Chit Chat Stocks - Steve Symington; Boston Omaha, Nutanix, & Disney

Episode Date: May 12, 2020

This week we have an interview with special guest Steve Symington (24:42). Before we get to the interview Brett and Ryan discus their news stories for the week. Ryan kicks things off with "The End of the Sharing Economy?" (1:47) by talking Uber, Lyft, and AirBnB and the impact of social distancing on each of their business models. Brett then does a quick deep dive on the video gaming industry as a whole (11:42). During Current State of FinTwit this week we discuss how Brett and Ryan both go about their investing styles when they think there's a bubble (18:20). Steve Symington is a lead advisor for 7investing, and he gives us an in depth look Boston Omaha, Nutanix, and Disney (24:42). After the interview, as always, we have our Hot Water (76:50), FMK (84:43), and Anecdotal Evidence (87:25).  --- Support this podcast: https://anchor.fm/chit-chat-money/support Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, May 12th. And today we have an interview with Steve Symington. It was Symington, right? Oh God, I forgot. We recorded it a few days ago. It's either Symington or Symington. We say it correctly during the interview. Yeah. Either way, it was a fun interview. I really enjoyed it. We talked Boston, Omaha, Nutanix and Disney he's got some fun takes on those some interesting takes and that was a lot of fun to get into but before we get to that you and I both have our stories for the week what's yours mine is gaming so EA and Activision the two largest United States gaming companies studios I guess they reported earnings and then there was a big company came out Newzoo came out their

projections for what the market is going to look like for games uh the growth of it for the entire industry so thought we'd talk about that a bit see how that industry is looking because they've gotten a boost from everyone staying at home this is kind of the one thing everyone can do okay and mine is titled the end of the sharing economy um but basically i'm going to go through uber and lyft and airbnb uber and lyft had earnings and then airbnb has had a lot of news slash noise around it. So I'm going to talk about that. And then as always, we have current state of FinTwit, Hot Water, Fuck, Marry, Kill, and Anecdotal Evidence. Let's go. all right welcome in today i'm going to kick things off with the end of the sharing economy

uber and lyft had earnings i'm going to go through those and then i've got some questions that brett and i will kind of discuss and then i'll also hit on some airbnb news um but i'll dive right into the uber earnings gross bookings from rides declined five percent year over year and that was for the first quarter and so if you think about the first quarter we really only saw i'd say like two weeks of impact i'm guessing i mean it was two weeks of hard impact two weeks of slight impact so basically all of march was impacted but yeah But April is definitely worse. Okay, and then – so, sorry.

Gross bookings declined 5% year-over-year for rides. Eats jumped 52% for gross bookings year-over-year. They had a quarterly net loss of $2.9 billion. Keep in mind, second quarter will be just as bad, I would assume. Maybe worse. Well, who knows? Who knows? Yeah, it'll be bad, though.

One Uber driver reported his rides capacity had fallen about 75%. So if you extrapolate that out for like all riders, you can kind of do the math. And it's been like, I saw sort of horror stories with it where he said, yeah, my income is dependent on this. I don't get unemployment benefits. I might go homeless or I might be homeless because this is my only job. This is my only income and they're losing 75% of their income or their rides capacity. So it's tough for them. But I'll kind of get into that later. They have Uber has 9 billion in cash. They cut 3,700 full-time employees or fires 3,700 full-time employees, which is equivalent to 14% of their workforce. Four days ago, interestingly enough,

lime scooters announced a new 170 million dollar funding round led by uber and google is this really what uber should be spending their money on uh i'm gonna say well i mean if you're a shareholder you could be like yeah whatever but yeah they have nine billion dollars in cash they have gig workers that aren't really uh taken care of by health care benefits like a typical employee would be, or, you know, laid off benefits, things like that. Maybe the government can do unemployment. But yeah, if you have that, you should be trying to take care of your workers. And this is why to me, Uber and Lyft are just not good investments because they aren't treating their workers fairly, at least compared to, you know, it can be a good side hustle or a thing

like that. But if people are doing this as their primary job, they do not have the benefits that most people working in the Western world do. Right. And I'll hit Lyft's earnings and then I have some more questions on that. So Lyft had a first quarter net loss of $398 million. Last year it was $1.1 billion. So good on them. They're improving a little bit, still losing around $400 million per quarter. And then $2.7 billion in cash and cash equivalents. They announced the layoffs as well. They announced layoffs of 17% of their workforce. Interesting note, I found that California sued Uber and Lyft or are suing them for misclassifying their drivers as independent contractors instead of employees. I don't know if it'll go through. I don't know

what'll come of it, but the drivers are struggling to get unemployment benefits because they're classified as independent contractors. So yeah, like when we talk about that Lime Scooters funding round yes technically they don't have any cost cutting that they have to do in regards to their drivers because they're not employees but if you don't keep them happy and if you don't treat them like actual employees there's no incentive to work for you yeah yeah definitely and then you know the drivers might not be as happy yeah it's just not the way to go about a business and especially with their business models being terrible as well so you're adding on treating the workers poorly and your business model barely works while you're treating your workers poorly

that's just not a recipe for something i want to invest in over the long term yeah i mean we're hearing more and more horror stories about being a driver whether it's for uber or lyft um and that comes from like actual scary stories where there's people with a gun or whatever and the riders are getting mad and punching you you know you've seen probably those youtube videos and then there's these where uh 75 of your rides are gone instantly and uber is not there to help you why like it really doesn't seem like it's worth it for anyone to drive uber or lyft right now yeah i mean yeah i'd rather work at an amazon warehouse um just i haven't worked for either uh i guess i did try to drive for doordash for a small time and it really sucks uh that's but that's for the eats business

for uber i mean it's just not fun and it's really terrible you're just going to fast food places and driving around uh the but i mean the horror stories thing that happens in a lot of different industries that are consumer facing i don't think it's just more common uber and lyft at least now after they put in those restrictions and uh you know regulations compared to all the like kind of no rules attitude they had 2013 to 2015 range uh but i mean it's probably still worth it for some people to drive in their spare time but relying on it as a full-time job seems very very risky yeah um do you think we'll see a lasting effect from coronavirus or this social distancing kind of thing or do you think we'll be you know three months down the road and uber and lyft rides are

back to full capacity so you're saying like back to 2019 levels yeah and i mean not just typical uber but like uber pool that kind of thing where you're getting in a car with four people uh i mean i don't know if it'll be three months it probably won't be three months but whenever we do it'll get back to full capacity eventually uh but they still don't have a viable unit economics uh so that's still a concern even in a thriving economy okay um airbnb news uh airbnb saw cancellations on over 90% of their stays or reservations according to in recent weeks. And they also announced recently

that they acquired a billion dollars in funding in the form of high interest debt. And they are apparently looking to raise another billion dollars. They committed to paying host $250 million in exchange for their lost income. I don't know if that's enough. I'm assuming it's not enough to replace all their income.

but they you know i guess it's good on them for taking some initiative and then on may 5th airbnb announced that they were going to be firing 1900 employees or 25 of their workforce is airbnb doing what they have to do here yeah i mean i don't look firing people you got to do it i mean you're running a business uh and they're trying to take care of their stakeholders you know their partners uh the people that run houses for them um that probably do it as a full-time job um and i guess there's a lot to unpack there but there's also the fact that they're not taking bailout money from the government compared to the airlines uh they probably need less money uh but i kind of like what they're doing uh but they go ahead i think they're doing it the right

way too and if you follow anything on fin twit they basically put out this forum of like here's the employees we're getting rid of come to us for any of them like they're great employees basically trying to give them the best possible yeah and they kept their uh health care benefits so that was nice but um okay big question here though is each of these business models they are essentially a middleman with zero responsibility or the whole, we're just a platform. We don't employ the riders. We don't employ the Airbnb hosts. Do you think that's kind of biting them in the ass that they really don't, they're just a middleman? Because the only form of cost cutting that they can really do is fire their own employees. Yeah. It's tough because

they have that liability insurance on their host homes. What is it? Up to a million dollars per host. And then when you have a thing like this coming out of nowhere, that can have a lot of money that you need to pay out to your hosts if things go happen. But I doubt that a pandemic or anything is in the contracts. I mean, I still like Airbnb's business model because the unit economics seem like they work. We haven't seen the S1 yet, so we don't know. But compared to Uber and Lyft, it seems like it's a lot better. Maybe before the pandemic, I would have invested or thought about investing at a price to sales of like 10 depending on their growth rate but now i see those valuation multiples just coming down a ton like you know three or four for airbnb even

though if their long-term trajectory or growth rate is still solid i think that risk uh just brings that valuation way down do you think there's any chance they go public within the next two years it'd be interesting uh they probably i don't know what if they're thinking we should have gone public or great we're still private because if they still had you know the advantages of being public say you're someone like shopify they did that offering because they have such a high share price um you can use that share price as a currency but private markets it's a little harder who knows i don't know if they're buying themselves like they're kicking themselves or they're like oh you know we can wait three or four years until we actually go public because

there's plenty of liquidity in the private equity market all right uh what's your story for the week okay gaming industry uh plus earnings so ea and activision blizzard the two largest gaming companies so activision blizzard runs call of duty world of warcraft uh candy crush a few other games ea does sports and then some star wars stuff apex legends uh just as a reference but first, I want to go through these gaming industry projections from NewZoo. Don't know how reliable they are. So we can really ask whether the predictions are logical. Because you know, when people make these projections, it's not like they're guaranteed to come true. But they said in 2020, the gaming market will be around 159 billion. Mobile is at 77.7 billion growing 13.3%

a year so mobile is the majority or about half i guess of the total market and growing quicker than the entire market that's because almost everyone has a smartphone now and it's not really the big legacy games but it's just a ton of games and people can play them for free on the phone and that's more of an advertising model think candy crush which activision blizzard actually owns uh the console revenue is at 45.2 billion growing 6.8 a year but that has slowed a bit and It's a little smaller, but it should get a boost because the new consoles are coming out, I think in 2020 or maybe 2021.

That would be whatever the next generation Xbox and PlayStation. Let's get into the Activision earnings though. And I'll just read off a quick numbers here. They beat their own outlook number on sales, although it was down from the previous year just because of the lumpiness of the business. They had a record earnings per share number,

raised the dividend 11%, 34% operating margin, $1.6 billion in trailing 12-month free cash flow. EA earnings, $1.8 billion in operating cash flow, repurchased $291 million worth of shares, and that is a one-quarter, $291 million worth of shares. Strong operating leverage, so they're increasing gross and operating margins, and then they had record sales. Question here, what holes do you see in the gaming thesis

over the next decade? Because I think it's one of the most solid, And it's a reason why I own EA and Activision, both the stocks. Yeah, this whole week I've been doing sort of like a lot of – well, I've been digging into like gaming industry and primarily EA and Activision. And I love EA, and I'm probably going to end up taking a position. I don't see any holes. I don't see the flaw.

I guess that there's like probably like other parts of the gaming industry that might grow faster but that's i mean that maybe that's like the viewership side or the um e-sports kind of teams type of thing whether that's twitch or youtube i guess but those all belong to big tech which is like because if you look about it or if you look at it it's xbox is microsoft playstation is sony twitch is owned by amazon i like youtube's google you don't want to invest, like you can't invest in any of those individually. I feel like the only pure play here is the content creator. So EA, Activision, Take-Two Interactive, those companies I think are going to benefit from all the functionality that's being added onto this. Yeah. So the big

growth drivers, I guess, you know, mobile, they don't have as much of exposure because their main titles, you know, FIFA, Madden, Call of Duty are mainly console based, although they are expanding for example the modern warfare mobile game had over 100 million downloads in like a month or even more uh internationally which is going to be good for helping to try to get them attacking mobile and then like streaming they don't really have any connections with that although it's tough to see how much that is worth unless they start really ramping up ads but then esports uh they have a really good lockdown because it's kind of like the nfl owning all the equipment you know activision blizzard can run their overwatch i don't know if they own i think it's overwatch

hearthstone call of duty leagues they own everything in that so however big that is they're going to take a majority of the profits and then ea obviously runs the sports leagues and apex legends um i don't know it seems like they're going to benefit a lot but yeah there is that concern that big tech concern i know amazon's getting into a little bit of the gaming distributor uh studio stuff they're just nibbling at it i think they sent out a rumor they're making a game for free uh so i don't know it seems like it's a rock solid thesis it's not exciting growth could be 10 revenue growth for the next decade but i still like that a lot especially if they're both the companies are doing solid capital uh allocation to shareholders right and someone did

raise a concern to me on twitter i kind of asked about this like what are the big names in video gaming on the content side or the studio side and it's only one person's opinion but they said ea is not user-friendly it's like not the primary user-friendly experience it feels very corporate okay like um and they said activision kind of errs on the side of we are with the users i guess i get that um but that i think there is probably a niche sports audience that says it's user-friendly yeah i mean i guess that's speculation i don't know i don't know it's tough to tell and maybe that's just one person uh but yeah i mean the the game the company that everyone likes is you know is epic games right now with fortnite and i guess that's why the stocks ea and

activision took a hit uh in the end of 2018 into 2019 uh but it seems like with call of duty war zone and apex legends they're coming out with these battle royale games that can compete with fortnite and try to make them more uh you know more for adults because fortnite seems generally for people like under 16 under 20 yeah i'd agree with that um any other notes nothing i mean i had the the free cash flow multiples if you're looking at these companies activision on a trailing basis is at a way higher free cash flow multiple and EA is at a lot lower, but EA had some tax benefits.

Activision had, I think, some hits or deferrals. So they're a little closer, but still Activision gets the higher premium on a free cash flow basis and EA's is a little lower just for reference, whatever company you like best. Okay.

Current state of FinTwit this week. So one of our listeners recommended that we talk about this this week and how to invest when you think you're at the top of a bubble or when you feel like you're in a bubble and prices are high or whatever. That's a tough question. And so I was just going to respond with what we primarily do. And I have my answer if you want me to go first.

Yeah, you can go ahead. Okay, so for me, I don't really look at it on a macro level or at least I try not to mainly because I think I'm incompetent when it comes to like macroeconomics. Like I, I don't, if, if tons of economists are wrong all the time, what edge do I have? So I look on a, I try to look at it on a case by case basis or company by company, which is basically,

is this company going to return value to me over the longterm at its current price. And usually that kind of times the market in and of itself without trying to, because the valuations are going to fall in line with the rest of the market typically. So, I mean, if you're looking at it and you're like, I just can't get around this valuation for an individual company, it's probably like that for a lot of the companies in that sector. So I just take it, I try to take it case by case. And then if I don't find any businesses that I like at the time. I just leave it in cash or I leave it on the side so that I'm ready to deploy in the event that there is a drawdown or something like that. Yeah, I think you summed it up pretty

well. We like to talk about the macro stuff sometimes, but it's not what we use to invest. There's a lot more. There's some experts out there that you could follow. Sometimes they're right. Sometimes they're wrong. There's more reputable ones than others if you're trying to get into investing during a bubble. But with us, if you're listening to this show, hopefully, kind of have the same investing style as us. I guess you don't have to have the exact same one, but we invest in individual companies and ETFs sometimes, mainly just broad-based ones. You have a long-term time horizon and you hope that over the long term, capitalism does its thing. There will be lumps along the way, but that's not something that

is easy to predict. Uh, and it's, it's just hard to make, you know, make money doing it. And it's a lot easier to just invest in companies, buy and hold for the longterm. That's where a lot more successful investors make a lot of money and earn their, uh, you know, I hate using this term cause I say it's a call out, but optionality with their life, you know, you know what I mean? Yeah. Um, did you have any other current state of fin to it notes? Well, I mean, I was going to say, do we have to talk about – it's going on right now, so it might be over, but there might still be some more things going on tonight after you listen. The Tesla again, which I guess I have to ask, is it fairly valued? No.

No? Okay. Well, move on. I mean – It's worse. It's as bad as it was. the c if the ceo said it wasn't i don't know what more right what clear indicator you need to realize that it's overvalued yeah and whatever games he was playing but today uh the i love what fell on elon musk on twitter it's amazing uh he's tweeted i will be at the factory uh and if anyone wants to arrest us because of the court order for the county so that people can't go back to you know work um and that you know factories can't get running up for another

like couple weeks uh and there's some you know legal disputes things like that they said they're suing but he said that he's going to be on the factory line and that if anyone should arrest him or anyone should be arrested it should be him so if we get a picture of him walking out of his factory in handcuffs it i would i mean it's going to be great yeah i man it's so infuriating and honestly i'm thinking about like trying to detract from elon on twitter because honestly it's consuming far too much of my time i know but and you know what all my hot waters we'll talk about this after the interview all my hot waters are linked to elon so oh i'll save some of my takes but okay well that's all i had um you have to follow this story on twitter if you're not you're missing out on a

ton of entertainment yeah and it is awesome that we are able to watch this live essentially watch this unfold live via twitter yeah i called a meltdown some people might call it tactics but who knows all right well next up we have our interview with steve simington um or simington i think it's simington i probably should remember this but uh what did you like about the interview uh boston omaha definitely wanted to talk about that it's something i hold in my portfolio it is a mini berkshire and you don't just invest in someone because they have a company like berkshire or because they have a relationship with Buffett and Munger, which the management does and the business model is.

But I think it's a great business and they're doing a lot of good capital allocation. Steve is more of an expert on that. He's been researching it longer. And if you want to know how they work, we go over it for about, what, five to seven minutes or maybe even longer. Yeah, I enjoyed the Boston Omaha talk as well.

And then honestly, like Steve just in general does a very good job of simplifying business models and it's like that that is a skill that is hard to find because a lot of people kind of complicate them he makes it very easy for everyone to understand so yeah go ahead give it a listen you All right, today we are welcomed by Steve Symington. He is a lead advisor at Seven Investing.

Steve, welcome to the show. Thank you for having me. Yeah, so why don't we get started just by letting you introduce yourself. How did you get interested in investing and then why did you decide to end up joining uh, the seven investing team? Yeah. So, um, I guess my sort of Genesis as an investor, it started for me kind of once I had a little money to put to work in college, really. Um, that was maybe what, 17, 18 years ago now when I'm, yeah, which seems bizarre where the time go. Right. And I was a computer science and math guy. Then, uh, I always appreciated the power

of compounding, but low yield savings accounts, you know, stuff like bonds and CDs, they weren't really all that compelling to me. And I wanted something I could provide greater long-term returns from, you know, what little money I did have at the time to put the work. But my interest in researching individual equities was really spurred, I guess, my first job after college. It was a small software company straight out of college. I actually told some of that story in a Twitter feed I can share later. But really, I joined this tiny little company that was acquired a couple of times, ultimately ended up being part of a massive conglomerate with the 401k that allowed me the option of investing in individual stocks. And

that was a lot more exciting because, well, 401k had a fair bit more money than your taxable brokerage account did. And you could actually kind of play around a little bit. And I do push back on the idea that you know to make money you have to you have to have money but um you know it certainly helps but uh i do think people should start uh low uh you know if with as little as you have i think it adds up quickly but um as far as joining seven investing uh i i worked uh for the martley fool for seven years uh i wrote oh geez um almost 8 000 articles for them i was a job i sort have stumbled into initially. And I helped them manage multiple real money portfolios toward, you know, near the second half of that tenure. And it was, it was really a fun job. You know,

I just, I figured out pretty quickly that I was a much better investor than I was a software engineer. And, and that's, I think part of the beauty of investing is, you know, given enough time and you know for me it's nice because i had the luxury of spending seven years literally focusing on nothing but investing um but uh i think that's the beauty is that anyone um can get good at this um you know with the time and inclination and uh it's so openly accessible uh to somebody who wants to invest especially in today's day and age so So, but joining in 7investing, I guess, I worked for Simon really closely for most of those seven years. And I really respected him both as an analyst and really just a decent human being.

Bringing Austin Lieberman and Matthew Cochran into the mix really just solidified that choice. And really, in the end, there was no way I was going to let the chance to work with that talented team slip through my fingers. so yeah yeah i mean we've we've had all those guys on the show and we enjoy them as well and it seems like an awesome team there so yeah it's and it's just really exciting to be able to to the prospect of building a platform from scratch that could positively change the investing landscape for individual investors like us uh was just it's it's so exciting and i'm really really um happy and giddy to to see what it can become over the next you know several years yeah so for all the listeners the way we're going to kind of structure the interview is we have

three companies that we're going to talk about specifically do some deep dives on them and then we have a few more broad questions but those three companies are boston omaha nutanix and disney so i'm going to go through boston omaha with steve um so why don't you introduce it what is boston omaha um and they don't actually sell anything um they're not consumer facing or anything like that so what's so attractive about their type of business model yeah so boston omaha is is really intriguing to me because it's this relatively small financial holding company and uh it's it's very similar to berkshire hathaway in uh it in that it implements a three-tiered approach to building shareholder value so uh you know if you're familiar with

berkshire you know they have um they have their insurance side of the business so like geico general reinsurance um boston omaha uh has and we'll talk about this more soon but they have their own insurance uh business as well they have uh an investing portfolio so they actually take some of their capital and invest it in individual stocks and uh and really third that third i guess part of the business is a supplementary group of acquired businesses. So insurance and investing portfolio and groups of acquired businesses that can really just spur their financial health. So it's no coincidence, I guess, that Boston Omaha is following Berkshire's lead. You hear a lot about mini Berkshires and, you know, companies that can actually take this approach and turn

it into value but uh co-ceo alex rosen buffett alex rosen buffett uh alex alex buffett rosen there we go uh is actually warren buffett's great grandnephew and uh he knows the the famous investor well he essentially grew up watching warren buffett do his thing i think uh might have been back in 2009 he he made headlines just kind of you know in in the background by proposing to his wife at the Berkshire Hathaway annual meeting. And, um, it's, it's going to be really interesting to see, um, you know, Warren Buffett has gone on record to say that, uh, he has a great mind and, uh, you know, he's not involved. Warren Buffett isn't involved in Boston Omaha's business, but he basically said, you know, Hey, I, I, I bet on this guy if I could,

but really for, for Berkshire, it's not, you know, if, if they were going to invest in Boston omaha or help that it's it's just sort of a drop in the bucket for them they're really tiny company did not know that um so we'll go through each of their individual businesses and the first one that they have is link media holdings um which is a billboard business so what is so attractive about billboards and then um will you talk about the difference between static and digital and which ones are going to be more profitable for them down the road um you know it's funny because i kind of i smile as as i hear that question because it's one of those things you know i've seen boston omaha described as as just another billboard company

and billboards seem like they're they're boring and why would you do this and um so it's sort of funny because uh businesses like berkshire and uh boston omaha and there's another one called Markel, these sort of Berkshire style holding companies. They like to find boring businesses that tend to earn favorable returns on equity capital. And billboards in particular meet that to a T. They earn favorable returns on equity. The cash flow from their initial return can really grow without requiring significant incremental capital as well. And, you know, established players in this billboard space, they tend to benefit from supply constraints.

So there's only so much room you can put these billboards in. You're not going to find, you know, it's hard to muscle into that market unless you can really acquire your way into it. And that's what Boston Omaha did over the last couple of years. they spend a lot of money buying thousands and thousands of billboards and it's this highly fragmented market that's owned by a bunch of little tiny players and often you know these guys just want to you know sell their business and and uh and you know they're ready to move on or retire or whatever it is and boston omaha basically keeps their eyes peeled to snag these

deals at whenever the price is right now they don't buy you know acquire for the sake of finding acquisitive growth they find it uh when the price is attractive and um so really i guess three things for for link media uh you know favorable returns on equity capital uh from that initial return cash flow can really grow over time without requiring additional capital and uh and that growth can really endure over the long term uh as demand continues to grow and supply constraints kind of stay behind so yeah and then as far as static versus digital which ones um are they pivoting more towards yeah so um you'd think that digital billboards you know digital is the future and everything but and it might well be um but i guess there's a couple advantages to each now in

boston omaha's case they they own i think there's there's 3 000 structures right now at the end of 2019 that they own and there's 5600 advertising faces on those structures right and um but only 63 of those faces are actually digital so the vast majority for boston omaha are static you know someone just slaps up a a big you know banner basically on this on this billboard now as for the financial impact it helps that static billboards tend to outlast the depreciation schedules uh digital structures don't um now a meaningful source uh i guess um of the you know that you can actually find i guess that's one of the other benefits of digital is that you can find additional uh supply uh of advertising faces by swapping static billboards for digital faces

um so you can you know cycle through seven or eight ad spots in a minute but uh that also means that you could you could overestimate your the revenue that you could uh potentially produce it's a lot harder to predict especially if there's say an advertising shortage now that's something that you know we'll probably see in the you know maybe the next quarter or so um is that you know the demand for billboards might fall as people kind of like tighten their purse strings um as far as advertising goes but um that's something i guess you just have to keep in mind so um static versus digital is interesting, but they both come with their pros and cons. Interesting. And now the second business that they operate is this insurance type that you

talked about. But more specifically, it's surety bonds. Now, a lot of people don't know what surety bonds are, including myself until I read up on it a little bit. Can you kind of describe what surety bonds are and how they differ from typical insurance underwriting? Yeah. So Boston, Omaha, I guess when it comes to their insurance side of the group, it's held under a business called General Indemnity Group. They refer to it often as GIG. But surety is interesting. So think of, you know, I guess one big example is, is say a contractor when they say they're licensed and bonded. Right. And that's somebody who is, um, who has a surety bond to basically ensure that they will do that work. And someone could, uh, if they don't, you know, go after the insurer in order to make sure that everything is actually made right. So there's also, I guess, another thing to that end. Well, actually, let's talk before, I guess, the current state of that industry. What am I thinking here? Boston Omaha released an update that basically said that they've temporarily suspended issuance of some surety bonds. And, uh, you know, another surety bond might be, um, uh, like a bond that guarantees rental payments by consumers in private businesses.

Uh, so they might have the surety bond pulled out that says, all right, if this tenant doesn't pay rent, then I'm going to turn to that surety bond. You know, I'm going to get an insurance claim that actually covers my backside. So if you see, you know, and we probably will, um, I guess another thing, you know, if you see claims by landlords due to, you know, tenants defaulting on their leases. Um, that's another thing, you know, that surety bonds can help cover, um, in a normal market, you know, and that's something I guess, Boston, Omaha manages their insurance side really conservatively. Um, so they, um, the, the beautiful thing about surety bonds is that the broader surety industry

averages a roughly 30% loss ratio, right. Which is really attractive, uh, you know, auto and home insurance tend to average loss ratios of more than 70%. So surety bonds are generally a lot more predictable and they, they also provide higher agent commissions between 30 and 40%. That's more than triple the commission that you'll see from agents in the auto insurance business. So, you know, really a lot more money tends to fall into the pockets of surety insurers than it does for home and auto. So scaling, you know,

you can scale, um, on a much smaller scale and still make a significant amount of money there. If you are smart about the way, uh, you handle your underwriting. So, um, surety is interesting because, uh, really in the U S um, actually, you know, there's, there's a $6 billion market for surety insurance in the U S right now. I think globally it's closer to 16 billion, but, um, for a company like Boston, Omaha, where I'm not sure where their market cap stood 400 million, somewhere in there um yeah you know surety insurance provides a massive opportunity um for them to to scale up and uh and turn toward you know pivot really hard toward sustained profitable growth um going forward fascinating yeah i mean you don't really think about sure the surety bond

business much it sounds like it's almost insurance on insurance if that makes any sense uh yes uh but They also made an acquisition this year. It was a pre-bay acquisition called AirBeam. So what does AirBeam do? That was actually just in March, yeah. Really? And then once you describe what they do, it has to do with fiber optic cables, I believe. So why do people even need fiber optic cables to begin with?

So AirBeam, it's a regional broadband provider. I think they've got, I think, 7,000 customers in southern Arizona. So basically, broadband internet makes sense, right? It's a relatively predictable business. The demand is only going to increase. But right now, most of AirBeam's service is actually in fixed wireless broadband service. So most of their customers are actually getting a wireless internet from Airbnb, right. Hence the name. But, um, so they're,

they're taking a lot of their cash flows though, and they're investing it in fiber to the home infrastructure. So, uh, you can end up being like a fiber internet provider. So, um, I guess this it's a business that's uniquely capable of supporting, exponential growth in data usage that I think we're really almost certain to experience in the coming years. So there, you know, you can look up any number of ridiculous statistics on how much more data people are using, basically, as they access the internet between streaming video and on and on. But most, you know, connections that actually come to consumers' homes now

uh come in the form of like copper wire uh including coaxial cable so i mean dsl um it's it's a you know you have copper um lines that actually support this and uh cable the structures you know can support a little you know a fair bit more broadband but you know when you're talking about something you know data usage growing uh to the effect of 30 you know compound annual growth rates uh, eventually you're, you're going to have to pivot over to something that, uh, allows for a wider, um, really a wider channel that you can pass more data through. So, and, uh, and fiber is going to be one of those channels, um, barring some other sort of innovation that allows them to handle that. So, uh, Boston Omaha recognized this trend and it you'll, you can read up on

airbeam in their their latest annual letter which by the way is a fantastic read uh it reads a lot like you know warren buffett's letters to shareholders and uh you know again no coincidence there but um they believe that there is opportunity for them to basically gobble up uh these other smaller regional similarly positioned um fiber to the home providers and uh and and it could be uh basically they're calling it their, their third line of business. Um, and I, you know, I think part of the beauty of Boston Omaha is that, you know, they have this optionality. Uh, they have, you know, a lot of cash. I think it was somewhere around 90 or a hundred million dollars or so. Um, and, uh, really, uh, they have the option to just continue either making these acquisitions or

reinvesting in their existing businesses or taking some of that, uh, investing in publicly traded equities but a lot of optionality and i think you know one of the exciting things about a company like this is that in the next 10 years or so it's probably going to look a lot different both in the scale of their existing businesses and some of those like little surprising acquisitions like airbnb like oh now they now they're in fiber broadband so yeah i mean they really are not sexy businesses by any means it's billboards insurance and uh fiber optic cables so yeah we're not talking about you know like a cigar company that's pivoting over to you know blockchain and bitcoin like they they're they just want to find businesses that are profitable and predictable

and uh and really have just yeah attractive economics so and then in terms of a holding company versus a company that actually sells products to customers how much more important is management when you look at it crucial now um that's something you know i guess that's both a risk and an opportunity um but as far as holding companies go i don't think anybody's going to um under state the influence that uh good management has on any business but holding companies i i think in in like boston normal house case in particular uh rosic and peterson and they're exceptionally talented capital allocators. I think they have the right temperament,

which is a huge piece of both management and investing, but the right temperament to succeed. I think they ended... I'll be very curious. I guess one thing to keep an eye on is how they invest. It's mildly frustrating as an investor when they're still really small because one of the fun parts of looking at companies that run equity portfolios is that you can look at their 13F forms that they file with the SEC and you can see what their portfolio

is made of at the end of any given quarter. Now, they're not required to file a 13F until their portfolio reaches $100 million. And I think last quarter was like $54 million. And I'm sure they took a hit at the end of the quarter. So it's probably smaller than that. But they did say in their annual report that they, they invested another 20 million into publicly traded equities, um, you know, subsequent to the end of 2019. And I can almost guarantee you it was right around that March 23rd plunge when they did that. So I really want to know, uh, what they, what they invest in. But I think, yeah, again, that plays into management and their skill as capital allocators. Yeah. It sounds like they're really adopting

that had a Berkshire model in terms of being patient and then being aggressive when you find good opportunities. Yes. All right. Well, I'll transition to Nutanix, more traditional growth stock software as a service, cloud-based. And I think a lot of people that look at this are confused on what Nutanix does.

So can you describe, just basically try to do a simple overview what they do and how they work within their industry yeah this might be as hard as a pivot as we could have possibly found from boston omaha yeah so we we go from you know these boring ish businesses over to nutanix which is a leader in what they call hyper converged infrastructure so um i think you know i was we were chatting uh with the best way to communicate uh what Nutanix does and Simon and I were talking about this and and he sort of said um I like the way he put it that it's it's sort of a digital traffic cop that manages applications within data center resources they require it sort of helps everything run smoothly as far as network infrastructure goes

so um what's and that's still confusing I guess when you think about it but uh the way if if you're familiar at all with like old legacy network infrastructures so think about enterprises like enter big enterprise customers they have these big you know networks that they manage and there's three tiers to those networks there's compute you know computing like processing power storage so you have this big server that handles nothing but you know backing up files every night and then there's networking tiers so they handle all of the network connections you know between your offices you might have you know a bunch of switches and all these crazy things but these old legacy networks were built sort of for the internet of old and uh they're these data

center requirements are evolving and increasing at a rapid pace and uh the pace of they've they're reaching the point especially as companies need to kind of adjust their network infrastructures to to work more effectively with the cloud you know i mean nobody's going to argue that cloud computing isn't a massive opportunity but as they pivot over they realize my network infrastructure isn't ready for this like my old compute storage networking this three-tier thing is clunky and it's built for the way we used to do things so um nutanix's goal it's a software-based interface that basically combines these three tiers, hence that hyper-converged infrastructure description.

It combines these tiers into a seamless solution that basically makes managing this network infrastructure kind of invisible to the user. They want to make it as easy and as just seamless as possible for enterprise networks to be implemented. so this i hope that makes more sense but yeah it makes it makes some sense i think something that would help people uh understand where they fit into the industry is talking about who their partners are so kind of who they work with who their uh customers are and then who are some of

their competitors yeah so um you'll see nutanix um kind of partnering with i guess they used to um um they used to offer their own sort of hardware solutions as well to kind of support this hyper-converged infrastructure but um now they've found that you know pivoting over to like a software and subscription model we'll talk about that more i think in a minute is is going to be important but um so one of their biggest partners is or their biggest competitors let's start there is vmware um actually vmware uh whose majority shareholder is dell technologies if you're familiar with the structure, uh, they are offering their own hyper-converged infrastructure solutions. It's this really fast growing market that is, uh, you know, I guess zooming out a little bit,

uh, the, you know, the legacy infrastructure market is worth about a hundred billion dollars annually right now. And hyper-converged infrastructure is worth about 5 billion of that. So a pretty small slice and everybody's competing, uh, to grab that slice, especially as it grows. But VMware, I think is probably its biggest competitive threat with its partnership with Dell Technologies. And it's almost ironic because Dell Technologies is also a longtime Nutanix partner. And that might be fading a little bit here. But Nutanix also partners with companies like HP, HP Enterprise, and to basically take their solutions and put them on servers that are sold. you know the hardware part is handled by someone else now so um what's really interesting about Nutanix though is they already have um a huge customer base I think they ended last quarter with like 16,000 customers uh and 97 percent customer retention rates and these are they're a combination of small medium and enormous enterprise customers I think they already

count 70 members of the ford 100 forbes 100 uh 880 of the global 2000 and uh i think what did they say a couple dozen customers who are spending over 20 million a year on their solutions and so they really have um sort of this head start uh as an industry leader uh that i think should help them uh where these other companies you know they it it's validation for their platform that they have such a huge piece of the world's largest companies already. Yeah, well, I think that helps explain it more. Do they work with AWS, Azure, and the other cloud partners, or is that something completely different?

So, yes and no. Their solutions are sort of platform agnostic as far as cloud platforms go. I mean, you could say they will help you manage your infrastructure regardless of which cloud platform you're working with. So that's part of the beauty is that, you know, they don't force you to use the cloud provider that you want. They will work with all of them. All right, that makes sense. uh okay so they've had over the last few years they've been transitioning to a more software based subscription kind of gone straight for the sas model that's very popular that's changed the

accounting a lot how has it changed the accounting and made it seem worse than it actually is on a cash flow basis so the i guess for perspective um i think last quarter uh subscription billings represented like 79 percent of Nutanix's total so that was uh that was a lot lower uh when they started this transition they really started pivoting toward like a software-based subscription model about a year and a half ago um they did have software-based subscriptions before but they were a much smaller chunk and they said okay this is how we're going to run the business now it's much more profitable but pivoting over to subscriptions and away from this legacy either license-based where you had a term license or hardware. Pivoting away from that meant that

revenue needs to be recognized, subscription revenue specifically, on a ratable basis over the term of subscriptions. So reported revenue growth and profitability appear to be much weaker than they actually are. And Nutanix, since they started pivoting harder toward the subscription software based model, uh, has been successful in that they have pivoted faster than they expected. Uh, but that also meant a disconnect between analysts models. You know, they, they expect revenue to be higher because, uh, you know, you don't have these ratable, um, revenue recognition requirements with the old model. So as they pivot harder and faster toward, um, subscriptions, their revenue growth looks weaker than it actually is and their profitability as well

and i think an important a good model for that uh how how they're actually doing this is to look at the way adobe did this uh back in i was actually writing about adobe through the course of this back in like 2014 um as adobe transitioned to the cloud and subscriptions they had the same thing they just repeatedly disappointed wall street every time they'd release earnings because they'd say whoops we you know our subscription services are so much more popular than we thought they'd be and our revenue looks like it stinks right now but then as soon as the the fruits of that transition became more clear and sort of the the ratable revenue revenue recognition say that 10 times fast actually became uh more clear than than uh it's sort of like wall street

catches up and says oh you're actually more attractive and uh as an aside uh Nutanix is um CEO, Dheeraj Pandey, is on Adobe's board. He's actually purposefully using that as a model for what they can do. Wow, that's interesting. If we go broader picture, if we look ahead five years, because for someone like us who I guess doesn't really understand as well how Nutanix's business works, what would it look like five years from now if you said the plan they went through or the plan they had you know executed perfectly yeah so

that's i love that that you asked about that five-year time frame now at seven investing we focus on longer term um longer term horizons really we're looking three five ten years out and uh for nutanix specifically um i think in five years we're going to see virtually all of their you know subscription billings you know they they have come from um the the subscription billings and you know they've they've essentially completed that transition five years from now I think it'll happen a lot faster than that um actually Nutanix I think has set a goal of reaching 3 billion in subscription billings by the end of fiscal 2021 so what is that another year and a half and I think right now their subscription billings for this fiscal year

supposed to be closer to 1.6, 1.7 billion. So I think we'll see a significantly larger subscription revenue stream and you'll see them continue to take a bigger piece of that $100 billion legacy network infrastructure market and really hopefully fend off competitors like VMware in the process because this is a fast growing market. There's lots of competition but there is multi you know room for multiple people uh companies to succeed in the process but uh nutanix believes its execution uh as evidenced by its customer retention rates are much greater so you should in five years see a bigger piece of this growing pie and virtually all subscriptions and uh hopefully by then wall street's kind of caught up yeah they

start understanding how the uh subscriptions are working yeah because i think it's been a frustrating stock since, so I think their IPO was what, 2017. And, uh, I think it's been a frustrating stock for people to watch so far because of those sort of disappointments and the disconnect between their subscription transition and their revenue growth. And, and, uh, it's like, Oh, Nutanix disappointed again. And, uh, and I think people are going to catch on. Um, so that's, uh, that's kind of, you know, I should hope that they have caught on by then. And one number to watch out for is the billings number, right? Because that takes into more of actually what they're getting billed for versus what they're actually recognizing on the

revenue line? Yes. Billings are a good metric to help you better predict what the revenue is going to look like in the coming quarters rather than what it actually looks like right now. That's why they focus so hard on billings. It says, hey, this is where we're at and we're not doing bad. I do think we're going to see in the next quarter or two, especially with the COVID-19 you know situation we're going to see some enterprise customers you know probably is particularly in the middle tier uh medium-sized here they're going to tighten their purse strings too uh and um actually i think um pandy the ceo um he likened it to when nutanix was founded in 2009 kind of in the grips of the financial panic he said everybody kind of had tight purse strings

then but it took a couple of quarters and once they sort of realized uh what that the world was going to be fine uh then they started spending again but i think you know it could we could see a little pullback uh but the stock's really been punished hard uh in the meantime anyway because of concerns over that so that's part of the reason i think it's intriguing right now so okay the last business that we're going to talk about specifically is disney um who's had a little little bit of a rough go here um uh surrounding coronavirus so why don't you talk about some of the complications that we're seeing with disney right now thanks to coronavirus because they obviously do a lot of different things um so what's really getting hurt disney is uh it's hard

not to love disney um but they they're facing this strange double-edged sword today so uh on one hand You know, it's it's been widely publicized that, you know, ESPN is getting hurt on the back of a lack of live sports. You know, they have this court cutting phenomenon that's hurting their their media business. And then you got your parks and resorts and your cruises that are shut down completely. But on the other hand, you know, you see this insane momentum for Disney Plus. I think it was it was fantastic. like the timing was stunning from disney and they could have they couldn't have foreseen it but launching disney plus what six months ago and uh imagine what you know how much worse the stock

would have gotten crushed if uh if they hadn't had disney plus in place with actually some momentum so i think they just i think three months ago their subscriber base stood at like 22 million which was also already faster than they thought they were hoping to reach 60 to 90 million customers and sustain profitability within like five years um but disney plus i think is one of those underappreciated uh maybe not underappreciated i think it's maybe one of the reasons disney hasn't gotten crushed harder than it is but um that's you know the the tough part that they're dealing with is is such a consumer-facing business that relies on people you know getting out and visiting their their parks and cruises and everything to you know movies and uh movie

theaters and oh my gosh there's so many working parts it's it's almost scary but yeah the well i guess their biggest profitability uh engine is the theme parks and then within that segment is cruise ships and those are the ones that are probably going to be coming back very late so when you see the parks hitting full capacity again and how much if like before they get back to a hundred percent capacity how much will that hurt uh the bottom line how much money will they be burning um oh geez i i don't need an exact number but like what i know it's i i'm not sure i'm brave enough to predict exactly when they're going to come back but i think it's telling already um that as people ease social distancing um initiatives that um they're already talking

There were a bunch of articles, um, you know, they're about, uh, how, uh, Florida business groups and, you know, we're talking about this. It was like a three phase structure for opening up Disney's parks again, uh, limiting attendance and, uh, they won't commit to a timeline understandably. So, but they're already talking about how they're going to reopen and they've run a lot of polls on how, um, how comfortable people are. and um there were a couple um couple polls that have returned already that said anywhere between 60 and 70 percent of consumers said if disney's comfortable enough opening their parks i'm

comfortable enough going right away and i think that's that's surprising in a good way um that you know 60 to you know two and three people basically are saying yeah i'm fine going back if disney thinks it's all right um but i you know i think they'll i think what we'll see is is they'll open you know half of a park and they'll kind of start from there and uh engage it you know there's risk because uh they could just have to shut it back down again if easing social distancing restrictions and stay-at-home orders results in a spike in the number of cases again and they might just have to go right again but i think over the long term they'll be fine and disney has you know massive cash hoard um that should really ensure uh that they can weather

uh this pandemic and i i think they'll be just fine in the end but i i am you know watching them closely because uh i i it's a stock i think i would buy you know if we're dropping another 10 20 bucks a share before we get there i'm i'm one of those people who's tapping the buy button so yeah it's it's kind of a sticky situation because if you open back up to the whole park and you get two-thirds of the capacity you're you're probably burning money so you know you really have to do it the right way you do and i think i think the initial openings you know they're talking about opening half the park then opening two-thirds of the park and then getting it all back up and running i think if anything um it's a matter of um getting the public to be comfortable with the

idea of visiting disney world again you know or going i i'm not sure i could say as much about the cruise industry so the the publicity there has been just like gag inducing but um yeah i i think uh i think uh these consumer facing businesses you know it may require burning some cash in the meantime but i think that uh i i think they'll i think they're smarter uh than people give them credit for as far as that goes and you know having eiger kind of come back uh in order to help manage through this this transition um is is also a great benefit um yeah in the process so yeah we're big we've we've been big fans of eiger and um anyone that read his book probably likes his story um but in terms of disney plus you're right the timing was basically

impeccable um and now they're competing with netflix and i think they're probably the second in terms of customer base the second largest if i'm not do you think that they'll be able to compete with their existing ip i mean they obviously have very valuable intellectual property and they have a strong brand but or do you think they're going to have to increase content spend in order to keep up and keep the retention number strong i i i think the answer is that i'm not sure they have to compete that way i don't think um i don't think it's a disney or netflix proposition like personally i'm i'm perfectly content keeping them both uh and i think they both are they're such inexpensive services uh with their own unique value in and of themselves i think there's more

than enough room for everybody to to kind of win in this situation so i think it's telling you know when you see netflix with their absolutely absurd quarter uh that they just posted even as disney plus you know gained 28 million subscribers in three months and netflix kind of just shrugged like yeah we're doing fine too uh but i i do think at the same time both disney and netflix will increase content spend uh so you know you're going to see you know both not only on the disney plus side but on the hulu side which disney you know has a controlling stake in thanks to their insane acquisition of of fox that 71 billion dollars they spent there uh because they have that controlling stake in hulu that they got but yeah so i i think they both win really and i think

disney plus uh not not at the expense of netflix i think they're going to just continue to attract new customers with exclusive content you know like mandalorian and and not as much to fend off competing services but really just grow their own so uh if they just keep their heads down and say you know look what we offer i think people will say hey i want that too right yeah especially with that price point i think they definitely wanted to play catch up uh so to speak since they were launching so much later uh with that you can get it for what six to seven bucks yeah it's yeah i think 6.99 or something it's crazy and uh and and the the funny part is you know when they're talking about, uh, when they first unveiled Disney plus way, you know, last year,

they were saying, all right, you know, we want to reach 60 to 90 million people within five years. And that should allow us to have a profitable business. And we're already darn near there. And, uh, I, I think it's, it's, uh, it's not long before we see, uh, that scale actually start to meaningfully contribute to Disney's top and bottom lines. So, yeah. Uh, well, all right, Let's transition before we hit the wrap-up questions. We wanted to talk one segment about companies that a lot of people follow and care about, and that is big tech. We've been talking about whether they are immune from a recession because they've stayed

so high and they've outperformed the market even during this dip and recovery. Do you think they are immune? Do you think they'll get hurt and then come out stronger? or do you think, you know, they're just as vulnerable as every other business that has been crushed, um, at least from a demand or, you know, perspective from a revenue perspective, uh, during this recession? I'd say they're not immune and they're quarterly, you know, like the quarterly reports from Facebook and Google, uh, in particular, uh, illustrated that, um, they, they saw a really steep drop off and a lot of companies are reporting a steep drops

in advertising revenue in march but a stabilization in april so i don't think you know when you talk about google um you know or apple even uh with you know apple i think has more than 80 billion in cash and they're still buying back shares and and uh and then you have you know google gosh how much you know they have on their balance sheet more than 100 billion and uh facebook is kind of in a similar spot but um these what's what's really interesting and part of the reason these companies popped last week is because they said oops steep drop off like we expected like everybody expected uh but the pleasant surprise was when they saw that ad revenue come bouncing back or at least stabilize um so i think they will be able to better weather uh this storm than a lot of your

smaller players uh but i think that might also create um some opportunity for the smaller players that get hurt worse um and then you know can recover as the the broader economy does so uh i guess long story short big tech not immune but much better position because most of them have ridiculous amounts of cash on their balance sheet that they can they can weather this from so right and it seems like amazon's the one that's kind of what you would describe as anti-fragile uh maybe uh because they are actually doing better within the crisis just with the specificity of what this is but then without you know all the other ones even though they will get hurt since they have that they're one of the like only companies i mean 90 of the market seems like

it has less cash than it has like debt and it's going to have a lot of troubles with having to finance themselves so those companies are going to be you know able to just kind of sit and not be worried and then when they come out on the other side um everything's going to look pretty they're going to have a lot more cash maybe they'll buy back a ton of stock and if a lot of other competitors fail uh they're just going to get bigger and bigger yep big gets strong gets stronger winners keep on winning uh i think that's going to hold through through all of this so okay our last two wrap-up questions um first one here what is one financial saying that you disagree with one financial saying um that i disagree with i go back and forth uh on a couple

different uh concepts here but i think one thing that that i that i often push back against is the idea that our markets are efficient the stock market in particular uh you know so often people say and and it's true most of the time where you have like hey this stock is being crushed for a reason, or this stock is overpriced for a reason, you know. But I think that also is the crux of our ability as stock market analysts to pick market beating stocks. I think people who are good at choosing and recognizing where the market is inefficient, because it's not efficient all the time um much of the time it is but yeah when they say the market always is always right the market's always efficient i'd push back really hard on that because i think the best analysts are the

people who can recognize where the market is getting it wrong and the market gets it wrong a lot more often than you think so yeah and if you look at the example the recent example of the zoom video versus the zoom technologies uh where that ticker had no nothing to do with zoom video and it was skyrocketing a thousand percent because it was a penny stock with like 10 million dollars in float i don't think you could argue that that was very efficient that was not efficient yeah not not really at all all right last question here what is one piece of advice you would have for anyone starting out in the investing world one thing i i think is is still a lot more i feel like I, I answer this question, you know, every week, but, um, don't be scared by high share

prices. And if you could see me now, you'd see me putting high in, in finger quotes. Um, but when you see a company whose stock trades at 200, 800, 1500, you know, $2,000 a share, that doesn't necessarily mean that company is so much more expensive than all these exciting penny stocks you're looking at or stocks that trade under five bucks a share. Taken alone, I think people need to, novice investors need to study up a little bit and realize that share price means almost nothing. It's basically just a function of how many slices a company's chosen to split their pie into. They've issued this many shares and this is the price per share. But I think a more valuable exercise is to look at the size of the company and their markets relative to the opportunity

they're working to seize. And in today's world of fractional share trading, there's so many platforms out there that offer fractional share trading where you can say, I want to invest 100 bucks in Alphabet stock, the parent company of Google, and that'll get you an eighth of a share. You can do that now and you don't have to have $900 to buy a share of Alphabet. So I think the better thing to do is look at your investments in terms of dollars, especially now that the platforms are there and you don't have to buy whole shares. I can name so many seemingly expensive stocks that trade a thousand bucks a share. I would much rather buy than other companies that are trading at under $10 a share and that has nothing to do with their per share

price. So that's, that's something I think that people really need to focus on. Share price means nothing. Right. For really novice investors. I think sometimes it's hard to grasp the idea of share structure and how it's divvied up. So that's important. Thank you, Steve. That was our last question. So thanks for coming onto the show. Yeah. Thank you so much for having me. It's fun. Okay. Welcome back in. Thank you once again to Steve for coming on the show. Very much enjoyed it but we have our hot water now you want me to kick things off because mine's all elon centric uh you can go ahead i love uh you know i love a good musk talk okay uh elon's new child is in hot water uh i don't know the name i don't think anyone does this has got to be the dumbest name

ever and i'm i feel bad for the kid yeah listen i know he probably won't go to public school and he probably won't get bullied like most normal kids with that kind of name but come on this is not inspiring or unique or any of that stuff like he's named after like 20 different things in his first name look i mean i don't want to tell someone how to parent but it's tough they should really give him a basic name like like yeah like me sure yeah you should definitely name him ryan uh but the names are tough when you're a kid you do not want a weird name um it's just it's really really it sucks if you have a weird name let me let me give you a hypothetical all right he goes to prison let's say let's say when when he goes to prison or yeah

okay we're obviously bearish so let's say he went to prison he gets arrested tomorrow for define alameda county's rules um suddenly his kids got to go to public school that's going to be hell yeah um yeah i feel bad for him i don't know yeah i just hope they call him something different than xae 12 um apparently yeah uh alameda county is also in hot water am i saying that right alameda no idea bay area county yeah whatever because elon is officially above the law uh yes i think it looks like he's gonna be getting out of this if i had to take a guess so uh yeah he always does if you have a business in alameda county open up yeah open up yeah it's not like the cases have they actually have the worst cases case numbers in the entire bay area

so they should probably be the last ones to open up but that's neither here nor there and i'm not and county official but you know i just hope that uh the rule of law can be i don't know like followed in our country we're a country of laws um and you know elected officials and people should follow them right and sometimes it might sometimes it might hurt you but you know sucks to suck yeah okay my third one here is buffett is in hot water right elon's not his biggest fan according to the joe rogan podcast which did you listen no i can't i actually couldn't when i saw that he said he was gonna cure the blind and quadriplegics i i couldn't listen because i know it's just all and tesla charts calls it this techno babble pretend

engineering it's it's it's all it's just so dumb i can't listen to that stuff anymore i on well okay whether you like musk or not i i honestly found the conversation not very engaging I thought it was boring. Maybe I'm anchoring to the first one, which was highly entertaining, but I thought it was boring. But he basically bashes Buffett for spending his life as a capital allocator. And if one billionaire making fun of probably the billionaire with the most integrity and the most honest billionaire isn't the most clear sign of a huckster, I don't know what it is. yeah i mean look buffett and gates are going to be donating over 100 billion dollars to charity maybe 200 billion dollars when it's all said and done uh from their trust and stuff but uh to elon musk they're underwhelming to be honest right and how he said to bill gates i uh and if if that hot water wasn't enough for you i you can obviously tell i elon takes up far too much of my time

uh yeah we're all there we're all there we're trapped in this hole i have to meet some people on twitter unfortunately people yeah you gotta you gotta go cold turkey yeah you gotta quit but it's either it's like it's gonna be like scarface if you've ever seen that where uh i have not that's old it's older than you so you can't really judge but uh it's basically like i don't know things unravel and he basically tries to go down guns a blazing and things aren't either gonna like you know what i mean they're not gonna go down without a fight tesla charts is right he said we said how do you picture this all unfolding and he said i don't know what's gonna i i don't know how it's gonna finish but it's gonna happen fast yeah and if this is the

end who knows if it is uh who knows uh we we definitely don't i don't think anyone does this is pretty fast yeah um okay what did you have for hot water this week okay well our nation is in hot water because we are this is the point like i you know not to toot my own horn i think a lot of people said that we were going to go crazy uh in about six to eight weeks during the lockdowns and that has happened uh one example of this and there's many uh is people protesting uh gyms not reopening by doing squats and push-ups outside of a florida courthouse i did see this which what you're just showing that you don't need the gym yeah you're i mean the irony there like yeah okay yeah great like the judge is like great i can see you guys are actually getting your you

know your workout on out here i mean i don't think the gym is that essential yeah all right next one okay an interactive brokers user that was trading oil don't know if you saw this but he started the day with 77 000 in his account and on the negative trading day when interactive brokers had their bug he ended up owing interactive brokers nine million dollars a quote on that uh from the story because he's not a rich person at all uh he said the statement arrived with a loss so big that it was expressed as an exponent oh dude i mean this is like i mean interactive brokers took the hit that i think they took like over 100 million dollar hit uh for people for things like this that was happening but he got he was definitely the

largest one this is the primary reason why you invest in what you understand yes yes like these are these are like the cautionary tales but yeah you don't don't get greedy don't get greedy don't on margin don't trade forex and oil and stuff like that if you don't know what's going on um yeah all right what else uh one more lime like you mentioned they got an investment from uber but uber invested in them at a 510 million dollar valuation which is down 79 from 2.4 billion dollars last april that 2.4 billion dollars has got to be one of the worst investments ever like who's a scooter company worth 2.4 billion dollars is a total joke yeah i've used these things they're fun occasionally but it's okay who cares yeah i've written them they're fun like you kind of do it

for a little bit and then you kind of get sick of it um but yeah i'm gonna ride my bike instead yeah okay shout out to uber for buying the dip i mean they did it couldn't you know could be wrong could end up being a good investment at least uber's at a way better valuation but keep in mind they fired what was it 17 of the workforce in order to seed this funding round yeah yeah so those workers should feel good yeah all right any other ones that's it okay the theme this week for fuck marry kill is uh i guess this really isn't the theme but i asked for great businesses at good prices on twitter this week and i got a few responses there were a lot of people that said these these few names so i'll give them to you fastly etsy and mercato libre which ones do you

like oh uh fastly's been doing really well but i did sort of like them at their valuation i want to check just briefly the sales ratios and other different types of businesses yeah fastly's up there a ton uh it doesn't this website doesn't have the sales ratio i want to see where mercato libra is at too wow mercato libra is almost up to 800 a share market cap i i think i'm gonna look mercato libra seems like a solid business but one it's in south america so i don't think it should have as high of a valuation multiple evd sales is almost 16 now uh so i think i'm to marry etsy i don't like it either way um it's been on my watch list but i still don't think etsy has that large addressable market and plus again they're at over an ev to sales of 11 now although

people you know people like etsy i think it's steady i just don't think it's got us it's not like going to replace amazon or anything um so i'll marry etsy fuck fastly because they're just on a tear uh still don't understand the business very well so it's not something i'm gonna actually invest in and then i'm gonna kill mercato libre mainly on valuation and uh south america sorry south america yeah um a lot of the people that responded to that tweet said fastly they really like fastly so it's a hot hot name hot name right now that's probably the one to bang um i might marry etsy they feel like it it's slower growing the mercato libre but it seems like sustainable growth they seem sort of like an amazon for antique store antique items i guess sort of

sort of it's more of like it's a better ebay almost with you know creators like it's not secondhand goods like people creating their own stuff right um so i'll marry etsy and then yeah I guess I'll have to kill Mercado Libre. I'm actually not sure on the valuation. I haven't really, I didn't really do a whole lot of digging, but all, all businesses that I like.

So yeah, they're all solid. There's all businesses I've looked at a lot, but never actually owned for one reason or another. Okay. Anecdotal evidence. What do you have this week? Okay.

Let's see. All right. So I decided to have one thing. Officially I bought some small cap value ETF. For my Roth IRA, it is 15 basis points expense ratio. It's a Vanguard one, has historically tracked the index very well. Any reason that you think I should not do this or continue to add shares over time?

I don't know. It's in your Roth? Roth, and the holding period is indefinite. What's kind of your thesis behind it? one small cap value based on the numbers and look historical performance doesn't mean it's going to happen in the future but over the last century small cap value is the largest or the best performing factor on the market um maybe everyone knows that and it's not gonna have that advantage and then two uh the gap between growth and value and i own a lot of

growth stocks so i'm getting a lot of exposure to stocks i don't have so it's not like i'm overlapping but the gap between growth and value and especially large cap growth and small cap value is the largest or almost the largest it's ever been even larger than the tech boom yeah i see no problem with adding to it periodically i wouldn't have it make up like your entire portfolio but I mean especially if it's in your Roth yeah yeah I think yeah I don't know

we'll see maybe you're getting it at a discount and I hope I don't know I think like people always say that value is dead at the exact moment when it's about to crush and everyone

is saying right now that value is dead and dunking on people that are still value investors so I thought you know i think i can hold this for the next 40 50 years and if it historically outperforms like it does um i'm gonna be you know pretty rich from it and if it underperforms by a little bit like it has i'll still have plenty of money so yeah taking a little more all right well anecdotal evidence for me i went to costco this week oh big time masks were mandatory i believe i had mine on and it looked like everyone else did uh but as we were signing out or as we were leaving and uh

purchasing our stuff they had like the plexiglass screen and then there was the little payment terminal and it was a visa payment or a point of sale solution thing it was a visa version and my mom like put her card up to it and i was like no you got to put it in the thing and she's like no i don't and ding like in a second tap to pay you don't know about tap to pay i have not used tap to pay before i don't think the pos systems are have ever have evolved enough for me to do that from where i'm from or where i spend most my money but yeah it was sleek and i think it's going to get a boost from uh this whole like no contact social distancing kind of thing Yeah, cashless will. Yeah. Yeah, definitely.

And it's just kind of sleeker. You don't have to press the buttons on the terminal. It's just a lot easier. Yeah. Yeah. I mean, yeah, cashless in general. Yeah. Yeah. Thank you guys for listening. Thanks again to Steve for coming on the show. Very much enjoyed it. We are not financial advisors. Anything we say or discuss here on Chit Chat Money is not formal advice or recommendation. follow us sorry i should have said this first follow us wherever you're listening like and leave a review or rate us and leave a review if you're on apple podcast also we've been getting a lot of email recommendations for shows really enjoy that uh we like when people do that because it's names that we haven't looked at so our email is chitchatmoneypodcast

at gmail.com feel free to give us some recommendations thank you guys for listening we'll see you next week Thank you. it's an honor this family is on the brink of civil war on september 18th mob land the hit original series is back on Paramount Plus. We are the Hurricanes. Don't know them yet? Then Google us.

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