Good Investing Talks - Why do you like Nvidia & Airbnb, Will Kim of Apsis Capital?

Episode Date: October 17, 2024

We had the pleasure of welcoming Will Kim of Apsis Capital Management. Will is investing in trends via the stock market.

But if you really want to have the most impact, you should focus on your strengths. And that's what we try to do at Apsis Capital is we try to focus on our strength of trying to understand the trend and picking the best winners, the best high quality and potential winners within that value chain of that ecosystem that will benefit from that trend.

So the high conviction ideas will command a larger percent. So it could command maybe 50%, 75% of the total portfolio. and then the remaining will be a much smaller percentage. Pierre Lynch's Invest in What You Know concept has been truly influential in how I invest as well as Phil Fisher's Scuddlebuck method of really digging into the company, trying to understand the company as well as the competitors

and the ecosystem around it is what who influenced me. Dear viewers of Good Investing Talks, it's great to have you back to the podcast, and it's great to welcome Wilkins' Capital Management for the first time here will it's great to have you here hey telman thanks for having me here and it's great to be here thanks for joining us we also have some interesting topics today but maybe let's dive in with you and your personality which also might shape your style of investing and maybe a bit of a ambitious question at the beginning so what kind of ambitious or

outstanding things have you achieved outside of investing before you joined the investing crowd yeah so you know um i've had a you know about around 10 years a career in the corporate world um you know i've i've done both i've been i've worked at both an asset allocator called cambridge associates which i guess many of you guys probably know i've worked in you know the financial services and consulting and industries um as well as you know i spent some time doing business development and strategy at big tech firms. So that's kind of my background. But, you know, I think when I think about achievements, I would say it's the small things

in life that matter to me. For example, it's being able to spend time with people that you care about, you know, whether that's your friends, family, you know, significant others. And I think that's to me what I consider achievement, being able to put yourself in a position to actually, you know, spend time and, you know, enjoy the lot of small things in life. So you had this career maybe to name drop from your LinkedIn, it's Discord and Indeed that is standing there. And it's also like, I think working there in corporate development and strategy is not the worst paying job. But what has driven you to start playing the investing game full time and managing money for others as a good.

goal instead of like staying there and clamping the corporate letter. Yeah, so I guess I'll take it a little bit far when I was a child. So I think the concept of finding value really resonated with me as a child. So I think when I was five years old or so, I remember building Lego pieces and selling it to my brother and, you know, essentially selling it to him for a higher price than what I, you know, what we bought that Lego pieces for. And, you know, that was great until my mom found out and she stopped it. Essentially, the regulator came in and, you know, closed the market down. And so I think the idea of making money, I think finding value, those kind of concepts always resonated with me. And but I would say in terms of actually finding passion for investing, I wasn't really

exposed to any of that until really, I would say, college. So I went to NYU Stern, which is, you know, a business school in New York, New York City. And that's where I really got to see the world of financial services and that's when I really got to you know when I got really passionate about investing and to me investing is you know from my perspective an intersection of something I really enjoy something I you know I have been good at as well as something that provided that valued people around me so I think that's why I got really into investing so your relationship with your brother is good again I hope Yeah, no, you know, we still keep in touch.

You know, we're cordial. No, we're great. Yeah, my brother and I are very close, so he never, he never. I've never asked him about it actually since that day, but I don't think he has anything holding back from it. Maybe it's a good time to ask this question. Just kidding. So you have this career in the corporate letter.

Are there any learnings? you used and transferred to your style of investing, which could be lead to different outcomes? Yeah. So when I first started my career, I started my career at Cambridge Associates. So the reason I went to Cambridge Associates was because I wanted to get tremendous exposure to the best investors in the world. So at Cambridge Associates, you know, we had access and, you know, I got the chance to meet very famous investors. I mean, I don't want a name drop, but, you know, Seth Carman, Bill and some of these are some of the people that I was able to meet because I worked at Cambridge Associates.

So that was great. So exposure and kind of the motivation to become an investor myself was what I got at Cambridge Associates. I think when I worked in consulting and private equity, that's where I really got exposure to how to analyze businesses, how to, you know, when you have, you want to fact check something, you want to understand a market quickly. I think those are the kind of skills. I got there. And then when I, you know, worked at, you know, whether it's Sony, PlayStation,

Discord, that's where I got to see how corporates work, you know, the pace, you know, how, you know, people operate. So I think all these things help me become an investor to some degree. So there's also other options. You only not have to found a YouTube channel to talk to interesting investors. You can also get paid doing it. With the investing part of you, like, what is your goal or what are you trying to achieve for you and your client base? Maybe put the client base first. So on a personal level, I've been investing since 2015 and I started a firm Apsis Capital Management in 2019. And the goal really was, and the reason, again, why I started it was because, one, I've been enjoying it since 2015.

Two, I was able to achieve higher than market returns since 2015. And then the third piece, which is kind of on a more personal level for me, was there were a lot of people around me, whether it's family, friends, people I knew from different backgrounds, where they were making suboptimal investment decisions. And I think that really motivated me to say, hey, I'm able to achieve, you know, make good investment decisions on a personal level, why don't I make this something that I do full-time? And that's where my passion really started. How would you describe your style of investing?

Yeah. So there's, I guess, there's a simple version and there's a complex version. I will go with the complex version. The complex version. Start with the simple one and then see how you can make it more complex. Sure. Okay. So the simple version high level is I invest in 10 to 20 stocks, mostly primarily focused on U.S. equity, long-bias portfolio.

That's what I would say is the simple version of, you know, what I do. But really, there's a lot more that goes into how I, the result of being 10 to 20 stocks, right? And my strategy really is to invest in high-quality companies that benefit. fit from major secular trends or themes. So when you think about, you know, a theme or a secular trend, there is a cycle, right? So we want to be a little bit ahead of the curb, but not too early because at the end of the day, investings about trying to predict how everyone's going to think in the future. Yes, there's a true intrinsic value within the company, but the beauty as well as the

the fall of the public markets is that your opinion only matters if other people value your opinion. For example, I mean, you think about GameStop, right? They were, you know, they've had declining revenues for the last five years. And there's no reason it should have gone up. But I think if you remember back in 2021, I think there was a guy named Warren Kitty who, you know, jacked up the price at the stock like crazy. And there were very famous hedge funds that were short on that stock, and they did poorly. And one way to think about it is from an intrinsic perspective, they were correct.

It wasn't a good company necessarily. They, you know, had declining revenues. There's no reason it should have, you know, 5x, 10x, you know, 50x in a span of a few months. But if other people don't agree with your opinion, then you're wrong. And so that's why I think you want to be a little bit early ahead of the curve, but not too early. And the way I think about it is you have an adoption curve. So there's the innovators, early adopters, early majority, late majority, and the laggards. We want to be in between kind of the early adopter and the early majority because that's the sweet spot of where we can already see the change and some of the metrics that I look for when you know you make an embedding.

and also reduces the risk of being wrong. Who did influence you to come up with this approach? I would say there's two people that have been the most influential in kind of my investment strategy. The first one is Peter Lynch, invest in what you know. And so Peter Lynch says, you should, you know, the best investments are, you know, investments that you find out in the field and what you know that are close to your heart. And I completely agree with that because when something happens around you, that's when you truly have invested interest in looking into how that evolves over time. And so Pierre Lynch's invest in what you know concept has been truly influential in how I invest as well as Phil Fisher's Scuddle Blum method of really digging into the company, trying to understand the company, as well as the competitors and the ecosystem around it is what who's influenced me. How long are you in the investing game for?

How long have I been or how long will I be in it? How long do you plan to be around? I plan to be around forever, as long as I'm capable of generating good returns. And I have the confidence to do that, then I'll be in it forever. So maybe let's open the engine a bit more and look in your process and portfolio construction. So let's start with the question. Where do you get your ideas from? Yeah.

So I get my ideas from various sources. But the most important thing is reading a lot and getting exposure to a lot of different things. Reading articles, news, third-party research, like from, you know, self-site investment banks, as well as just like credit card trends and history, raw data from U.S. Census or BLS, community opinions of, you know, other investors, as well as just talking to other people, you know, industry kind of folks. I think that's how I source my investment ideas, but really what triggers the engine is when you see something happening in front of you, that triggers me to dive deeper.

So for example, I think there's a big topic about declining birth rates that's happening globally. It's especially pronounced in Asia, especially like Japan, Korea and China, East Asian countries, but it's happening, you know, globally. You know, I think birth rates have declined from fertility rates decline from like 4.4 to two point something. So I think that says, you know, then you think about, okay, let's fact check to make sure that's real. Let's see how those, how that trend is affecting different industries or different things. And then from there, I think that's where the investment idea gets sourced.

Which aspects do you spend the most time in your research process? You can pick one to three maybe aspects. Yeah, I would say, I would say the most important part and the part that is the hardest for me is thinking about the trend and whether that trend is going to continue on. So that requires, you know, a lot of opinions thinking about whether you think that trend is going to continue on. but also where you can, fact-checking and trying to see the data behind it to see whether that's going to continue. That's one part. The second part of that is trying to figure out whether that trend is investable. So, for example, declining birth rates, that's a trend that everyone knows and likely to continue on, given just how people think these days.

but investing in that is not necessarily as easy, whether that's because a lot of the companies are private because I can't invest as a public investor or because maybe some of the companies in that industry are already highly valued or overvalued, that it's not actually a good investment because there's a difference between being a good company and a good investment.

You mentioned that you look for high quality in this trends. How do you find high quality and what is your assessment criteria? Yeah, so when I think about high quality, generally speaking, I look for three things. One is high revenue growth. Two is good operating margins, you know, profitable, highly profitable companies. And the third piece, third one is, you know, good balance sheet. That's in terms of the kind of the accounting financial metrics that I look for.

there's also another component of a high-quality company is whether it's a good relative investment. Again, there's a difference between a good company and a good investment. So that's another piece that I take into account. What is this difference? Yeah. So, again, I think I mentioned intrinsic and extrinsic factors that affect the stock. So the intrinsic factor is if a company is worth $100 billion and generating $100 billion, revenues and is, you know, $20 billion profit, you know, profit and, you know, healthy balance

sheet, that's a good company, right? No matter what you say, it has 20% margins, has out of $100 billion revenue, that's a great company. But what if that company was valued at $1 trillion? What if that company was valued at $10 trillion, $100 trillion? dollars. For a company worth $100 trillion, if you're making $100 billion, that's not a good investment. But it's still, you know, and that's just a factor of just because people have put money in it, the company has become overvalued. But it's still a great company. It's still

generating 20% profit margins. So that's what I would say the difference is. which free investing mistakes have improved your research process the most um three investment mistakes um i think one is fact checking the trend um that i believe in um so one investment mistake i made was upwork um so The reason I invested in Upwork back in the day was because, and this is before 2021, was because it was part of the shared economy. And the shared economy is growing 30, you know, it's expected to grow 30% a year over the next couple of years. There's a lot of reasons why the shared economy is good.

That trend is expected to continue because, you know, people, you know, want to share their assets, they're leveraging technology, so now you can actually reach people easier. But Upwork, there was a critical error I made in specifically Upwork. And the critical mistake I made was for a sharing economy company to be sustainable, it has to meet two criteria. One is it needs to have high volume of transactions, and then the second part is every transaction has to be unique enough that you need to go back to the platform. So an example of that is, you know, when you think about Upwork, are there enough high, is there enough volume of transactions? The answer is not really because, you know, maybe I'll need to hire someone, you know,

once in a while to, you know, for example, edit my photos or do my handiwork or, you know, or, you know, create a presentation for me. That doesn't happen every day. That doesn't happen even every week or every month, potentially. Two, when I find someone to do that for me, I can use that same person for the same job again, which means I don't need the platform anymore. can, you know, talk to that person and get them off the platform. That transaction could happen off the platform very easily. But when you think about companies like, you know, Uber or

even Airbnb, both the transaction is very unique because, one, you know, let's use Uber as an example. If you need to travel from your home to, I don't know, let's say another location, That's a unique transaction. At that specific time, that's a unique transaction. You're traveling to another country. You're not going to use the same driver for that transaction. Now, of course, if you're traveling from your home to work every day, and that's the only time you need a driver, then you might hire your own driver.

But at that point, your need is no longer unique. So that's why Uber has been a successful growing or, you know, a successful shared economy company. Airbnb very similarly, you're not going to go to the same place over and over for vacation. So if you decide to go in July every year, you know, just to some beach every year, then yes, that transaction is no longer unique. And maybe you'll get a time share. Maybe you'll buy a vacation home. you won't need that anymore but maybe you know you want to go somewhere different maybe you want to you know stay at a different part of the city maybe your budget is different every year because of

that the transaction is unique and there are enough people enough transactor volume of vacation rentals right so that's why Airbnb is a more successful shared a shared economy company are there any other mistakes you want to share um other mistakes um upwork was one i think that was essentially not understanding um the the shared economy model the second one was uh match dot com or or match group more specifically um it's online dating company and the mistake I think I made there was I overestimated the runway it had in terms of market saturation. So I think the market was a lot more saturated than I expected. And so when I think about the adoption curve, we weren't early enough in that curve.

We were probably more in the late majority than the early majority. Let us compare your research process like from today. to like five or whatever years ago after five where are you now spending way more time and effort on are you talking about the research process itself or are you talking about the industries or the research process itself so if you think about like your pattern of research let's call it like this how has it shifted and devolved in the last five years yeah uh i would say it actually hasn't shifted much. What I would say the biggest difference is, is I know the types of mistakes I make as well as the tendencies I might have. For example, I might be, a lot of my mistakes have been

I tried to follow a trend when the trend was already kind of deep, you know, in the late majority phase. And I think to improve that mistake, what I've done is try to market size better, try to understand where in the cycle we are with that trend better. And I think that's where I spend more of my research time because of those mistakes I've made. One investment you seem to have made right with the trend is Nvidia and it's a quite transformational investment. So maybe talk us a bit through when did this company come the first time on your radar? Yeah. So I guess I I've always, you know, I, you know, I was a gamer back in the day, back, you know, 20 years ago.

Yeah, like, you know, I was a, I was a big PC gamer, so, you know, GPUs and, you know, not having a strong graphics card was, was bad because, you know, your friends could play the best games back then, and you couldn't because you didn't have a good GPU that could run it. So I first encountered Nvidia, you know, probably 20, 30 years ago. But in terms of when it got into the portfolio was 2018. So, NVIDIA has been into portfolio since 2018, so I think six years, we haven't done anything. We haven't touched the position for six years. The reason I invested in NVIDIA, and fortunately, you know, invidia has done quite well, as well as we were, you know, earlier on the trend than some of the other, you know, mistakes that I've mentioned before. but the reason I invested in Nvidia is because

the demand of Nvidia chips and the technology they have is unparalleled. So when you think about Nvidia versus some of the other competitors, Nvidia chips are like $30,000 and some of the newer generation.

The competitor chips like AMD, I think, are like half the price, like $15,000. So you ask, why would people invest in and you know why why would people buy you know chips that are 30,000 well the reason is because invader has been in this business for I think 30 30 years or so they've been around since 1990s and fundamentally you know GPUs and you know processors are very different and because they've had expertise in GPUs which can do parallel computing this expertise has been with them for a very long time.

And because of that, they've been able to kind of cement their lead and benefit on the computing and networking trend. What they've also done is added a layer of a software layer on top, which is called CUDA. Essentially, they're creating an ecosystem around their product. And I think it's very similar to how Apple built its leadership by integrating hardware and software. So when you think about, you know, Apple, the iPhone or even the Mac computers, you know, Microsoft had the software, but they didn't have the hardware, which, you know, now they do, right, after kind of what's happened, you know, Google tried to buy Motorola and create their own phones. And they have their own phones now, but the Motorola acquisition was not a great acquisition by any means.

But Apple had this leadership, and Apple had this idea of integrating both software and hardware earlier than their competitors, and they've been able to kind of reap the benefits now. And VDIA has kind of done the same. They started out with the product, simple GPUs, and because they built this software layer on top, which is essentially the industry standard, there are no other ways or I guess the switching cost for users would be a lot higher on top of the product itself. And because of that, NVIDIA has been able to keep their leadership in this space. What made you hold you onto the investment? Yeah. So, NVIDIA has gone through a lot of ups and downs since I invested in 2018. And I think even when it was down, I think, you know, 30% I think in, in 2020.

A lot of tech stocks were down quite a lot back then. I held on to it because I believed in the computing and networking trend. I didn't invest in NVIDIA back in 2018 because I knew AI was going to happen. I didn't know the crypto craze was going to happen. What I knew about NVIDIA was we were going to need more computing power. And within the computing and networking ecosystem, there were a couple of companies I picked, which included Nvidia, but I actually invested in a couple of semiconductor companies because our investment approach is we invest in secular trends, but we have a concentrated diversified approach. So we concentrate our investments in certain trends, but we diversify within that trend. because at the end of the day, you're not going to know exactly who the winners are in that trend.

But if you can understand who the top, I guess the high quality companies are and who reap the benefits within that ecosystem best, and you pick those companies, you will probably be right one out of, you know, four. And the reality is, as Warren Buffett mentioned, you know, one stock can, you know, outdo all your other mistakes. because if you make, you know, if you make one good investment, that could essentially just change everything. And, you know, statistics say 25% of S&P 500 companies, only 25% have beaten the S&P 500 average. So you only have one in four chance of beating the market if you choose a random stock on the S&P 500 in the last 20 years. And so I didn't know that it was going to be Nvidia that was going to benefit from the, I guess, computing and networking craze. But I did know that Nvidia could be potentially one of the few.

And invidia was within the ecosystem, one of the top players at the time and still is. And that's why I invested in Nvidia. What would make you sell? What would make me sell? I would say if my thesis changed about the trend and if the company's valuation got so ridiculous that the risk reward would not be would not make sense and you're fine with the valuation right now i'm fine with the valuation yeah i've i've i've held on to it for you know six years haven't touched it and i think if i were to sell invidia it wouldn't be because of the current

valuation well it would be because of how much of the portfolio it currently is right now then we have the bridge to the next topic so how do you think about portfolio construction what is your framework there yeah so again you know the result of the portfolio is about 10 to 20 stocks but when I think about portfolio and construction um I think of high conviction ideas and low conviction ideas so I have high conviction trends that I think about and you know a couple of companies within that trend and low conviction ideas or trends in companies so the high conviction ideas will command a larger percent so it could command you know, maybe 50%, 75% of the total portfolio, and then the remaining will be a much smaller

percentage. But generally speaking, when a position enters into our fund, it usually is maybe anywhere from 2 to 5% of the portfolio, because that's a good starting position for me. And I can tell you, NVIDIA was about a 3% position when it started out in 2018, and it no longer is. But now it's the biggest portfolio holding in the fund. But it was actually 3% back then because, again, I, you know, I believed in the trend. And, you know, MVIDIA was one of the highest quality companies. But again, wasn't sure that that was going to be the only winner. So do you manage your positions then actively to make them higher conviction ideas? Or how do you go about like trimming if you ever do this and adding yeah i usually don't trim or try to

manage positions so that it you know it fits a certain bill um but generally if the position gets too big which is the case right now then that's when i consider whether the risk reward or if there are other opportunities that are better um that that i can you know benefit from better um and that's yeah generally I don't really trim positions and adding adding so usually additions happen when there's a higher conviction idea and I feel like the current the current positions in the portfolio do not have as high up of risk reward to reward to risk ratio as the newcomers so essentially I come up with a brilliant idea and I feel like that's going to 10x or 20x in the next few years that's going to come into the position versus the one that I feel like now is only going to 5x in the next 5 years.

Okay. Is there any difference? You have this experience from experienced and great investors. So how do you use other peers? So how do you, would you describe your framework as differently to others? Yeah. I would say what's unique about my portfolio process is, I have seen, you know, there's, you know, investors range from I own five companies.

I have private equity like ownership structure or investment approach to I own 100, 200 companies. I'm so diversified. I think we are closer to the private equity like approach, but still diversified in a way, that we have confidence and conviction in some of the trends that we are looking into or invested in, but we don't necessarily say that we're going to be right with this company and know everything about the company because the reality is, is next day, a newcomer, you know, in a couple of years, a newcomer can completely disrupt and transform the industry that they're in. And again, that's why the approach we have is we believe in this trend, but within that value

chain of the value chain that benefits from that trend, we invest in, you know, different verticals of that company, of that trend. So that's, I would say that's the biggest differentiator versus, you know, owning five different stocks in various industries that are, you know, that are, you know, very different from each other or owning everything in tech because I'm a generalist, so I invest across, you know, I'm industry agnostic. Hey, Timon here. It's great that you've made it that far into the video, and I think it shows a certain passion for investing you are having.

If you want to dive deeper and go further down the rapid hole, you're invited to apply to my community Good Investing Plus. It's a place that's very helpful to people who are ambitious about investing. It's helpful to investment talent as well as Experian fund managers. So if you're interested, please click on the link below. And now, without further ado, enjoy the conversation. One investment we also decided to discuss is Airbnb. So how did you play your investment with Airbnb?

So you do you also have Expedia with Webbo and booking in your portfolio? Or is it just like here I said, Airbnb is the clear winner and I want to write it? So the trend that Airbnb benefits from is. is consumer spending in travel. And that's, that trend has been happening for, and I expected to continue on for, you know, a little bit longer. And that's because of a couple of reasons. One is, one, it's because, you know, we're still below, you know,

pre-COVID spending levels or travel. So there's like a small tailwind to, you know, you know, potentially get back to where we were. Two, there's a demographic effect. So, you know, Gen Z and millennials are more likely to spend on travel than, you know, than future generations or older generations. And then we have the, I would say, shift in behavior about how people think about travel versus goods, et cetera.

And then the fourth one is, again, growth in the sharing economy. I invested in Airbnb as well as some airline stocks as well as even some hotel chains. That's how I invested for this trend. Why not booking or Expedia with Webber, which is a competitor in like holiday homes? Yeah. So when I think about the value chain within the travel ecosystem, I... I think of booking.com as not necessarily, it has tremendous market share and it has economies of scale and it's a dominant, I would say, leader and that's in at least getting traffic. But it doesn't necessarily have what I would say, a differentiating factor or an asset or an IP that's really differentiated.

And what I mean by that is if another, if another company, you know, spent a lot of money and built another website, why would that be any different from booking? So, you know, when I think about, you know, searching for hotels, you know, Expedia, booking.com, I will use multiple websites and I can, you know, get the same thing. But, you know, with Airbnb, you can't go to another website because the hosts are already on Airbnb. Acquiring the host is much more difficult than just, you know, scraping websites, getting their, you know, numbers, and doing affiliate linking, affiliate marketing. That's essentially what booking.com is. And because of that, it has a lot, I would say the IP and the asset that it has is a lot less valuable than Airbnb. be. What makes Airbnb a high quality company? It's not only the numbers, but I'm more asking for like the qualitative facts and why it's hard to replicate this high quality. Yeah. Again, I think

there's there's a couple of things. One is the types of customers that it attracts. And it meets a demand that, yes, it's competitive, it's in a way competitor to hotels, but also it's satisfying demand that hasn't been satisfied before. So Airbnb, again, satisfies the typical hotel people that would typically go to hotels, but also at the same time, it satisfies budget conscious travelers as well as people that are looking for unique experiences. So people that, you know, maybe they want to have five people in a room together, maybe they want to rent a beach house. You can't do that with, I mean, yes, you can own, you know, you can rent a penthouse, you know, you know, at the Ritz or something if you want, you want it to. But maybe you just want to have a

house. Maybe you just want to rent a house for a weekend. And that's not something that you could do before. Maybe you want to, you know, you know, stay at like a tree house, which you can do that at Airbnb. I don't think Marriott has a tree house that you can, you know, stay at. So from a demand perspective, it satisfies, it meets a demand that hasn't existed before, and that demand has been continuing to grow. I would say from a supply perspective, it essentially taps into, you know, host or, you know, workers that are, that want to essentially get the most out of their asset. If you think about the unit economics for a host, what is the cost for an Airbnb be host. Yes, it does require intangible costs, like your time and effort. But reality is,

it actually requires pretty much zero dollars for you to actually host someone. Because if you were planning on being away anyways, or if you had a spare room anyways, you're already paying rent. It's some cost. So your unit economics is essentially infinite because you're, you know, if nothing had happened, you made zero dollars, but now you're making some money. I mean, yes, there is some value and intangible value to effort and time that you have to spend to do that. But that's compared to hotel, there's real cost to actually operating hotels. So that's why Airbnb, from both demand and supply perspective, is a great company, qualitative company. Maybe you don't have a good answer to this, but do you have any unique insights why the consensus or the market, what they might miss on Airbnb?

Yeah, I think the biggest, one of the biggest kind of risk factors for Airbnb is regulatory. So that could depend by a country, that could depend by state. So a lot of states want to clamp down on people doing Airbnb. And a lot of it is because of, you know, real estate companies lobbying. They don't want Airbnb to, you know, or, you know, hotels, you know, don't want Airbnb to make money. There's also a lot of, you know, city residents that think Airbnbs are increasing the price of their homes because a lot of their investment firms that actually buy Airbnb's,

and that, you know, theoretically could potentially increase rent or, you know, housing prices. And that is a real risk factor for Airbnb. But if you think about Airbnb, when it's valued at, you know, 20,000. 20x PE when the market is 30x PE and has much better margins than the average SNP 500. It's still growing 15% a year. I think that's a good investment. What rocks did you turn before buying Airbnb? So maybe walk us a bit through your research process.

Yeah. So the most important thing and the part that I spend the most time on is thinking about the trend, whether like how far in on the trend, are we? And based on kind of, you know, what the research I did was, I talked to, again, reading a lot of third-party research reports, whether that's, you know, reading a lot of third-party research reports, talking to, you know, users of Airbnb, including, you know, my friends, looking at MPS scores of, you know, hotels versus Airbnb, loyalty scores, credit card spending, people's, there's a lot of surveys about travel as well. I think that gave me confidence about Airbnb as a trend, that it will benefit from the trend. But in terms of Airbnb specifically, what I did was I tried to understand.

And the key metric that I look for, so the key metric that I look for in Airbnb is actually host growth. I think demand is going to be there and based on, you know, kind of the macro research I did. But host growth is going to be the critical factor for Airbnb growth because you need more host and you need more good quality hosts so that demand will continue. Demand will always, you know, be there because if there are cheap enough, of hotels, if there are, you know, good quality kind of stays that you can go to, you know, like people will find you because Airbnb essentially is, you know, you don't need marketing to know Airbnb anymore. So I think that's what I did the most research on, is trying to understand host economics,

the troubles that hosts have to go through, how Airbnb is incentivizing host, as well as regulatory, you know, how states and how different countries are thinking about Airbnb and potentially limiting them. And based on, you know, what I've seen, I am comfortable with the risk or the risk I'm taking with the regulatory risk for Airbnb. What could you have potentially gotten wrong? There's a lot of things I could have gotten wrong. The first one is maybe we have an economic downturn, maybe there's another COVID, and things just, the trend of hotel spending or, you know, hotel and travel spending declines. Now, that's not something I can predict,

but again, based on current trends, inflation rising, that is something that maybe there are signs that, you know, travel spending and consumer spending could decline in the future. That's one, from a macro perspective, that's what I could have gone wrong. The second part is, maybe I'm underestimating the regulatory risks with Airbnb. Maybe a lot of these companies will actually decide to clamp down on Airbnb and shut down their operation, which I think would be terrible for travelers in general because now you have less of an option. There's actually research that shows after the introduction of Airbnb, hotel prices have gone down in the places where they have had Airbnbs, I think, from anywhere from like $30 to $50 to $70 per night.

And that's a benefit for customers and consumers. And I think it'd be a shame for, you know, the state, you know, the regulators to essentially just close it down or, you know, to essentially, you know, remove that benefit for consumers. How do you think about the exit here? Yeah. So the exit for me will really depend on two things. One is, are there other better, higher return, I guess, alternative stocks that I find in the future. I would say that's probably the biggest one. The second one is where in the trend I am with consumer spending and travel spending. I think this trend is going to be. I think this trend is going to, to continue for maybe the next five, seven years. And I think based on the valuation and based on how long this trend is going to continue on, that will determine when I exit the position. I have finished asking my questions. So for the end of the interview, I want to give you the chance to add anything. So do you have anything to add?

Yeah, so I would say, you know, Don Clifton, who's like a famous American psychologist, as well as the former founder of Gallup, which is like a famous research firm. They have good tests. I recommend them. Yeah, I've done that test as well. Yeah. But he mentioned that, you know, if you don't want to fail, you should focus on improving your weaknesses. But if you really want to. have the most impact, you should focus on your strengths. And that's what, you know, we try to do at Absus Capital is we try to focus on our strength of trying to understand the trend and picking the best winners, the best high quality and, you know, potential winners within that value chain of that ecosystem that will benefit from that trend. You know, there are companies that, again, do private equity-like approach and have five companies. There are companies that have, you know, funds that have a hundred companies but you know i think our advantage is you know focusing on that

trend and investing within that across that trend and that's what our strength is and that's you know how i want to approach the approach investing and thank you very much and good luck with it and for the end of and we are now at the end of our interview so it's time to say goodbye to the viewers. Bye-bye. Thanks, Timlin. Bye everyone. I really hoped you enjoyed this conversation. If you did, please leave a like and a comment and for sure subscribe to my channel. Traditionally, I want to close this conversation with the disclaimer. So here you can find the disclaimer. It says, please do your own work. This is no recommendation. What we are doing here is just a qualified talk that helps you, but it's no recommendation.

Please always do your own work. Thank you and hope to see you in the next episode. Bye-bye.