Yet Another Value Podcast - Roy Swisa on $DJCO

Episode Date: March 3, 2026

Roy Swisa talks about Daily Journal (DJCO) and the evolving thesis behind its valuation. Roy shares how independent research into Journal Technologies’ court case management systems led to consulting work with the company. They examine the sum-of-the-parts framework, the sizable equity portfolio, and incentives post-Charlie Munger. The discussion also explores vertical software durability, regulatory moats, primary research methods, expert networks, and AI’s impact on niche SaaS businesses. Roy outlines how compliance, proprietary data, and procurement dynamics shape competitive positioning in local government markets. Roy's Substack: https://substack.com/@valuetheelephant?Roy's Linkedin: https://www.linkedin.com/in/rswisa/_________________________________________________________[00:00:00] Introduction to Roy Swisa[00:03:02] Roy’s Daily Journal consulting role[00:03:51] Overview of Daily Journal structure[00:06:13] Vertical software durability thesis[00:12:41] Sum-of-the-parts valuation debate[00:14:02] Equity portfolio and capital allocation[00:25:58] Incentives and balance sheet concerns[00:35:14] Primary research methodology explained[00:42:26] Expert networks versus direct sourcing[00:45:44] SaaS disruption and AI risks[00:48:37] Compliance and proprietary data moats[00:55:57] Where to follow RoyLinks:Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

You're about to listen to the yet another value podcast with your host, me, Andrew Walker. Today I have Roy's on. Roy is, we're going to talk about Daily Journal. We're going to talk about a little bit about expert interviews. We're going to talk about AI. We're going to talk about all sorts of stuff. Roy, you know, I'll let him explain it to you in the podcast itself. But he just actually, he served as a little bit of a consultant for Daily Journal for the past few months.

So we're recording kind of as his consultancy comes to the end. But, you know, I think you're really going to find a lot of his thoughts on the primary research, that everything. I think you're going to find it interesting. particularly at the back end when we start talking about using expert interviews, expert calls on network versus off now, all sorts of stuff. So I think you're going to enjoy it. Roy is great.

If you want to follow up with him, I know there's a lot of daily journal heads out there. If you want to follow up with him, he linked to his LinkedIn and substack will be in the show notes so you can just like kind of follow up with him there. We're going to get there in one second. But first, word from our sponsors. This podcast is sponsored by me. Okay, okay. It's sponsored by Alphacinzance, but it's also sponsored by me.

I'm going to be doing a live webinar with AlphaSense's. director of TMT Research, Michelle Brophy on March 10th at 1 p.m. Eastern. We're going to be talking about all things media. You know, if you're a long time follower of this podcast, you're a longtime follower of the blog, you know, I love media. I love telecom. I love communication. I love it all. So we're going to be talking about all things media. I am recording this advertisement on February 27th. We just had within the past 24 hours, Paramount Outbid Netflix for Warner Brothers. Netflix backs off. I bet you were going to be talking about how that reshapes the media landscape a little bit. Disney's got a new CEO. Sports rights are always in the news. Video games,

remember them? Those are pretty interesting. That's evolving quickly. What about AI content? We're going to be talking about all of it. And the best part is, it's a live webinar. So if you come join, and I'd love for you to come join and listen live, we're going to be taking questions live for listeners. So you can hear me ramble like a madman in real time if you ask the right question. So if you're interested, there'll be a link in the show notes or you know what? Go to get another value blog.com. You can find it there. Go to alpha dash sense.com slash yavp. that's alpha dash sense.com slash yavp. I did that off the cuff of my head.

That's how much I know the referral link. So go there. You can sign up, all that sort of stuff. We'd love to have you, March 10th, 1 p.m. Eastern. And of course, there'll be a replay if you want to catch it on replay instead. See you soon. All right. Hello, and welcome to yet another value podcast.

I'm your host, Andrew Walker. And with me today, I'm happy to have on for the first time. Roy, how's it going? I'm super excited. I know you are because we were talking before. I know you are. You got a new mic and everything. Look, before we can start, really excited for the podcast today.

I've got some really fun questions I want to talk to you about. But before we get started, I have two disclaimers. First, my general disclaimer, nothing on this podcast is investing advice. Please see the full disclaimer at the end of the show notes, or there's always the legal disclaimer in the show notes if you want to hear that. And then we have a second disclaimer. Roy, we're going to talk about Daily Journal. The ticker there is DJCO.

Longtime Buffettmonger fans will very much know about the company, but I think you have an added disclaimer on the company that I think is also going to speak to the quality of the podcast to come. So I'll just kind of toss it over to you. So I was doing a research about the company, and it's got me a consulting gig with them, and I was involved with the latest thing with and the showholder meeting that happened this week.

Perfect, perfect. I think people can review the filings, and I think they will be very clear there. But obviously, you were doing great work. I think we had a podcast scheduled, and then you said, hey, I've got a consulting gig. I don't think I can do this right when I'm in the middle of this. So that's why we're talking out.

Let's dive into it. You know, again, long time Buffettmonger fans will know about Daily Journal, but I don't know if they'll know, you know, I've looked at it a few times over the years. It has evolves a little bit. Not everyone's a Buffettmonger fan anymore. Some of the youngans might not have any clue. So why don't we just to start with a quick description of what Dilley Journal is and why they're so interesting.

So I will say I didn't even know what it is. And kind of like how I got into that. I was working with the lifespan over the summer. I used portfolio. And I was like, that's an interesting name. That's an interesting market cap. And very interesting, I will say, EV. But to the story, what it is, it's actually a tree-led business.

So they have journal technology, which is a called case management system. It's the thing that grow. It's a thing that is interesting, I will say. They have a legacy business, which, which is the journal, as you can imagine, like journal for, I will say, legal paper. If in the state of California, Arizona, you probably know that. And the third leg, which I think that this is kind of like, will remind you a different company that related to Charlie Munger.

It's a portfolio business. And this portfolio is is about $500 million. Of course, giving you not an accurate numbers, the idea is to have like an idea. I think it's like $493 right now. But like from a 600 cap when we start our discussion, so you can have an understanding of like, oh, wow, this is a really interesting business, the way that they at least were traded and now are. Yep.

So great description. And I think the thing that excites me to talk about them today is, A, you've got the old, you know, Trulleymonger, unfortunately, RIP, and my respect for him grows every year, I guess, as I get older. You know, I sometimes write this stripedmonger thing where I'll say, hey, something he said that in my 20s, I thought it sounded silly. And my 30s, I'm like, God, damn, this is the smartest guy in history. But, you know, you've got the legacy piece.

You've got the portfolio piece. I think you've got an interesting question around those. And then on the journal, like, kind of, it is a software company, right? It is a vertical software company. So I think you get interesting questions on the SaaS side. So I want to talk about all that in our discussion. But let me start here. You know, I think the reason you thought about this, the reason we wanted to do this podcast,

everything, is you thought this was an interesting opportunity. So I'll just pause here to say, you know, the market is a competitive place. What are you seeing that the market is missing when you say, hey, DJCO is worthy of my time. It's worth it. It's worth going and doing so much work that they reach out to me about a consulting shop. It's worth coming on the podcast. What are you seeing that the market's missing? I think that what's kind of like super interesting and especially today and give you like context of this week,

why today is super interesting, anthropopal skilling or annihilating sector by sector. And the more niche you go, the more vertical you go, the more, I will say, regulatory, hairy, scary it is, and the way I think it's more protected. And when you go to places that it's really evolved with the heart of the business, and the business cannot change it so quickly.

Think about it like a heart transplant. It's exactly the businesses that I think, we need to own in general, because they will be a future components, and it's really hard to switch from them. And I think that the JTI, General Technologies, is one of them. And they have all these characteristics around it, and we can go deep around it. Like, the sector is specific, and then they in particular.

So we are investors. We allocate money, but I think that the better way to look into that, we are time allocators. because we don't have the whole time in the world. We can do our research, and, you know, it's not always translate to, I would say, monetary gains. And I think the one that do it correctly are the one to know how to monetize their research in the best way. Can I pause you? Can I pause you there for one second?

I think one of the most unfair things about investing is you can spend hundreds of hours on an investment. And if you were wrong, and it doesn't matter if you're wrong for, you know, the wrong reasons, like you just completely miss something or, I mean, I know people who forgot to, who put the wrong share count in Excel. It was like, this is a screaming by. And then I reviewed their model. I was like, dude, you know, if you use the right share count, you're dead. Or you were wrong because a meteor literally comes and blows the building up. Like, it doesn't matter. You can spend hundreds of hours on research. And if you are wrong, you got negative return in your time. And I'm sure there are other businesses like that, but it's really hard to think of another

business where you can be like, I did all this work. I worked so hard. and I lost $5 billion on return on investment, you know? Wow, no, that's truly this. And I think that for any analyst, when you communicate at least to your PM, I quite even with yourself, you always need to ask yourself, does it work in my time, does this next hour, does this half hour, does this week of work, can it go quickly? So on the first look, when I looked into that, I was like, wait a second. And it was summer 2025.

And I saw this massive portfolio. And the way that I saw that it was like the downside is super like high. So it doesn't make sense in English. I'll repeat on that. The flow is high. Okay. The flow is really high. And you have a software business that is transforming from service oriented to a product oriented.

And we saw that in the past. And we saw that when this inflection point is hitting, at least a year or, I would say, a few business cycles later, because it really depends on how you look into the business. As not all software companies are the same. The margin go up, the earnings go up, and of course, the free cash flow go up. And I was like, wait a second. Let's look into these businesses. And I had the same lens on Celer Bright. Before then, I was like, it's almost the same trick.

highly regulated environment switching the business model as in the past journal technologies and I would say it was not cool when I read it I was like what's going on here the clients used to pay them when they were happy have you heard about that pay me when you are satisfied

I never heard about that as well I was like this is no way to make business this is not a way to be compensated you have zero alignment of interest I don't even know how it could be exist but they brought this new CEO, Stephen Miles Jones, and I will not use the word swamp, but it was really hard marsh land to move in.

You need to clean a lot of things. You need to remove this company from service-oriented to this product, and you start to see certain sign points. And I was very skeptical. So over the summer, that's what I read. That's what I saw, like, we are moving, we are changing. So a few things that kind of like popped to my mind on, I will say, the initial research, okay, he said that they're changing, but let's find evidence that are they really changing.

And give you a little more context. I used to be a data scientist. I can program. I can use AI. I can build, I will say, tools that I think others can imagine just to build. But I'm a one-man show. I need to be very lean, but accurate. And what's so nice about this business is that the RFPs, which is the requestful proposal

for all these court cases, management system, and prosecutors are public. You can access to them. But what is good? They'll siloed. Each state has their own. So I was able to tap to all of that using AI. And then I downloaded it. And I started to see, okay, why they win, why they lose?

and let's see if the criteria and the way that they manage the like processes of getting better. And then I found it. I saw Orange County and I was like, wait a second. They have milestones. They start to have, I'll say, project management emphasis here. You start to see something that was not exist. Because before that it was like Chastradendamal Malfi. I see the change.

I believe the CEO is changing the company. is not only saying that because in a lot of like smid I will say in general I don't want to color it by the size of the company you know there's words and our words so I was like okay let's leave it up I found an evidence he's really changing the company now it's a matter of time that we'll start to see it's moving down to the fricash flow and that's okay I can put more time There are words in their words, because when you say that, I just think, like, I can't tell you how many times I've been on the phone with CEO, and they've been like, we are so shareholder focus. You know, we all we care about is getting the stock price up.

And we're going to create value in the long term. And the next day, they announce a deal in the stocks down 50%. I'm like, what happens to that shareholder focus? Like, this is going to work in the long run. They just like keep hitting you over the head. But I like that you kind of check with the actions. So let me start here. I want to dive into the business.

But I do think, like, one of the tough things with Jilly Journal and long time kind of Daily Journal followers will know this. Charlie ran this, right? He controlled it. He ran this. And he traded stocks in it, right? And pretty successfully, I mean, at the end of Q1, they had about $500 million in marketable stocks, and they had $340 million in gains on those marketable stocks. And I do think there were, I can't remember the specific details. I think there were some issues with margin in 2022 or so. But overall, you know, if you turn $130 million into $500 million, even if it's over a long time frame, probably pretty damn successful trading. Let's start here.

A lot of people really like Daily Journal for the sum of the parts valuation. And I'm going to probably push back a little bit on that for reasons that we'll describe later. But can you just lay out the sum of the parts basis? Like there's kind of two big values drivers here. There's the core business. And then there's the cash plus the marketables. You want to just lay that out and then we'll go from there? Sure.

And let's say that we are at, I will say, market cap of $6.50. so when we start our conversation, because we both know everything is moving, so it's focused on something, you know? I mean, this is a kind of a SaaS company, so if Anthropics says they're coming for legal, it's 650-ish right now. The stock price, as we're speaking,

we're recording February 27th Friday. It's a $500 per share stock price. It could be 300, it could be 900. Who the heck knows in the world of AI? But we'll set from there and go from there. So let's do the Met quite quickly. let's say the 650, you remove the 500, okay? But it's not actually 500 because when you liquidate that,

you need to pay the taxes, okay? And you have the margin of this $20 million. So it's give you somewhere around the $330, okay, on that. Now you have the traditional business. In my perspective, when you do the sum of the part, you can just put a big, nice X. It is worthy, but it's, It's not worth you of our time.

Like there has value there. There's a business. There's buildings. It is interesting, but that's not why we're here. But you left this sleeve of this journal technologies, okay? So you can look at that as 150-ish EV from this game that we've done right now. And now you need to ask yourself, how do you value that? And I think that the best way to value a software company in our days right now,

it will be Freakish flow. And 2025, I think Freakish flow is about like the 13 million. Let's say it was a little bit higher than that, but we don't need to say 13.3. And if you look into the different comps into that, you will see they are extremely undervalued compared to their growth. Okay, I know that they are like, really, they are so small. it's like you cannot compare them like you have Tyler in the game you have equivalent but let's put it like kind of like in the map okay you have the TAM the US court system which is including courts

prosecutors it's including like probation and etc so it's not only courts you have federal which is in the top you have the state you have I will say County and let's call them like lower one. Tyler, which is not a pure plague, sits on the federal to the state. Okay. That's what they do. And court management system that they sell, it's 15% of the revenue, but it's not their focus. I will not say that they're waking up and please that's a place that we can debate on. They're not waking up in the morning saying, Today we're going to sell more code case systems. Let's focus on our team on that.

Let's make the best one. Let's make sure that we're not losing these deals. The way that I was conducting, and I'll say that's the advantage of doing primary research and not staying behind the Excel or the GLG. I call to system integrators and third-party vendors that connect to all of that, which system is better?

And one by one, I was like here, you know, there's like several companies, but we really like JTA technologies. But let's go back again to that. So you have this parallel. You have equivalent that I will say it's almost the same in terms of market share and also playing wise.

But for my feedback, it was really hard for them to go. It's quite patchy. It's not unified system. It will be hard for, them to grow to different states. Because every time that you change a state or you change regulation, you change compliance, it's required a lot of work.

And for instance, you need to process right now a ticket, okay? So maybe you can create it right now, but you need to go back to three years ago, because if this ticket was started to in 2022 or 2023, you need to have the same logic of 2022, to 2023. So it's also really hard to new entrance to come. So I will say it does not justify the low multiple because they're growing about 20% on JTI. I mean, just on the justification, like, it's one thing I've been thinking about and just the SaaS wipeout in general, and I want to talk to you about that later. But, you know, like local governments are the people who are going to respond to the SaaS and AI wipeout last. Like, you can tell me if I'm wrong, but I believe

California, like daily journal, the way it started was they were publishing a daily legal journal. And one of the reasons stayed around for so long was California, like, requires certain court announcements to be published in a physical newspaper until I think they got rid of the publication, but, I mean, it was until way after the physical newspaper was gone. And, you know, you think about things like, I'm not saying local court cases are the same as nuclear weapons, but you read something that are like, hey, part of our nuclear weapon program is still run on floppy disks or something, you know, like local governments, everyone else get around here, block can fire 98% of their workforce.

Everyone else can be running lean and new technology. And local governments are going to come to work and be like, hey, guys, is it trying to get off of Windows 98 right now, or you guys think we can let this go for another year? You can tell me if I'm wrong on any of that, but that's kind of how I would think about it. I think you're not so remote from the truth, and I was so perplexed about that.

Okay, yes, they run on, like, really old machines. And kind of like, let's think about it from, two places, okay, that has the buyers, okay, there's the sellers, the buyer side, okay, these admin functions, maybe they will do it once in their life, this type of change. And that's what they know. And then they rely on Gartner and external consultant that they actually have the knowledge. So that's another issue that they are risk adverse. They will not want, like, it goes the following. Dude, they're not just risk-averse.

No one's holding them to the fire, right? Like, if they go out and they make a big systems upgrade, A, they need to get money for it, right? So they've got to go. It's just easier for them to sit on their hands. And then all these lawyers can say, hey, guys, like, why are we still using? I'm just going to use floppy this, even though I don't think. Why are we still using floppy disk?

They're like, I don't give a fudge. Like, I don't get paid for this. I don't get any bonuses. If I want to upgrade, it's going to be a headache. Like, what if the system breaks down for a couple days? like upgrading is no upside and all downside for me and not upgrading like make your life difficult doesn't matter to me. So like I just think it's like local governments to me are like kind of the at some point

they will upgrade but they'll upgrade 20 years after everyone else. That's kind of just my opinion. I don't know. Maybe I'm too libertarian here. So let's go deep into that. And that's I will show you the same mental. Can we pause there? Because I do want to go deep in that, but I want to come back to the sum of the parts because

I think it's floated around some of the questions. Maybe I'm too finance-minded. So what I was hearing from you is right now, you know, the stock price is 400, and I'll just give you my numbers. They've got this $480 million portfolio, $20 million of margin debt. Obviously, you need to take that out. And then some taxes. So if you do it pre-tax, I kind of have it at $335 per share is my number. If you do it post-tack, I've kind of got it at $275. You can quibble with the numbers you've done. Let's just say that, right? So you've got that. What value would you put on kind of the core tech, local government justice business? I will put it around the 250.

250. Okay. So if I actually, it's funny you say that because I actually kind of had it at 215. So we're pretty close. So I'm going to use your 250. If I did that, right, then I would get to a fair value. If I use, so the equities are 460 pre-tax. and the tech business is 250,

I would get to a 700 million market cap, and that would come out to about 516 per share on my numbers. So that's around today's number. So I guess my first pushback would be like, hey, this sounds interesting, but it doesn't seem like there's alpha here, right? And I've got a few further branches I want out there, but I just want to pause on that kind of some of the parts.

And I think that's one way, and I agree with you on like, okay, that's some of the part, that, but now let's look at it from a different perspective, different lens, okay? We've done this sum of the part, but we also know, and this, I will say, the bear case for me. Because I look at it, okay, we put the lens of not all software companies are the same. We know that there has a change going on right now. We know that there could be re-wraight of like this specialized software as, as a cluster, okay, these vertical one, like, I will use the Viva, okay, look at Viva right now.

They did not fundamentally improve themselves. But the way that the market saw them really changed lately. And if you put that lens, I will say the conservative 250, it's worth a little bit more. And say that they'll continue to grow, say that they improve the margin, it's, it's, It's a totally different game. Well, this actually, it kind of dives into my second word here, right? You have this company that's got, and we can bump the tech multiple up or not, but you've got this company that has this huge equity portfolio, right?

That was run by Charlie Munger. And I'm not going to argue for any portfolio, any company getting a portfolio running by Charlie Munger, right? Like that's fine capital allocation to me. But now you've got this company that is post-Charlie Munger. and they have a, you know, a 700 million market cap-ish. They've got almost 500 million of pre-tax stock on their balance sheet. And you and I just said the valuation of the core business was 250.

Maybe it's 300. Maybe it's 350, whatever it is. It's less than this equity portfolio. So I guess my second pushback on this is like, look, it's an interesting fundamental case, and we'll talk about it and continue to talk about it. But I kind of look at this and say, hey, this is a stock portfolio with a business attached. And I don't know if I want these guys running the stock portfolio. You know, it feels like there's beta.

It feels like there's extra corporate track, all this sort of stuff. And yeah, I just like, I wonder, is that just like misallocation or why should this, why should this company have this huge equity balance here? And you can tell me it used to be like heavily concentrated in a couple bank stops and Alibaba. I don't know if they're still disclosing. I didn't see it in the 10Q, but I could have just missed it. But no, if it's super concentrated, it'd be like, is it still concentrated in what Charlie liked when he died two years ago? That's a concern. Are we updating? If it's not, if it's not in what Charlie

who's making those decisions, who's pulling the trigger. So I worry about like, you know, a lot of times when I've heard people pitch this, I think including you, I hear you get the downside protection of the equities with the upside of the business. And like when I look at, I say, oh, I get the downside of an equity portfolio inside of a corporate wrapper with no longer maybe the best stock picker, one of the best stock pickers of all time running it. Now it's just kind of a group of guys. So I'll pause there and let you kind of respond to that. I will say that this is a real downside, okay? That's a real debate point.

And the question is, what's the money for? Okay, I don't think that the money is there just to be a nice portfolio. It's not going to be a mini Berkshire. Okay. And the money is therefore, at least according to Charlie and according to the CEO, currently Stephen Miles Jones, it's to help JTI to grow. So now you have a platform. They don't need $500 million to grow.

I mean, we just said the business as a whole, $250 on the conservative market may be worth more, but they don't need $500 million in cash. Not right now, but there's so many, I will say, attractive opportunities to either M&A, buy, grow, bring good people in. And maybe they have, and you're right, maybe not all of that, or maybe right now, but also it's give them a protection. Okay, look at it like it's really hard to swallow JTI without swallowing this 500 million of war chest, okay? You need to bring a lot of guns to the game in order to punch. Is that good? So I'll ask that in another way. I'll ask, is that good?

And then my second question would be like, this is a very non-charlie board and company to me where, you know, I look at the proxy and I see the CEO, doesn't own any stock. I mean, I think he had 600 shares from memory. The board, now that Charlie's not on it, doesn't really own any stop. So I guess I'd ask, you say the big equity balance is good because it lets them kind of, and Charlie had argued this before. I remember Marty 10 years ago, we've got the cash balance and the protection that when we were transitioning from the fiscal plant to the, we could make that investment. We could push that. But now I say, hey, nobody around here seems to own any stock in the company. They're protected by this enormous, by this enormous balance sheet and this enormous equity investment.

But I don't see anybody who, you know, I'm sure these guys are all great guys. And Charlie had huge praise for the CEO before he passed. But I look at it and say, I don't see like anybody who's really incentivized. If I'm a shareholder, I'm not sure if they're on my side or if they're on the side of, hey, let's just keep running this thing, keep this huge equity balance and we're completely protected and we can kind of keep cashing them checks until the cows come hold. I will say that with a little more nuance as what we see. And let's speak about like actions because they speak a little bit louder.

The debt or the margin, okay, let's look at it from these two angles, decreased over time. Okay, they use the money to reduce that. And according to the last shareholder meetings, they plan to use the money to, again, to improve JTR. you're right. Okay. I will not say that these are not a valid point. These are points that I pushed as well. Because a line of incentives, I think it's, it's where everything starts or where everything ends, because when we are both aligned, we both know how the game will end.

We both will want a bigger pie. We both will push for that. Okay. I'm laughing because I do agree with you. Like, you know, Charlie says, hey, I've, I've, I've always been a big bleepie. and incentives, and as my life's gone on, I've come to underestimate how important they are. And I completely agree with all that, though I am just laughing at how many times I've bought a stock where I'm like, I'm like, dude, the CEO owns 30% we're aligned. He's here to make money. And then the business falls apart. I'm like, well, we were aligned, but it didn't work out for us. And not everything is perfect. Like, I feel that like if there has like a point that people can literally push against like why to hold it, it's definitely that point. And

And not all the answers are strong. And I feel that like sometimes you need to swallow the, I will say, the fish, okay, with some skeletons. It's like, I agree. Okay. That's not something that like, no, I have like a different viewpoint on that. But with that, I will say there's tons of companies that highly incentivize in that way. And we also saw that result. But the way that they operate, the way that they work, the way that they communicate.

communicate. And that's something that I find quite interesting. You know, in the shareholder meeting, there was a real Q&A. How many times have you been? And there was all these like cell sides. And then, okay, do you have any questions? And then just the cell side, the bankers are asking some questions. None of the actual holders ask, they all whispering in between, kind of like in the coffee breaks or in the lunch. This was like a real Q&A, similar to Berkshire, that somebody asking like, hey, do you plan to sell the building and they answer? Are you planning to, what do you plan to do with the cash? And they completely converse with you.

So it is an outbird in that way. And clearly there's a lot of things to be done to improve that. But if we go a bit to the big picture, there has a starting board or a starting line that they can grow and change. and we start to see the change. So it's not like a story of when they will change. No, no, we're seeing. We're seeing this margin improvement. We're seeing the future improvement.

We are seeing the way that they interact with their clients. And that's what's so nice about these niche companies that operate within law enforcement, government, it's all transparent. You just need to be creative and you can get it. I guess, and not to believe with the point of the point of the way. the equity, like the other thing that, so if we just assume the equity portfolio is going to be invested fine, right? No alpha, it's just going to be beta portfolio.

That's fine. And we ignore the drags of the holding an equity portfolio in a corporate structure. The other thing that's tough is our original numbers were, let's just round it, 500 million in equity value from the equity thing and 250 million from the tech business, right? So even if this tech business grows and creates tons of value going forward, right? Like, if it's a 3x over the next five years or something, the stock as a whole is, if I'm doing that math in my head correct, the stack as a whole is not even a double at that point because the equity portfolio just so subsumes the tech business, right?

So it's just like it creates just all these weird incentives. And I just, you know, it's the one thing when I look at this. And I know because I've had people come and pitch this to me as like, look at this downside of protection. I'm always just like, well, yeah, if Charlie's going to run this at 25% annualized in equity portfolio, yeah, that's awesome. But if it's just, you know, an S&P index fund, or even worse, if it's a guy who's not Charlie Munger running the portfolio, like, you're making a lot of equity bets. And even if you're right on the tech, like the equity is what's, the equity portfolio is what's going to ultimately matter. I'll pause there because I do want to turn it back

to the tech business and talk, I have some other questions there, but I'll pause there if you have any other comments or thoughts on that. Oh, go ahead. I think that like, again, it's a valid point. And they, sooner or later, they need to use that cash that it will go down to us, the shareholders. Okay. It's either towards the business or to other means, I will say, there's, it can do a buyback. Okay. It's legit.

You can use that. And then you can reduce the risk for us as, as you said, the equity downside that could be. it's all on the table. It's funny because Buffett, one of his famous early investments is Sandborn Maps, right, which has an investment portfolio greater than the market cap, and he goes and Sandborn Maps has, if I remember correctly, they're maps for fire insurance and everything, and they've got a lot of insurance people on their board who own no stock and, you know, they treat it.

And Buffett comes in, I think he basically gets them to tender out the investment. And the Maps business is a nice business, but, you know, it had way too much, equity. It's funny, when I think of sandboard maps, like, DJCO might be the company that I think is like most likely to have a sandboard maps apply to it at some point, right? Because I could see, hey, you come in and you have them tender, and even if it's highly appreciated B of A stock, like they do a tender offer and they, or they do a swap of some form for their stock to retire shares. Like, it's just funny that I could see that happening and Charlie's got ties there. Let's go back to the core business. So I think one of the ways you kind of, you know,

when you and I were talking a couple months ago, I think one of the ways you got on DJCO, you mentioned earlier, you did a lot of primary research. I just want to ask, primary research. Like, how did you do the primary research? What was your path here? How did you go about sourcing it? What were you kind of looking to do with that?

So, let's kind of like when you do the primary research, of course you can boil the ocean, okay? the way that I try to do it is to find the key decision makers, usually on the client side, understand how they take the decision, why they say yes, why they say no, what's the process. And I'm trying to see that they can understand it as quick as they can. So for instance, I started to speak with administrators seeing how this other fee process goes, what you take into consideration. All of that is public, but like, why do you put 20%?

Why do you put 10% for references? A majority of the time will say, you know what? It's the consultant that's telling us. And then I understand the role of the consultancy. Okay? And the consultancy that came, it's really important. Like, I would say Gartner, I know that people are saying, like, they're a thing of the past, but they still have a role.

They're still important. Can I ask you a question on Gartner? This is obviously in the local government space for the most part. Yeah. And I know you've looked at other companies. So if this doesn't fit your primary research, just tell me, but do you think Gartner, you know, local governance, as we talked about before, maybe a little sleepier, a little slower, maybe a little more likely to outsource their thinking?

Do you think Gartner is still really strong in like sleepier local governments, but maybe they've really lost their fastball, let's say, and, you know, take your pick of bigger companies, faster moving. would I be wrong to think that? Would I be right? Is that too far afield? Do you tell me? It's not too far afield.

I think you're seeing the same reality as I see. And maybe it's not a reality. Maybe we are both in the same echo chamber. But clearly if... I worry about that all the time too, yeah. You know, it's like what... I was thinking about it as well because it came to me kind of like a counter

because I was, who needs you, you have deep research right now. You can create all of these things. But no, there's a lot. group of people and that's something that's like important to put we are so much advanced i will say when i say we it's like uh we have a i on our right hand we have gLG on our left hand or tigas or whichever it is we think that the whole world have the same access to this information but maybe we're like this three to four percent maybe one percent the majority of the world or which i will say the corporate

they need somebody to hold their hand help them to make it the same thing to make it the same thing and informed one, because this is one-time decision. It's not a repetitive decision that they do. And then it's like, open me to, I see why there still exist. I see why you need Gartner. Maybe not for when you buy your CRM. But there has a scenario, okay, that they are still relevant for these places. Can I actually, I think a lot of the primary research you did here, and you can correct

me wrong. I think you did it by calling people directly versus going through the expert networks and obviously I'm a big proponent of Tegas and AlphaSense they're a big sponsor of this podcast they might be sponsoring this episode I don't know but am I thinking about that correctly? Yeah so I think that the export networks are amazing

okay and Tigis and AlphaSense I'm a big it's the same actually I'm a big fan I'm going to clip that out and send it to Tegas and tell them not let's listen to it but I did have a question but please continue but I'm truly a big fan and sometimes I sit on this expert and just on the other side

and I think it's something that's really important for us the analyst to remember. The other side is highly incentivized to give you this 15 minutes block make sure that you are there with information that he will be happy to have the cycle okay so he can

I will say reuse the same information over and over. There has alpha there, there has information there but in these niche places sometimes, the real people are not there. And for instance, I will give you an example with the celebrate research, okay?

You cannot source FBI agents. You cannot ask SGLG give me to speak with them. They will not be there. Maybe now it changed. When last time we checked and this could be something that changed. So you need to go, you need to earn trust. You need to learn how to make an open conversation,

And of course, having the mindset of compliance, it's really critical. And that's maybe the one, I will say, biggest lesson that I learned in Columbia Business School in the was part of the value investing program. It's a specialized program, 40 students out of whichever number of MBA students that are there, knowing how to tap into people speaking with them, making sure that they understand what you ask them so they can open up and build relationships. I will say there's no replacement of it. That's an art.

I think that's a main skill that maybe is disappearing and that's an edge. Look, some of your fellow Columbia business school students had on the podcast who won the Persian Square Challenge. And I got so many emails after they came on from people who were like, these guys were amazing. I would offer them a job on the spot just based on this. And one of the things they did was they went to, a lot of conferences.

And, you know, one of the things I've talked about is, I think in the future, Alpha is increasingly, it's going to be outside the filings. I think it's already a lot outside the pines. But, you know, you go to a conference and you see the CEOs like sweating, you know, he's in the corner talking frantically on phone calls the whole time and sweating. That's something that AI is not going to have that you've seen or you go and you talk. And the reason I go on this long, and Lee stories is it's one of the things I've been thinking about, like the tradeoff.

Now, there is time, right? You go to a conference. there's costs, which, you know, I think dollar costs when you're doing investments, because it's scale so much are, it's not meaningless, but they're low, but there's a cost there, but it's really the time, right? Like, if I go to a conference, flight there, flight back overnight. I'm at the conference all day. Like, it's a big investment time.

So I've just, like, been weighing the two. And then the other reason I asked, I mean, conferences are different than expert calls. You know, I do quite a few expert calls. I was a friend had me listening with him on one of his expert calls that was kind of off network. and the person he was talking to blasted the company's CEO in a way that, quite frankly, I've never had anyone blast the CEO in any of my expert calls. I mean, it was some words that would not be fit for this podcast, you know? I was kind of like, hey, did he get that because this was like off expert network,

you know, did he, or was this just a really, you know, one-time unique employee? But I'd never had anyone come close to less than them. And I was thinking, like, do these guys kind of dial back when they're on the expert networks? just a little bit because they know, you know, same way when you're on network TV, if you're a comedian, you don't drop any of the F-bombs or anything because you're on network TV, but if you go see someone in person, they'll probably...

So anyway, if you have any thoughts there, I've been thinking a lot about it, and you struck a nerve, so I wanted to think about that. So I agree with you. That's a big thing right now, how you source and how you find these opportunities, because it's like extending on the tip of the toe, okay? you know, probably that reference.

Everybody has that. You need to find other ways to improve your edge. I'll not say if somebody's sweating, it says something X, Y, and when you know, it's just sweating. I hope not because I'm a really sweaty guy a lot of the times. But putting kind of, like, from my experience, and I would say I was in the Navy as well. And the thing is in the meta, okay?

It's not like what you do. It's sometimes what you don't do. I'll give you a real example. Okay, I met with different company, not related to the Daily Journal at all. Speaking with the CEO, the CFO was there. Real conversation. I asked him things that they,

I asked directly things that related to the CFO. And I knew the CFOs just came to the game. Like he had already like six months. He had already like earning. And it's kind of like after the lov-divavi stage. You know, when you bring somebody in, he is amazing. you love each other, but there has this little period that you remove the mask,

and then you can see the real relationship there. So I'm asking the CFO questions. The only thing that I wanted to see, does the CEO, will let him to finish a sentence or will let him to answer that or interrupt? Because I'm actually asking, do you trust the CFO? Can I ask that? Do you trust the CFO? Of course I can, but that's a stupid question.

But by doing that, I can see, does he trust him? And then I can see, oh, you know what, I'm wasting my time here. There's zero trust in the management team. Hence, actually, it's good. Like, I can conclude the day early and communicate it. I'm laughing so hard because one of the most frequent criticisms I get as a host is I interrupt my guests a lot and talk a lot. So I'm laughing because as you were speaking, I was laughing at that.

And I was thinking, do not interrupt Roy. Do not interrupt Roy. I let him finish this sentence. And I don't know if I was the CEO and you were my CFO, there might be a lot of trust, but I'm just so eager to talk sometime. I don't know. Let me ask, you mentioned sell bright,

which is another name you and I have talked about. I've done a great podcast on Sell Bright back in October. You've done Sell Bright for those who don't know, Israeli company that sells to, it sells things that basically will break open your iPhone, big seller to FBI, law enforcement, all that type of stuff. But that's another SaaS-ish company. Daily Journal, these are SaaS companies.

They are in the target of SaaS. I think both of them are unique in SaaS for some of the local government reasons, other things. But you've done a lot of expert calls. I'd love to just ask, when you're talking to people on the ground, whether it's about Cell Bright and Daily Journal or just other software in general, what are you hearing from people on the ground about SaaS and how they're thinking about this and the AI risk? Because I will tell you, I do some. And the views are evolving really quickly in some areas.

and the views are slower in others. And I just love to hear what you're thinking, broad strokes, company specific, wherever you want to go with it. So it starts with really broad strokes. I think we are right now, like a little bit in Echo Chamber, we killed so many companies so quickly,

kind of like this whole conversation. Yeah, the terminal value right now is that you can, it takes time for the decision maker to make a change. the way that they buy, the way that they make their decisions, we sometimes forgetting that. So go to the basics and see that the process change in terms of like procurement. I know that there's companies that maybe it does change and these like, I will say the one that more do I oriented. I don't know if like to put name and,

you know, let's do that. It's a, I believe that not everybody understand the hints that I'm giving right now, so I'll be more specific. Take companies that are mainly UI. They are main for you and I. Let's take a Monday, for instance. Okay. This is quite an issue, okay?

Because you maybe will have your agent that will do this job. Maybe it will disappear. Less of you will do that. But on the other hand, the question of would you build or versus buying, it's legit. I think that majority will decide to probably buy because that's not what makes their beer better. Okay?

But that's my opinion. Can I think, I'm not as familiar with Monday, but you can tell me if you're wrong, wicks.com, go daddy, a lot of these things I think would fall into similar buckets that you're saying. I think you're right that most people will choose to buy versus bill, but I think there's two issues with it, right? Number one, especially for UI and simpler, more, now, you know, with Wix, with website, you and I could not say to Wix, I will build this website on my own, or Monday, I'm not as familiar with them.

We can not say, I will build this on my own. But now, even enterprise level people can incredibly go to Monday and say, hey, we don't like your pricing. Bring it down, or we're going to hire two software engineers, and we're going to vibe code our Monday.com, and they'll maintain it easily. So now you've got that internal pressure where people can just lean on the buy versus build to bring their price down. And the other thing, like with a Wix or a base 44, like, yes, maybe they're nice products. But to me, like they're very easy to replicate and build. So you're just going to have, it's a commodity war in the same way that all these Instagram ads, right? Like all these Instagram brands.

Early returns were great for the people who realized, hey, go do Instagram ads. But then the ad rates get jacked up because everybody sees that and there's just no barrier. and I'm worried there's going to be like 5,000 Wix.com. Make your website here because anyone can vibe code it with any skills. And like you're kind of just in a huge price war, whether that's on the actual price side or the customer acquisition side. So I'll pause there if you agree, disagree, wherever you want to go. I'm going back again because this was like I was trying to describe the one that,

I will not use the word loser pool, but like the one that are going to be disrupted. Okay, so that that's the pool, okay? But I say that they have a nuance there. That could be that you may decide to be. versus sell, but that's kind of like it really depends on the, I will say the person, but that's a real threat. Okay, these ones having an issue right now. But on the other hand, you have these companies that I will say sits on a proprietary data that they create the data themselves. Okay, for instance, the transaction data that's been created within the product.

Let's take court case management system. In order to tap to the data, you need to tap to data. their API. You create a new court case. You create, it's within that. So there's proprietary. There's transaction. There's a compliance layer. Okay. So you cannot just come. Let's, let's look at it from like outside the attacker. Okay. Somebody will come. Let's say that he vied court. He gave to his cousin. Okay. His cousin went from, is a super duper, really smart guy, 72 hours, created this court case management system. It's good for today. but it's not good backward, okay?

And you need to have this backward capabilities. They're so protected, okay? Compliance price, not even regulatory. And now let's add a regulatory landscape. In order to compete in these like RFPs, and then it's true for Celebrite, it's true for daily journal, it's true for Tyler. Need to have enough money on your balance sheet.

Does it relate to how good? What is your software? No, it's not related, but you have that. You need to have certain certifications, okay, CJIP and et cetera, but FedRamp, if you cater to the federal. And you need to have a reference from previous product. So I will say not all software companies are the same. And these ones that I will repeat again, have proprietary data.

And in order to access the data, you need to tap to their databases. And the data is being created. They're part of transactions, important transactions within your company, and they have this either compliance plus other layers. They work more, in my opinion. And how to replace? This doesn't quite fit for Selbright because the FBI budget, whatever, like nobody knows. But for Journaltech, I would imagine, you can correct me from wrong, you know it better than me. it's also a very small, very, very small piece of billable hours, legal, all this pain for the software and everything.

So, you know, if you've got, and I hate when people say, oh, people spend 10% on 10% of their revenue on software and 50% on employees. So employees are the biggest. Well, it's like, yeah, but if you can cut that 10% out, they care. But, you know, if what you just described is something that is mission critical, mission critical, mission critical, and a regulatory nightmare. And then when you say, hey, this mission critical regulatory thing, it costs us, I don't know, $50,000 a year in the state and we're billing $50 million per year, well, yeah, I'm probably not going to go vibe to that. You can correct me on anything I just said,

whether it's the numbers, the overall, anything I just said, but that's kind of how I came to look at it. You tell me where I'm wrong, where I'm right. So be a bit more specific. I will say in broad strokes, okay, it really depends, like the county, it really depends, the size. And then I will say to you, you know, also for Celebrate, it's the same because not federal budgets,

not all the federal budget is the same for not all these like three-letter agencies, but not all the counties. There's some things that you can tap into like special either awards or grants and etc. And that's why it's so interesting. That's why you do the primary research. You see we're connecting dots from the past because sitting behind the Excel and all of that. You don't understand the complexity sometimes of like, wait a second, actually, Now, listeners, this is about Celebrite right now.

The budget actually coming from a very specific grant, and they secure this grant for five years, and this county can tap into that. Can I ask you a question on the grant real quick? Tell me if I'm wrong here. But let's just imagine the Celbrite budget for the local New Orleans Police Department. They get a grant, and it's $20,000 per year for the next five years.

And I think those numbers are probably roughly right, I would imagine if you came with a vibe code thing that said, hey, we'll sell you this for $500. They'd be like, get the budge out of here. You're going to cut our budget by 95%. Like we got this. We don't care. We don't care.

We got 20,000. We got to spend it. If we spend it 500 years, we're just giving $19,500 back. What are we going to do there? Tell me if I'm wrong in that. But I think that's probably right on the grant side. I don't know if it's only on the grant side or not, but they can do that. But I think that the pushback will be if I'm hearing you correctly.

you're like, wait, they don't care. Like, they don't care. That's like, say it outlaw. And that's what's happening in Daily Journal, too, right? Like, you have somebody who, it's an accountability single. It's a government, it's a nonprofit. They don't care. The money's not there.

They don't care about the spend. So that's the lens that they, I'm not fully agree. I wish I could say, you know what you're so right. They care, okay? These are, but they, don't care as much. Okay, that's not the majority. That's not where the decision is kind of, like telling them that this software, okay, will make, like, is reliable. The word reliable and it's so true for so many things. And then the cost issue, because is second or third. And you can

even see that in the other fee. We're going to say that. You know, look at the data. Cost is 20% to 30%. Hence, it's not as important as reliability, as having better integration and teaching and guiding the workers and employees, whichever it is. Here, that's a data point, you know. It's not an opinion. Hence, it's more complicated. It's more complex. That's reality. We're running up towards the end of our time.

I've had a lot of fun. I want to ask, we've covered a lot. We've covered a daily journal. we've covered a little bit assessed. Anything just like top of your mind we should have hit that we didn't hit that you want to get off in the last couple minutes? And the answer can be no, because I always ask this sometimes I think people think I need. If the answer is, Andrew, you did a great job as a host. You can just say, Andrew, you did a great job as host and we can wrap it up.

Andrew, you, it's such an amazing job as a host. You made me feel so welcome here. This has been great. Roy, where can people reach out to you or find you if they want to kind of follow up, whether it's on DJCO, expert interviews, Albright, or just kind of anything. else. So first, my LinkedIn is the way that you hear my name, R-O-Y, SW-S-W-S-A. Feel free to find me there. I have a subset. I know it does not carry my name, but it's kind of like an experiment. It's actually an agent of mine I created to generate these articles so you can find

value the elephant. It's there. I should have mentioned, I believe, you can correct me wrong, I believe that a couple of funds have even had you on like the consulting side about, you mentioned your software background about like kind of implementing AI and stuff. So I believe you can speak knowledgeably to that too. Yes, unfortunately, I cannot say their name out loud. I will say, but you can say yes, I've done consulting for. Yes, I've done consulting for different firms. And some of them I mentioned, some of them are not, but I'm here based in New York.

Each out. Maybe next time we have you on in a couple months, we're going to have to do like just an AI overview. because it's one thing I've been using and I know like I'm not the best at it. I also can guarantee I'm not the worst at it, but I know I'm not the best at it. And I think it's an area that I still hear from investors who are skeptical. And I'm like, dude, you can be skeptical or sorry, not skeptical. I hear from investors who are not using it. I'm like, dude, you can be skeptical.

But if you're not using it, like you're just so far behind just in terms of the project. So maybe next time we'll do like a, hey, AI for beginning value investors, dummies or something. But Roy, this has been great. I'm going to include a link to make sure to shoot it to me. I'm going to include a link to your LinkedIn and the substack and the show notes so people can kind of go from there to find you without me. But Roy, this has been awesome, and we will have to have you back on for the AI chat.

Thank you. Okay, looking forward. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.