We Study Billionaires - The Investor’s Podcast Network - TIP450: Mastermind Q2 2022 W/ Tobias Carlisle and Hari Hamachandra

Episode Date: May 22, 2022

IN THIS EPISODE, YOU'LL LEARN: 01:51 - Why Toby is bull on Domino's Pizza (Ticker: DPZ) 17:42 - Why Hari wants to invest in Meta (Ticker: FB) 38:41 - Why Stig has decided to invest with Mohnish Pabrai *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Mastermind Discussion Q1 2022.  Mastermind Discussion Q4 2021.  Mastermind Discussion Q3 2021.  Stig Brodersen's interview with Mohnish Pabrai. William Green's interview with Ray Dalio. Our FREE stock analysis resource, Intrinsic Value Index. Subscribe to our FREE Intrinsic Value Assessments. Tobias Carlisle's podcast, The Acquires Podcast. Tobias Carlisle's ETF, ZIG. Tobias Carlisle's ETF, Deep. Tobias Carlisle's book, The Acquirer's Multiple – read reviews of this book. Tobias Carlisle's Acquirer's Multiple stock screener: AcquirersMultiple.com. Tweet directly to Tobias Carlisle. Hari's Blog: BitsBusiness.com Tweet directly to Hari. SPONSORS Support our free podcast by supporting our sponsors: Hardblock AnchorWatch Cape Intuit Shopify Vanta reMarkable Abundant Mines HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Every quarter I sit down with my good friends, Tobias Carlisle and Hari Ramatandra. In this week's episode, we discuss why Toby is valuing Domino's Pizza to $500 a year and why Hari finds Mata's valuation attractive. I'm not pissing as stock during this session. My pick is money's par bride, and I outline why I decided to invest with him. I hope you enjoy this episode as much as Toby, Hari and I enjoyed recording it. So without further delay, here's our Q2-2020 mastermind discussion.

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. Welcome to The Investors podcast. I'm your host, Stake Broderson, and today we have the Q2 Mastermind Group meeting. And we have, Jens, how are you guys doing today? It's good to see you guys. Good to see you guys as well. I hope we are going to talk about the Omaha trip that Toby had recently as well. So looking forward to it.

Yeah, Toby, perhaps before you, because we were drawing straws before the before we hit record there and you're going first. But perhaps before that, any good stories from the meeting? I went with Jake Taylor, who's my podcast co-hosts on Aquarers 30 after hours. and Bill Brewster, who's the other co-hosts, it was really fun. Saw lots of old friends, lots of new friends. Saw some famous people. I saw Leelieu.

That's always a highlight for me. Leeloo's kind of my, Lidu's my guy. So it's good to see Liliu. And Leelu just loaded up on Harri's Peck, so we're going to talk about that later. But hey, Toby, you said you didn't mind going first. So brave as always. And, you know, I have to say whenever I saw your pick, I don't know about you, Harry, but whenever I saw it, I was like, no, I actually had to go in and double check because whenever

I saw the multiples on this pick, I was like, something has happened to my good friend, Toby. He usually doesn't pay off for anything like that. I do want to say, though, that the pig redeems itself whenever you read some of the statements and you understand the business model a bit better, but I don't know. I just want to like to jab at you there a bit in the beginning. I think it's optically expensive. I think it looks expensive from the outside, particularly given what I normally buy. But I think Domino's is my pick, just so everybody knows, Domino's Pizza,

world's largest pizza chain. It traded up to about $500 in the peak of the pandemic. And it's come back now. I think it's around $380. And I've bought some for the Acquirers Fund, Tigger ZIG. I've paid a little bit more than this, but not much more. I think it's trading roughly around where we bought it. I think it's worth about $500.

And I'm going to make the case for it here. So we're trading now. Market caps about $12.7 billion. I've got about $5 billion in debt total enterprise value, 17.7, 18. Doing about $18 billion in sales. So you're buying it for one-time sales here and free cash flow yields around 3.2%. So that's just the very high level. The reason I like it so much, it's got this huge return and invested capital because it's a franchise model.

So basically what that means is that dominoes the enterprise. They're responsible for running the franchise and then franchisees own all the stores. And I think the most interesting statistic is that 95% of Domino's stores come from people who are formerly drivers for Domino's or formerly employees for Domino's. So they get inside and I think that they see that it works. So I think that's really encouraging. That's sort of a good statistic. It's not outside capital.

It's people who get inside the business really like the way the business operates. personally my family eats dominoes about once a week. That's got nothing to do with the reason that I bought her. I very rarely go and do the Peter Lynch thing where you actually go and consume the product, but this is one of those ones where I know the product pretty well. And one of the things that really stands out is how easy it is to use their digital app. It remembers who you are and knows what you like.

It's a handful of button pushes. And then when you push that button, it creates this flurry of activity in the store. So we go down to pick up our pizza and you can see them working really hard inside the store. They make those employees work and there's not much to the storefront. There's not much stuff in there, which is why it's got this gigantic return and investor capital in addition to it being a franchise. One of the things that I think is really interesting about it, sort of everybody has known this forever. But Domino's was one of the very first delivery companies. They sort of solved that delivery issue that has plagued all of these other firms, DoorDash and so on.

deliveries, none of them have been able to figure out how to do it profitably, but Domino's has been doing it profitably for a very long time. Now, I think one of the reasons why, well, I think there are a few reasons why it's trading cheaply now. One of them is that, you know, it was one of those pandemic stocks where when people were unable to get out as much, Domino's became a very popular way of ordering because they kind of had that touchless delivery. It came to you in a box. You could stick it in the oven. In the very early stages of the panos, pandemic when we didn't know really how it was coming in, whether it was on services or whatever, we were buying them and then cooking them and getting home. They've also found it very difficult,

so that comp has made it difficult. Sorry, so that's one of the reasons why I think that it's come back a little bit. It kind of got ahead of itself through the pandemic and it's come back a little bit as a result, just being too popular. They've also got this ongoing driver shortage. So one of the problems with all of these competing delivery companies is that there's just lots of competition for drivers and it's just hard to find employees at this time in the cycle for whatever reasons, very low unemployment. People have sort of got their choice of jobs and Domino's is one of the companies that's suffering a little bit. So they've increased wages. They've spent some more money on wages in an attempt to sort of solve that problem. And the other problem

for Domino's has been that pizza is a, they're made out of dough. There's lots of wheat with the Russian invasion that we get a lot of our wheat or globally a lot of wheat comes out of Russia. So that has pushed up the price of the wheat and other commodities that go into pizza. So it's made them a little bit more expensive for Domino's to produce than they would have otherwise been. So that's the bad news.

I think all of those problems are solvable in reasonably simply solvable, either just through letting time pass, increasing the wages that are paid. And I also think that, you know, DoorDash and Uber are going to, they're going to struggle because they're still losing money

on these businesses. Whereas Domino's does not. Domino's is hugely profitable, generates a lot of free cash flow. What's most interesting about Domino's, it's the cheapest way to feed a family at four. If you look through all of the other options that people have, Domino's is the cheapest way to do it. Pizas are sort of $6 to $8. They've got this new method where you use your app and they'll bring it out to your car sort of two minutes after you arrive or you can get it delivered to your house. It's really, really convenient. It's a mature business. So it's not one that's going to see a lot of rapid growth. But having said that, they've got pretty reasonable robust growth internationally from the US. So in 2017, they had about 9,000 international storefronts. Now they've got about

12,000, which is about 30 percent total growth over about five years. And that's out of sort of 18,800 location. So they've got this pretty consistent growth that's likely to continue for the foreseeable future. They're very good at doing that. In addition to that, while they're sort of growing that top line, they've been very consistent repurchases of stock. So they've taken a lot of that free cash flow that pay a little dividend, repurch some stock. Total shareholder yield, I think, is something in the order of 6%. And right now, I think, is a good time to buy it because it's the cheapest that it's been since 2013, which was around about the time that it sort of got taken, a little bit after, they changed the model and they've had this great run as a result. I think for a variety of

reasons, it generates lots of free cash flow. Management is sensible, does the right thing with it, repurchase the stock at the right time. And I think if we go through a sort of inflationary period, which we, which looks like we probably will, it's still one of the cheaper things out there. So it's one of the ways that people will continue to feed their family. So I don't think that there's any risk that there's no risk to the business model. So that's for the pitch, Jens. It's a relatively scalable model. You've seen decent growth. You have this business model and you have this circle where, you know, with these franchise costs go down and the company, grows. And so I definitely like that. The way that capital has been allocated looks

relatively well. Actually, talking a bit more about the franchise model, I just pick, pull up some numbers here. The United States, a franchise is pay 5.5% of their revenue. And outside of the States, it's 3% under a master franchise agreement. So I just kind of felt there was some interesting stats to pull up there. Interesting pick, Toby. But before I talk about this pick, I want to congratulate it Toby on one of his previous picks, which was Lockett Martin. And I don't know whether Toby was in the boardrooms when Putin was discussing strategy. But I don't know. He timed it really well. Thanks, Harry. I appreciate that. So, yeah. So that's the reason, like, you know, the reason I'm also bringing that up is kind of the disclaimer I am putting for whoever is

listening because when we are trying to shoot down Toby's idea, remember we have also shot down Lockett Martin show. And now, who's laughing? So with that, Toby, I think it's an interesting pick because it's not a classic, it's neither a deep value, it's not a white moat. I went in a typical sense because that's the reason I'm kind of struggling to understand because pizza is almost a commodity. Like, for example, our favorite pizza go-to is mountain mics. So, each family has their own, but it's not like Pepsi or Coke. It's not a pizza hut and there are a lot of local pizza chains that keep coming and we keep trying that as well.

So in that sense, one, my concern is, if they're really good, will it be competed away in terms of ROIIC? because they don't really have a moat, maybe their mode is in distribution. Now, coming to distribution, as you said, there is driver shortage. There is input cost escalation due to inflation in general and gas prices. And my concern is, do they have enough pricing power with the amount of competition they have in the market? But most of that input cost, really has the most. Yeah, I think that's a good question. I think that's a – I like the way you think you about that.

I'm not sure that that's the way that they think about because I think what they're doing is producing a very consistent product and they're doing it at a very low price point. And that's one of the things that we have found too. There's lots of boutique kind of pizza places around us as well. But what we feel is that they're much, much more expensive than Domino's. And just because they tend to be one-offs or kind of family-owned, there's a lot more inconsistency in what they produce where Domino's is very, very consistent

and it's incredibly cheap. If we get home late from the kids' sports, which is what typically tends to happen, and we need to feed the kids pretty quickly, Domino's is a really quick, consistent way of doing it, and we know that they want it. The kids love it. And so it's easy to, it's easy to solve that problem. But as you point out, that is a real issue for them,

that commodity cost price, inflation does seem to be one of the reasons why the stock is depressed. And I honestly, I don't see that going away anytime soon. But I do think that they'll be able to price. They have made some changes that have previously. Some of the deals that you could get, you could get delivered. Now, the deals tend to be they're trying to encourage people to come. into the store to take away that delivery issue. So I do think that that's one of the risks, the driver shortage and the employee, sort of generally the employee shortage and the commodity

inflation. I think those are the two real risks to it. I think that they've just got such a great brand and so many locations that I do think that they have a little bit of protection in that, you know, if you go, you travel anywhere, you see a domino's, you know, pretty much what you're going to get. Yeah, I think that I agree with because I would say DoorDash probably will be hit first than Domino's because I know what pizos my kids like. And if there is inflation, I would rather go and get it myself rather than going through DoorDash and paying that extra cost of delivery.

So I think it might hit them later in terms of consumption patterns, but they will be probably later in the line after DoorDash and others. They still retain that incredibly, have an incredibly high and consistent return and invested capital. It's one of the reasons that, you know, I'm typically, I think you fade the return and invested capital over time. And theirs has come down a bit from where it was. It was extraordinary levels, you know, five, six, seven years ago. But even at, even at where it is, at 55%, it's, it earns more on its assets than Google does. So I think it's, I think it's an impressive, impressive enterprise.

To Harri's point about the industry in itself, it is a bit different than something like Martin. The bearer's entry is just very, very different than something like pizza. And Domino's pizza, I know they also have different products, but they do not compete with other pizza chains. They compete with food. And they compete in a segment of food. And so if weed is the issue, which is due to Ukraine being, you know, we have this saying

that it's Europe's breadbasket, a lot of production also in Russia, you know, then then it's an issue and you could lose out to those types of foods that do not use wheat. And that's what you're competing with just as much or perhaps even more. In defensive dominoes, it continues to be the cheapest way to feed a family. I have this little graphic that shows it competing against various other fast food options, QSR options, and it continues to be the cheapest one there. So I think that that stands it in good stead if we go into some sort of inflationary or if the inflationary environment continues.

One last point about the valuation, Toby, because you said it's not like, say, Google or any of the fast-growing companies, and I saw that revenue has been growing consistently around 10% to 15% for the past 10 years, which for a chain is quite an impressive feat. However, when I look at their P.E., is it 25? Maybe my data is outdated, but like, when you look at some of the companies that I'm going to pitch later, the P.E seems to be quite rich for a company that's growing at 10 to 15% ARR. So I just wanted to get your take on the values.

Yeah, no dispute there. I think the measure for something like Domino's, given that it is, it's mature. I don't think it'll grow at that rate that it has grown it before. I think that it'll probably grow to be 8 to 10% in the future. I think that the international growth will be reasonable. I also think that they've got a pretty good tailwind in that QSR. people just tend to be ordering up more and more as time goes by. So I think the measure is the free cash flow yield and then if you combine that with the fact they have such a huge return on invested

capital, you get, you know, the way that I think about these things, I always add the yield to the reinvestment rate. And I think that the two together give it this very, very substantial return. And additionally, the fact that they're buying back so much stock, particularly they've shown this propensity to buyback stock at opportune times. And I think that you probably see that there's been quite a substantial buyback when we, next time we circle back to this because it is right now, the cheapest it has been since 2013. So I think that they'll be taking advantage of that. The catalyst for this will be unlike Lockheed Martin, which, you know, I got a little bit lucky, I guess, is that I don't really want to say that, but got a little bit lucky that there was,

there was a conflict so quickly after that pitch. You know, Domino's will just report. So they were a little bit soft in their last day and X release, which is why they're a little bit soft now that they didn't miss by much. They missed and they could quite easily reverse that next time outperform and then I think you'll see the stock leap if that happens. So that'll be the catalyst for Domino's which I anticipate that that happens one of these quarters in probably this year. I think when he was pitching he was not hoping for a catalyst in case of locking. I think it was just based on the merit even if Ukraine-Russia war hadn't happened, a 4% and dividend with such a strong moat, I feel it was a very good pick.

Thank you. I think I said it was like I expected sort of mid-teens for the foreseeable future. So it's well ahead of what I sort of anticipated. So the stock I'm pitching today is trading at a P-Ratio of 12. It's in the deep value territory. I'm just trying to build up the suspense. It is going through a bad patch right now, which they have gone before, gone through before, as well. And it has a management that hasn't changed. It's a management that has delivered in the past. And its reputation has taken a hit. So it's not the most loud stock today. So with all these

factors, I feel meta, which was Facebook before, is at a valuation that makes it quite attractive for me for a couple of reasons. One, the moat or the business hasn't really changed much. The business is still going strong. In fact, in their latest report, their monthly active user count actually went up. It's around $3.64 billion. It has a strong ecosystem of products like Instagram, Facebook, WhatsApp. SAP and they're coming up with new products like Reels and Stories. These are innovation or you can say copying from others, but they don't mind cloning. But they're going through this bad patch right now because they have a couple of headwinds.

Number one is Apple's privacy policy. It is hitting them hard because it is reducing their effectiveness to target their ads, making it less effective in general for advertisers. That's the fear the market has. The second thing is they're facing some really tough competition from the likes of TikToks and Snap, which are newcomers, but Google as well for the attention and time of the users. And of course, the regulation risk is always there. That's a constant threat when it comes to Facebook because whoever wins in an election,

Facebook gets the blame. So that's a constant threat within US and worldwide too because anytime there is a social disturbance, government tend to block Facebook first. So they're always at the risk of losing some marginal markets. And secular headwinds like balkanization of internet due to geopolitical shifts can permanently shut off some of the markets like China today is completely shut up for Facebook. Well, the other side of the coin is that India is shut up for TikTok. So we might end up with like, you know, two camps for social media or multiple camps where in each country, if they're big enough, having their own social media. So those, the balkanization of internet is also a secular long-term headwind.

So those are some of the risks. So market, I guess, understands these risks. But the reason I'm pitching is my assumption is that the market is overreacting and not looking at some of the strengths. So I would like to handle each headwind one by one and see how Facebook is navigating it. So, for example, the first one is privacy policy by Apple. I think Facebook is even in their latest earnings call, they talked about how they're investing in AI. and I, being in this field and having interacted with Facebook employees and some of the conferences, I do know that they are considered in the Valley as, if not the best, one of the best companies for ML&A.

So they are using the ML&AI to improve the ad targeting and add experience in general for advertisers. The second thing is, even though their art targeting has been blunted by Apple, they are still better than newspapers, television, and other avenues. I think Facebook is much ahead of SNAP in terms of AIML and in overall their technology and their platform. But the second thing is advertisers go where the users are. And Facebook is still among the ecosystem, the largest. And the second thing is Facebook is one place where as an advertiser, I get an ecosystem and a complete 360 experience for the customer.

So whether it's Instagram, WhatsApp and Facebook and the marketplace in the Facebook stories and reels. So all sorts of media I can engage my customers with. And then I can also have Facebook pages or marketplace where I can draw my customers for call to action. So that experience that advertisers get is unique with Facebook. And the second thing is Facebook is not just focusing on what is the headwind today, which they are addressing, as I just mentioned. But what I'm happy about the recent foray into metaverse is that their culture and Zuck's tenacity hasn't diminished. over time, they're still ready to make bold bets and put meaningful dollars behind their bets. Metaverse is one of them.

It's actually a combination of multiple things, their hardware business. With Apple's experience, they understood that they can be de-platformed anytime. That's number one. Number two is that it's been more than 10 years now since iPhone first came out to the market. and revolutionized how we interact with computers. So from desktop, the form factor changed to mobile. And in fact, one of the things that Facebook faced at the time in 2012 was their audience were all moving to mobile and there was a serious concern by investors

that whether they'll be able to come up with the effective monetization strategy for mobile, which they navigated successfully. Same thing happened with stories in 2017-18. When stories became more popular, they went after stories. And this goes back to their DNA. When even Facebook was founded, Zach was determined not to monetize initially through advertisements, but to wait till he builds a good community,

strong community and a large community. And they have exhibited that ability to hold or hold of monetizing time and again. So with the new form factor, so phone has been around for 10, 10 years or more, so it's obvious that there will be new form factor, whether it is smart glasses or VR and ARDIs like Oculus, that's where the next generation is going to go.

And next 10 to 15 years, there will be new hardware form factors. and Facebook is smart in making those investments now so that they are ready for the next generation of hardware devices and it's no longer just hardware devices. It will be a combination of hardware and software. In fact, iPhone was exactly the same. It was not just the hardware,

but the software that made iPhone superior to any other smartphone. And in case of Facebook, Metaverse is basically a combination of Hardware, great software, and AI. That is what will be a killer product position. Again, it's uncertain, so we don't know. So it's almost like that's an optionality. And I would discount Metaverse when I'm valuing Facebook today. And based on my understanding of the business, we know the business has been consistently growing

more than 20%, north of 20% to 30% annually, they're revenue. revenue, their ROAC is also north of 20% today, 27% I guess as of now. And they're trading at 12 PE. So that's the reason my pick is Facebook. At this time, I wish we had met a couple of weeks back in it was $176. That's when I thought of Facebook to pitch Facebook, but it's already run up a little bit. But still, I still believe this is a good place. So with that, but I'm not the value.

expert here. So Toby Stig, I would love to get your thoughts and feedback. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Form is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history.

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Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. I think in full disclosure, I should mention that I also own meta and I bought it recently. I bought it in sort of late March. So I'm right there with you, Harry. So I'm not very good at playing devil's advocate, usually in this podcast I've noticed,

but because I do like the picks. I'm with you on the, I think it's last time I looked at the valuation, I sort of thought it was around half price. And I, that was before they had the last print where they ran up a little bit. So I still think that it's very, very undervoted here. And I think it's got a long way to run.

I just had a few sort of observations. about it, that one is the, I think what characterizes the difference between TikTok and why TikTok has grown so quickly and say Instagram, which is like, that's sort of their competing product. I think that TikTok is incredibly viral and what the people who creators who go onto TikTok find that they get this enormous exposure. And I don't know whether that's TikTok sort of helping out early creators and making it appear as if they're going to get this incredible exposure, or whether that's just a feature of the app that you do. I downloaded TikTok one weekend and I used it for the weekend

and then I took it off the phone because it was just like track cocaine. I just couldn't. I was spending way too much time on it. And it's got this, I don't know if anybody's tried TikTok before, but it's got this thing on it where, you know, ordinarily when you're scrolling through all of this stuff and you're seeing, you know, it's very good at figuring out what you like and it feeds it to you very quickly.

And on my phone, if I want to close something down, I kind of swipe to the left and it would shut down that app. When you do that with TikTok, what it does is it just shuts down the, you know, kind of the theme that you're looking at. And then it shows you another theme. And it caught me a few times where I didn't, I was trying to close the app. And I was like, oh, well, that's interesting. And I kept on going with this thing that I was looking at before I realized. And that's why I had to delete it off the phone. Instagram doesn't do that. They could introduce that, that funk. I hope that they don't introduce that functionality. But Instagram, when I first started using Instagram, was because I wanted to see photos of my friend's kids, basically.

I wanted to share photos of my own kids with a very, with a much smaller group of people than I was connected with on Facebook, which, you know, the blue app, which I regarded as being everybody who I knew, like kind of a white page is almost, whereas Instagram were just close friends of mine. And I don't use Instagram like that anymore. Now I use it much more the way that TikTok is used. It's sort of, I just use it to see things that I'm interested in, what those other people are doing. And nobody ever posts on it. I don't ever post on it either. So I think it's a plus for Instagram that it has been able to morph like that from what had been initially social to what is now I would characterize as viral. So one of the things that sort of surprised me, and I don't know whether this is plus or a minus for Facebook.

Do you know how Snap was resurrected? Because I sort of had the feeling that one of the problems with Snap that people talked about initially was that it lacked that virality because by its very nature it was intended to be you'd share something and it would disappear so people couldn't continue to share it on. And that lack of virality sort of prevented it from growing probably at the same rate that these other ones had. It made some change. I don't use Snapchat so I don't know.

But do you think that the fact that Snapchat has sort of survived and continues to grow is I mean, what is the level of threat there from Snapchat and TikTok to Instagram and Facebook and the rest of the meta sort of universe? And is that sort of resurrection of SNAP, something that potentially Instagram could use in the event that it started falling behind? I'm just sort of interested to know. I don't really understand the mechanics of that well enough. Yeah, I think those are really good points, Toby. And I kind of use the restaurant analogy here. Like in a marketplace, there is a restaurant that we all like and let's say it's Italian and we go to it every day. But then there is some Mexican restaurants open up nearby.

It's a completely different form. And then when people start going there because something new and they lose interest in the – it doesn't mean that they'll stop going to the old restaurant that was already there, but they might go less. And that's the constant pressure of Facebook faces. and they're gradually turning into a cheesecake factory. So that means they will offer all sorts of kind of cuisine in their restaurant so they can still attract. But that doesn't mean that it's going to be a monopoly anytime. There will always be something coming up. So for example, Snapchat's proposition was your messages will be instantly deleted after you share.

It has its own monetization problems for them. I think that's what they went through. And to answer your question, I think they kind of turned around their business by imitating Facebook to some extent. It's like the Italian chain adopting some Mexican food and the Mexican chain adopting some Italian food. So both have appetizers that are different now. But I think that was a very good point you brought up to me. I think so. But now with TikTok, it's a completely new content factor, right?

like when short form videos is what it is. Reels is the competitor actually from Facebook, not Instagram or TikTok. Reels is very similar to TikTok, but TikTok has other headpins very similar to Facebook in the sense. It's at a constant threat of being banned for national security concerns. But at the same time, it's a new form factor they came up with. And the risk with Facebook is this is going to happen every few years.

and we'll always have to see, is Facebook capable to compete and adapt? It reminds me a lot of Microsoft in the 90s and the 2000s, up to the 2010s, when they were always having to catch up with somebody else. And their talk kind of was in doldrums for a long time. And I think Facebook, unless Metaverse is probably a game plan where they want to leapfrog instead of always catching up with new trends. What's the reason for India banning TikTok? So very similar to Russia attacking Ukraine, but not to that extreme.

China basically sent its armed forces into Indian borders, and they occupied some territories on the Indian side of what is known as line of actual control, LAC. And of course, Indian troops push. them back and they can have now on a stalemate or there where both armed forces are now facing off each other. So since it is a hostile India ban, not just TikTok, but any apps from China to ensure because it was found that there were some loopholes or whatnot, that could be exploited. So they just banned everything. Thank you. I like the valuation. You know, we always have to look

in light of what's the price and what's the value of the stock. And I like that. I'm worried about Facebook more like long term than short term, but as stock investors know, whenever you discount cash flows, it's the next few years, 10 years call it, that matters. And after that, you have to have some really, really high cash flows before they really matter whenever you discount it back until today. But I have some worries about Facebook long term. And we were told about these network effects, and that was why these companies could grow so fast. And that's absolutely true. And we were also told this narrative about how these network effects would ensure the strength and the mode of these companies.

And I look at a company like, or look at an app like Facebook. I'm not just talking about Mesa here, but something like Facebook. How uncool Facebook became all of a sudden. It was just around the time our parents started going on Facebook, you know? And the reason why I'm saying, obviously I'm joking a bit about it, but whenever you see the usage of something like Facebook right now. Like young people in rich countries, they don't really use Facebook anymore. And even if we look globally, people generally don't spend a lot of time on the legacy app. Then they have the acquisition of Instagram. Everyone talked about, oh,

Facebook can just buy competitors. And that strategy in itself is just very, very difficult. It is, as any venture capitalists would probably tell you, it's very difficult to predict. Hindsight's always 2020. And we would say, oh, TikTok, it was so obvious. I don't think it was obvious to anyone. I think we sort of knew what's coming. And so this idea about doing it, I think, is just really, really difficult, especially something that moves so fast. And by definition, something always becomes uncool whenever enough people have been doing it. And so I guess there are multiple challenges for the company in meta. One of them is that what are they just going to do with the core market, which is advertising.

They are competing with Google and now increasing with Amazon. That's just not a fun market to compete in. They always post the daily user in their own interest calls, but we also have to keep in mind which countries are that they're adding now. I think it was last quarter of 2021. They had the last drop. I think it was only like a loss of a million users or something like that. But it was like significant because it never happened before.

And a lot of that was attributed to the rise in price of mobile data in India. Now, whenever something like happens, you also have to think about what's the GDP in India, where's the advertising dollars? And clearly, India's a market is a huge country. There's a lot of advertising dollars. But you cannot sustain the same type of growth rates as you've seen before. I'm a bit concerned about it long term. Another reason why I am is that they're betting so heavily on the metaverse.

They've been around $10 billion in CAPEX a year, which is around 50% of everything is spent right now. And they're a loss leader right now on the hardware part. And as such, there's nothing wrong with that strategy. I think it makes a lot of sense why they would do that because they want to make sure that the platform once it starts to make money. If we can make this comparison to cloud computing, I know like Amazon was sort of keeping a secret for a few years before, Microsoft and then Google's sort of came on board.

But at least to me, it seemed to make a lot more sense why you would put a lot of money into that. And now you've again, hindsight is over 2020 and you can like see the caselo's coming in. And you're like, oh, it made a lot of sense why all this money was put into it. And you can see how it's just going to grow and grow in the future. To me, it's a bit more unclear with the metaverse, when the monetization of that. Again, advertisers would go where people are. I just kind of feel it's a different game because you're just the activities you can do in that midaverse. as much as it's liberating, it's also, it's also limits what you can do otherwise.

You know, while you're, while using Apple's products, you can do so many other things in the old world, the real world, whereas you're very much, you know, whenever you're in the metaverse, that's what you do to a lot to an extent. And so where Facebook used to be, and I'm talking about like the old application, it was all about connectivity. And it kind of feels like Facebook now acknowledges that they're not the best. best in connecting people anymore. That's not what they do. So they have to use the real estate for something else where they can sell something else. Whenever I look at the valuation,

so that was sort of like the bare case, if I'm a bit more optimistic. And I'm looking at, let's say, oh, the past, I'm looking at past 12, 14 years now. The insurprice value to EBIT here, right now it's around 12. The median is 27 for a meter. So, and the minimum has been close to 11. historically, it's a very cheap valuation. I think there is some reason why it is cheap right now because of the growth prospects. But if you look at it and you discount the cash lows, it's a very cheap company. It's a cheap high quality company. And the disruption that you're going to see, I would say that the mode is probably shrinking, but it's not going to be at a fast enough pace that you can't justify buying into a meta at the stock price at the moment.

One thing I wanted to ask you about, Hari, because you have a good reason. good feeling with this. Where do the best programmers go in the valley? Do they go to Mesa right now? So those are very good points that you raise stick. And before I answer your question on the talent, and that's one of the risks I also see, is the right analogy for Metaverse to compare is not cloud business, but rather search business when Google was still a startup. There were, Nobody thought how this can be monetized in first. So Google was planning to sell appliances that are search engines,

appliance that can be installed in corporates. And they were finding it really hard to get buyers, even for that, until they figured out a way to monetize it through advertising. And that was the innovation. So it's more like venture style investing rather than value here. And when I'm valuing and when I'm buying into Facebook, I would discount anything that would come out of Metaverse, even though Oculus and Portal, a lot of their hardware devices

are seeing a lot of traction, but they're really nascent at this point. So I would just bet on their continued engagement in terms of their monthly active users, as you said, there is always a risk that the cool kids will go away as long as their parents are joining Facebook, kids don't want to be on Facebook. So that's always the case where they want to be in a club where the parents are not there. But I think those are the risks. But as of now, the numbers don't tell me that it's a flashing red in terms of growth opportunities.

Coming to talent, Facebook is no longer where the brightest kids from MIT would go. It used to be 10 years back, seven years back, because most of them would join. startups because that's the draw and Facebook was startup initially then it was just a high growth public company but every company goes through this cycle even Google is not the most preferred destination anymore it's always startups in the valley the brightest kids will go to startups at least right now till we have a downturn so right now it's really hard valuations of all startups are unrealistic in many cases people think I think all the unicorns will continue to grow.

There is no concerns about funding. That is slightly changing now. We might have seen the Twitter storm by Bill Gurley. I think there will be a paradigm shift. At that point of time, you will see talent migrate back to Google's and the Facebooks of the world. So this is a cycle I have seen multiple times in the valley that happens. So it's very hard question to answer because it depends on right now. it might change in the next one or two years,

depending upon how the environment, business environment is in the valley. Thank you for painting some color around that. All right. 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

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investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right, back to the show. So my pick is actually not a pick. It's, or at least it's not a specific stock pick. I want to talk to you guys about picking the right asset manager. And it's not something we talked about here in the master group before. It might surprise some of the listeners that I would talk about it because, after all, like,

the reason why Preston and I started this podcast was to talk about stocks and how to pick stocks. So I sort of wanted to tell this story and what has changed personally and why I'm looking into different types of investments. I want to optimize for the best returns, and you might be like, well, I think we all do that, but I want to optimize for the best after-tax returns, because that's what matters to me. And so whenever Preston and I started the Amherstas podcast, I had a W-2 job and I ran on personal portfolio on the side. And I'll just be tax like capital gains tax, like what you have in the States. Today, the situation is different.

Most of my income is corporate income and is funneled into a Danish holding company one way or the other. And so I'm taxed differently depending on the asset class. If I would buy something like gold, which I've talked about here on the show before, I would have to pay a 22% tax whenever I sell. Private investments, I don't have to pay any tax at all. But if I buy into listed stocks with that type of cash flow, I would have to pay unreal gains. And so whenever you do the math, it's not a question of pre-tax returns. It's a question of what do I get after tax. And so I've started to look into different types of investment

vehicles. And as it turns out, it makes sense to me to invest in something where the pre-tax return isn't as interesting, simply because I don't have to pay tax. So, you know, take it for what it does. And I just think it's important for people to understand where I'm coming from. Of course, do your own homework. We have listeners from all of the world and sort of like figure that out whenever you want to identify what the right thing is for you to do. Not too long ago, it was on episode 448. We had Dan Hanford on the show where Explored Commercial Real Estate, which is also something

I expect to invest in this year for that same reason. It also means it's not because I'm going to stop talking about stock investing, but it means that I have a lot of conviction now in the stock picks that I pick because I have to to pay unrealized tax on them. So I wouldn't do that unless I was quite sure, which is why I only have three individual stocks right now. Anyways, regardless of how you are being taxed, I do feel that discussion on how to pick the right as a manager is still relevant.

Also, because we have a lot of listeners out there who might not feel comfortable about picking their own stocks, even if they were living in a place where you pay very little tax. And so I've invested here starting April 1st in the pop-right funds. I actually just want to say that just to derail there in episode four, the first three episodes Prest and I did together. Episode four, we had the first guest on. And that was no other than Hardy Ramachandra, who is with us today here.

And I don't know if you remember the topic of that specific podcast, Hari. Yes, I do. So it was Monish Paparai, in fact. Yes, the title was the next Warren Buffett. And we talked about whether or not that would be Monash Parai. And so it is certainly someone that's been on my radar for some time. I haven't heard about him before you brought him up, Harry. And so all of this is really traced back to you.

And I think I even told the story in another podcast, how we wouldn't have started TEP in the first place without you. But that will be a story for another day, Ari. So all the disclaimers, I should put them on front, put them up here on the show. Monez is a friend. He doesn't pay me to recommend his fund. I don't pay him to come on the show.

And I don't have any other preferred type of deal. investing in his fund. I don't pay less in fees than anyone else or anything like that. So I wanted to talk about this in the format where I have seven factors that I look at to determine the right asset manager for me. And then I hope I can ask you guys afterwards, what you'll be looking for is an asset manager. So the first one is a proven track record and an investment manager with the right age. I would like to see an investment manager with at least 15 years of already the track record, both in the bull and the bear market. And if you look at a Manus's flagship fund, it was founded in January 2000.

It has returned 989.1% net of fees since then compared to 400.5% for the SNP 500. And that is equivalent to 11.9 annually versus 7.9. Prop barry is 57 years old, and it's, of course, hard to generalize. I don't want to sound agious in any kind of way. I mean, we went around to go to Omaha to listen to Warren and Charlie. It's not like they're young, so please don't get me wrong. But you generally want to find someone who have enough experience, have made a lot of mistakes, have learned from the mistakes.

A long track worked where they show they beat the market, but at the same time, you want to invest with someone who have decades, where you can invest alongside them, which I have to say, I hope will still be the case for Warren and Charlie. Point number two, you want someone with integrity. It means a lot to me personally to invest with someone who has integrity and who is not uncomfortable talking about mistakes. Nobody's perfect and even the best investors in the world, including Warren Buffett that we talked about before, has made a ton of mistakes. But it makes me worried to speak with the people who just seem too good to be true if they have this very assertive tone of voice where they just don't make any mistakes.

And then at the same time, they typically don't have an audit track record. So whenever that happens, that's probably not who we want to invest with. And I really feel that money falls into this category, being a constant learning machine, having this great track record, but also have talked openly about the mistakes that he has made. If you meet an investment manager who never made a mistake, you're speaking to someone who just started or certainly is a liar. Point number three, putting your money with your mouth is. End of 2021, PAPRA Fund had $543 million on the management.

of that $43 million belong to the Paprae family, Paprai Fund's team, and Parabrii's Charity Foundation, Daksana. So I really like that Pari wins and loses together with me, and I know that it's a significantly part of his net worth. He's also very open about his net worth. So, you know, it's actually a huge thing for him. It's not everything he owns, but it's a huge part of what he owns. And so it's also important to me that the fund manager is already financially dependent

and does not need to work, so that managing that money is not a job, but a passion. Whenever you have a job and you need to pay the rent or your mortgage, you often have your own incentives that is not always aligned the way it should be. But by investing with someone who is financially independent with skin in the game, I feel I'm investing alongside a moneyist rather than being a client. Point number four fee structure, Monies uses the 0625 structure that Buffett made famous

with his Buffett partnership back in the day. So 0% fees, high commemorative 6% high watermark, but the fine manager is compensated by 25% in excess of that return. Running a fund is expensive, and I really like that there's no fixed fee. It really aligns the incentives about boosting AOM2, but that's not the only game in town because you can also be incentivized too much to be a marketing company and not an investment fund.

I feel that PAPRA funds have aligned interest there pretty well. I also like that Marnes is investing outside of the U.S. And a lot of people who are looking at Marnes' fund that go to Dada Romo or something like that, and they don't see the full picture. You only see his U.S. holdings, and he doesn't have too much in the U.S. Right now he has two holdings. We're recording this May 5th, so this is before the 13F is coming out. We don't know what it looks like whenever it's being published here soon, but at the time

recording, he has stakes in Micron and Saratage. It looks like that Manish is exiting the ladder. If you look at the latest fighting, at least he's been trimming his position quite a bit. I'm personally most comfortable investing in the US, and Pop-Rib being a bottom-up investor, who is investing in him in the world where he can find value within his circle of competence. That's something that resonates with me. Not that there's nothing wrong investing in the US, but I'm just already so. heavily invested in the US, so I like that diversification piece. And I also want to keep in mind

that the US is one of the most expensive stock markets in the world. You can still find good stocks in the US. That's not what I'm saying. I'm just saying that you generally want to fish in the point where the fish are. And the US is to some extent an exception because the market is so deep, but the point still remains. And so I like that there isification like it mentioned before. And whenever I say that there'sification, I'm not saying it in any kind of sharp ratio, bogus type of way. I'm saying it as in a, I feel it lowers my actual risk of a permanent loss of capital to some extent. That's what I'm looking at. I'm not looking at beta or anything like that. Point number six, I like that minus has high conviction bets. A full position is 10%.

Money's lets his winners run. So three bets quickly becomes 50% of his portfolio. And while this might seem very concentrated to some. I love the idea of investing in managers where I get his best ideas and that's his 50th best idea. Also, like if three stocks are, you know, if you kind of feel like that's too concentrated for you, I mean, you can just size your position accordingly. Perhaps you only want to invest 3% of your portfolio on that and 2%, whatever it is. So you can always manage that with your initial investment. So point number seven, do you understand his investment process. And so to have high conviction, especially in volatile markets, especially if it's going against you, that's probably typically what you mean whenever we say volatility. Volatility

is technically also whenever it goes up, but we often do not mind. But really to have the conviction within the position is moving against you, it's so important to understand the investment framework and process of that manager you invest with. And being taught at the school of Buffett and Munger and reading his book, having spoke with him multiple times here on the show, I feel I have a pretty good understanding of how he invests. Others might not feel the same way, so they might have a different level of conviction. That's perfectly fine. I interviewed a few hundred investors in the podcast since 2014, and Manya stood up to me as the investor that has, there was just most in line with the investment objectives that I had in the stock market.

And that's not the same as saying he's the best investor, because being good investing can be many different things. We had Radeleu on the show. He's clearly super, super. was smart. But it's really hard to compare Redalio and Monis Paprai. They're playing two different games. If I was playing the game that was, who can I find to make the best macro bets on specific countries? I would go with Dalio anytime. But that's just not the strategy that I'm pursuing. So, it's not what I'm looking for. So with all of that said, guys, I want to throw it back over to you, what do you look for in investment manager? I think Toby would be more qualified. to comment about this than me, but I just want to share an anecdote because one of the things

that you brought up was taxes. And I know in Denmark it's much more extreme, but it's illustrative because a lot of us think of returns before tax, not after tax, intuitively. So thank you, Stick. I think that's a very good reminder for all of us. And the anecdote I wanted to share is there are different fund structures. And there are some which are partnerships. wherein you have an account that is jointly owned by the investor and the investee and the investor basically invests on your behalf's vice and sells. And like one of my acquaintances was sharing with me that every year the returns that is published for the investor that he invests with is very high, but he's paying taxes

through the nose because of the fund structure. Because every time the investor is buying and selling in his account, he's paying a lot of tax. So he says, it all looks great for the investor, but I'm paying for it every year. So I think it's also very important to look at the fund structure or the way it is formed because that can have tax implications. So that's what I would, I think I remembered and I would, the key takeaway for me here, would be pay attention to taxes. But I would let Toby share his thoughts because I think he is in the business.

So he would be a better person to comment about it. And obviously, I like Monash. So I don't have any, like, I'm biased. So I would reserve my comments. I couldn't fault any of the points that you made there. Stig, I thought they were all really good. I'm also an admirer of Monish's who isn't. So I'm not, this is, this is not so much a specific commentary about Monash as it is

commentary just about the way that I think about other managers because I'm a manager. I'm a much younger manager. I'm much, much earlier in my journey. I think that May 16 or May 15 will be the end of my third year. So I've got quite a long way to go before I get as much experiences as Monish has. Having said that I've been in the industry for quite a bit longer than that, I think that the observations that I have developed over that period of time, particularly because we went through an unusual period through the pandemic,

and we've seen, and this has been a longer tech cycle too. We've had a tech cycle that started for 2010 to now, where higher growth was much more popular than deeper value, which is much closer to my strategy. And I think the things that I would say are you absolutely need a seasoned manager. You need someone who has been through more than one cycle. And you'll see many, many managers who have phenomenal returns in their cycle. So, you know, for a value manager, if you were a value manager in the early 2000s,

you'll have very, very good returns for that first decade. And then the second decade, you know, perhaps not great returns. And I think a lot of guys folded the fold of the hand in that second decade. and that's not what you want from a manager. You want someone who will persist even when it's not their cycle, knowing that there's always a better cycle. There's another one coming. And the fact that there is always another cycle coming,

I think should inform the way that you invest as a manager, should inform the way you invest as an investor too. And that should be that your objective is not so much to maximize returns at every step of the way. your objective is to maximize the likelihood of your portfolio surviving. And so that's what I look for now. When I talk to somebody else who's a fellow manager, I'm always trying to work out what their sense is of the risk that they're taking into the way that you can determine those things.

And this is one of the reasons that I took my shorts off. So I don't know if you guys are aware. I was running a short book until December 7 last year, but I've taken my short book off. And a lot of that has been, there was some unusual short behavior in 2020, but then 2021 was quite a good year for the short book was quite a good year for my portfolio. I had, in Zieg, I had a 37% year last year. So that was largely driven by the short book. So I'm very proud of that, very glad that I was short through that period. But I no longer do it for the reason that there is this sort of almost metaphysical risk with the shorts that you could be in something, even though I'm very,

I sized them very small, I rebalance them regularly. I mean, I have all these other risk management tools. Even so, even applying all of those risk management tools, there is always a tiny risk of blowing up the shorts because they do have that leverage embedded in them and the market can do crazy things. So I just thought that my philosophy now is that I want to survive under all circumstances and shorts there is this sort of tiny risk of blowing up.

So I've taken them off. So that's how I approach things. Now, when I invest, I look for, can this business survive under almost all circumstances? Where is the risk in this business? Is it in the balance sheet? Is it in the business model? Is it in the management? Is it in the sizing of the position that I'm putting on?

So I work backwards through the risk to ensure that I've given myself the greatest chance of surviving. And I talk to other investors now and I try to get a sense of how they think about risk. if they're guys who are chasing very, very high returns, I sort of know what the opportunity set looks like out there. There are various ways that you can improve your returns. If they're prepared to do those things, then I sort of discount them as managers a little bit because I want someone who is almost exclusively focused on survival.

So that's an attitudinal thing. And then that's sort of the first thing I look at. Largely that's informed by, do they have any seasoning? As you say, have they made those mistakes? Have they learned from those mistakes? Do they have that experience? have they survived various cycles? And then I look at, you know, are they conscious of taxes? Are they investing in a tax-efficient way? And so that's one of the reasons that, you know, I run an ETF.

ETS are a phenomenally tax-efficient structure relative to just about anything else. Managed accounts, hedge funds, limited partnerships, mutual funds. It's by far and away the best structure. So I couldn't fault anything you say. I'm a great admirer of my initiatives. I've tried to grow my business in a way. And my own experience as an impact. investor and my own skill as an investor by really I'm an enduring fan of Warren Buffett's and Charlie Mungers and I look for guys who are like that for my part I think Lilu is one of the guys who every time I read something that Lili says I couldn't agree more I love the way that Lelu thinks I love the way that Lelu invests I think that he is very very Buffett like in in his approach to things

so for me it's Lilloo but I don't know if you can even invest with Lilo I've got no idea about any of that at all. I'm just an admirer from afar, also an admirer from it's just. So that's, I basically I'm agreeing with everything he's saying. Just that's my, that's my sort of view. Yeah, I think, but this has been a very good discussion though, Toby and Stig. Thank you, because you're bringing up key points for all of us. Like, Stig, you highlighted the importance of taxes when we are considering returns. But Toby, you're highlighting the importance of staying power. And if you're the miracle of compounding only works if you are in the game for the long run.

And that's where one of the things, the combination of the two, for me personally, I think Monish would also recommend this for most of the listeners here would be index. That's my core foundation. In fact, in Monish, in many of his talks, it talks about that if you are investing with me, it should be your play money because he is running a concentrated. portfolio, it's a high octane fund. So it's not a fund that he would recommend to put all your nest egg in. It should be like somebody like Satyana Rela putting a couple million dollars of his net worth. But that would be like maybe 5% of Satya Nadella. I think Satya Nadella was one of his

early investors. So Monish is very clear about the goals of his funds. And I think when we are investing with him, we should also understand that very clearly. Because each, say, for example, with Toby's ETFs, I know that he's zicks and the market, Zaks and vice versa. So I know why I would buy into Toby's Eadf, because I want that hedge in case of

a market. Whereas in case of Monish, I know why I'm buying into Monash because I want a part of my portfolio to be really high-octane growth, but at the same time, I know it can have serious drawdowns in some years. Like, for example,

in 2008, one of his mutual funds, that is P.I.4, had a 60% drawdown. So you should be able to stomach that. If you put all your network, maybe you'll exit out at the wrong time, basically. So that, I think, clarity of why you're going with a fund manager or a fund or an ETF is more important than actually the fund manager themselves. Because it's not their fault if you pull it out at the wrong time. Like if you invest with Monash and you can't stomach a volatility of 50% either way. It can go up because in fact one of the years, I think it was 2009, after 2008, 60% down, it was 118% up. But then it was down again in 2020 by 40%. So if you're not able to stomach it, you should not be in that front or you should not put all your networks.

Similarly, I really appreciate what Toby is doing, like in terms of giving us a hedge with the market with his ETFs. And then index funds and then your own paystow. I would design my portfolio in such a way, Toby, to your point, that I'm looking at 20, 30 years. And I feel ideally for me, what I have realized is I would definitely recommend J.L. Collins, path to wealth, if anybody has read that book here, where he lays out the case for index funds because they're tax efficient, efficient, has staying power, and they're self-cleansing.

That's more important, actually. That doesn't mean that you should not go with fund managers, but I would say that's my main course. And then I will embellish my portfolio with the right fund managers to help me smoothen the volatility like the ZIG ETFs or give me hypergrowth a little bit more than the index funds with Monash. And that's how I think about it. I hope that makes sense. Sorry, that was not a question or anything, but I'm just sharing what I learned from this discussion.

Fantastic. And thank you for wrapping it up, Harry. Jens, it has been absolutely amazing, as always, having the opportunity. to chat with you guys. Before we let you go, I just want to give a quick handoff to episode 442, where I'm speaking with Munches, and you can learn more about him and his investment approach. Toby, let's start with you. Where can the audience learn more about you and your fund?

My firm is called Acquirous Funds, and Acquireus Funds.com is the place to go. My two funds, I run a mid-cap, large cap, which is Zig. It's long only now, as of December 7th last year. 30 positions, equally weighted, regularly rebalanced, trying to buy that high quality, deep value, ticker ZIG. And I have a partnership with Roundtill, which is another ETF firm, for a smaller micro fund called RoundTILAQEEEEEEEE Deep is the ticker. I also have a little website, Acquireasmultible.com, where you can see articles and podcasts

and a screener for the sort of stocks that we like to buy. And I've got some books as well, which in Amazon under my name, deep value, concentrated value, choir is multiple and quantitative value. Thanks for having me, stick. It's always fun. Good seeing you, Harry. I'm on Twitter.

Harry Rama, H-A-R-M-A-M-A is my Twitter handle. My blog is bitsbusiness.com. Happy to engage with you guys. Learn from you and discuss interesting investing topics. I think we've done this since, what, 2015, 16? It's incredible. But, Jens, thank you so much for your time. Always a pleasure and see you next quarter.

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