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6 Stocks With Insider Buys This Week; CoreWeave's Collapse; Amazon's New Grocery Venture $AMZN $CRWV
01:03:53
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- [00:01]
A
Welcome to Chit Chat Stocks, a podcast that helps you discover hopefully your next great investment. Today we've got our Power Hour episode. We do these every week on Thursdays at 5pm Eastern Time and we do them live on YouTube. So if you have any questions and you want to ask us and maybe you're listening on the podcast players, feel free to head over to YouTube and ask away in the comments. Want to once again, that's 5pm Eastern Time on Thursdays. We've got a load of topics to discuss today. One I want to talk about is the threat of AI potentially eating or disrupting software. That seems to be kind of a focal point and a point of discussion topic that a lot of people seem to be on both sides of. And we've got some stocks that are down a lot maybe on that narrative as well. We also have I don't know if there's a whole lot to talk about here for us, but Buffett disclosed his mystery position, I think 30 minutes ago, so we could talk about that. And then, Brett, you've got a couple of items here as well. We've got Kava earnings. I've got a little, maybe a little pat on the back for you, potentially in one of your portfolio holdings with Portillo's not going to spoil anything yet. But how are you, Brett? It's kind of the tail end of earnings season. So how has it been for you so far?
- [01:28]
B
Yeah, we're, I think every company in my portfolio is reported so digesting everything. We're in the tail end. So earnings, I don't even know how to describe them this week. I don't want to use the swear word term to describe these companies. The companies that may not have much about them, may not have much of a business are reporting this week. And it's nice to not have a barrage of information to try to digest. Been trying to get through everything, but I thought Kava was quite interesting and Core Weave Circle, Portillo's is related and Amazon's grocery initiative, which I think they may have finally gotten it correct. But let's get to the first topic. Ryan, what do we want to discuss first?
- [02:21]
A
Yeah, well, just to kind of touch on what you just said there, the earnings season, call me crazy, but what do we think of this spreading them out, spreading out like earnings reports.
- [02:37]
B
Throughout.
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A
The quarter, you know.
- [02:38]
B
Yeah.
- [02:39]
A
Not concentrating thousands of them in one week so that people can, you know, actually look at all the reports. But anyways, I'm sure there's reasons that it's concentrated to A couple of weeks. But it would be nice if it wasn't so jam packed.
- [02:58]
B
Yeah, exactly. I agree, I agree. Hey sec, what have you auditors, if you're listening, maybe an idea but for the companies that are already doing it, they're not going to switch. What do we want to discuss first, Ryan? AI Eating Software.
- [03:14]
A
Yes, first on our list, AI Eating Software. There have been a number of analyst reports. I think one was actually named AI is Eating Software. And I want to talk about this because there are a couple very notable stocks that are now in big drawdowns. Salesforce is down 36% from all time highs. ServiceNow down 27% from highs. Adobe has been cut in half basically -49%. Monday.com is down 61% from highs and HubSpot has been cut in half as well. And the narrative here, I guess there's a couple schools of thought. So the first one is that AI is so helpful that companies are now going to start building much of the functionality that they get from soft like outside software vendors going to start building it in house internally. CRMs, payroll software, maybe anything that they can, they think they can do on their own scheduling software. I know a lot of people actually subscribe to that stuff like that. The thought here is that companies start doing it internally. I think that's the thought from some people. The other I guess narrative that goes along with this is that AI is making it so much quicker to scale a startup that that there's now more competition for CRMs and other software solutions. That one I can kind of get behind a little bit more. But Salesforce is trading at its lowest free cash flow multiple of all time. I think maybe, maybe something happened to the dot com, but I'm pretty sure it's the lowest of all time or not. The dot com, the gfc, Adobe once again they've been public for a long time but for sure the the lowest valuation in 15 years EV to EBIT I think is around 16 times trailing, maybe 17 times trailing, which is very low for them compared to their historical averages. What do you think? I guess two questions here. Do you think companies will actually take this let's build it in house approach now that I can maybe help do that or do you think that this is a lot of these were richly valued stocks anyway, so it might just be a sort of a natural drawdown. But do you think there's opportunity here?
- [05:47]
B
Maybe. I have no clue. The if someone said hey these companies are going to be able to use AI tools to build all this software in house, I say, yeah, that's plausible. If it can do that. I have no idea if the software can do that or the AI tools can do that. Maybe it's a giant unknown to me because all these tools, from anthropic to what is it, cursor, OpenAI and Google, they have their products change every year and they've changed every month. So who knows if something's going to come out that actually revolutionizes this. My gut says these companies stay and what I mean is the Adobes, the Salesforces, the other what have yous, they're gonna stay entrenched within these large enterprises, but at the edge. Maybe there's some disruption. If I look at a company like Monday.com though, and maybe this is not indicative of the entire basket. We're still at an EV to sales trailing to a month of seven, so it's not dirt cheap even though it's in a drawdown. Perhaps these were priced to perfection. Adobe at 16 times earnings feels fair to me. I'm not touching these stocks. I don't really invest in software. It's not a industry I know well whatsoever. But if you're someone that's confident Adobe is going to stick around and that the moat is going to be fine or maybe just slightly weaker than it used to be, the pricing power here alone should make it a good stock to buy. Plus, and I saw you posted this chart earlier this week on the the fiscal AI Twitter account. Adobe is buying back records amount of stock. So they are confident in the business and maybe they're seeing stuff that the investing narrative isn't portraying correctly. Because as I've learned in the last five to 10 years, when Wall street takes a hold of a narrative and the online investing community takes a hold of a narrative, it can. The exaggeration of what is actually happening can get put a hundredfold. Like there can be thoughts of what is it? Oh, the latest one, Google Search is dead. That one was taken from a few big analysts on Wall street and basically spread to everyone. And Google's valuation got cut in half. So is that happening here? Maybe I have more confidence in Google Search, something I think I understand better as opposed to software. But I'm curious your thoughts, Ryan.
- [08:35]
A
Yeah, I mean I had been a buyer of Adobe, I'll come out and say that. So I like them and I think they've been, I think you get good returns from here would be my gut reaction. And the fact that they're buying so much stock, I think it's at basically an 8% buyback yield. Every time in my short investing career that I've seen a business that's been deemed ultra high quality for 15 years get really cheap and there's a short, some sort of narrative that's crushing it. This kind of like Meta as well. When those management teams start turning on the buyback machine, it usually ends up in pretty good results a couple years from then.
- [09:25]
B
Yeah. And Meta didn't even turn on the buyback machine. They've been, they started abhorrent. They're pretty abhorrent about it.
- [09:32]
A
But yeah, yeah, I remember they, they announced that they would and that was pretty much all it took. And then the results started to improve as well. So it became they weren't able to buy back at the same prices that they would have. But I think Adobe is a bit of an outlier here in that when you look at task management and CRMs and IT ticketing software, those to me do feel susceptible for people to try to build it in house. And oftentimes I think startups especially like you typically do, try to build like that CRM initially on your own and a lot of people probably try it in a spreadsheet, try to manage it there and then all of a sudden they realize that there's all these tools built out that are great for it. And my gut tells me there's a. These companies are all going to be fine. There's this old saying, I can't remember where I heard it, but it's like, does it make my beer taste better? It's. It was this sort of approach from apparently a famous brewery I think in Germany, where basically they said unless it affects the taste of my beer, I outsource the function. So if it's like the restaurant management software, they're not going to build that. If it's payroll, obviously they're not going to build it.
- [11:09]
B
I think the listeners understand. Ryan. Yeah, I've heard the term before.
- [11:11]
A
Doesn't make my beer taste better.
- [11:13]
B
Companies are not going to. Companies aren't going to build all this stuff in house. They're not going to build Adobe in house. Canva in house. Common house. Is that what Monday.com is? Ticketing software?
- [11:22]
A
Task management, for the most part. But they've also grown into CRM, I think.
- [11:28]
B
Yeah, yeah. Other people can make money in this. I don't have confidence in long term. It just, it's just not the sector I like. But if you are confident in the competitive advantages, there are opportunities here given the valuation.
- [11:47]
A
Yeah, yeah. And I, I Don't know what spurs the narrative on. I swear, it's like, you see one.
- [11:53]
B
It'S a game of telephone. It could be. That's it. That's all it is.
- [11:57]
A
The people love to use expert transcripts for more than one hour.
- [12:03]
B
Yep.
- [12:03]
A
Yes. And it's like all of a sudden, that catches on. All of a sudden the analysts start putting it in their reports and saying, oh, you know, we're seeing a slowdown or pressure, whatever. And then all of a sudden it becomes this big narrative. Remember when the Apple executive came on under. Under oath and was like, we're seeing a slowdown in searches or something like that? And then Google Safari. Yeah.
- [12:28]
B
Because Google Chrome is taking market share.
- [12:31]
A
Yeah. And then the Google the next day was like, no, we're not seeing a slowdown in searches. But that. That narrative caught hold for like two or three months. And search was growing, paid clicks were growing. And they're like, no, no, we don't believe it. It's like, yes, they're giving you the numbers.
- [12:49]
B
It's very memetic. It's again, a giant game of telephone that gets played around. One that I saw that I think you get turned into this in the opposite direction for Google Search is. And I saw this from Mostly Borrowed Ideas, Daily Dose. There was a survey from Semrush around Google search usage before and after or people that use ChatGPT and people that don't. And fascinatingly, people that use ChatGPT more used Google search more, according to the survey. Now, this is a survey of, I'm assuming, like a hundred people. Maybe. Maybe it's statistically relevant, but this could get spread around. And then they go, oh, it's actually a huge winner. Now. Alphabet could get rerated from 20 times earnings to 40 times earnings. Who knows?
- [13:39]
A
Speaking of surveys, did you know people don't drink anymore?
- [13:43]
B
Yeah, Ryan, I'm seeing this chart here, and I was. The headlines that were getting tossed around that no one drinks anymore. I don't even know if this chart is statistically relevant. It's a tiny dash.
- [13:55]
A
Is the. Okay, yeah, let me give some context on it, because we're describing the chart.
- [14:01]
B
I'll share the screen. I'll share the screen.
- [14:02]
A
While you're people listening probably don't appreciate it, but a survey came out this week. And I know surveys can be just a load of crap, but I think there's some validity to this. So the survey was conducted by Gallup, who has apparently been tracking alcohol consumption since 1939. Yeah, that's. I didn't know Gallup had been around that long. And according to Gallup, the percentage of U.S. adults who say they consume alcohol has fallen to 54%, the lowest by 1 percentage point in Gallup's nearly 90 year trend. Now like you said, is it statistically relevant? It's certainly, I mean it looks like the average has been about 63, 6, like low 60% for, for the last 20, 25 years. And this is certainly the lowest it's been and way below that trend. I do think this is pressure on the alcohol beverage companies. This, like there's no way that this is not leading to some sort of top line pressure for them. Let me call out a couple things that I thought were a little fascinating here in terms of when we look at like who all is abstaining from alcohol. It's pretty broad based, but there are some interesting things worth calling out. Women are abstaining from alcohol more than men. I kind of expected that. I guess a little bit lower income consumers are abstaining more than higher income. I guess that's to be expected. They just have less money to spend on this. And then Republicans are apparently abstaining more than Democrats. I'm not sure where they got their vote, their voting drink.
- [15:50]
B
Ryan, you're a total lib, as they say.
- [15:52]
A
I guess I wouldn't have guessed that.
- [15:55]
B
I wouldn't have guessed that. I know what happened.
- [15:57]
A
That Bud Light commercial must have done a real number.
- [16:00]
B
It's still happening. It's still killing the industry. Wow.
- [16:04]
A
Interestingly though, there doesn't seem to be any data supporting the notion that declines in alcohol consumption are caused by people shifting to other mood altering substances, in particular recreational marijuana. So that was kind of, I think one of the big things people pointed to which was okay, there's, there's more alternatives today than there used to be. So yeah, people are turning to other substances. There doesn't seem to be any proof of that. Marijuana consumption has been like pretty steady over the last five years while alcohol consumption continues to decline. So I guess my question to you is do you think this trend will continue and do you have any interest in owning the alcoholic beverage companies if they're is like continued pressure?
- [16:53]
B
That's a tough question. I would have interest at the right price, but knowing the right price is tough. It's a little more competitive than other CPG areas where market shares can shift. You've seen random changes in, you know, beer getting popular than wine getting popular, then spirits getting popular. So it's not like there's just cigarette Brands that kind of stay the same. There's not that many new entrants. So that that's a little bit of a downside versus, you know, soda, candy or tobacco. But I would fade this a little bit. Alcohol has been a part of human civilization for thousands of years and I don't know if I can call the end yet because we are at 54% conception in a survey methodology that may not even be worthwhile. During the Internet, there's been a lot of talk about how the ways that some of these surveys go down. They're having trouble adapting to the fact that people don't answer phone calls anymore from unknown numbers, stuff like that. So I'd want to know the methodology, what's changed with it, if that is having any impact and whether this is statistically relevant. Let's say if it falls below 50% maybe I'd be concerned. But looking at the stocks here and I'll pull it up here on fiscal AI. What's, what's one BFB brief Brown Foreman. Isn't that Jack Daniels? Yeah. Fun fact. Jack Daniels internationally is like a great brand. In the United States it's kind of tacky, but internationally fantastic. I'm going to pull up. How about EV to EBIT? Let's use that. It's kind of our classic one. 13.6 on fiscal AI. Stocks actually rebounded a little bit even on this news. Am I interested? A little bit. But for a company that could be in terminal decline, it's more of I want what Altria was sub $40 which is like 6 times earnings. Maybe not 14 because at 14 you're still pricing in at least if you want an acceptable return, you still need some growth there and I'm not sure they can provide it if the downside occurs.
- [19:16]
A
Yeah, I think that's fair. You want probably a true, true sin stock multiple if that's what this is going to be considered and maybe a high dividend yield as well because I assume a lot of these alcoholic beverage companies are pretty mature and pay a dividend would be my guess. But here's what I, I guess blows my mind. The survey basically said like people are coming to the realization that alcohol isn't healthy. That's what's causing this. Are you kidding me? Like people have had hangovers for thousands of years. You think they wake up thinking that that must have been good for me?
- [19:56]
B
No, I know there has been that narrative. Yeah, there's a health kick like online tech people, Silicon Valley, but. But I'm not sure that has Staying power and I'm not sure that's broad based. Yeah, Ozempic is. And the GLP1, the weight loss drugs, maybe that's having an effect. I could definitely see that having an effect on a 5% rate here because this isn't a huge shift. But people saying alcohol is unhealthy so I'm not going to have it anymore. Yeah, I agree with you. That's not going to be a long term factor. And marijuana, I also agree with my, my gut check or what I feel it lines up with that data there. I don't think that's going to have an impact. Marijuana is going to stay subscale. Not, not, not big. We've talked about this before. We grew up in a state that was one of the first ones to legalize and it never becomes as big as you think. It's not nearly as big as alcohol. Even though I think there's some profitable cannabis dispensaries in the Seattle area.
- [21:03]
A
Yeah, I imagine that as a percentage of the population, people that are cannabis consuming are probably, it's probably going to stay relatively consistent just because it's legalized. I don't see it increasing too much. Anyways, that's kind of speculation.
- [21:21]
B
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- [22:14]
A
All right folks, if you are a regular listener to Chitchat stocks, then you know that we use Facebook Fiscal AI, formerly known as FinChat Daily. Fiscal AI is our complete stock research terminal. It's where we have our investment dashboards. It's where we create financial charts. It's where I read all the transcripts for conference calls, sell side events, shareholder meetings. And it has Morningstar's high quality reports on more than 1700 companies. It really is the complete research platform for stock focused investors. If you use our link they Fiscal AI chit chat. You will automatically get two weeks of Fiscal Pro for free. And if you find that it's worth upgrading, which I think you will, you'll get 15 off any paid plans with our link. Again, that is fiscal AI chitchat. The link will be in the show notes. Let's get to some other topics though.
- [23:06]
B
Let's do grocery. Grocery.
- [23:07]
A
Okay.
- [23:08]
B
You want to do that?
- [23:09]
A
Sure. Let's go for it.
- [23:10]
B
You. Are you an Instacart shareholder? I think you were on the fence. It was watchless stock for you.
- [23:16]
A
The I was actually really considering buying it. And then I think a day before I did my research episode on them, the CEO left and took a job at OpenAI and I just got kind of shaken out of it.
- [23:34]
B
Well, maybe this will shake you even further away from having it on the watch list. Amazon just said that customers in more than a thousand cities in the United States and towns now have access to fresh, perishable groceries with a free same day delivery. My first thought was how much capex this required and maybe that's part of the spending they've been doing lately. This is same day free delivery if you spend at least $25 on an order. I personally tested out. I didn't actually do an order, but I made like a grocery cart and they were pretty cheap. Like the items for my regular grocery bill are very, very cheap. They still don't have like the, you know, grocery list problem solved where you don't. You can't just make a list and it finds it. You have to search each time and then find the item. So building your cart might take just as long as the trip at the grocery store. Even if I guess you don't have to drive there or not. I might test it out to see if it compares to in person shopping at, you know, Trader Joe's, Costco, Walmart, what have you. My question here, Ryan, does this compete better with Costco and Walmart? Which I think maybe the answer there is obvious. Yes, it helps them compete better there. But more fascinating, more interesting, does this ruin Instacart's value proposition?
- [24:53]
A
I. I kind of want to think this is like fade the news where it kind of feels a bit to me like how every grocery concept got crushed a while back when Amazon bought Whole Foods. You mentioned it. The user experience. Yes, obviously logistics there is good. They're better than anybody. But there is some value to the user experience for an Instacart customer. They are recommending new products to you. They know what products you like that you know in which store you like to shop from. Like, it is sort of a digital experience of going through the grocery store in some sense. I think that matters a little bit. And I wish. I don't think Instacart sold off that much from this, unless I'm wrong. Did they. When was this reported, do you know?
- [25:50]
B
It was like 10%, it was yesterday that they reported this. I think it was about a 10% drop down.
- [25:55]
A
It's down 16 and a half percent in the last five days.
- [25:58]
B
Yeah.
- [26:00]
A
I kind of think this maybe creates a buying opportunity for Instacart. Honestly.
- [26:07]
B
You really think they have a moat here though? Again, this is a great value proposition. I would. It's going to be significantly cheaper than Instacart.
- [26:20]
A
In. In. Sorry, in what way? Which part?
- [26:24]
B
Like, okay, it's free. Like there's no delivery fee. So that knocks off a huge fee, no tips. And the products are going to be cheaper and I can use my Amazon Visa card and get 5% back.
- [26:39]
A
And are they going to grocery stores to get this stuff?
- [26:43]
B
I think it's their own logistics. So it's like I forgot what that company is. Ocado Group or Coupang or. And then they have their Fresh Warehouse. They're taking it straight from there and Whole Foods. So I think. And it's within. It's not, you know, within an hour. It can be, okay, we're gonna order this in the morning and it's gonna be in the window of 3pm to 7pm So I think it's within the regular delivery network. I'm definitely gonna try it out. I'll report back to listeners what I think. But cost wise, this is a significant undercut to Instacart or Doordash.
- [27:27]
A
Yeah, I think. I don't know if the costs on Instacart are as steep as you're imagining as. I mean you get $100 basket, you're. You can tip 10 bucks. I think a lot of people, A lot of people that use Instacart already, cost is not their primary concern. Like if cost was their primary concern, they wouldn't use Instacart would be my guess because they would go get the groceries themselves. The I'm. You know what, I could be totally be wrong here Amazon. Like, I guess it depends on the items they have in Fresh grocery. My thought is a lot of people like their grocery store. They know. They're like, they know what items they like from their grocery store. They go to instacart and it's basically just facilitating that relationship between you and your grocer digitally. Costco or Amazon in this case, if you're buying from Amazon. I guess if they have the same Items like the SKUs or there's parody, then maybe I'm wrong, maybe this does win. But I just. I don't know. My gut tells me this is the habits for Instacart customers might not change that much.
- [28:43]
B
Maybe I would never buy this stock. Just seems like picking up pennies in front of the steamroller. But Amazon has not been able to execute in grocery. This could be the one time they finally do. But they've had all these announcements and seemingly interesting ideas and it hasn't worked so far. This one at least coming from the gut. The gut feel like this is the one time they've announced something where I go, oh, I would easily use this. So that's what makes me a little bit nervous for Instacart.
- [29:14]
A
Let's do a little quick valuation work on Instacart using our friends at Fiscal AI. Shout out to them. Operating profit, $526 million over the last 12 months.
- [29:30]
B
Current market, 10 billion. So 20, 20 times.
- [29:34]
A
Yeah, I'm trying to see if that might be slightly outdated here. Yeah, yeah, you're right. 10 billion, 20 times. I'm probably still not interested. If this got to like, Amazon's going to kill them multiple, which I'm thinking is more like 10 times. I could be probably pretty interested. There is probably some operating leverage still going on Instacart as well, assuming they continue to grow. But the.
- [29:58]
B
Yeah, the risk reward there could be interesting. 20 times. What do you. What are you really getting? We have a comment here, though, that says, has Ryan been to an H E B yet?
- [30:09]
A
Of course they are.
- [30:10]
B
Good.
- [30:11]
A
Yeah, that's a great. Do you know HEB is a local.
- [30:15]
B
Grocery store, I'm assuming.
- [30:17]
A
Yeah, it's kind of like a. Maybe like a Fred Meyer, I guess, in terms of, like, what they offer, but it's a little more like there's. For some reason, there's just a fascination with hb. It is a nice grocery store. It's lowcost, but it's not. It's not too different in terms of like, actual offerings.
- [30:41]
B
All right, well, we got a lot of earnings to cover. Aden Circle, Core Weave, Cabba. I'll let you choose Ryan. What do we go first?
- [30:54]
A
Let's do Cava. Because that kind of. I think there's a broader discussion there around fast casual and fast food spending generally. Right.
- [31:03]
B
Now, okay, so let's get the headline numbers out of the way. Revenue up 20%. 16 new kava openings in the quarter. That's up 17% year over year for store count. So they're growing store count fairly quickly. Same restaurant sales growth was only 2.1%. And I'm sure we're gonna have some charts here. I posted one on my Twitter account I think was good. Comparing them to some of the other restaurants. And Cabot had a huge slowdown. Their AUV still $2.9 million. They had positive net income and free cash flow. So the business is still operating fine for valuation reference market cap $10 billion. Last 12 month revenue of about a billion dollars. There's 398 Kava restaurants valued each at $25 million. So they do about $3 million in AUV valued at $25 million a piece. And what sort of margins could you get at that? 10, 15%. So still a steep valuation. My question, I know I say this every time. What price are you a buyer, Ryan?
- [32:17]
A
So restaurant level profits was $273 million over the last 12 months. So you said, what was the market cap here? 10 billion.
- [32:31]
B
10 billion.
- [32:32]
A
So 40 times restaurant level profits. I do like the trajectory of this concept. Now, that doesn't mean I'm a buyer. And you can still go wrong. But there seems to be like, because Chipotle had such success and it worked out so well for a lot of investors, there seems to be just this like, fascination with restaurant concepts where.
- [33:00]
B
And giving them 50 times earnings.
- [33:02]
A
Yeah, and. And giving them 50 times like BS earnings. Like this is 40 times restaurant level profit, which just excludes like all costs at the corporate level and probably some other costs too. So I don't know. I don't think these kind of things should be trading at a huge premium. It's the same with Wingstop. Like Wingstop got that same. Got. Gets that same multiple. Now theirs is primarily franchise economics, so little different. But no, I'm not, I'm definitely not interested at this price. I would probably be. If they got to like 15 to 20 times restaurant level profits, I would be interested. But we're 50% away from that.
- [33:52]
B
Yeah, 50% drawdown. Well, you look at it, if they're going to be, and I know this is just one quarter, but if they're going to be a normal comp store sales grower and maybe they expand restaurant count at 10% a year, you can grow revenue 12, 13% a year. Maybe earnings grow at 15% a year. Do you really want to buy that at say, 55 pe? I don't think so. It seems like maybe somewhat of a fair valuation if you're thinking they're going to grow revenue at 15% for 10 straight years, which is definitely possible, but not guaranteed. Yeah, I'm not interested. And seeing these numbers and seeing Sweet Green, Chipotle, some of the other ones. What's funny is that the two restaurants that seem to be doing well are actually three are Domino's, McDonald's and Chili's. Do you know Chili's had 20% comp store sales growth, Ryan?
- [34:51]
A
That actually doesn't surprise me. I know that's kind of weird, but it's become like this cultural resurgence out of nowhere.
- [34:59]
B
And the branding's better now, huh?
- [35:01]
A
It's very big in the south too. It's not as big up in Washington. Chili's, I don't think.
- [35:06]
B
Yeah, we got better tastes up here. That's Southern cooking. And you know what?
- [35:11]
A
This is this. I should have known. This girlfriend indicator. My significant other was like, we should go to Chili's. I see everyone talking about it on social media.
- [35:24]
B
Numbers are backing that up.
- [35:26]
A
Yeah. And you know what other chain seems to do well is Texas Roadhouse.
- [35:31]
B
Kind of similar for a while.
- [35:33]
A
Yeah. Like comp sales, I think are really strong. Similar to. Not quite Chili's level, but yeah, they've been doing. Let me just pull up some numbers. Comp sales.
- [35:47]
B
I was mentioning that to finish my thoughts. Seeing most restaurants struggle led me to actually buy a little bit more Portillo's. We'll talk about these insider trades too. The fact that they're actually posting positive comp store sales when Chipotle and Sweet Green are negative was good indicator for me and I thought the valuation looked great. For reference, I did talk about that on our newsletter in our chat that we have on the substack chitchat. Stock substack. But yeah, add a little bit to the position. It was small. It was about 3 1/2% position. So I just added it to a little bit higher. But the comparison there made me feel a lot more comfortable that they're facing macroeconomic headwinds and still generating a profit generating restaurant level cash flow. And once or if this normalizes, they can post, you know, positive comp store sales over the long term.
- [36:51]
A
I'm gonna pull up a comparison for you here. So let's go. Am I missing anybody here? I'm doing Wingstop, Portillo's, Chipotle and Cava. I kind of think of those all as sort of fast casual.
- [37:04]
B
That's fine. You could put sweet green, but doesn't matter. Okay, this is the live advertisement for for fiscal AI, Ryan. Look at that quick. You make a four company chart in during a live podcast. There we go. So we use our link Fiscal AI slash chitchat. Get a discount there. All right, you got it loaded up, Ryan, what does it say?
- [37:26]
A
Cava. Same store sales growth. Two quarters ago they were doing 21% comp store sales, which is actually remarkable. This quarter they're doing 2%. So it's fallen off a cliff. Same with Wing Stop. They were doing 20% comps. They've now treaded to negative 2%. Chipotle has gone negative as well, so negative 4% comps relative to last year. The actually the only other positive one in this comp other than Cava was Portillo's, which.
- [38:01]
B
There we go. Which beef sandwiches.
- [38:03]
A
We looked at Portillo's first. It just kind of sucks that they have to be the first ones to report. I think maybe it's Chipotle, but you look at it in isolation, you're like, that's not really that great. But if fast casual spending is slowing across the board, these results for Port Pillow for Portillo's might be a little better than I think people thought initially. Are you feeling more fulfilled now that you're back to work? No, I need a vacation.
- [38:32]
B
See the movie that critics are saying is an awesome. Look at that crowd pleasing, fist pumping all out brawl of a film. You're right about that.
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A
They're coming after our family. Go fix this.
- [38:49]
B
Oh my. Nobody 2 rated R. Only in theaters now.
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A
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- [39:26]
B
What I can't figure out is why doordash? And I think, well, this is from say, September 2023. Again, I'm using Just Fiscal AI, not their press release. 9-20-23 to now, their gross order volume on doordash has grown at 23%. So if all these restaurant spends are going down, I'm trying to figure out where the doordash man is going. Is it all going To Chili's? I don't think so. I think people eat in house there. Maybe McDonald's, maybe Domino's. But what's happening? I'm not sure.
- [39:58]
A
Could be. It's.
- [40:00]
B
Could be grocery.
- [40:01]
A
I don't know.
- [40:01]
B
Grocery.
- [40:02]
A
I was gonna say, I don't know if the doordash really breaks it out, but maybe there's a growing piece of like, convenience store pickups and grocery pickups, but maybe it's those value chains, because McDonald's Domino's, not only are they seeing stronger growth in some of these, but they're much larger as well. So hard to say. Now, this kind of leads into another topic, which is I. I looked through companies that had big insider buys over the last month. Really more so the last week. And I just think it's a good indicator overall. Like when you see. Obviously people have said this a million times, but executive sell stock for a lot of reasons, personal finance reasons, you name it. But they only buy it for one. Yes, you only buy stock for one reason, and that's because you think it's. Well, sometimes it's to signal to people that you think it's worth more, but sometimes it's because you think shares will go up. Now, I have found six stocks that I thought were interesting that had recent insider buys. Number one, Asana, have you heard this? Do you know what's going on here with Asana?
- [41:24]
B
I don't, but I know the CEO is Dustin Moxkovitz, founder and founder, but he's one of the founders of Facebook. And I know that he likes buying stock in the open market for some reason because he's mega wealthy.
- [41:35]
A
It's. Yeah, he has it on a. What do they call it, Rule 10B51 or whatever plan where it's. I've usually only seen that for insider sales. Like, you have sales planned out over months. He hasn't, like, insider buys planned out over months. Like, he literally just buys half a million dollars of stock seemingly every week, and it's just, like, on automatic. So he's been buying stock. Maybe he's gonna somehow buy the whole thing one day. Uh, Elevance Health, which I think is the second largest health insurance company in the world.
- [42:13]
B
The CEO is a health insurer.
- [42:15]
A
Yeah, yeah, CEO. About $2.4 million worth of stock. That was a. The. The big thing I look for here is not nominally how much do they buy, but how much of a change in their ownership was it? Because if it's like a 1% change in their ownership, it kind of feels More like signal. Like they're just trying to signal to investors that they're insider buying, but yeah. So 7% increase for the CEO. Decent. Trans Medics, the CEO, about $2 million. Not much of an increase for him. Here were the three that I actually found very, very compelling. One, Shift for Payments, their payments processor. That's kind of a hodgepodge of assets, if I'm not mistaken. They. They kind of have a number of different brands under their umbrella.
- [43:05]
B
They acquire a lot. Yeah.
- [43:07]
A
The CEO, Jared Isaacman, who is also an astronaut and kind of an extraordinary human being, bought $16.3 million worth of stock that increased his stake by 26%. And this was after sort of a collapse following earnings. And then the other two that stand out to me more so than anything else, Sonos and Portillo's. Portillo's, our resident shareholder here, the CEO, cfo, general counsel, and a board member all bought shares in the last week. And then at Sonos, yes, the speaker company, the CEO, cfo, and multiple directors all bought shares in the open market last week. The thing I find a little weird about the Sonos one, they are not trading at all. Time lows, so it kind of feels like maybe they know something's coming or, I don't know.
- [43:59]
B
They got the tariff text on signal, I guess.
- [44:03]
A
But, yeah, I'm not sure. Portillo's and Sonos both had four different people buying shares that are associated with the company, which I thought was pretty promising.
- [44:16]
B
Yeah, the Shift four one, the guy, the founder, Isaac Min, he was going to be the director of NASA, so this could be just him coming back and saying, I'm confident in this company still. And I think. What, he's the board of directors now? I don't know if he's the CEO. I'm not sure if he came back as the CEO, but it was a whole thing where he was going to be the NASA director. He retired from shift 4, but then they went in a different direction because he was an Elon guy. Whole long drama. Not sure. But hey, Portillo's. This was one of the key reasons I decided to add to my position, because the fact that they're confident here, along with the activist investors and along with the new board of directors members from all these experienced restaurant executives. It is a good team. And maybe this was just a bad quarter for restaurants in general.
- [45:12]
A
Yeah, certainly looks that way. Where do we want to go next? We've got some bubble watch topics, for sure, including you want to sprinkle in.
- [45:22]
B
Some fun, some fun stuff.
- [45:24]
A
The. Yeah. Talk about the company that went public this week.
- [45:30]
B
Well, I don't know much about them, but the company's name is Bullish, which is strange. The ticker I think is blsh and they are a crypto exchange. I didn't know we needed this many crypto exchanges. I didn't. I thought there was already enough. I I Right. But they went public. I have no idea what the numbers are, but the Stock went up 143% on its first day. So the IPO market is hot. Any company that wants to go public should go public now. I think it is an optimal time, just not from a investor's perspective, but just from raising money. If you're someone that needs to raise money, do it. You're gonna maybe get a billion dollars or what have you even more. We're gonna be talking about that with Rocket Lab expert Simon Erickson tomorrow with the show that'll come on next week. They raised a bunch of money at a very premium stock price on our acquiring companies and cleaning up their balance sheet, which is quite nice. But what did you think of this company named Kabul? Did you know it existed? Did you know the IPO is coming?
- [46:40]
A
No. I would guess there's probably a thousand crypto exchanges that I don't know exist. The great name, like if the goal is to like take advantage of IPO markets when they're hot.
- [46:53]
B
Perfect name.
- [46:55]
A
And frankly, if you're a crypto exchange and you don't really care about the durability of the business, you should take a. You should change your name to something that could get memeable. Memeable. Because you're going to probably get a better jump on your IPO anyways. No. Had no idea this is this company existed. I. How many crypto exchanges do we now have public Coinbase?
- [47:21]
B
A lot.
- [47:22]
A
Is Circle. No, they're us. Not really.
- [47:26]
B
Right. No. Circle is different. Yeah.
- [47:31]
A
Is it just, I don't know, the Robin Hood International.
- [47:35]
B
Robin Hood, technically is. They all technically allow crypto trading now.
- [47:39]
A
Yeah, I guess that's true. Yeah. I really think the team at Huddle should consider an ipo. As a shareholder of Nelnet who owns a minority stake or a 20 stake in Huddle. I would love for them to go public.
- [47:55]
B
Yeah. It could be a nice boost to Nelnet stock price which is hitting an all time high. So. Still feeling good about that one question for you. There was one. I don't know if.
- [48:05]
A
What's the last IPO you saw drop like a rock, just like collapse I can't remember one.
- [48:15]
B
Oh, there was one last year, wasn't it 20, 24. I swear there was one that didn't enter. Well, the one time Bill Gurley was celebrating. Yeah, we don't need to get, we got other stuff to talk about. We don't need to get into that debate.
- [48:31]
A
But I've never seen. Well, I've probably seen some but I cannot remember a super unsuccessful IPO lately.
- [48:40]
B
They price it like that and they restrict the float. They want it to be a little bit of a pop so employees can celebrate. It's kind of the whole game. Just wait. It'll be down six months from now. They're almost all down six months later. So if you like the company, just wait, wait a year. Just wait a year. You'll get a cheaper price. Another bubble watch was there's 18 year olds on LinkedIn posting rocket ship emojis about beating hedge funds. Been there, but it's, it's like it's again, this is classic sign of a bubble behavior. And are you aware of, I think you might be the online skit actor named Drew Ski.
- [49:25]
A
Yeah, yeah, he was on comedian Ride basically.
- [49:29]
B
Comedian skit. Yeah, comedian skit actor. Why was he on Bloomberg?
- [49:35]
A
I have no idea. I saw screenshots. I don't know what he was talking about. Do you actually know?
- [49:42]
B
I wouldn't invite that guy on a show because you know he's probably playing a prank on you. But that again is I think a sign of seriousness going out the window and probably marks Bloomberg supposed to be the most sober network out there. There's a lot of nonsense. I can't, I could. There was probably 10 other things I could have included this week. I just say stay safe. Stay safe. Yeah.
- [50:07]
A
I feel like Bloomberg's like supposed to be the C span of financial media, financial news.
- [50:12]
B
CNBC is usually the one that has. Hey, we have Aaron Rodgers on what is your. You're investing in this ayahuasca startup. Wow. Wow. Oh yeah.
- [50:21]
A
Martha Stewart's on the board on the LinkedIn post. If you're just getting started in the investing world, it is easy to think you're really good at it based on returns. Like, you know, you can just buy us see a story. You like buy it. It's almost like a coin flip. It really is like a coin flip. Like chance, you know, 50 chance you're going to make a lot of money. Maybe not a lot, but so, so yeah, if you're eight months in, I'm sure you can beat a lot of hedge Funds. Uh, if you're listening, you're 18 years old. Don't post about it on LinkedIn. I don't recommend it. Unless you have like a five year track record. It's really not credible returns.
- [51:09]
B
Yeah, you can do quarterly updates or update your portfolio. Try to get a conversation going. But bragging about stuff like that, don't do it unless you're trying to raise money.
- [51:19]
A
Yeah. I will say though, I've seen John Hampton, who I like as an investor, dunk on a lot of like kids on LinkedIn, like really young people that are trying to get into the industry. It's like, just leave them. Who cares?
- [51:32]
B
Yeah, their brains aren't formed fully. Do you want to talk Adyen now? This is a company I love. Wish the stock would drop. Maybe you'll tell me if it dropped. But how was the results? How was their first half results and what did you think of the quarter?
- [51:51]
A
Slowest growth on record for Adyen. So they processed, I think it was €334 billion this quarter in volume, which was only up 4% year over year. That was primarily due to the loss of Block as a customer. So I guess Block accounted for a good chunk of their payment volume.
- [52:15]
B
Did you know, Ryan, do you want to. Did you know an email that Block sent out today.
- [52:20]
A
Oh, boy. Sorry, I'm distracting something crypto related.
- [52:25]
B
You got it, you got it. Okay, let's load this up. Essentially, they have innovated in crypto mining. Apparently they have been doing that for.
- [52:37]
A
Five years and yeah, it's inconsequential.
- [52:40]
B
The proto rig marking a new era in bitcoin mining. Eye on the ball. Eye on the ball. Dorsey.
- [52:49]
A
A couple things that I have been proud of myself for in the investing. My investing career is don't buy IPOs. I've never broken that rule. And now I've had a rule, if Dorsey's involved, don't go anywhere near it. And actually that served me fairly well because the core business, Cash App and Square, not doing that great. They really aren't. And they had, they had a gold mine. They were like early to the point of sales business. They had built out a lot of software for retail concepts and they could have just really kept plowing money into it. Same with Cash App that, you know, they had a great business there and then it's just cash apps. Growth has completely stalled out and Square has lost a lot of market share, frankly to concepts like toast and clothes and probably even Adyen as well. Let's go back to Addien though. Real Quick management. Well if you excluded block which I guess you really shouldn't do because it is lost volume but if you exclude a block, I think processing volume grew around 15 to 20%. Management also called out cautious consumers for online retail due to tariffs which you don't see.
- [54:15]
B
You don't see that.
- [54:17]
A
Yeah.
- [54:17]
B
Shopify's GMB is soaring, especially in Europe, which is Aden's original market.
- [54:23]
A
Yeah, I was going to say that feels weird. I'm not seeing any consumers because like I don't know tariffs. Like, like maybe, maybe if there's been some sticker shock but like normal consumers are not sitting there thinking like I'm going to pull back on spending because tariffs are coming.
- [54:38]
B
Like no. Yeah. They. They can't say anything about tariffs because they process payments and they are a take rate company. So if things cost more, they're just going to earn more per stuff if unit volume's lower. Yeah.
- [54:49]
A
Anyway, so the quarter was fine. I guess the, the headline headline numbers were okay. There has been a slowdown pretty much across the board for payments processors. So I'm looking at some numbers here. Add in 4% process volume growth. Shift 4 has. Has slowed down pretty quickly as well. And add in is larger than all of these Toast is. There was a slight re acceleration at Toast and then a slight acceleration for. For Square. But the. The trend seems to be towards slowing growth ever since lapping Covid. I. I like Aden, the stock didn't come down that much. I think it was down like 5% today. I can double check that. But the. Yeah. Down 5.4% today. I just don't think I'm realistically going to get this at a price I like.
- [55:49]
B
I don't either. Yeah. Yeah. Unfortunately. Yeah. And it looks like maybe this is just normalizing inflation over the last year to 18 months is possibly impacting that because these companies are going to grow faster if inflation's higher. But I don't know if the chart really is showing that.
- [56:08]
A
It. You know what's kind of. It seems like a company that's been really aggressive in this department lately is JP Morgan on their payments business and they're.
- [56:21]
B
They advertise on acquired. You hear that ad?
- [56:24]
A
I think they're one of the ones that are blocks shifting volume to. I think it's. They mentioned that they were shifting it to like three different companies, but I think JP Morgan was one of them. It. I don't know maybe sort of a dark horse in the payments processing side of things. But there could also be this industry. There are so many different aspects to the like value chain that they could be not overlapping here. I could be wrong, but it, I don't know. J.P. morgan, watch out for them because it doesn't get broken out. They don't. They don't explicitly. No one's really tracking them, I guess, as they're. As a competitor in this space.
- [57:09]
B
Do you want to talk. The quintessential AI infrastructure company, Core Weave.
- [57:19]
A
Sure, let's do it.
- [57:21]
B
Well, they reported earnings, I should say the Stock is down 15% today. So there's been a little bit of a flood out of it. Still up. Way significant from their IPO price. They went public back in May. But let's go through the numbers. 1.2 billion in revenue, up from $395 million a year ago. But operating margin was down to 2% compared to 20% a year ago. And interest expense is at 22% of revenue. So what that means, Ryan, is that even if they get to Google Cloud's operating margin, they're going to have net income margins of zero. Their backlog, if you believe the way they report it, backlogs can be finagled. Backlogs, $30.1 billion. So $30.1 billion versus run rate revenue of maybe $5 billion. So significantly higher. They raised $2 billion in 2030 notes at 9.25% interest rate. And they had. Drumroll. Negative $4 billion in free cash flow. So free cash outflow. I always say that, weirdly, it's kind of a double, double negative. They lost. They drained $4 billion in free cash flow in the first six months of this year. I'm going to ask, and I want you to answer it. Then I'll answer it. Does this business exist at this time in 2028?
- [58:51]
A
Exist.
- [58:52]
B
Does this equity exist? Okay. Does this equity exist?
- [58:57]
A
So you're looking at Core Weave Q, the. The bankruptcy?
- [59:01]
B
Could be, yeah. Is it Core Weave Q or not?
- [59:05]
A
Three years? I don't know. They might not. They might have enough financing to last three years because they could get less aggressive buying GPUs and then suddenly their backlog means nothing. But I think it's a terrible business. How much of that operating margin contraction is just purely due to depreciation? All of it.
- [59:32]
B
I did not dive deep into the numbers enough to care or I don't care enough to dive deep into the numbers. But that's a great question. I think that is expensive debt. Yeah. Gun. Yeah. Pretty expensive. Yeah. Gun to my head, I'd say it doesn't exist. The Equity does not exist.
- [59:51]
A
In three years, this might be the most aggressive company I've ever seen. Capex wise.
- [59:58]
B
Right. It's not like Palantir. With Palantir, they boast about killing the shorts, blah, blah, blah, but the business and the balance sheet is clean.
- [60:09]
A
So, yeah, they're profitable.
- [60:10]
B
Yeah, this company's technically profitable.
- [60:14]
A
Okay, sorry. They generate cash.
- [60:16]
B
That's what I mean, they generate cash. Yeah. Core Weave is crazy. They just think of when supply finally reaches demand. Yeah. And people say, oh, that's never going to happen. It's going to happen eventually. We talk about that. We've talked about this constantly. It will happen.
- [60:38]
A
And the thing is, like, if you are sort of cheering for Nvidia's innovation, the depreciation schedule could accelerate on these GPUs. Like, here's the one thing that I feel like we, a lot of people just don't talk about GPUs. Sean Wang came on our podcast and said, GPUs are the fastest depreciating asset in human history. For a company like coreweave, that's their entire business. And it's depreciating so quickly. Like they have to keep raising financing, I imagine, to continue to finance like new workloads and kind of to be a provider here. But yeah, I've also heard that they are like the access provider for compute where.
- [61:36]
B
Yeah, it's not good. They're like, they're bragging about signing on hyperscalers. It's like, well, you, you're only going. They're only going to you temporarily. Maybe they can sign OpenAI, which they said they have a huge contract with. But how reliant are you going to be on that?
- [61:55]
A
Yeah, some of it. It's a bit over my head in terms of like what they actually technically are providing to these companies.
- [62:03]
B
Oh, they're hyperscaler, but they just say AI focused.
- [62:07]
A
Is it basically like they're just renting out GPUs?
- [62:10]
B
Yeah, yeah. It's trying to replicate a Google Cloud or what. But they don't have their internal chip division. They have no advantages that the big three have.
- [62:20]
A
Yeah. When I think about the hyperscalers like Azure, Google Cloud and aws, I think about them having like people utilizing their services beyond just the compute, beyond the, like the rental of GPUs.
- [62:40]
B
Let's see what their website says right now. I'm sure it's really, really good and not gobbledygook. Well, there's also Nebius. Have you heard of this one?
- [62:50]
A
I've seen the ticker.
- [62:53]
B
Yeah it's funny. Experience the Note this is their tagline Experience the no compromises Cloud Platform Purpose Built for AI the Core Weave cloud platform simplifies the complexity of engineering, assembly running and monitoring state of the art infrastructure at a massive scale to deliver cutting edge performance and efficiencies for AI workloads. Help unleash the full potential of your AI innovations with Core Weave aka we rent GPUs. Yep.
- [63:25]
A
Okay. Well yeah, it's an extremely aggressive business model. It feels like they don't need to be that aggressive. They could just, you know, tone it back a little bit and grow a little slower, get a little profitable business. But to each their own I suppose. I think we are going a little long here and we fit most of the topics other than circle which every time we talk crypto companies it just puts my more brain in the pretzel circulation. I guess there's not yeah, I don't want to talk crypto so maybe we wrap it on that.
- [63:59]
B
Yeah, let's wrap it up. Reminder and thank you to our sponsors, Interactive Brokers. Go check them out. Our preferred brokerage of choice, not Bullish, IBKR and Fiscal AI. Use our link Fiscal AI Chitchat or now. You can also use a coupon code chit chat at checkout to get 15 off. We are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan I or any podcast guest may hold securities discussed in this podcast, may have held them in the past and may buy, sell or hold them in the future. Thank you everyone for tuning into the live show and we'll see you next time. You say you'll never join the Navy, that you never track storms brewing in the Atlantic and skydiving could never be part of your commute. You'd never climb Mount Fuji on a port visit or fly so fast you break the sound barrier. Joining the Navy sounds crazy. Saying never actually is. Start your journey@navy.com, america's Navy forged by the sea Support for this podcast and.
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A
The following message comes from America's Navy the Navy offers new graduates hands on training and experience in careers like computer science, aviation and medicine, plus education and sign on bonuses.
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Parents help your grads start their career today@navy.com.