[#63] Stock Market Volatility and What We're Doing Now

All right, says we are live. Awesome. This is episode number 63. Been going for almost two years strong here. Uh we have Daniel Prank on the left. Uh over 250,000 subscribers on his YouTube channel and I'm his business partner Jake. We are streaming live on YouTube even though most of you do watch the recordings on your favorite podcast that finally we have had a pullback in these markets. If you're new to the show, we are stock nerds. We talk about stocks. We are long-term investors. That's what Daniel's YouTube channel is based on. And I had to say, Daniel, I personally have not bought stocks this heavy since the end of 2022. So, I'm curious if you're like seeing the same thing in your neck of the woods and thought that's how we could kick off today because we finally had a pullback. Uh yeah, I uh I mean I'm trying to always buy stocks. So, yeah, I mean I'm always buying. I will say that I have bought more recently and my cash position has dropped more recently, but yeah, nothing too out of the ordinary for me. Definitely happy to see a pullback and hope it continues. You say like you say close to 0% cash though, right? Or has that changed recently? No, it's Well, it's 0% cash, but uh like I talk about this with my community. Um, I have money set aside for taxes and I'm doing my fence soon. So, like I don't count that cash as cash. So, when you factor out that cash, I'm probably like 1 to 2%. But including that cash, I'm probably 5%. I guess I do that too because I have my USFR uh ETF for people who don't know that just holds like US 10-year government bonds. So, like that to me like is my cash position, but I also like don't include the like liquid emergency fund and things like that. Um, I was super happy because Airbnb dropped after earnings. It went up and as fast as it went up, it came down. So, that was like a gift for me. That was what I was buying the heaviest this past week. Yeah. I'm sure no one is surprised about that. Yeah. And I'm sure you were buying some more Brookfield, right? I saw it actually took a little bit of a quote tumble with the market there. It fell maybe like 10 15% from its highs. So that should feel good for you. I know you're always looking for buying opportunities there. No need to reexlain your bull thesis. We know you are the resident of Brookfield Bull. Yeah, that's uh that's definitely a stock I've been continuing to buy. You know, I I think I actually bought shares like within 5% of its all-time high that it set in recently. So on a 20% correction that it was in, I was like, "Well, okay, cool. " Yeah. I typically buy one share at a time of Airbnb, which includes like after earnings. I think I made like one buy at like 150 something. Uh but then once it dropped down to like 120, I even think I picked up like a good handful of shares at 11969. We'll see if that ends up uh being a good buy or not. I honestly hope it goes lower. Uh one thing about Brookfield though, also Samir cat for those who are watching the video. So cute. Yeah, he just drooled hardcore on my arm though. So like on live. Yeah, it's great. It's wet. Yeah. Um I do see this uh comment from Mitchell here. Nice to see you about him. So, we'll jump into that briefly, but wanted to ask you, maybe it's a nothing burger, but the pol the political scene in Canada, which I know nothing about as a citizen, except for the stupid slam piece titles I see people like sharing on social media, seems like Justin Trudeau is on the way out and guy in. I don't know if he's like officially in or not, but I'm seeing a lot of headlines around him owning like millions of dollars of Brookfield options. Uh, someone told me he actually used to be on the board of Brookfield. Someone actually said they were happy he's not there. I'm just curious if you have any thoughts on this, like as a Brookfield shareholder or if it's just a bunch of hoopla noise that makes for like a good media slam piece, but it's a complete nothing burger. It's um, yeah, I mean, everything you said is

pretty much right. Trudeau is gone. Mark Carney is in and he was on the board of Brookfield. He actually has interviews with him and Bruce Flatt, so like he was heavily involved in Brookfield. Um, we don't know exactly how wealthy he is, but it's estimated that he's like in the hundreds of millions, if not billions. So, I mean, Bruce Flatt is worth like six billion dollars. Um, so like or ordinary people. Yeah. No. Uh, and you know, it's just how politics works. No matter which side of the aisle you sit on, they're going to just attack the other side. And you know, uh, I've seen the conservative side who is the opposition to Mark Carney putting out hit pieces on Brookfield. And as someone who's studied Brookfield in depth for three years now, I'm like, "Yeah, this is all just uh just crap. " It's like, it's not true. So, uh, you see it on both sides. I just think that the other side's going to attack the other side and they're not going to get their facts straight and it's all honestly propaganda. So, well, it's uh it's good to talk about though. So, uh this is a good situation because you are like a Brookfield I'll say expert at this point. I think that you should own that. Um expert compared to relative people. I am not. So when I see media headlines which are like technically factually correct which is hey Brookfield is doing weird fraudulent behavior. They have like multiple funds and well I was going to tee that up saying it wasn't correct but did you want to correct Well no you started that sentence saying I've been seeing articles which are factually correct that Brookfield is a fraud. I'm like that's not correct. Okay let me finish this thought and it'll become more clear. Um, okay. People are claiming that Brookfield is a fraud. You are correct. I worded that terribly. With factual information backing that claim, which doesn't make the claim true, by the way. Um, that, and I'm just saying as someone who doesn't know Brookfield, I read these. And the facts that are in there, which to someone who doesn't study it, propaganda, as you're saying, like kind of makes sense. They will say, "Okay, Brookfield has, please correct my terminology after, but Brookfield has like multiple different funds or like different pools of money that they raise over time and invest. " And across all those investments, they are selling assets between each other and like recording paper gains where let's say they have 10 different funds under the Brookfield umbrella. Fund one will buy or sell something from fund eight. They'll like record it as a gain. So for someone that doesn't know crap, I read that and not that I believe it at face value, but it at least like makes me question like, okay, that sounds interesting. Like maybe it's normal. I don't know. And then obviously when you like take the look under the hood, I know that I'm obviously referencing your Patreon message that you sent where you address this as well as what you said before where for years you've been dealing with the same crap where like these articles come up all the time. And maybe I'll let you explain it, but the long story short on that is the behavior is actually fine. Uh, one, what they're doing is actually very normal, typical behavior. And two, if you actually take a look under the hood at the asset values and sales, if anything, they're not inflating. Might even be a little bit too conservative on some of the valuations they're giving, which would actually give credence to management not being fraudulent. So, I'll be more careful wording that in the future. If you're just joining, Daniel nabbed me on a uh a little word snafu I got myself into. But it just made me think of that when you said propaganda because after you explained it, just like, wow, well, that's a load of crap. That article is propaganda may be a strong word, but it's like I don't know. It's propaganda. It I feel like it kind of just is, you know, like they're just kind of slandering the other side in any way that they can without doing real research or actually saying real facts. So, yeah, it's uh whatever you want to call it, misinformation, whatever. Um, yes, Brookfield does sell assets between its funds to itself. This is normal in the private equity business. It's not illegal. It's not fraud. Um, it's just the nature of their business. Like, so in the article, they were talking about a piece of real estate. So, what Brookfield does is they raise money from investors in a fund. So, the fund, let's say, is 5 billion. They'll take that capital and go and buy a real estate asset. Let's say these funds typically have like 10-year durations. So at the end of the 10 years, the investors in that fund want their money back and their they want their returns like they want liquid capital. So what Brookfield has to do is sell those assets in that fund to give investors their liquidity. Now what Brookfield also does is they raise new funds. So, a new fund comes up and they're like, "Okay, well, now we got to deploy this capital, but our previous fund wants liquidity, but they still own good assets. Let's give our existing fund liquidity by buying those assets, giving them their returns, paying them out, and then our new fund still owns a great asset that's going to produce returns over the long term. " That's what's happening. That's what they're doing. So yes, they buy assets off themselves to give their investors liquidity and new investors get to maintain a great asset. It sounds great. I'm trying to pull up the article, but I can't find the link. But yeah, makes sense. Yep. That's what they do. They've been doing this for 30 years. Like it's nothing new, guys. Well, surprise if you're just joining. Daniel's talking about Brookfield again. Guilty is charged. I brought it up. Um and so are you in the chat. Uh we see you, Zion Mitchell. Uh, Yaric, if I'm pronouncing those names incorrectly, my apologies. Daniel, we got a couple comments in here. I'm seeing a lot of people mention HIMS, so maybe that's just a video direct for you because I know that you already put out a lot of public content on them, but there's also a nice question here about dividend investing, so feel free to fly with this. But, uh, Brookfield and HIMS are

definitely trending in the live chat here for those. Yeah, they're uh they're in the news, man. They're in the news for sure. Um, HIMS, it's a volatile stock. Don't buy this stock if you don't want to see 50% swings in a month because that's what it's been doing ever since it's been public. So, it's not for the faint of heart. Um, you know, 10% up, 10% down, 20% up on a day. Like, that is normal for this stock. Hims for me, I own a very small position. It's one of my smallest positions. I have it and I don't even look at it because I know it's volatile. It's a stock that I just kind of want to own for the long term. So I don't I that one I have gone in with the mental preparation of just ride it out and that's what I'm doing. So we'll see where it goes. But that's what I'm doing. I don't care about the volatility. Not on this one. Well, not on any really. But yeah, you and I had a I think you and I are having a big role reversal here because typically you are a person who like you'll buy and there's a valuation and if a stock gets too expensive, you'll sell it. No BS. Uh I actually have been on the other side of that coin where I'm more of like the Wall Street Bets like diamond hand person just like where's the sell button? Like I've never even touched it before. Uh but I think we had a roll reversal here. So, I also bought him around like I think it was 25 bucks and it was also a super small position. Like saw the financials. I'm not going to run through things we already talked about on this show, but we've talked about HIMS at length when shot up. I mean, I didn't make it to the top. You can't time that, but I was up like I think 70 or 80% in five weeks and I got off the boat, which was very unlikely. I didn't have high conviction on it. I was like, maybe I'll make 50% in a year if I get super lucky. That's already market beating returns. I got that in five weeks and I don't understand the moat in the stock. So, so I was out. But yeah, it isn't just here. You're just kind of like a ride or die on it. You got your hand duct taped to the bull. Yeah. You know, I wanted to switch it up a little bit because, you know, when it when hit $73, I was actually extremely tempted to sell it because I was up 150% within 30 days, which shouldn't happen. Like, that just shouldn't happen. So, yeah. You know, there was a part of me that was like, well, yeah, I could just play this and just bank my gain and whatever. But then I kind of thought about it and I was like, well, let me just try doing something different on this one. As I said, you know, it's a small position, like whatever. It can go back down to my buy price and it's not going to affect me that much. So, I was like, whatever. I'm going to hold it. Just going to ride it out. Um, yeah, obviously in hindsight, dumb move, right? Like should have sold and bought back. Like, whatever. But you know, you don't hindsight is 2020 and it is what it is and like I think I have the conviction in him enough conviction at least to hold on to it. So, I'm just going to ride it out and whatever happens happens. And you know, another thing that I will say is him has really been an interesting one to even just follow because when it was at like $73 a share, I was getting so many comments like, "Oh, I missed the boat. Like, I'm going to buy in now. Oh my god, this thing's going to like $400 next month. Oh my goodness. " this and I'm just sitting there like you can see the euphoria go nuts when a stock is up 150% in a month. Like everyone is like fist bumping. Um they think the company can do no wrong. Everyone wants to just continue buying in because it's going up and now it's completely changed. Like now that it's back to 35 bucks or something like that and it's lost 50% from its highs. Like no one is touching the stock now even though it's half the price. So it's at 3277 right now. Yeah. So theoretically like if you liked him's business, why would you want to buy it when it's at 70 but not 32? Because I mean this is like the classic retail investor fallacy that we try to solve with Yeah. It's it's literally emotions. Like you could watch in real time the investor sentiment and emotions just like getting the best of everyone. Well, not everyone, but like a lot of retail investors. It was wild to watch. Yeah, I mean, Palunteer was and has been even a crazier example of that. We do see the chats coming in. Daniel, I did have one nuanced question for you, though. Uh, in terms of reflecting back on not selling at 73, you made the obvious point of like, well, mathematically, yeah, a crystal ball. Like, no crap, you're going to sell at 73 if you know it's going back to 30 something next week and just buy it. Uh, like you're not going to make some like stand or be cool for just like riding the wave, right? But I think the other side of that question, which is debatably more important, is your emotions around this. So let's flip the script. If you were to ask me with Airbnb, hey, after earnings went they went to 160. Maybe they were fairly valued. Like if I knew that I was about to fall back to 120, should I have sold all my stock? Mathematically, yes. Emotionally for me, it's a no. Like I actually feel good on my conviction. I'm not trying to wash sale. It adds anxiety to try to time the highs and lows. You're never going to do it perfectly. So Exactly. Yeah. So, ignoring the math side of it, do you emotionally like feel good about that? Because it was a break, I don't want to say breaking character that you need to fit the mold you've fit in the past, but it was a change in behavior, I'd say, from your relative uh valuationbased selling. I understand you're trying new things, but like how do you feel about it now ignoring the math side? Fine. I am completely unemotionless to what happens in a unemotionless emot unemotionless would actually be emotional. So I know about that you're double negative I'm emotionalist. No and also I wouldn't say that it was necessarily out of character because like I at $25 I thought that him was extremely cheap. Okay. So, I thought in my DCFS, I thought the fair value of the stock was like 56 bucks. So, when it gets to 73, I was like, yeah, you know, it's probably overvalued now, but I actually don't think it's like stupid expensive. So, like I don't know if HIMS went up to a price where I thought that it was just ridiculously overexpensive, then I would have sold it. But it didn't get there, I don't think. Okay, fair enough. Uh let's topic change here. We are getting a few uh live messages in the chat. Not sure if you want to pick the

next one. I think I picked that last one. Guy Cohen, what's up? Obie_rr. Bob R. Stunk. That's a good one. Great to see you all. Um Guy Cohen says, "Good to be here. What do you think is the reason for Interactive Brokers trading for under 10 times cash flows while revenue is growing 30%. What am I missing? Um, well, this is a financials business, so I would not look at free cash flows at all. I would use earnings on a business like this. So, I would look at PE and basically ignore free cash flow on financials types businesses like banks, lenders, even brokerages like this. their cash flow statements are just extremely weird. So yeah, look at earnings would be my suggestion. And I think when you look at the PE of Interactive Brokers, last time I looked it was like 70. Yeah, I'll bring up the PE. I was trying to look at that cash 99 100. Yeah. Wow. So let's see if that's typical for IBKR. I actually was looking at this stock uh maybe like six months ago for a potential buy, but I didn't pull the trigger on it because I thought it was a bit too expensive. But obviously that was dumb uh because they've absolutely flown. Um yeah, I mean if you're looking at the last let's put this 10 years, we'll do nine because I want to remove that high valuation period. I mean it seems relatively normal if you ignore the pre209 era. uh that's kind of always at this what I like to look at is the PE on cost because if that looks good that means that they've also been growing their earnings pretty well. So let's see if we can get that up here. I think they have been growing very well. They have to have been with let's see oh wow yeah ridiculous actually this explains it. Yeah. So we're measuring from a just positive value of 97 million. So maybe we'll move this up a bit to get a better a more realistic kagger. But yeah, net income compound annual growth rate since 2018 has been 28%. That's off a base of it looks like around 150 million. And they keep setting uh all-time highs. This is TTM. So even if we set a quarterly, it looks pretty good. And yeah, I mean this is what I really love to look at, Daniel. So let's just take this random date. uh the end of 2018 they were trading at a price to earnings ratio of 175. So for value investors like us to keep us honest here you and I would probably look at this and scoff be like that is ridiculous with the exception of course that if they continue to compound their net income obviously your price to earnings ratio relative to that buy price in the past is better. So that is proven right here. It was at 175 PE. If you bought at the end of 2018 and held until now, the PE on cost of the shares you bought back then has dropped all the way to 28. And like this is growth value investing here. So yeah, it's high, but if they keep growing their net income like this, they'll continue to grow into the valuation. So until we see this growth curve subside or like show any chance of waning, I honestly would not be surprised to continue to see this uh stock priced between 50 and 100 P. Yeah, that's a high price for me. I'm not going to be buying at 100 times earnings. Well, okay, let's let me challenge you on this. I I totally agree. And by the way, I would come to the same conclusion today. However, let's use our uh fact that we're in the future now relative to if we were having this conversation in 2018. If in 2018 I told you that the price to earnings ratio is 127, but if you hold the stock for half a decade, it's going to drop down to 30. Knowing that, does that change your answer or mindset on the price of earnings being 127? No. Why? Because waiting 7 years for your PE to drop to 30 is still extremely expensive. A 30PE is still high. And that's after 7 years of 30% growth. That also means basically that when you're buying it now, you're pricing in the stock to continue compounding at 30% or sorry, it's earnings 30%. Which is a very tall ask for any company. So, if you're buying a stock and it's already pricing in 30% annual growth, then if it comes in at 20, which is still very good, what happens? I agree with you if we were having this conversation today. However, mathematically, I'm just pointing out that if you were trying to get market beating returns and if you had a crystal ball and knew that even though this was at some crazy 150ish PE that it would drop down to 30 in six years, you would have beaten the market. Just really, I know this is so nuanced, but just scoping this conversation to 2018, my point here is yeah, like the P looks high today. Yes, Daniel, I totally agree with you. However, I would not be surprised for us to have this conversation in five years and come back and say, "Well, they started growing at 40% Kagger a year. " If the intelligent investor looked at their earnings and their customers and could have created a thesis for that to happen, then I would just argue the point that 100 isn't at face value expensive. But, sorry if this is getting contrived. Um, it just really wows me when I look back because I've missed stocks before. we both have from this like Netflix is an example. Um I think selling Facebook earlier, me not buying Facebook might also slightly pattern match to this. Yeah. But I think what you're doing right now is uh looking at what's it called? Stons. Yes. But it's like the one out of a million that works, right? And you have to think Interactive Brokers is still trading for 100 PE. Like imagine if its PE dropped to 40, the stock would look completely different today. It would actually be producing market lagging returns. So the fact that it's been able to maintain a 100 PE is largely the reason why it's actually continued to perform well. That cannot continue forever. There is no chance it's going to be at a 100 PE in 20 years. There's just no chance. Stocks don't trade that way. like as it matures, its growth rate will slow down at some point. Nothing can compound for 30% forever. When that growth rate slows down, you're damn right that PE is dropping. And when it does, that's going to be a massive headwind. So, yes, you can look at IBKR or Netflix and in hindsight, you can be like, oh, well, you know, let's just buy stocks at 150 PE. Nothing that can go wrong. Go look at Cisco in 2000. Go look at Microsoft 2000. when multiples start compressing, it's not good. So, you know, it's I still think it's incredibly risky. I definitely agree. It has to keep growing an insane amount. Yeah. I think we're saying the same thing here in different ways. It's like what you're saying is true. Like it can't keep this up forever. And the flip side of the coin saying that from the other direction is the reason why it is keeping it up right now is due to this growth as well as maybe some macro and the market comps. And like if things don't continue to go really perfect uh with you calling out that growth like that literally can't exist forever because of the law of compounding in large numbers. It would become the biggest company in the world. Like we know that's not happening. So yeah, good point. Let us know in the chat what you guys think. Um just beat that one with a stick. But surprise you're hanging out with a bunch of stock data nerds. What did you think was going to happen? Well, actually, but it's also interesting because Google is putting in a bid for Whiz right now, and the math works out that it's probably around 100 times cash flows that Google is buying Whiz for. So, but if you go and watch the

video that I just posted not too long ago, I actually made the argument that in 10 years, this may actually not look like an insane price because Whiz is doubling revenue every year. and one you plug in to Google cloud which is what they want to do and then you can sell that cyber security to all of Google's network like whiz may 10x revenue next year so it's like sometimes I do agree with you that like sometimes it looks insane that Google's paying a 100 times price to free cash flow but it could work out they actually paid over a hundred times sales for YouTube was doing $15 million in revenue when they bought it so here's my one introjection like vibes. I'm on the same page as you, but the framing I think is different. Like to me, using a fundamental valuation framework for this type of M& A is not the way these companies are thinking about it. And maybe that's like where you're getting at here. So, for example, YouTube, that was like a long-term strategy play. Like they wanted to own that content. Google's been aware of this AI thing for decades. Like there's a reason why they've had cars with all this LAR taking tons of videos for over a decade now. they're saving that data. Like they were smart enough to like see the future there. So yeah, I'm not saying fundamentals don't matter at all. Like there is a price limit, but I don't really think they're seeing that through this lens. And I agree with what you said. This is a strategic play for them to continue to enhance their like long-term security offerings. And even if we didn't understand this, look at their past acquisitions. Like DoubleClick, debatably the best acquisition of all time. YouTube, one of the better acquisitions of all time. Like these people working in these boardrooms have higher IQs than us. They think about this 10 to 100 times more than us and they're playing some 10-dimensional chess that we don't understand. So this is when it comes down to like trusting good management teams too. Like do you trust that the Google management team is critically thinking about the cost in this acquisition? Well, yeah. The answer is yes. Yeah. The funny thing about Google too is they have a hundred billion on the balance sheet today. So, a $32 billion acquisition is like nothing for the company. And I saw investors getting upset where it's like, you know, they could have spent that $30 billion on buybacks and I think they maybe would have bought back one and a half% of their shares with that money. So, like that's not materially going to impact the share price that much, you know? So, it's like, why not just let Google go off, buy this company, and just take the freaking chance because the alternative is they're just going to continue buying back shares, and it's really not going to do that much for you. Well, it also shows Oh, sorry, continue. Whereas, I was just going to say whereas they could go buy a whiz and maybe it could turn into a $300 billion company in 10 years. Like, I'd rather have Google do that. As a shareholder, that's what I would ask them to do. Yeah, there was a lot of macro stuff going on with like Lisa Khan and the previous admin uh political administration the US was like very anti M& A and like did they blocked a lot of things. Even Figma got like blocked by Yeah. Britain. Uh it really like bricked up that entire uh industry and one issue bigger companies started having is like they have a ton of cash and they were used to going out to buy these. So then to give shareholder returns they're like what do you do with this? And buybacks are good. I like when my stocks do buybacks at a same level at good valuations. But there's also another angle to this where if you're taking your cash and like just buying back stock and you're not reinvesting in the business, like you're not investing for future growth, like should I be putting my money somewhere else too? Like is this becoming a commodity business? It shows me that they don't know what to do with the money and it's almost like a escape hatch button like oh we ran out of ideas. I don't know. Just give them a dividend or like buy back shares or something, right? So yeah, that's what happened. I do like that they're finding ways to do it and I do trust management. I guess time will tell and we'll even see if it goes through because they toyed us last year with this acquisition and talks fell apart. Yeah. I don't know what changed. Yeah. No, I think you just described Apple's business very well. Like that company is producing hundred billion dollars in annual cash flow now and they just spend all of it on buying back shares and paying a dividend. So it's like you know what like my criticism is like what are they actually doing to innovate and continue pushing Apple forward and growing the business because its top line has been stagnant for two years now and they've just been funneling cash into buybacks at 30 to 40 times cash flows which is like not even a cheap price to be buying back shares. So it's like I think that's a clear indicator that Apple doesn't know what to do with its cash anymore. Yeah. They also don't know how to build an innovative product. But I will zip my mouth cuz I've made that rant here before. You want to move on to another topic here? I think we might have like one or two more in us uh as well. Uh it is a Thursday. Normally we are live on a Friday. Maybe that's a little bit of comic relief here. Daniel, you're going to be having some fun. What are

you doing this weekend? Uh going to BC, going snowboarding, hanging out with family, and uh going shooting. Oh, sick, dude. You're like fulfilling all my Canadian stereotypes. Like, we're going to be up in the mountains, there's a snow everywhere. Uh, might have some maple syrup, and then go shoot guns somewhere. Yep. I love it. It's going to be fun. I see something in here about Nintendo from uh Babar Stonk. Oh, this one. Did you find one? Uh, Yaric asks, "What are

your thoughts on Alibaba after recent runup and other stocks? I know Dan sold out entirely of his Chinese stocks. " So, yeah, I sold Alibaba to buy HIMS. Oh, you Wait, you sold out of Alibaba? Yeah, to buy him. When did you sell out of it? When I bought HIMS? Uh, I mean, what Sorry, what price? I think around like I think around a hundred. Okay. Yeah. Well, as a Canadian, I don't have a lot of US dollars available and the conversion sucks right now. So, instead of converting currency, I was like, I'll just sell B. Sorry, I'll just sell Alibaba and put that money into HIMS because I thought HIMS was offering better growth. And for a short time, it did. I was going to say your your timing there was unfortunate because you baggh held Baba for so long. And like, not to make fun of you here, but like you're a very good investor, by the way. So, I I'm going to poke at you when I can. These situations don't come up too often. You bag held Baba for two or three years. You look at the stock price, it went up, it held down, down, down, down. Barely went up. Sold right here. And then literally on the graph, it's like bing. I think it's at like 130 or 140 right now. But not bashing you for that. I actually think it was a fine trade. But yeah, I guess I could speak on this one because I still own it. Um, Baba, super cheap. Um, China exposure. It's almost like a hedge in my portfolio at this point. And the reason why I don't sell is uh one valuation but two I am very bullish on AI also understand that Alibaba might have a moat in China where I'm kind of forecasting that the Chinese government is going to kind of force companies to use Baba cloud there. There's going to probably be uh what I'm guessing is a lot of poor behavior between US and China like continuing to separate. Uh that's just a pure guess by the way, but I do think Baba has a little bit of a moat there. And on the AI piece, they're coming out with some amazing cutting edge models. That to me is showing me at least that they're still able to innovate. toe-to-toe with these massive tech companies and their financials are like okay enough where I'm just here on the hold. Uh I'm almost at the break even point, but that's not my mindset on this investment. I would probably look at selling it if their valuation actually started getting a little bit rich. But for me, it's still I don't want to say too cheap to ignore now at around 13140, but uh still seems to have like a very good costreward, good margin of safety. Business isn't going under, and it's the one Chinese stock I own. So, sorry you're not on the boat anymore, Daniel. We we've been having a lot of fun this past month or two in Baba Land. It's uh been green while the market's been selling off. Yeah. No, I have been noticing that like it actually shot straight up basically since January whereas the S& P has been well down. Yeah. Uh do you still own

Airbnb? Am I still alive? Of course. I've been buying Airbnb. I've been buying heavy, dude. I'm um ignoring Oscar Health, which I don't like counting because I own a crap ton of shares from being an employee there and exercising them. So, it's not like a typical stock buy for me. Ignoring Oscar, Airbnb is by far my largest holding now. Thankfully, the earnings uh swell that they saw uh has completely bled out to where it was before the earnings report uh which is just a gift for me. So, I have been rebying again. Google, Amazon, Airbnb. I bought a couple shares of Lyft, man. Not a lot. It's like, it's not even like quantifiable. It's like a fraction of a percent of my portfolio, but that stock's almost looking too cheap to ignore for me. If people are curious to hear about Lyft, it was either last uh stock talk or the one before that. I think it was the last one. Uh I went through about like a 10-minute investing thesis on that. So, you can see the timestamps uh on your favorite podcast player or on YouTube uh to check that one out. Yeah, I think I remember you saying recently that if Airbnb gets to a certain price, you're going to make it a larger portion of your portfolio. Is that still If Airbnb went under $100, I would start selling off other stocks I like and building it up to maybe like 50% of my net worth. That is how convicted I am on that. Oh jeez. Yeah. And like that is how convinced I am of like how wrong the bears are and like I'm going to eat my own crap here in a few years if I'm wrong. This is not financial advice. I could be wrong. I'm not like saying, "Hey, like have fun being poor. " Um yeah, man. I'm I am convicted. I continue to study it, continue to read articles from the bears, like continue to look at the data. In my opinion, the worst case scenario for Airbnb is it minorly underperforms the market. The business does not achieve new revenue streams and it does not grow at the clip that people expect it to. It will then not be given a high valuation and since they are very uh rich in cash flow relative to the revenue they bring in, their free cash flow margin end of the year at 40% on their TTM free cash flow. It's insane. Uh they're just going to keep buying back shares. So, not that I want that and not that is my thesis, but I'm thinking of this from like the riskreward standpoint. U obviously there are existential risks that could really harm the business that I don't believe will happen, such as the classic regulation argument. We've hashed all these out before, so I'll spare the chat from getting on my soap box and doing an Airbnb monologue more than I already have. But yeah, all you have to do is ask and I'm happy to keep ranting. Yeah, I actually looked at uh Airbnb and booking in a recent YouTube video because booking is their forecast for 2025 was pretty low. Like I think they said four to 5% growth is what they're expecting this year, which is and like when you look at their annual growth rate to revenue, it's going down quite a bit over the past few years. So I think people are just kind of expecting a headwind in travel right now. And obviously that would apply to Airbnb as well, but I don't know. I think I hope it happens. It should if you have a recession. Yeah. No, and I was just about to say too, like are you a long-term investor or a short-term investor? You know, like I think these companies are going to get through a dip in travel if we have one over two years like the economy is going to be fine again at some point. Yeah, I tell people like look at what happened to Airbnb during COVID if you want to like see how the see how the company handles like adverse conditions. This is going to be like Yeah, there you go. for them. So yeah, and you are right like my thesis here is like this stock might not move for two or three years. like I am like very mentally prepared and like ready especially based on the sentiment here where this just like might be a flat investment and when you look at investments that do the best they typically go like this where the market doesn't realize something they grow to the point where it's like unignorable and then all of a sudden it gets a bunch of news attention and things like that. So yeah, my bull case here is I believe Airbnb has a good chance to be a trillion dollar business in the 2030s. I think they're set to be one of the next big juggernauts in terms of how Amazon started off just selling books. Uh Google started off just as a search engine. The biggest companies in the world are led by generational founders who like Elon Musk are one of a kind and they create immense shareholder value by innovating and expanding beyond their core. Uh again, we'll hold my rant here, but I have strong reason to believe from my research that Brian Chesy of Airbnb is the founder to do that expanding Airbnb outside of just travel to be more of a lifestyle brand. Uh, if you want to get into it, listen to the earnings calls. He's very open about his vision. Yeah, I see you laughing at me. I can't help myself. I check myself, too. Like, I read a lot of bare articles because I'm like, I want to make sure I'm not like smoking my own crap here. No, it's what you should do. You definitely should do that. Um, no, it's interesting that you also said it could be flat for two years and you won't care because I've been noticing I own one stock that I've talked about before. Go easy. Um, oh, the controversial one. Yeah. I'm not going to get into the controversy today, but Well, we did that in the past stock

talk if anyone wants to hear that. Yeah. Um, but that stock has been actually negative now over the past one year. And I've seen people basically being like, well, I'm bored of this one now. Like, why would I own something that's been flat for a year and is actually down? I'm just like, you're looking at the wrong things. I don't look at the share price. I look at the business. And the business is doing just fine and growing very quickly. So yeah, you know, I think that's part of being an investor is being okay with the stock being flat for a couple of years. As long as the business is continuing to grow, then all that's happening is it's getting cheaper and cheaper and that just can't continue forever. You know, eventually the market will wake up and be like, "Oh, yeah, this thing's kicking ass. " Yeah. And here's the base case, too. when you have really like profitable uh companies that might not grow that much, you can still have like a generational investment. I think AutoZone is the like classic textbook example of this. Do yourself a favor, go on Stock and Lock and look up AutoZone's diluted shares outstanding since the year 2000. It has been going down like this. They bought back 90% of their shares and that's where most of the shareholder returns came from. So, if you're invested in stocks that like make money on their own, are likely to keep making money, uh, and are very shareholder friendly, uh, that's an angle of value investing I don't see people talk about a lot because to me it's always per share returns. So, you could have like flat, um, net income, but your net income per share could be growing at 10% kagger if you're buying back, right? Yep. I think people sleep on that a lot. Oh, yeah. Absolutely. Right. May we'll take one more here. It's happening to us again. hop on be like half hour and then you get lost in the sauce on the data. If anyone is uh joining us or new to the show uh you can find out when we go on live next in our free uh discord uh which I'm going to drop a link in here and if you're listening to the recording uh we are live on YouTube right now uh hanging out with a lot of our friends in the chat and so if you're free come hang out with us live sometime. Yeah, Daniel, maybe one more here and then we could uh bring to a close. If we did not get to your question, bring it to the Discord. We do our best to get to all them, but sadly not possible. Uh I'm just reading. You and I are both slow readers, right? Uh well, I just don't read the comments until I get asked to and then I'm like, "Okay, I gotta read 15. " I'm like so add you're like talking. I'm like reading the comments. I'm like flipping windows. I got you, man. Uh, well, I just put one up, Jake. Okay. What do you think about Meta in

comparison of other big tech like Amazon, Google, and Microsoft? I think these are all great businesses. Um, yeah, I think Meta is killing it. And I actually think that they're not looking super expensive today. I haven't looked at their price versus the others in a while, but I can bring that up. I think the only one out of that list where I'm still not entirely sold on its valuation is Microsoft. I think it's got to come down a little bit more for me. You did comment on that to me. Maybe it was in a private conversation where for the first time almost ever. You're like, "Oh, you know, Microsoft's like actually not looking like stupidly expensive like it was at 460. " I was just surprised to hear you say that. But yeah, we're going to bring up it's one of those situations where the stock hasn't moved in like 18 months now, but the fundamentals have improved dramatically. And you know, when that happens, the stock gets cheaper. Yeah. Uh what do you think we should bring up here, Daniel? Price to earnings, price to free cash flow. What do you want to look at? I would do operating cash flow. Price to operating cash flow. Oh, you fancy. Okay. Well, all these companies are doing ridiculous capex right now. Yeah. So, let's look at the last uh you know what, screw it. I love going all the way back, but it gets a little weird back there. Okay. Uh let's keep in mind that Meta has not been public for as long as these companies. Uh but yeah, uh what do you make of this graph, Daniel? So right now what we're looking at is we have Amazon's, Google's and Meta's and Microsoft's uh price to operating cash flow which is a valuation metric uh dividing their market cap into their trailing 12 months uh operating cash flow. It's actually kind of weird. They're all like converging on the same value it seems. Yeah. And you well if you take a look at the latest Amazon is at about 18, Google 16, Meta 16. 6 and then Microsoft is still around 23. So that's what I mean is like those three uh the first three looking extremely reasonable in my opinion. I think Amazon's looking extremely reasonable and then Microsoft is still kind of up there in my opinion. Yeah, I always uh the graph might be getting a little bit confusing to some people, but I just overlaid uh as a flatline their actual operating cash flow. Let's Does this look good as bars? I love playing around with these new charts that we made, man. They're so hot. Okay. Yeah, that's a confusing chart. I would just look at the taggers. I know. I'm getting distracted here. Um Yeah. All right. So, let's look. Microsoft since 2006 by far the outlier here with only 12% Kaggger, which is kind of funny because that's actually kind of good. It is important to point out that they are starting from by far like the highest base. So it looks like they're measuring their Kagger from a 15 billion base while of course Google and Amazon is much lower. So that is gamifying the Kagger a bit. Let me zoom in. Okay, I think this is a little bit more fair. Their Kagger for the past 10 years. Microsoft's at 16. 6, Meta is at 28%. Google's at 17 and a half and Amazon's almost at 31% uh measured since uh 2015. 30% Kagger. And what's crazy is like they're some of these companies are still like speeding up their growth rates, I think. Yeah. Incredible. Yeah. Meta I think Meta actually had the best earnings report out of all these companies in its most recent quarter. Like Meta has been absolutely freaking killing it, man. It It's just shocking. Like their last report was one of the best I've ever seen. Wow. Yeah. I mean, it's hard to like paint where this is going to go, but it looks like Microsoft and Google, like uh two of the best sports teams, are just constantly battling each other for the most operating cash flow here. Uh Amazon's actually a little bit more choppy. Uh which is interesting. Uh maybe because of the way they sell products. Obviously, they had more of a COVID dip. And yeah, I don't know, man. I mean, Meta seems to be accelerating. The thing I like about Meta to actually answer the question this person asked us of like what's different? Meta to me is innovating the most in physical tech and I like to invest in the future. So, what I missed is Mark Zuckerberg went on Lex Freriedman's podcast about like a year and a half ago and he was talking about like the RayBands u I guess like AR uh goggles, not goggles, glasses that they made. And it was one of the first times as a consumer where I was like, you know what, like this isn't really that science fictiony. Like I can like the glasses kind of look good. Um it's actually being proven in their sales numbers. I think they've sold like two or three million. So, we're still like in the early innings of that game. But if you believe that like consumer wearables is going to have the type of growth that like AWS cloud had as a segment, Meta at this valuation is potentially a sleeper. Now like I'm not claiming that will happen. I have to look at it way deeper, but Meta to me does stand out that way. Meta is also not focused like too much on the cloud, right? So like AWS, Microsoft, Google Cloud's one of their biggest growing segments. They each have their own core business. So like Microsoft selling B2B, Google is search. Um Amazon is obviously marketplace. Meta is really interesting because they're like mostly selling ads. They own all the major socials. Those have incredible moes that are very hard to break from the network effects they have. It's a compelling business. I I'm really hitting at myself for not buying it at 200 because I said it's already doubled from 90. Why am I going to buy it after it doubled? And I will forever kick myself in the face for thinking that. But we've talked about that too in the past. Yeah, it's actually it's come down quite a bit. It was at 740. Now it's at 592. That's a pretty big correction. That's over 20%, I think. About 20%. I guess it's like every other tech stock. Yeah. Join the market, right? I mean, it's uh feels like they all move together with big money at this point. But anyways, man, this has been great. Uh this is episode 63, so we're really getting up there. We put these on uh

monthly, so we will be doing this again next month. Typically, it's on a Friday, but Daniel's heading to BC somewhere in Canada to snowboard and shoot guns. I mean, it's like doesn't get any more Canadian than that. So, any parting words here, Daniel, before we head off? Just want to say thank you for everyone for joining us live. And if you listen to the recording, uh, thanks for checking in. No, I would just say thanks everyone for tuning in and we'll see you next month. Heck yeah. Let's go. All right. Goodbye, everyone.