We Study Billionaires - The Investor’s Podcast Network - TIP842: Comfort Systems USA (FIX): The Five-Bagger We Passed On w/ Kyle Grieve & Shawn O'Malley

Episode Date: August 30, 2026

In today's episode, Kyle Grieve and Shawn O’Malley revisit Comfort Systems USA, a business Shawn originally passed on at $320 that has since appreciated fivefold due to explosive data center spending. The company shattered original projections, with accelerating organic growth, expanding margins, and exceptional capital efficiency. Despite acknowledging the business quality, the hosts discussed whether the original decision reflected a flawed investment process or was the natural outcome of applying a strict investment framework. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:09:16) About the tailwinds behind their organic growth (00:13:05) How AI data center spending transformed a boring contractor into a multi-bagger (00:21:45) How to use the backlog to be directionally correct about the company’s future (00:44:53) Why surety bonding capacity creates a widening competitive advantage (00:49:32) About how the return on Incremental invested capital has improved (01:02:28) About their exceptional incentive plan (01:08:58) Why are we uncertain about Comfort’s high growth metrics 5-10 years from now Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Track ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Portfolio⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about how to join us in NYC for our ⁠⁠⁠⁠⁠⁠⁠Intrinsic Value Conference⁠⁠⁠⁠⁠⁠⁠. Portfolio Review ⁠⁠⁠⁠⁠⁠Submit Tool⁠⁠⁠⁠⁠⁠. Follow Kyle on ⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠. Follow Shawn on ⁠⁠X⁠⁠ and ⁠⁠LinkedIn⁠⁠. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses through ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Investor’s Podcast Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our sponsors: Scribe Plus500 Netsuite Plaud References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Welcome back to the investors podcast. Today's episode is number 842, and we're doing something a little different today, going back to revisit a stock that Sean actually pitched a while back in Comfort Systems. So when Sean covered it, his model assigned a fair value of around $320 per share, and he ultimately passed, preferring to wait for a better entry point. I remembered vividly, and yeah, this is going to be a painful episode for me because we really, or I really, missed out on quite the opportunity.

My valuation could not have been more off. Yeah, but, you know, so the business has kept growing at this just incredible clip, largely riding this data center in AI build out. And the stock today is now sitting at five times its price when, unfortunately, Sean, you first looked at it, just miles past the top of even the most bullish view that you possibly could have modeled for. I'm ready for it. Lay into me here, because it was a mistake.

And, you know, I'll leave it up to the audience. to decide how big of a mistake they think it was that we made in passing on this one, or if there were some factors here that were simply well beyond our field of view that changed, as in, is our investment process flawed, or is this just part of the reality of having an investment process where you end up excluding things that other people will make a lot of money on, and that's okay. But it also helps save you from making big mistakes, or at least that's the idea. So let's see if this incredible stock run is really, Random luck, or if we simply miss the forest for the trees on this one?

Let's find out. Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice.

It's intended for informational and entertainment. purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Sean O'Malley and Kyle Greve. Every so often on the show, we think going back and probably just grading our initial pitches is just a really, really good idea, not only to highlight some of our winners, but also to highlight our losers. And not only to look at businesses where we maybe own them inside the intrinsic value portfolio, but also to look at businesses where we may have made a mistake of omission simply by passing on them that turned out to be just an incredible, incredible investment.

We are, after all, achieving some pretty good returns, but I think I speak for both Sean and Daniel when I say the process is something that we weigh very, very heavily. This is why we think it's important to look at our previous decision making to try and pinpoint whether we made a mistake or if our decision making was sound, even if the outcome wasn't exactly where we wanted it to be. So today's episode, we're going to cover a business that Sean covered a while back Comper Systems USA. For anyone who didn't listen to the original pitch, it's basically a mechanical, electrical, and plumbing installation and service provider based out of Houston. While management

doesn't like the label Sierra Acre, I think it's probably the best label that we can use to help understand exactly what they do. Yeah, I think that's fair. And part of the reason I like the business was that it does have this well-established playbook with over $10 billion in revenue and over 23,000 employees. So in terms of size, it is a pretty big business. But the real story, has been their ability to continue compounding even at a large cap size. And so for a business to have a market cap of over $60 billion, while compounding revenue at 13% a year, and earnings per share at 22% a year for the last two decades, that is really something special. But what I found even more incredible is that most of the time when you look at the growth rates

of a business with maybe a similar market cap to the size of comfort, growth tends to be plateaued or is even declining. When I look at the past 10 years, of comfort systems, revenue growth has actually increased to 21% while earnings per share has gone up to 37%. So it's actually really, really clear, at least from what the numbers are telling us, that the business is just getting better. Just in the last year since you pitched this, Sean, revenue has gone up by 33% while EPS has gone up by over 50%. So, you know, it's just at a very astounding growth story. Now, I think part of it is definitely timing. I think when you pitched it, it was kind of right before it started to really, really heavily inflect. So you mentioned in your

episode on some of our winners that you didn't actually have any regrets in missing this one because you believe that the current tailwind is going through the result of kind of these cyclical forces that were and probably still are very, very unpredictable. So I tend to agree with you that avoiding businesses that are cyclical is a good idea, simply because for most industries, I feel very uncomfortable with getting any degree of conviction of when a cycle is going to turn and how to estimate, you know, the more normalized earnings that you're going to get across the company's business cycle, which is to say how you determine what the company's baseline earnings power is when things can dramatically change from year to year.

It's all like Apple, for example, which is very stable, and you just know how many people bought a new phone last year and likely how many people are going to buy a phone for the next year. It tends to be more linear and less cyclical. Cyclical businesses, for instance, could make $2 billion one year, lose $1 billion the next, and then make $10 billion the following year. Well, and because cyclical businesses are so much more unpredictable. than iPhone sales or some recurring subscription in business,

they're definitely harder to estimate intrinsic values for it. But this also means the market is more likely to make mistakes periodically valuing the company, though. And that can create opportunities, especially if you are an expert on the industry and you understand how to kind of time the cycles. And before we get into the cyclical nature of comfort systems business and what they do, I do just want to give listeners a little bit more content. on the original decision to pass on investing in comfort systems.

And so when I first analyzed the business, I did estimate a fair value of about $320 per share, which feels a little funny in hindsight because, you know, I was quibbling over what a good entry point would be in the stock. And I talked about maybe wanting to buy some shares if the stock fell below $300 per share. And while the stock is absolutely just rocketed from there and traded at a, a huge premium to my valuation. And so I already had a low conviction in what the business would be worth because its earnings are cyclical.

So I put it in the too hard pile, but I did end up missing out on a five bagger. And so at the time of the recording, the share price is, you know, almost $1,800, which, yeah, is painful to see that this opportunity was so clearly staring me in the face. and we didn't capitalize on it. And so, you know, a huge opportunity in some sense was missed. And again, we can talk about whether this was a mistake or simply just the occasional reality that if you're going to stick to a disciplined, fundamental-based investment approach, every now and then you're going to get these things where the casino falls in love with

a stock and it flies to the moon. But it's not necessarily indicative of the types of fundamentals. that some of our influences and Graham and Munger and Buffett would find attractive. Yeah, I think with some businesses, it's just crazy to think about how much value they can create even in a pretty short time. So I remember listening to your episode and not to insult you or anything because I never bought the business either. But you were discussing whether to buy it at 290 or 320. And with hindsight, you know, haggling over those small price differences just wouldn't have made any difference. Instead of maybe a 4 to 5 bagger, you would have been

looking at a 5 to 6 beggar. And I don't think anybody is greedy enough to really pass. on either of those two options. No, you say it like that, it does feel almost embarrassing to have it be that big of a payout in such a short time period, basically from immediately after I looked at the company. And so just to resist maybe the urge for self-flageation, though, I think it would be easy to do that, but also not really the most productive use of our time, or at least I won't entirely enjoy it.

I think there's a major difference, though, in making an analytical. mistake versus making what is maybe a correct and pragmatic call as an investor by honoring your own margin of safety and then having that just so happened to get massively overrun by an unknowable swing to the upside in demand where you made a calculated decision given the information you had on the table maybe you made the best decision available it's just that in the random distribution of everything that can happen, there's going to be these small percentage outcomes where you end up being hugely, hugely wrong, or at least that's what I'm telling myself so I can sleep at night.

Yeah, I completely agree with you, Sean. And then don't worry, I'll take it easy for you here on the rest of the episode. But, you know, just speaking personally, I've made so many mistakes in investing that we could probably produce an entire show on it. But let's get back to the original thesis first and give everyone maybe just kind of a summary of your original thesis because, you know, you can't really evaluate an investing decision without restating the initial idea. Sure, yeah. So the original thesis was based on comfort systems growing through a few different levers. And so the first was organic growth. And if we

assumed they never made another acquisition again, then I thought maybe the business might grow somewhere around 2 to 4 percent annually, which would basically mean around the same level of GDP growth. Because demand for mechanical and electrical engineering services should be pretty steady when you really zoom out and if anything, they might outperform GDP a little bit. And so especially as you have things like data centers becoming larger and larger parts of the economy, which we'll get to. That's a big part of the comfort systems story today. Comfort systems is specialized in doing maintenance work on data centers and in HVAC work as well. So I think the real beauty of this business is in the fact that they're a serial acquirer, meaning they've demonstrated the

ability to continue to allocate capital back into the business by snapping up regional contractors all across the country and then doing so with very high rates of returns on those investments. So just to give you an idea, since 2015, they've had a return on incremental invested capital well north of 20%. And so the more money that they can reinvest, the better. And what that means is that if they were able to reinvest 100% of earnings at these 20% rates of return, And when you stack organic growth on top of that, you should expect earnings to compound at well more than 20% a year. And the thing is, of course, it's not that simple, though, because oftentimes you can't expect companies to continually find enough investment opportunities

to put all their earnings into that generates 20% plus return. So maybe you can find some incrementally very attractive investments. You're not going to be able to reinvest 100% of your earnings into those opportunities. And typically what you more often see is diminishing returns on investments after a certain point. So only so much capital can be invested each year at a satisfactory rate of return. And then your expected returns as a shareholder, especially in a serial acquirer business, become the byproduct of the organic growth and the underlying companies. Growth from whatever percentage of earnings can be invested into acquisitions times the rate of return on those investments, and then any capital returns to shareholders that come via either

buybacks or dividends. And so with comfort systems, they do actually have multiple different areas that they can reinvest capital into and making acquisitions with. And so that is both in the field of electrical contracting and also mechanical contracting with mechanical contracting comprising over 70% of revenue. And so really the big question for me was what do the opportunities before this company look like going forward? Are they running out of attractive businesses to acquire? And then also correspondingly is basically the law of large numbers kicking in where they have to find bigger and bigger deals over time or significantly more deals to be able to move the needle. And so that is where I ended up being quite wrong. I thought that the business

was much more mature than at least it's proven to be in the last year. Yeah, so as a major fan of CERO Quires, I can actually attest to this exact business model. I think when it's done correctly, the business essentially just turned into a compounding machine. And when you have one of those, you just told it and good things tend to happen if the business is very, very well run and if you're just willing to be patient. And I think Comfort Systems is one of those really kind of boring but high quality businesses that investors love to talk about, but unfortunately tend to rarely own. And one reason that many investors probably don't own it is simply because they're just too

boring. I had the same problem with owning Micron, which unfortunately 20x from where I first bought it, depending on how the market is feeling on that day. But even though Comfort Systems was boring, I probably still is boring, it definitely had a very interesting angle to it that you kind of already alluded to here, which was the company's connection to the AI craze by servicing these data centers. That turned an incredibly mundane business just two or three years ago into one of the hottest names in the entire market. And since we own a few hyperscalers like Alphabet and Amazon, we have become quite familiar with the hundreds of billions of dollars that are just being pumped into AI on a quarterly basis.

And correspondingly, Comfort Systems backlog absolutely ballooned in 2025 and is still carrying some momentum into 2026, albeit at a lower growth rate. So just so you have some idea of how the backlog has actually grown, it has grown by over eight times since 2020, just in an insane growth figure. And it actually more than doubled between 2024 and 2025. So looking at it in 2025, like you did, I think you might have already thought that you were probably a little bit too late. What might have been an attractive, boring business to own at a fair price had already received this massive tailwind from the AI spending. And so, you know, there was a risk that had already been swept up in the hype and become massively overvalued based on just these temporary boosts to earnings.

Is that kind of fair to say? That, yeah, I would say that's exactly what I thought. And I did see that backlog double over the course of just a year for what had otherwise been a pretty. slow growing and plain business, at least in more recent years up until that point. And so I assumed that comfort systems would still be the beneficiary of incremental spending on data centers, but I definitely underestimated just how much further the AI CAPEX cycle could go and is still going. And I very much recognize, though, that AI would be a net positive for the business and could boost their earnings power for years because once these data centers are built,

You need routine HVAC maintenance to keep the buildings functioning. So new buildings can become customers for many years. And revenues from HVAC services on those centers tends to be much higher margin than the other type of contracting work that comfort systems does because it's very specialized. You're talking about cooling very, very expensive and advanced computer chips. And so you can see how the rise of AI was becoming a boon for. for comfort systems business in the physical world. But I think we've all been shocked by just how much money the big tech names have been

spending on data center CAPEX. I mean, really, it's unprecedented. Historically asset-like businesses are breaking records for the amount of money invested in a single year. You've got meta, alphabet, Tesla, Amazon, Microsoft, all those Mag7 names investing hugely in AI and then Apple to a lesser extent. And at the time I looked at comfort systems, it wasn't that long after we had this so-called deep-seek moment where it seemed like LLMs could be trained at a fraction of the cost.

But spending has just kept growing, nevertheless. And so even when you identify a lasting positive tailwind, as I think I did, I've very much been humbled at how difficult it is to account for just how asymmetric those impacts can be on a given industry. I mean, data center spending has grown exponentially. And exponential growth is a really hard thing to confidently model because if you're even slightly off, the margin of error in your intrinsic value can just become massive versus underwriting growth in a more stable industry that's more linear in nature.

So I was pretty much wrong by an order of magnitude about just how much comfort systems could benefit from AI CAPEX. I would say it is still an open question of what percentage. of these inflated earnings are actually going to be sustainable for them. And maybe it is a new paradigm shift and these earnings will be more sticky. But this is really true for any cyclical business. You need to have an opinion on where you are in the industry's business cycle and then be aware of what multiple you're paying for that business relative to where it's at in this cycle. So when things are going abnormally well, earnings will rise explosively. And then the PE ratio can actually look

cheap at a time when the stock is actually more expensive. And so if you buy a cyclical business at the top of the cycle, the multiple is going to look cheap on paper because Walshry is not giving the company full credit for what it recognizes as a temporary earnings boost. And then once the cycle turns down and pessimism around the stock bottoms out, then the stock can actually offer the best value despite the PE ratio on paper looking much, much more expensive because the denominator in earnings are really depressed. And so point being the rule of thumb that you'll hear people say when it comes to investing in cyclicals is that when cyclicals are cheap, they're actually expensive. And when they're expensive, they're probably actually cheap. That's right. And the thing that I

found interesting about Comper Systems, at least your original thesis, was kind of the shift just actually in terms of the operating margin. So in the original thesis, the model projected that operating margins would steadily decline over five years to around eight and a half percent from around 10% range when you first looked at it. But today, operating margins have expanded all the way up to 16 and a half percent. And this is kind of the case when you run into some really interesting problems that you just kind of just discussed with cyclicality. You know, look at comfort systems operating margins from 2005 until 2022. And they were a pretty nice range that was quite tight, kind of in like, you know, around 5%. But since 2020, operating margins have skyrocketed to nearly

17% today. So it kind of begs a question, you know, what are the normalized operating margins going to be in the future? Yeah. No, I mean, the margin expansion has been really incredible for a business where it's not like software as a service or manufacturing where you can think of how economies of scale directly translate into more operating leverage. If anything, that's one of the criticisms of this serial acquire model with regional contractors because you can really only grow by acquiring other contracting businesses, and they're very labor intensive. And so it's very one-to-one of, you know, if you want another dollar of earnings, you need to spend a dollar to acquire that. And you're not necessarily getting massive operating leverage because you don't

have these huge fixed costs that are being spread out across a wider and wider revenue base. You have a lot of variable costs and incrementally needing to hire more people, basically, to do more contracting work. So that's what really has made this margin expansion that comfort systems has pulled off all the more incredible, but also all the more hard to believe, at least from my perspective, that it's going to be lasting. And so that's really the other variable that you have to figure out here, right? Not just what percentage of earnings are, let's say, artificially inflated, if any, by perhaps unsustainable data center spending, but also what does the company's profitability look like? What are its margins on the other side of all this AI spending? And that is

obviously still a big unknown, of course. Absolutely. But when you look at the last year, essentially, the improvement margins is just kind of part of the story. It's not the entire story. For the business to really increase by about five times in price, you know, margins aren't the only reason for that. So let's go quarter by quarter here and walk through how things have played out. because it's not often you find a business that can 5X in a single year. So the next simple kind of question to ask would be, how did multiple expansion play a part in things like this? Well, the P.E was somewhere in the mid-30s when the episode came out.

And today it's sitting at about 43 times. Now, that's obviously a really nice multiple expansion, but I don't think that's nearly enough to explain a 5x in share price without a massive earnings growth, which, to be fair, there's been a fairly decent amount of. So with that said, I think we need to look at two other numbers to get a little more context. The first is in revenue growth.

So in 2024, the business did $7 billion in revenue. In 2025, they did $9.1 billion in revenue. And in the last 12 months, they've done $11.2 billion in sales. Since fiscal year, 2024, revenue is compounded at 34%, which is no small feat for a business of this size. Now, when we add the margin expansion and revenue growth together, we get comfort systems net income, which is nearly tripled in the last 12 months versus their 2024 earnings

and is up by almost 10 times from their 2020 earnings number. So when we've talked about volatile earnings, you know, we definitely were not kidding. That's the thing with cyclical businesses. And these aren't results that you see honestly very often, though, in publicly traded companies. It seems like more of what you would expect from a startup where they're doubling revenue every year in their infancy. And yet we're talking about what should be a pretty boring contracting business. And so I think the crazy part with this growth in some sense, too, is that it was fully

telegraphed, at least for part of their revenues. And what that means is to say, you could have seen a lot of this growth coming by just simply keeping tabs on the company's reported customer backlog that we mentioned earlier. In hindsight, it does make the whole trade seem very obvious. But then at the same time, if the AI bubble, if you want to call it that, then that whole backlog could have evaporated overnight. So order backlogs do tell you where the business is going, if everything goes as hoped, but it's also not necessarily contractually guaranteed income either. So there's a big question mark over the likelihood of converting those backlog orders into actual cash flows. So when I think about modeling comfort systems, I clearly underestimated not only

how much the backlog would grow, which is definitely hard to predict, but again, what percentage of that backlog would convert to real sales dollars? And so that was the part I was pretty skeptical, on. And, you know, AI spending has thus far proven far more durable than I would have, and I think many people would have anticipated 12 months ago. But anyways, how about we discuss in detail where all this growth came from? Because it's definitely not evenly distributed. And I would say that this tells you a thing or two about how the AI build out as flowing through comfort systems. The mechanical segment, which has historically been the larger, more traditional HVAC segment, has accelerated its growth to about 40% over the last year, which is really incredible. But the real

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All right. Back to the show. Yeah. So I went back and looked at Comfort Systems percentage of revenues from the electrical segment, and it's moved drastically over the year. So in 2017, it accounted for just 0.4% of revenue, and since then it has risen very, very sharply

to become nearly 29% of revenue. So the thing I found most interesting is that it wasn't one acquisition that just completely transformed this company for the better. You know, we looked at a business recently in QXO, and that's a business that has scaled up to with really only three acquisitions. And in Comfort's case, they have steadily made more and more acquisitions since 2022,

but nothing here seems super, super flashy to me as they've deployed about $319 million over the last year over a handful of kind of these smaller acquisitions. Now, Sean, you mentioned in your episodes that they made an average of about one and a half to two deals per year when you first pitch the business, but in 2025, they really, really stepped up their acquisition pace to round four. And two of them were made after your pitch in Fay and Zifstra and Misenor, electronic. So what are your thoughts on these acquisitions? Yeah, I think the great thing about comfort systems is that they make these acquisitions from a position of strength. They're very

disciplined on price. And in this case, like most of their deals, these acquisitions were funded almost entirely from cash with little need for debt. And so I think both of them look like pretty good deals, but the Fine and Zilstra deal in particular stands out. And so the purchase price is about 10 times operating profits or 0.7 times revenue. So, That is a pretty reasonable price. And I'd say FZ is also strategic for comfort systems and the sense that it adds to comforts portfolio of electrical contractors, which we've mentioned as being this major growth area for the company.

So if anything, I think it signals just how strong demand has continued to be in this area where FZ brings more contractors supporting data center buildouts and also more exposure to the healthcare industry as well, which I think. is generally a good area for comfort to try and diversify into, right? Hospitals have huge HVAC needs and they don't really go out of business or have downturns because people are always sick. So they make for great customers from comfort systems perspective as an HVAC contractor and servicers. So yeah, I like it mostly because comfort is really sticking to what they do best and what's been working. And also, they're not venturing well beyond their circle of competency or making

massive, unprecedented deals. Yeah, I really like the deals as well. They're sticking to the wheelhouse and not trying to go out and, you know, completely reinvent the wheel or go into some sort of adjacent vertical that they don't really have any experience in. So I really commend them on that. One thing I found interesting about comfort systems was the increase in same store sales growth. So, you know, when you look at most serial acquirers, they tend to have organic growth rates kind of in the low single digits. But looking at the numbers for fiscal year 2025, they had about 3.4% in contributions from new acquisitions and an outstanding 26% growth in same store sales driven by demand

in both technology and data center sectors. But this is a double-edged sword. With historical same store sales growth being in kind of that 3% to 4% range, I would say that current growth rate seemed very highly probable to regress to their mean. And again, depending on whether it becomes clear that we've been in an AI spending bubble, you could see more than just a reversion. You might see a revenue decline for several years into the future. But I will say, you know, that doesn't look imminent.

If we look at the mix of acquired versus same store growth on the backlog, this quarter had actually increased by $1.6 billion and $1.4 billion of that was in same store growth. So, Sean, do you have any thoughts on when same store sales growth will normalize? Well, I think this is the big question. And for context for our listeners, right, when we say same store sales growth, we're just referring to the existing businesses they already own and their growth versus any recent acquisitions that they've made. And so when we think about whether all this AI CAPEX spending comes to fruition, and if that is true, then comfort systems remains uniquely positioned to capitalize on that spending. And we can speak more about that.

But that would effectively mean that the stocks run is not entirely unjustified. And if AI is really everything that technologists are promising and more, then conference systems could very well be in the midst of a new growth paradigm for their business that really nobody saw coming at the scale five years ago. And you could say that maybe we started to get some ideas of how much data center spending there would be when we saw how popular chat GPT became at first. But really, a lot of that spending has started to become more visible just in the last 12, maybe 24 months. And then on the other hand, though, if we're to have a stock market crash,

a bunch of AI startups go under, maybe lenders bail on financing data center buildout, maybe Anthropics IPO doesn't go very well this fall. I think that's one that's planned for. Well, then much of comfort systems backlog would evaporate. And we mentioned that earlier. And then the jump in revenue and earnings that they've seen would look like a flash in the pan. So that's really what I struggle here with assessing with comfort systems. Well, let's talk a little bit more here about how AI spending has really translated into this just massive boon for comforts business. So if you look over the last year at all of comfort systems customer categories, there's one that really stands out very obviously over the other. And that is the industrial segment.

So this segment has historically been the largest. But the growth over the last year has been near parabolic at 74%. And this segment alone accounts for Neuron. really three quarters of comfort systems revenue in the first half of 2026. Now, the reason that I highlighted the industrial segment is that technology is included in this segment. And since data centers and chip manufacturing is a big reason that Comper Systems has had this meteoric rise upwards, I definitely think it's very important to highlight it here. Just to give you an idea of how large this part of the business is, 56% of Comfort Systems' year-to-date revenue was just from

technology up from just 30% in 2024. And they also just added another electrical business, Hunt electric, which could add a decent amount of industrial and technology-based business as well. You know, you hear a lot of people talking about betting on electrification as an investing theme, or maybe more so a few years ago. And the thing is, the energy grid very much does need to expand because we are going to have more electric cars in the future and more battery powered things. And so many people have bet on copper to increase in price. And you need more copper in an electrified world without getting into the physics of all of it. And so, and that's been a crowded trade because it is fairly obvious, right? It's just first order

thinking. More electricity demand equals more demand for copper to conduct that electricity. You need a lot of copper wires. And for decades, energy consumption in this country, though, has been pretty flat. But in recent years, we are seeing that change. And per capita energy consumption is finally starting to grow again thanks to AI and data centers. And so comfort systems is more of a second order thinking bet on this. And that's an idea that comes from Howard Marks, who talks a lot about that in investing. And so thinking about the second derivative effects, essentially. And so increased electricity demand leads to more copper demand, but less obviously, it also leads to greater demand for HVAC technicians. And really, I have

no excuses here. I knew that data centers and EVs were dramatically increasing demand for electricity and therefore electrical engineering services as well. And that's because my wife works in renewable energy. So I saw through her work how energy demand had just been exploding. And yet, I didn't connect the dots enough to not underestimate how much this segment could continue to grow and benefit comfort systems after it had already experienced. it's massive growth. Yeah, and I'm a huge admirer and fan of Howard Marks and second order thinking. And I think kind of the key to second order thinking as well is that you need to have

a lot of depth and knowledge in that area to even actually think in the second order, right? Because like you just mentioned here, you know, you, the writing's on the wall for the need for more and more HVAC technicians. But, you know, if you're not thinking about HVAC technicians or how they're going to be utilized over the next few years, well, then chances are you just won't even think about it. So it kind of just kind of goes to a circle of competence thing. But I can really see how you've already thought a lot about the optimism that was already

baked into the business when you first looked at it. You know, when a business's CEO says they're optimistic about the future, it really doesn't mean very much simply because in reality what CEO out there would admit to shareholders that they're pessimistic about the future, you know, maybe Buffett would do that. But most CEOs have to watch their words very carefully because they don't want to upset the market. But on the other side of thing, it kind of dulls you as well to how CEOs who are being being bullish because you feel like you kind of have to take what they're going to say with a

grain of salt. Not to say that comfort systems management is untrustworthy by any means, but just a general view of how I tend to look at management. If you've owned businesses for multiple years, you tend to get kind of accustomed to how they speak and how good you become at reading maybe between the lines a little bit. This is when you kind of get that really, really good edge that you can use because new investors or investors that are maybe just looking at the business for the first time, they just won't have the same feel for how the management speaks. And, you know, if management regularly sandbags or if they're overly optimistic, these things take a lot of time to understand at a deeper level and you kind of only really

develop that feel once you own the business for a certain period of time. I would say comfort systems really does have a high class management team. I mean, the fact that they were so reserved about the opportunities ahead of them probably limited my own optimism and businesses that tend to conservatively underestimate their prospects are actually probably in a stronger position than the companies that have to sell investors on just how great their business model is. And it's one of those things where if you know you're good or in a good position, you know the numbers will eventually show that.

So you're happy to let the numbers do the talking for you. And that's definitely more of comfort systems style. And so I think in my initial thesis, I probably should have sent more time on the data center and chip manufacturing part of the business. and thinking about just how impactful that could be. But now that we're revisiting it, we do have some more time to provide a fresh perspective on the topic. And so if we look at the company's latest presentation, management has discussed large

project bookings in this segment in states like Texas, North Carolina, Indiana. So the data center story is very much alive and well across the U.S. And I've even seen the boom in data centers firsthand living in Virginia, which is really currently the data center capital of the U.S. So again, it does show just how much something can be right in front of your face as an investor and you can still miss it if you're anything like me. But Texas now looks like really the data center hub of the future. It's forecasted to overtake Virginia by 2030 with Texas reportedly using about a fifth of its energy capacity to support data centers today. So it's not a surprise that comfort systems is therefore focusing on Texas

in particular as a growth avenue in the future. And then in terms of chip manufacturing, Texas already leads the U.S. and chip exports. And there are billions of dollars of more government funding and private equity that are being invested in this industry in Texas. So it doesn't look like chip manufacturing is slowing down anytime soon. And that pairs closely with this AI super cycle more broadly. And so in other words, I think Texas is very important to the future of comfort systems business. And that means that any investors looking at comfort systems today, I think you would want

to pay close attention to the local regulatory environment there and the sentiment around data centers, not just in the U.S., but in Texas in particular, because we've seen in many places data center construction and in the impact on the energy grid is very much being protested. And I suspect it will become an increasingly controversial issue in the state of Texas, which could ripple across to affect comfort systems, businesses. So I think this search for more favorable regulatory stances is what has led data center construction out of Virginia to Texas. But again, it's not guaranteed indefinitely that Texas will always be so friendly to new data center build-outs.

Yeah, these are all great points. And I think it really shows us that there are some real legs behind the tailwinds that Kumpur system has. But, you know, it might be a few years before things begin to level off. And to be honest, I think as we made very clear today, we just don't know when that's going to happen. So from what I was able to research, it's really tough to figure out what kind of correlations there are between data centers or chip manufacturing as well as the comfort

system's product offerings that they offer, obviously, from mechanical and electrical segments. It's quite obvious that there is some sort of correlation, but I think it's nearly impossible to determine exactly what that correlation is and how we would actually use that in a context that makes sense for an investing purpose. What we can tell from comfort systems disclosures is that they're willing to look out about a year or so. So their backlog disclosure represents revenue that's expected over the next six to 12 months, but it probably actually underestimates the real number because they also have some shorter term projects inside of the next, say, year that are not included in the backlog.

And since the backlogs continue to swell, obviously that's a good signal that things are getting better. Right. And as we said, management is not crazy aggressive about the guidance that it tends to provide. But they did recently note that things are likely to continue going well for the remainder of 2026. And I definitely believe them when they say that. And so this doesn't tell us where the backlog will necessarily end up.

But I do think it's a pretty good signal that it will be at worst, sustained and at best could continue to increase significantly. Right. And since we own a few hyperscalers in the intrinsic value portfolio, I think we do have some insights into the coming AI buildout that Sean, you kind of already mentioned here. So, you know, for instance, one of our company's Alphabet guided its cap X for 2026 to be in the range of about $200 billion. And management has actually stated that that number's probably going to increase in 2027. Now, we really have no way of knowing whether Alphabet is even a customer of comfort systems. But if we use Alphabet and the hyperscalers as kind of proxies for data centers and chip spending, I think it's really obvious that spending is likely

to continue to increase over the next few years. So I would say the chances are pretty good that comfort systems will continue to benefit from these trends. But again, as we keep coming back, it's just hard to know how long these trends are going to last. Well, it's funny you mentioned that because I was actually just reading earlier today about how the SEC has made it easier for data centers to now sell asset back securities to raise financing. And so basically, the Securities and Exchange Commission has said that a major subset of data center securitizations don't need to have disclosures and investor protections baked in to what similar deals would typically require, such as risk retention, which is a requirement that companies

issuing asset-backed securities retain some of the debt to better align their interests with investors, meaning you have to have some skin in the game. And so regulations are, in other words, are loosening up to a lot. allow for even more money to flow into data center construction. And to me, that feels like a sign of a bubble. But you've also got private market giants like Blackstone, Apollo, Brookfield, and even BlackRock promising to invest up to $500 billion into data center infrastructure alongside Nvidia. And so these are mind-boggling numbers. How does one even fathom $500 billion in spending? So even with everything we've seen in the last year, it's just

hard for me to process that this spending is real and that all of it will manifest as as currently planned. But thus far, my skeptical impulse on AI spending really could not have proven more wrong. So I would say take what I say with a grain of salt. Yeah, I mean, that's right. But to be honest, Sean, I mean, I've looked at quite a few bubbles in the past. And one of the more commonalities that you'll find in that is the ability of government or, you know, leaders or people with lots of capital to make the access to capital even easier to buy more of whatever the asset is, whether that's, you know, tulip bulbs or whatever. So, you know, the fact that the SEC is making it easier and easier to get debt, to buy things to basically help with this data center and

chip manufacturing rollout, I would say that's honestly pretty concerning. And it's something that I would pay very, very close attention to because the fact is where people can find cheap money, money is going to go into those sectors. And obviously the SEC and the U.S. government knows that. So that's probably why they're doing this, is that they know that they want to grow the sector. But the problem is we just don't really know if the sector is actually going to offer an attractive return. So the fact that they're doing that, like, again, I'm pretty concerned. Definitely, definitely well said. How about we shift here, though, and discuss whether comfort has any competitive advantages. And clearly comfort systems is riding a big tailwind that is lifting

entire industries that the company is exposed to. And so in theory, that should attract more competition. And I do think that it inevitably will. But in the meantime, we've already discussed other companies' profit margins are very much trending up into the rate. And that implies that demand is growing fast enough to more than offset any new competitive pressures. And because profit margins have been expanding, we know that this is not a case where comfort systems is out there just trying to bid on any project they can find, even if it comes at a loss, just to pump up their revenue figures in the short term. And that is something you do sometimes see in poorly run real estate and contracting companies. And you can basically sign a bunch of projects that might

make your revenue jump. And that might make some investors happier or unlock bonuses for executives. but if you pay too high of a price for those deals, the company actually becomes less profitable over time, even as revenue is increasing. And again, that's not what we're seeing here. And to make things even better, the electrical contracting business is very much tied to having more longer-term contracts than some other forms of contracting services. So basically every incremental dollar they're earning in this electrical segment is arguably worth more than some of their other business segments because those cash flows are on paper at least contractually more likely to continue for longer. They're more locked in. Yeah, Sean, and I'll just comment there on your point about

projects and bidding process. I have a business that I won't mention by name here, but it's involved in the housing construction industry. And they've unfortunately basically had to pivot somewhat to having to take on some of these lower margin projects just so that they can maintain their revenue numbers and not have this giant decline in revenue. And unfortunately, because of that, their margins have also come down. So this is a business that's, I would say, not even close to the same amount of quality as comfort systems. But, you know, the point being that once the dynamics of bidding change and it becomes harder and harder to actually find suppliers to do the bids, they can actually increase the price of those, of their projects,

which increases margins. So it's just kind of a roundabout way of saying, you know, when you're looking at businesses that are in kind of a competitive bidding process, you do have to take those dynamics into account because it can sometimes be really, really dangerous. Obviously, if demand is low, it tends to be worse for those businesses. But when demand is high like it is right now and obviously like Comper Systems is exposed to, it's a really, really good thing, which helps boost margins. But getting back to kind of competitive advantages here, so whenever I look at a business as competitive advantages, I like to look at whether they are widening or shrinking. So you brought up in your initial pitch that you thought Comfort Systems wasn't necessarily the strongest business in terms

of having a moat. And I agree with you then, actually, and I still do. But the one competitive advantage that you highlighted was that they are highly specialized and they have this kind of geographic advantage that helps them stay sticky with their current customer base. Now, one additional advantage that I think Comfort Systems has is developing the ability to work on just larger or larger projects. So at the end of 2025, they had about $24 billion in aggregate contract value spread across nearly 8,500 projects. And one project was reportedly worth about $470 million. So just massive in scale. Now, if you're looking at that from the point of view, let's say a local or even a regional

competitor, if they don't have a balance sheet that Comfort Systems has, they're just not going to be able to bid on a project anywhere close to that size. So if we use Hamilton-Helmer's framework, I would consider this to be kind of a corner resource. Since competitors don't have access to the same balance sheet, they simply cannot participate in those same contracts that comfort systems can easily pursue. This is for sure becoming a much more powerful advantage for them as it begin working on larger and larger projects and as the financial scale of those projects grows. Let's take a quick break and hear from today's sponsors.

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Yeah, well, that's the beauty of a good business, right? They surprise you consistently to the upside. So I'd like to just briefly cover how this advantage really works

because when I first read it, it was kind of confusing. So they have something called surety bonding capacity, which allows them to secure these larger projects. Now, when I first read that, I was thinking,

what on earth is surety bonding? So you can think of it kind of like this. When a potential customer of comfort systems wants a project to be completed, they need to know that the project will be guaranteed to be completed. If the company, let's say messes up, let's say they walk off the job, or if the company, worst case scenario, goes bankrupt during the building process, well, then the project is going to be heavily delayed or it might even be canceled completely and no customer is obviously going to want that.

So you can think of surety bonding as a type of insurance policy against that risk. A company like comfort systems makes a promise to their customer that they're going to finish the job. And if they don't, well, then they have to pay for the job to be completed. And to date, comfort systems doesn't have any losses, nor are they expecting any in the future. It's both a financial advantage, but also it's an intangible asset to having a trusted reputation here. And Berkshire Hathaway is probably the best example of how having balance sheet advantages and a high level of trust can uniquely position them to capitalize on certain deals and lead to excess returns on capital and a lot of value generation for shareholders.

And so Berkshire, for example, made a killing, helping bail out Goldman Sachs during the great financial crisis. And in part, that was because they had the cash to do it. And they were, Buffett in particular was seen as really a trusted partner to work with. And going back to comfort systems, I think the fascinating part about surety bonding is that it comes from surety companies, not comfort systems itself. So these companies offer to backstop the bids provided by companies like comfort systems, basically. And so in order to back a company, they're going to have a few different criteria that they focus on. And they'll look at things like how much equity that company has and how much cash it has in the bank. And they'll also look at

how long the company has been around for and whether they have a track record of completing larger projects. So again, comfort systems strong balance sheet and track record very much give them a step up against the competition in securing surety bonds at a reasonable price. Yeah. So essentially the idea is that some small, you know, two truck HVAT company in a tiny town, which is simply never get bonded for a $100 million project. As a contractor scales its operations, they also build legitimacy and unlock more opportunities effectively.

Yeah, exactly. And so no surety company wants to take a risk betting on a smaller operation if they don't have to. And that creates something of a barrier to entry. But since comfort systems obviously has the capacity to see these projects through, unlike really most of its peers, they can get bonded for increasingly large jobs pretty easily. That allows them to, as we've seen, pretty uniquely be able to scale their margins as the business has grown to an extent that goes farther than probably what you would have expected a regular contracting business to be able to accomplish, However, if we're being honest, most contractors are not hugely profitable businesses. That's right. So getting back to that original question of whether their mode is shrinking or expanding,

I think when we're looking at this kind of quarter resource advantage is probably widening. But, you know, if I'm looking at other competitive advantages, I'm not really sure there's one that really jumps out to me. I've seen some other investors say that Cyril acquires just in general that succeed have processing power. And so for those that are unfamiliar with the idea, processing power is defined as when a business whose organization and activity set enables lower costs and or superior products that can only be matched by an extended commitment. Basically, it just means that processing power has to be built out over time. And I think that comfort systems business model has been compounding overtime, with them being

publicly traded now for over 30 years, not to mention that the original business was actually founded way back in 1917. So one of the more compelling aspects of the company structure, and I know, Sean, you originally commented on this was like how it's kind of like Berkshire in the fact that they're both decentralized business models. And this means that corporate headquarters, you know, isn't necessarily calling the shots for every single one of its subsidiaries. They end up delegating a lot of responsibility to some of the lower level managements who are a lot more closer to the end customers and therefore better understand their customers wants and needs. Another part of the

business's process that I think has been improving is their move towards prefabrication and modular construction. This allows them to build parts of the project off-site, which helps improve their ability to finish projects on increasingly more and more complex projects. Yeah, I think speaking about competitive advantages leads naturally to another area of analysis that we spent some time analyzing with comfort systems, and that is capital efficiency. And specifically, I looked at returns on incrementally invested capital between 2015 and 2014. And the numbers are really good, over 25 percent returns to. put that simply, what that means is that the business was doing an exceptional job at Allocan

Capital. And given how well the business has done recently, I'm going to guess that their incremental returns are even higher and will continue to be so for some time. And that's really not something you see every day. For most businesses, we talked about this earlier, they begin to run out of attractive investment opportunities as they scale and incremental returns fall off. But comfort systems has managed to prevent that. And similar, to how companies like Alphabet and Amazon have managed to use profits from their core business to resist the law of large numbers and drive growth into even more profitable areas like cloud computing, I wouldn't put comfort systems in the same vein as those two companies, but they certainly

aren't doing so bad either. That's right. So kind of getting back to your point there, you talked about returns on incremental investment capital. That was kind of a metric that was heavily popularized by John Huber. And I think he's done an incredible job of just kind of making it understandable and easy to digest. So I was really interested in actually seeing how this number has moved just since 2024, which was the last year that you ended up using for your calculation.

So what I ended up doing was just basically extending out your initial analysis. So instead of making 2024 the end period, I use a trailing 12 months number for net income and ended in the second quarter of 2026. Then I just added any additional incremental invested capital. And with that, I got a number that was very impressive. because their incremental ROIC is more than doubled to nearly 60%. And due to this increase, the compounding rate of the business has also increased up to about 39%. This is something I think is a great exercise because it shows that they're actually

allocating capital even better and the market is currently rewarding shareholders because of it. Yeah, it is clear that they've been doing an exceptional job on the capital allocation front with the usual caveat that I think we've discussed at length today being that much of the organic growth appears to be part of a tailwind that I don't think will last. forever. I feel pretty confident saying that. And so when I first pitch comfort systems, they were averaging somewhere around one and a half to two deals per year. And since the start of 2025, they've completed six deals across their mechanical and electrical segments. And so those six deals had a combined purchase price of over $540 million. So they are deploying an unusual

amount of capital, I would say, compared to what they've done in years past. And again, the big question is whether this is a new normal for them or if these opportunities are going to be fast depleted. Yeah, and since I like serial acquires, I tend to get downright giddy when a business is actually increasing its acquisition pace. But it's also important to really kind of temporary expectations. Most businesses tend to carry a pace that they're comfortable with, and that depends on a few factors, such as the size of their M&A team, as well as the size of their M&A pipeline. Another way that I like to assess capital allocation of serial acquires is to really understand their acquisition criteria. You've looked at

plenty of businesses, Sean. And I know that if a company makes an acquisition that doesn't have the right synergies or if they pay the wrong price for it, it can really spell a company's doom or at least cause maybe some unwanted problems in the future. We saw that with one of our portfolio holdings, Netflix. They passed up a pretty massive opportunity in buying Paramount Skydance. And I was really excited about Netflix getting all that new IP like Superman. And I'm glad though that they had the willpower to restrain themselves from making a really, splashy and sexy deal. I think that would have been very tempting, but it didn't fall within their financial discipline constraints. And so comfort systems is not going to be doing any deals

that generate those kind of headlines. But the point is really about having a disciplined criteria that you base your acquisitions around. Right. So to better understand their acquisition criteria, I just went straight to their source and I tried to use their filings to see what they kind of spelled out for investors. And on this, I kind of found myself being pretty disappointed. So when you look at a business, let's say, like perimeter solutions or Lyftgo, they do a really, really good job of spelling out exactly what they're looking for in potential acquisitions. But when it came to comfort systems, I felt like I really had no idea what they were looking for, at least in terms of their own disclosures.

Now, this doesn't necessarily mean the company is putting up a giant red flag. It just means that perhaps they don't want to attract any potential copycats and give them the blueprint to success, which obviously would end up harming comfort systems over the long term. So the next best thing to look at is some of their more recent acquisitions and then try to back out some of the numbers from there. Yeah, so how far back into their acquisition history did you look? Yeah, I didn't go too far. I just wanted to see the last six deals that they've done. Now, luckily for us, they do disclose a decent amount of data, including the purchase price,

but they don't always disclose the revenue of these acquisitions. One thing I do appreciate before I attempt to look at the multiples they pay is that they are using notes to sellers as part of their acquisition payment. Now, I like this because it means that comfort systems doesn't actually have to front the entire purchase price itself. So for five of these acquisitions, we actually receive the backlog, which also gives us some really good insights into the future revenue generation of these businesses. We know from Comfort Systems disclosure that they expect to recognize about 75% of the backlog as revenue over the next 12 months. So knowing this, I created a table to project future revenue based on the backlog. Then I applied Comfort Systems' own margins to its mechanical and electrical segments, estimate future operating earnings. This gives us a directionally correct view of what they're paying for in these businesses.

I love doing a little reverse engineering with serial acquires, huh? That's right. Sometimes that's the only way you can do it. So I think, you know, in order to sometimes understand these businesses, you have to be willing to do the work that no one else is doing. And hopefully that's some of the hard work that nobody else is doing. So doing that work, I got numbers that were actually pretty good. You know, the average multiple was around nine times operating earnings.

I found this interesting because usually when I look at zero choirs, this multiple seems a little bit high to me, not really high, but maybe a little higher than what I usually see. But you also just have to consider how good comfort systems organic growth has been. So in that case, I'm okay with them paying a little bit higher if they think that they're going to continue to get some organic growth. If you're going to get zero organic growth, then obviously you want to pay an even cheaper multiple. But I will say, to be honest, I'm kind of torn because over the long term, what kind of organic growth can you explain? You know, 26% organic growth from an explosion in data center spending is completely unsustainable over the long term. Now, one final area that I wanted to highlight is a small hiccup they had in their latest

acquisition, which was called Summit. So if we look at the contingent earnout obligations for fiscal year 2025, they actually decreased by 62% caused by a lower earnout expense for Summit. They also wrote, this decrease was primarily caused by lower earnout expenses for Summit, driven by larger changes in their forecast and results in the prior year. and as a result of them reaching their maximum cumulative earnout target. So perhaps summit when purchase was maybe a little too bullish on next year's numbers, but generally you don't like seeing this.

Given how well everything has gone for the business, I'm kind of nitpicking here, but I just thought it was worth highlighting here. And just for the listeners, earnouts are like bonuses for hitting performance targets that the acquiring company pays to the target, the company being acquired. And so if these decrease,

It seems like that might be a good thing because costs are declining for comfort systems. It's actually more of a bad thing because it means the new business they acquired is underperforming expectations. Exactly. Another area that you pointed out that was a major strength for comfort systems and your original analysis was their debt profile. So around the time that you were researching them, they had about $131 million in debt, but also had $860 million in cash on the balance sheet.

On top of that, the business had just generated over $700 million in operating cash flow over the last nine months. So, you know, it's pretty obvious the business was incredibly safe in terms of its debt profile. But given the fact that they've spent nearly $540 million on acquisitions over the last year and a half, I thought it would be a good idea to maybe revisit their debt and see how things have played out since then. Yeah, to the fact that this business has negative net debt was a real positive for me. And not to be too cliche, but Buffett's first role of investing is not to lose money. And I say that kind of tongue and cheek, but if you invest in a business that goes bankrupt, you can lose everything as an equity investor. Your entire position just goes to zero.

So to some extent, good investing is about minimizing catastrophic mistakes as much as it is about finding big winners. And with comfort systems, you know they have a lot of financial leeway. There is a margin of safety built into the business there. And I would say that bankers are probably falling over themselves to lend to a company like comfort systems was such a high quality balance sheet because you know that they're such a good credit. Yeah, bankers can get kind of pushy when they see a good opportunity to make some money. But I don't want to dunk on bankers any more than that. So you'll be happy to know that comfort systems actually decreases long-term debt since you looked at them. So as of Q2 of 2026, they currently have $1.8 billion in cash and only $53 million

in long-term debt. Last summer, they amended their credit facility to increase borrowing capacity up to about $1.1 billion. But from what I can tell, this is completely undrawn. So all the debt that they're currently carrying is actually from the notes to former owners as part of their acquisition strategy. And these notes carry really, really good interest rates of just about 4 to 5.5%. That doesn't really surprise me. I mean, given how much money this business has made and how its cash position has swelled,

it does seem obvious that they wouldn't really need liquidity. But the only real reason I can see that they would need to reach into that. banked at it is if they found a monster acquisition target with a multi-billion dollar price tag. But that doesn't really fit into their wheelhouse and making these small regional acquisitions of contracting businesses. So I wouldn't expect it, but you can't completely rule it out, I guess. That's right. Now, there really isn't too much more to say when it comes to debt simply because the business just doesn't have that much. The business simply has a beautiful balance sheet as it's well below its debt covenants and is very, very well protected by both equity and cash that it has on

its balance sheet. That was true. The Munger would say, I had nothing to add. With that said, how about we take a closer look at management then? And when I first looked at comfort systems, Brian Lane was their CEO and president. And he had clearly done a very good job of setting the business up for success. And so interestingly, Lane gave up the title of president in December 2025 to Trent McKenna, who previously had served as the business's chief operating officer, as well as serving some other roles since he joined the company all the way back in 2004. Yeah, so this seems like Brian Lane has perhaps found his successor. You know, he's now about 69 years old, and I don't really blame him for wanting to maybe

give up some responsibilities to a possible replacement for him in the future. So the title of president carries a lot of responsibility, and this is probably a good test for Trent McKenna to see if he's the right guy to continue leading this business into the future. Since I think that culture is just an heavily, heavily underrated part of a company's competitive advantage, I'm always happy to see businesses that internally promote. So I actually really like this assignment for Trent. It's hard to really give him an honest review yet because he's been in the position for such a relatively short period of time. So all we can really do is look at some of the operating metrics since he's been there. And I would say so far, they're very good.

but to be fair, I'd probably attribute more of that to Brian Lane, their current CEO. It feels like a move in the right direction. And given how long Brian Lane has surrounded himself with this current version of the management team, I can only guess they've also made a large contribution as to why this business has had so much success. And I think another part of the business I highly respect has been just how stable the leadership team has been. Right. The stability in leadership is always kind of a positive. because I think it denotes that a business does have this kind of good culture.

But unfortunately, I think the market realizes that too, which is why I think stable management of a good company tends to carry a premium price tag on the business. So you probably won't be surprised that this business currently trades on about 31 times operating earnings, which is very high. But, you know, given the recent performance, it's probably not all that surprising. Another area worth exploring in regards to management is in insider ownership. So on this end, the numbers don't exactly scream alignment, but I think they're adequate enough. So since 2024, insider ownership has been on a slow decline going from about

1.8% in 2024 down to about 1.2% currently. Considering one of the business's founders, William George, who is the CFO is still on the team, I would have liked to see maybe a little higher insider ownership, but it's definitely not a game breaker for me. I'm with you on that. And how about we discuss maybe the incentive plan in more detail then? Because in my initial analysis, I outlined how management compensation at all levels is tied to earnings per share growth and free cash flow. And so that's actually one of the better incentive plans we've probably ever covered on this show where there's just a real degree of alignment that helps shareholders feel like they will be enriched alongside management.

Yeah, I absolutely love this incentive plan. It's probably one of the better ones that I've ever had the privilege of analyzing. Another area I like about this business is that the base salaries all seem to be very decent for a company with a market cap of $60 billion. So all executives are making between $300,000 and a million dollars. Now, kind of getting back to your point there on the incentives, they're basically just sticking with the exact same thing, which I think is brilliant. They're sticking with earnings per share as well as this kind of free cash flow incentive.

So the other thing that I really, really respect for them is that they give targets for earnings per share as well as for free cash flow. Most businesses that I've come across don't actually tell you what those targets are publicly. I assume they just keep them internally so management knows what they need to hit, but for whatever reason, they don't tend to tell shareholders. But in Comfort Systems case, they actually do disclose these numbers. So listen to this. EPS target in 2023 was about $5.50 and in 2025, it's up to $15.75. The free cash flow target over the same period went from about $204 million to $302 million. Now, to be fair, the actual numbers are quite a bit

higher. So I think it's a target that they have very high conviction in that management can hit. nonetheless, I feel that the simple act of hitting these targets will create a lot of shareholder value. And obviously, if they exceed them, which they have by a country mile so far, then shareholders are obviously going to be even happier. Now, just to give you an idea of how well management is done, they've received the full 200% of their target, which is the maximum they're allowed to for each of the past three years.

It is pretty safe to say management is top notch here. And the proof is right there in the numbers. Executives have earned very nice performance bonuses, but they've been well deserved. They've also earned shareholders a pretty nice rate of return, right, with shares compounding at over 100% annually since 2023. I completely agree. So the only kind of yellow flag I found here is in the declining ownership rates. You know, I think this is a signal that management is maybe converting their options into cash

upon investing rather than holding them. But, you know, I guess I'm okay with this for the most part. I obviously prefer that they keep insider ownership above 1%. So there is a risk. get drops below that over the next few years if insiders keep selling. But, you know, if you look at this from a strategic standpoint, management might just think that the timing right now is probably when they will get most of the cash from their vested options. Perhaps maybe when this data center chip manufacturing cycle ends and shares become more reasonably priced, they'll be more likely to

them, but we obviously won't know until that actually happens. So when we first looked at the company, our co-host, Daniel, has some really great questions about the risk inherent to this business. And so I think we looked at the risk in the business cycle simply because this was to some extent, a company that was so closely correlated with the construction cycle more broadly across the US, and that was and has been a pretty volatile industry. But I made the point that Comference Systems is not only reliant on new builds. So even if new builds are in a rut, about 40% of its business comes from existing building. things like renovations,

expansions, maintenance and repairs. And in an economic slowdown, if there's a cash crunch, some of that stuff can be deferred, but it can only be deferred for so long. And so that sort of serves as a natural hedge for the business. Right.

And you can actually argue that the company has further diversified, which I think is another edge for that business. So now that they have the multiple segments and are working more on technology, which obviously has its own cycles, they're somewhat more protected. But again, Once that cycle turns, I can't see how this business maintains its current momentum.

And you can probably argue that they're trading more traditional construction-related cyclicality for more exposure to just data center or chip manufacturing cyclicality. So the other risk that I'd point out here is more of an inherent risk in this business that I personally lost money on. And that's just looking at a business that publishes their backlogs and trying to extrapolate future numbers from them. So I've had two very small businesses that had backlogs that I felt were very large for their market cap size. And the fascinating part was that I ended up actually doing well in those

bets for a very short period of time, but then the longer I own the business, I started running into some issues. And you know, some of those issues might be that the projects take longer than you think. So the revenue that's recognized originally in a year, maybe that takes 18 months or maybe that takes two years. Or you run into the problem where they're working on just a bunch of different projects and they have deadlines that come out immediately after they report their earnings and therefore they don't get that revenue until the following quarter. So my experience with businesses with growing backlogs, to be honest, hasn't been great. But I will say, you know, looking at this business's revenue, earnings per share and free cash flow,

it's absolutely outstanding how steady their growth has been over the last few years. The only KPI that seems to be a little bit more volatile from quarter to quarter is in their free cash flow number. Well, it is, after all, a business that constructs things. And so therefore, you're going to have some fluctuations quarterly in working capital needs. And yeah, that shows up in free cash flows, but it doesn't bother me hugely. I think I'm okay with the lumpy cash flows in the short term because over the long term, it does seem to balance out.

And since free cash flow has compounded at 22% a year for the last two decades, I have a lot of faith that they'll manage these working capital needs pretty well. Well, I think it's a time of the episode where we look at the intrinsic value of comfort systems. So since we're revisiting the business, usually we wouldn't see much of a shift in our model. but I actually had to make some pretty big adjustments to the model given the five times and share price appreciation that we've seen so far. Yeah, yeah. I mean, the original model was built using 2024 numbers.

And while a lot has changed in that time in the world of AI, so it's definitely due for an update. And just to mention it, you can go into the show notes for this episode below and click to see the model that we're referencing and that's available for free. Exactly. So I went through and rebuilt the model using the trailing 12 months numbers from the first half for 2026. Now, outside of the revenue-based number changing substantially, the other part of the model that needed adjustment was obviously on the margins. So the original model had operating margins

gently declining from about 10.5%. Now, instead of the margins declining, the business has actually scaled dramatically and operating margins are now running at about 16.5%. So we have to account for that in the model as well. But if I'm being honest here, modeling this business, it's pretty tough. And I think it might actually be even tougher now than when you first modeled it, Sean, simply because I feel the business is now running somewhere around the top of the cycle. And to be quite honest, I'd be lying if I said I had any insights on how much longer this AI cycle is going to last. I'm right there with you on that.

I'd prove to be pretty premature in saying that, though. But how did you think about the base case when you tried to model out comfort systems fair value? So I assume that revenue continues to compound at about 13% per year on average, reflecting some slowdown, but also a new reality where comfort systems has more opportunity for growth thanks to AI than it did it over the last few years. Now, with the assumptions that the company's valuation multiple comes down, once it's clear we've reached the top of the AI spending cycle, I also try to approximately account for this by using an exit multiple that is about two-thirds of the company's current valuation.

Evidently, these are all very subjective inputs where you're trying to be directly correct, even if you're inevitably going to be precisely wrong. So, you know, with all these assumptions, I get a fair value of about $1,600 for Comfort Systems, which is a small discount to the current stock price. And this is before applying any margins of safety to determine what might actually be an attractive entry price. The takeaway to me is that Comfort Systems has legitimately seen its intrinsic value increased dramatically, thanks to some external factors and their savviness in capitalizing

on those opportunities. And so it really is a great business that after this episode, I would be even more excited to own than when we first looked at it. But the range of outcomes here are really, really wide. And so nobody knows where this AI super sick will lead us. And yet it's become so critical to the intrinsic value of this business, especially at this valuation. And I just couldn't get comfortable owning it at a price that didn't more significantly hedge some of the downside risks, which I don't think are. being priced in fully today. I don't think hundreds of billions of dollars are going to be spent indefinitely on AI CAPEX and infrastructure. And so I'm sort of in the same place as last time

where I'm thinking the business is really good and has continued to exceed my expectations. But buying at these prices feels like really a momentum bet on AI spending, being able to continue as it has. And fortunately, for Comfort Systems, in the last year, it has very much accelerated But now we're another year end of the cycle and we're at a five times higher stock price. And it would just feel really speculative to buy in at these prices. It would feel like chasing after an opportunity that has already gone by. And so honestly, just recognizing my own biases too, I have a lot of FOMO from this one. And I think that clouds my thinking.

And so rather than potentially doubling down and making a catastrophic mistake by chasing after comfort systems at five times the price from when I first looked at it, I think, feel like it is probably better to just remain on the sidelines and take a more cautious approach and see where things balance out in the coming years and maybe look for a moment where the sentiment sharply turns against the business and the market is discounting perhaps the quality of the new data center revenue streams that it will continue to get as those facilities need to be maintained and that might create a more attractive buying opportunity. Then on the flip side, where a sentiment is sort of at an extreme in the other direction. But who knows if or when that

will happen. So as painful as it is, I do think the right decision for us is to continue to stay on the sidelines here and recognize that it's okay that this one got away from us. But we don't have to chase it and there are always going to be more opportunities. Yeah, absolutely. I completely agree with you, Sean. And it's funny, when I was going through this episode, I felt like, oh, I don't want to bash Sean too much saying that he made a mistake in skipping this one. But to be honest, when I looked at it, the more and more I understood the business, the more I actually think he made completely the right decision and not buying it, because simply put, there's just so many unknowns in this business. And, you know, maybe if we were out

there building AI data centers or funding AI data centers and had some idea of how long this KAPX cycle is going to last for, well, maybe we would have some insights that would be like, yeah, this thing's going to last for another 10 years, in which case, to be honest, comfort systems probably would be really, really cheap right now. But again, I have zero conviction and I think Sean also has zero conviction in making that call. And therefore, I think the right call also is to just skip the business. So with that said, that's all we have for you today, folks. But as usual, I'd like to leave you with a quote. And this one is by William Thorndyke. The heads of many companies are not skilled in capital allocation. Their inadequacy is not surprising.

Most bosses rise to the top because they have excelled in areas such as marketing, production, engineering, administration, or sometimes institutional politics. Once they become CEOs, they must now make capital allocation decisions. Now, this is just a super powerful quote because I completely agree with it. The rare company gets a CEO who can excel not only at the job of running a business day today, but also in allocating capital well. And I think when it comes to comfort systems, it's very obvious that Brian Lane has excelled at both, which is why it's been such a big winner. And with that, that's all for today. And I'll see you next time. Thanks for listening to TIP. Follow the investors podcast on your favorite podcast app and visit the investorspodcast.com for show

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