Chit Chat Stocks - Top 10 Widest Moat Stocks; Google Hits All-Time High; Lululemon Earnings Debate $GOOG $LULU

Episode Date: September 5, 2025

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 (02:01) Google's Favorable Court Ruling (12:40) C3 AI's Disappointing Quarter (17:26) Lululemon's Earnings Report (28:08) Drafting the Top 10 Widest Moats ***************************************************** JOIN OUR NEWSLETTER AND CHAT COMMUNITY: https://chitchatstocks.substack.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

Welcome to Chit Chat Stocks. This is our weekly Power Hour episode. I am one of your hosts, Ryan Henderson, and today I am joined, as always, by Brett Schaefer. This is the Chit Chat Stocks podcast where we hopefully help you find your next great investment. And on these specific episodes, we talk all things financial markets, and we have a special one today, a little more prep went into this episode, I'd say. We've got a top 10 whitest moats segment and brett and i will be drafting going back and forth on the businesses that we think have the widest moats and then we've also got a whole bunch of other news google had some news around their court decision their court ruling which spoiler alert was quite favorable for them

wix maybe a company not everyone knows apparently has a hidden gem and i think it's worth talking about and we can get into all of that and then we've got some earnings as well we have of lululemon c3ai which will be fun to talk about and a whole bunch of other fun topics but before we get to that brett how are you doing well uh it's gonna be well it was going to be a very slow part of the quarter earning season has wound down a bit i guess we're talking a little sales force i think little lululemon which has been quite the controversial stock lately and also going to talk some Celsius post-mortem. Unfortunately, as a little tease, I could have earned, if I acted on my own judgment and said, hey, you know, I like this stock at about

$22 a share, I could have earned about 200% gains in six months, and I did not. So we're going to go through why that happened and give an update on that fascinating energy drink company. But I think, Ryan, a lot of listeners wanted us to discuss the Google deal. So I think we can do that first, then the draft. Plenty of listeners, they said, obviously, we have to talk about this when I asked what we should discuss this week. Plus, you've been a shareholder since, I think, a while and added in April. So I think some good returns for you as well. Maybe I'll go through some of the details here. Essentially, what happened is nothing. I know there's the joke around in the online world that nothing ever happens. That's the big joke. And I guess in

this time well it kind of did so thumbnail notes and then we can kind of discuss the implications here for investors is alphabet and apple are both soaring because a judge deemed the remedies in the monopoly case to really not have much of a remedy um there's no chrome divestiture no android divestiture for alphabet and the apple payment can remain so So for those that don't know, Apple receives upwards of $20 billion or more, the exact details aren't known, from Google every year to make Google search the default search engine on Safari. They've been doing this for a long time.

It makes up about 15% of Apple's operating earnings, maybe even up to 20% if it's been much higher than that. Now, why did this change when Google search was deemed a monopoly in 2024, but today they said, we're not going to have much happen in reaction to this deal. Well, the court and the judge said there's been increased competition from AI chatbots in the last year. And if Google is broken up, it cannot make default payments to other web browsers, because these web browsers, such as Mozilla, Firefox, some others out there may collapse because a lot of their earnings power is because Google search is there is paying them to be that. So I thought that was interesting.

people didn't. That's maybe unknown to the common investor out there. And that's really it. I guess open AI may have saved Apple's 15% of Apple's earnings. But curious first, there's a lot of ways we can go here. Does this make sense? What are your investing takeaways? What are your initial thoughts after seeing this ruling from a consumer perspective first uh it doesn't i don't mind it at all i still have the most success with google search for most of my search queries and if i want to use open ai i can go ahead and do that and i can download the jet chat gpt app on the app store it's really not that difficult so i am not bothered by this as a consumer it's free So it's not like they're gouging us on price or anything like that, like some of the monopolies of a century ago.

So, yeah, don't really care as a consumer. As a shareholder, no news is good news when you have one of the most dominant digital businesses in the world. and they despite all of the news or the noise i should say and despite even this case i guess nothing materializing from it they still are growing search queries according to management so i i find it interesting that open ai saved them and maybe if this case went to court three years prior or was ruled on three years prior the ruling might have been different but yeah i guess it doesn't make too big of a difference for me i thought well the only thing i didn't agree with really was this apple payment thing because that does seem

i think on its core i know i'm an apple hater but seems a bit anti-competitive to me i don't know if you should allow that to occur i guess they made it so you're not allowed to make it exclusive anymore although i don't know what that means you can't have multiple people paying to be the default option unless it changes every time you load it up that that doesn't seem to make logical sense but what i thought was more interesting was a report that apple is planning and you can roll your eyes because of the apple ai stuff that has been lackluster so far but they are planning an AI web-powered search tool with Siri to rival OpenAI, but right now they are talking to Alphabet to have Gemini power the bot.

My question is, is Alphabet going to pay for this? Are they going to do it for free to get more usage for Gemini, or is Apple going to have to pay because they are so behind in AI? I'd be curious to know if it's going to be the same as this traditional Google search deal, which seemed to be extremely lucrative for Apple. But if Alphabet's going to give them this access and they're going to have to make the infrastructure investments required to, you know, for the inference on the AI usage on Apple devices, I don't know if it makes sense to give it away for free or pay Apple to have that privilege. But we're probably not going to know the exact details of the contract. yeah i don't know what exactly that last part would look like obviously siri for anyone that's used it in the last five years it needs some upgrading ever yeah it's horrendous so it makes

sense that they would use gemini or literally anyone else to power it and the fact that they haven't thus far feels like they're just kind of afraid to swallow their pride and admit that the the the product is significantly worse but back to your first point what specifically about the payment from google do you not like that it makes them a monopoly well i'm thinking like as just a not from an investing perspective from this case it doesn't feel like paying for that is any way fair if you want to even playing field with not only traditional search engines but with ai you would say that you can't pay to play you can't pay to have people be the default person on uh the default engine on the safari browser it yeah it just doesn't feel competitive um

yeah so what would the alternative be i think the internet would be better if google and apple weren't a cartel that just kept all the profits for themselves i feel like the internet's pretty good like my experience on safari is phenomenal because of well yeah but if what i'm saying firefox if they're the best they wouldn't need to pay so people would still use it right yeah i think if they dropped this deal google would benefit my but like i guess i just don't see what the alternative is like they have to have someone as the default right well the default just be the default can be nothing because you can have set it yourself at the start you can list through all the search engines available you could have hey look this is the default web page when

you open safari it could even be yahoo i remember people have that and still have that if you have older computers that that makes more sense to me paying for play here it it it clearly to me is anti-competitive now is ai going to change this whole paradigm and make search engines not as relevant anymore and are is really gemini in the competition with chat gpt what's relevant here maybe but it's really hard to make an argument that this apple payment is not anti-competitive even though i agree google is still a good product and i have no complaints there but that doesn't mean it's not like when you select a link you can click you can select your browser like oh i don't use safari at all i think it's a bad browser uh i use chrome but

i still don't think it is someone what makes it competitive what's competitive about it it is by definition anti-competitive they are paying the most that is not fair it is it's it's a it is locking in a monopoly but if you were apple what would you do oh you take the highest bidder if i'm apple i'm focusing on maximizing my profits as a business i'm talking about what the courts what i disagree with with the courts ruling there it seemed like they had zero backbone with two of the most powerful companies in the world that would be just fine if apple didn't receive that payment i don't know when i look at this i think like is the consumer worse off for it and i would say no uh yeah but they would like you can download yahoo if you want you can

download the app yeah but the default's always going to prop you up to that so i think by definition it makes it slightly worse but it doesn't matter like what i'm saying is if you're right and they're vastly superior and everyone's going to use them anyways then this shouldn't they shouldn't have this thing they shouldn't have this payment and it should be it's it's it's it's i don't know i it's a hard time to describe it but i felt like this judge had zero backbone and do i think apple at 37 times earnings is a good investment still no they just didn't lose any earnings but man i think they they really dodged a bullet they dodged inter kind of inter what icbm they dodged a total this thing could have crushed 20 of their earnings

overnight i feel like they got extremely lucky and shareholders most of them don't even realize it yeah we gotta move on i will say okay so i understand that the payment feels anti-competitive but the the free market did choose google initially like they had 90 search share before safari was a dominant search browser people chose that i don't know about that I don't know about that. The iPhone came out in 2007. Okay. Desktop, they're the dominant search browser too, right? 85, 90% search queries go to them? Yeah, and that's for different reasons than the mobile operating system, but yeah. anyway all right let's move let's shift gears to other topics do we want to talk maybe i guess the

news from the week first before we hit the draft there were a couple quick ones we can touch on and we can save sort of the moat discussion for uh maybe 10 minutes from here oh you were asking that i thought yeah whatever type of you want okay let's go c3 ai they may have just reported the worst quarter i've ever seen so i think it's worth talking about uh in their own q4 press release so this is q4 this was three months ago they guided for first quarter revenue of 100 million to 109 million dollars yesterday they reported first quarter revenue of 70 million dollars so i'm not sure how you're that far off on your own guidance three months out oh i can tell you how you're off dishonesty

maybe but does it benefit them to be dishonest in that situation yes because they can sell stock i follow this company i am short it is a total fraud Well, let's say fraud is the wrong word. It is a bad company. They have no revenue that's legitimate in the AI space. We're in an AI boom. As you're about to say here, they missed their home guidance by 33% and they're not growing revenue. They've never made money. They've transitioned from some carbon credits company to an Internet of Things company to now an AI company. This is a terrible business. Yes, I am short a couple of shares of this in the single digits of shares. But as you're going to say here, they just have excuses over and over and over again. And I'm pretty confident saying it's a total joke of a company. Well, yeah, I think you kind of said it all there. So, yeah, misguidance by 33%.

Here's a quote from the CEO who actually stepped down as of this horrible report. He basically, on the conference call, he said two things. He started by saying the results here are unacceptable and they're unacceptable across the board. And then he goes on to blame hiring a bad sales guy. So he's like, yeah, we hired some sales guy who just wasn't up for it and that threw some confusion into the organization. so okay and then he said don't worry we fixed that we got rid of him yeah curious palantir doesn't have those issues and that's probably why that's the only reason palantir wins all the contracts overseas through yeah yeah and then he says he blames his own poor health which

you know he might be sick or whatever but here's a quote from the call as i have previously announced i ran into some unanticipated health issues and as a result of these health health issues, I was unable to participate as actively as I used to in the sales processes and the coordination of resources necessary to make these sales processes successful and come to closure. In hindsight, it's clear that my active involvement in that sales process had a greater impact than any of us knew. The good news is that we have completely restructured our sales and service organizations globally. So he finds a way to compliment his own abilities and say, we didn't really i don't think any of us realized how much we needed me and they're also uh you're

also resigning as the ceo uh or they're hiring someone else so i think he does have a very serious medical issue but the way he goes about it is very egotistical here yeah it feels weird to plug that in as like the team must have really missed me and that's why we reported a horrible quarter like you could just say it it wasn't helpful to have the ceo not involved uh anyway so yes horrendous quarter speaking of horrendous quarters lululemon just reported i have one more thing to add on c3ai that'll make you even more excited about this company the new ceo is named Stephen, last name's tough, Ehikan, E-H-I-K-I-A-N. He is leaving his role in the Department of Government Efficiency to join C3AI.

Does that make you confident in this business? no but they do talk a lot about government contracts oh yeah so perhaps they could have some uh little bit of maybe they've got the inside man there now at the ceo helm if he has some sway with any people of importance in the government but no that doesn't make me excited at all. Let's talk Lululemon really quickly. Total comp sales grew 1% driven by growth from international channels specifically. So international comp sales were up 15% year over year. America's comp sales were down 4% year over year. The stock is now down 13% after hours. Here's a quote from management, kind of boilerplate quote, but I'll go through it.

While we continue to see positive momentum overall in our international regions in the second quarter we are disappointed with our u.s business results and aspects of our product execution we have closely assessed the drivers of our underperformance and are continuing to take the necessary actions to strengthen our merchandise mix and accelerate our business they are still buying back stock but the amount they spent on report repurchases this quarter was about half of what they spent this time last year feels like all those people with durability concerns especially concerns about like the trendiness in the u.s have been validated and to me this is one of those examples where it looks really cheap on the surface i think it was

trading at a single digit earnings multiple this went from market darling to fallen angel in the span of a year pretty much and it's really easy sometimes i'm kind of on the fence between oh mr markets manic depressive mr markets having a bad day with lululemon to also thinking okay there's a lot of people on wall street smarter than myself with access to better information than me that maybe know something i don't and i think in this case and maybe with retail broadly wall street is usually ahead of the curve especially with all the alternative data sources that you can now get with retail. You can get all the credit card indicators. I think you can even, some people have satellite retail demand type indicators. My question to

you is, would you ever touch this? I'm going to look at the earnings ratio right now, but I believe we're probably back down. What is it down? 13% after hours, something like that, 10% or a little bit more. So we can go off that. I'm not sure our friends at fiscal we'll have updated within after hours yet, but we can look at and just kind of project what it'll be tomorrow. The trailing EV to EBIT before the earnings today is 9.6. So tomorrow we might be down closer to 8 to 8.5 or lower, depending on what this reaction is. I think the stock works quite well from here. I'm going to be honest. America's revenue still grew 1%. I would be curious to see what the Nikes, Adidas, what's the other one?

Gap, they have Athleta. There's some other ones you can look at at publicly traded companies. Unfortunately, some of their direct competitors are private, so we don't have good numbers as retail investors, but they have been doing all those ones that I listed that you can look at have been doing significantly worse than Lululemon in the United States, which makes, which I think is quite bullish for the brand and internationally, they're still chugging along. I'd like to see, maybe they usually include China revenue.

And I think, yeah, okay. Oh, wow, yeah, acceleration. China mainland revenue accelerated 24% year-over-year growth. I think that's quite promising. They're expanding to other countries. Yeah, the stock, I think the stock, well, sorry, definitely is not something you should use when investing in companies. But I think this is a good risk-reward here.

yeah i'm not sure how america's revenue grew one percent maybe that must include south america as well i know canada was it's just north america um it's online just online sales okay so u.s revenue which makes up the vast majority of the america's revenue declined half a percent that is probably one of their biggest profit drivers too i would guess i'm seeing net revenue in the second quarter right now i'm looking at it net revenue in the second quarter flat in constant dollars which doesn't matter right no minus yeah minus 0.5 for the u.s really am i looking at the wrong thing are you looking at that revenue change flat for united states revenue or america's united states revenue yeah canada okay maybe that was

that might have been rounded it's minus 0.49 so they may have rounded a flat sales but either way that's uh i would guess that store growth is probably store growth and online sales driving that because comp sales down four percent the concern for me china is like you look at the revenue growth and it feels okay but china has gone from two percent of sales to sixteen percent of sales in three years i i just hate when that happens like because it's it's buoying the top line but that business is like we've seen businesses that operate in china basically grind to a halt quickly and consumer sentiment can change over there really quickly

as well you just kind of never know what's going to happen and we talk about china risk all the time when an american company doing business abroad is that's like their primary growth lever I kind of get a shaky feeling. But yes, to your point, the valuation is quite cheap. If you are serious about investing, you need to consider interactive brokers. I've said this before and I'll say it again. The number one reason I use interactive brokers is because they do not cut corners. IBKR gives investors powerful capabilities that make a difference in the long run. For example, they offer margin rates up to 53% lower than the industry. They provide up to 3.83% interest on instantly available cash. They allow you to easily make extra income on your

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events, shareholder meetings, and it has Morningstar's high quality reports on more than 1700 companies. It really is the complete research platform for stock focused investors. If you use our link fiscal.ai slash chitchat, you will automatically get two weeks of fiscal pro for free. And if you find that it's worth upgrading, which I think you will, you'll get 15% off any paid plans with our link. Again, that is fiscal.ai slash chitchat. The link will be in the show notes. Let's look at United States revenue trailing 12 month. I'm going to look going back to how about the start of 2023? Do you want to guess the United States revenue compound annual growth rate since January of 2023 to this latest quarter, which I should say, shout out to our friends at Fiscal AI, because they've already updated the quarter. what do you think the annual growth rate has been u.s revenue trailing 12 months over the last two years basically is that you said two years yeah from january 2023 through to today actually that

yeah it's the last 12 months so it shouldn't be not like a weird comp for seasonality i'll go eight percent well five and a half percent but the way the reason i wanted to say this is the way people talk about this business is like over the last six quarters it's america's revenue is down 50 and it has grown yeah but it's not you know like it's that's not sticky like what do you mean sticky it's the same revenue they get everywhere else it's just convincing people to buy clothes i know but that changes so fast like that is the one thing with retail like two years ago revenue doesn't matter like those aren't there's no subscription here the customers are not pledged to staying with lululemon forever and anecdotally it seems like

a lot of people are shopping elsewhere but that is just anecdotes for me it's i see why it gets the multiple it does because if u.s comp sales really are in like let's say it was negative of comp sales for the next three or four years that's going to be a huge headwind to earnings oh yeah but it's which is possibly a good if it's at eight times earnings i guess i'm not sure what how ebit translates translates to earnings but should be fine if they're at eight times earnings buying back a lot of stock feels like if i i usually have the never invest in apparel category uh strategy so i probably won't buy it but won't people listeners might know if i say i like it stock and that i don't buy it just with like with celsius here it's probably going to go up 200

in the next year it feels like over the next 18 months a fantastic risk reward but i just don't know if that's how i invest yeah it so it's in your psychological long portfolio but not your real sure sure which seems to crush it because all right let's get to the fun segment well they're all fun but i think this one will be a little more fun top 10 widest moats in the world i think most of mine are u.s companies but we're going in the world here lay the groundwork lay out the draft rules pretty simple and we're doing it's just three or four rules here but what are the criteria you know like no private companies stuff like that yeah so it's public companies only if you have one

that's like a duopoly for example visa mastercard you can kind of just take them as a group you can't take if someone says visa can't take mastercard as well because we're just grouping them together but the rest will be public companies it's just a draft back and forth brett generously gave me the first pick before the show it's snake remember so i get second and third oh yeah okay i guess we're going snake draft snake so i get second and third then you get fourth and fifth and then back and forth until we end it yeah okay and we're just going our the totally 100 subjective whatever businesses we think have the widest moats brett and i i believe have both set up our own little pools of companies here that we can select

I got my list right here. Brett's got his notepad. I've got my – I've got my notepad. 16 companies to make sure we don't overlap too much. I've got my notes here. I'm going to be taking the first pick, and we'll take some time in between to talk about the actual moats. It's not just going to ping back and forth.

Number one largest moat in the world for me would be Amazon. Not sure if that would have been your first pick. I see you crossing off a name there, so I'm hoping that was on your list. It was on the list, yeah, unsurprisingly. To me, this feels the least likely to – purely from the infrastructure and logistics advantage. I'm focusing mostly on the e-commerce side here, but you could probably make some similar cases for the cloud business as well and the cost that it's required to scale that. But the logistics advantage for Amazon feels like, of all the companies on my list, the least susceptible to someone stepping in and having a better infrastructure fulfillment network. It seems so unlikely that someone could do that, not only because you have to spend now $30 billion, $40 billion a year on CapEx and most companies can't do that.

But the actual complexity of the fulfillment network and the iterations that they've built over the years is really, really difficult to solve for. And you just see it in their delivery times. It's going to be very, very difficult for anyone to replicate that, and it will always be sort of a self-reinforcing advantage for them. any reason that you wouldn't you would say this isn't the top one the top one i think well if we're going to go competitors here i'm not going to spoil one i think there's another one we can talk about that has a economies of scale moat that i could argue is better because it combines with maybe a different moat uh again i don't want to try to talk vaguely and not spoil my answers here because it is going to be on my second and third list here number two for me

and i didn't do this one just because we didn't want to do big tech only uh trying not to do only big tech for this because it can just be more fun for the listeners the first one on my list and it's one i wish i bought when it fell to 25 times earnings in 2022 although it is at 31 32 times earnings today. So not that crazy cheap. Well, somewhere in the 30s. It is Hermes. One that previously, I don't know if I put on this list, but as I think one of the premier luxury companies in the world, it has and has shown over the last few years, it can grow while not only the entire luxury market is struggling, but one of the key regions, China, has been struggling from a consumer spending perspective from 2022 through to today. And the fact that

when you look at their resale prices on their luxury handbags, they're two, three times the amount of what they actually sell them for. That gives them, they could essentially raise prices on their handbags without changing anything about their products and selling the same handbag. They could change the price by 3%, 5% annually for the next 30, 40 years and are not going to get affected. As long as they keep retaining the moat that they have today, it's not something that could get disrupted by AI. It's not something that could get disrupted by huge capital spending. If you gave any of their competitors, such as a Gucci, whoever, $100 billion, they would not be able to replicate Hermes. And the reason I like them better than one that I think might be on your

list might also be on mine as well. Someone such as a Ferrari is because, and this is backed up by stats, I'm not just saying this, statistically spending in around the globe, I think it's something like 60% or 80% is driven by women, whether single or not. And this is kind of the women's premier luxury product. And Ferrari is more male. So I think that might be a bit more tied to the the crypto russian billionaire market and i think it's a little bit less stable although still a fantastic business if we're going to compare those all right i might be going a little long but what's what's your thoughts there no i think carmez is a good one i stayed away from luxury on this list because it was might have been a mistake but for me i just maybe it's like

the could the type of consumer i am but i just somehow grab like i struggle with the idea that someone's gonna they have unlimited pricing power even though so far it seems like that might be the case well compare again compare to the other players on the resale market their stuff sells for that much higher which shows that people value it that much so if it's at two three times the actual price and they can keep raising prices in general again they just have that pricing power not nothing's unlimited but like ferrari they can keep going higher and people like it more if the birkin bag only cost a thousand dollars versus 10 i think it might be 13 maybe 20 000 the cachet around it would be way lower yeah it is a good test of if i gave you a billion dollars today

could you maybe we can make this 50 billion dollars if i gave you 50 billion dollars day could you replicate this business i think with airmez the answer is clearly no you have 200 300 right i think around 200 years of heritage in that brand that you're just can't replicate yep and talk about another one that i should have bought it was at 20 it was i think sub 25 times earnings in 2022 that i think will go down as a generational buying opportunity and if it gets back to 25 times earnings i think it'll be another generational buying opportunity all right what's your number three on the list number three number two for me is going to be the one that i think improves on amazon maybe beats amazon's uh capital expenditures moat and

that is taiwan semiconductor manufacturing corporation tsmc a company that has dominated its industry so much has the supply chain connection has the technological expertise the engineering expertise, that so much that the U.S. government is going to have to pretty much keep Intel, it's number one of its top competitors, it's going to have to give them possibly actually $100 billion to try to stay in business. I think that just proves how far in the lead they are. The United States sees semiconductors as a strategic priority or a national security priority, and they decided not to have their primary vendor be the U.S. semiconductor maker, but make Taiwan Semiconductor, you know, kind of a Taiwan American

semiconductor manufacturing with all this spending they're doing in Arizona. I think that gives them a fantastic moat, and it just seems so hard for someone to defeat them. I don't know how that would happen over the next 10 years now compared to some luxury players you can play maybe a game of saying well 10 years is a long time in tech and some stuff could change but within their industry their competitive advantage seems extremely strong and that's why i got them on second my list that was number two for me so i had to cross them off the board nice yeah i totally agree it seems at this point it could always change maybe but it seems like nobody's catching them in terms of the leading edge chips and developers chip designers they will always build

for the leading edge um and that's just that there's that's always going to be in the highest demand so they will always be a be sort of a price maker not a price taker yeah i've been writing the new david gardner book got an advanced copy which is nice the snap test you did this they probably have the ultimate snap test if you did the snap test eliminated taiwan semiconductor manufacturing the global economy would probably be worth 50 percent or less overnight yeah it's a wide moat that that's probably true they probably would be the most effective on the snap test all right i'm going to take my second pick number four on our rankings here and this is going to be sort of a grouping not just any one company and keep in mind the parameters here

we are taking the companies with the largest moats not necessarily the companies that we think would be the best investments for me it's the railroads this is one of those things where it's just a byproduct of timing and sort of human evolution where today there's just simply no way to build another i think they call it class one railroad and i'm no expert on the railroads by the way but when you drive across the country you realize pretty quickly there's no way to build a railroad across the country anymore and they've been so consolidated and i think the consolidation is continuing i can't remember the the two railroads that just announced another merger. But there's no way to compete with them other than alternative forms of transportation

for goods like trucking. But there's some goods that will always be, from what I understand, economically more sensible to ship via railroads. To me, that is something that will continue to be sort of irreplaceable. And I'd say on my list, behind Taiwan's semiconductor, this one might be the most the highest on the snap test where if the railroads disappear tomorrow there would be a lot of goods that don't get where they need to go and might not have a way to get where they need to go okay yeah that's a good one all right what's your fifth one well sorry your third overall number five okay this one might surprise some people because it's my first real i think this is the first digital one from the list meta i'm gonna take meta i think they have the biggest network

effect in the world i'm not sure that's necessarily controversial maybe platforms like youtube or google i guess you could say the payments networks too but like yeah i'm not i wasn't going to add any suggestions to give you any ideas for for the rest of your rankings but yeah i meta to me it's it's not something i use that regularly although i do use whatsapp i don't have instagram i don't have facebook i don't have reality labs or oculus Yeah, what was it? MetaHorizons? MetaHorizons, if there's five people still using that one. But I see it so often. I see it with friends, family, just purely addicted to Instagram. And it used to be Facebook. Now it's Instagram, maybe WhatsApp internationally as well. But

you can't replace that network effect. It's so hard to reach that level. At this point, I think Instagram is probably at roughly 2 to 3 billion users. Pretty much everyone that has internet access seems to have some sort of a Facebook-related account. I might be reaching there. Maybe I could have waited until a later pick, but I think the network effect is really strong. Yeah, you should have known me, Ryan. I wasn't going to pick that. True.

But yeah, I'll take them as my third. I agree, though, with the fact that so many similar to cigarettes, soda, what have you, you know, nicotine, caffeine, I guess we don't have many. Maybe you have some of those on your list, but I don't really have those on my list. People say all the time, I want to quit. I want to quit social media, but it's so damn addicting for them. They can't. From a society perspective, you can have your own opinion, but that makes it a that has

made it quite a good business. they always go back from what i've seen all right yeah what's your third pick number six on the list okay i'm just gonna go down in order no changing my opinions from earlier number three this is one that again has that lindy effect it's been around forever and i think will never is a tough word i've been using a lot of definitive words on this podcast. I think this one will never be disrupted in our lifetime. It is Intercontinental Exchange, the owner of the New York Stock Exchange. I see Ryan had it on his list as well. If you look at the New York Stock Exchange, it is, and I think some of them, there's some other

publicly traded ones out there like in Mexico that has, I think, a wide moat. I've owned it before. But the New York Stock Exchange is, as the financial capital of the world, it is the premier stock exchange out there if you are on it you're that much more viable as a publicly traded business and similar to the rating agencies it may be more expensive to list on there but the fact that your stock is going to be worth that much more you're going to have that much more access to the capital markets for funding what have you it is worth it and they as a small fee each year should have extreme pricing power on their business and they will grow along with global economy financial markets what have you i guess that's more of like is the business good

but extremely wide moat super lindy business something that is going to have this strong brand because it's been proven over two centuries and one that will continue to widen its moat as it's used i mean would someone say well we're starting the austin stock exchange no one's gonna list on there doesn't someone tried right didn't someone try to do it in Dallas long term maybe they did yeah but there's that long-term stock exchange that got zero traction remember that one yeah so I agree with this number eight on my list was just stock exchanges broadly because I've said this before if I'm ever looking at investing in a country like let's say i i think an economy is going to be an attractive maybe japan for example

one of the first businesses that i look for is the stock exchange what is the stock exchange trading at because it's always a monopoly or duopoly and in fact in the u.s you picked intercontinental exchange but in the u.s it's probably one of the more competitive ones Where you've got the NASDAQ and there's some incentive to try to build a competitor here in the US because it's such a lucrative market. But abroad, there's probably less of an incentive to do so. These companies, if you want access to liquidity, you basically have to go through the premier exchanges. If you want access to more investor attention, you got to go through the premier exchanges. It's not enough to go through the pink sheets.

You're basically going to be getting a discount relative. You're going to be getting less money. So it's worth paying up in that case. I agree. I agree. All right. Fourth on my list is this seventh overall, right? Something like that.

Seventh overall, this is also one that's going to include other businesses. Although I will only, as a disclosure, in case you want to use one of the other ones, if possible, I'm only going to use two of them, Visa and MasterCard. I'd say those are the only two that count in this category. I will say Visa for my one, though. Largest payment network in the world. I think when you talked about network effects, I would argue this is the premier network effect in the world. You have more users than, I think, more users. Well, they have more cards in circulation than Meta has total users across its various platforms.

There might be also overlap on both from an individual user. But I think they have four and a half billion cards in circulation. They have 200 million merchants that use them and all these banks that use them for their credit card lending. They are any sort of threat out there. Buy now, pay later, stable coins, what have you. There's always threats coming for the credit card business. The swipe change fees and Visa, along with MasterCard, I think will just continue to grow and grow and grow, even though we're going to go to mobile payments over time and

more and more mobile payments over time. People paying with smartphones, it doesn't matter. You're preloading your card onto your Apple Pay and use that as well. It's more of a complicated mode that's probably harder to talk about through just this draft. But I think in general, their network effect is one of the largest in the world. And the fact that one snap test, also the fact that governments have tried to kill their business and have largely failed is a huge testament to their competitive advantage. yeah i think most people that are skeptical or pessimistic about the card networks and think that it will be disrupted by stable coins which is i don't know if there's ever been as clear of

like uh this could technically really circumvent the payment networks if it got broad adoption all over the globe which maybe there's some validity there we'll see i'd probably take the other side of that bet. But I think most people don't really understand necessarily what Visa and MasterCard do. And for those that don't, it's basically just a communication system between all banks globally. So if you're a bank, a regional bank in Wyoming or whatever, and one of your cardholders spends money online or wherever, do you want to set up that connection with the bank yourself and route the orders and double check to make sure that there's sufficient funds and then have whatever the the settlement process as well like back in the day for context

there was literally they were sending reams of paper they were sending actual reams of paper visa is the communication system at this point so i think uh it's so much easier it's really actually the only option to plug into one of the major networks and there's pretty much there's really three i guess you could say discover as well but visa and mastercard are definitely the premier ones is that is it my pick now you got your last two last two okay i was hoping you wouldn't say this one and you did not so i'm going to take it now i'm going to go with the debt ratings agencies here in the united states so you can kind of pick which one you like moody's or s&p global they are it's basically sort of the same as the stock exchanges in terms of

their structural advantage which is it will sort of always be more costly to not go with them even though they have raised prices considerably over the years. So if you want to get your debt rated, you could go to Ryan and Brett's credit rating agency and I could give you a stamp of approval and say, yep, this is AAA, but nobody's going to buy that. And you're going to end up paying more in interest rates. If you get AAA or whatever the rating is from Moody's or S&P, you're paying significantly less in interest rates because there's much more buyer demand. So it's a huge, I guess, reputational advantage, sort of the same as the exchanges. People are buying more or you have access to more investors because you're on the New

York Stock Exchange or the NASDAQ as opposed to the pink sheets. So to me, those would be some of the biggest advantages. It'd be really hard to see anyone replacing them in the next two or three decades. So probably I wouldn't put it quite as high as everything – the other ones we've talked about today. But yeah, that's going to be my fourth pick and number eight overall. Let's go to number nine. Yes, we got some other topics. So let's roll through these last two.

This is a very broad category. I'm kind of deciding between two here. I'm going to go with number six, six on my list. Trust my gut. The airports. The airports in general? you can't just take airports okay mexican airports all right fair fair but it's like if i took the mexican airports you could turn around take the argentina airports whatever like

airports in general pretty much all over the globe are local monopolies they have considerable pricing power the only thing i don't like here is the government relationship i don't when i think of like the hierarchy of competitive advantages, anything that's slightly dependent on government contracts or relationships is probably pretty low for me even though it does create barriers to entry. It's susceptible. It's a pretty quick change. But no one is really putting up new airports unless you get the approval to do so and only

few have the approval to do so, especially in countries like Mexico. So I'm going to take the Mexican airports. Right. Yeah. And we're not just talking about like their equity, it's how wide of a moat they have for their economy. I mean, you're not just going to prop up a second airport in a city without major approvals across the board from the entire, any sort of stakeholder in that community, from the

individual citizen, to government, to the business, to the local cities, to what have you, to the wider government. All right, my last one, another semiconductor pick, ASML. It's one, again, where the Chinese government has tried as hard as they can to replicate their product, and they can't do it. NVIDIA's chips, along with TSMC's expertise, are not possible without ASML. And the fact that they're giving or selling their first new machines to Intel is a huge favor, I think, to that company. the no one's been able to copy them they keep extending their lead and what you know are what sort of their machines are needed to make these smaller and smaller chips you know five nanometer

three nanometer two nanometer and the smaller we go the more important lithography is going to be i believe from what i've read the fact that no one's been able to copy them is i think a testament because of how valuable they are and the pricing power they have in their machines they can sell a single machine for 400 million dollars i think now the new one i think it might be 400 million euros but depending on constant currency stuff as well as the switching cost from going from all right we're using asm lithography for our semiconductor manufacturing line we have all the services revenue associated with that and if we're going to rip and replace that you'd have to have something significantly better that gives them tons of pricing power especially with their

services operations i think we'll close things out there we'll make the list for the listeners on the substack chat probably on twitter as well but i don't know if we're going to do a vote maybe we'll just have people give an opinion on who won the draft ryan do you want to list off your five then i'll list off mine and then we'll go yeah real quick on asml i think the stat that stands out the most to kind of describe their moat the average price and shout out to fiscal for being able to allow us to make this chart. Average price per EUV machine costs $189 million. 10 years ago, it costed $43 million. They've raised the price on average of their EUV machines by 13% a year over the last decade. My top five were, let me double check, make sure I'm getting

these right amazon railroads meta ratings agencies airports i did take the broad ones i think it's funny i took airports i still think that's quite a funny but i agree i agree we're not just going to each take different airports mine is airmez taiwan semiconductor international international continental exchange new york stock exchange or being added in the other u.s uh stock exchanges visa and asml honorable mentions here on my list i made 16 american express ferrari autodesk fico costco and here's some interesting ones that you might be surprised on shopify airbnb accent enterprises and our sponsor interactive brokers i had most of those as well the only other two i think i'd add would be

microsoft apple and google oh yeah i try to stay not big tech heavy just for fun yeah and they have so many different businesses it's hard to argue yeah all right all right last topic i think maybe we can get to a couple because i do want to talk about the pepsi activist stake but i want to talk about this news with wix so this came out yesterday technically but wix essentially i have never seen this happen before i can't remember at least the last time i've seen this happen three months ago wix acquired a private company called base 44 i didn't even know what happened it was pretty small acquisition they paid 80 million dollars which is pretty small in the grand scheme of things i mean they're an eight billion dollar

company so one percent of their market cap there was also some additional earn out terms but 80 million dollars base 44 for anyone that doesn't know i didn't know is apparently a vibe coding platform so according to jim and i base 44 is that term that term is not so elitist i'm a vibe coder yeah it does sound elitist but i like it base 44 is an ai powered platform and tool that allows users to create fully functional custom software and applications using natural language prompts without writing any code sounds nice however not really however but this week the ceo and the founder of base 44 who's still there mayor shlomo i hope i'm saying his name right put out a post on linkedin i actually i bet wix does not appreciate him doing this he might want

to stop doing that. But he put out a post on LinkedIn that said, some business and product updates, as I haven't done some in a while. Business, last week on average, we added $400,000 in ARR every day. That's more than $1 million in ARR every two and a half days. And the growth seems to accelerate week over week. To put that in perspective, when Base44 was acquired, we were doing a few million in ARR overall. While it's hard to predict the long term, if this trend continues we will probably break quote the fastest in history record or something like that so they base 44 to clarify here they are adding 12 million dollars in new annual recurring revenue every month right now when did they acquire them three months ago they were at 1 million total

well yeah that's great i think it was like 3 million in arr and today estimates are they're doing 140 million in arr that's three months later wix themselves does 1.9 billion in total revenue so within three months they've gotten to like almost 10 percent of wix's revenue i have never seen i don't think i've ever seen this where you get like sort of a small cap stock that acquires just some extreme growth private company i guess it wasn't extreme growth when they bought them but to this is going to be meaningful to wix so i guess my question is it's currently at an eight billion dollar market cap wix i would guess if base 44 were just on its own in private markets it would probably get a private market valuation of around somewhere like five billion but that's

but they're not they're not at 140 million in revenue yet they're projected to get there soon It's like an AR metric, which it's getting technically ahead of what the actual numbers are, but is it subscription? Maybe? I don't know. I'm clear. I'm guessing. Does this give you any interest in Wix? Because it's not really that – it doesn't seem to be that priced in.

Well, maybe they're pricing in that Base44 and other companies are disrupting Wix's old business, and they're going to need to get on that. and disrupt themselves maybe that this is going to help with that seems promising not sure how did you find this little fin twit sleuthing yeah someone someone on twitter posted about it and the ceo and founder posted about this on linkedin i have seen a ton of base 44 ads which guys you're targeting the wrong crowd i'm not a vibe coder so well we do i'm sure we own a business so maybe it's that yeah but i mean i i had no idea they acquired them and and this growth we've seen this a couple times now where companies seem to go like they're hitting record pace of going of reaching like 100 million in arr or something like that where all of a sudden it catches fire and just

the pace of growth i don't think we've ever seen it at the current rate that it is today just tell me the unit economics it's i i would bet they're like accidentally profitable my guess is that like a lot of the companies like this yeah yeah they get growth quicker than they can and then they like have to invest after the fact because they want to sustain it and they have a period of extreme profitability would be my guess but we'll see any other news well maybe we could do this um um i can save celsius and pepsi for next time because i think that's more of an actual intellectual category here's a fun one maybe bubble watch in sports salaries or something

like that but there was financial shenanigans in sports i think is relevant for investors because it's kind of someone did a off balance sheet arrangement and it was one of the well the old ceo of microsoft steve ballmer so there was some off balance sheet arrangements with uh the los Angeles Clippers basketball team essentially paying people outside of the salary cap. Here's a quote, and I guess they're not listening, but it was an investigation from Pablo Torre. Quote, Los Angeles Clippers superstar Kawhi Leonard signed a $28 million endorsement deal with an environmental startup funded by Clippers owner Steve Ballmer. Quote, multiple former employees independently characterized Leonard's arrangement as a

no-show job none of the employees nor tori found any evidence of social media posts photographs or appearances promoting aspiration as stipulated in the deal aspiration is the company's name seems like they found quite a workaround to have a lower salary there um what do you think should this type of stuff be illegal is this fraud is it or is it just smart financial engineering well yeah they should be punished by the league uh i think this happens more than a lot of people realize maybe maybe not in nba but i know it does happen in a lot of spots so the entire college football and basketball business i mean that's that's 100 of the salaries there i bet there's a lot of gms looking at this like uh well it sucks for them they got caught yeah don't do a

wide-scale investigation here what i think what happened is that leonard didn't even do any of the services what's funny though is that this aspiration company has gotten caught doing um what is it calling circular revenue endorsement deals with a lot of famous or rich people for this tree planting carbon thing and this was only one of the times so i think what happened is balmer was like balmer got pitched as an investment here and then they went went he went wait what are you guys doing i actually might have a use for this yeah we might be able to keep this guy around i will say this might be a contrarian opinion i get the ick the investment ick from steve balmer i don't know what it is i know some people kind of really like him like for example

his interview with the acquired a lot of people were like wow he was passionate he did but he seemed i don't know some it's hard to put my finger on it but i got the ick from him i got i got the sense that he pads his stats so to say like he pads what he did at microsoft yeah i just i think the board well maybe i don't know if he resigned or what but it seems to me like it's a lot of talk and he's a very good talker which maybe that's a huge part of being an executive he's very passionate but i kind of get the investing neck from him All right. Hot take from mine as we end things out here. Anything else for the listeners that they need to know before we get out of here? No, I think that's going to do it. If we missed anybody on the top 10 moats list, please give us a shout. You can DM us on Twitter. You can email us at chitchatmoneypodcast at gmail.com.

this is where we have the conversations now and you should join ryan there as a member of the show on the substack chat that is where the conversations are nowadays subscribe to the freeze newsletter on substack and join the chat there in common on youtube too or any of those other places but i'll probably respond on the substack chat all right let's get out of here yeah thank you to our sponsors interactive brokers and fiscal ai go check them out link is in the show notes. If you are following the show or we're listening to it, make sure to follow us on Spotify, Apple Podcasts, YouTube, or wherever you get your podcasts. Let's see, anything else? Nope, I don't think so. All right. Disclosure, we are not financial advisors. Anything we say

on the show is not formal advice or recommendation. Nine, nine, or any podcast guests may hold securities discussed in this podcast, may have held them in the past, and may buy, sell, or hold them in the future. Thank you everyone for tuning into the live show or listening wherever you get your podcasts, and we'll see you next time.