We Study Billionaires - The Investor’s Podcast Network - TIP310: Mastermind Discussion 3Q 2020 - (Business Podcast)

Starting point is 00:00:00 You're listening to TIP. On this week's episode of the Investors podcast, we have our mastermind discussion for the third quarter of 2020. For anyone not familiar with the format, each person brings one stock pick to the table and the rest of the group tries to provide valuable feedback and risks associated with the pick. The intent of these episodes is to provide the listener various ways to assess the strengths and weaknesses of trade ideas while also showing you some insights into the key metrics we look at when finding and selecting various trade ideas. So without further delay, let's go ahead and

Starting point is 00:00:32 dive into this episode. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Hey, everyone, welcome to the Investors podcast. I'm your host, Preston Pish, and as always, I'm accompanied by my co-host, Stig Broderson. And like we said in the intro, we're here with our two great friends in finance, Toby Karalau, Hari Ramachandra. Guys, welcome back to the show. Hey, thanks so much for having me.

Starting point is 00:01:13 I love doing this, the highlight of the quarter. Hari, welcome back, buddy. Hey, thank you, Pristian and Stig. All right, so Stig, I'm going to throw it over to you for your pick because I find this to be very brave, smart, and I'm concerned all. at the same time. Go ahead. I want to hear this one. I'm happy to say that, Preston, because I am repitching Alphabet.

Starting point is 00:01:40 Most people probably know it as Google, but the parent company that is Alphabet, which is primarily Google, but there are also a bunch of other businesses. I completely get where you're coming from here, Preston, because, you know, with the valuations we see right now, with the fang stocks, not looking to be able to be any more expensive. And still, you know, you can be surprised. why am I repitching Alphabet? I pitched this back 1st November 2018 for the Q3 Mass Smart meeting. And since then, it has outperformed the market.

Starting point is 00:02:12 It has returned 26% compared to the S&P 500 doing 12%. And I think it's a very different type of pick than Spotify that I did last week. It is a tech company, but it's a very different tech company. And going back to what Preston said before, I would like to argue here that it has a different and downside protection than something like Spotify, but you probably won't see the same 50% sore as you saw with the last pick here since the last quarter. And one of the reasons why I really wanted to repitch the stock is that being a value investor, we tend to learn to become contrarian and to think that we can be right even if the market is wrong. And I guess what I've

Starting point is 00:02:53 experienced in my own investment career is that I've sometimes taken it too literally, too often thinking and for too long that if I had a different opinion than the market, it must be because I'm so much smarter and it just takes such a long time for the market to wise up. That approach is very expensive and opportunity cost because you could have invested in something in a different and better business. And I also come to realize that often I just have to acknowledge that I was wrong and I have to move on with my life and sell that stock. So I sort of like wanted to use that going into alphabet. Because whenever I do see a stock, that has outperformed the market, like it's the case with Alphabet here. I really want to see if this

Starting point is 00:03:34 is a chance to double down and see if my investment thesis has not been fully appreciated by the market. And especially what we've seen here recently with a lot of great investors, definitely not including me, but a lot of great investors building stakes. I think the most famous stake here recently is Seth Claremont, just building a 5% stake in Google. This episode will come out August 15, which is the new time for the 13F filing. So let's see. see what the so-called super investors are doing. I wanted to talk about another reason why I really wanted to repitch Google or Alphabet. So sorry, if I use that interchangeably, is that over the past two years, Google have been breaking out a lot more detailed information for the business unit,

Starting point is 00:04:16 including YouTube Cloud and many other of the units, specifically other bets. So there's a lot more information available that we didn't have the last time where I see that we can unlock a lot more value. But that was probably the longest introduction ever had. So let's go into it. to the actual pitch. So if we look at how Google makes money, Google products are still the main source of revenue for Alphabet. The revenue compositions have gradually changed over the past few years, and Google search is now only 58% of the revenue. And part of that is that Alphabet has simply just changed the accounting, has broken out more separate units from that. So that is part of the explanation, but whenever you think how Google makes money, think about AdWords, think about AdSense.

Starting point is 00:04:58 Today, YouTube is 10% of revenue. This is a segment that has grown 33% year or year in Q1. It's only up 6% year-a-year-year if you look at Q2, but that also includes a lot of COVID-19. And then you have Google Cloud, you know, 7% of total revenue, but it's growing like 43% growth year-a-year. And then they have a bunch of smaller units typically categorized in other Google revenue, which includes YouTube non-advertising revenue and play, which is up 26%, and then they have other bats. Now, I usually give a more detailed explanation of the industry whenever a picture stock, which for Google still is online advertising primarily through search.

Starting point is 00:05:39 However, I did that the last time in Q3, 2018, and I'll make sure to link to that in the show notes. And in that space, not a lot has changed, and I'll get back to that because I actually think it's a good thing. But Facebook and Google still heavily dominates the space. Amazon has caught up at little, but they're still way behind the two giants. Let's talk about Google's mode. That comes in many different shapes and forms. Typically, talking specifically about search that still dominate the market with more than a 90% market share.

Starting point is 00:06:09 And some of that mode simply comes from the brain recognition and people just going on Google for search by default. But interestingly, the mode of the most probably queries that Google has is really not doing much better the job than most of the competitors. However, where they really have a mode and why so many people use the service is also that 15 to 20 percent of their searches are so-called unique. And there's a huge difference there because Google has such a data advantage. So they get so much better search results on those queries. And speaking of data mode, I would like to emphasize that for a company like Google, it's not really only the vast amount of data which

Starting point is 00:06:48 in itself is a mode. Whenever it comes to the amount of data, it's in itself, it's a mode. Whenever it comes to the amount of data, there is a saturation point. So rather, I would say that it comes from the breadth of data, of all the different platforms we have and how they're able to process that in a central spot. Because data is not just your input data, it's training data, it's feedback data, and you'll need all of that to maximize the value. And because of that, in many but clearly not in all fields, Google really has a mode compared to most other companies, including some of the big tech companies, I think it was his last time, Hari introduced the term China-approved and Corona-approved. So it was kind of interesting the way he looked at that. So I wanted to

Starting point is 00:07:28 include that here in my pitch. And starting with China, there's a clear distinction between competing in the West and competing in the East. And if we do look at the Chinese giants like Tenet and Al-Arabba, and you can even say Baidu to some extent talking specifically about search, even though that Ten-Sit and Al-Ale-Baba is sort of gearing up to make Baidu services less relevant because of what they're doing with their ecosystem, they would just have such a hard time competing with Google in the West, just as we saw Google have major issues in China, by the way. One practical example is that for something like Cloud, they're just not competing about the same type of customers. Like, you just have some customers going to something like Amazon Cloud

Starting point is 00:08:07 or Google Cloud or Microsoft products, and then completely different segment going after Cloud in China and in the East. In terms of being Corona-approved advertising, it is expected. to decline nil, we are looking at around 5% in 2020, but still 30% up from 2019 to 2022. And I remember going back to 2018 that I was so concerned about what we're having with the next crisis. And I don't think we could have almost a more severe crisis that what we're facing right now. And given that advertising is probably the first thing that's being caught in the time of crisis,

Starting point is 00:08:42 where we've really seen advertisers feel the pain has been in conventional offline marketing and not in the online. I think it's quite astonishing to see the impact or the lack of impact for a company like Google. And from the perspective of a business owner, despite where you are on the market cycle, if you can track $100 in revenue from a $99 expense, it's still an easy decision to push through. And I kind of feel that's very important to understand whenever you look at something like Google's revenue and the sustainability form advertising. But before I go to the valuation, I actually wanted to talk a bit more about some catalysts

Starting point is 00:09:17 and sending some of that over to Hari. Because if you look at Google, you know, one of the big things that Dick did back in 2017 is that launched the AI first strategy. You know, I'll be the first one to say that you don't hear anyone talking about that they have a strategy never to use AI. So I do understand that it's a busword for many companies more than actual strategy. And I wanted to see how that translates into alphabet. Sunda Pichai said that we want our products to work harder for you.

Starting point is 00:09:47 you in the context of your job, your home and your life. And that was sort of like the framework we saw the new strategy around. We saw Google a system with just one of the many products that we saw around that time coming out. The strategy in itself doesn't really, I want to say, it doesn't clear the no test. Sorry, throwing that over to Hari, I'm curious to hear some of your thoughts about where you see some of Alphabet's revenue coming from in the future and what your more qualitative analysis say about Google and the disruption we're going to see from AI? Stick, this is a great conversation and also your introduction covered all aspects of Google. And I do agree with you that for the next three to five years, at least, Google is well positioned.

Starting point is 00:10:30 In terms of qualitative aspects of the business, I think they have really strong modes in terms of their search engine for now, at least, and of course, YouTube. They're also making great progress in Google Cloud, which is not talked about it. They're like the third most popular cloud platform. I think they're making some good progress with Thomas Corian. However, there are some issues or concerns that I have with Google, and they are more for the longer time. Number one is the optionality factor that Google used to have,

Starting point is 00:10:59 like how they came up with new businesses. Looks like all the pieces are now kind of baked in, except for the self-driving technology, which people don't really understand how to value, how it will change Google's future revenue and their position. But there are some concerns in terms of what has happened in the past few years. I would say in their core business search, one of the developments that concerns me is Amazon stealing their lunch

Starting point is 00:11:25 for the most lucrative search keywords. Because today, if I want to buy a product, I just go to Amazon directly, not Google it. Those were the ads that Google had the most expensive bits. So that's number one. Number two, in terms of their AI, TensorFlow was like one of the best the way they launched it, but there are other open source and other platforms that have taken lead now. It reminds me of how Sun used to be back in the day when they were the one to come up with the best technologies.

Starting point is 00:11:58 Like if you see today's operating system, especially anything that is Unix and Linux-based operating system, a lot of the underlying technologies were actually pioneering. engineered by Sun, including Java, which they open sourced, but they were never able to capitalize on it. And there were other people who ate their lunch. And when I look at Android, when I look at some of the progress that Google has made in terms of open sourcing AI with TensorFlow, I don't say that Google is Sun, but it's kind of very similar. And finally, with Larry Page and Sergey Brin not at the helm, I miss them. There is a difference between a founder-led company and kind of, you know, a

Starting point is 00:12:38 executive hired hand leading the company, there is definitely a difference in terms of the vigor and vibrancy. But having said that, this is all for next 10 years, that concerns I have, but I would rather have Google in my portfolio than cash. That's how I would say. Yeah, I agree with you on the Google versus cash comment, Harry. I got two questions for you based on some of the stuff you were saying there. So the TensorFlow piece, which is the algorithm or the code, the open source code that Google has for artificial intelligence, isn't the business model more to push them into Google Cloud for processing? So I'm kind of curious because your comment made it sound like other competitors are pushing developers into a different AI algorithm over

Starting point is 00:13:23 TensorFlow. Is that because Google Cloud is too expensive relative to maybe using Amazon's artificial intelligence software and their cloud computing? That's a great question. I think it's not about whether TensorFlow is good. In fact, it's really great and sophisticated. And you're right. The way Google wants to capitalize on their TensorFlow platform is to expose it through their Google Cloud. What I see the problem with Google and some of that is being corrected is in general, their focus on coming up with the best and most sophisticated technology rather than focusing on the use case. For 90% of the customers or enterprises, they don't need all the belts and visits. the TensorFlow offers. Folks like Amazon Web Services and other companies are just good at identifying

Starting point is 00:14:12 what the customer needs and offering those features through their cloud or platforms. And Google has been struggling in that. So that's the difference. The other question I had for you, Hari, was in the driverless car technology, the software, because I really don't know anything about where Google stands in that race. Would you say they're competitive, who's the frontrunner? I'm kind of curious to hear your thoughts on some of that. Good question. And my knowledge here is also like murky. I wouldn't say I know who's the leader there. But there has been a divergent approaches that companies have taken. For example, Tesla, the approach of trial by error, I would say in a less sophisticated way, in the sense that they

Starting point is 00:14:54 went from, there are five levels in self-driving technology. Like if you're level five and that's what Google is trying to aim at, then your car is completely self-driven in all conditions. You don't even need a steering wheel. But there are, what Google decided to do is go for level five from the beginning. And that's the reason they have been taking a long time. So this might pay dividends in the future. But companies like Tesla and other startups took the approach of gradually progressing through the levels and then they're making good progress because in AI, more about data than

Starting point is 00:15:27 the algorithms nowadays. The models can be really sophisticated, but less sophisticated models can be more sophisticated models with a lot of data. And Kai Fulie in his book, AI Superpowers kind of goes into details of why is the case. And that's what is happening in self-driving. So that's number one. Number two is they did have a early mover advantage, but every year that goes by, they're losing it bit by bit because there are many other companies getting into it.

Starting point is 00:15:56 So one argument or one option was that once they have the self-driving technology, they can come up with like Uber or Lyft or they can partner with Lyft, for example, because they own some stake in Lyft, and then capitalize on that, and that's how they can basically get the platform. However, with other companies also making sufficient progress, I don't know whether it will be, Google will be a clear winner. So it's really hard to say at this point. Yeah, I just don't know how they could catch up with, if you're saying, in my understanding of how AI works, is it is all about the data if there's training sets and pushing as much data through the model as possible. And you look at what Tesla is doing and how much data they're capturing on all these different cars that are out there. I don't know how Google's going to possibly be able to replicate that with all the hours and hours of driving that Tesla is able to capture. But Stig, my issue with this one, A, it's a great company, obviously. Everyone knows

Starting point is 00:16:53 It's a great company. When you look at the margins, they're fat. Top line, the bottom line, you're 21%. The top line keeps exploding higher. The macro environment, they're adding more Fiat into the system. I mean, we just pumped five to $6 trillion into the system. It seems like all that printing goes straight into these fang companies. My only concern is when I look at the chart, I mean, it's straight parabolic.

Starting point is 00:17:15 So I'm looking at Toby, who's totally relaxed and on vacation, and we appreciate him being here with us, even though he's on vacation, but he's laying there and he's smiling and I'm looking at Toby. Toby, what do you think of the valuation on this parabolic chart? Google is my favorite business. And so I was really happy to hear Harry's criticisms of it because I've kind of fallen in love with Google a little bit, because I think it's such a spectacular business. It's like this automatic money machine with these gigantically fat margins. Anytime you go to use the internet, you're basically using Google. You go in through the Google search bar to find something. Google gives you its picture of the internet directs you where to go.

Starting point is 00:17:53 If you're listening to music through YouTube or something like that, you're on Google. If you're using Gmail, you're on Google. All of these things that just caps so much of your life. I've got a pixel phone, so I use a Google phone. There's no question that it's one of the best, if not the best business in the world. And I think the others are Favim. You know, I don't like FanMag. I like Facebook, Amazon, alphabet, Apple, Visa, Microsoft and MasterCard.

Starting point is 00:18:15 I think they're the best businesses in the world. Everybody else thinks they're the best businesses in the world. I think they're expensive. They're sort of the cheapest one's probably Apple, and it's on like 27 times EV free cash flow. And then Google similarly, I think the two challenges with them, I don't think with these businesses, they're the kind of businesses. It doesn't matter if you pay up. The worst that happens to you is it's sort of dead money for a decade.

Starting point is 00:18:36 You don't go anywhere while the market goes somewhere, but you're not going to lose much money in them. The other thing is that Google's really controlled by three people. It's Sergei Bryn, Larry Page, and Eric Schmidt. All of the other shares are basically non-voting. So you're at the whim of those three guys. So the two challenges, I think, for Google are. There's no question.

Starting point is 00:18:54 It's one of the best businesses in the world. The two issues for it right now, I think, are the valuation. And I agree. It's like when you say you prefer it to cash, I interpret that as, you know, I wouldn't sell it. If I owned it, I wouldn't sell it here. But I wouldn't necessarily buy it here. I just like buy a starter position to track it or just watch where it goes to.

Starting point is 00:19:10 So if it pulls back, I can buy more. And the other challenge is corporate governance. I mean, if you're worried about the way that it's governed, you're worried about the way that it's run. There's really nothing that you can do. You sort of along for the road. with those three guys. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:23:33 I completely agree with your comment. I don't know that I'm buying it here, but I'm watching it to buy it. if I get an opportunity at a better price point. The one thing that I'm looking at from a momentum standpoint is the MACD. I'm looking at the daily and the weekly MACD for all of Fang. And it appears right now at the start of August 2020 that a lot of the Fang companies are all starting to really kind of, their momentum is starting to fizzle out. I'm curious whether in the third quarter we're going to have another whiplash like we saw in March, April timeframe where there's some type of currency, liquidity event that drops everything.

Starting point is 00:24:13 We get a really violent correction, and you get an opportunity to buy a company like this. That's where I'm looking at it today is amazing company. I think that you might have an opportunity to get it at a better price here in the coming quarter. I hope you can, and I guess I'm looking for that opportunity. Great comments. If I'm worried about anything, I'd like to get back to the valuation piece here a little. I'm definitely worried about Amazon. And, you know, Harry, I think you kick this off by talking about, you just go to Amazon now.

Starting point is 00:24:42 You don't even start with Google. And, you know, Google had been doing the Google shopping for quite some time. Now, after they included that into the search piece of it, it works a little better. It doesn't work as good as Amazon, but they have starting to generate money from that. I guess the functionality of going into the Google shopping universe is just not as interesting as doing Amazon. Where, really, for me, it might be that the ship has just sailed. The other thing is also that I'm thinking, Google knowing so much about us, is there a way that they can do it indirectly, serve those ads to us or sell those products to us one way

Starting point is 00:25:16 or the other? I think that's sort of like the important key, not thinking about the next three or five years, but more than the 10-year considerations that you talked about before, Harry. To me, it was very interesting whenever the CEO, Sunni Phajai said that Google needs to be better, like in the context of job, home, and life. And I think that statement is very inflation-proofed. Now, I'm not one of those people who are thinking that we're going into something like hyperinflation or anything like that.

Starting point is 00:25:43 All of that being said, I do see a lot of money being put into the system, and I am not completely sure what's going to happen. It's actually a very warm-buffet way of looking at it whenever you talk about inflation. Where is that value coming from? And if you can do that, to me, that in itself is an extremely value-inflation-proofed system. Whatever you want to call that or whenever the macro environment says. I guess for me, going into the piece of my valuation, I don't really see a product or service that will replace advertising as the main source of revenue, but I do see multiple minus streams

Starting point is 00:26:13 that might combine make a huge difference. And most prominent of these are probably something like YouTube and Cloud. And you might even say that YouTube to some extent is advertised-based. But you have so many other products and so many other projects that's burning cash right now, and a few of them will turn into highly profitable businesses. And I just don't know. I see a lot of asymmetric bets there. So if you look at the owner's earnings for the company, it's just far from the free cash flow because the growth capic is just so high for a company like Google. And of course, for a company with 166 billion revenue, it does take a lot to move the needle.

Starting point is 00:26:50 So whenever I refer to a few units to be highly profitable, I'm not talking about a speech recognition service that costs 20 bucks a month for 30 million users. But something bigger than that, which at least historically we've seen that the Google had been able to pull off. Last time I pitched Google in 2018, I used 15% as my projection for growth rates over the next five-year period. And since then, we've seen growth in excess of 20% annually. It is tricky to come up with growth projections, as it always is.

Starting point is 00:27:21 I guess with my assumptions, I'm probably looking at, I can see Preston is smoking there because I'm just about to say that. If I use like a Tuesday's growth model, say, call it 20% for the next five years and then a perpetual growth of 3%. I do arrive at the double-d-year-to-return. That is not how it's going to play out. I'm not saying they're going to grow 20%. But I'm also not saying that it's only going to grow 3% after five years.

Starting point is 00:27:44 So it's probably going to be somewhere there in the middle. Having known Stig for many years at this point, he's not one to ever brag. But that was Stig very delicately bragging that at a 15% growth rate, he was underneath of something that actually went 20% and he called this for many years ago so I give him a thumbs up and kudos stick. You deserve it. Well, thank you, President.

Starting point is 00:28:07 I just have to say the humble brag came much earlier. That was whenever I said that my last pick actually went up 50% in three months. That was actually my humble break. And I got no credit for that, guys. Anyways, growing it back over to you, guys. Before we move on the next picks, I don't want

Starting point is 00:28:27 and like take all the time here for us today. I actually wanted to throw it over to Toby because I can hear myself saying weird things like 50% growth rates and 20% growth rate. I hear myself pitch the weirdest stocks that I would never do. I typically would do all machinery type of low growth kind of thing and I find myself pitching other things. And we do see more traditional value investors buying into big tech, not just as common like you mentioned before, but we do see a lot of that. So, Toby, for you being a deep value guy, and I do admittedly recognize the difference between deep value and value. I know it's two different things, but is it because that you have other investors who are now keeping up with the times? Let's just call it that. Or is it a question

Starting point is 00:29:15 of value investors having lost their way because they are just under so much pressure to outperform the market and at least not trail the market like many have because they haven't been in these stock. So how do you see that? I don't like fang the definition because I don't like Netflix because it's negative free cash flow. Tesla's got some problems from a valuation perspective, but I think that there are a group of companies that are very big, very well established, very good moats, excellent returns and invest capital, excellent management. And that's that. I call it Faber Mar, the list of companies that I gave before. In order to value those companies, you have to come up with some reasonably aggressive assumptions. And that's been the challenge,

Starting point is 00:29:54 certainly for guys like me. What I tend to do is look back at historical. So Credit Suisse, I think with Michael Mobeson, has produced this document that shows you the rates at which companies have been able to sustain very high growth rates. So when I say rates, it's like, can a company sustain a 15 or 20% growth rate? What are the chances that they can do it for a decade, for two decades, for three decades? And you come down to these vanishingly small numbers. So you're making these very low probability bets and you're paying a reasonably high multiple for it. Having said that, if you look at these companies individually, it's probably hard not to see how some of them are not going to do that over a period of time. So the challenge has

Starting point is 00:30:33 just been for value guys to sort of be a little bit more aggressive and those who've done it have done quite well. And those like me who haven't been as aggressive, it tend to be more conservative, haven't done as well. So I think these probably are going to do very well, the underlying businesses. The question is going to be, and this is the question that I always have, just can the valuation sustain, can the multiple sustain, even though the business is going very well? If you think back to the first.com, there were lots of really good companies. And I'm not even talking about the famous dot-com blow-ups. I'm talking about Disney.

Starting point is 00:31:04 Lots of big companies came into that peak and they still very, very good companies, but they were punished because their valuations were too high. And it took them a decade to grow back into those valuations. And I think that there's a little bit of that going on now. And I think it's driven by interest rates being too low. That's all it is. You squash interest rates to zero, then a 3% free cash flow yield becomes very attractive, a growing 3% free cash flow yield.

Starting point is 00:31:26 You can't get that anywhere else. So Google is a better option than cash. You've got two challenges. If the interest rates go up, then you've paid too much. I have tended to be conservative, and that's hurt me. Thank you for your response to that. I really need to think a lot about this. I think around 7% of my portfolio, I tend to be a quite concentrated investor,

Starting point is 00:31:46 and Google is actually not my biggest stock picker, half-stock. That's much more than 7%, which I don't know if it's good or bad, but you really help me think about doubling down on something like Alphabet at this price level. So thanks guys for the feedback. I really appreciate it. Stig is just a final comment. I would look at your correlation too. So if it's a large percentage of your portfolio, I know on our TIP finance, we're now

Starting point is 00:32:11 doing that where we're showing compared to all your other stock picks, what's the correlation look like in indexes or whatever? how correlated is that to everything else. And it just is another consideration to try to keep it as uncorrelated to the rest of your portfolio, if possible. I'm going to go ahead and pitch mine real fast here. Mine is E-Trade. The picker for this is E-TFC.

Starting point is 00:32:35 I think anybody who listens to this show knows what E-Trade is and pretty much understands their business model. The thing that attracted me to this one is two things. There's a lot of volatility in the market, which typically means that there's a lot more trading taking place. And the numbers on this for me were really good. When I look at the numbers, the top line more recently in the last three years hasn't really kind of exploded. It's gone up. It's been good. When I look at the free cash flows on the business, it's doing really quite well. When I go in and I do an intrinsic value on this, I do an IRA on the free cash flows of the business.

Starting point is 00:33:14 and I do it in a conservative way moving forward, I'm coming up with a valuation that should pump out something in excess of 15% annually. And when I look at everything else that's on the market, I'm not finding too many things other than the finance sector that's kind of pumping out IRRs at this level. And I really like that e-trade is more focused in the trading realm than they are in like the JP Morgan type side of finance. So in general, I mean, you look at the revenue to their bottom line. It's 33% margin. They're very healthy company. Good balance sheet. In general, I really like it. I think when I look at the momentum, the momentum's in a positive trend. That's all I got. It's pretty simple. I like the numbers. I like the sector that it's in,

Starting point is 00:34:01 and I like the conditions, the environmental conditions as far as volatility. I expect there to be a lot of volatility in the coming year, so I think this is going to do well. I think it's a very interesting pick Preston. And if you look at how they make money, they basically do that three different ways. So they have interest income, they have commissions, and then fees and service charges. And whenever I look at something like the interest income, we have to talk about the low interest rate. I can't help but think that the rates we are now can only go up, which would be good for a company like each rate. But I've been saying that for five years. I guess most people have thought that we can't go any lower and still seems like we can do that. And I guess at this point,

Starting point is 00:34:41 time, as much as I see the low interest rates, I also don't really see them going up. Obviously, there will be some sort of mean reversion eventually, but I don't see it happening anytime soon, especially not what's happening right now with the crisis. So that's probably not where the money is going to come from here anytime soon. If you look at something like commissions, we've seen a lot of disruptions in commissions here lately. That is probably also not a place where you see more money coming in. I'm not saying that it would just be completely gone, but with the new players you've seen in. Everyone has been Rub in Hood. I think that's the term that I've heard a few times. And it's a bit painful, even for some of the discount brokers who, like each ratio came in and like

Starting point is 00:35:20 undercut like the big banks, like they're getting disrupted too the same way that they went into the industry. Then if you look at something like fees and charges, I think that's an interesting one too. And I guess for me, I like to look at it in the very Jeff Bezos type of way. He says that he doesn't want to talk about what's going to change. That's too difficult for him. He's more focused on what will stay the same for a very, very long time. And he uses the example of faster and faster delivery and low prices. So that's a very Amazon way of thinking. If we look at it for a company like this, lower fees, that's one thing, and commoditized financial service, that's another thing. So I guess that's some of the red flags that I see right now for a company like E-Trade.

Starting point is 00:36:01 Harriers, so you have a head of point there. Great point, but I just want to add, like, your comment about Robin Hood is quite present. I think that's definitely a risk, and especially now every other company is driving down their commission fee. So how will they expand their margins and their revenue? But one thing I wanted to point out of e-trade is one of their strengths, which is not well known, is that they are the preferred vendor or brokerage for most of the companies to offer their employee stock auction plans or RSU's restricted stock units. And that's very sticky. And also the volumes are huge. there because of all these companies granting their employees through E-Trade. And I have worked for

Starting point is 00:36:44 multiple companies in the Valley and invariably it has been E-Trade. I have not seen any other company. I don't know how they managed it, but somehow they seems to have some stickiness there. However, I also wanted to ask Christian, there is a lot of rumor about a merger between E-Trade and Morgan Stanley. Is that any factor while you're looking into it and would that be kind of an arbitrage that you're looking for in the short term. I think anytime you see the numbers where these numbers are at, as far as how much margin and profit a buyer could capture, yeah, absolutely. So, I mean, they're a prime candidate to be purchased. I mean, just think of all the data that they've got that would benefit as far as

Starting point is 00:37:29 a merger for a company like Morgan Stanley. So, yeah, I think that that's definitely something that's in the cards. When you look at the size of this company, it's really kind of on the lower size for a large cap. I think their top line was, what, $2 billion or something like that, $2.8 billion. It's small relative to a lot of other things, which makes it another great candidate for a buyout. So when I'm looking at the IRA and the numbers are literally double, triple, quadruple, which you find for other companies, IRAs, and it's that size. I think it's a prime candidate for a buyout. Just to address Stig's comment real fast, when we look at Robin Hood, they're selling their order book to high-frequency traders.

Starting point is 00:38:10 So is e-trade exempt from that activity? I don't know. I mean, they could be doing the same thing. I don't know necessarily their corporate culture or whether they would entertain something like that. I'm sure if things got competitive enough where they really started seeing a hit on their revenue that that could be another avenue that they could maybe step in and really kind of give Robin Hood a run for their money.

Starting point is 00:38:33 I don't know. But I think you have a lot of people that are not day traders that have accounts with e-trade that conduct a trade once a month. And for the fee, it's like, so what? It's not a big deal. The hassle of them changing all of their information and their data over to another platform is way more friction than they want to deal with for the few trades that they can conduct on an annual basis. I think you bring up a good point. It's definitely too sticky. Something like working with brokers. I mean, you don't want to switch broker if you can avoid doing it. I definitely agree with that.

Starting point is 00:39:08 I think what you see right now with brokers is sort of what you've seen in the anti-management field is that, no, you're probably not going to switch from one vehicle to the next to save 10 basis points. But you just see an overall pressure on profitability. And it's just all becoming more and more commoditized. And I do think that's the effect that's going to hit something like e-trade more than anything else. Toby? I quite like E-Trade. That's a position that I've held in the fund,

Starting point is 00:39:36 and I like it for all the reasons that you like it. Stig, I think it's beaten up along with all of the other financials. It's still a really, really good business, generating lots of money, really solid balance sheet, and it's in a good place, I think, in terms of being fairly low cost compared to its competitors. The reason that we sold it was because it had this bid from Morgan Stanley. When they set the bid, it was at $58.74. for it's 1.04332 Morgan Stanley shares. At the time that we rolled out of it, we just had better

Starting point is 00:40:03 opportunities. I see it's trading around $50. So it's an interesting, because I just can't do the calculation right now, but it would be worth working out where the bid is right now, what the bid is worth and seeing, because it's one of those things where if the bid goes through, you do very well because you'll get a good little return from here. And if the bid doesn't go through, it's still really undervalued. I completely agree with you, Toby. I'm seeing it the same way. All right, let's go ahead and go over to Toby for your pick. My pick is Berkshire Hathaway. I think it's a popular pick on this podcast.

Starting point is 00:40:35 I think everybody knows that Berkshire has underperformed the market for the last sort of could be 15 years. Basically, it needs no introduction by Warren Buffett, one of the biggest companies. It's like a $475 billion market cap right now. There's a little bit of float liability there, so it ends up being a $540 billion enterprise value. on evaluation front it's very, very cheap. Questions are, is there something lurking in the portfolio that from an insurance perspective, and that's why everybody's being cautious about it?

Starting point is 00:41:04 The other question is, has Warren Buffett lost it? At 90 years old, is he too old? So the only thing that I would say to the question of Warren Buffett, has he lost it? I think that the greatest trade ever is Warren Buffett buying Apple. And I'll tell you why I think it's the greatest trade ever. Apple was a completely known quantity at the time that he put the money in. and he invested, I think it was $36 billion, which might be one of the biggest acquisitions, probably one of the biggest acquisitions for Berkshire Hathaway, maybe one of the biggest

Starting point is 00:41:33 investments ever made in the market. And the stock is up almost three times since he put that position on. It now accounts for almost half of Berkshire Hathaway's book. So I don't think there's any question that he's still the best investor in the market. The company is built by him to be resilient and to perform very well. I don't see how you can lose in Berkshire Hathaway at this price. Really the only question is, is there something in the book that we don't know about? And I think that you have to trust management.

Starting point is 00:42:01 That's really the only thing you can do in insurance. And I don't think there's any management more trustworthy in America, probably, but certainly in insurance. Even though that they are quite old, I think that the company is constructed in such a way that it should continue to do very well into the future. And the fact that Buffett has absolutely nailed this Apple trade recently, just is proof that he's still fully in command. And so I'm sort of astonished that Berkshire is as cheap as it is. I think that it's one of the easier positions to put on in this whole market. Whatever happens next, if it's a big drawdown or if it's a big drawup, I think that Berkshire is, from a valuation perspective, from a management perspective,

Starting point is 00:42:38 and from a quality of business perspective, I think it's one of the easiest decisions I've ever had to make. I know when I look at the numbers, Toby, they look very good. I'm not accounting for the look-through earnings, and I'm coming up with a 9 or 10% at the current price. In terms of Ford return? Yeah, in terms of the IRA that I'm doing on the company. I'm looking at the free cash flows, and I'm making an estimate into the future, and then basically taking the current price and solving for the percent that I think you'll get.

Starting point is 00:43:06 Without the look-through earnings, I'm already getting 9 to 10 percent. So I think when you add those in there, especially if Apple's taking up as much as the balance sheet as we're saying they are, I think that you've got a lot there. I think there is risk in the insurance area, especially if this global economy plays out in the very negative direction. I think it's going to go in the coming year. I think you're going to have massive insurance claims, and I think there's a lot of risk there. With that said, of all the insurance companies that are out there, I would put GEICO

Starting point is 00:43:37 at the top of the list just because I know how conservative they look at this and how they're not chasing market share. They're chasing protection for their shareholders at Berkshire and the operational subsidiary of GEICO. So I think that all the insurance companies in the whole U.S. have that same risk as GEICO. And moving forward, I think that as things continue to play out, they're going to continue to adjust their policies and try to manage those risks as they pop up. I don't see any one particular risk being able to blow up all the assets under GEICO.

Starting point is 00:44:13 So we know the one that Warren always talks about at the share. Holders meeting, but I don't think that that's something that's very realistic in the grand scheme of things. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer.

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Starting point is 00:47:53 to come with a huge bare scenario. But I do think that there are a few different important things to note. If you look about the performance and Buffett gets a lot of things thrown at him right now because of the like a performance. And if we look at the low since 2009, the S&P 500 and Berkshire, they're more or less the same. Like, we're looking at something like a, what I looked up here was 188% return to the SEP 500, 181 for Berksa Heatherway. And it's only here very recently that the S&P 500 caught up. I do know that whenever you're looking at Buffett's track record, if that is what you're

Starting point is 00:48:28 comparing it to, clearly you might be disappointed, but as we talked about multiple times, times there are a bunch of reasons why he cannot keep up with that track record. I kind of feel that Buffett is not getting enough credit. You mentioned the Apple deal before here, Toby, and I think it's important to understand diversification here. Buffett is famous for saying that diversification is a protection against ignorance, and that diversification makes a little sense if you know what you're doing. And a lot of people are saying, well, you know, Apple is like half of your equity portfolios. I feel it's the wrong way of looking at it. I mean, he's having sitting in so much cash, everyone wants him to put that cash into use. He's doing that. He's

Starting point is 00:49:07 outperforming everyone with that position, and then people don't like it. I mean, I kind of feel, you know, it is sort of like difficult to satisfy anyone. And Buffett has been asked specifically about the diversification part. And what he's just saying is that this is just the third major company aside from insurance and his real interest. And I guess you can put in something like Buxley-Hadleway entity too. I mean, it's just another great business that he is running. One deal that he's been doing here with the recent quarter, I really like what he did with Dominion, employing close to $10 billion. And we're looking at something around the $1 billion EBITDA.

Starting point is 00:49:43 I don't know we have this reservation about EBITDA, but that was what was reported, especially with natural gas prices at historic lows. Buying something at a 10% multiple, I think it's not streaming cheap, but it looks like it's a good value and a very, very warm buffet-type way, owning the infrastructure of natural gas, I think he hiked his stake from 8 to 18% of the transmission on that. I guess my question sending it back to you, Toby, is how much can this be a part of an investor's portfolio, something like Brooks Heatherway? Just to pin some call around that, you know, I mentioned before that Google was 7% of my portfolio, and it's by far not the largest position I have. That would be something

Starting point is 00:50:24 like Brooks out of the way. But what would it be for you, Toby? Like, where would you feel that a retail investors should feel comfortable, who really understands Berksie Heatherway, wants it to be a huge part of their portfolio, but how big should and can it get? That's a difficult question to answer because it's always going to depend on the individual and the other opportunities that they have. It's hard. In the fund, I run 30 positions long and I just equal weight, them rebalance them on a quarterly basis. If I was to run a more discretionary portfolio, I wouldn't probably run as many positions and I'd have more concentration in sum. The thing about Berkshire is that I think that it's a reasonably steady, certain 13 to 17

Starting point is 00:51:07 percent. I are mine's a little bit further north because I include the owner earnings. You get $100 billion in cash. You've got $100 billion in Apple. You've got a $500 billion market cap. So you've got the rest of the company is just the rest of the businesses that I think are already worth more than where the market cap is. I think it's a pretty easy decision on a valuation basis, the downside is very, very limited and it's run by great managers. It's one of the safer positions that you can put into the portfolio. The question is whether it's going to give you the rip-roaring upside that some people are looking for. If I was to run it discretionarily, I'd put it somewhere between 10 and 15% probably in my portfolio. But then I like Favorma, the companies that

Starting point is 00:51:47 I've listed a few times here, they're hard to own on a valuation basis. I'd be inclined to have much smaller positions in them just so I could track them. I might have a 1% position in lots of those. So I'm already getting looked through into Apple by owning Berkshire. I get a big chunk of Apple and I get it at a discount. I get Buffett managing it. I get all these other things thrown in free. I think Berkshire is unlikely to blow up to say the least. So I think it's a reasonably safe position. If you're going to size one up, this is the one to size up. All right, Harry, talk to us about your pick here, Brookfield Property, Reed. I cringe when I propose this as my pick this fake. But the reason I'm pitching this is sometimes you've got to go where nobody

Starting point is 00:52:27 wants to go and Brookville property kind of is right in the middle of it. It's basically one of the largest operators of globally diversified quality assets. They include office and retail. And the problem is retail because they have around 41% of their assets in retail. They have around 85 billion under management, assets under management. They have been growing their assets under management quite healthily. In 2015, they were 30 billion asset under management and two rates around 85 billion. Obviously, I think Toby would be probably looking into it too because it has deep value written all over it. Toby, correct me if I'm wrong. I do have some concerns with Brookfield, mostly in relation to corporate governance. I do see that they're trading at a deep

Starting point is 00:53:16 discount to their. However, I think the main concern is they do have good financial liquidity position that they say they have around $6 billion in cash and undergone credit lines. They feel they can withstand this one year or more of downturn. Their tenants in office space are doing okay. Their average lease period there is around nine years and 93% of them have a long-term lease in office space and most of their tenants are doing okay there. But I think their retail is hurting. Their FFO obviously has declined compared to last year at $1.39, $1.39 this year compared to $1.48. This is not including their resale of their investment. So a couple of unique things about Brookfield property partners is that unlike most rates, they engage in one developing their property into what they call as townships. So if they have just malls, they would build townships around them and then basically develop it and then sometimes even resell some of their properties they already have.

Starting point is 00:54:23 So there is a constant flow of funds from the sale of their assets as well. So that's one thing that I've found to be interesting. I think for me, the number one concern would be their leverage, high leverage. That's like 13.8x detribita and it has been increasing. their payout ratio is quite high. If I include the realized gains from the sale of assets, it around 95% or close to 100%. But if I exclude it, it's way more than 100%. There is also a component of fee that their parent, Brookford asset management, charges, like their pay is 0.5% of asset under management. Then there is an equity enhancement fee, which is 1.25%. And then there is incentive distribution fee. There's a lot of fee that one has to go through and that kind of, you know, eats up into the returns that one makes. And conflict of interest, because Brookfield Asset Management owns it and their fee is such that

Starting point is 00:55:25 it's kind of tilted towards growth. They get more share of the growth and hence they might be incentivized to take more risk. So that's some of the concerns I had. I think in conclusion, I wanted to bring it up here more to get. an opinion from you guys, is it worth looking at this price point? It's more than 50% down. It used to be close to $20. Beginning of the year and it's now around $11. It was $8 something a few months back. So obviously it has come up. And the Brookfield has also offered to buy back their share at $12. And then they recently sent out tender to all their existing shareholders. So obviously they are

Starting point is 00:56:07 seeing value in it. So they're confident to buy it back. Well, I was thinking the same about IBM when they were buying back their shares. So, disclaimer. Bookfield is one of those ones that is heavily discussed in the value community because it's cheap. It's run by guys who are operator compounded type investors. So the long side is always that there's a sum of the parts, NAV valuation that you can come up with that makes it look very cheap. And the criticism of that is that you base it a lot on what. what Brookfield tells you the assets worth and they tend to be maybe a little bit aggressive with

Starting point is 00:56:44 their valuations and it's very rare that you see Brookfield trade close to NAV. I don't think it's traded at a premium to NAV because they are a little bit more bullish in their in their own assessment of those numbers. The fact that they're buying it back means it's probably undervalued but the big risks I think it's got a lot of leverage. You're kind of betting that interest rates stay very low. And the other one is that the corporate structure that they have is just mind bending. Every time I try to go through it, it just puts me to sleep. I can't figure it out. And I've seen, even reading somebody else's assessment of, it's this interlocking web of multiple companies that make it very difficult to work out who owns what and why it's structured

Starting point is 00:57:21 that way. It's one of those things where I see that sort of complexity and it just makes the hairs on the back of my neck. It gets my hackles up a little bit. It makes me a little bit nervous. I mean, why is it that complicated? Why have you built it that way? It's possible their answer is just ad hoc and things have come up and we've had the money there. We've bought it and that's what's created this structure. Not saying that there's anything going on. It's just whenever you find something going on in these companies where there's some sort of fraud or self-dealing or something like that, they also have very complicated corporate structures because it's a way of hiding what's going on. I don't know in relation to Brookfield, it's just hard

Starting point is 00:57:51 to get a bead on where it is. So the complexity of the structure and the leverage and some of the questions about devaluation of their own assets make it too hard basket for me. I just can't see the valuation on the free cash flow side. So you were talking the net asset values, which is just your assets minus your liabilities divided by the shares. And so what it really comes down to is are those values that are being listed on the balance sheet really the valuations that we're going to see moving forward into the future? And when I think about those valuations of those properties, so much of the valuation is dependent on the free cash flows that those properties are able to kick off.

Starting point is 00:58:35 I know from looking at our screener, our TIP finance, when I'm looking at the small cap companies, the momentum status on all of these small cap companies are bad, really bad. When we look at the indexes going up, we're really talking about a couple companies that are driving these indexes. And all this five, the six trillion dollars worth of printing that's taken place, it's all nesting itself into these tech companies. And when you look at the smaller businesses that make up the leaseholds, and the people that are fulfilling or sitting in these buildings, all those small businesses,

Starting point is 00:59:11 they're getting crushed. My expectation moving forward into the coming year is that that's going to continue to persist. And if you have a lot of vacancies and you don't have them filling these buildings, my opinion is that there's impairment on the valuation of those buildings. And so, like, that's my real concern on a fundamental level of the underlying assets on this company is that I think they're overstated. When I look at the valuations on this, it really doesn't excite me all that much. I see that there has been a little bounce from the March low. It has had a little bit of a bounce. So there might be something that I'm missing. And like Toby said, the complexity of the corporate governance and what's actually sitting on the balance sheet is

Starting point is 00:59:52 the part that's really hard for me to understand when I'm looking at, when I'm doing a quick And I obviously haven't spent a ton of time researching this, but just from a very high level standpoint, those are my concerns. Generally, Hari, whenever everyone is running away screaming for something, I'm always curious. I guess that's something that just comes with the territory whenever you have value investor. What I've also come to realize, especially over the last few years, is that there's often

Starting point is 01:00:18 reason why people are running away screaming. And the kind of argument to that, we had in Formiglion here last week, from Crown Street, and he talks about how space is the new luxury. And that comes both with something like the malls that, I think you have 122 now and they have 134 office properties. And I see that argument and anyone should definitely listen to a lot more what he's saying than what I'm saying. But I think what goes into this is that, yes, space might be the new luxury, but you also have to account for not just the impairment. And Preston was talking about the redeveloping cost, because so many of those buildings, they can't be used the same way. So even if space is in luxury,

Starting point is 01:01:00 it would have to burn a lot of cash before you see cash coming back again. All right, guys. Well, I think that concludes all of our remarks. I want to give Toby and Hari a chance to tell people where they can learn more about you guys and check out some of your stuff. My fund is called the Acquirerous Fund, Tigger ZIG. And I've also started managing another call the Deep Value Fund, the Tigger's D-E-E-E-E. that's going to be a small and microcap deep value fund. Deep values vary out of favor of the moment. So if you're a mean reversion, contrarian type investor,

Starting point is 01:01:32 then take a look at deep value. It's really beaten up at the moment. I also have a website atquiristmultible.com, and I'm on Twitter at Greenbacked, G-R-E-E-N-B-A-C-K-D. Ari? Thanks, Christian, Toby, and Stig, for your feedback. Yes, I knew that this is something that I was on the fence, and that's the reason I brought it up here,

Starting point is 01:01:53 to kind of, you know, put it on the dissection table. You're right. There is a reason why everybody is running away from this. My reason for looking into it is as Sticks said, any time when everybody's running away, it's time to just give a closer look. The positives I see is most of the bad news is out, but at the same time, we don't know how long this will last. And, Pristin, you brought up net asset values might go down.

Starting point is 01:02:19 and Stigke were talking about how much capital they'll have to put to redevelop those properties in case things change. So there is risk, so I wouldn't bet my form on this. But thank you. This was great conversation and feedback. All right, Hari, tell folks where they can learn more about you. As usual, people can find me on bitsbusiness.com, my blog and my Twitter handle, Hariurama, happy to engage in constructive conversations. All right, guys, as we're letting Toby and hurry go, we're now transitioning into playing a question from the audience, and this question comes from Streaming. Here we go.

Starting point is 01:02:57 Hi, Preston. Hi, Stig. My name is Pramag. And I'm calling you from United Kingdom. First of all, big thank you for your podcast. I've been with it since the beginning. I love to see your journey as investors. It's fantastic.

Starting point is 01:03:08 I've got a question about stock dilution. So when I invest and I do fundamental analysis, one thing I don't understand why sometimes companies like Tesla, issue more shares. So essentially, they dilute my shareholding and the shares actually go up the next day and they continue to go up. So how to factor this into fundamental analysis, the risk that the company will be diluting your equity by issuing more shares to investors. And is that something that's captured in some of the fundamental models of investing? Thank you so much for your podcast. Appreciate it. Bye. I think it's a great observation you make. Now, Tesla in itself is a tricky example, and we often

Starting point is 01:03:52 talked about here on the show how Tesla sort of goes against everything we learned about value investing. For instance, Tesla took over the position from Toyota here recently as the world's most valuable carmaker. And that was not by having any earnings. They actually haven't had since it was founded in any fiscal year, but it's been through issuing stocks and taking on billions of dollars in debt. So I'm not sure if that is the base case study to understand what's fundamentally happening when a company issues stock. But what does happen whenever a company is your stock is that the individual stock price doesn't have to go down in price by default, because what it means is that the company raises capital and they will also have more owners

Starting point is 01:04:41 to share the ownership of that company. But again, it's from a higher base. So the effect can both be positive and negative on the individual share. And you can of course bring up the argument that it's better if the company can generate cash flow and it doesn't have to finance it through issue of more equity. But keep in mind that companies are at very different stages. You might have a growing company who needs it to turn profitable very soon, or you might have a situation like with airlines who are a mature industry and used to be very profitable, but now due

Starting point is 01:05:14 to COVID-19 is not. And we all knew that they need a capital and then the terms that got actually weren't that bad and the market reactive positives to that. So you had to divide it up and say that in the first place, no, it was not great that they needed capital. But at the time that they made the announcement, the stock was already punished hard, everyone expected it. So everything else equal, it was actually a not as bad as it could be scenario, which the market liked. And it's also important to understand that if we use the case study of airlines, the fundamental value of airline stocks is lower than 2019, but not because of the dilution of the shares, but because the missing revenue and the bleak outlook. You can even make the

Starting point is 01:06:01 argument that if airlines didn't issue shares, they couldn't get loans and then they would go bankrupt. So, delusion of stock, as mentioned, is not really a good or a bad thing per se, but it really depends on the specific circumstances for that deal. And it could even be so, though this happens more often priority than publicly, that you have companies seeking capital, not just for the sake of capital, but as an add-on also to get new investors in with know-how. But really sure question about is the dilution of shares accounted for in valuation models? Most valuation models use a per share basis. And so it's a great point to ask what happens if you now have more shares. But as I mentioned before, the answer is a little more complex because it does depend

Starting point is 01:06:49 on which value the company would have after the issue of more shares and whatever happens whenever that equity has been utilized. So that's why if the market deems that in a positive light, you can see that you actually have the individual share price, even after the announcement, would go up price. Tremack, I'll be honest with you. I don't really have too much to add beyond what Stig said because he really kind of covered all the bases.

Starting point is 01:07:14 For people that might be looking at this with a fresh set of eyes and have no experience with it, I would just tell you at a very general and basic level when a company's going through this, they're taking newly issued equity and they're just turning it into a currency. They're turning it into cash in order to subsidize their inability to earn free cash flows. That's really kind of the essence of what it's at. So whether they can raise capital through the issuance of debt or they're going to do it through the issuance of more stock, that's pretty much what they're getting at. And so when you're thinking about the valuation on that playing out or you're concerned about,

Starting point is 01:07:54 about a company doing that in the future. The main thing you got to really look at is, are they, do they have free cash flows? And if they don't, well, then they're going to have to probably go down one of those two paths in the future. So that's probably a good indicator as to whether it is or isn't going to happen. With respect to Tesla specifically, man, there is no way Stig or I can provide you any type of advice as to why you might be seeing some of the things you're seeing on Tesla because this is a, this is a case study of case studies. as to how this stock keeps moving and all the intangible things that the market seems to value on this one that I have continued to be surprised with. So I can't really add much value

Starting point is 01:08:36 in critical thinking and some ideas on that one. So I'll leave it at that. But Tremic, outstanding question. I really enjoy questions like this. And for asking such a great question, we're going to give you a free subscription to TIP Finance where it will help you do intrinsic value calculations. It'll assist you in many different areas for momentum investing and helping you filter and find good value picks. We're really excited to be able to give you that subscription for free. And for anybody else out there, if you want to get your question played on the show, go to Ask the Investors.com. If your question gets played on the show, you get a free subscription to TIP finance. All right, guys, Preston, I really hope you enjoyed this episode of the

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