Chit Chat Stocks - Stocks At 52-Week Lows; Meta's Agentic AI Push; 2 Under-Followed Small Caps

Episode Date: September 11, 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 (01:14) Robinhood's Stock Tokenization Initiative (13:05) Oura Ring's IPO and Health Tech Market (22:32) Stocks Hitting 52 Week Lows and Market Cyclicality (25:49) Vici Properties and Vegas Market Outlook (28:27) Autozone and Builders First Source Analysis (38:30) Listener Questions and Small Cap of the Week (47:26) Small Cap Spotlight: NMI Holdings (55:36) Watches of Switzerland and Luxury Market (58:09) Meta's AI Agent and Future of AI Assistants (01:00:48) Market Leaders and Tech Giants in AI ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Trade election, climate, and economic outcomes with IBKR prediction markets right alongside your stocks and options. Earn interest on your position and receive $1 per contract if you're right. Learn more at ibkr.com slash predictions. Welcome to chit-chat stocks, the podcast that helps you find your next great investment. I'm one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. today we have our investing power hour episode now typically we do these shows live on Thursdays at 5 p.m. Eastern time but I have had seemingly endless internet connection issues with the live show so we're doing this recording on its own not live so we did take some questions from the chat that we'll answer but on these episodes we talk all things financial markets any news any earnings digging into new stocks I've got a small capital week Brett

is looking over a company I have honestly never looked into that was a listener recommendation. And we've got an S1 for one of the more popular consumer products over the last couple of years. But I'll leave it there. That's my tease for the day. Brett, where do we want to kick things off? Yeah, we'll try to keep the same sort of banter, I guess, with the live show, without the live chat, which, of course, we love all the people that join. We won't have as much live feedback, but I think it'll still be quite fun.

Ryan, we were very perplexed to know that in a new housing community like yourselves, that you live in now, apparently Spectrum owned by Charter Communications cannot provide upload speeds for a single live call. Does it make you any happier to see that over the last five years, charter stock is down 83%? Well deserved. I think so. It's abysmal that they don't have this quality of service. Latin America, I always have better Wi-Fi speeds than this. Like, get your got together. Yes, it is shocking.

It does bring me a slight smile to see the underperformance. But, too, I mean. Maybe Starlink's going to be a trillion dollars. Maybe. Maybe they'll do it. Maybe. I don't know what upload speeds. They offer, but maybe they honestly, you might be right. It's, yeah, it absolutely shocks me that I am this close to sort of a major city and we don't have fiber to the home. But anyways, let's move forward. I think we've got a lot of stocks to talk about.

there's a number of very popular companies hitting 52 week lows. We've got some tokenization drama, if we can call it that. And a bunch of other news. Where do you want to start? Yeah, why don't we start with this tokenization one? We actually did it for 10 minutes on the live stream. We tried before. What's happening here?

What is Robin to try to do? Because I look at them, and I also should mention that they're actually directly underwriting part of the IPO I'm going to mention as a later segment. So they're really moving to try to do a lot of things to, I think, differentiate themselves from other brokerages. It looks like

AMC is upset here. Now that's a stock. We like to last up to do down not 99% 99.6% from all the highs. Ryan, what's happening here? What's the dispute?

Yeah, I'm actually glad this we're re-recording this segment because it gives me a little, it gave me a little time to research what's actually going on under the hood here. So Robin Hood is putting in this effort to essentially tokenize stocks. And basically, the way I understand it, that just means they have a one, all these tokens have a one-to-one correlation with the shares they're representing, which Robin Hood, through probably some other entity, is holding the shares one to one for each token they offer.

So I think they're starting with 19 stocks to kick things off. AMC is one of them. AMC's CEO Adam Aaron was apparently irate about this. And maybe you can pull up his actual quotes, but basically wrote this long rant about how this is terrible for investors and all that. and Vlad Tnev, the CEO of Robin Hood, responded, what's the concern? Which at first, I wasn't necessarily sure whose side to take,

but the more you dig into this, it essentially just opens up access to, I think the most likely use case for these tokens is international investors, getting exposure to stocks listed on U.S. brokerages because there's been limitations. with that historically and still are. So that seems to be the primary benefit.

That seems to be why Robin Hood is doing this. There are, I guess, some legal rights they lose by owning tokens instead of owning the actual shares. They don't have voting rights, but let's be honest, who on Robin Hood was really exercising their voting rights. and from the looks of it, this seems like pretty much just a special what do they call it, special purpose vehicle that a lot of those companies have been using.

What difference is this between a setting up a hedge fund or I guess, yeah, people call it special purpose vehicle for that. When there's a specific, I know some funds have done this for specific stocks, hey, you want to invest with us, we're going to have a specific vehicle for people who want to invest in this company. It's not that different because it's the same sort of mechanism

where Robin Hood has the approval to buy the shares, the people that they're trying to push out to internationally don't have approval to buy the shares because of regulations in their countries, and you can't get all these sort of stocks to try to list internationally. Like, that's only really the large multinationals that list in all sorts of exchanges around the world. I think it's the same. I have the quotes here for you.

Of course, Adam Aaron. again, not focused on his stock price down 99.6%. He says, quote, to this quasi-fake market you are creating on the island of Jersey, so's distrust amongst the public about financial markets in general. I think hyping up a fake gold mine also might do the same, which is what AMCs. I don't know if they're still in that, but they were doing that for some times. He says the list of concerns is almost existential,

and he says, I hereby call on you and Robin Hood to voluntarily all, Case and desist the trading of AMC stock tokens. The old Twitter ceases desist. If he tweets like Trump, he's got to get his way, I guess. The, yeah, we're, I wonder what is going, like, for a normal company, this shouldn't matter. So what, what is AMC up to that this could cause? Like, does it, does it prevent the meme stock narrative? I don't know.

I don't know. Why do we even talk about AMC because they're going bankrupt? Am I wrong? The stock's going pretty much to zero. I don't know. I mean, it seems like a worthwhile endeavor from Robin Hood's perspective just for international, more international revenue or trading revenue potentially. Yeah, it could eat into IDKR's, of course, beloved sponsor.

but as a stock I could eat into their competitive advantage ever so slightly it's going to take I think a long time to get to that same sort of level the direct connections probably give you a competitive advantage but for the individual it might you know that's probably what they're going after here those traders leaving for interactive brokers

and I question some parts of this like how do the capital distributions work when you own the token as opposed to the shares what happens if like someone passed away and owns these tokens how do they you know like

correct i mean the big question is like just gut check would you trust robin hood if you wanted to buy a stock and the only way to do it was through one of these robin hood tokens would you trust them i thought i'm pretty on the fence there i don't think they would try to like

it's not in their best interest to screw shareholders over but if i wanted to put a good chunk of change like something above, what is it, five figures, you know, something above $10,000 or something like that, I don't know if I would trust to put it into Robin Hood tokens. Don't you want your name on the digital ledger, Brett? Don't you want these companies to know that you are a shareholder? All right, maybe before we move on, I have Robin Hood's revenue here. It has grown at a 51% compound annual growth rate.

I'm looking at the fiscal AI chart here since 2019. Last 12 months, $4.9 billion. Market cap. It's about $102 billion. They're trading at a P.E. of about 51. Revenue is still growing nicely. There is that bump that we talked about the week before. I think you had that nice data point on prediction market's revenue.

Is the stock cheap here? I feel like it's, my opinion, a little premium value. I wouldn't touch it, but the business is executing, I think, quite well. And they're disrupting without trying to kill their reputation. Yeah, I think a few years ago, a lot of people liken this to like, this is just an online casino. And it seemed a little disingenuous. It was kind of like older investors that don't really trade, making fun of younger investors. Like, it's a casino, which whatever, you know, maybe it was.

But now you look at the financials, sort of. actually does earn money like a casino the majority of revenue not the majority uh prediction markets revenue accounts for a higher percentage of the top line than uh equity trading which which is pretty astounding uh the i am probably not interested it's not it's not crazy cheap i'm not totally against some of the stuff they've done the way I think other investors are but I don't know I just think there's easier easier fish here easier hurdles going on right now I look at my own portfolio there's a lot of companies I like right now so it's the bar is high and I'm not sure I feel like there's a lot of uncertainty with Robin Hood and I think sometimes they are like sacrificing their

long term like taking people's savings accounts adding prediction markets might might be a bit short-sighted because right and pushing all these crazy trades on that yeah i agree i agree that because the number there on the amount of revenue they were making which again is the money not going to their customers was astoundingly high they did have an interesting note on their press release that said they think it was 12 or 13 uh business lines now generate annualized revenue of over $100 million, which is nice. You know, they have the subscription revenue. They have the credit card revenue.

They have the net interest income. So that's building okay. But I don't, they brought out that Robin Hood platinum card. And I think that's going to fall flat because you're trying to compete with the American Express Chase Sapphire and what's the other big one, Capital One. Maybe there's some others out there. I'm forgetting. And I think they're going to have a difficult time doing that.

But one of the benefits that was actually on that card, it's going to be a nice segue, Ryan, that they had to take off because they're an exclusive, I think, marketing partner with American Express at the moment is the ORA ring. And they're going public. How about that for a transition? Yeah, it's smooth. Smooth. All right.

So ORA ring. It's a health wearable device. People may or may not know about it. I think they're popular probably in San Francisco and New York City, as a lot of these things are. is a device that tries to monitor things like heartbeat, sleep quality, activity, women's health, and many other factors from bringing on your finger. I think it's actually really one of their first marketing pushes was that if someone's trying to have a kid, like it can really help time that correctly to try to actually conceive a child

or the monthly cycle for women's health. They made some good, I guess, innovations there to help people track that. The business model is essentially this. You have your hardware sales, which is the ring device, and that is about $400 to $500 for the latest device, depending on the finish. You have a better finish for like not just the, I think it's made out of, maybe it's made out of titanium,

probably or steel. Maybe you have something other than the basic finish. It's going to cost more. And the subscription, which you get for the health insights, is actually less than $100 a year. So maybe if it's valuable, could be a reasonable price

and there might be some nice pricing power there, but you want hardware sales, you transition that to active users, using their app every day, and then you have subscription software revenue. They have 5 million paid members, up from only 1.5 million in Q1 of 2025, and apparently the 12-month retention for usage

is 87%, which seems high, but maybe flip that around, 13% churned over a 12-month period. great. I mean, if you have a nice influx, yeah, and maybe that'll improve over time, but I don't know, flip that around. It's not Netflix like, I wouldn't think or Spotify like. I think now that I've been in a marketing department, I guess, for a while, 13% turn. Yeah, you might know better. 13% annual churn is actually, like, that's pretty, pretty solid. I think if I'm getting it right, probably getting like eight to nine year lifetime.

value usually or eight to nine years average customer lifetime value, which is pretty solid depending on what you're paying for them. Yeah, and the number from their chart over the last two years has gotten better. So it's getting better. The trend has so it looks nice. Let me just finish up the numbers here and then he can give your opinion. Ryan, harder revenue is the vast majority today. 80% comes from the ring sales, but membership revenue growing 120% year over year, probably

about $300 million this fiscal year. the IPO reportedly is going to have a market cap of $16 billion, raising $3 billion. So I think they're going to do a huge marketing push, I'm assuming, as well as probably trying to pump out some new devices. Any interest in this type of business? Yeah, I'll leave it to that. I do like, I like companies where there's a hardware software tie-in, because you, especially one like this where I would guess, 30% of revenue comes from people just losing the item and repurchasing the hardware.

I think you probably hear that with AirPods all the time. People have to rebuy them. But I think some of these medical wearable type companies, it feels like they come and go pretty often. For a long time, that was what the Apple Watch wanted to be. there's a lot of competition here Garmin's into it whoop is very popular it just feels I don't know

hard to sustain like I don't know which of these is going to be the long term winner or are they all going to be winners it just I like the membership revenue should grow as a larger percentage of the pie

over time but I don't have that much sense of the durability here. And the 12-month retention rate, it's like that stuff can change so fast. It really can. Like,

you're especially at a company like this where it's relatively young and you've had a lot of user growth. You're adding a bunch of new hardware. Yeah. Yeah. You've got a lot of new user growth where maybe it looks like 13% churn today,

but if you have tranches of these customers turn off in waves for whatever reason, 13 could, turn to 30% or something in short time frame. So it's, I'm probably holding off on this one for the time being, but I'll continue to track it. The growth is pretty impressive. They've done a very good job of actually getting their brand out there and like being sort of a, I don't want to say verb.

Maybe it's just our age demographic, but people, they know what it is. People know what it is. And it's different than since it's on the finger, it's different than the wrist. There are some issues with it. One, anecdotally, I have one, and I stopped using it

because I don't think the insights are that great. Like, okay, first of all, you can't really work out with the device on. It's too big.

So I think long term, maybe you have to, like, shrink it down to something where you can't see it on someone's finger or you can't really notice it there.

I think that's kind of the long-term end goal of these type of devices. There's also the difference between, like, all right, it can tell you what your heartbeat is. That's fine. But you did some activity and your heart rate was elevated. That's great. Like, do I really need to know this?

It feels like almost a gimmick and not something that you actually need in your day-to-day life. I will also mention in, I was looking at some Reddit comments for people, I guess, just thoughts about the device. And yesterday, which we also talk about Apple's new device launches, there was a new, I think this, I have it correct here. The Apple Watch Ultra4, this is what, this is the one I have. I don't know exactly how many versions of the Apple Watch they have,

but they launched heart health notifications, better understanding your daily health status with the vitals app on your Apple Watch, which has heart rate variability, heart rate, respiratory rate, risk temperature, a holistic understanding of your daily health status, and sleep insights and sleep scores. So they essentially copied everything from ORA. I think if the stock was public, if ORA stock was public, it would probably be down quite a bit

today. I don't, if Apple, I just have a hard to be a future of someone else's business model. Yeah, so it kind of reminiscent of the Dropbox debate with Steve Jobs when he yelled at Drew how often that you're a feature and I'm going to kill you with ICloud. Dropbox still around, they fought, but it's kind of true. That's something like

yeah, I mentioned we talked about this on the live show that we had to scrap. The key here, I think the whole the end state is that you have the tracking that actually gives you good insights whether it's, oh,

I'm, why am I feeling bad? Whatever. And I can tell you like, look, you're deficient in X nutrient or something like that. I don't know how that's possible without like a blood test, or something along the lines of, hey, whatever, your heart help. Look, I'm not a doctor. I don't know what exactly the number is.

But it can connect to your health care records. It can connect to your doctor. And it has this whole thing where you can just seamlessly say, hey, look, I have this connected data on this device and then through my healthcare provider, I can get a solution to that relatively quickly. You know, maybe in the long run, the healthcare provider is AI. And if you can do that, that is a huge, you know, value add and time save. And I think you can help make people much healthier.

But is ore ring there today? I don't know. They're kind of spending a ton of marketing dollars and just getting items out there. the door. So I'm fascinated about the business. The financials look good, but is there a competitive advantage today? I don't think so. World events unfold in real time, and now you can trade them. With IBKR prediction markets, you can trade election, climate, and economic outcomes alongside stocks, options, and bonds all in one integrated platform. These are simple yes or no contracts price to reflect the market's view of probability. If your prediction is right, you'll receive $1 per

contract and earn interest on your position while you're invested. IBKR prediction markets turn market expectations into actionable trades. Prediction contracts are not suitable for all investors. Learn more at IBKR.com slash predictions. Okay. When I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime.

I wonder if my head of office has a forever setting. An IG Private Wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IDPrivatewealth.com. Yeah, I'm probably more on the skeptical side. Lean, it's impressive growth for sure, but I don't see myself being a shareholder at this moment. Okay, let's shift gears. spread. I'm going to rattle off some stocks. They hit 52-week lows yesterday. I don't think the markets

are even open yet today, but maybe they hit them again. So I'm just going to rattle them off. You afterwards, let's pick what interests us. All right. You're going to do them all first. Yeah, we can pause if there's any interesting ones. Okay, AutoZone, Ku-Pang, which I guess that's it. We both own, yeah, unfortunately. Yeah. We'll pass. Yeah, we'll lay that one to the side. Builders First Source.

L3 Harris, which for those that don't know is one of the largest, one of the largest contractors, government contractors. Las Vegas, Sands, Lowe's, McDonald's, Nike, Neo, On Holding, Otis Worldwide, which Otis is like elevators, for those that don't know. Rollins, Stryker, and Vichy properties. Thoughts? Any that stand out to you here? AutoZone, Builders First Source. There's a lot of people that like Builders First Source as a quality business to get housing play. The capital intensely and cyclicality make me a bit nervous to invest in a company like that.

But if the numbers don't look fantastic today, you can kind of look through and say, hey, maybe if the housing cycle and normalizes. That could be interesting. Let's see. Coupon we can ignore. Elder Harris. I'm surprised what's happening here because I would assume, like, are the rest of defense stocks cratering? It's in a 33% drawdown. I wonder what specifically is affecting them.

Maybe they lost a contract, something like that, because, hey, the EV to EBTA next 12 months. Not, you know, it's EBITDA, but, and maybe that's all right. Las Vegas Sands, probably not. Lowe's, McDonald's, Nike, Neo. No, no. Have you ever seen Neo? They have the greatest 20F in market's history. I think it's a thousand pages.

On holdings, never invest in apparel. Otis. Elevators are interesting because you have the service stuff. And you cannot neglect service on elevators. No. So that's, there's probably pricing power there. If you live on like the 10th floor of a, or if you work on the 10th floor of a commercial building,

you know, you probably know the Otis name. Just look at the ground and you will probably see Otis as you're entering the elevator. Yeah. Rollins, we've talked about that. Stryker, I do not,

that's medical devices, right? Yeah. Do you know? Yeah, medical devices. Vichi properties, that's the Vegas reet. Maybe. Maybe.

Builders First Source and AutoZone would be the two. What about you? I'm finding it interesting around what's happening with Vegas. Vichy properties they own like the MGM Resorts property and basically all the big casino operators

that decided to go capitalized and sell the ownership of their buildings sold them to Vichy. They have like an 8% dividend yield right now. So if you believe that Vegas is not going to crater.

Is MGM going to go bankrupt? I don't think so. Yeah, or I mean, like they're going to make their lease payments. Yeah, what are tourists going to look like to over the next five years? I don't think Vegas is going to cease to operate.

Maybe at flatlines, maybe there's some maturity here. But I think I think you can get a pretty good yield here. Yeah, they have a good, I'll speak anecdotally. Vegas has a good, not a good, but it still has a reputation internationally of a place people want to go because of the marketing they've built up over the years.

You ask someone, I love doing this. Like, where do you want to go in the United States if you visit? Just curious since I'm from there. And foreigners always say, New York City and Disney World, which Disney is still in the hearts and minds of everyone. but another one they mentioned is Las Vegas

and I kind of go you know Las Vegas is it's not as great as you think but people want to go and I think the international tourism will still be there plus domestically I think people still want to go

especially of the sporting aspect now like think about it Ryan I don't think there's an MLS team there I know you're kind of a niche compared to the people rooting for the bigger sporting leagues in the United States but if they had a team there and they played your below

at Seattle Sounders, wouldn't you think, like, hey, like, we can make a weekend out of this. Go to Vegas, go to the game. Like, I think that aspect will give it a floor as well. Now, there's so much sports and entertainment, MMA, UFC in the city. Yeah, I'm sure that the sporting teams there

helps with domestic travel. I think there's probably sort of a negative correlation with airline or, air ticket costs to Vegas would be my guess especially with the international travel. True. Oil price above 100.

Yeah. If fuels and we're seeing it now where the airlines are starting to pass through some of these fuel expenses and tickets are rising, I think you're probably going to have a hit to tourism there. Auto zone, it's on my list,

but it's still only in like a 30% drawdown. and just it feels like there's this cohort of compounders that have just people have just been buying blindly for like five years that are now they're starting to be starting to come back down to earth on valuation right it was at 30 times earning now it's at 20 but it's not a hyper growers you kind of go and maybe the returns are solid 8 to 10 percent but you're not getting that like really um juicy upside that you would want to just because, you know, not every investment, just for our philosophy

there, like for anyone, I know people like to look at investments and say like, this stock is so rock salt. This is an incredible business, you know, it can go up 10 to 15 percent or maybe 10 percent over the next decade per year. And you can't look at that like 100 percent probability of happening. So if you think of it like, hey, there's a, with AutoZone good business, 70 percent chance my estimates are fairly reasonable. Okay, then you need your return expectations to be even higher because you need to make up for that 30% chance that it's not going to do that great. That's why when we always look at these, we kind of go, well, you need better upside

because you're investing in individual stock. Yeah, and something that kind of grinds my gears is like people always say, you can expect bond-like returns. If you can expect bond like returns, just buy the bond. But just buy bonds. Like, it's, what's the point? The Treasury is buy bonds. Have you heard of this Treasury buyback, Brian?

I was not, no, I've seen this mentioned all over the place. I didn't pay a whole lot of attention to it. I, again, we're not experts on the bond market. I'm not no expert on the bar market. But essentially what's happening. So think about it. Okay, the Treasury issues the bond. It sits at, or the Treasury, right?

They issue treasuries. Someone buys them. but when they issued them, okay, the 30, let's say the 30 year bond, I believe it's at a 19 year high in yield. Let's look at actually what the 30 year bond is yielding today. I think it's like 5.5%.

Let's look. CNBC actually has good. Yeah, 5.3%. So you can log that in. If you're going to get a bond-like return somewhere else, like you better have a good hurdle on that for the stock price. But essentially, the yields up now. now. And that means the price is down. So the treasury is coming in and buying back. It's not the same because they have an infinite money printer, but buying back their own treasuries to try to set a floor. And Bessent being a little bit aggressive rhetorically with this. But we'll see if it can, I guess, prevent yields from going even higher. But it's interesting that the bond market tries to fight this. As an aside, I just thought I would mention that.

So if I'm understanding this, right, the yield rises as people have, either find better opportunity cost elsewhere or better investments elsewhere or they become more expectations. Yeah, skeptical about the payback or. Well, they're going to get paid back. The Treasury has an infinite money printer. So the, let's say people's inflation expectations rise from, they think it's. going to be 3% over the next 10 to 20 years. Look, it's hard to, I think it's possible to forecast that, but let's just say that's what Mr. Market is moving to.

If it goes from 3% to 5% and the Treasury bond is yielding 4.5%, this is very simple. They're going to want a higher yield, so they're going to sell that. And there's also all the bonds for the AI infrastructure build out, which might be taking capital. That could be going somewhere else. And you can get, say, a higher yield there. And you go, well, Amazon. Amazon balance sheet in businesses rock solid, Microsoft, Alphabet, meta, who have you?

Like, why would I get 5% from the U.S. government when I can get 6, 7% from these companies? And I'm pretty certain they're going to pay me back. Yeah, that could be it. Yeah. If I'm talking out of my ass, please tell me listeners in the comments. We don't have the live chat today, but I'm no bond expert. It's, I think from an American's perspective, I guess it's nice to see the U.S. kind of setting a floor or the Treasury Department's setting a floor here and basically implying that inflation's not going to be as high as investors are projecting. Am I reading through the lines there correctly?

Yeah. And then there's the balance with the Fed because the Fed and the Treasury technically are partners, but the Fed is supposed to be independent. So if the Fed is more, how do you call it, dovesh? And they let, let's say, rates go down and maybe inflation can get out of hand. That can lead the long-term bond yields to go up. Or if they're hawkish, that might say, and they actually raise short-term rates. If they raise short-term rates, that could actually lead long-term bond yields to go down because people say, all right, they're going to crush inflation.

and short-term bond yields to go up, but the long-term bond yield will go down because, hey, look, they're going to get inflation under control, and my 30-year bond paying 5.5% will get me some decent real returns. That's about it. How about that for Bond Corner? Let's move back to stock.

That's our bond segment for the day. Yeah, for maybe the year, two minutes. Two minutes for the year. Let's look at Builders Force source. I was pulling up some charts here at fiscal AI. I should mention, as always, people use our link, fiscal.a.ai slash chit-chat, get 15% off any pay-point.

The link will be in the show notes there. 71% drawdown for builders' first source. Let's just look at the numbers because it is cyclicality. For people don't know, it's a... You know this a little bit better than me, Ryan. I think it supplies basically building materials, manufacturing components,

and it helps, okay, what if you need, like, concrete, lumber, any sort of material for a subcontractor or general contractor for building things, they are the partner that brings it to them. Like, that that's essentially it. Yeah, I believe they're a big supplier for trusses, which is like the... Trusses. Yeah, okay. Yeah, you need it. For the home. I remember in the civil engineering class, you have to, we had to calculate that. I'm sure

I can do that much better than me by hand now. Let's look at the revenue. And then we'll kind of, wow. Yeah, it is declined quite a bit. It peaked during the housing boom at 22, let's say 23 billion. It's now down to 15 or 14 and a half. And let's look at operating earnings. Operating earnings peaked at $3.77 billion and are now down to $400 million. Ryan, the market cap is $6.5 billion and the EV is $12. billion dollars not sure how much of that is a lease or financial debt that's holding to the balance

sheet more yourself that it you don't know well okay i wouldn't expect the the earnings to surpass the 2021-2020 peak but this feels cheap no it's easy to look at it and say wow if they get back to three billion in earnings this thing is ridiculously cheap i'm having a hard time at the moment with anything very reliant on the housing market recovering. It, from the looks of it, so, okay, home affordability, generally speaking, is, is as low as it's ever been. Like, it's as hard to afford a home in the United States as ever has been on average for the median income earner.

I don't see in the short term what changes that. I don't see what happens in the next two years other than rates coming back down, which seems unlikely at the moment, like significantly lower. I don't see what changes that. And you've probably got a lot of builders here with inventory sitting idle where they're holding off on new builds. They're holding off on new orders with builders first source, for example. there is a world where earnings continue to come down for builders first source. Like if the builders are getting pinched, the order book's going to look pretty crappy. Yeah.

I think you can't, you got to take a longer term time horizon with them. Feels like a high quality, not a high quality business, but high quality management team, they buy back a lot of stock. I get it. Yeah. You probably need to take. a long-term approach here. But maybe you're getting paid for that at the moment.

The 30-year mortgage, 6.7%. I believe that's pretty close to a multi-year high. It's not at the peak of where it was in 2023 when inflation was peaking. But it's inched up. That's for sure. That's what I mean. Okay, that's historically around average, right? Like long-term history, it's still maybe even below average.

And, yeah, it's not that crazy. And we're still seeing low affordability? Yeah. Yeah, it's going to be a weird housing market. I feel like he could stay in this no man's land for a long time. And that would be a huge bear case for someone like Builders First Source. Because, yeah, like treasuries at wherever they're at, maybe a little bit lower would be somewhat normal. It's not crazy.

Two, three, four percent, depending on how hot the economy is. whether you have to battle a little inflation, where the Fed, you know, raise it a little bit, lowers it a little bit, and then mortgage is slightly higher. Like, that's not, that's not a crazy number. All right. We got to,

should we have some listener questions from the substack chat? Yes, and then I do want to talk small cap of the week. I think this might be the most interesting one I've done in a long time, but all right. And I have a small, I have a small cap of the week as well from another listener question

that someone, Kender, who actually is, I would say, probably the lead ambassador in the substack chat, always putting out good stuff. He put out a lot of info on this company, so I want to do, you know, he put in a lot of work for free.

So I wanted to put it on on the episode. All right, listener questions from the substack chat. The link for that is in the show notes. You can join that as questions if you want. I have a question about valuation. How much should you, or are you willing to pay for the, quote, best companies in the world? not sure where companies you put in that basket,

but I would say Hermes, Intuitive S-Surgical, are at the S-tier. I think the problem for me here is I'm willing to buy now. Maybe it's a shorter window of opportunity, but I see so many I think could work better because of price. This is a fascinating question because there are some businesses in the world. I would put Hermes and Intuitive Surgical in there

where the quality is extremely high. Costco could be put in there. And maybe Ryan can come up with some other ones. for those, and I know Arames might be getting close to that figure now, it is moving up my watch list. I don't I don't have some sort of crazy idea for this

or my analysis is his wild, but I kind of look at it as, well, when they're at 50 to 60 times earnings, that's a prohibitively expensive unless they're hypergrower. But you want them in that kind of 20 to 30-ish range. And they get there sometimes. Simple as that.

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Yeah, that shouldn't be how we look at it, but that is kind of how I look at it. The valuation purist would say it depends on your opportunity cost with, obviously, like if you can get, if you think you can get a better IRA or just a better annual return over the next three, four, five years. with a bad company than a whatever, these best highest quality. Theoretically, you should take those. Again. But the bad companies do bad things. Good companies, they'll surprise you in bad ways.

Good companies will surprise you in good ways. For example, ASML currently at 53 times earnings. Honestly, given their order book, it might be a fair-ish price because of the growth they're going to see. Now, again, the AIA boom. just dependent on this, but I would not be buying ASML at 53 times earnings, and we've talked about this before. We both kicked ourselves for missing that window,

I think last summer when it was down to 25 times earnings. When you had a super high quality business like that, like, yeah, that's kind of that window I look for. Yeah. How much should you be willing to pay for the best companies in the world? I mean, obviously, if you can get a business, the thing is no one can really look 15, 20 years out. Realistically, a lot of us can't look five years out and know what's going to happen. But you get a company like Hermes or a company like Costco, and you know these things are going to grow for a long time as long as management.

There's the exception. Yeah. For the five-year time. I still think the best approach is to just have a rolling and you don't need some extensive model, a rolling five-year assumption of what a company can are. And it really does not have to be that granular. Just try to think what kind of rate can this company grow at? what kind of margins could they have in five years?

Do I think management is trustworthy? Okay, that's how much I think they can earn. This is what I'm paying today. Comp that against the other companies in your universe. Now, I say that, and that's the approach I try to use. But then, yes, sometimes it just comes down to vibes. Like, okay, I love this company. How you trust the management team, the business, all that good stuff.

One thing I'd add is you can also, if it's a cheaper stock, need to account for capital returns and kind of cash flow generation over the five-year period because that can be meaningful of its part of the story. All right, let's keep moving so we get these small capital weeks in. Here is another one. Open-ended question. Do you generally see geopolitical instability as a risk or opportunity or a mixture of both? I understand it can be very circumstantial. What I care about. For me, it at risk.

Yeah, it's a risk. And look, what do we say? There's no morals in investing. Maybe, like, okay, the way we look at it, I know some people look at it different, is that when you buy a stock on the open market, you are not helping or hurting a company. Same with shorting.

You're not helping or hurting the company. It's going to do what it's going to do. What I care about is if it's in jurisdictions with high-quality rule of law for businesses, For example, the United States, fairly strong, might be getting a little bit weaker with some of these government interventions, but it's still strong worldwide. Like, that's something we would be concerned about, but compared to other countries, good. Now, if you look at a place like Mexico, it's fairly good, but you compare that to a place like Brazil, which I've heard more stories about, learned a little bit more about through my travels. it's a tough market.

Like there's corruption across the board and the business laws can be difficult when it's impossible to fire people. You know, that can be. Like, I care more about that whether like Brazil invades Paraguay. Frankly, I would not care. Yeah.

The way I see it is like, has it I can't think of any instance where there has been a geopolitical conflict and I thought, this is, this makes my businesses better. Like, almost always. It's true. You want status quo. Yeah. Yeah. Almost always.

It either has little impact or a negative impact. Like, I think people, unless you, unless you just own the government conduct. contractors, you should not be, you should never be rooting for this, but your portfolio is probably not going to benefit. Yeah, that's fair. Long TSM, long Lockheed. That could be a nice, too well-bode environment. Sorry, that's dark.

Yeah, that's dark. All right. Someone wanted us to talk about the Nintendo Direct. Look, the stock might be down a little bit because they did not launch a 3D Mario game. And maybe people were looking for that. It's kind of a bestseller for the holiday season. I can assure you they're working on it. Their mainline game was a Kirby one, which is kind of a sub-franchise.

You know, not one of the biggest ones, but I looked it up. The last Kirby game sold something like 8 million copies. So I think that should still drive some earnings growth. And according to the quick reviews I read, which, you know, they're gamers online, so it's hard to actually pick up true opinions. The number of the volume of total games on the Switch 2. is much higher than the Switch 1 from third parties and just niche publishers,

things like that. So I think that could be helpful for driving unit volumes. And yeah, you know, not the core gamers won't like Switch Sports Resort, but I can tell you families will love that. Maybe it's just our time, but the Wii Sports Resort for the non-Coreg gamers, like Ryan and I, that can drive usage.

And if you're a family and you're thinking, what could I get my kids for the holiday season? season. You can get a switch to. You get the Mario Kart World with the bundle

and you get the Nintendo Switch Sports Resort. They're going to be entertained for games if they're sports oriented for years. And that's going to

make them quite a bit of money. Yeah. All right. Let's talk. Small cap of the week, Ryan? Small cap of the

week here. This is one of the most interesting ones I've found in a long time. So I... Do you know we did an interview on

this, Ryan, with Fabio from Capital Mindset. I didn't not remember that years ago years ago yeah we've done so many now sometimes it's harder this is such a hidden company that is really hard to remember but they're quite good and fabio always finds those hidden gems i swear kudos to him this is uh yeah this is impressive the i ran a screener for the most profitable companies per employee shout out to fiscal a i for being able to do that a lot of them

were with the companies you'd probably expect AI winners i mean in videos on that list big tech meta's on that list but there was one company that really stuck out to me which was NMI Holdings

and I should also add there's a lot of companies that are like hold coes where they don't really account for all their employees like maybe it's a mining operation but they have like a six person office in Toronto or whatever

that they don't have a mine they're speculating yeah stuff like that anyway the NMI Holdings has 225 employees that primarily operate out of a modest shared office in Emoryville, California. You can look it up. I mean, it looks like, I think it's close to Sacramento, if I'm not mistaken.

Oh, yeah. That's grit. They're not living that SoCal glamorous lifestyle. We're living in Central Valley. If you went and visited, you would probably think this is the most ordinary business in the world. However, over the last 12 months. Keep in mind, 225 employees. That is small.

That is really small. The 225 employees, they generated $400 million in net income. That is $1.7 million in net income per employee. They are more profitable on a per employee basis than Visa. Well, let me note here. It's actually not Central Valley. It's north of Oakland. So, yeah, maybe still grit there, kind of a different type.

Yeah. What do they do exactly? They are one of the six largest private mortgage insurance companies in America by premiums. So for our international listeners in America, anytime a home buyer puts down less than 20% of the purchase price at closing, they are essentially required to purchase private mortgage insurance. And with private mortgage insurance, if the homeowner defaults on their payments, the insurance underwriter, NMI in this case, pays the lender to cover some of their losses. This helps borrowers purchase homes, even if they don't have a lot of money to put down initially.

The U.S. really kind of started clamping down hard on this following the GFC, and really it stems from Fannie Mae and Freddie Mac basically won't buy a loan from these lenders if there isn't PMI on it below, on any loans where it's more than, or less than 20% down payment. I recently purchased the home, so I'm pretty familiar with this process now and kind of how these companies work together. You'd think NMI, their customers would be the home buyer, but it's really more so the lender. So basically the home buyer in the process, or at least in my experience, you're really just working with a lender, and they're coming up with a package for you based on, here's how much you can put down. Here's your income. Here's your rate.

if you're not above 20%, here's what PMI costs. You really don't even know, at that moment, you don't even know who the private mortgage insurance company is. So the lender has a tie-in or an integration with the PMI provider that is basically whoever can provide the most seamless tech to the lender, essentially. So can you make a seamless thing?

integration where they can just punch in the information and voila you've got a pMI added to your loan it is not the most glamorous business by any means but from what i understand they were they have been able to gain a lot of market share primarily because they didn't have much technical debt so a lot of these companies coming out of the gfc either a they were struggling because of the housing crisis itself, or they just had a ton of tech debt. And NMI, confusing the acronyms here, NMI was founded in 2011, so didn't have to deal with a lot of that. It's a $3.7 billion enterprise value company. They've generated $395 million in net income over the last 12 months, so less than 10 times earnings.

earnings per share has grown at 18% a year for the last decade. And mind you, in a pretty poor home buying environment, and they're buying back about 3% of their shares each year, this is, I've blown away that this ordinary 225 person company in a shared office is this profitable. they seem to do a really good job. Now, again, insurance, the risks, I guess, don't really show up until they do. So there's always the chance that you have a big hit to earnings. But in the meantime, I'm running. It's housing. There's never any problems there.

I'm joking, but it's actually, now that we got past the great financial crisis, I feel like there's so many regulations in place that it's hard to see how it would blow up. Yeah, and what's fascinating is that they might benefit when the housing market eventually unfreezes. Like, they've still done well despite it. The stocks have up 104% in the last five years. And I'm looking at their metrics here, 10-year average revenue growth per year, 24% and earnings per share. Yeah, diluted earnings per share, 39%. That's highly impressive.

It still could be somewhat cheap here. I have to look into it, but hey, if they keep buying back stuck, wow, fascinating, fascinating. We should have listened to Fabio. Yeah. We will go back. Anyone wants to go back and listen to that episode. You can search it. For anyone that doesn't know, you can go on the Spotify page at least.

If you go into our podcast and you search at the top, this is why we put tickers in all the episodes and show notes. If you search the ticker, it'll pop up, even though it's a couple years old. Yeah. Go listen to Fabio. He knows the business a lot better than I. do the I mean the thing I like about this is that they in theory premiums should have slowed right like you you trying to home buying new home buying home transactions slowed which you would think okay for a PMI underwriter they're going to have less volumes but they have they haven't skis

to beat over the last couple of years, which either tells me there's a lot more people purchasing homes under 20%, which might be the case, or they continue to tick share and they're earning really well. So, yeah, that's my small cap of the week. NMIH is the ticker. All right. I have two. We'll do these quickly before we get out of here.

This company is a little. My small cap of the week from a listener, suggesting. suggestion. Kender, if you want any more suggestions for Small Cap of the Week, please join Substack Chat. You just join the free tier of the newsletter. The link is in the show notes here. It is Watches of Switzerland. I think the ticker is WOS listed in the London Exchange. So you know what you have to do. If you want to get access, you sign up to our friends and interactive brokers and you can trade it. All right, here's what watches of Switzerland does. They operate a retail of luxury watches. The company offers luxury watches and jewelry, as well as provide

servicing repairs and insurance services for fashion and classic watches. It operates 131 showrooms in the United Kingdom and 40 showrooms in the United States, as well as through seven transactional websites under the Goldsmiths, Mappen, Blah, blah, blah, brands. It was founded in 1775 and is headquartered in, oh, I always get this wrong. UK people don't laugh. Lester, Lester. Lester.

Lester. Yeah. Why is it spelled like that? I don't know. but you know it from the Premier League, right? The only reason, yeah, people know that is the soccer team. Okay, I am guessing here that you are betting on the growth of the luxury watch market. I feel like as a key retailer for brands like Rolex, this is kind of an economic, as the world gets richer, you're kind of just betting on GDP plus growth here because as more people get rich, they have more disposable income, things of that nature.

Going by the last 10 years, revenue has grown by 15% annually, but there was a huge bump during. the pandemic. You kind of remember the Rolex bubble crypto people, things like that. That's right. Yeah, yeah.

Evita Ebit is 12. There's some slight margin fluctuations every year that can be a slight concern but nothing too crazy. Shares outstanding down a bit but no large capital returns. Any interest here,

Ryan? I think I'm lukewarm. Hey, could work. I imagine this is pretty lindy. The, it's definitely going to be pro, cyclical or

not buying a Rolex on Amazon. Beneficiary of the wealth effect. Yeah, that's true. Yeah, bull market, yeah. But the thing of the AI bull market is all these nerds from San Francisco. They don't do they want these things? They buy like an expressive machine. Yeah.

Yeah, that's a good point. We need a bull market in Europe and China and Russia. Maybe South Korea, the South Korea, you know, East Asia loves luxury. Maybe the South Korea bonuses will go in. All right. I can't help but see founded in. 1775 and think like I read those I read that sentence I think this thing's going to grow slowly no matter no matter what the company does maybe they could have reinvented themselves but it it's just

I have a hard time with it all right last one here uh we have a couple of minutes yeah meta released an AI agent rhyme did you hear about this meta muse yes of course of course I first off I feel like Google and Apple are dropping the ball here. As the operating systems, they should be on this. Right? Let's let this age for a little bit and then see. Okay. Quote, unlike other agents, this is Metas press release.

Muse was built to work for billions of people worldwide, so there's no learning curve. Anyone can use it out of the box. No technical expertise required. It can handle tasks like sending an email or booking travel, and it can take on big, audacious goals. Once a person shares a goal with Muse, it helps them develop. develop a personalized plan and coordinate their time and resources and advances the work on its own. It can open a browser, fill out forms, and negotiate on their behalf.

Would you use this, Ryan? Not from meta. Not from meta. I downloaded one from a random startup called Instinct. And it works okay. It's okay. But if it could start filling out forms for me and like doing all the busy work for, or, oh, making a restaurant reservation.

That's not too hard. But like travel stuff. If you can do the busy work with that, that would be great, I think. And you know what I had it do? Because I'm trying to not log on Twitter. This might be dangerous. I don't know.

Hackers do not. They better have good security. It doesn't really matter. But I have a Twitter account that I don't want to use. And I had it log in and it searches my feed. It literally browses my feed and comes up with topics that I could use on the power hour every day. I think that could be helpful.

Yeah, it could be. It seems like every time meta launches something AI related, maybe this is just my little echo chamber here, but all the shareholders get excited. Yeah. And I don't see much genuine customer adoption. Yeah, that is. And I know that's not exactly accurate because they are,

whatever, a top downloaded app, for example. But I, who, I, go talk to ordinary people who was talking about muse, or who was talking about,

whatever you want to call it, meta-a-I, Lama, whatever it was. It, they just, I still think they continue to miss the mark. I mean, this could be a great idea.

It's just like, is it a part of people's daily workflow? Like, I, I think, I think Google still owns the real estate to do this more so than meta. I think I would put it this way. Google and Apple have the right to win, but what they've put out lately, especially Apple,

but even recently with Google, has been very subpar. Like, they should be able to put out something equivalent to this. Maybe they're just sitting on it. But opening eye, putting out Astra seems to be trying to doing something similar. You have these startups like Instinct, Meta, Grockbot, who knows, next week, Google could launch something. Gemini could have an assistant. But I believe, especially because what they're connecting to for me is all my Google workspace

stuff. Like, what's interesting is this instinct thing. It said, hey, there's a advertiser that reached out to you and forgot to respond. I was like, oh, that's actually helpful in the email. Yeah, this should be. Why isn't Google doing this for me? And Siri, Google and Siri. Like, why aren't they doing this for me?

All right. I think we got to end it because. Because we're at an hour. We have another recording to get to. Ryan, anything before we get out of here? No, I think that's going to do it. Apologies again to all our live viewers for my internet debacle. We are going to, it will be an endless effort to figure it out.

But we will try to do the regular time next week because Ryan will be at visiting his family. They have fast Wi-Fi. And then the next week, Ryan will be on vacation. We'll have ARIA returning as a very day. the guest host. So we'll have two live there, but then hopefully we'll figure it out over the long term. Yep. All right. That is going to do it.

Thank you. Everyone for tuning in. We want to remind listeners that Brett and I are not financial advisors, anything we say or discuss. Here on this show is not formal advice or a recommendation we may buy, sell or hold any of the securities discussed on this podcast. Thank you all for tuning in and we will see you

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