Chit Chat Stocks - Top Performing Small-Caps of 2024; Mexican Tariff Threats; Hawk Tuah Coin? (CRWD, DAVE, APP + More)

Starting point is 00:00:00 Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome to Chit Chat Stocks. We have another episode of our weekly power hour. I am joined as always by the one and only Brett Schaefer. My name is Ryan Henderson, I should mention as well, and we've got plenty on the docket for today. We've got news on Macy's, a rogue employee, maybe hiding a couple of dollars worth of expenses. I've got my small cap of the week,

Starting point is 00:00:57 And we're actually going to go back through – I made a little watch list of all my previous small caps of the week to see which has performed the best. And I think it might surprise you, Brett, but a little tease here. The best performing small cap of the week is up 920%. So year to date. Wow. That's small caps for you. Yeah, I guess. The worst is down quite a bit as well.

Starting point is 00:01:21 So you get both sides of the spectrum there. uh brett's got some topics maybe addressing what we're going to call the re-bubble uh a certain a certain meme coin from a certain uh influencer is going viral uh so yeah that's a good way to put it yeah uh but before we get to that i also i want to mention two things first of all there is a job opening at my company finchat.io it is one of our sponsors it's the platform we use every day for financial data. It's a research analyst position. You'd be working directly with me on all things, content and growth. And it's a lot of equity analysis and equity research. So if you're interested in that at all, reach out to me at ryan.henderson at finchat.io.

Starting point is 00:02:10 And then second thing, a quick word from our friends at Public. Heads up folks, interest rates are falling, but you can still lock in a 6% or higher yield with a bond account at public.com. That's a pretty big deal because when rates drop, so can the interest you earn on your investment. A bond account allows you to lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds. So while other people are watching their returns shrink, you can sit back with regular interest payments, but you might want to act fast because your yield is not locked in until you invest. The good news, it only takes a couple of minutes to sign up at public.com. Lock in a 6% or higher yield with a bond account

Starting point is 00:02:50 only at public.com forward slash chit chat stocks all right brett where do you want to start i don't know well we got a serious topic from you uh for anyone that's watching on the old youtube page i know most people listen on sunday morning i have switched up my recording location hopefully the wi-fi is a bit better here but let us know if the audio or the video doesn't look nearly as good but it seems a little bit more stable now um that's what happens when i guess a bomb cyclone as they call it hits your local area let's talk i mean the macy's thing is interesting it's just i guess with earning season out of the way it's hard to it's hard to talk about stuff as much um that's exciting you know the macy's you know i'm probably one off the rails

Starting point is 00:03:43 maybe we can start with that maybe we can talk about your small caps you get a lot of stuff there what do you want to do yeah it's uh not that lengthy of a topic um i'm not sure it's that big of a deal but macy's was forced to delay reporting its full third quarter earnings today i'm this is a quote so it's not today but they were forced to uh delay their report after discovering that one worker covered up 132 million to 154 million dollars in delivery expenses over three years which is a an insane amount uh so what happened an employee working in small package delivery expense accounting filed phony reports from q4 2021 through november 2nd of this year to intentionally hide expenses the retailer reportedly had four point a little like 4.4

Starting point is 00:04:41 billion in delivery expenses over that time so that means three percent of the total now appears to be unaccounted for it's a big jump in expenses um i saw some people remind the world of scott galloway's take from 2016 which has not aged well which said the future of retail looks a lot more like Macy's than it does Amazon. Not that this actually has anything to do necessarily with the retail business, but yeah, that unfortunate take there. Any thoughts here? I mean, there isn't, it's not that big of a deal, but wow. That employee went, I guess, off the rails. Yeah. That's, I mean, what can you say? What's the Buffett quote? There's going to be some level of malfeasance or something along those lines within the berkshire hathaway ecosystem

Starting point is 00:05:32 when they have 500 000 employees i think this is an example of that and how did it didn't affect cash flow i'm correct right it's just hiding the delivery expenses so it's just accounted for incorrectly i can assume so honestly i don't know if they gave enough color on it and i'm not sure I think we'll probably – I probably could have checked the earnings report if they've filed it yet. I don't see how it could affect cash flow. Let me check here. Who knows? Either way.

Starting point is 00:06:06 It doesn't really matter. I'm not really looking to buy Macy's at any time soon. Yeah. Is there any path where this company doesn't just kind of go to zero like Sears? You know what's wild? It's up. nine percent in the last five days well i'm really sure how that happened uh all right well yeah no we look at it over the last five years what do you what do you think the returns

Starting point is 00:06:37 are last five years i gotta load it up right now five percent at least excluding dividends yeah what do you think the returns are since 1992 excluding dividends cumulative we should probably look at the dividends because the dividend yield is pretty high so it might matter here but just the price performance well it i mean it was at the top in its heyday right so i would guess this is uh 10x over the last 30 years 100 cumulative wow really yeah just 100 now let's look at 1992 total return well hey 239 okay uh still significantly lower than the the market average but market cap is still four and a half billion dollars i would say the worst is

Starting point is 00:07:41 yet to come i mean is there a single young person that shops at macy's anymore does anyone care maybe maybe one not uh it's not cheap for starters um not that i mean maybe they'd go out to the luxury market but yeah it's just i don't know they're kind of the iconic not iconic uh sort of the poster child i guess of the demise of malls shopping centers like it might not be amazon that disintermediates them like the maybe or maybe it hasn't been amazon that's really disrupted them but just the overall i'd say shopify has probably killed macy's more so even than amazon i don't know how much retail shopping goes on in amazon but everyone not yeah or not retail apparel but anyways okay macy's uh 150 million dollars more inexpensive than i thought

Starting point is 00:08:43 or maybe recategorized. The other thing I want to talk about, though, is the small caps. Should we move to that? Let's do it. Okay, so a couple things here. I'm not going to go to my small cap of the week first. I'll touch on that in a second. But two things.

Starting point is 00:09:03 First of all, a while back, we did our small cap of the week presented by Yellow Brick Investing, which, as I was going through all these, actually reminded me how thankful I am for Yellowbrick Investing because there was a lot of these. We've done 24 small cap of the weeks so far this year. And I think just about every single one I have used Yellowbrick Investing for. So if you go to joinyellowbrick.com, you can just look up the ticker and you'll find a high quality write-up, most likely on that company. Anyways, we've done 24 small caps of the weeks. You may have already read this,

Starting point is 00:09:37 but how many do you think have had positive returns year to date I guess I don't have it in front of me so half I'm just going for the coin flip yeah going for the coin flip 13 of the 24 have had positive returns

Starting point is 00:09:55 11 have had negative can you guess which ones are the best performing and worst performing ooh that means I have to remember what the small caps of the week were do you have a list on the sheet um i have it on a dashboard and fin chat let me categorize it do you want to maybe share that with

Starting point is 00:10:22 me oh my gosh uh yeah i can maybe screenshot it just um well i'm gonna guess it's too long a screenshot go ahead and just take a stab at it the way you're teasing it and makes me think it's one of the the shit goes but i still can't remember it's is it the nerdy the nerdy one that you that you liked nerdy is down 57 year to date what about the one there was one at the time And when we looked up, that was up like 400%. So maybe it's that one. I think you might be thinking of the right one. So it's – and just to clarify, year-to-date returns, we haven't been doing this since the start of the year.

Starting point is 00:11:12 So it doesn't – it's not indicative of the time that we looked at it onward. But it's still, I guess, fun to look at. The company is called Dave. it was that financial services app that like was growing gangbusters up now yesterday it was 920 today it is 989 year-to-date yeah up six percent today 93 why what's going on means i don't know uh the financials actually look pretty good okay if i remember correctly it's still down quite a bit from its highs in 2021 must have been a big 70 yeah but this does go to show and i'm not sure if that was a SPAC or an IPO but busted IPOs busted listings

Starting point is 00:12:09 or broken listings from that 2020 to 2021 time frame is can be a very profitable pond to fish Now, you've got to sort through a lot of crap and a lot of bad businesses, but there are probably some companies that are on the cusp of turning the corner to profitability and have real growth and real users and a real business, and everyone just dismisses them because of the return so far. So Dave has kind of been one of those, it appears. But yeah, it's far and away the best performing stock from that list. The other one, the next closest one, next best performing, and we're going through some of these, all these old ones here, is I believe SoundHound AI, which seemed like a horrible business. So probably won't spend too much time on that. people love growth investors are falling in love with this one right now i remember looking at that and being very concerned uh the worst performing stock is wag group this was the dog walking

Starting point is 00:13:25 marketplace um and they were like kind of making a pivot yeah they were making a pivot to like pet pharmaceuticals or something like some some sort of inroads to the veterinary side of things and it kind of got bid up if i remember correctly because the competitor rover got bought out by private equity and it seems like that's one of those areas where you only really need one marketplace, maybe not two. But yeah, that's the worst performing. I don't know. I guess that's what you get with small caps. It's kind of fun to look at these because the spread is so wide from 1000% returns year to date to negative 90% returns. You got to be very choosy and willing to cut things fast. Now, the other topic that I wanted to mention, you mentioned Nerdy, which

Starting point is 00:14:29 we talked about this, it must've been a month ago, maybe a little longer. And it's this platform marketplace for tutoring, like online tutoring, you help people. It's like, basically it's just, I don't know, it's pretty straightforward. You sign up for a tutor online and it's mostly people i think the main product is called varsity tutors um it's pretty simple you set up a time you tutor them you pay out money to the tutor and then nerdy takes a cut of it as well well anyways the business was not in shambles but it was not performing well it was not profitable the marketplace itself was not growing that much but they were talking about turning to profitability and the the whole reason that

Starting point is 00:15:21 i was even remotely interested in this thing was the ceo had bought up a lot of the stock and so i just bought like a tiny starter position and i'm kicking myself because i They reported a quarter, and the quarter looked rough. It was like the marketplace wasn't growing. It looked like they had all this negative headwinds, if you will. When a marketplace isn't growing, it becomes an issue. It's like they're running into a wall with marketing spend, essentially. So I was like, why did I buy this?

Starting point is 00:15:58 It's so stupid. So I just sold it. The stock is up 56% in the last month. i think due entirely to insider buying so the ceo is still on a buying rampage in the last six months he has bought 20 of the shares outstanding in the open market and he's made some private transactions as well buying shares from i assume vcs or whoever backed them so i don't know if he's just setting the like bid on on every purchase right now or if he's planning to take this company private single-handedly but i have never seen a founder ceo like essentially reacquire his own

Starting point is 00:16:42 company in the public markets yeah that is a lot is it that good of a business or is he maybe he's just bitter at the valuation yeah it's almost like an extreme rh situation i don't know I wonder if he – I should probably go back and look through. I wonder if he sold a bunch when they came public and now he's just using the proceeds to reacquire the company. I mean obviously he believes that the business is worth something. Like he believes it's worth more than they're getting value for in the public markets and probably no one knows the business better than him given that he's the CEO and founder. um yeah it's pretty i don't know like i don't love the business which is why i kind of discarded it like do i really want to own something where i'm just waiting for the insider to buy the whole

Starting point is 00:17:39 thing um but it's given his pace of acquiring shares it's hard to see how this doesn't go up because if it does drop he has basically stated that he's going to buy the shares himself it's true it's almost like buffett with occidental petroleum that's uh you know i guess that stock hasn't really done too well but he seems to have a very strong bid if it goes to a certain level and well i guess for the last five years up something it's up 30 when compared to the s&p or nasdaq right now everything almost looks bad you know what someone else mentioned here in the youtube comments for anyone watching live apologies i guess my audio has been okay which is fine for the recording but the video is a bit laggy better than last time where it was just

Starting point is 00:18:34 inconsistently hopping in and out but i'll keep trying to fix that we want really you know as high quality of image as possible here and we'll just keep trying to improve it until we get there we're not a professional studio and maybe i'll just have to upgrade the wi-fi system but all right someone mentioned root how is that done didn't we look at that one as well i don't think we ever looked at that well maybe that was a set that was never but wasn't on my list do you want to guess what that's done yeah you want to get guess what that's up here today what do they do again is it car insurance or is it it's some sort of insurance i think they sell their stock

Starting point is 00:19:16 that's their business is selling yeah uh company offers automobile homeowners and renters and wow all right full gambit uh well i'm looking at it now year to date the stock is up oh boy wow 10 bagger almost oh my gosh 825 okay this is what concerns me and we're going to do a show some point here so check your feeds be ready for it we're going to do a show on places to hide in markets of excess and maybe a bubble if you will this is the stuff that concerns me it's not that big tech trades at 30 times earnings that's not something i'm excited about but that's not what gets me worried as an investor it's the horrible companies that up a thousand percent and i guess i haven't relooked at root but i remember visiting them

Starting point is 00:20:16 one time and thinking that was not a very good business and the stuff like you're about to talk about it the stuff that is not even a business uh the what do they call them shit coins the meme coins if you will that are getting out of nowhere fart coin i know yeah it's all one big joke yeah it's it's so funny to me when like the a meme coin gets like i think fart coin was a thing and it got bit up pretty high which is kind of funny but the i love when like crypto enthusiasts are like wow this is a bubble it's not like my cryptos aren't but that those are a joke it's like yeah i don't maybe it's my new maybe i just maybe there's some sort of utility that i don't understand although i would venture to bet that 99 of people that own crypto are not

Starting point is 00:21:14 owning it for the utility or else you want to own it number go up that's why and yeah what's what's the difference yeah and if if the only difference is the name at the end of the day what matters we have another question here it says please share your thoughts on oil and commodities don't have much on that but i want to ask you ryan can you give a guess of what the price of oil is right now wti crude oil futures i guess according to google search hopefully that i'd assume they're correct who uh what the price is currently yeah and that's like per barrel i believe it's uh i believe it's 100 100 barrels but yeah whatever the price is okay um

Starting point is 00:22:01 yeah i'm so not versed in the commodities market let's go 75 dollars wow pretty close 68 bucks not too bad it's it's that's close yeah i mean it it really hasn't gone anywhere it's way lower than 2022 when that war the war with Ukraine started between Russia and Ukraine and it's not too much higher than 2019 I guess we look back pre-pandemic it was kind of in the 50s and it's still way below where it was in that post GFC commodity boom of the 2011-2014 period it's so interesting because so like there was so much of the this time it's different crowd in oil where there was so much talk about the world has under invested in production and we're not going to see the same cycle where

Starting point is 00:23:08 the price goes up and comes back down the way we have in the past now it's not down as much as some people might have expected but i remember a lot of people talking about ninety dollar hundred dollars for a hundred barrels uh or ninety dollar whatever oil i think it might be a barrel i'm not sure i think it might be per barrel we sound so we sound so i think bad with us this is this is all i know yeah i don't i don't know much about that that stuff all i do know is that i don't know what the price is going to be in five years and therefore I'm not buying any of the stocks directly correlated with that because do we know how much governments around the world are going to pump the oil? No. Do we know how much we're

Starting point is 00:23:54 going to be investing in renewables, nuclear, electric vehicles that could bring down demand? I don't know. There's just a lot of variables out there and there are so many countries, there are so many companies, there are so many different incentives. If you have any sort of... Now, maybe you can play a hedge in your portfolio if that's something that matters to you. But having any sort of prediction here doesn't make much sense to me. Now, something like... I don't invest in these type of companies, but there's some, I think, more interesting theses out there on copper mining, coal mining, just given the dynamics of those industries and the restriction on supply.

Starting point is 00:24:38 now i've looked at lithium miners before i don't necessarily like that industry because when you understand the fact that there's almost an unlimited amount of lithium in the ground and it's just a matter of whether we want to you know bring it out is that that's kind of tough to have a thesis on whether what lithium prices are going to be at because if push comes to shove we can just get more of it well what's my long-term thesis yeah i mean anything that's commodity dependent and it's not like a cornered resource it's out for me it just is i just don't see now would you consider banking a commodity somewhat but there's a difference between how you bring it to market where you can be better

Starting point is 00:25:38 than other people and the price of money or your consumer app or the way you acquire customers there can be a competitive position there i'm not saying there isn't any money to be made in oil obviously there is people have made a ton of money but as an outside investor a small-time investor having any sort of predictive power on at least just oil and commodity prices i have no clue yeah that's fair all right did you read the crowd strike earnings at all i did not how was it so okay okay it was okay the you remember when they broke the internet for the day and like maybe a couple days and businesses went down yeah i remember when yeah them and

Starting point is 00:26:35 microsoft caused the airline industry to to freeze up and then they blamed the airlines it's like that's really great customer service guys yeah yeah so here's the thing that's interesting to me annual recurring revenue grew looked fine but remaining performance obligations and maybe i can pull this up here on finchat let me try to yeah while you're pulling that up ryan take your time on that i will pitch finchat because for anyone listening to this it will be during the Black Friday sale, which ends on December 2nd. And you can get 25% off, an extra 10% off after our promo code. And it's a perfect time.

Starting point is 00:27:22 If you've been on the fence, we know it's a super valuable platform. You can get this discount. A lot of people are trying it out. Check out our code, finchat.io slash chitchat. You've heard us talk about them time and time again. Get 25% off for a limited time with the Black Friday sale. All right, Ryan, what are we looking at here? So this – they report remaining performance obligations, which is like revenue to be recognized beyond next 12 months.

Starting point is 00:27:53 So – and then they have – they don't actually break out. There's like current remaining performance obligations, which is like any revenue to be fulfilled or serviced in the next 12 months, I believe. And then there's like long-term RPO. So it grew – these are the percentage changes. It grew 46% year over year. Which one? Annual recurring revenue, remaining performance obligations, long-term total remaining performance obligations grew 46% year over year. Annual recurring revenue, which is basically your immediate revenue extrapolated out 12 months, especially for a software business, grew 27%.

Starting point is 00:28:36 this is the widest divergence in those two figures that they've ever had as far as i can see so remaining performance obligations grew at almost double the growth rate of arr and i was at first you you see the rpo figure and think ah you know that's good i guess and it's strong growth rate it's revenue to be recognized over the future but it makes me think that they're just like apologizing to customers and giving really long-term discounts like giving oh okay we'll we'll give you an extra two years but it's like they're not it's not valuable revenue today or maybe they're doing some sort of long-term discounting and someone asked about it and maybe this is me just looking at it with a critical eye but someone asked about it um on the conference

Starting point is 00:29:33 call and he basically just like want to give the ceo would not give the number so the guy said he said he's like first of all i just want to thank you for always being so honest on these calls like really kind of buttered up the ceo he's like and in the spirit of that would you mind explaining why there's been this giant divergence and he's like and could you maybe give us some uh context on the current rpo which he just did not give out and he gives this answer he's like so i think ultimately when we think about rpo we think about the increase it just talks to the longer deals longer duration i think all the things we've talked about a lot of things yeah and it basically yeah he it's like a two-sentence answer he doesn't go

Starting point is 00:30:21 into it very much and then someone comes back and is like hey can you elaborate again he's And he gives a two-sentence answer, and he ends the call. So I don't know if they're just trying to – maybe it's not a big deal because at the end of the day, it is probably serviceable revenue. Hopefully, it's not like super long-term deals. But yeah, I thought it was weird, and I think that's probably why the stock initially dropped like 1% after hours, and then today it's down I think 4.5% after I checked. So I think the lack of clarity on that call is probably why investors are a little worried. But yeah, for anyone that doesn't know, Brett just mentioned it. We just use FinChat for that.

Starting point is 00:31:09 I also use them for the conference call transcript, the report, the slides, everything. We use it for all our financial data. 25% off. They don't do sales. We don't do sales like that very often, but we like Black Friday sales. So, if you've ever thought about it, now would be the time to do it. 25% off. Use our link in the description.

Starting point is 00:31:31 Yeah, that CrowdStrike stuff seems suspicious. Not too suspicious, but a little suspicious. It's very Autodesk-y. It just sounds like some Autodesk mumbo-jumbo that would get thrown around. We're changing our payment collection strategy. Our current RPO is growing fast. I don't know, our total RPO, blah, blah, blah, blah, blah. It's like, all right, what's your revenue like?

Starting point is 00:31:57 What's your earnings like? Just tell me. Just tell me. But it makes sense that this would happen if they're dealing with the fallout of that incident, which cost Delta Airlines, I think, what, $500 million? So all in all, looking at the long term, looking at those numbers, what was it, 27% AR growth?

Starting point is 00:32:20 It's kind of hard to see in that screenshot. yeah that's good it is still worth noting yeah it's worth noting that they broke the internet you would think every single customer would be absolutely livid um maybe there's some long-term repercussions from this lawsuits things that work themselves out over time and they lead to expenses for crowd strike but uh customers seem to forget because the arr growth is still there and it was pretty impressive so um it's a business i guess the people like the product that's a good way to put it all right you want to talk mexican tariff threats and my relationship to mexican stocks we may have a relationship with mexican stocks yeah yeah the mexican stock market we may have

Starting point is 00:33:12 some you know the incoming presidential administration may be ladder attacking my long Mexican thesis, but here's what happened. For anyone that doesn't know, because I know there's a lot of information coming around with the presidential transition, the incoming administration is threatening 25% tariffs on Mexican goods across the board unless they solve the drug and cartel problem, which I guess is a vague kind of idea to solve. I don't know if that's even possible. It would have to get pretty messy to solve that. But in relation to financial markets, in relation to stocks, Ryan knows, listeners know that I'm very interested in Mexican stocks because I kind of think, and we just did an episode on that, you can get some

Starting point is 00:34:03 companies that would trade at 40 times earnings in the United States trading at about 13 times earnings in mexico so you know that that kind of that makes me interested now on this news the peso dropped versus the u.s dollar and what happened i don't know what's going on with my lighting here the listeners don't really care oh geez wrong wrong direction uh listeners so we're just listening okay yeah uh peso is down 17 percent in the last year versus the u.s dollar it fell a lot after this announcement and there's not much else but the announcement because you know it's just kind of ideas of what's going to happen when the new president comes in for international listeners that doesn't really happen until january what are your thoughts here embrace

Starting point is 00:34:51 it go into buying the dip buy on the news or is the thesis potentially threatened here ryan yeah well i guess depends on the business i'm not sure it would impact bolsa mexicana the stock exchange a whole lot there in mexico maybe some of the companies listed there it might affect them but kind of that's more second third order effects um anyone that's exporting uh yeah that's potentially uh quite an issue i tend to think it's going to be more u.s companies or international companies selling into the u.s where they for example the automotive industry has a bunch of factories in mexico now and you have someone like general motors i don't know if they exactly have them but say a general motors type company has a factory down there and they're going to be selling

Starting point is 00:35:50 into the united states as opposed to for example an alsea group or i think it's group maybe just alsea they're the owner of a bunch of international restaurant brands like starbucks dominoes or they operate excuse me a bunch of these in latin america and europe is that going to affect them that much i don't think so because you have a lot of the product moving in the opposite direction so what is your answer are you does this make you more bullish given the peso movements on mexican stocks or are you kind of wishy-washy because i know you still don't own any yet ryan you gotta join the club sorry the audio was kind of breaking up there but uh i think i got the question the it's all good the uh yeah i think you're probably going to get some indiscriminate

Starting point is 00:36:41 selling from a lot of the mexican indexes so people that are just selling off the mexican index on this news and any companies that are included in that um where they might actually not be that impacted so i'm guessing i'll say it kind of gets thrown into that bunch um the yeah automotive companies would probably be hurt by that i tend to think in general to fade stuff like this where it's kind of a negotiating tactic tactic from our incoming president's perspective is what i'm guessing here and it's more meant to be a threat to kind of i guess encourage them to help with the border patrol issue um now it just seems if we go back to trump's first presidency there was a lot of stocks that would be short-term impacted by

Starting point is 00:37:36 certain statements by the president yeah tweets which then it didn't really affect the business that much yeah now it's screenshots from his account on another platform whether the whatever the one he owns yeah i just i think it's probably going to be a good opportunity to buy mexican equities in i already thought it was a good opportunity to buy mexican mexican equities certain ones not all of them of course um but this probably makes it even better if the stocks are selling off because of this because a lot of them just simply aren't going to be impacted yeah and then the one thing people could have which could obviously get hurt is the reshoring narrative where you go all right well i thought all the manufacturing because of the

Starting point is 00:38:24 tariffs was going to leave China and come to Mexico. I would say, as Ryan just mentioned, the announcements, I know it causes confusion. I know it's kind of, it's just all this uncertainty. They never mean they're actually getting followed through. The ones on China have happened. And the last time the Chinese tariffs went through, which there's threatened to be much higher now than what this Mexican proposal is, there was a switch from Chinese manufacturing to Mexico. Now, we'll see how much or how healthy the relationship is between the Mexican government and the U.S. government. But I think over the long term, regardless of who's the president, who's the president of Mexico, who's the president of the United States, there seems to be, and I would be confident in, the embracing of Mexico and further strengthening those ties versus China, which seems to be an actual geopolitical adversary. So I don't think it affects much of the thesis whatsoever. And I look at stocks like the Mexican airports, which in peso terms haven't gone down that much. But if you're a US investor, I guess, you know, they've gotten a little bit cheaper. Especially if you think there's going to be a lot of foreign tourism from the United States that goes down, there's still see something like OMAB. That's the ticker seems it's got a healthy dividend. You have I'll say a group. Actually, I think it's just I'll say you have that.

Starting point is 00:39:54 mexican stock exchange you have walmart mexico you have plenty of stocks out there i think at least and especially because we're going to get talking into bubble talk here the u.s market i struggle to find and i struggle to find companies now worth investing in well here's something you could invest in brett hawk to a coin yeah if you uh do you want to head on into that segment i can't help but laugh just hearing about it yeah i just had a little note here called what part of the cycle is this i guess we can ask it's a little bit of rhetorical question it says and this is from coin telegraph verified account on twitter america today all caps hayley welch announces that she's launching the hawk meme coin on december

Starting point is 00:40:51 4th one day before my birthday wow hawk for those interested i just think at some point they're going to take all the tickers and then searching for tickers on on twitter is just going to get entirely ruined oh it's become a nightmare this has got to be one near the top of the cycle i have another one that actually makes me think that we're literally doing the exact same thing open ai has just received a 1.5 billion dollar investment ryan from softbank and the vision fund we're back 0.0 we're so this is the it's it's the exact same thing are we not yeah i understand in 2020 and 2021 we were we were part of this i don't think we or the extreme part, but we got hurt by it as young investors. We hadn't experienced the dot

Starting point is 00:41:49 com bubble and we couldn't really understand what something looked like. But 2020 and 2021 were a couple of years ago. And do people really have this short of memories? The indicators are the exact same. And it is a time to take risk off the table. I mean, you get something like Rocket Lab, a company I like. Unfortunately, I didn't invest in it. I thought it was an interesting growth stock. Back when it was at, where was it at earlier this year? Let me just get the numbers correctly, correct here. Let's say earlier this year in the spring, thought it was pretty interesting at like five bucks, under five bucks a share. Well, it's up 500% in the last year and it trades at $25. Price to sales ratio pushing 35. It's a low margin business.

Starting point is 00:42:32 It's high risk. They literally launched rockets that are not that proven yet. They are unprofitable. I mean, if you own Rocket Lab, you have to be taking money off the table. I've seen people in Palantir, smart investors, said, look, we love the stock. It's done extremely well for us, but we're trimming down our position. I mean, the valuations across the board here, you cannot let the mistakes you made in 2020 and 2021 affect you again. And if you do, I just don't think you got to look yourself in the mirror. Yeah. little rant to touch on no no it's good the to touch on the meme coin the hawk coin um for

Starting point is 00:43:19 anyone that doesn't know someone that got famous doing some uh basically not even a bit on some video uh not gonna go all into it but it it's like a meme like she got famous on a meme and here's the part like i don't care you know what you get famous on some random video you want to make a little money that's fine the part that kind of pisses me off is you've got before this she said like i want to thank michael saylor for helping inform me about bitcoin and like helping me like get under understand it as if like she genuinely like she's doing this because it's like her genuine interest and she you know that's she's done her research sorry not to be too derogatory here but and then she slips in i'm also producing my own meme coin and it's like

Starting point is 00:44:16 okay just if you're gonna try to just profit off it just be straightforward about it like i i got famous on a meme now i'm putting out a meme coin like if you want to buy it buy it but to pretend And I don't know. The whole like, oh, I'm so interested in it and it's a real chance for everyone to make money. That part just kind of irks me. It's also – yeah. I think we're at – it's hard not to feel like we're bubbling again. We might be going to extra innings.

Starting point is 00:44:49 People ask what inning we're in. I think we might have just finished the ninth and, hey, we're going to extras. Runner on second base. this is why i want to do the first thing i think is j pal please just keep the rate hikes coming it's fine we need them the other thing though is it makes me think where am i gonna hide what where am i gonna get positive returns if we're in an equity bubble and rates are likely going increase and i don't really short i don't so what am i going to international small i think this is dividend payers the bond account at public.com which you're going to mention here in a second

Starting point is 00:45:33 with our advertiser i want to say there are different levels of the charlatanism the meme coins the nonsense selling magic beans on what like i kind of think of it as the concentric circles stuff where most of this stuff won't affect me personally and i think as long as it doesn't affect me personally that's fine but if it's hurting like at the next level if it's hurting a bunch of other people and a bunch of innocent people like i saw something in the wall street journal where there was a guy um i think it looked like he was in his 50s or 60s i didn't read the full article, can't remember his age. He got convinced to put $750,000 into a promised 15% annual return fund, and he's likely not going to get any of the money back. Now that affects real

Starting point is 00:46:26 people. But I will say selfishly, the stuff that I really dislike and hope like just concerns me are things that could affect my life personally financially and the one thing that i think is extremely dangerous and something i am deeply concerned about is this idea that the government needs to print a bunch of money to invest in bitcoin as a bitcoin strategic reserve that's something that actually is not something to joke around right oh well the usual stuff was this the one governor or whatever no no no there's a lot of people you know this is news to me yeah well there's there's ideas floating around here from the usual suspects like anthony pompliano but it's also within the incoming presidential

Starting point is 00:47:19 administration that we need to somehow and this is where the magic thinking comes in because i don't think people actually kind of close the loop on how all this would work that we need to cancel the debt by printing a bunch of money and buying bitcoin i don't necessarily know how this will work but there's ideas thrown around that it should be 250 billion dollars worth stuff like that and that's seriously dangerous and it's when a meme could actually start ruining things in real life like that's just nonsense it's pure pure nonsense it's it's it's not in america's best interest to do that you have sovereign debt you have debt that is denominated in u.s dollars and you want to spend that dollar buying bitcoin you like it's it's a strategic advantage

Starting point is 00:48:16 as a country to be able to borrow in your own currency because you can you can print money yeah i don't know it doesn't make sense to be you would be if you should be shutting this down as a government like you it's it's a waste of resources frankly it's a waste of energy i'm sorry like bitcoin mining i think uh consumes more energy than the country of poland Yeah, I think Argentina too. Well, it finances terrorist groups. It's a misallocation. Yeah, the cartel.

Starting point is 00:48:50 There was just a story today about the cartel or maybe this week about the cartel using it. Yeah, I don't know. I don't want to turn this into a whole crypto thing because it just doesn't make it any fun. And I hate going round and round in circles about it, but it doesn't make any sense from the government's perspective to do that. But let's – all this to say, bubble feels back. Be creative with how you deploy capital. Be thoughtful about it. This is not the time to compromise on valuation and turn – kind of look away.

Starting point is 00:49:28 I think be cognizant of it and try to find areas where you can get a real return. I think we should bring Hawk to maybe a dividend player. We should bring Hawk to on chitchat stocks and she can enlighten us about how Bitcoin yield and how that's going to help, you know, dynam make the U.S. economy a dynamo. And I think that's, you know, it's really going to be good. That's going to be great stuff. And I will say one thing. And you know who, and people are going to, I know the Apple lovers are going to get upset when I say this because I'm just using it as an example, but it is true with that company. You can't just hide an Apple at 38 times earnings with them not growing. You have to make a decision. Buffett is making a decision. I think you can just follow him and say, look, this is not the time to own Apple. takes them off the table. I know so many people have it as a giant percentage of their portfolio

Starting point is 00:50:27 and at least trim, at least trim because that, that it, I don't know. I'm kind of on my soapbox today, but it's a very frustrating time. It's not like I'm doing poorly. It's not like I made a bunch of mistakes, but I just see so much of the same things that happened in 2020 and 2021. won and not very many people changed apple versus a high yield savings account over the next 10 years who you taking that's a good bet because i guess that interest rate on the savings account could change so not even locking in a 10-year can i say lock in the 10-year treasury can i say that instead i'm guessing i think that's about yeah four and a half percent let's assume taxes are equal so no taxes

Starting point is 00:51:21 i'm taking the treasury i mean apple's at what what is that like a sub three percent sub three percent earnings yield something like that yeah it's got to be yeah and it's risk-free the treasury side of things like the earnings side of things for apple is certainly not risk-free and talk about something that talk about high yield why don't we before we go to our final topic in your small cap of the week talk about our friends from public.com again ryan good call all right heads up folks interest rates are falling as we have alluded to here but you can still lock in a six percent or higher yield with a diversified portfolio of high yield

Starting point is 00:52:05 and investment grade corporate bonds on public.com you might want to act fast because your yield is not locked in until the time of purchase lock in a six percent or higher yield with a bond account only at public.com forward slash chit chat stocks all right i yeah apple i get it you don't want to take the taxes it's harder to sell whatever it's maybe a huge position but it feels extremely overvalued in my opinion um i just that's purely based on the fact that i just don't think earnings can grow that quickly at this point services accounts now for 40 of revenue and i think some of that's at risk with the google contract and and the uh regulation there so increasingly i think there's more yeah i think there's more risk to apple than people think they look at apple they

Starting point is 00:53:02 think bulletproof business and uh it's understandable you look around and you see everyone on their iphones it's hard not to use that evidence as support for your thesis but it's uh it's gotten a tad bit extreme what uh what else do we want to talk about here the oh speaking of buffett did you see his letter about the charities yeah kind of got me a little a little sad yeah well I gotta say I'm sorry I hate saying that term I gotta say I should stop saying that

Starting point is 00:53:40 because if you're gonna say something you should just say it but I kinda disagree with his charity stuff giving it to his son you think he's the best use of capital if you're really gonna think about this intelligently Warren

Starting point is 00:53:57 and spend time doing it I'd say just give it just give the shares to poor people just stop with this oh it's going to a charity like just create this literally give it to people i can't stand this charity stuff but it's all so waste so wasteful if you kind of go through the numbers on all that stuff but yeah whatever i didn't read the number i don't know i might agree i might agree with it more than than you do just i don't know if he hasn't spent a whole lot of time looking at the charities himself and you've got what's the point of accumulating all this stuff if you're not gonna like oh because it's intellectual interest

Starting point is 00:54:37 i know but like what's the point of saying i'm gonna make all this money and give it to charity if i'm not gonna be super prudent on what charities i give it to i got i haven't given it to someone else to be prudent on yeah whatever the uh i don't know it just made me think this might be we might be looking at some of the last last few meetings with the buff dog there oh yeah it yeah what there's a quote in there mr uh something about the uh kind of times finally getting to him and i guess this is one step in that direction if he was expecting uh if you were expecting him to give away or allocate his money to someone else late in or when he's expecting to retire or drop uh drop off the not drop off but uh leave the company

Starting point is 00:55:36 kind of feels like it's heading in that direction all right we've gone what is it now 50 minutes 55 minutes let's talk small cap of the week presented by yellow brick investing right ryan let's talk about your new small cap yeah this one's interesting i i don't feel like i have a real edge here but i heard a good pitch for it and so i looked it up on yellow brick join yellow brick.com if you use join yellow brick.com slash chit chat you can get a discount on any paid plans and you can see investor returns and they're honestly i love the plot i love the website so i recommend checking it out um but the company is kraken robotics so kraken robotics manufactures and develops products and technologies

Starting point is 00:56:25 intended for underwater exploration sonar and optical sensors the revenue is segmented into products which accounts for three quarters the business and it's made up primarily of sensors and battery sales and services which is a quarter of the business but really it's kind of products driven here the flagship product is the pressure tolerant battery capable of withstanding pressures of over 600 bars at 6,000 meters depth don't know what the bars measurement is there uh but with an energy density that offers greater autonomy than the competition apparently it's it's um kind of best in class for uh batteries in this market the revenue over i guess the last decade has gone from $2 million to, well, I guess $1 million to $67 million over the last seven years.

Starting point is 00:57:20 A lot of that is from what I understand. They have kind of customer concentration where one of the biggest customers is Anduril Industries. They're a government contractor that makes AUVs. So just underwater vehicles that I think it's autonomous underwater vehicles where people can control them and you can scan the floors and you can use the Kraken robotic sensors to take images. And it's been growing really quickly. And they recently invested in a factory in Rhode Island where they're planning to really kind of mass produce these AUVs because there's a lot of government demand for them.

Starting point is 00:58:04 This will, assuming that the demand is really high and they're able to increase production, This is Anduril Industries. They're able to increase production of the AUVs by a lot. Kraken Robotics is going to benefit. Investors are thinking that Kraken will be acquired maybe by Anduril. So Anduril will just bring in one of their biggest suppliers, which leaves a little upside for the stock there. Kraken stock, though, I might be a little late to the party on this one, is up 231% over the last year. It's big in microcap club as well. So you see a lot of – it seems like when you get a microcap company that's pitched in microcap club and does well, all of a sudden you get a lot of people kind of latching on to the story and the thesis. So I'm not really that interested. i don't know if yeah i'm not sure on the technological advantage so probably keeps me out but i guess any interest here you are our resident engineer on the show

Starting point is 00:59:15 so any interest yeah it seems like an interesting product clearly a growth category what's the valuation we're looking at is that your revenue trailing 12th brand new 67 million you know what kind of gross margins they get or i don't i can easily check i think it's 550 million canadian market cap market cap and revenue is 67 million so that's pretty pricey that's pretty pricey yeah i mean i think price would keep me out but congrats to the people that kind of saw a few years ago or at least basically 50 gross margins okay yeah not bad no but they're still kind of they're seeing the operating leverage now so it's going to be real expensive on an earnings basis yeah yeah the earnings aren't going to look that great but theoretically

Starting point is 01:00:13 you know they're not going to have a huge snm spend i would hope that they're pretty efficient on overhead, but they're going to probably have a ton of R and D. So, you know, add it all together. You could see at least 10, probably 15% margins, maybe a little more. Yeah. 14. Does that deserve 10 times sales? 12 months. Yeah, probably not. 10 times sales for any business. You got to be confident that the earnings powers, the earnings are going to grow. This isn't a business I know very well and micro caps just have tons of inherent risks to begin with so yeah tell you something i mean hindsight's 2020 but i could see the risk working like the risk reward profile definitely definitely worked like the last year and i could see it making sense about a year ago but

Starting point is 01:01:06 the stock has outgrown a bit of its fundamentals and hey if you have high confidence that this going to be a three four five hundred million dollar revenue business maybe it's still a buy today but given the risk that that might not materialize and as ryan said microcaps are riskier just from a management team perspective just that the fact that they have to compete heavily against big competitors yeah it just make me nervous here but it's one though given the small size like compared to a palantir palantir's market cap is what 150 billion dollars now cracking robotics at 50 or sorry 500 million if you i don't know if it would be one i would be selling at this price just given that hey if it's been a winner for you don't want to take the tax

Starting point is 01:01:56 loss if they keep succeeding this could be totally be a 10 bagger for you you know i wouldn't i wouldn't be opposed to letting it ride but right now the brief look not too interested you want me to blow your mind real quick check this chart out this is completely unrelated but app 11 i don't know if you saw this yeah this time a little under two years ago app 11 had a market cap of 3.6 billion it currently has a market cap of 111 billion dollars and it is a what is that basically a five bagger in no 10 bagger in less than a year and we're not talking about microcaps here it was maybe it was a small cap near a small cap it went from small cap to mega cap within uh two years which is mind-blowing what do you think of

Starting point is 01:03:00 that i guess people love apps i don't know uh another sign of excess regardless of how i just people get during the bubbles or during bull markets people get very defensive it's like well the business is doing well well it's not doing as well as the stock being up 600 mind you going to 100 billion dollar market cap versus three billion dollars i've heard some good pitches i tweeted something about apple oven like oh wow this is crazy big company for just a random business and it's up an insane amount and people were dming me like no you don't get it it can get 50 margins they they have this clear advantage i'm like so so what what multiple sales are they trading in it's the same stuff we were talking about in 2020 26 yeah it's the same stuff what is this unity 2.0

Starting point is 01:04:00 remember that debacle unity did you ever follow that did you ever see what happened john riccatello our favorite not really i'm saying that in jest he's the ceo that somehow keeps getting ceo gigs and he's like just destroys everything he touches john riccatello uh instituted a new flex pricing model which like ruined the business it seems because a whole bunch of their customers i don't know if i've ever seen this much of an adverse reaction to price increases from like in any business i've looked at the pricing model changed uh and customers fled like the last thing you want to do on a pricing model change or a pricing change in general is make it so complex and such a big change,

Starting point is 01:04:53 not just in the price, but how you're priced, that you encourage customers to look for alternatives. And that seems to be what John Riccatello did. They have since replaced the CEO, and they said we're working on raising prices in a more customer-friendly way on the latest call. So we'll see. Price increases that are customer-friendly.

Starting point is 01:05:15 I'd like to see that ever occur. For anyone that is wondering, at the peak, November 12th, 2021, Unity, and this is on Google, so it's maybe not exact. Let's just say around $200 a share. Today, $23.38. This is going to happen to a lot of the stuff right now. And it just is. And that's probably up a bit. What was it at its lows?

Starting point is 01:05:46 Or is that at lows? I can't find the exact lows, but I'm seeing 15s. Let's just say 15. Yeah. Market cap still $10 billion. Okay. So now that we've had a whole podcast about the excess of the current markets, we're going to have to follow this up with where we're looking to hide in a bubble.

Starting point is 01:06:09 So you can expect that on your podcast player. We're going to have one of those coming. So not sure when, but yeah. what else is on the docket oh let's see show on david gardner gonna have a research episode on a cannabis retailer from yours truly i think that one will be fun definitely a you know some people like cannabis some people don't but it is an interesting industry and one from really loved to hated so i think that'll be fun then we have some interviews coming up on meta platforms an update on the cloud and AI sector as a whole from an expert in the industry and ASML. I won't leave

Starting point is 01:06:51 out or I'll leave out the guests, but they should be fun. And I think they're all well versed in the topics that we're going to be covering. And yes, when you mentioned the not just complaining about the market bubble, it can be fun. And I think we try to make it a little bit entertaining on talking about the market bubble for stuff like Hawk to a coin. I mean, that is just pure absurdity but it is more value added for the listeners that we can actually discuss stuff that you can potentially do with your own portfolio to make sure you're not i guess in danger when we head into the ninth inning or i guess maybe we're nowhere near to the ninth inning it could just be the early innings but when you head into a bubble period and things can get quite dangerous for your

Starting point is 01:07:36 portfolio all right anything else ryan before we sign off today i think that's it just a reminder if you've made it this far uh if you've ever thought about investing in a stock research platform finch is currently 25 off all paid plans and uh we use it every day it's it's really valuable and critical to our own research so highly recommend checking it out with our link yep that's perfect and if you made it this far give us a review on spotify or apple podcast best way to support our free show that is spotify or apple podcast give us a nice five-star review takes you 10 seconds and it can provide a ton of value for us and keep this thing pumping along all right disclosures we are not financial advisors anything we say on this show was not

Starting point is 01:08:26 formal advice or recommendation. Ryan and I 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, once again, and we'll see you next time.

Chit Chat Stocks - Top Performing Small-Caps of 2024; Mexican Tariff Threats; Hawk Tuah Coin? (CRWD, DAVE, APP + More)

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