We Study Billionaires - The Investor’s Podcast Network - TIP557: Mastermind Q2 2023 w/ Tobias Carlisle and Hari Ramachandra

Episode Date: June 4, 2023

In today's episode, Stig Brodersen speaks to Tobias Carlisle and Hari Ramachandra. Stig only owns five individual stocks, and in this episode, he outlines why he added Teqnion as the newest addition to his portfolio. Hari’s pick, Palantir, has recently traded at a 52-week high after a preceding 80% drop, and Tobias pitches Virtu Financial, a value stock with strong cash flows in uncertain times.  IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 01:35 - The group’s takeaways from the Berkshire Hathaway shareholder’s meeting 06:00 - Why Hari is bullish on Palantir (Ticker: PLTR) 24:46 - Why Toby is bull on Virtual Financial (Ticker: VIRT) as a trade but not as a “buy-and-hold.”  41:37 - Why Stig has invested in Teqnion (Ticker: TEQ) as one of the five stocks he owns 58:21 - Which questions to ask management if you get the opportunity 01:17:07 - What the TIP Mastermind Community is and our plans to meet up in NYC in October Disclaimer: Slight discrepancies in the timestamps 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. Stig Brodersen’s interview with Daniel Zhang, the Chief Acquisition Officer of Teqnion Daniel Zhang’s book, An investment thinking toolbox – read reviews of the book. Listen to Mastermind Discussion Q1 2023 - TIP528 or watch the video. Listen to Mastermind Discussion Q1 2022 - TIP418 or watch the video. Listen to Mastermind Discussion Q2 2022 - TIP450 or watch the video.   Listen to Mastermind Discussion Q3 2022 - TIP475 or watch the video. Listen to Mastermind Discussion Q4 2022 - TIP496 or watch the video. Tune in to Stig Brodersen’s interview with Mohnish Pabrai about the Turkish stock market or watch the video. Tune in to Clay Finck’s interview with Chris Mayer about Constellation Software and 100-baggers or watch the video. Teqnion’s investor relations 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 Ramachandra.  SPONSORS Support our free podcast by supporting our sponsors: River Toyota Sun Life The Bitcoin Way Meyka Sound Advisory Industrious Range Rover iFlex Stretch Studios Briggs & Riley Public American Express USPS Shopify 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. As tradition would have it, it's time for the Q2-2020-Mastomite meeting, where each member will present a stock to the group. Tobias Carlisle said it well when he pointed out that we all chose a stock that represented as well. Hari picked a tech stock, Tobias a deep value stock trading at a very appealing multiple, and me, I'm pitching a Swedish microcap compounder. And it's the only new stock I bought so far in 2023,

that brings my portfolio to five individual stocks. Also, make sure to stick around for the end, where I dial in my co-host, Clay Fink, for more information about our mastermind community and the upcoming live event in New York City. The stock investing discussions with Toby and Hari here on the podcast are always very popular, and Clay wanted to facilitate the opportunity

for you to be a part of a like-minded group, online and in person. 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, Dick Broderson, and this is the Q2-2020.

And as always, I'm here with Harry and Toby. Hey, Steve, good to see, Harry. Hey, good to see you, Toby, and stick. Great to be here back after the Berkshire annual meeting. Yeah, it was good seeing both of you. Any takeaways from the meeting that you want to share? Oh, just so there, a couple of studs. Yeah, go ahead, Toby.

You got Harry. I'll call it in at the end. Yeah, I think for me, I got my son this time, so he's turning 13 soon. So that was a lot of fun, hanging around with him. And I was surprised that Buffett and Munger were able to keep him interested for four hours. And he sat too. I mean, that would happen never with me, at least at home. And for me, the takeaway was the 90-year-olds are still energetic kicking and going.

That's amazing to see. And in the introduction video, they played how many times the succession plan has come up in the last two decades. And that was kind of funny to see that. And these guys are still going strong. And also I can clearly see that, you know, Ajit and Greg were kind of on the stage. and we can see the transition happening as well. But I think for me, one interesting observation from the meeting was when there was a question about United States and its dominance and dollar as a result currency,

Munger, I know, is usually a bit skeptical or pessimistic about it. And Buffett is usually the cheerleader who would immediately kind of, you know, rebuttal or disagree with Munger and then talk about American exceptionalism. This time he was somber. He kind of, he didn't really go for the cheerleading. He was thoughtful. He said there are a lot of things going for the United States, but tribalism has to cover.

And he's not so sure. I think for me, that was the key takeaway from the meeting. How about you, Toby? Yeah, I think it's amazing that they can sit there for three hours at a time, eating peanut brittle and drinking Coke and just field questions. We're very, very diverse questions. Sometimes it's about specific to the Berkshire Hathaway, and sometimes they're sort of more philosophical.

And Buffett's ability to sort of say something succinctly, pithily is amazing. Last year, they only got through five questions before lunch, something like that. And this year, I thought the answers, Buffett rambled a little bit last year, and he'd get off topic a little bit on some of the questions. And I thought it was a little bit, you know,

it's tough to be that kind of in your 90s and be coherent and cogent. There aren't many around who are in that sort of, with that intellect that sustains into that age. But this year, I thought he was back better than ever. You've got to hear how fast he spoke in the 60s and 70s. He now speaks at a normal pace now, but in the 60s and 70s he spoke an exceptionally fast pace.

So maybe he's just come back to the crowd a little bit. Munga, you know, amazing that he's 100 in February if he makes it. But it's an amazing run and he's brilliant as well. Yeah, I really enjoyed it. I just sort of soak up the philosophy that they have, I think, is more about, you know, trying to survive, first of all, trying to do the right thing. Second of all, and I find both of those things really attractive as businessmen and as investors and then everything else is sort of secondary to that. But those two things

really stand out to me. And I just like going in there and soaking that up once a year, I'll be sad when it doesn't happen anymore. But it was a great time, great seeing everybody to say. Yeah, and it was absolutely wonderful. And I agree with you, Toby. Last year was like, he had, I don't know, three to five things you really wanted to say. And it did, it did a didn't really matter what kind of question he would get because he would just like go on and like say whatever we wanted to say about the specific topic. This time he was very much like, no, we have, I want to say he was 60 he mentioned and he said 26 now we're and we still have like 34 to go or whatever just before lunch. So he was very much to the point. There were

some really great questions about like not just about the successions and all of that that you always have, but like how to motivate people who are financial independent running those subsidiaries. I really like that question. And I really like the way. that they responded to that. So yeah. And then had a chance to hang out with you guys. That was pretty cool. Yeah, I said I didn't cross paths with Harriet,

but I sort of have to run from event to event. Yeah, I guess we missed each other by an hour or so. Toby, I think that was one BIP get together. I was part of. I was told you arrive, stick huddled, arrive, but then stick came later. But then I had to go. My son was really hungry, so we have to run.

Fair enough. All right. So we have not been drawing straws who are going to kick this off. But Hari, you ask because you have to go here a bit later in our conversation. So why don't you take it from here? Awesome. So good to be back in the mastermind pitching ideas again. So my pick today is volunteer. And I've been thinking about this company and Toby and Stig. I always spoke about it offline as well. I'm still forming my conviction around this idea. So that's why I was kind of. hesitant to pitch it here. But I, I think it was finally to get your thoughts on. For those who are not aware, Palantir is in the broad area of data analytics, but it's really hard to bucket them into any one category, but data analytics kind of, but they're into security as well. Their claim to fame was their willingness to work with the government agencies. And especially after 9-11, the work they did caught everybody's attention. So that's, and then also the

Eclectic CEO Alex Carr, who moved the company from Silicon Valley, San Francisco, to Denver, responded by Peter Thiel back in 2003. So it's been around for a while. They took a while to really identify their markets. And as we stand today, the majority of their revenue comes from government agencies, especially working with security agencies. They're now famous for helping Ukraine in the war with Russia, with the intelligence, and their software Ukraine has actually been able to do very well is what Alex Garb claims.

What their core technology is about bringing data in desperate places within an organization where it's started with government with different departments, harmonizing them, having the data available to provide insights and intelligence and reconnaissance. And it's a very complex problem. There are many companies in this area that are trying to solve this problem. And it's a real problem for government, obviously, especially when we have FBI, CIA, and other government agencies, or local police departments, not talking to each other.

In fact, there is a YouTube video on how 9-11 happened, and many months before, there were some agencies who knew something will happen, but they were not able to connect the dots. And that's what volunteer claims to do. They've helped agencies connect the dots. In fact, this problem also surfaced in the Berkshire annual meeting when Ajik was asked about GEICO and how GEICO is doing.

And he talked about one of the major challenges GEICO is facing is that there are so many softwares and so many sources of data. I forget the number where it was in the 30s or 40s. 600. 600 systems. 600 systems. Thank you, Toby. And it's really hard for them to kind of connect all this together.

And I was thinking if somebody from Ballantir had attended this actual meeting or at least watch this, they would be making a call to Geico. Palantir probably would be really a good fit. So they have two platforms. One is Gotham, which is mainly focused on security agencies and government customers. And another one that they recently, that is three or four years where I came up with, is foundry. But they are all powered by another platform called Apollo, which is basically not just software delivery of data or harmonizing of data, but also delivery of the software.

They're cloud native, so they have really amazing partnerships with Microsoft and AWS. They have been growing their revenue at the rate of 40%. This year, it dipped a bit low, but the revenue growth is in the range of 40%. Close to 50% back in 2020. They're Today, their revenue is close to $2 billion. Their market cap is $22 billion. It's definitely not cheap by any standard. They were losing a lot of money, but they've been able to kind of get close to break even. So their earnings per share is negative 20 cents.

And the market in which they are playing, so far, 55% of their revenue comes from, government agency is only 45% from commercial. But there is a huge potential for what they do. I believe it is BP who took or Chevron. I need to one of the oil majors, actually took a 1% stake in this company after they saw what Ballantir can do for them. And I am forgetting which one it was either BP or Chevron,

one of them, because that was the impact. And when companies use their software, they see the difference. And Alex Carr, in many of his interviews, he always says that we are not slideware. Like many companies, they just have power points, but not software, but he says like, try us. And that's where their strength comes from. Their market in which they operate is data analytics, which is $41 billion today in terms

of total address for market. It is expected to grow to $346 billion by 2030. So they're kind of set up in the right place. They have the right technologies with 4,000-plus employees. They're the right size. They're very efficient. Having said that everything is not rosy. I think for them it's a go-to-market.

Their per-unit cost is really expensive in the hundreds of thousands of dollars. So usually they play in the big enterprises. But their sales force is not the typical sales team. They have a very small percentage of their employee-based sales team, only 15% I believe. They're struggling to kind of making roads in scale. So that's where it's more like a venture. bet is they can solve their sales and channel problem and build an ecosystem. They can really grow from here. So that's the bet here because their product is, they have a killer app or a killer

product, which is one of the best, but they need to figure out the go-to-market strategy. They have been growing, but if you look at something, a company like Snowflay, which is growing 100% here over year, or past three years. With around $2 billion market cap, it is valued at 55 billion today. And their EPS is negative $2.50. So they're losing a lot of money, but they're able to figure out the go-to-market strategy. And one of the criticism of Valentia is that it doesn't have a starter package or a modular breakdown of their product so that somebody can just onboard with a lower cost and

then kind of, you know, gradually expand where Snowflake offers that. And also there is no easy on-ramp to them. You go to Snowflake, you can sign up for a free trial, on-ramp to the product, do a trial use. That part, Palantir is not so smooth. So those are some of the challenges. So it's not like it's a sure shot. But if they can figure that out, then there is huge potential for this company. So it's more kind of a venture, but so Toby, this is definitely not value.

So there is a lot of ifs and buts there. But as a technologist, when I look at their products, I have looked into a lot of their demos, have seen their CTO and the CEO who really deeply understands the problem set. They understand ontology very well. They even launched an AI platform recently. They have been doing AI all the while

because it's all about anomaly detection, signals. and synthesis and prediction. So they are really, really prepare well for the next era in that sense. And they're prepared to empower many enterprises. So that's the bet here. But I wouldn't give it 100% probability that it will work out the way I'm projecting it will. If they can figure out, they'll go to market.

If they can figure out and build a good ecosystem and a good on-ramp to their products, They have a huge potential. And this might be a very undervalued company if that happens. That's my pitch and looking forward to your feedback. As Harry was delivering that, I was thinking, I'm so glad we have Harry on this podcast because this is just not something that is understandable for me. The way that I invest is mostly through the financial statements, trying to model the ability of a business to earn in the future.

And something like Palanty, it's just I don't have enough. domain expertise to be able to do that. And I can't read the financial statements, see where the business can get to. I tend to like more mature businesses that are at the point where they're returning capital, the shareholders were there. They've got material free cash flow that they're returning and they're still able to grow with what they've established. For Palantir, it's just, not enough has happened for me to make those assessments. So it's just something that's, it's just too hard for me, but I was impressed listening to Harry. It sounds attractive. And when they figure out that go-to-market strategy and I can get a better idea about how they am, there are many things

that are very attractive about it, but I'll have to defer to Harry on this one. I'm going to pass. I just saw that Kathy Woods, Ark Fund just brought it back today. So I don't know if that's a bull sign or a bear sign. I'll let the listener decide how they feel. about it. One thing that I'm not a big fan of is just the way that T.S. Outstanding has just ballooned. It's almost parabolic. And I know like all the seven past quarters it's going down. The pace, it's been even more than, I looked up more than 100% of revenue. It's like, is that possible? Is that as part of the listing? Or is it subsequent to the listing? No, this was in 2021. And today it's around 26-ish.

And I'm not really sure what to do about that. You know, if you look at the revenue number, it looks great. Like Harry said, it looks nice. But then you go revenue per share and it looks less nice. Who knows? I had the chance to read a few stock analysis before I jumped on this call. There were quite a few that seemed pretty bullish. But, man, I hate to come out here.

It was just like it was in my two hot. pile, I have a really hard time wrap my head around a company operating like this and how they're going to change the future. I don't doubt that they're as good as Atari is saying, but for me, doing the valuation piece, it's just really tricky for this company. In that framework of doing the destination analysis, I sort of like have an idea of, you know, the pick I'm going to talk about here today, but it could be any other pick where I was like, this is sort of like how I think it would look like in 10 years with all the mistakes that I can, you know, I can possibly mega biases of just be wrong.

I have a really hard time figuring out where I have Palantir's in 10 years. Essentially, it stems from I have a really hard time figuring out where they are today. So it's just above my pay rate. Harry, can I just ask you a few questions? You describe it as a killer app. Can you just for the non-technologists like myself, why is it a killer app? I think that's a good point. And Stigal has also come back to your point.

But thank you. This is really helpful feedback. So when we say a killer app, what I mean by that Toby is think of like chat GPT is a killer app because what it did was it caught the imagination of the public. And also it is solving a use case. It's really holding on a use case that is really impactful for the users. Or it's basically either scratching an itch or really solving a pain point for many companies. So in an enterprise world, a killer app is something that is where the customers will chase you to buy your product. Like what Ajit was describing in the GEICO is like that. Basically, there is no capability within that organization to solve that problem.

It's not an easy problem. Otherwise, they would have solved it. And what Palantir has done is has figured out how to solve this problem because they solved a more complex problem with government agencies, especially counterterrorism, security, and all that stuff. So that expertise now they're applying to commercial and enterprise. So the problem is that you have all of these different systems that don't talk to each other, and they're producing data that humans have to sort of put together across these systems. And so what Palantir does is they create some sort of AI or some ability

to read this data and put it all together into one user interface so that you can then automate the sort of monitoring and analysis of these data feeds and then you're able to make some sort of analysis that rolls up into something that's understandable by a human and you can see where there's some deterioration or something is going on so that you can then monitor that system more closely is that description Yeah, that's a very good summary of what they do. But then there are certain problems with doing that. So bringing all the data together is one part, but making sure it is secure and also making

sure that how do you apply security predicates so that not everybody can access everything, but they have only certain view of the data, for example. That's a very complex problem. It sounds as, so it's like just not a feature, but it's core to that product because the reason we don't bring all the data into one place is because of security. So having that security architecture in place, having the right security posture for the product is critical as well. And Palantir seems to have solved both of these problems. Actually, that part is well figured out. Like once you have data harmonized and secure, you can apply ML or you can use visualizations.

You can use anomaly detections or you can also use predictions. So those part is figured out. Thank you. 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. in every conversation you have is with people who are actually shaping the future.

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ETFs. So they provide the back end infrastructure for many ETFs, not mine, but they are one of the parties that I could have used. They essentially make a market in between, you know, it could be foreign exchange, it could be equities, it could be futures options. They're trying to buy and sell at the same time, standing in between two parties and to take a penny or so every single time. So they rely on having the best technology, good connections. They are the second biggest market maker for retail. They are 25% of the market. Citadel is bigger. Citadel, I think, is about 40% of the market. The business does well when there's more volatility in the market and there's more trading. So they did very, very well through the whole meme stock explosion. And there have been a few

sort of developments there, the retail public has largely moved away from that speculative mania. And so their financials are going to have to normalize beyond that. And so that's been, I think that's one of the main reasons that the stock has traded as low as it is because the last few years don't look great on a revenue basis just because they've come down like that. But there have been some other developments that are sort of interesting. So there's been this explosion in these zero day to expiry options. So people to speculate. in spy options in options that expire today or tomorrow. So zero days to expiry options. Mostly in spy. So people come into spy and trade in these things. And there was some question

initially whether they would be beneficiary of that or whether that would hurt their business. It seems that it's neutral to slightly beneficial. But there is also this other concern that if you, this is a slightly complex idea, but the abstract version of it is basically this, that sophisticated market participants can use options to move the underlying equity. And so it's called gamma hedging, gamma manipulation, but basically what they're trying to do is they can move the underlying by piling into the options and then the market maker has to hedge their exposure by buying it. So if I wanted to push the stock price up in something, I'd go and buy a whole lot of calls, which would then make that the market maker to hedge it,

core, which is the right, but not the obligation to transact at a higher price in the future. To hedge that position, it's necessary for the market maker to buy the underlying. So they buy the equity, which incrementally pushes up the price. And so there's been some sort of conspiracy theory that there's some gamma manipulation in Tesla stock, for example, that there's a lot of option activity and that to hedge it, you then buy the underlying and it pushes up the stock price. So are they hurt by that? Are they able to trade their way around that?

Seems that in the zero days to expiry options, they seem to be okay, neutral to maybe slightly beneficial, because more trading is good for them. They're trying to be market makers on the other side. The business, though, has suffered because of this sort of the disappearance of the meme stock, and it attracted a lot of attention from the SEC, you know, that payment for order flow, where Robin Hood, for example, they could give you a free trade

because they sold the trade information to one of the market makers who then front ran the trade and they made that penny in front of the Robin Hood trader who was trying to make their own and there were very wide bit ask spread so they were making a lot of money and that's why Robin Hood was able to be. That's how Robin Hood generated its income. They were paid by these market makers. The SEC doesn't seem to like that.

And so there's this ongoing reform process. I think that some of the changes are to the market structure are going to be good for the market makers. Some of them are going to be bad for the market makers. They're pushing back against the bad ones. They're trying to adopt the good ones. They've also received a wealth notice, which is that the SEC will take some enforcement action against them.

And we don't know what that is yet, but they're going to be, it gives them an opportunity to respond and negotiate because these are quite complex businesses. and so the SEC is not necessarily as familiar with the underlying nature of the business as the business themselves. So they give them these notices and they then negotiate. All of that has sort of pushed the price of this stock down to, it was $18 last time I looked, it was closed at 18 last night. In addition to that, they have this reasonably complex capital structure where they've got various different classes of shares, the insiders hold these shares that have 10 times the votes of others. So the insiders are in

control of this company. And so you have to kind of trust the insiders here that they know what they're doing. They also, they get quite a lot of their options and they're all of these things being paid out to these guys all the time. So I'm not describing something that sounds particularly attractive. I appreciate that. And I think that if I'm, if I'm being completely honest about this, look, I think it's my main attraction to this. I think that this is more of a trade than an investment that you hold forever. But I'll explain to you why I'm attracted to it from a trading perspective. And when I say trade, I mean, you're looking at to an event and beyond that event, it's less interesting. So the reason that I like this stock here is that

it's trading close to its lows over the last few years. They're basically free cash flow generative. As interest rates go up, that's likely the cost of funding will go up. And that's been an advantage for them. Their cost of funding has been virtually zero, but they do have some debt, interest rates will go up because they're trying to, you know, they're trying to trade on margin for the most part on both sides of the, or they're trying to trade on, they've got some debt in the business because they can do that. The cost of funding will go up. So that's another reason why it's probably depressed. But the event is that if we get some market correction, if we get a lot of volatility returning to the market, they will be massive beneficiaries of that volatility.

and they could have an explosive period where the rest of the market is going down. And so the thing that I like about it is that it's basically a market hedge in the event that you get a very substantial crash, which I think there's a reasonable chance that we see something like that in 2023 or early 2024, very early 2024.

So my attraction to it is, I think it's undervalued. It's quite free cash flow generative. They've been using that free cash flow a buyback stock. I think in my notes, the sort of the lesser voting shares that the public holds, there are about 122 million of them in 2020 at year end. There were 95 million of them in the last queue. So they've bought back, I don't know what that works out to, but 20% say of their stock over that period of time as they've come down. So I think they think that they're undervalued

at that level. They also pay a very substantial dividend. So the dividend is now the yield on the dividend is over 5% at $18 where it's currently trading. So the trade looks to me like a positive carry into a potential correction where they would do very, very well. And it would be one of those things that should perform if we get a crash. And so that's, it's a dirty shirt. And there's things that I don't like about it. But that quality that it has positive cash flow, positive carry into a correction is the reason that I'm attracted to it. I hold it in the, Zieg and it's one of the 30 positions. And as you know, I'm trying to build a portfolio that will perform there rather than focus too much on any individual stock. And I can rebalance out of

any of these positions at any given time. And I've got to rebalance that coming up in a month. And I don't know between now and then what the stock will collect. So if you return to my portfolio, if you hear this and it's past a month and you return to the portfolio, you see that's not in there. And I'm explaining to you know why that could have happened. I don't know what happens. I have an idea what my model looks like all the time and it's well inside my model and it's undervalued and it's got that sort of quality in it. But there's always a possibility that I rebalance out and I just want to make that plan to everybody from the outset. But in short, positive, very material dividend, good potential for something to happen in the event we get

some market instability, volatility. They're buying back stock in the interim, which is always, I think is a very good sign when a management will do that, particularly when they do it in material numbers like this, 20% over a few years is a very good number. And then the risks and the things that I don't like is that I don't like that different share classes, the share classes make it difficult to sort of determine what the true market capitalization with, you'll see it quoted at $1.7 billion in some places, which is only counting one set of shares. You'll see that are $2.9 billion in other places. They've got a little bit of debt in there. The cost of funding will go up with interest rates going up. And there is this ongoing negotiation

with the SEC that has culminated in a Wells notice and a Wells notice is notice of enforcement. So that's something that you shouldn't ignore. But all of those things are the reason why I think it's cheap. It's potentially explosive in the event that we get some sort of big drawdown. Happy to take questions, Jens. Well, thank you, Toby. This was very educational for me because not just about the stock. You kind of also explain how the market works, especially the Tesla case was very interesting.

So thank you for that. and what ought my attention is that it's more like a mining stock or any other cyclical stock is what you're saying. So what I understand is you're catching it at a low point. And when things go back, when low point, I mean, when things are stable right now, in whatever way, when it is calm, the markets are calm. But when the volatility picks up, you basically sell out because that's when they will make a lot of money.

The only question I had was, is there any? tail risk for this company where they can go out of business or their business can be materially impacted or they're built to kind of survive these cyclicalities. They are very good at generating free cash flow. They've been very good at generating revenues. As the business shrinks, the business seems to scale quite nicely. They can just scale the business down, scale the business up. So to me, that says that they've got that sort of flexibility in the business margins compress as they go down and the margins will expand as they go up. The business was, you know, was an amazing looking business when they were going through 2019 and 2020 because there's just so much trading and it was,

you know, less sophisticated trading that jumps across, bit-ask spreads. And for them, that's great. They make lots of money. And they're, they're in 25,000 instruments. There's always something that's, there's always something that's happening that they can, there's always someplace for them to make money. They've been kind of cagey about the zero days to expiry options. I suspect that they can probably make quite a lot of money in there, but it remains to be seen a little bit. I don't think that it has the donut risk. I'm not as confident as I am saying about, you know, lots of the other consumer-facing good companies, but I think that they're seeing pretty gnarly conditions at the moment and they're still working the way through it. I think the big risks are that if the SEC does something

to change the nature of that market-making business. That's a black swan that I don't know exactly how that plays out. But I think that they'd be crazy to do something like that because it might completely change the structure of the market. I mean, they seem to be trying to change the structure of the market a little bit, but I'm hoping that it's mostly, they seem to say, virtue seems to say that the people who will be hurt are the investors and that they're going to be fine, whatever happens.

So I'm taking that at face value. I think that they're in a good position. There's a little bit of debt in there, but they've been doing some acquisitions. That's debt is largely from the acquisitions. And I think probably they'll bolt something else on when there's some more volatility in the market. I suspect it makes them stronger rather than hurting them. But if volatility completely drains away and the SEC does something, then there's always the risk that, yeah, that something happens there.

Thank you. I don't know if I like the company. I sort of do and I sort of don't. So, wow, that's a terrible way to start. Right. So I like the price for sure. I like the free cash flow. That's amazing.

You already mentioned the capital allocation with the buyback of shares. You know, just from 2021 to 2022, the win from $117 million to $104 million. It's material. And like you mentioned, the yield right now is more than 5% under dividend. So this is really interesting what's going on. They say that time is a friend of a great company and the enemy of a bad company. And I don't really know how to put this. Like this is not a company that's 10 times bigger in 10 years.

That's not the business model at all. But whenever you look at how cheap it is, like there's so much catastrophe priced into the price, probably because of the regulatory headwinds. And so I don't know what the probability of the SEC, you know, way we're going to be. the white flag. I would not estimate it's that great. But if they did, like the stock price would just go to the moon and something like this. And even if they don't structurally change what's going on with virtue, I would say that you're priced in for something good to happen. It seems like they have gotten a lot of headwinds for retailers, for retail investors like you mentioned. But I can see they also do a fair amount of business for institutional clients, which is

interesting in itself. I would also imagine that they would benefit from a secular trend of just more trading in general. I'm not so much talking about what happened during the pandemic, but just I pull out some stats here. The average holding period for individual stocks in the US is now 10 months and down for five years back in the 1970s now by itself that gives you a lot of volume and the level of volume as well as volatility. I had a conversation with money about the Turkish stockmine. He said that the average holding period was nine days. I don't think it's going to be similar to that here,

but I don't know if it's too easy to extrapolate and say, it's probably going to be shorter than 10 months more than the other way around. Who knows? If I had to guess, I'd probably say it would be in that direction. So it has a lot of tailwinds working for them. So, yeah, I definitely like the valuation. Let them put it like that. It's peak uncertainty for this business.

It's peak uncertainty in a six. clickl trough. And so I think that you remove the uncertainty and you get some event or there's just an increase in volatility and that's a, they're a beneficiary of that. In the interim, you're getting paid a little dividend and they're buying back stock. So that just means that when the event happens, the move will be pretty big. The risk is that the SEC does something material. I mean, the world's notice is a serious thing. We don't know exactly what happens with that, but I don't think that it's ultimately going to be destructive to their business. I think they'll negotiate something just because of the sheer complexity of these businesses.

The SEC needs to be careful when they're dealing with them. So I think that on balance, it's a good, it's a good trade looking out over the next few years. But as you point out, it's not a compounder. They pay out what they earn, basically. The payout comes in dividends and buybacks. I like those two things. So when companies are returning capital, I don't like the share structure. I don't like the, and it's all a little bit strange with the minorities in there as well.

It's not perfectly clean. It's not an easy company to analyze, and it's already a reasonably complex financial business. So it suffers from those things. It also pushes down the valuation. But I think that, you know, that idea that you sort of sell the rumor by the news, I think that this is one of those situations where everybody's worried about what will happen And when they get some clarity, probably with an event, probably it does reasonably well over a short to medium term.

But I don't want to be holding. I mean, I'm not going to be holding this thing forever. All right. So let's go here to my pick as we're letting hurry go. And so my pick is a small Swedish stock called Technion. And full disclaimer, I'm long Technion, so I won't be trading at all the next 30 days. That would make me a long term. actually all there in Turkey apparently

but we have these guidelines here and so I won't be touching that for the next 30 days but I am I am long Technion and this will be go out June 3rd so Technion is trading on the small Scandinavian exchange Nestak 1st North under the ticker TEQ

and if you're based in the US can be bought all the calendar through intact brokers chow swap and whatnot and so the stock How small is it? It's a it is It's $267 million US.

US, correct. And it's sort of like it's opposite your pick, at least I hope, because it's very expensive, whereas your pick was very cheap, but I hope that it's a compounder. And the stock really came on my radar after listening to Clay's Into You, Chris Mayer, on episode 543. And he also wrote the book, A Hundred Baggers. And I tuned into the episode because I thought I'll be learning about. our constellation software, which I also did. But there was actually not really piqued my interest.

After going through Chris's portfolio, Technium was really what I was interested in. And we already talked about that it's a very small stock. Not a lot of people I heard about it. Also, the reporting is mainly in Swedish. So that also limits the field. And I'd send Toby and Hari before this call, sent them a Google translated version of a version of, of the reporting. And I do like that it's a little odd. As a Dane, I do have a home field advantage given it. It's in Swedish. But as a value investor, regardless, you know, I'm always excited to go that extra mile and look where no one else is. I'll make sure to link to that Google translated any report. I'll also make sure to link to the Swedish version if you're,

if anyone would be interested in that. The business model of Techian is it's simple but not easy. And so these days, you will call them a serial acquire. And for the companies that they have in the portfolio, they have 24 right now, they don't expect a lot of organic growth, especially not adjusted for inflation. They grow through acquisitions, which by definition is just really, really hard. And the intention is to get the money back in five years. They pay everything in cash with 6 to 7% up front and the rest in the two-year earnout. and that cash is financed 50% eternally and 50% by bank debt.

And they would typically prefer to keep the existing management. And in any case, they take control of the board. That's not always possible because sometimes the owners want to run into the sunset. And so it would be their job to find a replacement. Generally, the target companies are small industrial companies with emotes and pricing power in these industries. They want to grow and they have these financial targets. And perhaps those three financial targets will also give you a good idea of where they are.

So net debt to EBITDA lower than 2.5, it's 1.5, sorry, it's 1.1 at the moment. EBITA, so without the D, higher than 9%, it's 11 at the moment. And through that, as a result of that, they want to double the EPS at least every five years. And so that's sort of like the, that's the structure. You know, if you look at the 2022 report, stock price is up by 456% here at the end of 2022. and since then at the time of recording, we end up another 20%. And no, that's not 20% as in 456 plus 20%, it's 456 times 1.2.

So there's some rocket fuel tied to this stock, and who knows? Perhaps it reflects that it's just very expensive, or perhaps it's a reflection of a very strong business. The business of acquiring businesses is just notoriously difficult. Whenever you look at value creation for listed companies, the shareholders of the acquiring company typically do not gain any value if you run a long time series. All the value go to the shareholders of the target company. And the reason why is quite simple.

Synergies are overvalued. Cost cutting isn't as easy as you typically thought. And there's also an element of management vanity in that. I read about one CEO who called it, I think he called it company dating or he said it's so romantic because that's sort of like what you do whenever you shove around for companies. Because it's more fun to buy and take over another company than is to do your daily operations. If you buy a listed companies, you have to pay a premium to the existing shareholders of the requiring company.

And you're paying for that if you're an existing shareholder in that company. And so you might say, well, how does that relate to being a private? company. Well, if you typically, and your Buffett talked about this, he talks about how difficult it is to get private companies for a really good price because you typically speak with very sophisticated sellers. It's not like the stock market where sometimes business market is going crazy and sometimes you can't find a bargain, even though, again, if you're acquiring an entire company, you have to do a tender offer so you don't get the same discount. And so you might be thinking whenever you're hearing this, but Stake, you just said there at the top that there was a five-year

payback period. And you also said there was a difficult buying private companies. How do you square that circle? And I think there are different ways to look at that. And the track record has shown that it is indeed possible for Technion to do that. First of all, there are not a lot of potential acquires of small Swedish companies. And that is the main market for Technion. That's where most of their businesses are located. They've done very few acquisitions outside. And also think you need to understand the Swedish culture a bit more to understand how these somewhat bargains can occur. So I should probably also say that I taught I used to live in Sweden. So that's why I tend to think that I know a bit about the country and also live in Denmark.

But anyways, the Swedish culture is together with the other Scandinavian countries characterized by a high level of trust. It's somewhat easier to decentralize, which is a big component of this, especially if going to have so many subsidiaries that have 24 at the moment. Succession is very difficult for, well, generally, succession is very difficult for all companies, especially very small companies. But I would say that most of the companies that are acquiring their family businesses, depending on which country you live in, you'll probably see, you'll probably experience that there are different expectations by those parents for the kids

to take that over. In Scandinavia, there are no such expectation for you to do so. You're more encouraged to paint your own, paint on your own canvas and follow your dreams. And I would say if the U.S. is your point of reference, I would say it's way more prevalent than in the U.S., which is already quite prevalent whenever you compare to other countries. Equality is a core value in the Swedish society. You don't want to strive for money to an excessive amount. You would probably be looked down upon if you talk too much about money and that you probably state that you have ambitious financial goals.

And I think it would surprise a lot of people that that is the culture in Scandinavia. And so money is perceived as a comparable small role. It doesn't play a big role once you reach a bit more than middle class in Scandinavia. And so let me come up with a simplified example of how this could come into play. Pretend that you are living in a small village, 1,000 people, 5,000 people. You want to take your chips off the table. your business is generating a million dollars in annual free cash flow, and you don't want to do whatever you're doing anymore. Would you like to sell to a private equity fund for $8 million or

sell to Technion for $5 million? I think you would be surprised of how many that would go for the lower offer. Whenever you're dealing with a company like Technion, who promised not to put a lot of debt on your balance sheet, not to sell it off, it's a very different discussion. If you have a small business, you probably have your accountant, be a good friend of yours and you might go to the same club or whatever is the case. If you go with some of the private equity companies, they would do a lot of their centralized lot. That's not the case for Technion at all. So this was, this just a very simplistic example of why this, why you have this, the case here. And it's typically also very difficult if you live in a place like that and a lot of these small industrial companies are

located in place like that. It's very difficult for yourself to find a replacement to take over the CEO role for something like that. So Technion is simple, but it's not easy and you definitely need the right people to execute on that strategy. So I have a really long section about different risk factors and valuation, but I kind of feel I've been rambling for so long now. So I'm going throw to you, Toby, for any thoughts and reflections? I think the challenge with these businesses is always that you're relying on the acquisition discipline of the management team. And as long as their rules concrete and they continue to apply them, then they should do pretty well. I think there are lots of examples of, you know,

Constellation, the Canadian company that buys the famously buys the vertical market. software, little tiny little businesses. In Australia and Canada, the roll-ups have never sort of of worked that well because I don't know why we overpay or they tend to be siloed in one industry, so they end up just paying more and more for these businesses when the thing that makes them succeed is discipline on what they pay. I agree with you that the negotiated sale price tends to mean in the public markets particularly and often in competitive. private equity markets, they tend to pay at least a fair price. And they make up, they generate their returns by layering in some debt and then paying off the debt and then dressing them up a

little bit for sale and trying to get them, trying to sell them at the right time. But as a kind of proposition, like clearly that's what Berkshire Hathaway is, like acquiring discipline, not overpaying for things, incentivizing the managers appropriately so that they continue to run the businesses, send all the free cash flow up to Warren Buffett who redeploys it. Sensibly, do that for a really long period of time, generate absolutely fabulous returns. The two ways that you can go wrong, too much debt and overpaying, that will kill you. And that applies also for someone investing in these businesses. You need to be getting a pretty good, not a good, you just need to get the right price.

You need to pay the right price for them so that your own returns look a little bit more like the underlying returns of the business. not overpaying. I don't know, the valuation of this business, that would be the main risk that I would see. If they've got a good track record of making acquisitions and their rules are concrete and they seem inclined to follow them, and they're an acquirer of choice, if someone will sell to them, sell to them for five times when there's another require out there prepared to pay eight times, that means that they're getting a lot of value every time they're buying and they're probably going to do very well. It sounds really interesting to me. So when I was young, when I graduated from law school, this was exactly the kind of thing that I wanted to do because I thought it was a really interesting.

I thought it would have been a fun business to manage. I did a few, as a corporate advisory lawyer, I did a few buyouts and just saw how much effort there is in making an acquisition. And then we had to, when the acquisition failed, we worked on the other. I mean, when the business failed because it had too much debt and they were in a price war, we worked on the other side to pull them apart. And it was at that time that I could just see comparable businesses on the stock exchange, trading for three times EV EBITA when they had to pay six times to get control of this thing. And I thought, what if you just bought the ones that were cheaper on the market? And that's sort of the entire reason that I have written the books that I have and run the business that I do.

Because I do like, you know, I love this stuff. It sounds like a really interesting opportunity. I'm going to keep an eye on it. I don't know much about it other than what you've just said. There's no reason why it wouldn't work other than overpaying and too much debt. 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.

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It's one of those things that are simple but not easy. Keeping that discipline would be tough. And so we definitely have different risk factors. So we have Johann, who is the CEO and Daniel, who is the chief physician officer. I don't know if I offend anyone in the company, if I say that they run the show. But there's definitely some key main risk there. And if one of them would depart, I would seriously consider whether or not it would still make sense to be invested.

because so much of the value in Technion is future growth. Right now it's trading at 26, P.E. of 26. And so you really have to have a lot of faith in the long runway of the business. Johann started the company in 2006 with his friend Jonas, who is no long part of the company. Jonas's parents are still pretty big shareholders. And they didn't really have a high degree of inside ownership. Johan still owns 5% of the company today. He has a background as a mechanical engineer

and speaks really the jargon of the company that they acquire. It's the type of business where if you meet up in a suit, it might be a lot harder to acquire that company. There's a lot of, it's not just a cold business transaction with these small companies that they're acquiring. So Johan just comes with loads of trust and knows how it is to run a small business. And I should also say this before we move on.

I had the opportunity to meet up with the management in Omaha. And they were just fantastic people, Johann and Daniel. And I actually met Toby that night at one of our events and told Toby like, this is not good. I met the management now, which I never do. You've fallen in love. Yeah, I'm falling in love. And, you know, Buffett never takes my calls. But, you know, we're in a lot of situation.

and Daniel was a big fan of the podcast and, you know, I got in touch with him and he was just like, oh my God, let's hang out and talk about business. And so I had a bunch of questions to them and they were just amazing answers and have all the biases that you could have. You know, it's terrible. I read Daniel's book after meeting them, which is a wonderful book too. And he talks about that if you fall in love with the company, do not buy any shares in that company the next 30 days. And so I want to live by that, not just because it's a rule with TAP that you cannot do it whenever you go public for the stock, but also because I just think it's, it makes sense, you know, a lot of CEOs, it wasn't the case with Johan who was found in the company,

but a lot of CEOs became CEOs because they were great salespeople, everyone liked them. And so, so you have to be mindful of that. But again, really impressed by the management, Daniel owns 0.24% of the company and he bought all the shares on the open market, no stock options, for Daniel. It's the Berksia Hetherway approach and I love that. He has a background from Bain, McKenzie, the like, but he doesn't come across as that type of consultant. It's actually a man as a compliment. I don't know if I saw anyone by saying so. But I kind of like that that he has that background because it really helps you in dissecting a lot of companies really, really fast. And I would also say that whenever I meet up with people I like to test them,

if I'm going to do business with them, obviously you're not going to phrase it as a test, but you want to know if the top management understand capital allocation well. And so I had like this, I should say that the company do have a stock option program. And last year, it was 0.1% of shares outstanding, which to the best of a knowledge, Dan, was not a part of. He said that he bore all the open market. But I talked to him about that to him and Johann about that options program. And I said something like long and complicated, which probably sounds super arrogant if you're tuning in. But I sort of asked that question. It was about a European-style call option with a strike price out of the money, something,

something, something. I did it to test the management because whenever you ask a ridiculous question like that, you typically get three different types of responses. The first one is they have no idea what you're talking about. So they just start to be issue. You don't that because that means that they're also going to be as whatever else that they're doing. They probably don't have a healthy corporate culture if they do that. The other response you can get is that they just say, I don't understand what you're saying. That's okay. That's completely okay.

But that also tells you something because that tells you that they're honest and humble, which is typically also signals that they have a good corporate culture because something like that, that humility triggers down throughout the entire organization. And then you also have the third option that they actually do understand what you're saying. And Daniel understood that. He had no problem understanding all the rambling I was doing. So I was impressed by Daniel. And Johanna Daniel stayed at a very cheap hotel outside of the city.

I looked it up whenever they told me where they were staying. I really like that. As a shareholder, you want the management to be frugal. Alternatively, you can be the McLennan's of the world if you do have the cash, but he travels on his own dime. So I don't care if he goes private or whatever it does. They talked about how they tied the world because they were doing the like three different flights and got up too early in the morning. And I was like, they didn't have

to. But it said something to me about the culture. And then again, the company has 452 employees, seven people in the HQ. The HQ have rented a co-working space in the suburbs of Stockholm. It's just another wonderful observation. And they also include the expense for the HQ as a percentage of sales in the annual report. That's not something that you're typically. So the level of transparency is just absolutely wonderful. So I also want to say that the bet is very much in the management. I guess it always is, especially because it's priced relatively high with the P of 26 right now. And so you have to be mindful of that.

So let's talk about the evaluation. Like you mentioned before, I don't feel that the current portfolio justify P of 26. If price is your margin of safety, you should probably go with something like Toby's pick. I like that much better, like a low single-tj-multible. But time should be the friend of this wonderful company. So if you run the numbers, the type of stock return is very much correlated with the return on best capital, which, like you mentioned before, is well above 20% has been for some time. You have low leverage, so you have to count on that for a very long time.

And so I sort of like, if you're talking about decades, it doesn't matter too much if the P is 10 or 50. Like if you go along enough and the return investor capital is high, it gravitates toward your return. I should say incremental return on that capital. And so, for example, if this company grows 10% of the year the next 10 years and then trades in the multiple of 10, you don't really make any money. You sort of like break even. So in opportunity costs, that would be a terrible decision. If you feel that they can do this for 20 years, returning 20% a year, and then trades at a P of 20, which depending on the interest rate level, may or may not be realistic, you're at 18.3%.

And so it very much go in line with how long is that runway? How do you think they can continue to have that discipline whenever they're acquiring companies? So where does all of that leave us? If you look at the return from an index, roughly 5, 7 is percent of that comes from very few stocks. You know, it's thinking about the Amazon and alphabets of the world. And you have the index driving that appreciation because the index is too dumb to sell the best performing companies, whereas we as investors tend to cutting off flowers and watering the weeds, as Pillar Lynch would say. You want to buy those high quality companies for single digit multiples. It's tough.

I'm not saying it can't be done. But unless you're investing in some sort of crazy turnaround, it's close to impossible. So you have to pay up and you have to have faith in that long runway. So is this one of those companies? I would like to say yes. It may and it may not be the case. I just wanted to add one more thing here before I throw it over to you, Toby. I keep on talking about this wonderful management, but I just want to throw more numbers at you.

Compensation is relatively low, even by Swedish standards. And so if you compare it to other companies, unless it's perhaps Berkshire and how Buffett compensates themselves, you just wouldn't believe it. So the CEO in 2022, he was paid $140,000 in base, $140,000 in base, and he received $120,000 in both. That was a record year. And the way that that bonus is being calculated is that it's a split on the profit that may compare to the previous three years. So the benchmark keep on going up. And that's the case for everyone in the management, seven people in HQ, but also the CEO

of the subsidiary. So I kind of like that that's the way it's being run. The chairman of the board was paid $20,000 for his time. The others paid between 10 and 14 and Johann, being the CEO. is not paid at all for being on the board. And so, believe it or not, this was like my short version of going through the company together with you. I did do an interview with Daniel and the chief assistant officer that was published a few weeks ago. I'll be sure to link to that. It's on YouTube right now. But I'll be sure to link to that in the show notes, but they didn't

throw it all to you, Toby. I mean, I like all of the risks are always that management's taking out more than they're earning for the shareholders. And that's the norm rather than the exception that they overpay, that they don't know what they're doing. There's too much debt. It sounds like all of those things are not there. They sound like my kind of guys, honestly. I don't know much about it other than what you've said today, but all of that sounds very, very promising to those guys. The valuation, when you say it's at 26 times PE and you say that the is pretty close to cash flow. So it's like a 4% free cash flow yield growing at about 20% a year, maybe a little bit more than that potentially. So interest rates currently, 5% of the 10 year,

so you're a few years until you're earning the 10 year. I think for me that would be the only thing that would be maybe you could get, maybe you could put on a partial position. and then wait for a better price. Maybe that better price never comes. Like, there's plenty of people who are waiting for that better price for Berkshire and it just never came. I'm pretty bad at paying up for things. So sometimes I miss some of these better opportunities.

So probably don't listen to me with a mistake. I still have a strong bias toward not doing it. It's so easy to see something in a single-digit range. And you can see the cash load and you can see the shareholder yield. It looks so good. makes so much sense. I tend to be a numbers guy and not a qualitative guy, so I'm practicing. I don't necessarily think I do a good job. I'd probably say for people who might be interested in this stock, build your position slowly. Buy very few Cs and add whenever you learn more about

the company. There's a macro, we didn't mention this, but I do think that there is this sort macro trend that is worth observing here that there is a in the Western world in particular, there is a baby boomer generation that is aging and exiting the workforce and they will need to transition these businesses to someone else. There are a lot of people talking about at the moment. Having said that I remember 20 years ago they were talking about this too, that there would be this transition and doesn't seem to have really kind of happened yet. But it must happen at some point.

There must be a way of solving that problem as they transition. If these guys have got a solution to it, then I think that's an interesting trend that's worth sort of watching closely anyway. And probably this is a good way of playing at these guys are in a good position to take some of these middle market, smaller businesses, need a home, need the administrative help. Because often businesses, and this was something I found as an activist, particularly in Australia, where many of the smaller listed companies are run by founders who are engineering typically as a background, haven't spent as much time in financial markets and don't know about buybacks

and all the other levers that you can pull to improve your shareholder value. Not saying that they would need to consider that as private businesses, I'm just saying that they're engineering types rather than financial guys. And so it can be a good marriage where you have a financial guy at the top with an engineering team that sort of runs the underlying business. And this might be that kind of opportunity. I like that you say that. And I had a discussion with the management about that, not just the way that they're being compensated, but also the way that the CEOs were compensated at the subsidiary level.

And we talked about this whole stock option issue. And I would prefer not that to be the case at all. But if it were to happen, perhaps you could be structured XYC. And they looked at me in the set, just what you were going at before, like, they're engineers by trade. Like, they don't necessarily think of strike prices and is it American type of call option or is it European style or whatever. Like, they don't think about like that. Just like, pay me in cash. If I reach X number of dollars in profit, I get more.

That's enough. And so I think that's very telling. And I also feel things very telling that whenever they do the internal reporting, so they do that once a month with the subsidiaries, at the very top of the income statement, they have profit. They don't have revenue. They do a stream once a quarter and I checked out the last, I don't know, five, six. I think that's probably what they have online now. That's in English where they talk about why sale isn't important. I know that sounds super counterintuitive probably, but they feel that sales are more derivative

of the profits, more than the other way around. And it's the way that they build the thesis, I just tend to like especially. It's probably not too much a problem here in 2023, but you don't remember a few years back, it was all about revenue and no one cared about cash flows at all. And I like that conservative approach. And I asked them about the interest rate and what that meant that they had a higher cost of capital. And they said, no, payback period is still. It's still five years.

It's still 50% band debt and 50% cash. Like we need to make it simple. I like that. I like that approach. I think it makes it easier for everyone. Yeah, couldn't agree more. Simple and concrete and incentivized so you don't do silly things to hit numbers. but do the right things in the business.

Yeah, those are all good things to look for in compensation plans. So, yeah, that was my pick here for today. Technion. Technion, yes. Good name. Toby, anything else here before we round at the show? As always, I'd like to give you an opportunity to tell about you and what you're up to. Anything else you wanted to share with the audience before we do?

I think they're really good picks reflective of who we are. We got Palantir from Harry, got the tech company from Harry, cut the deep value financial from me and the European, unknown European stock from Steve. Right. The Europeans microcaf. Right. Yeah, well said. In a different language, perfect.

In a different language, perfect. Yeah, you know, that's the way I make sure you can criticize for two months. I send you reporting a language you don't understand. All right. All right. All right, Toby. I have a website Acquirousmultable.com, and that has, I've written some books about my investment process and research that I've done by myself and with other people. I run two funds in the States that domestic US equities have a mid-cap, large-cap fund called the Acquirus Fund ticket is Z-I-G and a small and micro-cap version of exactly the same strategy.

the ticker is deep, D-E-E-E-P, and I'm on Twitter at Greenback to G-R-E-N-B-A-C-K-D where I post a little bit and I spend a lot of time on Twitter just sort of watching what's happening. I post less and less these days

because I don't really know what's going on. I feel like there's a fair bit of deterioration under the hood in the global economy and it doesn't seem to be reflected in stock prices. So I'm always pretty bearish though, so take that for the grain of salt. Thanks for having me. stick. I always love chatting to you. We've had this mastermind discussing since 2015 and I don't

remember you're not being bearish, which I like. You know, in an uncertain world, Toby, it's good to know people like you. You know, because I'm a deep valley guy, I really want to pay really, really cheap prices. So I'm hopeful that at some point we'll have a gigantic collapse and then I'll come on and I'll be uber bullish where everybody else is bearish. And, you know, you're probably right. You know, if you look at any historic metric, it's as much as the market has dropped, even though at the time of recording we've seen the rebound, like it's still really expensive. Well, we're two years in.

Arc topped out in February 2021, so it's more than two years ago. And the rest of the market topped out at the end of 22 or the beginning of 20, sorry, the end of 21, beginning of 22. So we're more than 18 months into that drawdown historically when markets have collapsed. they look like this. They bump sideways for 18 months and then the last third is the business end. And so we're right into that business end. I sort of think we're going to see it in 2023 or very, very early in 2024, but I think 2023 and soon for my two cents. I'm Will Tell. Wonderful. Thank you so much for your time, Toby. I really appreciate it.

Thanks to having me stick. Love seeing you. Love chatting. All right, guys. I wanted to transition to the second segment of the show. show and include my co-host Clay Fink for that. Now that we're letting go of Toby and Harry, Clay, how are you today? Doing wonderful, Stig. Thank you. How are you? I'm good. I came back from Omaha not too long ago, as you can probably hear here on my voice. So this is being published June 3rd and actually recorded before the mastermind meeting that you heard before with Toby and Harry. Because we came back and we got a lot of

wonderful feedback from our audience. And we had these four free events from Thursday to Sunday in Omaha where we met the listeners of the show. And we talked about investing, life, everything else in between. And it just had a wonderful time there. And one of the things that we heard from the community was that they really like the mastermind episodes. And I sort of like wanted to use that as to transition into a discussion of our mastermind community, which it seemed like not a lot of people knew about. It's also very, very new, and it's something that you initiated. So perhaps, Clay, let's start with that. What is the TIP mastermind community? Yeah, I'd like to tell a little bit of a story here to paint a picture, paint a background of where we're coming from.

Stig, when we were planning the Berkshire weekend and what TIP events we wanted to host for the audience, you asked that I help organize a few meetups in Omaha, which completely, completely, makes sense because I'm familiar with the area. I used to live in Omaha. So logistically, it just made a lot of sense that I'd work on that. So I was very involved in that process. And we ended up planning for free meetups. And we talked about our plans for the Berkshire weekend. We talked about it on the show back in October 2022. And then just within just a couple months, I quickly realized that way more people were registering for our events than we had space for. So we, kind of had a little dilemma on our hands. People were spending thousands of dollars to travel

from all over the world. And it wasn't just to see Warren and Charlie. They wanted to meet like-minded investors. And after going to Omaha, I realized that this was absolutely the case. And people would tell me that, you know, they were the one person in their circle or the one person in their friend group that was interested in investing. So they really had no one to talk about investing with. And I can totally resonate with that. I think back to when I was a TIP listener, the vast majority of my friends were not and they weren't interested in investing really. So I kind of had these conversations with myself in my head and then listening to you and Preston on the show, almost having that internal dialogue with you guys. So I had mentioned to you Stig that I would absolutely love

to start a community for the TIP audience. Specifically, what I wanted to be included in it was it's a place where people could meet like Biden investors. They had a network to bounce ideas off each other, a place where they could get new ideas from others in that network. They can run their stock ideas in there and get people's thoughts and feedback on stocks. And then just somewhere they can ask questions to people, you know, maybe explore new subjects. You know, they could ask you or me questions, stig.

And then we also came up with the idea of having a live meetup in New York City as well. and I think people were pretty excited about that, and we plan on doing that this fall. And so far, it just seems to be getting a lot of interest. And one thing we're also doing in the Mastermind community is having weekly or maybe bi-weekly live events on Zoom for the community. So people can join live, they can hop in with questions, and then we also record those for people to watch afterwards. So another thing I wanted with this community is for it to be relatively small and tighten it. I just really wanted people to have a place where they could build these strong and genuine connections with others. So we limited the TIP Mastermind community to 30 members for the general audience.

And then going into Berkshire weekend, we had around 27 paid members. And then to my surprise, around 15 of them were going to Omaha. So I wasn't planning this at all. And I've already met around half the community. So, you know, many of the members are just truly incredible people. They're engaging. They're joining our live calls. they're going to Omaha. And I honestly just have a ton of fun learning from them, hearing their

stories and learning more about their own investing strategies because that's another interesting thing is everyone kind of has their own viewpoint and their own strategy. So I had mentioned on the Berkshire episode we've recently released that I feel like we have the best audience in the world. It's likely that all podcasts say that or maybe they're obligated to say that. But I truly do believe that our audience members are absolutely amazing, especially judging all the people I met at our meetups and met from the mastermind community. And also, before I close out my answer here, I also wanted to mention that the price tag to join the community is north of $100 per month, which I'm well aware is not low. But really, I just want to ensure that we

keep the community relatively small and we can continue to attract to those high quality people. At the time of this recording, we have around 36 members. I had mentioned we wanted to cap it at 30, but I wanted to give everyone in Omaha the chance to get in as well and join as they're kind of our TIP super fans, I would call them. And I guess, you know, one thing that you hit on there was that not knowing anyone in your circle that could talk about stock investing. And I didn't really know anyone before I met Preston 2013. And so, and don't get me wrong, people love talking about stocks, they just don't get wrong. I mean, they just don't know what they're talking about. And so, so like they would say, oh, buy this stock and you ask why. Well, it's awesome.

Or you know, you get all kind of weird responses. They would never dream about opening, reading the financial statements. That's not how we're thinking about. It's just like, oh, the price doubles. So I was probably going to double again. And so I had friends that talked to about investing. I just didn't have anyone who were who I felt I was on the same journey with. And if you told them, you were going to Omaha, you know, spend thousands of dollars. and fly 20 hours to go there to like, let's to Warner Buffett. They would be like, who's Warner Buffett?

You know, so it was just fantastic first to meet Preston and then to meet other like-minded investors. And that's what we want to facilitate. But, you know, even whenever I speak with Tobin Harrow, and we also talk, you know, sometimes whenever we don't record it. But whenever we do record it, you know, you are also constrained to some extent. You know, partly, you know, we have time zones, whenever kids back forth and all of that. And, you know, and it has to fit into the podcast format

if we started building there. What I like about the mastermind community where you've been gracious enough to invite me, Clay, I should say, is that, you know, we can have as many discussions about a stock as we want, you know, we can share our screens, we can compute together. You can sort of do different things you can't really do on the, the investors podcast format. It's just not how we do things for a number of different reasons. So I really like that we can dig deeper and you can meet people from all around the world who are really on the same journey as you. So if anyone finds this interesting, I'll highly encourage everyone to check it out. And I wanted to throw it over to you, Clay. How can the audience join the community?

Yeah, before I answer that, I do want to pull the string on that idea of people from all over the world. I've had one-on-one conversations with each member and we have people from Australia and people from different areas of Europe. We have people from California, New York, and many people from Canada, too. I mean, this is people from all over the world, and it's just so many, many different, interesting, and new backgrounds and new perspectives.

And that's just one of the truly incredible things about our TIP audience dig is just how global it really is. It's just a crazy to think how, you know, I'm just a guy from Nebraska in the middle of nowhere in the U.S. and we're connecting with people from Australia and all over the world. Just an incredible thought.

But anyways, as of today, I mentioned that our community is currently close to new members. And for the time being, I'd like to spend quite a bit of time focusing on our first cohort and adding as much value as I can to them. And then assuming all goes well for the next few months and I feel that we have the capacity to add new members, I'd like to add around 15 to 20 more sometime during the summer. And that's assuming that there's still interest from new members to join, which I suspect there will be given the interest to date. And I'd like to give those listening to this episode today the chance to attend our live in-person meetup in New York City. We're still working out

a lot of the details there on what that's going to entail. But sometime this fall, we plan on doing a weekend trip to New York City. If you have any questions about that, you can feel free to shoot me an email, Clay at the Investorspodcast.com. And then because of the limited availability, we decided that we're likely going to have people apply to join. You know, we want to ensure that we can keep the group really high quality and we're letting in high quality people that are excited to engage with others and learn from others. So it's likely we're going to have people apply as well. So it's just something to be mindful of.

And I also wanted to mention that we do offer a 30-day money-back guarantee. So if for any reason you decide the community isn't a good or a right fit for you, then you'll be 100% refunded and no questions asked. Absolutely, I'll send it right away. So if you'd like to stay updated on when we open the community back up to new members, you can join our waitlist by visiting theinvestorspodcast.com slash mastermind. That is the investorspodcast.com slash mastermind to join the waitlist and stay updated on when the community opens back up.

Thank you, Clay, for jumping on the call. And with that set, I'll see the rest of you next week. Thank you for listening to TIP. Make sure to subscribe to millennial investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts or courses, go to theinvesterspodcast.com. This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network.

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