatever, it's using GAAP accounting to arrive at the earnings figure. All of that is still dependent on whether or not the depreciation or the life – the useful life of GPUs is accurate seems to be the big question. That's fair. Or if they can – yeah, or if they can grow out of the upcoming depreciation growth. Sorry. If revenue can keep growing at just as fast or faster than the depreciation that's going to hit the income statement from all those CapEx in the next few years.

Yeah. And the PE here, 23 and a half. So not terrible, but we're not back. This isn't 2011 Microsoft at like eight times earnings ex-cash. It's nowhere near the same. Yeah, no. All right. I want to share. I assume you've already read this since I believe you are a Wix shareholder. But this week and part of this was already like known, but there was some surprises in it as well. wix the drag and drop website building platform website building and hosting platform i should say uh released a 6k announcing basically a big restructuring organizational restructuring which is a friendly way of saying layoffs plus a revision to their guidance so i'll read a couple of the quotes says the company now expects well first of all i'll just full screen this real quick so i can see it the first line says the organizational realignment also includes a reduction in the company's workforce by approximately 20 or a thousand employees

the company now expects free cash flow excluding acquisition and restructuring costs which how can you exclude restructuring costs when that's the point of this announcement whatever uh to be approximately 420 million dollars a 20 million dollar increase to our prior plan so So that all, from an investing perspective, should look okay, increasing free cash flow guidance. They then say, while Wix Harmony and Base44 continue to perform as we expected when we issued guidance as part of the first quarter of 2026, the company expects an approximately $50 million reduction in bookings and an approximate $25 million reduction in revenue in fiscal

year, 2026, as a result of our organizational realignment, as well as a more pronounced slowdown in the growth of our partner's business. So this is kind of what I wanted to talk to you about, Brett. First of all, I find it a little weird that they had to reduce bookings because they laid off employees. That seemed a little funny to me. like is it i wouldn't have thought there's like a one-to-one correlation there but well maybe it's inverse bookings are down so they had a lot of employees there's also the currency stuff their

salaries are getting more expensive versus u.s dollars i know but the the way they said it is it's like bookings are dropping because of the re the real organizational restructuring which that didn't make sense but i think the big thing here is that the partner's business is declining faster than they expected and the department's business has been rock solid for five years until up until last quarter and i this was i think we've talked about this on the show before i do think if you are a web design agency you can really start to do a big bulk of your workload on claude on codex on these ai platforms and all these test competing platforms who knows maybe wix harmony will be the best to breed over the long haul but yeah i mean there's

definitely a lot more competition for those customers and partners or agencies basically or professional designers are they account for 38 percent of wix's revenue so not the majority but a meaningful contribution i just i i kind of feel like before i was thinking well base 44 wix harmony those are kind of cherries on top if they work out but now i'm thinking these have to work out for the thesis to really work because if you do get a partner's business that's in decline that's going to be a consistent headwind to revenue i agree i think it's possible that you know what we talked about we could be wrong about this stock um tomorrow well friday which this will release on friday but i have a update on uh the northern airports operating mexico as

part of that newsletter as i'm kind of comparing that kind of spoiler alert a little bullish on them uh their stocks down i think 30 from highs uh and i'm comparing them to existing holdings And I got to say, Wix is down there as one of the lowest. My cost basis is about 65. And, you know, this could be one where you cut your losses before things get worse. Or, you know, I still think the stock works over the long term. But if you have another opportunity out there, which luckily, I still think there's a lot of high quality businesses out there trading at reasonable multiples.

If you have another opportunity, nothing wrong with taking the tax loss and moving on to something else if it's frustrating you that's kind of how i look at it i still think we're putting a 0.9 times sales they're still growing they're probably still projected to grow this year market cap is down to what like two billion dollars yeah 1.9 actually should be pretty low hurdle to do well going forward but if you have something that's maybe higher quality i wouldn't say like all right the one trap you don't want to fall into is okay let's say you bought the dip on wix 60 70 80 90 100 something in that range and it's a loser for you don't fall into the trap of saying oh i'm gonna sell it now and then a couple years down the line it could be

at 150 or 200 a share even higher if what you invested in like with that capital does well Do you think it's just a good opportunity? I wouldn't kick yourself for moving it around, especially, again, if you can take advantage of the tax loss. And the other thing is I am typically a dip buyer usually with existing holdings. I'm making sure. We love falling knives. Yeah, honestly, it's probably hurt me more than it's helped me. But that is if I believe that the fundamentals of the business are still strong, if the business itself is still growing. So if you just took the stock out of the picture, imagine that there wasn't a stock, no narrative, no investors, you owned the entire business and it reported to you. Would you feel confident about the results? after reading the 6k from wex i would not feel more confident about the business today than i did three months ago so i do think it's potentially easy to fall into the trap here of well results got worse but three times four times free cash flow now it's way cheaper i think if if you see

fundamental if you think this business is deteriorating potentially uh look elsewhere and see what else you can find. Yep. And if you don't, you know, if you're way more bullish than us, probably a good time to add. But if you think it's deteriorating and you don't want to double down on stuff

where the business is getting worse but the stock's getting cheaper, that's just a recipe for bad results. And if you want to get out of something, it's not, again, the end of the world to take a 20% loss versus what could end up being an 80% loss. Those are two wildly different figures.

And yeah, it's possible that we could be wrong on the stock i'm kind of yeah mellow mellow on them uh don't don't love them after after this all right what about this nintendo direct ryan let's let's do it yeah they i did not i did not watch so give us i didn't watch either i read us i read a summary they have a zelda game bria famous zelda game is a is getting remade for the switch to people seem somewhat excited about that but it's not a new game um still people are happy there there's nintendo sports resort or nintendo switch sports resort something like that and there's a splatoon raiders game which is not popular in the u.s is popular in japan but those are going to be the

big sellers this year i believe uh should drive some decent profit growth maybe a couple million sellers from each splatoon might be 10 not sure besides that you had some updates on that pokemon pokopia game which is selling pretty solidly it's not a mainline one but it's still very very good might be a 10 million unit seller which again will drive some nice profits for them but besides that you know there's not a lot of blockbusters a lot of game remakes a lot of third-party kind of niche stuff which is good you know they can earn some fees on that but you have no mario game and that's what a lot of people are looking for there hasn't been a mainline mario game for a long time i think that's why the stock is down the question i have is is

is it time to get concerned over the patience of Nintendo with these game releases for Mario games, or do you just have to trust that they don't announce everything? Because I think it's very difficult. You kind of, the stock price starts talking to you and sure. They, they always seem to just randomly announce stuff,

but again, the switch to keeps, you know, we're at the one year anniversary and yeah, we're, we're the Mario games is what I would say. it sounds like you're maybe finally getting a little frustrated here with management,

Brett, the, I would, I just don't know if, are they working on this stuff? And I'm not like, should we just trust that they just don't announce stuff? I think so.

That's usually what happens. Like, are they, are they working on Mario games? Definitely. Maybe, right. They have to be.

I'm sure they've got an entire division that that's all they do. The it's, here okay i haven't kept up with nintendo as closely over the last year i think we first maybe started paying attention to the story around 2020 2021 and at that time the thesis was this is no longer they're no longer tied to the hardware cycle that there might be some cyclicality in new launches with the switch pro switch light switch to that kind of thing but in general people will have their nintendo online account and they'll be it'll be more of a seamless upgrade cycle do you think that thesis has come to fruition we're now five years into

that potential story yeah definitely i mean the the trough earnings were two billion they were about to pretty much back to record revenue earnings will lag a little bit but yeah we should get to record earnings here pretty shortly maybe excluding the pandemic boost that was kind of one-time catalyst for earnings for video game companies but yeah i i think if again that's why i asked that question if you trust that they're still working on the blockbusters 20s 27 should be a great year you just get maybe a little short-termism with this holiday season because you have a few blockbuster franchises, the Marios of the Worlds, the Zeldas, the Pokemons,

and maybe stuff like Animal Crossing. Yeah, probably those. If you don't have one of those launching kind of as a new novel thing in November, December of 2026, yeah, maybe sales will be a bit weak, especially with the price hikes. Yeah, they are awfully patient. uh i think maybe they're worried about diluting the mario brand with too many games but

the last one was like 2017 so well mario kart right the new one that doesn't count that doesn't count all right yeah it's to me you making a bunch of games for mario doesn't have to dilute the brand i think people think there's this constant balance that if uh mario games are being released every two years it ruins the the brand if you're making quality games and you're making unique storylines in the movies which they are and people seem to like them i think they can be very complimentary and if anything enhance the brand i think people get worried about it because they saw what disney did to star wars or some of their other notable brands yeah they're not releasing 10 different marvel

things or 10 different things a year like marvel uh yeah i guess maybe the slightly frustrating thing is if they release the movie this year you maybe wanted to partner that with a mainline mario game but who knows maybe they're about to announce one they always seem to just announce games like a month before sometimes uh which could easily happen um now yeah the stock is one that hasn't done too well but i'd say i'm still pretty dang bullish okay we've got a couple more topics to get to and a bunch of listener questions from the sub stack chat the first topic i want to hit is a little list i found of five high quality companies that i think are high quality i think my, my cutoff here was 8% revenue growth, 8% annual revenue growth for the last 10 years

and more than 20% average ROIC. So that was, those were kind of my two thresholds for quality growing and high returns on capital. Five companies that trade below 15 times earnings are, and I'm using EV to EBIT, so not priced earnings, but whatever. Booking Holdings, adobe which might not surprise anybody for the who's followed that story third one is zoetis i might be pronouncing that name wrong but they're the pharmaceuticals for pets yeah yeah it's a lot of pets and like like uh household pets as well as farms farm animals number four number five interesting copart and ulta beauty yeah i wonder what copart is down they've been they usually traded such a high multiple that would interest me the most at first because i know booking

should do fine maybe it's getting overlooked but copart i feel like never trades at this multiple or it hasn't for many years let me show you a chart brett that i think might entice you is this chart from our friends at fiscal ai yes shameless plug here for fiscal ai let's go quarterly last uh maybe seven years since april 2019 before we bring it up i will mention that use our link it's in the show notes fiscal.ai slash chit chat get 15 off any paid plan plenty of value well worth the money uh you can use analysis kpis all sorts of charts like one ryan is about to mention here what do you got loaded for us you have two things free cash flow and share repurchases this is free cash flow versus share repurchases they have not bought

back any stock for the last seven years up until the last two quarters and now they are buying back a ton uh they spent 1.6 billion dollars on buybacks over the last two quarters alone compared to i think basically 1.3 billion of free cash flow over the last year so they're spending more than their year's worth of cash flow it's it's uh certainly a signal from from management at the very least what's even going on here why why is the stock down i have no idea i i'm not sure uh to be honest i did a cursory glance uh it's in its biggest drawdown in 15 15 years for those those p since 2017 here yeah for those that don't know they do basically junkyards uh and they're they do a really good job of it as well so they are uh home for salvage

vehicles so when uh when someone forecloses on there or not forecloses but doesn't keep up with their loan payments the insurance company can't remember the exact term but they seize the asset they send it along to cobar copart i believe auctions it off digitally and holds it in its junkyards so yeah i would say they're at the top of my list here and then ulta beauty as well i i feel like this is a very underrated business they've weathered the last few years and sort of the covid bullwhip really well and i think it's incredibly durable people will continue to go in person for fragrances for makeup all that stuff comp sales look really good they continue to expand stores there's economies of scale plenty to like all right i and remember i asked uh gemini

why is copart stock down you got to remember the little note gemini is ai and can make mistakes so let's just see what it says stagnating growth declining insurance unit volumes multiple compression yeah that's when a stock goes down thank you gemini margin and fee pressures maybe it's probably i'm guessing it's the margins then if they're giving out a lot of um i don't know one of their sources here is perplexity it's just all one big ai loop i don't want to research copart live on the show we don't have enough time for it but it's what i want to look into for sure maybe do some more research on the stagnating growth sounds like the reason i don't know what the culprit is there but yeah thank you jim and i for telling us that

the multiple is compressing and that's why the stock is going down but yeah kind of chicken or the egg there let's uh what do you say we take some listener questions from the substack chat i liked this one this is from tom putz on or tom putz you know that's uh that's my uncle oh no way yeah let's have the show uh new he says new subscriber here do you two ever work on lowering your cost basis through covered call writing on stocks you currently own alternatively do you write cash secured puts for price levels you have identified as good entry points for stocks you'd like to own that's the first part of the question i don't i don't as well no no options too much uh brain work i guess it honestly for me i just i don't have the time to to manage

it that closely um or to come up with like derivative strategies to resemble stock ownership i'd rather just own the shares yeah there's some good people at the fool molly fool that do work in this jim gillies one i believe he still works there we haven't talked to him in a while we should try to get him back on but he's a busy man i think maybe ron gross i don't know if he works at the motley fool anymore i also could be getting his this person completely wrong but there's another options uh person at the motley fool that does a lot of work that i kind of go oh that sounds interesting but i have no expertise on whatsoever but like this other question sprouts farmers market seems to have a nice runway looking out at future growth no debt good free cash flow ratio

what are your thoughts at the current levels yeah i've covered them uh at the newsletter let's look at what they're trading today i see pe of 16 ebit ebit of 10 i think ebit ebit's probably 14 something like that maybe 13 that feels like a really good multiple they're buying back a lot of stock and kind of you add everything together where you think over the long term they they've had a little bullwhip because last year was a really good year comp sales should be low single digits. They can grow a store count by maybe 7% to 10%. You get 10% or more revenue growth. Combined with buying back stock, you should get 15% plus earnings per share growth. You're starting at this pretty low PE. That feels like a good buy and hold candidate. I mean,

they're 10-year for, again, it's a grocery store, but they're 10-year revenue growth, 8%. They're 10-year earnings per share growth, 20%. They have a good track record and seem to be really good capital allocators yeah i like it here it's right near i don't own it at the moment but it's right near the top of my watch list and i really like how it's kind of inversely correlated to hyper growth so it can be good balance and i guess we're not in like a meme bubble right now but when you know hyper growth the ai bubble kind of narrative is taking hold it seems to lag sprout seems to do well when the market's down i like to have that counterbalance and it can give maybe a buying opportunity and an extreme bull market yeah i like it a lot owned in the past

it's maybe number one on the watch list at the moment ryan do you own it or have it on the watch list i don't own it i'd say i agree probably number one on my watch list at the moment the we first bought it right uh i believe during the pandemic and it traded at like eight times earnings so i get this like uh almost the sense to anchor to that price like oh i i used to buy it cheaper so it's not gonna i don't feel as inclined to buy it at this current multiple but that's a mental block that i should get rid of in general i think yeah at 14 times ebit this is a business that i really like uh grocery stores i think are underrated as investments generally they're very durable there's switching costs uh

going to a new grocery store to try to figure out where everything is is a pain as i think everyone knows um and people cling to comp sales too closely this isn't like it's not like an emerging fast casual restaurant where you're going to see price hikes plus throughput plus all that like you're going to see ebbs and flows in comp sales some some years it's going to be better than others so i think long run you probably get four percent five four percent to six percent comp sales growth maybe that's a little aggressive so slightly above inflation margins can probably creep up a little bit it's differentiated they sell different products than your typical walmart or kroger and store growth i think

They'll probably end up growing stores 8% to 10% a year. I think the recipe to good returns here is pretty straightforward. I like this business. I really like the management team as well. I think Jack Sinclair has done an incredible job since taking over. So yes, thank you, Tom. Great question. And yes, we do agree.

We like Sprouts here. Yeah, this is a family affair. All right, here's another one. chris says serious suggestion in a fresh portfolio what would be your contrarian take to tech and ai i think what i mean here is if you were building a portfolio from scratch this is my take sorry i should have put this in oh oh oh this is what ryan is saying i yeah okay i didn't totally follow the question so i think what he's asking is if you were building a portfolio from scratch that didn't have tech and ai in it what would sprouts they traded you that

could be a good one right yeah that's probably up there um sprouts would be in there uh ulta beauty maybe uh junkyards copart i think i like all those businesses if he's talking about things that don't trade with ai or maybe trade in the opposite i think i have a lot of stuff in my portfolio that might be like that but honestly i was looking at my portfolio right now i don't think i have any ai stocks maybe wix could be considered one but it's also considered an ai loser coupon they have a little narrative there but also not yeah yeah i might be interpreting the question wrong but it most of my portfolio is not well i guess he says tech as well so so So if we excluded tech, I would say – I guess Nelma is kind of pseudo technology, but they're in my portfolio.

Sneaky tech, yeah. More financial services, airports, grocery stores, durable retailers. So when I say durable retailers, I think stuff that's not going to be disrupted by e-commerce. I think beauty is that for me. So Ulta Beauty, O'Reilly's Auto Parts, that's a very resilient category. from from any sort of e-commerce pressure uh let's see one i have on the watch list kraken robotics it's down 30 percent from hines looks a little more attractive kind of that defense tech disruptor and yeah you mentioned airports argentinian and other airport operator

corporacion america airports mexican airports a lot of stuff a lot of stuff that's not ai and tech it's just gonna lag right now you're gonna have to deal with it uh we we deal with it at the moment just don't in a market like this it's only going to make it worse if you compare your report if you're not ai investor and you compare your portfolio to the s&p you're just going to be disappointed like that's all that's driving the market at the moment okay do we want to talk uh spacex predictions sure i include this in bubble watch maybe we can do this first i also have open a confidential ipo i'll give my prediction i think it pops this could again this could age more of your age well we're not investing based on this but it's four times oversubscribed according

to reuters now again pops pops up or bubble pops no pops like ipo pop it jumps okay it jumps yeah yeah that's uh yeah i think it's definitely not definitely that would be my prediction because Reuters is reporting that it's four times oversubscribed. There was $250 billion in demand for the $75 billion allocation, which kind of, I think, shows the amount of opportunity there is to raise money. And I was thinking, is it going to be good for these investors? I don't know.

But for OpenAI and Anthropic as well, to just raise money out there. Look, if there's all this money chasing it, I think there's going to be a first-day pop. and then it's going to for the next three years not be not do very well yeah i saw brad freeman had a take on this that i liked where he said it's probably going to pop first few days and then it's actually probably going to pop maybe even more as people get fomo i think that's right on i yeah it could easily happen i think we are underestimating the amount of people well maybe we're not but in general i think value investors underestimate the amount of people that

buy shares in ipos with or in general without caring about valuation whatsoever like people simply a lot of people simply don't pay attention i saw share spacex shares were being i don't know if you saw this they're being fake on the grocery delivery app that i've been fake was it okay but It's – when you talk to people that don't involve themselves in the investing world as much as we do, they don't care about valuation. SpaceX, great story. Elon Musk. I mean look what he did with Tesla. It sells to the people that don't care that are still going to – which are the ones that are probably putting some money in this.

Oh, yeah. There's a lot of money for it. Look, here's a Wall Street Journal article. I think this morning. I think I read it. No, yesterday morning. Musk looks to an army of loyalists to help make him a trillionaire. Dean Norrie, might be saying your name wrong,

wants in on the biggest stock market debut of all time. Elon Musk is counting on it. The 41-year-old fintech entrepreneur has spent years listening to Musk's video and podcast interviews. Hopefully, listening to Chit Chat Stocks, we could use a little more demand for our services instead of him. Tesla stock makes up some of 85% of his net worth, and when shares of SpaceX start trading, he plans to buy.

Quote, what's there to think about? The Wall Street Journal is really good at this, aren't they? They pander to the value investors, and I like it. You know they're good at this because they don't actually say anything. They just take the quotes that value investors are going to go insane about. Yeah, I mean, I think that's part of it. What is there to think about? And my bold prediction is that things are going to get really crazy.

I'm talking $3 trillion valuation market cap potentially. For SpaceX? Oh, I agree. We could get there easily. Yeah. And the funny part, what if Musk's options vest? Well, I guess maybe there's time. No, it has to take.

There's also the Mars colony, I guess. that's a good point that one's gonna take a while uh yeah but look it it's still on it like you got to do fundamental work can't be chasing can't be chasing all right yeah what about this i would that's my other part to the prediction is i think things get really crazy after the first maybe in the first week or two and then stuff comes back down to earth oh no pun intended over the last over probably the next five years i think it's probably dead money uh for five years maybe longer maybe 10 yeah i mean it's 100 times sales at the ipo price yeah we'll see what happens and a lot can happen in 10 years all right what about

this open ai confidentially files for an ipo i think spacex filed in march so open ai could be going for an august september debut thoughts here i think altman's just jealous of all the diet yeah these don't technically mean anything um just just in that they can keep updating their s1 and stay private for a while although there's some cost to it obviously you got to pay your auditors and and everything to keep filing these s1 updates or these amended s1s but to be clear they don't even have the s1 yet well okay so i for what i understand they do like it's like a private s1 essentially it's it's what they would generally be opening to the public but it's just confidential so far with morgan stanley golden sack stuff like that yeah

i saw recently that someone said we've got a new acronym it's mangoes now not fan mag it is uh mangoes which i believe meta anthropic nvidia google open ai spacex that's the new acronym good what about uh i thought you spelled mango o e s well they missed that part so i don't have to i think you spell i think you get spelled either way uh yeah open air we'll see we'll see but it's again i think our thesis is coming right anthropic open ai want to get in on the action altman's jealous of both and he's going to try to get out here and they're both going to try to raise 100 billion dollars here's something i saw that is a very fun account um it's called 2001 live it's it's it was it's tweeting it's live tweeting the dot com and

telecom bust and on this day and i say on june 7th uh 25 years ago live you can follow that twitter account enron executive lou pie completes the sale of 340 000 shares of enron stock cashing out 250 million dollars and formally leaving the company his reasoning is unknown and someone said uh to be clear and then they had a follow-up tweet but everyone was asking why what'd he do and he said to be clear pie left the company because he enjoyed going to the strip clubs and his wife was divorcing him so that's what enron was like in 2001 what we can't make a prediction but there probably is going to be an enron like company this cycle i don't know what it is but i'm fascinated to see someone right now is cooking the books i see a comment that says

he's going through a divorce guys enron is still strong i love this account it's great i mean he got out right so like he sold all his shows got out and he wasn't there was nothing incriminating for him uh i yeah i think he he owns a bunch of land in colorado and he's like a precluce no one's heard from him since he's got his kind of harem yeah it's a little weird wow that is that is crazy yeah i think i mean the cooking the books yeah sure probably someone's doing it somewhere but i i think the what's the expression the chickens that are gonna come home to roost with this are the revenue deals these sort of circular revenue deals or no margin revenue deals like i think x

xai is basically producing a bunch of these right now they just closed it they closed a deal that is it's like up to a billion dollars something like that a billion in revenue a month like what they had with anthropic but uh yeah with google yeah but it's a 60 day like google can get out at any time they want and you have zero clue what the margins are on that so yeah yeah yeah i think that's probably what's going to hurt these companies eventually but again the music is playing brett we have to dance yeah yeah i think uh what i was going to say alphabet raised the money maybe last week right before we got on uh and it reminded me of when they kind of front ran everyone was like we're raising 80 billion dollars quick here 85 actually

and it reminded me of the margin call quote when you're first that's not called panicking so alphabet yeah i think that's smart but last thing on bubble watch do you remember and this guy's fairly famous financial media downtown josh brown cnbc guy oh yeah he's still popular yeah exactly they yeah they have a very popular youtube channel but i haven't looked at his stuff in a while and he's very very good at getting the vibes of the market i think that's kind of one of his specialties. He doesn't really do much individual stock research such as us. It's more of talking kind of this, all right, where are we at in the cycle? Things like that. In an article, maybe it's not 1999, but 1966. He has a long introduction, but he says, something I've been

spent the last few days thinking about, everyone is racing to sell as much stock as they can at the same time. This is a 180 degree turn from where we were three years ago during the staying private for longer and records share buyback era. The switch has flipped. It kind of goes through to say, well, there's a famous book, Bubbles and Crashes, written by Brent Goldfarb and David Kirsch. And they have one, two, three, four, five, six, seven, eight characteristics of stock market bubbles looking throughout the last few hundred years after the Dutch invented the joint stock company. One, story. Is there a compelling story? Use. Is there good use for the technology? Three, are naive investors in the market? Are there novices in the market? Four, are there pure

play stocks? Five, is there competition? Does the narrative ignore future competition? Six, business model. Are there a variety of stories about how money will be made commercializing new technology? Seven, narrative accelerator. Did something or somebody turbocharge the narrative? Cough, cough, AI space data centers. Eight, leverage. Are investments significantly leveraged do intermediaries play a large role are we eight for eight i think we are it checks every box and the i mean the big one the ipo indicator is undefeated it really is when mega ipo yeah when all the biggest private companies are rushing or maybe not even the biggest when companies are rushing to get public or rushing to do equity issuances honestly kudos google for

pulling that off it is a bad time to to be a buyer of those stocks and probably most stocks in general just pure correlation um even if your companies perform well even if they're at cheap valuations it can still be a headwind potentially if there's some sort especially with fund correlation these days it yeah i think sound the alarms honestly i think we're at at the top oh or we will hit the top here yeah uh what do they say what inning are we in yeah maybe kind of bottom eight bottom of the eight that's gonna say yeah we're gonna jam yeah we need the closer coming in he's not uh he hasn't been sharp lately all right we have one minute left ryan you made honestly your best investments of the last year could

have been premier league bets for those around no when ryan was last offhand on the show who was going to win the premier league and who uh year two predictions were arsenal wins and leads gets stays up which probably would have made a good amount of money and a listener reminded us of that but the world cup has happened in the united states i actually have four today not today for the live recording but when this comes out recording i have a semi-related stock to the world cup with a northern airport operator in mexico their main airport is actually hosting kind of try to time that up for the launch of the event ryan if you were a sharp better what are your predictions for the world cup well first of all brett for the title of that article i don't

know if you picked it yet but the world cup beneficiary is yeah that's true i might i might have to mix it up for seo purposes yeah the so uh with the with the premier league uh it's cool that i was right i really didn't have uh any company that was rooting for so no bias really with the premier league bet uh let's exclude your giant u.s team fan we're excluding the u.s obviously i'm gonna go far u.s excluded there's still national teams that i like kind of root against and national teams that i root for um i want to see i would like to see portugal when do they have to bench CR7

they could put the other Ramos as the other striker they could put him in too I think they've got a good team I'm not too fixated on Ronaldo with this bet but I like Portugal I don't know if they can really put it all together and do it

that's your value play that would be my value play and I think the return on that investment would probably be pretty high i think the odds are pretty low right now it's probably 10x world cup betting odds what about uh what was he gonna say yeah i guess that's it huh what do you think it's gonna be are you going to any games have you decided i haven't i i don't have any tickets yet uh but i'm kind of waiting to see what happens i'm trying to get a sense of who will end up where in the knockout rounds to buy tickets for those games

because you don't know yet. That's honestly a way to bet is you buy certain knockout round games and if the right team ends up in it, you could sell it for more. All right, all right. Here's what we got. Betting odds, France plus 550, England plus 700, Spain plus 550, Brazil plus 950, Argentina plus 950, Germany plus 1,400, Portugal plus 1,600.

You like Portugal's value there? Any other value? Brazil? Are they finally underrated? Hey, you're in Brazil now. Yeah, you know what? I do feel like a lot of people have kind of wrote them off. Maybe they're a value play.

USA plus 6600. You could win basically 66 times your money. That might be properly priced. Yeah, quarterfinal would be nice. All right, well, I know we've got a lot of U.S. listeners that may not care about football slash soccer, but give it a chance. It'll be a fun event.

And who knows? Maybe Ryan's bets will work out. I like that because I have no, I can't look stupid with anybody. And at a bare minimum, the best way to play the World Cup is a potential underrated wide moat business in Mexico.

That's right. A lot of people are going to be coming in airport traffic. Okay. I think that's it, everyone. I can hit the disclosure today. Thank you, everyone, for tuning in. Remember, we are not financial advisors.

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