Mastermind Q4 2023 | Dollar General (DG): Stock to Buy or Value Trap? (TIP586)

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Stig Brodersen speaks to Tobias Carlisle and Hari Ramachandra. Stig outlines why he put LVMH on his watchlist and is waiting to buy the dip. Hari’s pick, Dollar General, is down 50%, and super investors like Chris Bloonstran, Seth Klarman, and Tom Gayner have invested, and insiders have been buying too.  Tobias pitches Inmode, a stock facing a lot of bad news, which could be trading at a very attractive price. 

Ensure you stay around for the end of the episode, where we share information about how you can meet up with our hosts William Green, Clay Finck, and Kyle Grieve in Omaha for the Berkshire shareholder’s meeting.

▶️ RELATED EPISODES:
– Intrinsic Value Analysis Of Dollar General & Apple | Buffett’s Investment Framework: https://youtu.be/vDFrRUbGrl8
– How To Attend Berkshire Hathaway’s Shareholder Meeting | Intrinsic Value Of Apple: https://youtu.be/OJ8TrdaV-zU
– The Vigilant Investor’s Guide to Success in Stocks & Life w/ Chris Bloomstran: https://youtu.be/kM8Z7cWtKV4
– Mastermind Q3 2023: Stocks on Our Watchlist: https://youtu.be/BIU8t35baOM
– Mastermind Q2 2023: Stocks to Buy Now?: https://youtu.be/DhN8uBjrrgU
– Mastermind Q1 2023 | Disney, Spotify, Amgen Stocks & ChatGPT Discussion: https://youtu.be/rxM-3HneF_k

IN THIS EPISODE, YOU’LL LEARN:
– Why Hari is bullish on Dollar General 
– Why Stig is bullish on LVMH  
– Why Tobias is bullish on InMode
– How can you pitch your stock to the TIP Mastermind Community 
– How to meet up with the TIP team and listeners in Omaha in May

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🖊️ Access the transcript and learn more about the guest here: https://www.theinvestorspodcast.com/episodes/mastermind-q4-2023-w-tobias-carlisle-and-hari-ramachandra/

📖 BOOK MENTIONED:
– Future Luxe by Erwan Rambourg: https://amzn.to/3Qfwt4A

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(00:00) you go to Omaha and you read all the  Warren Buffett letters and and you read all the   books about buffets and him Monga just talks about  how you should just never go into retailing I do   think that retailing is appealing because it’s  very easy for us to understand so perhaps before  

We dive into our piics uh which is typically  how we do things here on the masterman meeting   uh we we all uh present a stock we wanted to  talk a bit about uh what we see right now in  

The economy and there’s so many things going on (00:34) right now and so I’m going to to throw   it over to to Toby uh first to hear like what  is what are you seeing in the economy right  

Now I’ve been talking about on Twitter I’ve got  a collection of the bad news stories that I see   that might indicate some sort of recession  coming and I’ve also been tracking the uh   the inversion the 103 the yield curve inversion I  know that that’s sounds like this it sounds like  

This kind of technical indicator that you can  probably ignore uh pretty comfortably but I I  (01:10) don’t think it is so much a technical  indicator as it is just an indication of what   the Federal Reserve is doing in the economy  so when they see the the the Mandate of the  

Federal Reserve is full employment and stable  money and it sounds like a funny like those two   things don’t really sound like they should  go together but the reason that the do is   when you when you have very low rates really  you get very low unemployment and when you  

Lift rates you get higher unemployment and so  they’re balancing those two and so they see the  (01:44) economy gets overheated which might show  up as inflation or booming stock prices they raise   rates to cool it off a little bit and vice versa  if they see that unemployment’s too high looks  

Like the economy is in recession they lower rates  to try to stimulate the economy a little bit in   very sort of rough terms that’s what’s happening  so we’ve gone through this unusual period where   we had Co we had a shutdown um there were lots of  stimulus that came out of the federal government  

Through that period so uh fiscal stimulus and we (02:22) had some monetary stimulus too in the   sense we had very very low rates and we increased  the money supply you know materially 40% plus   through that period of time it doesn’t always  flow directly into consumer prices it can flow  

Into asset prices and I did both which is why I  think we had nfts running up and the tech stocks   going silly and all of these things that happened  through that period of time and so pal I think is  

Trying to somewhat put the inflation Genie back  in the bottle a little bit by raising rates  (02:57) here we’re we’re at about I think the uh  the 10e is approaching 10% I think the effective   funds rate is somewhere between it’s sort of five  and 6% it’s somewhere around that which is sort  

Of what the interest rates are in the economy  the effective funds rate for most borrowers   those aren’t particularly high on a long run  that’s about the long run average but we’ve   gone through more than a decade of very very  low rates and a lot of interest rates are you  

Know and and in the pick that I’m going to talk (03:28) about this you this is a this is a real   effect the higher rates are affecting um the  business of this of this company so the higher  

Rates just you know a lot of people have borrowed  at the lower rates they’ve borrowed they’ve set   their businesses to run at the lower rates  when rates go up it makes it harder for them  

To finance their business and they’ve got to  roll over a lot of this debt a lot of it’s not   paid out it’s most debt is just rolled over  and so we’re going to go through a period now  (03:55) where these lower rates are going to  start impacting the economy the yield curve  

Really just shows that influence so it shows that  at the short end which is the the shorter term end   the thre Monon end that’s the end that um shows up  when the when the FED is doing something because  

That’s the end that they control and the longer  term end is um less under their control so they’ve   raised rates rates have gone up um historically  and that that those rates going up has caused an   inversion which means that the front end rates are (04:30) yielding more than the the later the  

Longer term rates so historically where we’ve  had these inversions there’s been recession   that’s followed on from it I don’t think that  the recession has followed on sort of I don’t   think it’s a correlation I think it’s in  fact what the FED is attempting to do I  

Think they’re trying to cool the economy down by  raising those rates and it’s difficult you look   at it from J Pal’s perspective he is looking  at an economy where a year ago rates were BAS  (05:00) basically zero rates are now at 5% stock  market’s close to an all-time high L it’s off you  

Know coming up maybe 10% 5 and 10% since 2021 when  it peaked so we’re about 22 months into that sort   of draw down but it has been lower was lower  in August October last year it’s quite a bit  

Higher than it was in October last year and house  prices you can look at any search and you’ll see   house prices are more expensive than they have  been at any other point in history mortgage   applications are at like 30e lows all of (05:36) these numbers are you know they’re  

Stretching to find to go back in the data to  find the last time that it kind of looked like   this and so it’s just hard the extent that you  can find comps they look like they come from the  

70s um which was not a great decade there  was a lot of inflation in the 70s lots of   Unemployment uh stock market didn’t do very well  had two big crashes so the inversion typically   it takes about 12 months for the inversion  to show up in the economy so it’s 12 months  

From the beginning of the inversion to (06:05) the impact on the economy to the   Declaration of a recession that’s the average  we’ve only got eight instances sort of in modern   history going back to sort of I think it’s like  the 60s or something like that of these inversions  

And the recession that followed so there’s  not enough that it’s statistically significant   it’s just that I think the logic of it is pretty  straightforward fed sees a hot overheated economy   raises rates the impact of that is eventually  a slowing economy lower asset prices and 

(06:41) where sort of 12 months into it uh it  was October 25 was the inversion last year so   October 25 would be 12 months which is the average  this is the longest inversion that we have in the  

Data um we’ve never stayed inverted for an entire  year so the FED has kept the rates very high and   there’s a lag between when the rates go up and  the impact in the economy who knows how long it  

Is it could be 18 months to 2 years so I think a  lot of folks have they either don’t realize that   it takes a year for the inversion to really on (07:12) average for the inversion to have any  

Impact on the economy or those higher rates to  have any impact and so they seem to think like   this story is that happened a year ago nothing’s  happened therefore nothing’s going to happen   eight month eight eight ends eight instances  is not enough uh um but that’s the average and  

It has been as long as 15 months and this is the  longest inversion record so it’s entirely possible   it’s quite a bit longer if I look around the  economy I think that I can see a lot of weakness 

(07:41) in individual names when I look at their  results I think there are layoffs coming the   employment number is a lagging indicator it’s  always the last data series to go and in fact   when the employment actually starts ticking  up that’s likely the point that it’s time to  

Buy the market because it’s so lagging that  when unemployment ticks up that’s sort of the   actually the point that you want to be getting  a little but likely asset prices have come   down and it’s time to buy so that’s my that’s my (08:12) kind of thumbnail sketch of what I think  

Is going on um that’s all of those influences have  sort of impacted the stock that I am going to talk   about in a little bit and some other G political  things that are going on but I I do think that  

That is real I think the recession is likely  coming I think you need to be in names that are   robust enough to survive whatever is going to come  and they T typically last like 18 months to two  

Years the stock market could bottom a lot earlier  than that though I think what tends to happen is  (08:43) the stock market we could be we could  have 3 to six months of a lot of volatility and  

Much much lower prices in 3 to six months but at  the time that it looks darkest that’s often the   time to buy so I think likely the after you get  through that period the Ford return particularly  

For Value be very good so I sort of I welcome  these periods even though they are a little bit   stressful for everybody as we go through them  that I think it’s a necessary part of clearing  

The dead wood out of the economy to allow the (09:13) next phase of growth to occur and the   sooner we get it done the better in my opinion  thank you for for sharing Toby uh let me throw  

It over to you har what are you seeing right  now yeah I was very curious to know Co talk   so thank you stick for asking that question so  I think I can I can kind of you know uh add to  

What this Toby said because some of the things  that Toby touched upon I’m seeing the symptoms   on the ground like the layoffs uh in Silicon  Valley it hasn’t stopped it’s a trickle now it’s  (09:47) not a flood like it started off but there  is every other week I hear there are layoffs that  

Are publicly announced but they’re also getting  smarter in the sense that are stealth layoffs   that is like these small numbers like 200 300  I’m going not going to name the companies you   know them they’re all big but I see that  happening even now uh LinkedIn recently  

Announced the layoff 700 or 800 people uh were  let go so I think um it’s it’s almost like all   these companies have got the memo from the Fed (10:23) so that is happening and also I see that  

There’s a lot of pressure from the Wall Street  for many of these companies to incre increase   their profit margin now that growth doesn’t seem  that imminent in the near future so that’s also   probably a contributing factor um the other  thing I I also kind of you know worry about  

Or in the rizon is what Peter zahan talks  about is like us is the only oecd country   that can afford to raise rates the rest  even if they wish to with inflation they   can’t because of the demographic situations uh (11:00) they have they are in uh so that’s and  

Also with all the geopolitical issues right  now it looks like energy cost is not going to   come down anytime soon so I don’t think we will  have the um the Tailwind of lower energy prices   uh going forward now that like a major supplier  like Russia is pretty much shut off many of the  

Markets so um yeah like when you look at all  this data points it’s hard to imagine a good   economy but I when I look look around in  the neighborhood the homes still selling   fast home prices are still alltime high (11:42) we are living two different worlds  

So that’s very interesting yeah thank you for  for sharing Hari you know it’s um I think it’s   it’s a very interesting time you’re in and  one of the things that I remember thinking   about whenever we started of the podcast back  in 2014 is I thought to myself so many times  

That this time there’s so much uncertainty  and something is going to break and I can   more or less say that I’ve said that every single  quarter since we started in 2014 and now I kind  (12:17) of feel like we are in a place where  there is a lot of uncertainty and and hindsight  

It’s always 2020 now whenever we look back we  can be oh of course you know we had the big   draw down with coid yeah we didn’t expect the  pandemic but of course what sort of like what  

We saw with the money printing all of that I had  no idea what would happen if we had a pandemic I   I’d never experienced a pandemic before I didn’t  know what what what happened before and so you  

Know it’s I think it’s important to to stay (12:42) humble and you know I I think Toby   Toby had very interesting uh thoughts on  what you’re seeing for example with the   interest rate and I might I might see some  things slightly different perhaps I’m just  

Been been looking at different uh different  data I don’t know I I I don’t I I think it’s   natural to compare it to the 1970s but I  also think it’s quite different because   the debt level are just so so much different  today like it they’re a lot higher today and  

So I don’t really know where we going like we (13:12) we have this Dynamic where with the   interest rates going up and we do see inflation  retract to to to some extent but how much can   the economy take that’s another thing like  uh you’re looking at the numbers of how much  

Um all the debt that we have how much of that  simly say the government revenu is just going   to be paid back with with paying back the the  government the interest of government debt like   it’s kind of ridiculous and to your point  before har where the US is in a privileged  

Position but it’s it’s not like it’s in a good (13:45) position but it’s it’s in a better   position than many other countries like what you  see in Europe right now with the spread with the   Italian uh interest rate compared to say the  German like and they can’t like it would just  

Break it would just break uh Italy if if you  had with with the kind of debt burden they   have with interest rate and then you have ECB  coming out more or less repeating what ra said  

About whatever it takes in terms of buying back  bonds and it’s just like I can’t really see how  (14:10) this ends because you can’t really  can’t really continue to hike the interest   rate but then you know you sort of like have  to do it because inflation is going to run but  

Also a big component of hiking interest rates also  that well we have to finance this with the deficit   that we have because we have interest rate in  the first place and you know going up so there   it’s sort of like you have this cycle where  it’s just really really difficult to stop it  

Like if you really wanted to stop it it would be (14:35) something like aurity or something like   that which is just not going to fly you know  that’s sort of like what what uh your First   World countries impose on third world countries  and then they do the you know the exact opposite  

Whenever they have a crisis you know whenever they  go to to Pakistan or whatever Argentina they say   something like you should stop spending money  because now you’re in a crisis you know don’t   invest in R&D don’t invest in your education  system and then you know we have all the 

(14:59) politicians in the first First World  countries like whenever there’s crisis like   but now is the time to invest and it’s okay to  run 10% deficits uh on on government Finance so  

I I I just I can’t really see how how this plays  out so I I guess there’s a long in way of saying   I have no no clue what’s go what’s going on I  I do want to say I have noticed that an ounce  

Of gold just crossed $2,000 and we’re closing  in an all-time high and so without I kind of   feel like I sounded like a fearmonger uh just (15:29) before but I I do want to say that as  

Much as I’m into equities having having a bit of  your portfolio in in some hard money might not be   the worst time right now but who knows so um I  don’t know if we can use that as a segue going  

Into to to Toby’s pick I I originally I prepared  saying something about I Now understand why Toby’s   skin is so fantastic but but perhaps perhaps  I don’t know if you could use that as a segue   into your into the first topic here with with  all the the conflicts that we see across the 

(16:01) globe yeah so my pick is in mode inmd is  the ticker uh and the reason that Stig makes the   gag about my skin is that it’s a it’s a minimally  invasive non-invasive um surgical procedure for   Aesthetics mostly so they have a variety of these  different brands but they’re all basically the  

Same the same ideas that skin tightening and those  kind of uh where it’s somewhere in between full-on   cosmetic surgery and the the less invasive  stuff that a cosmetician might do it’s it’s   in that in between um for people who they say (16:46) that their target demographics mostly  

Women 35 to 50 who don’t want the full surgical  procedure but want something does a little bit   more than you know like a cosmetic sort of  update um all of their revenues or most of   their revenues are from the US even though it’s  an Israeli company it’s an Israeli based company  

And that’s one of the reasons why so what has  happened if you look at the stock price the   stock price is down about 50% from its peak uh  which was July uh and then it had sold off it was 

(17:19) down sort of 30% something like that  until earlier this month in October when they   released their full year guidance and they got  they had guided for 5 $ 30 to $540 million for   the year they’ve guided down now to $500 to  $510 million of revenue for the year so you  

Get the idea this is a pretty small company um  and when that happened on that day they sold   off 20% and I do own this thing so I’ve I’ve um  I’ve owned it I’m not entirely sure exactly but  

A quarter or so so we taken a lot of that uh draw (17:53) down so far um this is a smaller company   it’s a $1.6 billion market cap uh Enterprise  Value is about a billion dollars because they’ve  

Got about $600 million in cash uh net cash which  is the kind of business I like not um stressed   financially going into what could be a difficult  period financially um stock pric is at $19.  (18:18) 73 so was $46 so it’s off more than  half since July it’s it’s a financially a  

Very impressive company it’s small and it’s  only been listed since 20189 something like   that so Financial the financial statements don’t  go back publicly for a long way but EPS when it   listed was 80 cents EPS last time it reported  was a little bit over $2 so it’s grown very  

Rapidly over those four or five years they still  projecting Revenue growth rates for the next   years will be well this is this is the this is (18:51) the estimates so it’s 520 well be500   to $510 million this year through to $666  million in two years time now I don’t know  

How likely that is to eventuate I I think that  probably they’re going to struggle going into   what we’re about to go into I don’t I mean I  think there are there are lots of reasons why  

This stock is down um but I still think that the  business itself is is impressive you know the way   that I invest is I’m quantitative I look at the  financial statements I put together a portfolio 

(19:24) this is in my mid and large Cap Fund  Zig I do hold this it’s still in my model I   would still buy it now um so but this is one of  30 names in that portfolio just so you know how  

I’m waiting this thing in mind it’ll be 3.1 3.3%  when it went down I bought a little bit more um   if it goes down again I likely buy a little bit  more at the next rebalance state provided it’s  

Still in the model but that’s my my belief is that  it will be at this point um return on Equity it’s   like 30% plus gross margins are in the order of (20:00) 40% plus uh sorry gross margins are in the  

Order of 80% plus operating margins in the order  of 40% plus and for all of that you’re paying a   PE under 10 price to cash flow under 10 price to  free cash flow under 10 most of the most of the  

Money just flows through to the bottom line so and  it’s a little bit tax advantaged in Israel as well   because they they’re in some tax Zone in Israel  Ford growth is still like in the 10 to 133% annual  

Compound kind of range at the top level it seems  to fall through a little bit maybe a little bit  (20:34) higher than that at the bottom so  I think it’s I think it’s a reasonable risk   adjusted bed this is a better company than  where it’s trading at the at the moment so  

It’s a reasonable question to ask why is this so  cheap why me why now uh it’s Israeli so there’s   clearly some geopolitical risk there in in  the Gaza Strip although they have S they’ve   got a press release saying everybody’s safe and  they’re fine and there’s not a lot of consumption  

Of the products that so they sell to the they (21:02) sell to the the people who perform these   procedures not to the not to the people who  receive these procedures so they’re sending a   they’re selling a um a machine that then somebody  uses to perform these procedures so and they’re  

Silling these mostly into the us so that it’s  unlikely I think that the business itself is   impacted by the geopolitics of that region  possibly a bigger issue for the business but   this is going to be true for many many businesses  is some economic weakness here I I suspect and I 

(21:35) don’t know but I suspect that if you  go into a period of economic weakness then if   people have got constrained budgets I don’t know  that cosmetic procedures are high on the list of   the things that they’ll do but I don’t people  are strange creatures they prioritize different  

Things it’s not immediately true that these guys  will see that reduction but maybe at the margin   maybe they won’t see as much growth as they’re  predicting I still think this thing is so cheap   that it’s such good value at if the business (22:06) continues on the way it has been even  

If it’s just a little bit weaker than it has  been it’s still too cheap at under 10 times PE   the other sort of risks for this thing it’s it’s  become a little bit of a gag on fin twit to say  

That you know all the semaglutide and all the  weight loss drugs um are impacting every single   business you know planes are be people are going  to be lighter so planes are going to fly faster   which means that jet fuel’s going to be consumed  less so that’s going to be weakness in the jet 

(22:36) you it gets silly how far you can go  out there’s a possibility that this is in some   way impacted by people leaning down and therefore  not needing skin tightening procedures but I could   easily make an argument that someone who leans  down decides that they need a skin tightening  

Procedure and so maybe it’ll be a burn to them  I don’t know maybe it’ll be helpful I have no   idea but this it’s it’s worth noting that  that does seem to be a that’s a recurring   risk it’ll probably be in my disclosures for (23:02) my ETFs when it comes out it’s funny  

The stuff they identify every year as the risk  the the main question for me is they’ve got $600   million in cash on their balance sheet they don’t  seem to be spending a lot on R it seems to be  

Largely unnecessary for them at this point there  does seem to be increasing competition they have   a slightly different model uh you know there’s a  razor razor blade type model it’s how much do you   sell the initial machine for versus how much do  you sell the recurring elements of the machine for 

(23:35) they’ve taken One Direction some of  their competitors have gone another Direction   I don’t know which is the correct direction  to go um but at this price I think it’s sort   of a little bit risk adjusted it’s worth  taking a look at something like this but  

The real question is with all this money on board  they’re making a lot of money they’ve still got   pretty good margins a lot of this money is falling  through the bottom line why not Institute a stock   buyback like a material stock buyback at this (23:59) level and really show that you have  

The financial wherewithal and the belief in  the future of the business um to spend that   money buying back that stock and in the absence  of that buyback that’s the only thing that gives   me a little bit of pause because I’d have one  on if I believed in the stock and it was as  

Cheap as this and I had the cash but that aside  they could say well we’re an early early stage   company was still growing we are still spending  money on R&D we need that money there and you 

(24:28) know we might be at the beginning of  the of the economic weakness not the end of   the economic weakness so we might need the  resources to get through the other side so   I can I think those are reasonable arguments  why you wouldn’t Institute one having said  

That I’d still be doing it here because I think  these are pretty good prices but that’s that’s   sort of my pick in a nutshell the business is at  least quantitatively the business is much much   better than the price where it’s trading at the (24:54) moment um there are some a more office  

Geopolitical risks and other sort of economic  weakness and other sort of Trends and things   going on but I don’t know really realistically  what the impact of those things is going to be   so I think as a risk adjusted bet as a small  portion of portfolio this is a good position  

To have on thank you uh thank you Toby uh Hari uh  would you like to go first with h with comments or   questions sure no this is a very interesting  pick and U the reason it is interesting  

Is uh one like you know any bad news that (25:31) can hit them it’s like coming at them   all at once there is uh concerns about recession  there is inflation there is geopolitical risks and  

They’re at the heart of it right now uh so I think  that’s why like Toby I found this very interesting   and also thank you for going over this because I  I had never thought about this general area and  

I was after you shared the pick I was looking  at some of the data and they said that the uh   skin tightening Market um itself is growing at  around 11 to 12 or 133% kager year-over year and 

(26:06) expected to continue that growth and the  second thing in a way correct me if I’m wrong this   can be inflation proof because this is something  that usually the affluent uh the upper middle   class or the rich would go for so they they Target  customers unlike the one that I will pitch later  

Are affluent High net worth individuals are people  with high income so they might be and probably in   developed countries they Pro predominantly are  in us or maybe in Europe and I I don’t think the  

World will have shortage of uh people over 50 (26:48) or 40 no no time soon no time soon so   uh in that sense it it’s very interesting  and timely one and why while I’m speaking   I should congratulate Toby on his pick on locked  Martin what a timing um again yeah it’s sad and  

Paradoxical so I’m not in no way saying we should  celebrate but um but um but this one seems very   timely especially since all the bad news is  out uh the only risk I see as you mentioned   Toby is uh alternative procedures coming along um  whether it is non-invasive or better devices if 

(27:33) they’re not investing in R&D uh and  they might be distracted for a while and there   might be somebody else who might um overtake  them and I don’t know how much of a switching   cost they have I’m assuming minimal um so that  that might be one of the risks that we have to  

Keep in mind yeah it’s I I don’t know how much  competitively how competitively advantaged they   are how much competitive their advantage there  is in this stuff I suspect there’s not much   really if if somebody can come up with a better (28:08) procedure or a cheaper procedure then  

That’s where people will go but you know it’s a  long time it’s a long process to get the approvals   when you’re going to do some sort of procedure  on on person so that’s one thing that slows it  

Down a little bit and they’re already selling  into it and they’ve got a process for getting   the approvals getting the the reasonably  well resourced having said that you know a   much bigger entrant could come in and change the  Dynamics of that so I think I I I do agree that 

(28:40) there is some risk in this and I the  other thing that I should have mentioned the   economic weakness is not just a theoretical um I I  forgot to mention this as I was going through but  

One of the reasons that they said that they missed  guidance was that the higher rates are making it   more difficult to finance the acquisition of their  machines which is you know because there a it’s a   business decision ision to buy these things they  buy them to then service an a third party customer  

So at the margin again it makes you know 0% (29:08) interest rates make everything financeable   5% interest rates make things slightly harder to  finance at the margin um Toby as uh I’m tending  

To say as always I I I like your pick and you  there there are many there there I would say that   there just a you know a uh a huge list of things  that are that really nice about this company um  

The the income statement is just um it just makes  you happy to look at the income statement I don’t   know I I I come across too much of a accounting  nerve whenever I say that but it is like it’s 

(29:46) it’s a very neat uh income statement the  margins are really good um you don’t have a lot   of debt or you actually don’t have thatb to to  to service you have positive Financial income   which you don’t see too much these days um you  uh you have a lot of marketing expenses which  

Is always interesting because generally with  marketing expenses you can also capitalize it   but but generally it’s it’s expensed and so  that means that it’s written off right away   but you’re still building an an asset even though (30:16) it might be expense through your income  

Statement and so um I just in itself I think  that’s very interesting um and I I don’t really   know because I don’t understand the product well  enough um how important that is I will imagine it  

Is important but I I I couldn’t be able to tell  like how much of that we can actually put into   let’s call it maintenance capex compared to to  growth capex um but but but on basically what I’m  

Saying is that you know if marketing if that makes  you think differently about the brand uh it also  (30:48) has value it’s not it’s not just a  pure expense for you as a company so um I I  

Think I definitely like that I like that that um  industrywide um it’s not common in this sector   this is um that Founders are still involved the  founders are still involved both in like the in   in in management but also in ownership it’s just  it’s not because it’s this this specific industry  

You can say that about all industri uh which  which you really like and you know uh like like   Hari was also getting at you know this is just (31:22) the perfect storm like everything could  

Go wrong is just going wrong and and whenever  that happens um um I like to think it’s a it’s   a good thing um because we all have this  recency bias they also low guidance you   know there’s there’s so many things you can say  that you don’t like about this company and so you  

Know I I remember one one thing that that stuck  with me was uh there’s there’s this uh research   been done that if you if you analyze uh sorry  if you invest in companies where they’ve just  (31:52) announced that a lawsuit was filed against  them typically like if if it’s day after and the  

Market has has reacted because of recenty bias  you would actually outperform the market it just   kind of kind of feel that that was interesting so  of course whenever you see lower guidance like if   as an existance shareholder that’s probably not  what you want to see but if you’re if you’re  

New or if you want to double down sometimes it  can be um be an opportunity of course it could   also be a secular thing that you know that’s (32:16) that’s just how capitalism is and it’s   of course starts with with lowering guidance but  I just think that there are so many a wonderful  

Thing so what do I not like about this pick uh  definitely not valuation I like the valuation   I like how much cash they have I should also  mention that but I think one thing I don’t like  

Is that I don’t really understand the buyer and  uh and here I’m not talking about the customer   who wants to have wonderful skin like Toby but  you know the the clinic buying the equipment  (32:46) I don’t know why that they’re buying  it I don’t know why they potentially not buy  

It anymore I don’t know how sticky this product is  and based you know to to Toby’s point you know if   yeah I would also expect because I know nothing  about the industry that if someone came up with  

A better procedure or it was cheaper why wouldn’t  they go with that so it’s not as as sticky as we   would like for it to be um then there’s um  the component of regulations I don’t really   know how what impact that has um and I would (33:19) imagine since it’s um more cosmetic  

I would not imagine that there’s a lot of  insurance that that is a factor here but   that’s just with a very little knowledge that  I have and because if you look the financial   statements you know they have to before 66% uh  of the sales in United States 11% Europe and  

Then International it’s the remaining 23% and they  talk about that in the financial statement as our   International Market there are 27 languages  and more than 27 regulatory bodies that we   need to deal with and I I I don’t understand (33:52) that that component and I’m I’m sure  

They do so I’m not saying that you should  not invest in the company because of that   but I I think that I I’ve learned from bitter  experience that uh as much as regulation can  

Be a mode around what you do it could also  be the very opposite and I I don’t I think I   would need to understand that component a bit  more you know I I mentioned you know you have  

Some of the big tech companies and they you  know you could also say their argument about   that but I I’d like to think at least I understand (34:21) the reg regulatory framework around that   and the potential limitations for those companies  I don’t really understand for a company like this  

And how it could potentially be um creates say a  bare scenario around this so um those were just my   uh my two cents let me throw it back over to you  uh Toby yeah in terms of the um the competition  

Or the the purchaser of the the product it’s  always it’s I mean it’s largely a financial   decision for them it’s the and the payback  period and that’s one of the there there are  (34:55) different approaches among the competitors  is the where how they implement the razor razor  

Blade model how much the I think in mode is  a little bit more expensive up front and then   it’s cheaper to earn over time the payback  period is about I think I I think I saw about  

12 months something like that to get paid back  for the purchase of the machine which I think is   probably pretty good in terms of the regulatory  environment or let let me just say in terms of   that in terms of the competition I think that the (35:22) business itself looks financially the  

Business itself is is it’s much it’s worth a  lot more if the financial statements continue   to into the future if the future looks like  the past has looked the the business is too   way too cheap on the basis of its historical  financial performance and you you’re kind of  

Paying you know under 10 times PE under five times  acquir as multiple EV bit under 10 times priced   to free cash flow those those are very cheap  numbers that’s sort of like a no growth static  (36:00) business pretty ordinary business you  would still do sufficiently well I think at  

Those kind of numbers and this is clearly a much  much better business than that very high return   on Equity reasonable growth huge gross margins  huge operating margins those sort of those sort of   numbers so it’s it’s if the future looks like the  past it’s way too cheap the question is does the  

Future look like the past and that’s the that’s  the difficult question to answer because the it’s   a newish business with you know it’s it’s trying (36:31) to adopt a business model that’s slightly   different to the other competitors out there um  what that looks like through a recession what  

That looks like if they really become successful  and they invite some competition I don’t know and   I also don’t know the regulatory environment  well enough to sort of comment sensibly there   as I say I’m I’m a quantitative investor I look  at the financial statements mostly over a period  

Of years is sequentially to try and get to  the economic truth of the business without  (37:02) looking at so much of the other  stuff because I just think it’s hard to   I I can build a narrative one way or the other  pretty comprehensively showing why it should be  

A good short or why it should be a good long and  it doesn’t help me make a decision ultimately so   I decide to make a decision on financial  statements alone and then the way that I   protect myself is I make these positions 3. (37:24) 3% positions in the fund and I take  

The position up if it goes down a little bit  in a quarter and I take it down if it goes up   a little bit in a quarter and I sell out of it  if it works and I sell out if it falls apart  

So that’s that’s I I’m thinking about these as  portfolio so I’m trying to create a portfolio   of good businesses that aren’t too expensive  that are doing reasonably well good businesses   that are very cheap and uh that’s that’s a  distinction between me and many other investors  

Who will know a lot of this stuff down to a (37:51) great deal of detail because it’s just   it’s not possible to know this level of detail  across across as many names as I cover in the  

Fund but I protect myself by sort of constructing  portfolios so I always say that I try to say that   every time I do one of these podcasts just so that  there’s nobody at home who’s like I said that this  

Is a really good pick and so therefore go and  put 100% of the portfolio and definitely don’t   do that all of these things have risk they  have material risk I’m looking at portfolio  (38:18) performance rather than individual names  yeah and then one one more thing I wanted to add  

Is and if if somebody’s thinking of looking into  this company’s Moree one of the things might be   to look into their IP uh if they have patents  that might be a form of protection they might  

Have they do and they’re trying to protect them I  always say that patents are just a ticket to the   fight rather than you know the winning lottery  ticket they just they they let you get in the   ring and swing a few punches but they don’t (38:51) determine the outcome so I do think  

That they have a patent they they’re protecting  it they they they’re suing to they’re suing a   company right now that’s their last fil and  you’ll see their last uh their last press   release is is information about that so they  have some IP there to what extent you know  

That that is useful or not I don’t know but yes  thanks for thanks for giving me reminding me   about that Harry all right fantastic uh Hari  do I have more for Toby’s PE or if not would 

(39:24) you like to throw to me or would you  like to to pitch your uh uh pick afterwards   no I think that uh that was an interesting  uh uh pick Toby thank you I’m I’m going to  

Look into it for sure it’s very timely I can  go next because it’s some of the themes will   continue wonderful please think you don’t mind  so I think uh keeping keeping up with stocks   that have declined more than 50% I’m going to  pitch mine in the last one year and that will  

Be Dollar General so Dollar General as uh many of (39:56) you might know um is a retailer um they   focus on moderate income households that is  anybody with $40,000 or less mostly they are   completely in United States they have more  than 19,000 stores in 47 States um their  

Strategy is very much the opposite of the  uh big retailers like Walmart or taret uh   in the sense that they’re uh stores are very  small uh on an average 7500 Square ft compared   to the super stores which are 187,000  square ft that’s Walmart uh the second  

Um pillar of the strategy is they focus on (40:45) communities who are not served by   big retailers or don’t have access to many  Alternatives so they’re usually located in   rural areas um which are away from any other  Alternatives by at least a factor of 15 or 20  

Miles radius and uh as of now 75% of Dollar  General locations are in towns of 20,000 or   fewer population and 75% of Americans live within  five miles of a Dollar General so that’s kind of   how they have positioned themselves as their  um their strategy is as I said um and the  

Strength also is that kind of like network of (41:37) locations uh low priced items uh and   then really good scalable Supply and distribution  capabilities um most of their sales comes from   consumables whether it’s Healthcare products  Sanitary products tobacco all the stuff that  

People need need on a day-to-day basis 11  from 11% from seasonal 6% from Home Products   3% from apparel uh I kind of think of them as  like 71 on steroids like they’re conveniently   located but have more options um they also  have ventured into like you know grocery or  

Food uh with refrigerators and some of their (42:21) locations they also are trying to get   into urban areas especially of what is known as  food deserts where there are not many options   and uh U one of their key strengths is  also that they basically sell in small  

Packet sizes unlike the cost go of the Walmarts  of the world because their customers don’t have   the flexibility to buy products in bulk and  get the discount so in so their their tickets   ticket prices are usually less than five dollars  their customers usually when they buy uh their  

Like know average ticket item like whatever they (43:04) buy in a single visit will be $12 or less   many times um this has two advantages number one  it protects them from online retailers like Amazon   because when the the ticket items are smaller  in value it becomes less profitable to ship  

Them especially on in a single day and the second  thing is since they’re focusing on moderate income   households they don’t have the flexibility or the  affordability to pay for the annual membership   so that they can get prime or single day um  uh shipments so and with only five M radius 

(43:50) or within 5 miles of accessible distance  for 75% of Americans most of them would rather   just go buy what they want so that’s one thing the  second Advantage they have is smaller ticket items   has higher margins so they have been historically  known to have higher margins so it works um in  

Two ways to their advantage one defensive one the  other one is from a profitability perspective so   that’s kind of um um how they are uh situated  but however the reason they are down today   is again um combination of multiple things a (44:29) perfect perfect storm uh for example  

Um they kind of in a went time when there  was a lot of stimulus um checks going around   they were growing really well but suddenly  the customer habits have changed this also   goes back to our discussion about the current  economy like especially the households that  

Dollar generalist serves got a lot of stimulus  check they had a lot of money to spend Dollar   General expanded into multiple different product  categories to serve them and then the stimulus   Teck started wearing out interest rates (45:12) started going up and this shows  

Us that uh in fact they said that you know the  same Source sales have gone down even though   their overall Revenue grew by 3.9% historically  they had Revenue has grown um much higher um uh  

In the past in the at least in the 5 to 10% but  like they the same St sales did go down they   brought it up back uh this year though back  to 10% but uh they had a u inventory growth  

Problem because of that so they’re recalibrating  readjusting to that um but it it does tell us   that you know not everything is Rosy in the (45:56) economy uh the second thing is that   they’re trying to also attract more customers  by lowering their prices so even though their  

Revenue has gone up it doesn’t mean that their  profit has gone up in fact their profit profit   margin has gone down this year because of they’re  lowering the margin and they’re also hiring more   labor so investing more uh resources there um  to improve the customer experience so it looks  

Like they are having to woo the customer so  far they didn’t have to because of increased  (46:33) competition derating economic condition of  their customers so all these factors are kind of   you know putting a lot of pressure on them they  also cited shrinkage growing shrinkage which is  

Another uh if you live in California especially in  San Francisco or La you’re so familiar with this   because there are stores which are closing down  in San Francisco because they just can’t handle   the shrinkage um one of the things in California  at is like up to 900 correct me Toby here dollars  

If you are shoplifting and cod up to $900 (47:10) you cannot be persecuted so by law   is I correct me if I’m I’m quoting it correctly  I don’t know but that does sound like I think  

I have heard that I don’t know what the number  was but that it was something like that number   yeah that that has resulted in a high um volume  of shrinkage for many retailers uh and and they  

Also had an incident where one of their employees  was shot uh in Florida so it’s like a lot of bad   news one of the other and in the communities they  Ser they’re all hurting and there is uh a lot of 

(47:48) shrinkage because of that and there is  also um the less affordability by their customer   base so that’s what is causing uh the current um  conditions for them to go down however they are   implementing few new strategies that they believe  will help them uh one is um they’re basically  

Implementing this digital strategy where they have  um an app that you can get coupons and they’re   implementing it treasure hand kind of a model  that TJ Max and Ross have applied successfully   in the past through these apps there is (48:33) also increased loyalty and then  

There is also a a self checkout or no contact  convenient checkout which will reduce shrinkage   as well as improve the efficiency with which  they can operate with lesser labor and improve   the customer experiences their whole um and uh 70  70% of their Target customers do have smartphones  

So they believe this is a viable strategy um  and uh they’re almost done going through their   excess inventory and they have brought the  inventory growth down now and they hope that   they will come back to their original mode uh (49:16) where they were so in terms of um just  

General mode to summarize um number one um  there are a high margin business because of   the small ticket items they have lower cost  because of uh smaller footprint which means   lower rent lower labor lower maintenance  um they’re insulated from online retailers  

Because of the small transaction size um of  roughly $12 per per visit by their customers   and they’re insulated from Big Box retailers  because unlike say Dollar Tree or other stores   they deliberately choose a place where there is no (49:54) Walmarts or targets the world and they’re  

Far away whereas if you see when in California  when I was kind of doing the research for this   Dollar Trees are always located very close  in the vicinity and sometimes it’s the same   parking lot as Walmart so they have taken a  completely different strategy than Walmart  

They did grow through acquisition uh in  the past so um and they’re they’re quite   acquisitive when it comes but uh comes to  growth but they have been quite prudent so   so far um however I think going forward we have to (50:30) see whether their goow strategy will work  

As it has worked in the past in terms of their  performance they’re not as impressive as Toby   Pi it’s only 15% average uh or return on invested  cap the past five years their uh margin is in the  

Low 30s that is um gross margin compared to  say uh uh 20% higher 20% of Target basically   uh 9% 9% is their average um operating margin  for the past uh five years uh compared that to  

Around 6% per Target um and uh overall like you  know in terms of cost one one example I would  (51:13) like to give um for operating leverage  uh they incurred around uh $60 in selling and   general Administration cost uh uh per square fet  compared to say $80 per Target their operating  

Margin is now around 7.9% but it used to be more  than 10% usually so it has so it has come down   and obviously because of that uh there operating  margin also has declined uh quite a bit in the  

Past so from at a peak it was around 10% 10. (51:54) 67% now it’s around 7.99% so their   PE also has accordingly adjusted from a high  of 24.6 7 to now around 11.81 so their stock   price has obviously reduced by 55% so um they  also posted a decline they guided down their  

EPS uh decline in EPS guided out there in their  guided their EPS growth down so um everything   that could go bad has gone bad much for them  uh so that’s my pick and I I would like to  

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Your first order that’s kachava.com SB a lot of  people follow Dollar General Dollar Tree follow   those names and I think it’s because they  they think that there’s something special   there I don’t know it well enough to comment  um it’s retail is tough particularly the sort  

Of discount retail is really tough there’s  some real comp competition in there as you   pointed out Walmart and Dollar Tree and various (54:24) other Costco you know maybe not directly   competitive because they sell bigger ticket  items with a you know it’s a you have to pay  

The subscription fee the membership fee whatever  it is but still like competing we’re we’re just   dividing up the pools of customers who are  going to go to each one that I when I when I  

Look at it I think I think it is I think it is  you know it’s it’s amazing how much it’s come   off from $250 to where it is now which sends  it back to where it was in like 2019 it’s even 

(54:59) cheaper than it was through Co through  the coid crash all that sort of stuff it’s crazy   that it’s it’s all the way back to here which  I think really speaks more you know I I get a  

Little bit of criticism as a value guy who talks  a little bit about macro but for a lot of these   names like I just don’t think see how you can  look at Dollar General and not have a some sort  

Of macro opinion it’s clearly the reason why  they’re weak is because their endc consumer is   weak or weaker than they were when they had (55:24) all the stimulus through through Co   the the questions I think the real issues for  for this are they took on a lot of debt to buy  

Back stock when the stock was much much higher  than it is now and so the stock is down a lot   the debt is still there uh there’s some weakness  in the in their end customer and there’s a lot of  

Weakness in their end customer and I can’t tell  and this is one of the really tough things about   having that big Co comp through there you don’t  know to what extent this is just coming off that  (56:01) Sugar Rush of all the stimulus  that came through or whether this is and  

Then probably both are true or whether it’s sort  of extreme weakness in their end customer that   everybody is starting to feel a pinch I think  this is um it’s an interesting pick I I think  

It’s I do think it’s under valid I think that the  Management’s taking all that debt to buyb stock at   much higher prices is a concern and the um the  debt being there is a concern particular if we  

Still have to go into the period of economic the (56:37) real economic weakness I I don’t I don’t   know a few a few retailers have sort of quietly  slipped out the back door through this process  

It’s been a it’s been rough to be in retail some  surprising once r r declared bankruptcy um I don’t   know about you guys I I don’t know if it’s a rate  or whatever what the whatever the other every time  

I go in there I I I’m astonished at how much  money I spend in all these places I don’t know   how they do it what’s what’s the what’s the (57:05) competitor to r at har what’s the  

Local competitor is it Walgreens I see them  together most of the time maybe did I go to   yeah Walgreens I don’t know but whenever I go  into this place I’m always like blown away at   the amount of money that I spend so they must  be doing okay but rid is like slipped somehow  

R a’s gone into bankruptcy too much dead and we’ve  seen that with quite a few Bed Bath and Beyond uh   you know GameStop I guess has got a GameStop has  got a lot of weakness there but they were able to 

(57:34) raise some money because of the funny  stuff that happened with the stock retail is   tough Dollar General um has a lot of debt has  a impaired End customer at the moment there is  

A little bit of a they do have a finite amount  of Runway here they have to kind of resolve all   these issues uh there’s some risk it’s under value  but there’s some risk in it is is is kind of where  

I get to thank you Ste so um I’m really happy  that you that you um Pitch do Dollar General I   was uh I was actually not sure which company I (58:10) would pick and I’m going to tell about  

That later but uh it’s the very opposite of Dollar  General I would say but it was it was one of those   two uh two companies because um so I I I use uh  dat Roma a lot just because I’m I’m I’m curious  

You know that’s my intellectual snacking and  it’s always fun to see what um what some of the   best investors in the world are are buying and  it’s also interesting to see who who are doing   Insider buying and sometimes those two uh you  know the Stars just seem to align and so you had 

(58:42) um some some of the investors that I  follow including uh Chris brunen uh s claran Tom   Gainer uh and they all use different approaches  to investing but for different reasons I would  

Say at the very core of of course they they agree  in terms of how to value a business but uh the   three of them all either added or built a position  in doll General and then on top of that you also  

See a decent amount of Insider buying so that that  has to make you you know excited and um there are   a lot of things I I like about this uh this pick (59:18) um and uh also I like the valuation but  

You know to to to to um to horris point before  that’s typically the case with uh with value traps   you like the valuation until you don’t anymore and  um you know I I think we we can talk specifically  

About do genal but also think there is a component  of just not liking retail in general which is also   something Toby talked about and why you typically  don’t see that multiple expansion that you might   hope for in retail just because that’s not  how retail trades and that’s the case for 

(59:52) for good reason and you you know I  I remember whenever I was brand new into the   space of investing and you know I I went through  I had my rer page whatever you want to call that  

You know you you go to Omaha and you read  all the Warren Buffett letters and and you   read all the books about buffets and him and  him and Monga just talks about how you should   just never go into retailing because it’s such  a terrible terrible industry and of course after  

Reading that I started to invest in in retail  because I wasn’t smart enough not to not with  (1:00:24) particularly great results and um I  I do think that retailing is appealing because   it’s very easy for us to understand and so it’s  easy for us as investors to understand which is  

Probably also why it’s appealing but it’s also  appealing for people who want to start up a new   business because they can understand that  and there’s this famous story of Sam Walden   that was found I don’t I don’t remember  which story was but he was like founding  

Like laying down on the floor of a retailer (1:00:52) and then someone came up to him   like what are you doing and he was was  measuring the distance between the the   different aisles in the in the supermarket and  the point of that story is I don’t know if it’s  

True or not though but the story of that is  nothing is hidden in the world of retailing   and everything can be copied you don’t have um I  I completely buy into what you said before about   the competitive Advantage but at the same time  you just don’t have that competitive advantage  

In in retailing that mode as you do in many (1:01:17) other businesses and so um that’s the   irony we we’re supposed to invest in something we  understand but whenever we understand very often a   lot of other people also understand it and I was  I was quite of excited whenever I heard you pits  

Do General compared to last time when you pits  paler because I started it I read the reports I   still don’t know what paler are doing and so you  know I sometimes have to rely on like my smarter  

Friends like you har like this is actually what  pener is doing even after listening to what you  (1:01:43) said I’m still like I’m not completely  sure what they do and so but I but I can easily   see how you can build I know I’m sort probably  overexaggerating a bit here but there was  

Something to be said about what can be understood  and and what you could be invested in but and   then I’m also um I also feel like I wanted to  to say you know um Buffett and his his bet on  

Apple that he started in what 2016 or whatnot  it was just there hiding in plain side for all   of us to see and we all used app products it was (1:02:11) so easy to understand and the balance  

Sheet was just pristine and the income statement  was easy to understand and I definitely did not   invest I just spent all my savings on Apple  products but I did not invest even whenever   I was seeing what Buffett was doing so I know  there’s only so much you can say about it’s easy  

To understand and everyone does it apparently  that was definitely not the case with with   apple and me but at the same time also feel that  there’s something to be said about whenever you  (1:02:35) do that extra work um you know let  let’s talk about the Deb situation for example  

I don’t like how much debt that they’re taking  on I don’t like some of the asset allocations   decisions like they’re still increasing their  dividend I’m like why was that not caught a   long time ago and there’s something about yeah  you don’t want to cut your dividend you have to  

Signal the right thing to the market y y y but  like and I know the payout Rao is like 20% or   whatnot so it’s not like they can’t quote unquote (1:02:59) afford it but they’re still taking on  

A lot of debt that they’re not supposed to take  or I would argue they’re perhaps not supposed to   take on and I looked into I looked into the  Deb and the maturity and I’ll make sure to  

Link to that this is in I sure to link to it  in show notes but you can look at it at page   35 so all companies in the financial statements  whenever they’re uh regulated by the SEC they’re  

Supposed to um to to tell about the uh the  debt situation like the obligations and you  (1:03:26) can go in and find that and then you can  compare it to the income statement about what the  

Coverage ratio is so how many times can you pay  that debt back and so that’s breaking down and   I just so roughly I would say it’s something  like and so this is breaking down it’s like  

Total less than one year one one to three years  three to five years and five plus years and I I   just I can see that they could they can still  service the debt obligation but you still have  

To do a bit of work there and um some of that (1:03:53) also has to be refined and an high   interest rate U I don’t know about the credit  rating right now but I would not imagine that   the credit rating is improving right now so  there might even be mean even more expensive  

Debt to to take on and so we can of course look  at like brilliant investors like Chris rstan and   and the like and be like yeah he probably  figured it out but I I still and I should   also mention he he actually went on Williams  podcast and talked about do General and outl  

The both Theses not too long ago I’ll also make (1:04:19) sure to to link to that but I still   need to be I still like to be able to look at de  obligations and then see that there’s at least a  

Coverage ratio of five preferably 10 which is  not the case you’re probably looking more two   or three here and so if you if you can read  the that situation better like I don’t know   I’m coming up with the famous um was it green  blood whenever he did that with marage hotels  

And he figured out the whole debt situation and  all of that and he got rewarded uh hands for that  (1:04:46) it’s just because of that and and  that probably also some of the upside that  

That that I’ll be missing for not investing in D  General some of that is just too difficult for me   to do and I just want don’t want to I guess  I I would still like to have a a very nice  

Margin of safety and and understanding the Deb  situation and I don’t really feel I have that   now then of course you can make the argument  that there’s a margin of safety in in the price   that you’re paying in the first place and it (1:05:12) is indeed very uh very attractive and  

I was I was speaking with one of the members of  our Mastermind Community the other day and I was   saying I think it was trading 110 or something  and what is it trading 115 or what whatnot not  

Today and I was I was telling him like I kind  of felt like a lot of that risk was was uh you   know we had a bit more Marin of safety and  I would I would say the intrinsic value is  

Probably higher than what you’re seeing right now  then he looked at me and I don’t know how long  (1:05:38) he’s been invested but he looked at  me and said you know steti there were people  

Who bought in 180 who said the same thing I was  like okay yes I’ve tried those value TRS before   it’s painful um so so anyways um those are some  of the things I like but also some some of the  

Things that I that I I don’t like about the pck  no thank you Toby and I think this is really good   feedback I think both of you pointed to pointed  out that you know the retail business being very  

Hard and as Buffett says it’s a Widow Maker so (1:06:10) yeah I think that’s one of the things   why I it’s almost like one of those Investments  for me where I had to really hold my house and  

Then do it if I have to buy because um retail  ril is a tough business and as just uh Toby was   pointing out to write a closing shop or playing  for bankruptcy that was Aldi and European retailer  

I guess they came in they tried to do this  kind of you know um smaller footprint smaller   uh square square feet shops that that didn’t  work Walmart had this I forget the name they  (1:06:49) they had this initiative where they  had the smaller U footprint stores like Dollar  

General or Dollar Tree they wanted to do that it  didn’t work out for them so it’s a tough business   um I am not sure whether I should see that as a  strength of Dollar General that all these big guys  

Did try to compete in that space or should I see  it as maybe they’re not seeing value in that area   that they don’t want to put their effort because  if Walmart really wanted to kind of you know put  

Their foot down and go for it for a couple of (1:07:25) uh decades they could have probably   conquered that market they didn’t so either it’s  not viable for them or it might be that it was   already saturated with Dollar Tree Dollar General  a couple of other um uh similar retailers so that  

Is one the second thing is are we approaching a  railroad moment here or are there still Airlines   in terms of speaking of buffet right like uh is  it getting Consolidated with fewer players that   people have realized enough for now that  they’re not new people are not venturing 

(1:07:58) or the existing ones are becoming  more rational I don’t know the answer that is   one thing that we need to think about um the last  one is that they recently had a CEO change so they  

Brought back the old CEO on October 12th it all  was like the Disney moment where the new guy was   shter on his job but then the old the earlier SEO  has come back I don’t know why should I see it as  

A positive or are they panicking so yes there  are more questions my my one of my assumption   for pitching this is that it’s like Toby Pi (1:08:35) like all the bad news is probably   priced in because everybody knows about it so  and then the second thing is when I look at its  

Competitors or peers um they’re all selling in  the P multiple of 15 to 30 whether it’s Walmart   at 30 Ross at around 24 Target around 15 so  I don’t think they they are much Rosier than   Dollar General in terms of their positions so  not sure why they’re uh probably the negative  

Sentiment on Dollar General right now is higher  is my assumption but having said that this is  (1:09:12) not Microsoft this is not like a  multi-year compounder um I guess at best it   will be like a good pop and probably then you  collect the dividend if you continue to hold  

It um so yeah I think that’s that’s my take on  wonderful um thank you thank you har was uh very   interesting uh pick um like I mentioned there  before I’m probably pitching the very opposite   of Dollar General um I’m pitching lvmh and most  known for Louis vuong and and Christine Jor and a  

Few other uh Brands so definitely the the the very (1:09:52) opposite um you can buy it as an ADR if   you’re us-based you can also buy on all the  major European exchanges and yes the tiger  

Is lvmh just like the just like the brand and uh  lvm is behind 75 uh Brands uh I mentioned L Tong   before Christen yor Tiffany uh you name it and  until very recently uh it was the most valuable  

Company uh based on market cap in Europe but  it has just been eclipsed by uh the Danish   pharmaceutical uh company no norisk that’s the  case and now it’s second most valuable company in  (1:10:25) Europe now I do not have a position in  lvmh uh not because it’s not a great uh stock it  

Is most certainly is um but also what you very  often see with with high quality companies is   that they’re trading at generous multiples and you  know this is this is not too different and perhaps  

It is anyways but if you just look at the stock at  a glance is currently trading at a PE of 20 and a   price of free cash flow of 18 and I would also say  that with the interest interest rate of call it 5%  

Um it doesn’t look that appealing but I would (1:11:00) I would argue later in my pits here   that you need to normalize some of those earnings  and uh whenever you do that it it’s a lot more  

Attractive than it appears so please don’t just  look at it and the glance but dive a little deeper   um another thing I wanted to mention is that um I  I think that the company is such of a high quality  

That even if you don’t like the price right now  put it on your your watch list perhaps just buy   a few shares just to um just to make sure that you  have a bit skin in the game and start following uh 

(1:11:29) what’s happening with the stock it’s  it’s very interesting um this is a company that’s   been on my radar for quite some time um and it’s  it’s not because I’m I’m big on on fashion uh not  

At all um I’ve been married like last last week  my wife and I had a 13-year anniversary which   means that to the best of my knowledge I have  not picked my my own clothes for the past 14  

To 15 years like so you might be wondering why  why am I you know pitching a fashion brand but   I or a fashion house but I would say that (1:12:01) it’s not the case I I would say  

That if if you make a bet on lvmh it’s a bet on  brilliant Capital allocation and not so much on   fashion and I also get to to that later um the  founder of lvmh he’s also the CEO today and is  

Currently the second richest man in the world uh  after a long period of being the richest but uh   lvm8 has traded down Tesla has traded up so now  Elon Musk is back at the top uh but still with  

A net net worth of 180 or billion dollars Benard  I know I probably just fine so lvmh the company  (1:12:36) we’re going to talk about here it’s from  uh it’s founded in 1987 but the brands they’re  

Representing there are much older and I’ll make  sure to if if like they have a fascinating story   in terms of of that but I’ll just make it make  it short here um and I should probably also say  

That I should apologize literally for my French  because I’m going to say a lot lot of fren French   words and I’m I’m terrible with French so uh the  name is moy Hennessy Louis Vuitton still it’s it’s 

(1:13:08) know known as lvmh so louisi Tong  is sort of like first I don’t know it’s a bit   confusing and it’s the merg of louisi tongue that  was originally founded in 1854 and the founder  

Name was Louis Tong yes you guessed it and he was  the trunk maker of Napoleon the Third wife and in   turn to the noble families of France and so in  1987 uh the company emerged with mu Hennessy  

Uh which is the top authority in uh champagne  and and cognac then itself was also formed by   a merger and I probably should also apologize to (1:13:41) a Dutch audience because I think Mo is   actually supposed to be pronounced Mo or  something like that uh it’s it’s a Dutch  

Name but the company was actually still founded  in uh in France and so regardless the business   today is a luxury conglomerate and so while  L tongue is core to uh lmbb the the company   is just so much more and you can think of it as  a conglomerate with five major business units  

So you have wies and Spirits fashion leather  goods perfume and cosmetics watches and jewry   and then selective retailing but the one (1:14:14) really to look out for here is   fashion and leather goods that’s 50% of the  revenue but 75% of operating profits and here  

Especially L vuong and Dior out as the two  most important uh Brands whenever you read   the financial statements um they don’t break it  out into different brands how much that they’re   selling but it it is still in that order of the  most important um and uh fashion and leather  

Goods just have an outstanding uper margin  of more than 40% and whenever you’re buying   a stock you’re you’re you’re of course buying (1:14:47) the future cast flows and and not   the uh not the past but it’s also important  to understand the past before before you can  

Understand the present and it used to be Western  Europe and the United States where lvmh made its   money but today Asia uh is the most important  Market with 41% of the conglomerate Revenue   overall um and I should also say whenever you  you read the financial statements they have  

Asia and then they have a segment called Japan  and then they have uh Asia excluding Japan and   still they don’t they don’t break that (1:15:19) up but still China by far is   the most important market for them uh and  that is the case for lvmh um you really  

Need to understand that which we’re going  to get to a bit later and so partly it’s   uh it’s because we expect uh growth to come  from from the Asian region but also because   the Asian consumers buy higher margin products  so for example you can see that simplistically  

They’re buying the the fashion leather goods  with a 40 plus% upate margins whereas for   example something like Sephora which is like (1:15:51) it’s it’s grouped on selective   retailing uh they’re growing fast in the US  right now but they have operary margins of 5  

To 8% so it’s not just a question of looking at  whenever you read the financial statements yes   you look at Revenue but you very much look at  the operating margins uh too and so I think I   might be confusing here because I introduced  lvmh as a luxury conglomerate but I’m also  

Talking about more conventional retailing such as  a Sephora even though it’s still a very small part  (1:16:19) and very small part of the upating  margin so perhaps we should talk more about   the luxury component that’s also where they make  their money and I’ve uh borrowed a quote from the  

From the famous K Chanel uh because she has a  great definition of luxury and that is luxury   is a necessity that begins where necessity ends  what better way of talking about what defining   what luxury is and this is a massive company the  market cap of lvmh is more than 300 billion EUR  

So uh how can we talk about luxury uh at that (1:16:52) scale because by definition luxury   is something that you know that scarce and so  I think there are different ways of looking at   this so perhaps we should talk about uh what’s  a premium product so I recently bought a a new  

IPhone iPhone 15 and um I did not buy the  cheapest model I bought the second cheapest   model so I needed a bit more of hard drive  space and I think I paid an additional $200   something like that so an iPhone 15 is a premium  product but it’s not luxury because you get more  

For those say $200 more you get uh you got a bit (1:17:28) more of hard drive space now it might   be ridiculously overpriced it probably is but you  still get more features someone who is who knows  

A lot more about fashion than me would probably  disagree whenever I say that’s not the case with   a Louis vitt Tong bag for example if you look at  the materials of a $10,000 back and look at it of  

You know a $500 B I would I would make the claim  that they’re not too different but The Branding is   very very different which is why you’re willing  to pay significantly more and this this uh the 

(1:18:00) next thing here about uh cost of go  Souls the the multiple of that is is of course   different between the uh the different types  of backs that they have I’m just using backs   and Sample you can basically choose any kind of  um any any kind of item that they’re selling but  

For backs it’s around 15 some lower and some  higher that they sort of like Mug up on the   um uh the cost of good Souls so like this is like  the margins are crazy for a product like this if  

We can talk a bit about uh pattern recognition (1:18:30) here one thing I I really thought of   even though lvm is is much much better like  I cannot help but think of a a product like   um Coca-Cola you know you have carbonated water  and sugar and a few other inexpensive ingredients  

And then you slab a brand around it then you  control the entire value chain which lbmh also   does and then you know that’s basically  what you’re looking at here right now of   course it’s not not as cheap as water and sugar  whenever you’re creating a bag but it’s not that 

(1:18:56) expensive it’s really really The  Branding and um it’s also it’s also interesting   whenever you look at the balance sheet uh for  lvmh so I’m just going to throw some numbers at   you so we are looking at around 80 billion euros  uh in Revenue but they have 30 billion euros in  

Marketing like it’s it’s such a huge component  of uh of the business and then we we are back   to to to the point about is marketing real expens  should it all be expensed or you really building   an asset and I’ll I’ll argue that you will (1:19:28) have to add some of those marketing  

Expenses whenever you do the evaluation  um back into your into upating earnings   and they’re already across the the entire  company making 25% upating margin so it’s   uh it’s it’s quite uh significant but if we  if we talk about competitive advantage and  

Uh competitors um and I I should probably say  that the first have a competitive Advantage I   wanted to talk about here it’s not so much just  lbmh compared to say a or or caring uh but just  

More the business of luxury in general it I just (1:20:02) mentioned caring there which is also a   French brand but like they’re probably most known  for Gucci and usang uh and and a few other brands  

And so um you know old Brands old luxury Brands  had this mode around them that were just harder to   disrupt and I kind of I wanted to talk a bit about  that here because um if we come up with the more  

Recent example something like open AI you know AI  is you know changing so many things disrupting so   many things and if you look at open Ai and Har I  can probably talk way more about this nikan most 

(1:20:36) people would say that they have a mode  around them and they have a first move Advantage   then we read about something like entropic you  know and there were some of the defectors of   open Ai and they got funded by$ billion dollars  of Amazon and now they’re competing fiercely with  

Open Ai and I don’t know who wins but even  the best art director in the world if you   gave him $4 billion and said okay don’t work  at Louis vong here anymore start up your own   brand he’s not going to disrupt Louis vuong (1:21:05) the same way as uh and Tropic are  

Going to potentially disrupt open AI again that’s  my that’s my my claim with very little knowledge   about fashion and very little knowledge about  uh Ai and and I should I should probably also   just say that um probably come up with an  anecdote before I throw it over to to you  

Guys but there’s this anecdote and again I  it it’s probably the the same lines as Sam   walon lying on on the floor to to measure the the  this between different aisles but um there’s this  (1:21:36) story where Bano he asked Steve  Jobs about whether or not he thought people  

Would still be using iPhones in 30 years and  job said he wasn’t sure but he was quite sure   people would still buy dong pong and drink that  in 30 years which is also owned by lbmh so I got  

A few other points about competitive Advantage  a few other points about some of the risk and   valuation but I want to throw it back over to  you guys and continue the conversation uh from   there I love lvmh as a business that’s  Bernard I know started whatever they had 

(1:22:10) he had some low margin manufacturing  business the family did and I think he went   to New York is the story that I have read  something like this and he saw the margins   or what they selling the the premium luxury  the luxury goods rather what they were selling  

Luxury goods for and he realized that there was  much more margin if you could sell a little bit   more of the magic and I guess the way that you  sell the magic is you spend $30 billion a year  

In marketing to make them an object of desire  and so they do that very well and they’ve got a  (1:22:41) good sense for which um which of  those luxury brands are uring and will be   desirable in decades to come I think they’ve  got a really good stable of Brands there and  

They’ve been very good at picking them and  they they seem to also Thrive under lvmh’s   ownership so it’s a great business run by a  very smart businessman he’s got kids who he’s   bringing into the business as well I think it’s  something like it’s like a it’s not a birkshire  

Hathaway but it’s something like that in the sense (1:23:14) that it’s it’s an it’s a conglomerate   it’s an acquisition based conglomerate that  buys businesses that have these high margins   and but it’s more luxury whereas bksh sort of  go anywhere do anything I think that they uh if  

You look back at I’ve run back through five years  of just looking at the valuation rather than the   share price just looking at the growth in the  valuation the value has grown very materially   over the last five years from you know whatever  it was probably worth 20 or 30 bucks an ounce 

(1:23:46) is probably worth like 150 that kind  of range so the value itself has gone up five   times the stock price has been you know much much  wilder than that through the run the stock price   is currently I think it’s about fair value  um right now so there’s not a big discount  

But this business has shown you that’s that’s  where you’ve had to buy this business at fair   value or a little premium to it because it’s the  value is going to be it’s going to be worth more  

Next year probably or not necessarily next year (1:24:17) but you know what I mean in 5 years   time it’s probably worth more they’ll find some  more stuff to buy they’re reasonably disciplined   in their in what they pay they’ve the brands  th Thrive underneath them I think this is a  

I think this is a this is not this is not the  usual thing that I would buy because it’s just   a little bit expensive for me but if I was  running discretionarily if I had a a PA that  

Was outside of my funds then this is the sort  of thing that I would potentially hold as as a  (1:24:47) distinctly different strategy to what  I do where I also think it would be quite a solid  

Pick that you know in five or 10 years time you  would assume that the business would still be   bigger because they’ve got diverse diverse income  streams across lots of different um product lines   they understand the nature of supporting the  luxury brand you have to invest in it you got  

To invest in it through marketing there have to  be premium products on top of that have to make   them desirable they’re very very good at (1:25:17) doing that so I really respect   and admire lbm it’s one that I would love to  own at the right price I don’t own any don’t  

Plan to buy any because I only invest in my  funds but good pick S I like it yeah I think   I I would second that in I was just thinking  about Dollar General versus lvm if I’m supposed  

To hold one of these for 10 years I would any  day hold lbm match um because I think it’s one   of the um businesses that is most protected  by from any effects of Genera AI in general   AI basically because as I think that was (1:25:56) a good quote St you about what  

Steve Jobs said about iPhone versus some of the  brands of lbmh I think uh there is an intrinsic   value to the brand the scarcity the recognition  and then margin is built into their business   model because they can’t sell it for cheap  so um I think uh and also I looked at their  

Um dividend they have been consistently paying  dividends they have been consistently increasing   their dividends so that’s that’s a good point  that Toby brought up as well uh in terms of   their revenue growth um I think they’re they (1:26:36) have been growing their revenue at  

Around uh quite a healthy uh Pace like correct  me if I’m wrong saying except for 2020 when   the revenue declined they have increased the  revenue yeah the higher teams right uh most   most of the times and sometimes you cing  20% so that’s very interesting I think I  

I in case of their marketing spend I don’t know  whether I should see it as an investment or as a   toll that they have to pay because unlike  say Toby Pi on the skin inbb where you’re   developing the relationships with these medical (1:27:17) professionals or institutions and um  

There’s a lot of greasing happening there so  there’s an investment part of it here it’s like   every few years a new Star is Born somebody  else becomes more popular so it’s almost like   a tax they have to pay they have to keep going  after this new celebrities and new events that  

They have to be part of um so I that’s one thing  that might concern me but I I’m not too concerned   because anybody else entering this business  has to do that so so there will be a cap on 

(1:27:53) their margins at some point is how I  see so I don’t know like yeah it is probably like   you know we can only get it at fair value so it’s  probably trading at a lower P than the last five  

Years for sure so it it might be a good buy but  it’s more like a a stable dividend earning stock   that you keep as a safe place not for something  that would double in next few years necessar like  

20 what what was that rule by monish B 20 26% a  year yeah definitely not 26% a year no so this is   more like the way I look at it is it’s like buy it (1:28:35) and forget it like a Burkshire as we  

Were saying it’s more like Burkshire probably not  I don’t know whether it’s from here on Berkshire   and lbms might grow similarly so that’s that’s  what I see it the issue for something like this   is always overpaying because the everybody  knows everybody knows it’s a good business  

Everybody knows the brands it is run very well  it’s well financed all those things the risk   is that they perform so well for so long they  get well ahead of themselves and people buy  (1:29:07) them and then it’s just dead money  for five or 10 years I don’t think you’ve got  

That problem here I do think it’s at about  fair value I think that fair value probably   chops around a little bit for the next I don’t  know what if we have a little bit of weakness   does that impact the people who buy Lu stuff  that’s a really tough question to answer it’s  

Because wealthier people do seem to be largely  insulated from a lot of the economic pain that   comes through I bought coach in 20 2008 n when (1:29:37) everything was blowing up I bought   coach and I was a much more discretionary  kind of investor at that point I was sort  

Of wandering around looking at all the stores and  watching people actually buying and I asked people   who bought and and everybody seemed it people was  still buying handbags through that period of time   people tend to buy small luxury items so lipstick  does very well through periods of economic  

Recession because you still you know it’s not such  a huge expense but it’s something that you can  (1:30:03) feel good about so very hard to  pick what happens I think but um but it’s   a good business even if we have a period of  economic recession you probably beyond that  

People still going to want to buy all of  those products it’s probably pretty well   insulated ultimately so I like it I think it’s  a good pick at this price you don’t have that   five or 10 years of dead money yeah I I don’t  think you have that uh either chi I agree with  

That I’m not saying that it’s a very cheap uh  stock either uh here at the time of recording  (1:30:35) it’s trading at 670 Euros um the uh  the founder uh bought it back uh so the ownership  

Structure is a bit special so he has a holding  company that owns um uh lvmh and it’s it’s it’s   a dual share class kind of thing where he owns  less of the uh uh of the shares but he still has  

Control uh the family and so uh he bought it back  at 8 8810 EUR just to to give you an an idea um   there is if we can if we continue a bit with the  comparison to Burkshire um and it’s um I would  

Say oh I’m probably going to be crucified for (1:31:17) this if I say it’s higher quality   than the bur here so I’m not going to I’m not  going to say that but uh definitely the the um   R return on Capital employed is much higher than  with Brookshire like we’re still talking close  

To 20% and this is a company with what like 300  north of 300 billion dollars uh um and so it’s   a it’s it’s a huge company and they’re still  compounding really really well and um there  

Are quite a few things I wanted to to add to that  a part of it is that um they have like a almost a  (1:31:49) status of uh like the first buyer if  one of the fashion houses in Europe are uh being  

Sold uh they’re very they’re very connected to  fashion houses in Europe and um you typically   don’t want to sell to Americans uh for um and for  me being American this space is should should be   seen as a compliment so I definitely don’t  want to offend our American uh listeners but  

For example you mentioned coach before uh Omar  tapestry I I um I’m reading this just read this   book here called future locks I’ll make sure to (1:32:24) link to in the show notes and it talks   about how the fashion houses in Europe has  a right of first refusal because they don’t  

Want to sell to Americans and so if if if uh  none of the European fashion houses want it   they bid it to the Americans afterwards which  just gives you a selection bias and another   thing is that um um which seemed like it might  play against this but actually also meant as a  

Compliment lvmh’s founder Bano has sort of  like a reputation for being American which   uh to me is very positive because you have (1:32:55) a strong focus on shareholder value   but in many in many fashion houses actually not  seen as a good thing so he’s in a way he’s like  

The first and last buyer because a lot of those  houses also can’t stand each other but the reason   why I wanted to mention this is that he really  got his education in the states and he saw   like activism and that that way of conducting  business with lbos and the predatory behavior  

And he’s just shown that over and over again most  recently whenever they bought Tiffany and Company  (1:33:23) like the way that he wanted like started  to sue them because they paid some in dividends  

While you know the the the deal was um was about  to get signed and like there was just a ton of   stories about him and he was just that close to  buying Gucci and then he pulled out in the last  

Second because he wanted to you know uh talk  about a few a few dollars and cents and so uh   he he understands valuations really really well  um U and know and so um and also I I’m sort of  

Like trying to figure out what is it that this (1:33:53) company does so well because you it   it’s sort of like difficult to compare them  to to some of the competitors like the most   obvious one would probably be a company like  caring that owns Gucci salang and a few others  

Like I mentioned before and not something  like air which is like family owned by many   many deration and still still controlled by the  family and they have one brand so and it’s um I   I read through the financial statements and  I couldn’t really figure out why is it that  

They’re not growing and why is it that lvms are (1:34:22) consistently growing and the think Co   it goes back to to Capital allocation and I was  speaking with um with industry expert um from a   mastermind Community L Yubel about what what is  it that they do so well and the way he explains  

To me because I again I know nothing about  fashion that he he said that there were like   they have their 75 Brands and it’s it’s sort of  like up to LVH to figure out what should now be  

Be fashionable like where should we put our Focus  right now and that gives me and yes I prepared  (1:34:54) this uh that gives me a chance to  come with another KOCO Chanel um quote it’s just  

Fantastic where she says I don’t do fashion I am  fashion so I love that code and it it it just made   me think of the way that they to Capital location  and the way they take a brand like remova and just  

All of a sudden make it so much more popular and  then like hike prices and like they they really   create fashion which is just absolutely uh amazing  so I’ve talked a lot about all the good things I  

Wanted to talk about some of the bad things (1:35:24) before we we talk about valuation I   think perhaps the biggest risk factor for me is  that I don’t understand the Asian market and uh   and which is really the key to understanding  lvmh and um I I would like to highlight my  

Own show shortcomings before I before I get  to that because I I speak Danish and English   there’s nothing written in Danish about this  so I would I would go to my English s which   is mainly us sources and they would talk a lot  about um lvmh and how they bought Tiffany and  

Company like and and they’re going to (1:36:02) paint a really good business   case about what like it’s just amazing what  lbm have done and how it’s be rebranded and   talk about Beyonce and JC and we all love  them and it all seems like fantastic like  

This is this is the company you should you should  understand and and and and buy but then whenever   you read the financial statements you will  see that uh watches and jewelry isn’t that   important to lbmh it’s 10% of the operating  profit and if only of that 23% of that is in  

The US and oh by the way Tiffany Company is (1:36:32) not just that segment they have   bulgary in your Blau and so many others like  it it it’s a great case study it doesn’t move   the needle but it’s a great case study and  you and and youd buy into the future cash  

Flows and not the past cash flows and so you  really need to understand the Asian market   and uh um I read up on that and I I I think I’m  still I’m still confused about un really truly  

Understanding the Asian market I mean it’s it’s  so vast and it’s it’s so it’s so different um so  (1:37:04) for example um if if if you look at  just China there’s this saying that China is  

Not a country it’s a continent in itself and you  can’t really compare it to Japan you know they if   if you if you sort like look look at the landscape  of Japan you know you have the uh takyo Saka k  

Region and you know uh I I read a book about like  how the landscape uh really determines like for   example uh why is it that brick and mortar are  so powerful in Japan but not to the same extent  

In China just because of the way you know (1:37:35) the just the country but also the   preferences um another thing I learned about Japan  was that whenever you had like that huge slump in   the 90s where just like the economy is terrible  that was really whenever lvmh took off that was  

Really whenever people started spending so much  on handbags because there was a generational shift   going on in Japan at the time whereas you can’t  really compare that to China because that’s really   just characterized by the speed of change and you  have so many different cultures you have so many 

(1:38:04) different languages and it’s different  you have a different types of loyalty to a brand   in China and you can’t even use China as just one  market because it’s so diverse in the different   regions of of China and I I had an experience  uh a few years ago that really made me humble  

Have a have an American friend who uh who who uh  was staying in uh in a Chinese City for a long   period of time and he asked me if I wanted to  visit him I was like sure give me an excuse to  

Visit you and he asked me to to to visit (1:38:35) him in chingu and I was like I   don’t understand that word like I what and  he was like yeah yeah you know it’s a it’s  

A city twice the size in New York I was like  I’ve never heard of this like this was a few   years ago I never heard about it and it’s twice  as big as New York and I was like oh okay uh I  

Wasn’t sure how to to you know could could he  tell me more about he like oh yeah okay if you   don’t know that uh you it’s just right next to  Chong Chen I have no idea what Chong chin is 

(1:39:02) but it’s four times the size of New  York and so whenever I don’t un I don’t even I   haven’t even heard about this city there was  four times to size in New York and here I am  

Wed to talk about understanding just China not  just all the other Asian countries that are very   very different too but just China it’s just it  really makes me humble how little I understand   this and I if I can make a comparison it’s a  bit like if I said uh the Americas you know  

And I was said yeah tell me about the common (1:39:31) denominator between Colombia and the   us because it’s all in the Americas and you’ll be  like it’s called Americas but there’s America and   the Colombia and Ecuador it’s not really the same  and a Chinese person would be like yes ex exactly  

And so um I think that makes me humble whenever I  look at um at the company because you would really   need to figure that out if you really want to to  to bet back on lbmh and so if you are as ignorant  

As me I would probably say you need to put a  lot of emphasis on that margin of safety uh in  (1:40:07) the price that you’re paying at the  same time I just wanted to to say um don’t  

Please don’t look at this as a p of 20 like one  of the key things are how much of that marketing   expense should you add back into normalize your  earning and size does matter I know this is a  

This is a massive company but there’s still a  lot of runway for for growth um not just in uh   what what you would call personal luxury where  there’s still a lot of uh you there’s still a   lot of growth opportunities but they recently (1:40:37) uh went into Hospitality which is a  

Much much much bigger segment and there’s a lot  of lot of things here where you can um sort of   like buy one get get get a lot for free um just  one example could be something like advertising  

Uh size really really matters and they have so  many Brands so um they have a lot of uh puring   Power when it comes to that it could also be  something like real estate so you would think   that they um they would they would pay the  highest rents because they always have the  

Most prominent places they actually don’t (1:41:09) they pay the lowest because they   provide the customers so not only do they get  get the best locations they pay the lowest rent   because they can make a break uh massive  malls because they’re just decide not to  

Go there and so um size really really matters  in this and there was a bit like you know you   know the Netflix effect where you talk about you  can spread uh you know the content creation on on  

More users it’s the same thing whenever it comes  to advertising when it comes to real estate and   so on and and so forth so um what I would (1:41:40) encourage you to do is continue   to study how much of the um of the marketing  expenses should be added back to normalized  

Earnings and I kind of feel that’s a bit more  art than science um and so I want to say It’s   relatively reasonable priced right now uh but  if you’re really into high quality companies   and something that can compound for a long time  despite being a north of $300 billion dollars uh  

Company probably take another look at MV uh  lvmh so um yeah thank you s I think one one   interesting point you brought up was understanding (1:42:14) Asia and their exposure to Asia which is   around 41% of the revenue and China might be a big  factor in that uh is the growing tensions between  

The west and Asia especially China uh and whether  that is going to impact with kind of you know   nationalism and anti-west uh sentiments in China  Well India is also a good good market for them   probably in the future because uh India’s India  is not just one India like similar to what you’re  

Saying in China like I see like three indias  there is India which um uh per capita income  (1:42:53) is as good as a country like Poland um  and the size of that population is also like a  

Country like Poland like say 30 40 million people  but that I hopefully will grow but we don’t know   and so there is a lot of it’s it’s very easy  to look at 1.2 1.3 billion people and say oh  

That’s a market but no that’s not the market it’s  probably 20 or 30 million people for them or even   less than that actually so yeah I think that is  one risk that is worth highlighting when we are  

Looking at it but it’s more a risk for growth I (1:43:27) believe rather than a risk for existing   revenues uh for the company but uh but I’m  still not convinced that the marketing is an   investment in their case how much of it will of  course there’ll be like mind share and all those  

Things but I’ll be surprised if their marketing  expense would not keep up with percentage of   Revenue similar to what it is today they might  have to Forever it’s not like uh they will   invest a lot in warehouses and after that they  don’t have to invest it’s like you got to keep 

(1:44:04) investing it’s my assumption yeah I I  agree with you on that I think they still have to   do that where I might have a slightly different  opinion I I would love to hear Toby’s thoughts  

Also are that so if they have 80 billion Top Line  and then billion in marketing and then 20 billion   uh they also have all expenses of course but  then 20 billion in operating um income I would  

Argue that some of that 30 billion had to be  added back to normalized earnings I would not   say all of it is a is pure let’s call it (1:44:37) maintenance capex for like of  

Better words uh but I’ll be curious to hear uh  uh Toby I I should say that not only do you have   wonderful skin you you seem to be a person who  knows slightly more about uh fashion then than  

I do I don’t honestly but I I I admire the  brands I I I don’t lots of different people   value companies in different ways I don’t  really like adding Back N you know amounts   that are spent and saying that’s not a real  expense even though I do agree that there’s  

A big discretionary component to marketing (1:45:11) and you could easily add some of   that back and it could be but you know guessing  what it is who knows really you you really want   them out there spending the money protecting  the brands it makes them hard like if they’re  

Spending $30 billion a year on marketing it makes  them very very hard to compete with I don’t think   you need to worry about too much the Precision  there I think you could look at something like   this and say it’s not deep value it’s close  to being it’s close to fair value for where 

(1:45:38) it is now but what you’re what you’re  banking on is the fact that they can buy more of   these businesses grow the businesses that they  do have over time they’ll always have pretty   solid pricing impa sounds like they’re very  good operationally if they’re getting that’s  

That’s real own operator type stuff where you  go in and negotiate the lowest rents you know   how often do you see people buy Flagship stores  or Flagship buildings and overpay for those sort   of things so that’s that you know that’s uh (1:46:07) that makes me feel good about the  

Way that it’s managed I look through the the  valuation is um I think it’s close to fair   value it’s it’s at 150 bucks it’s come off a  lot it’s come off from uh it’s closer to 100  

It’s under under 150 now at that level it’s 20  times PE as you mentioned before free cash flow   yield is to around 3% so the question is in a  world of 5% interest rates how much growth are  

You how solid is the growth how much growth  are you expecting does it justify that price  (1:46:42) there that’s that’s the part where I  look at it and I say e FCF at 35 times say so   say 3% free cash flow yield that’s clearly  growing and can grow into the future in a  

World where you got 5% interest rates that’s  the only thing where I sort of look at that   and I think would I buy this right here right  now would I want to just sit in some cash and  

Maybe consider it where the differential is just a  little bit that’s the that’s the only little part   that I struggle with but then equally how often (1:47:13) do you get to buy it I mean this is  

Still cheap for lvmh it hasn’t come back this  much for a long time how how how greedy do you   really want to be I don’t know and I honestly I  don’t know the answer to that I don’t have to make  

The decision so I’m I can’t I don’t actually have  to go and buy it so I don’t have to force myself   to do it but that’s the that’s the that’s the  sticking point for me 35 times free cash flow that  

Is growing versus a 5% risk-free cash at bank on (1:47:42) deposit yeah how do you fall out there   that’s the question yeah all all good questions  and I I I think I I probably see slight slightly  

Slightly different multiples uh for for a number  of reasons um but I I I actually wanted to go back   to this whole thing about potentially adding uh  some of the marketing expenses back and I know  

That probably sounds way too aggressive and it  probably is uh for for a lot of investors what I   what I would like to to compare it to is let’s  say that they’re not uh building a brand and 

(1:48:14) improving a brand let’s just say that  they’re buying a brand instead and then so um   what happens then accounting wise so they they  have something happening on their on the balance   sheet where they uh it’s assume they’re financing  with cash and then they put a new asset on the  

Balance sheet uh and the obvious reasons pay a  lot more than um since this is luxury they will   pay more than the book value so they’re going to  have a lot of Goodwill uh on the balance sheet  

Now and all of that will will be impaired at (1:48:46) some point in time and so what and   I I mean I’m making all kinds of uh I’m TR  like trying to draw a balance sheet and then  

Draw another uh income state with my hands which  doesn’t work well for for podcasting at all but   whenever you do that you don’t see the same type  of expense on your income statement you it looks   like you have a much lower expense even though  you’re still getting the same brand value so  

That’s sort of like to to the point I had before  about why is it that I come with this outrageous  (1:49:16) idea of saying um you’re actually  building a brand a lot of that is you know   really investment capit even though it’s already  written off well if you compare to the other thing  

Where they actually let’s say they would  buy Gucci it would just not flow through   the income statement the same way but Gucci is  still a very powerful brand to own and I think   that I think it’s important to understand that  difference and so I don’t know if it did a good  

Job sort of like explaining um impairments and (1:49:41) Goodwill and in the in taxing between   the balance sheet uh and income statement  but uh I think it’s important to understand   whenever you look at the income statement like  you really have to I call it normalize earnings  

You can call it whatever you want but like please  I think it’s important not just to uh potentially   look at a multiple and say oh it’s it’s it’s  trading at DES but uh sort of like paint that  

Paint that color around it um who knows Toby  and Har um please I I kind of feel I’m way  (1:50:09) too bullish on this and I I haven’t  even made a position yet so please tell me why   I shouldn’t I should shouldn’t invest in  in this stock for me it’s like uh should  

I just keep it in the dry power of for better  opportunities later not just this but um is   this a cinch um I’m so it is definitely a good  business it’s it’s very interesting it’s a good   long-term hold but in the current interest rate  environment and economic situation uh am I locking  

In my funds that I could have waited for better (1:50:48) opportunities um is what are businesses   that are much better uh of course lbmh is still  really good but it’s kind of you know it’s it’s  

About opportunity cost is how I see it yeah  and I think you bring up a great point there   har because the opportunity cost have changed  in so many ways now with the interest ratees   uh going up and it used to get around 0% when  whenever we were just sitting there waiting  

Cash and you know you’re right like now we  could be getting 5% while we’re waiting for  (1:51:18) something that’s really really cheap um  so good good point um Jens uh before we we end the   episode um any any comments to lvm anything  in general before I I give you opportunity  

To to talk a bit more about where people can can  learn more about you not good solid pick from my   perspective wonderful uh Toby where can uh where  can people learn more about you here before we end  

This segment I run aquiris funds we have two  funds deep which is small and micro domestic   us value and Zig which is mid and large cap (1:51:55) domestic us value I’ve written some   books that are all in Amazon under my name and I  have a website aquiris multiple.com which just got  

Some free screens and all of our blog posts  and podcasts and various other things there   thanks for having me S pleasure as always uh  Toby uh hary where can people learn more about   you yeah I think X or Twitter harama is my  handle uh happy to continue the conversation  

There um I also have a Blog bits busness uh. (1:52:27) com uh so look forward to comments   feedback and conversations fantastic all  right uh let’s uh let’s just end this uh   segment here J thank you so much for for uh  making time for for the mass man meeting as  

Always Jans yeah thanks s so as we’re letting  go of Toby and Hari in this epode segment I want   to welcome my co-host clay think uh clay you  just came back from New York uh you just met   our Mastermind community and perhaps for some  of the listeners out there who don’t even know  

What we’re talking about could you perhaps talk to (1:53:05) us about what is the masterman community   and how’s that related to you know this the  discussion I just had here with Toby and and   Hari hi St yes I just got back from New York  City to meet with our Mastermind community and  

First I’ll just say that it is just so nice  you know getting to meet people in person who   listen to our show especially those who are our  most passionate listeners here at tip and you   know most people don’t know this but I know  you certainly know that with podcasting it  

Can sometimes just feel like you’re in a (1:53:40) bit of a silo you know in the   back of your mind that a lot of people are  listening but so much of your time is just   spent alone you’re in Denmark I’m in Nebraska  um I visited Denmark and it’s I see it as very  

Similar places and most of our listeners aren’t  you know aren’t where we’re at unfortunately and   uh you know getting to meet our audience members  especially those that are really really passionate   about what we do it’s just a really nice spark  and you know it’s just awesome just to keep us 

(1:54:10) grounded and thinking about what why we  do what we do here and who we’re doing it for so   that’s just something I wanted to mention it’s  just always cool uh meeting with our audience   anyways the tip Mastermind Community it’s  a paid group we started Stig back in April  

2023 and it’s so interesting to think back on  because we started it you know almost just to   see how much people would like it and just try  and gaug how much interest there would be in   something like this and we were pretty sure that (1:54:40) our audience wanted to join a community  

Like what we could create and I personally  think that the 80 or so members that we have   have I’ve really enjoyed being a part of it so  to give a brief overview of some of the benefits   that members receive um I’d say first off we  have these weekly live Zoom calls that many  

Members have absolutely loved and we’ve been  doing so many different things with that just   to you know allow members to collaborate with  each other and allow members opportunities to   get new ideas share new ideas and learn and (1:55:14) then another aspect of the live  

Zoom calls that’s been really really popular  is our Q&A with our special guests sometimes   we’ll bring in you know guests that have been on  we study billionaires for example here shortly   we’ll be having Tobias Carlile join us and that  will actually happen before this recording goes  

Live but um you know we have 15 plus members  RSVP to sit in on a Q&A with Toby which is uh   really fun and then the past we’ve also had Chris  mayor and gotam bade and then members also get 

(1:55:49) access to an online Community Forum so  they could connect uh share posts you know kind   of share what’s happening and then you get access  to tip hosts so you and I Stig and then um Kyle   grieve our Millennial investing host is also  quite active on our online Forum then members  

Also get invited to our in-person events that we  host which as of today we plan on having twice   a year we just had our first successful live  event in New York City and we had around 17 of   our members able to attend that and then most (1:56:21) importantly with the community it’s  

Really just an opportunity to connect with  many like-minded investors and that’s what I   found to be the number one reason that people  are joining and the reason people are staying   around and you know they really just like  connecting with those like-minded members  

And then another part that I found interesting  that people you know something that people are   really looking for is the ability to share new  ideas and then get new ideas from others so they   kind kind of have that idea flow from people that (1:56:51) they can trust and people that they know  

So if the Mastermind Community sounds exciting to  you then maybe one of these things you know sounds   exciting maybe all of them it’s interesting  how each member they kind of have their own   taste of what they’re what they’re looking for  and what what excites them for example when I  

Got to New York City I I grabbed dinner with uh  two members of our community who I now consider   pretty good friends one of them manages his  own small fund and then the other works for 

(1:57:21) a very large fund as an equity analyst  and I asked them you know what were they looking   for when they join this and you know why have they  stuck around since April or May and they made it  

Very clear that they wanted new ideas and that’s  just really great for us to know Stig because   then we can prioritize that and you know do do  the best we can to offer them that that type of  

Value then I know other people in the group who  you know I hop on a call with them and they’re   just like yeah I just want the opportunity to (1:57:53) meet people in person and that’s great   too so it’s just really cool to see us bringing  together these incredible people that you know  

Have the opportunity to collaborate and have this  group that really lifts everyone up together yeah   and I think that’s very well said clay and if I  can go back to what you said about um we just did  

The first live event in New York like I think  it’s important also to to know that we’re sort   of like building the plane uh as we’re flying it  you know it’s like we we would like to say that 

(1:58:27) we have like a fantastic road map of  what’s going to happen the next 10 years we we   certainly don’t because to your point before  speaking with with two of the members of the   community like we really want to to meet you  in person and and get to know how we can best  

Deliver value for you and uh the best way for us  to know is by asking and for for you for you to   tell us so I think we should probably start there  and so I I don’t know um how this is going to look  

Like perhaps we’re going to have way more (1:58:55) Live Events perhaps we’re going   to have fewer Live Events perhaps we’re going  to do more online I we don’t really know um so   that’s one of the things I very excited about  starting something that’s very new we just we  

We just don’t know and I should also mention uh  now that um we’re talking here that I’m GNA host   a launch in London England uh November 23rd for  The Mastermind Community um this show should go  

Out uh I want to say November four so um if you  listen to this make sure to you know reach out to  (1:59:27) Clay and hopefully sign up for The  Mastermind community and and attend and so  

If you were sort of like were saying wait wait  wait wait s that makes no sense clay just said   that we gonna have two Live Events a year like  what’s what’s going on there were Omaha and you  

Know New York and then the thing in London  so uh Clay is way more organized than I am   let’s start there Clay is very is much more  organized and uh so he would he will plan   these fantastic weekend events um for example  in New York uh for me I for for many different 

(2:00:00) reasons I don’t want to Bard you with  right now uh I travel a lot and it’s very often   with relatively short notice I do that and  so but and whenever I go different places   I’m always always thinking hey meet new people  that’s wonderful and so sometimes I would just  

Type up in the in the masteran community online  and send out an email to our to our members hey   I’m in in this case uh London come and meet up  with me for lunch if you if you want to so it  

Really comes from there and I I would say that (2:00:29) some of the closest friendship I have   today is through tip directly indirectly and  you know just just as one example we we had a   an event uh in 2019 in in Vienna this was before  the masterman community and uh but anyways and  

I one of the listeners him and I really just  hit off you know the the following year my wife   and I uh visited him and his wife in Brussels  and then of course she had Co so like nothing  

Really happened but uh then as recent as last  weekend he came and visit and you know um we   are soon going to go into clusters for guy (2:01:04) guys spear events get together and  

This is not sort of like my way of saying sign up  for the master man Community get new friends that   I kind of feel that that would probably come off  the the wrong way but what I think I found and  

One of the the very very valuable thing I found  from the masterm community has been that you   know we were just all so busy with with family  and koreas and and whatever and I have you know  

I’ll be the first to say I have wonderful friends  here in my hometown um and you know we we we hang  (2:01:37) out we have a beer and we talk about  the the game last week or or whatever we do but  

Like they’re not interested in investing and  and if they’re interested in investing is a   bit more the uh you know rub Hood let’s buy a  call option that expires tomorrow kind of thing   it it’s not like do read financial statements  like that’s not the type of investment uh you  

Know discussions that we’re going to have and  so one of the things I really appreciate about   this mastering Community is that you meet you (2:02:06) meet just like-minded people from all   over the world and you have a chance to to hang  out with them have a ton of fun and also talk  

About investing and you know I I’ve been doing  these Mastermind discussions 10 since um 2015   with Toby and Hari and I learned something new  every time and we also you know become friends   because of all these discussions that that we  we have and and another thing I also want to  

Say is that I am well aware that you can talk  much more about any stock that we do here so   we talk I don’t know 30 minutes about each (2:02:40) stock pick and um I I just know   because I get all the emails afterwards  that there’s so many in our audience that  

Have comment questions and everything is  very valuable and it would be wonderful   if most more people heard that you know  I I can respond back to an email but then   it’s between that person and and me and so  um I I like the idea of how the Mastermind  

Community enable us to to communicate with more  people but still keep a relatively small group   and sort of like find that balance because okay (2:03:15) let me let me come up with an example   you know I I mentioned to you clay some time  back that I was considering p Ing lbmh and you  

Said that L from our community he could help  with some of the qualitative analysis of the   stock so I jumped on a call with him the other  day and had a very thoughtful discussion with   him and then he mentioned another Community  member who had uh who knew someone who had  

Ties to the management of the company and I  was like oh this is great so they can give me   another perspective of the company and so that’s (2:03:42) is kind of like the ethos of how we’re  

Trying to help each other in that and this is  just one example but I I think the example just   captures what the master man Community is  all about you know helping each other and   and um helping each other and also being on  being on the same journey in the you know  

This journey into value investing and soon uh  we’re going to have a discussion together with   the masterman community who have been then  listening to this episode we’re going to   have here today and my discussion with Toby and (2:04:11) Hari and then we can all sit together  

As a group and and talk way more about the uh  the stock that we had the opportunity to do   in this episode um so anyways but I have  very selfish reasons as you can probably   tell for for me to know more about lbmh and  and hear from the community members but clay  

I know that uh there are a ton of other stocks  that we are currently discussing um so perhaps   you can shed some light on on some of that yeah  it’s funny you say you have selfish reasons you  

Know to talk about lvmh because some of the (2:04:41) companies you know I that come to   mind for me that I’ve been talking about with  the community or companies that I own so uh you  

Know I guess I’ll be the first to say that you  know if you’re looking to join this group just   to get stock ideas that you should go buy then  it’s probably not for you because you know you  

Shouldn’t just look for you know an opportunity  to purchase a stock that somebody hands you on a   silver platter because inevitably that company’s  going to be going through hardship and go  (2:05:10) through draw downs and you’re GNA have  need to have that research and that conviction to  

Hold through the growing pains with the company  but you know some of the stocks that come to mind   for meig um I think a lesser known one is  Tech neon which you know discovered through   one of my episodes with Chris Mayer and then  you pitched it in The Mastermind episode and  

Then the community is um quite interested in it  because we’re you and me and Kyle are talking all   about it uh with the group when we actually had a (2:05:39) call talking all about it as well um  

Another one that comes to mind is consolation  software which you know I own I own both of   these names full disclosure and uh it’s another  one you’ve pitched you know in The Mastermind   episode where we can talk about it more uh with  the community and then you also mentioned Lance  

And he’s outlined some of his top Holdings in his  small fund and um you know a couple picks in the   e-commerce industry so it’s just really cool to  have that opportunity to share your best ideas  (2:06:07) with others in the group and then I also  think it’s really interesting to discuss and kind  

Of find out and talk about names where you know  Mr Market is just just going crazy uh an obvious   example from 2022 I think is just meta um we  didn’t have the community then but I’m I’m pretty  

Sure if we did have the community in 2022 a lot of  people would have been talking about meta and how   it just kept falling and falling and you know it  seemed that everyone in the market was just given   up on it and obviously it’s rebounded quite (2:06:41) dramatically and I think another  

More recent example is Dollar General um I  didn’t sit in on the call but I know that   uh a few members were definitely interested in  that stock given that it’s pulled back around   60% from a ties and then you know you think  about how sometimes these pullbacks they can  

Be just really shortlived so I think there’s  a lot of value in having that opportunity to   chat about a company with others and get their  opinion on it and you know see if you know when   a name draws back by that much in a short (2:07:13) amount of time whether that might  

Be shortlived or may you know consider whether  their moat is still intact so I I really think   that is just a a really cool thing to see  you know Mr Market is just kind of going   crazy maybe it’s Justified maybe it’s not um  this is definitely not my way of saying that  

Dollar General is a buy um it’s not one I’ve  uh dug into further but a lot of members have   been reaching out to me since I did an episode  on them um last year and then one more example  

That I wanted to mention um that sort of ties (2:07:46) into sharing individual stocks is   the day we’re actually recording this dig we’re  having two of our Top members come in for what   we call a roundt discussion and essentially it’s  what you’re doing with Toby and Har where members  

Share a pick they do sort of a presentation  we actually you know have them do a bit of a   PowerPoint so it’s easy to follow along and  um kind of hit on all the high points on why  

They like an individual name and then you know we  have over we’re going to have 15 members attending  (2:08:16) that round table so it’s going to I  think it’s going to make for pretty manageable   group where there’s going to be a lot of people  interested you know sharing comments sharing  

Questions and you know it’s just really cool to  see like some of our Top members come in share   their very best idea and you know it gives them  a chance to prepare and have that presentation   ready and then we share that presentation with  the whole group so then the group can look  

Into it and be prepared with questions or uh um (2:08:43) you know what they like or don’t like   about it so yeah those two members I also wanted  to mention that are doing the round table one of  

Them practically manages his portfolio full-time  it seems like uh you know some of these members I   meet they’re they seem to be more passionate  about investing even than uh myself I can’t   speak for you Stig but man these guys just  love stocks it’s it’s pretty crazy so yeah  

One of them manages his portfolio full-time  I believe he’s like partially retired you  (2:09:13) know some some of these really  successful people they they retire but   they get their get their hands in in different  things uh once they retire from their regular  

Career and then the other person doing the the  round table pitch today he uh started a really   successful accounting firm out of Atlanta and  he just absolutely loves this stuff as well   and it’s just really cool for me to have that  opportunity too to to meet people who you know  

Just have a lot more experience than I do in  the markets and there’s so much you know for  (2:09:45) me and you to learn Stig but also the  the group over overall so I think it’s going to  

Make for a really fun discussion yeah you you  definitely don’t want to be the smartest guy in   the room in in any room and I I certainly am not  the smartest guy not even kind of close in The  

Mastermind Community um so uh so like like  clay and I has been hinting at it’s a it’s   a very selfless deed uh to meet up with really  really smart people and talk to them about uh   about Stock Investing and and you know I think (2:10:13) that’s just a very healthy way of um  

Approaching like you you want to continue to learn  like that’s the tra continue learning it’s the   same reason I go to uh I’m going to go to guys uh  event there in in cluster cluster Switzerland in   uh January February like I’m certainly not the  smartest guy in that room either but it’s like  

Doing some of those Live Events are just such  a wonderful way of continuing to learn network   with with fellow investors and I also want to  jump in here and talk about Omaha a little bit 

(2:10:46) we just wrapped up our New York City  meet up up and I’ll be the first to say that so   many people that attended absolutely loved  it um we’re going to be having our second   Mastermind Community meet up in Omaha during  birkshire weekend and some of you might be  

Wondering you know why I’m mentioning it  now well um you said this episode’s going   live November 4th and the Berkshire meeting I  guess I’ll say is Saturday May 4th and we’ll   probably plan some things from Friday through  Sunday those are probably the best days to be 

(2:11:16) in Omaha and the reason I mentioned  this is because the earlier you book this stuff   the better because hotels fill up flights get  get booked and it it’s just you know Omaha it’s  

A you know it’s a big big city for Nebraska at  least but it’s by no means your New York City   where you have the multiple airports you have  an international airport um so the earlier you  

Get this stuff booked the better because it just  becomes more of a headache to do it later after   you know everyone’s already uh jumped a gun we we (2:11:48) talked all about this last year’s dig   you know covering everyone’s questions everything  you need to know about the Burkshire weekend that  

Was episode 500 so that was about something we  recorded about a year ago if anyone wants to   learn more about Berkshire weekend right now but  uh definitely get your stuff booked if you plan   on going to Omaha for those who aren’t aware  in the audience I was actually born and raised  

In Nebraska and I’m still based here so I’m  quite familiar with Omaha and it really helps  (2:12:17) us STI with headaches of planning  something like a live event because planning   something is already hard enough so it’s much much  easier when you’re already familiar with the area  

You know what sort of businesses are around what  areas you should be in and uh this past year in   2023 I’ll say we only did free events because we  didn’t have our Mastermind Community yet and it it   was quite overwhelming so I’m definitely looking  forward to having a smaller group and you know  

Really building out those deeper relationships (2:12:49) because when you when you’re uh with   a group where you don’t really know anyone it’s  just like a ton of surface level conversations   with people you uh generally you know don’t  follow up with and stay in touch with so that  

Was one thing I really liked about New York  City is I knew who I was going to be meeting   with you know they weren’t asking me you know  just uh surface level questions that really   don’t dig deeper and uh like I mentioned we  have currently 80 members of the community and 

(2:13:19) my guess my best guess would be that  we’ll have 25 to 30 or so of the community uh   joining us in person in Omaha and uh I certainly  know that a handful of people that were were in  

New York City they already uh plan on meeting us  an Omaha again too yeah and and and I should also   say that if you if you haven’t been to Omaha uh  and this might just be all my own biases um it’s  

It’s just very nice to have a group group you  can meet up with just in just in general um and   you can go to these free events like I don’t (2:13:56) know we probably had 400 people or  

Something like that go through our events and  like if if you spend two minutes with each of   those 400 is 800 minutes times 60 like someone  better with than than me with math would probably  

Say it’s like what 13 hours of like it’s it’s a  lot and you don’t even get to get to speak with   people and I kind of feel like it’s probably one  of the the lessons we learned also again perhaps  

A bit for for selfish reasons that we would  really like to connect a bit more with our  (2:14:26) audience and you know it’s it’s kind  of it’s kind of like being a difficult decision   because a part of me also um I don’t probably  because I’m a teacher at Heart Like I want to  

I kind of feel that there’s something nice about  meeting as many as as possible from all walks of   life and I should also say that the masterman  community is certainly also from all walks of   life so it’s not it’s not like that it’s more  Christian especially for me I get very ID  

Whenever I go to places where there are a ton of (2:14:53) people and you’re supposed to to mingle   like for me that’s like it’s just really really  difficult and um it’s a little easier whenever  

You have like the same like let’s say you have 25  people to hang out with or what whatever and then   you of course whenever there’s 25 people there are  some that you have more in common with than than  

Others but it’s like you can have conversations  with those people for consecutive days and really   you know get to know them I kind of feel that’s (2:15:21) really nice you have a you have a place  

To go you have an itinerary it’s just like it’s  a little easier and especially you know when if   if you come there and I know like clay would  have HomeField Advantage because he used to   live there and and today lives very very close  but like it’s for me like say flying in you  

Know I I never owned a car that’s sort of like a  different discussion but like I to me it’s like   really really nice that everything is walkable  but the walkable area in in in Omaha is just 

(2:15:49) very very small so if you don’t want  to be dependent on a car you can of course rent   a car uh if if if you want to and you might say  well there’s also Uber yes but this is this is  

Like you have four 40,000 people coming into  relatively uh I don’t know like 3,000 people   whatever but like in that area it’s just so  congested so you can’t like if you kind of feel   like I I’ll be one of those 40,000 people just  showing right up to to the event together with  

With with Warren Charlie and all the others like (2:16:16) no you’re not gonna get an Uber and   so so like there are so many of those things  where to me I can just say it’s so it’s so nice  

Either either to I I both tried like staying  like really near all the events which has   been really nice but it’s obviously also more  expensive and I also been you know in Council   Office which is like I don’t know 30 minutes  away or something like that and like to know  

Someone who can sort of like show the ropes  because I was certainly a newbie when I was   I was there the first time in 2014 to me that (2:16:46) just gave me a lot of less angst of  

Of going there in the in the first place and  you can really focus on the reasons why you’re   you’re there and I should also say we would  really like for the community to to feel like   it’s it’s small and and feel more like it’s a  mastermind group for example you know Clay you  

Mentioned before that you knew this specific  individual in the group uh L and you knew   him well enough to know that he could perhaps  help me with a stock and we can’t do that if we 

(2:17:13) have 500 members and we don’t want to  be 500 members so like we want to to keep it uh   small and I should also say that we do see this  as a as a two uh two-way street you know uh we  

Want to make sure that that everyone is vetted  before they they join uh the community but it’s   it’s again it goes both ways because we also want  to make sure that we can add value for you coming  

Into the community but anyways um clay I I wanted  for to to you to be a bit more practical about   all of this yeah I can’t help but jump in with (2:17:47) a couple other comments there because   you mentioned just something so so important  um you know turning back to the surface level  

Conversations um a couple of the things I  learned from our New York City Event is a   lot of people don’t just want to learn um  to be a better investor or learn about a   specific name um since so many in our group  are just like just very successful in many  

Walks of life whether entrepreneurship running  a business you know excelling in their career   um one of the things we did was we created these (2:18:25) member cards where each member would   essentially say you know here’s my background  here’s you know my line of work and uh you know  

The lines of work I’ve been in in the past  here’s what I’m looking to get from joining   this live Meetup maybe it is something with  investing maybe there’s something with my   business where like you know this is one of my  Growing Pains within my business and then uh  

There’s we also do things like have them fill out  some sort of vulnerability so like what can they  (2:18:52) offer to the group for members who  are looking for you know maybe tips to grow   their business or whatever else so I think those  member cards they really jump over the uh the uh  

Surface level conversations and really dive in  and you know you read someone’s card and you   you’ve realize that hey they really need help  with this and I know that I can help them with  

That so it’s really a a fantastic way I think for  people to you know dive in deeper and really build   those relationships and another thing I (2:19:24) uh selfishly do is uh you know   I create the itinerary of what we’re going to  be doing but I also don’t want to make it too  

Structured where you know yeah you know every  30 minutes you have to be going to a new place   you know exactly at this time we need to head to  the the restaurant restaurant or whatever um I  

Really want to you know open up the schedule a  bit to to allow that Serendipity to take place   so you know maybe right off the bat we have  for New York City for example we just had a   happy hour right off the bat so everyone (2:19:54) met each other everyone had a  

Chance to kind of uh get their feet wet get to  know who who was going to be there and then you   know the the days that followed you know there  was a lot of open time for people to you know  

Maybe go grab coffee with a specific person  or whatnot so I really just think uh I’m just   really excited for Omaha even though we just got  back um from New York City here but anyways if   this sounds exciting to you to apply to join  listeners can go to the investors podcast. 

(2:20:25) com Mastermind Das application  again that’s the investors podcast.com   Mastermind application and for those who don’t  want to type all that in we’re also going to   provide the link to this in the show notes it’s  probably easiest to fill out the application on  

Your computer rather than your phone and by  the time this episode goes out we’re going to   have the registration list out for those who  want to go to Omaha and spots are going to be   limited so if you’re interested in joining the  group meeting many incredible people including 

(2:20:57) myself Kyle grieve who’s our recent  host of millennial investing then you can apply   to join by going to that link and and just as  a disclaimer here I’ll also mention that our   community is priced at north of $150 per month  and we’ve been gradually hiking that price over  

Time and that’s shown on the application and  it sort of reles to the point you add Stig of   wanting to keep the group small and keep the group  tight-knit so if joining the community you think  

Is right up your alley and especially if you want (2:21:27) to get registered to meet us in Omaha   we’d absolutely love to have you join us if you  feel you’re a good fit and also as always if you  

Have any questions comments concerns uh feel  free to reach out to me at clay the investors   podcast.com um always happy to hear from the  audience if there’s any way I can help them   wonderful wonderful uh thank you so much uh clay  for taking the time to jump on this call all right  

Uh everyone again thank you so much for for tuning  in and um yeah we see each other again uh for  (2:22:00) for another episode take care  constellation software is a great stock   and you might be thinking if if it’s such a  wonderful company why don’t you have a position  

Well as it’s very often the case whenever you find  a high quality company the market also knows that   it’s a high quality company so Mr marget sells the  company to you at a at a very high multiable you  

Have to pay attention whenever that is to your  advantage and the multiable is more attractive