Debating Value Traps; Bezos AI Bubble Discussion; OpenAI's Wild Ambitions; Brett Bought a New Stock

Summary

Chit Chat Stocks – Power Hour: Are We in an AI Bubble? & Debating Value Traps

Podcast: Chit Chat Stocks
Hosts: Ryan Henderson & Brett Schafer
Date: October 10, 2025
Episode Overview:
In this Power Hour episode, Ryan and Brett tackle some of the most pressing questions in today’s markets: Are we living through an AI infrastructure bubble or boom? What did Jeff Bezos say about the nature of bubbles and the future of AI? Where’s the line between value plays and value traps? Plus, Brett reveals the stock he’s buying—even breaking his own rules to do it. They dive into notable earnings, debate companies trading at “cheap” valuations, and take listener questions on what sectors are underappreciated today.

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Main Themes

• Bubbles, Booms, and Bezos: Dissecting Jeff Bezos’ rare comments on the AI era, industry bubbles vs. financial bubbles, and what separates a boom with lasting impact from fragile speculation.
• AI Infrastructure Frenzy: Navigating the dizzying network of deals among Nvidia, OpenAI, Oracle, and others—the financialization of AI and its bubble risks.
• Value Plays vs. Value Traps: A rapid-fire debate on stocks frequently called “cheap,” but often with good reason. The hosts share where they draw the line and key stocks to beware.
• Notable Earnings & Market Proxies: Pepsi’s fight against declining volumes, Delta’s read on the economy, and what it all means for investors.
• Brett’s New Buy: A surprise pick from the world of apparel—Crocs—and a breakdown of the risk/reward.
• Q&A and Quick Drawdowns: Lightning analysis on Sprouts Farmers Market, Shift4 Payments, Ferrari, and Dutch Bros, plus a listener Q on overlooked sectors.

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Key Discussion Points & Insights

1. Jeff Bezos on Bubbles, Booms, & AI (02:14–16:21)

• Ryan introduces rare public remarks from Jeff Bezos at Italian Tech Week, calling it “one of the best explanations of the current AI environment in a long time.” [02:14]
• Bezos emphasizes building “a heavy company” that’s durable beyond fluctuations in market sentiment:

  “In the short term the stock market is a voting machine, in the long term it's a weighing machine...As founders and entrepreneurs...our job is to build a heavy company.” (Bezos, recounted by Ryan, 02:58)

• Discusses how current AI technologies are unique “horizontal enabling layers” that will touch “literally every company” (04:22).
• Makes a crucial distinction:
  • Industrial bubbles: Excess investment leads to productive infrastructure, even if many players disappear (e.g., dot-com era fiber and data centers).
  • Financial bubbles: Pure speculation (e.g., mortgage securities), with little societal benefit when they burst (05:25–06:59).
• Brett and Ryan debate whether the current AI rush—marked by massive, circular investments (ex. Nvidia investing in OpenAI, which then buys Nvidia hardware)—is bleeding into financialization and thus more dangerous (06:59–11:10).
• Ryan defends that “at the very bottom of it there is advancements going on that are actually like tangible benefits” (10:21).
• Brett brings receipts: OpenAI’s need for “massive external capital” and mounting vendor financing resemble financial bubble characteristics (12:14).

Memorable Quotes

• “There are two types of bubbles. There are industrial bubbles and financial bubbles…the bubbles that are industrial are not nearly as bad. It can even be good because when the dust settles and you see who are the winners, societies benefit from those inventions. That is what is going to happen here too.” (Bezos, as relayed by Ryan, 05:25)
• “OpenAI’s own cash flow is far from sufficient. Its future hinges entirely on continued inflows of massive external capital. This colossal AI infrastructure empire cannot be sustained without liquidity from financial markets.” (Brett citing industry analysis, 13:13)

Segment Timestamps

• 02:14 – 11:41: Full recount and debate on Bezos’ remarks
• 14:01: Comparing to the Global Financial Crisis and implications for AI

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2. Value Plays vs. Value Traps Showdown (18:50–34:23)

• The hosts alternate on naming “cheap-looking” stocks, debating if they’re undervalued gems or traps.
• Defining a value trap:

  “It’s when a stock looks optically cheap...but growth in the future will be much slower than growth in the past.” (Ryan, 20:23)

• UnitedHealthcare (UNH): Brett questions whether the industry’s legal overhangs and shifting ACA market aren’t being properly accounted for; could be “pennies in front of the steamroller” (18:58).
• Western Union (WU): Ryan calls out the high dividend yield as illusory given digital disruptors:

  “Don’t reach for yield. Don’t fall for the value trap.” (Ryan, 22:19)

• Ally Financial (ALLY): Both agree it’s at risk of stagnation as fintech disruptors outflank the former disruptor (22:38–23:35).
• PayPal (PYPL): Initial instincts call it a value trap, but running the numbers (16x P/E, 17% EPS CAGR since 2013) gets them rethinking it as perhaps a misunderstood value (24:07–27:18).
• Match Group (MTCH): Former value play that suffered due to Tinder declines, management woes; now a “midway” case (27:24–28:49).
• Altria (MO): Once the ultimate “value” stock, now feeling the pain of secular volume declines and weak next-gen products (29:05–31:55).
• SiriusXM (SIRI): Consensus: “Not even a value trap, just a short...a melting ice cube” as streaming eats its lunch (32:05–34:23).

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3. Hot Bubbles, Global Macro, and Listener Q&A (34:23–38:03)

• Brief but insightful tangent on Argentina’s currency crisis and China’s investability (34:23).
• Updates on U.S. Treasury being drawn into currency swaps and the perils of confusing “liquidity support” with outright bailouts.
• Ryan is still holding a “tiny starter position” in Argentine airport operator CAAP as a real-world proxy for these risks (37:11).

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4. Earnings Watch: Pepsi & Delta (38:07–48:47)

Pepsi (38:07–44:48)

• Pepsi: 13 straight quarters of volume declines; price hikes are the only thing maintaining revenue growth.
  • The move to “smaller packaging size”—or “tricking your customers,” as Ryan puts it (39:56)—shows consumer pushback.
  • New initiatives like Doritos Protein met with skepticism.

    “Don’t go against your brand” (Ryan, 40:58)

• Connecting the dots: GLP-1 weight loss drugs may be partly to blame for sustained volume losses (41:23–41:38).
• Elliott Management is involved but unclear what value can be unlocked given topline headwinds.
• “Would you rather own Pepsi or SiriusXM?” leads to a wider discussion about yield and risk in blue chips vs. “melting ice cubes.” (44:22–44:41)

Delta (45:30–48:47)

• Delta as an economic bellwether: still strong operating margins, 12% growth in AmEx co-brand spending—a “fantastic proxy for the health of the economy” according to Brett (45:30, 46:46).
• Ryan shares a festival anecdote: “The longest line I’ve ever seen…at the American Express lounge,” raising questions of exclusivity and cardholder demographics (48:01).

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5. Brett’s New Buy: Crocs (49:15–54:21)

• Despite a rule to avoid apparel stocks, Brett is buying Crocs:
  • Low EV/Sales (1.4), Gross Profit (2.4), EBIT (5.8) multiples—low expectations.
  • “Heads I win, tails I can’t lose too much” situation (51:38).
  • Brand momentum via smart celebrity partnerships and growing emerging-market exposure.
  • Aggressive buyback program (>10% yield) while reducing debt.
• Risks? Unpredictable long-term growth; questionable management decisions (Hey Dude acquisition).
• “I’d make it probably max 3% at cost…and if it goes up by 3x I’m just going to sell. Not one of my never sell positions.” (Brett, 53:58)

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6. Quick Fire: Drawdown Stocks (54:21–62:23)

Major Drawdown Stocks Discussed:

• Sprouts Farmers Market (SFM): Solid operator, but anchoring bias keeps hosts cautious; interested below 15x EBIT (54:56–56:00).
• Shift4 Payments (FOUR): Interesting at 11.6x forward EBIT w/ strong founder-CEO (56:37–57:39).
• Ferrari (RACE): Despite recent drop, still trades at 40x earnings; tough to justify unless growth or pricing surprises (57:53–60:22).
• Dutch Bros (BROS): Solid brand but expensive relative to profit, heavy on company stores vs. franchise (60:30–61:49).

Which Drawdown Stock Stands Out?

• Brett: “Got to say Sprouts, it’s the most close to buying.”
• Ryan: “I think I’d probably go with Shift4.”

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7. Listener Q&A — “What Sectors Are Underappreciated?” (62:23–65:00)

• Both agree: Consumer discretionary and selected older software companies (e.g., Salesforce, Adobe, Monday.com) are seeing missed opportunities amidst temporary headwinds or AI fear-mongering (63:18–65:00).
• Ryan cautions against overreacting to every OpenAI press release as a threat to legacy software:

  “Are we really gonna do this whole thing again...everyone's just saying AI disruption. Here it comes for Adobe and Salesforce...It takes so long to switch those systems out and most people just don't do it.” (64:19)

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Notable Quotes & Moments

• On Value Traps:

  “Don’t reach for yield. Don’t fall for the value trap.” (Ryan, Western Union, 22:19) “Pennies in front of the steamroller.” (Brett, UnitedHealthcare, 19:23)

• On AI Boom/Bust:

  “We are taking...the invested capital of the return on invested capital equation and we're 100xing it...to maintain returns...we need to increase profit by 100x.” (Brett, on AI capex boom, 09:47)

• Earnings Real Talk:

  “Thirteen quarters in a row of volume declines...They are shifting to smaller packaging sizing to appeal to price conscious consumers. Tricking your customers.” (Ryan, 38:56, 39:56, on Pepsi)

• On Apparel Investing:

  “Despite saying I’d never do it: I am buying Crocs...It’s a heads I win, tails I can’t lose too much situation...not one of my never sell positions.” (Brett, 49:15, 54:21, 53:58)

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Episode Timestamps

• 00:00–01:12 — Show intro & episode overview
• 02:14–16:21 — Jeff Bezos, bubbles, and the AI gold rush
• 18:50–34:23 — Value Plays vs. Value Traps: debate with numerous stock case studies
• 38:07–44:48 — Pepsi earnings, volume declines, and consumer headwinds
• 45:30–48:47 — Delta’s economic read-through, AmEx anecdotes
• 49:15–54:21 — Brett’s Crocs thesis: risks, rewards, and buyback math
• 54:21–62:23 — Quickfire: major stocks in drawdowns, pros/cons
• 62:23–65:00 — Listener Q&A: underappreciated sectors

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Summary Takeaways

• Bezos’ take on bubbles offers a crucial distinction—industrial bubbles (dot-com, AI) can leave lasting productive legacies, but when they tip into financialization, the risks are much higher for all involved.
• AI infrastructure boom: While real innovation exists, the architecture of deals is treading dangerously close to financial bubble territory; investors should be discerning.
• Value Traps abound—especially in companies with high yields, long-term secular decline, or overhyped “turnarounds.” But some “traps” (PayPal?) may still have underlying value.
• Consumer and software stocks with durable brands, deep customer integration, or real capital allocation smarts might offer attractive entry points amid prevailing negativity.
• Brett’s Crocs play exemplifies the “invest then investigate” mindset—identifying strong risk/reward bets but staying disciplined on size and time horizon.

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For more details or company-specific data, see referenced timestamps or connect with the Chit Chat Stocks hosts via their Substack or YouTube live streams.

Transcript

[A]

Welcome to Chit Chat Stocks, the podcast that helps you discover your next great investment. I am one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. This is our weekly Power Hour episode where we talk all things financial markets. We've got a few interesting topics for listeners today. We're talking value play versus value Trap. We've got a couple names that we've both written down that we think are value traps to avoid, so we'll talk about those. We have Jeff Bezos making a public appearance for the first time in quite a while with some wonderful quotes. And then we also have a couple earnings updates as well as well. We have to talk about it. AI infrastructure bubble slash boom. We aren't sure we're going to talk through it. And then Brett is buying a stock as well. He's going to talk through why he's buying that. But before we move on, if you're listening to this show for the first time, please go ahead and follow us on Spotify, Apple, or wherever you get your podcast so you never miss an episode. And if you enjoy these episodes, please, please, please go ahead and give us a review. It helps the show grow. Without further ado, Brett, where do you want to start?

[B]

Well, Ryan, should we start AI infrastructure or should we not put you through that pain until halfway through the episode? I know you were probably so happy that Sam Altman decided to make billion tens of billions, well, even $100 billion partnerships that have what some may describe as insane gigawatt plans for these data centers. 20% of the United States current capacity actually in the deal with Nvidia. But I'm excited to talk about it. I think it's getting to the point where it's hard to argue it's not a bubble. But I think first, why don't we talk Bezos? He doesn't make many public appearances. We'll get a little, as the guys at Value After Hours say, vegetables out of the way first. And we'll try to learn something from an entrepreneur, a founder that went through the dot com bubble and came out clean on the other side.

[A]

Yeah, let's eat our veggies, so to speak. And this actually is a good precursor to some of the bubble talk that we're going to discuss later in the episode. But Jeff Bezos, who I would say is probably on my Mount Rushmore of favorite CEOs of all time, he might be number one, gave a talk last week at the Italian Tech Week conference. I guess I had never heard of this and he rarely does public appearances since he's been retired and business related ones. I, I can't remember the last time we saw him kind of holding court, so to speak, but I thought it was honestly one of the best explanations of the current AI environment in a long time. And he gave some really thoughtful quotes and I'll go through some of those, but I'll just say I recommend to anyone eventually go listen to this. You can find it online on, on Google and YouTube and other places. But basically he was asked a couple questions around the, the same questions we ask ourselves, are we in an AI bubble? Are we in an AI infrastructure bubble? And he gave some really good quotes. So here's one he says, Benjamin Graham, the great investor, is famous for saying, in the short term the stock market is a voting machine, in the long term it's a weighing machine. And so as founders and entrepreneurs and business people, our job is to build a heavy company. We want to build a company that when it is weighed, it is a very heavy company. We do not want to focus on the stock price. So that will be misleading because it can be disconnected from the fundamentals. And when bubbles happen, that's one thing that happens. Sort of ironically, he says the quote, you want to build a heavy company. I think if you weighed the physical property and equipment of all the companies in the world, Amazon may literally be the heaviest, which I think is just kind of ironic.

[B]

Yeah, commodities might make beg to differ, but I think Amazon's probably up there literally heaviest. Or if you did capital intensive as heavy they might be number one.

[A]

Yeah, and that wasn't at all what he meant, but I just thought it was funny. But then he said he's asked more directly about the AI discussion. He says AI is real and it is going to change every industry. In fact, it's a very unusual technology in that regard and that it's a horizontal enabling layer. Today we talk about AI first companies like OpenAI and Anthropic and Mistral and so on and so on and so on. There are so many startups that are kind of AI companies of various kinds. And that's normal for this phase. But that is not the biggest impact that AI is going to have. The biggest impact the AI is going to have is it is going to affect every company in the world is going to make their quality go up, their productivity go up. I mean, by every company, I literally mean every company, every manufacturing company, every hotel, every consumer products company, et cetera, et cetera. And so that is Hard.

[B]

What about chitchat stocks, the CCM Media Group? Are we getting affected by AI?

[A]

Actually maybe.

[B]

That software tool we record with this right now probably already saves me hour a week of work. Yeah, something like that.

[A]

So yeah, honestly we are. It's. I, it makes sense that he could be right on this. And then the part that got a lot of discussion is he basically said that there are two types of bubbles. There are industrial bubbles and financial bubbles. He says the bubbles that are industrial are not nearly as bad. It can even be good because when the dust settles and you see who are the winners, societies benefit from those inventions. That is what is going to happen here too. This is real. The benefits to society from AI are going to be gigantic. I think that's a very important distinction because you look at the dot com bubble, all the companies that laid fiber, you even look at Amazon, obviously they got crushed coming out of the dot com bubble but they wouldn't have become the company they are today if it weren't for the dot com bubble. We've talked about that before. They were able to raise money I think in 1999 that helped them stave off bankruptcy. And I would argue that consumers are unquestionably better off because of the company that Amazon is today. And they are one of those beneficiaries, one of those winners of that dot com industrial bubble so to speak. Whereas I think you'd be hard pressed to find anyone other than Michael Burry who was a beneficiary of like the great financial crisis. Like the financial bubbles don't provide a whole lot of tangible benefit to humans.

[B]

Florida real estate agents that didn't over lever and just it just put their money in some treasury bonds. Maybe, maybe, maybe those are the beneficiaries. But I get your point. But you mention financial bubbles and I'm going to share this chart here. Ryan, that is pretty incomprehensible, very, very difficult to understand and looks maybe different than the financial or excuse me, the industrial build out that Bezos is mentioning. And these are the AI deals going across the industry right now. For listeners right here we have a chart from Bloomberg. I look up if you want to see what this chart looks like. It was floating around Twitter but essentially it's gray bubbles with all the different companies in the AI infrastructure boom including Nvidia at the center, OpenAI, Microsoft Core Weave, Oracle, AMD, XAI and others. And it shows the cross revenue and cross partnerships for spending that is going along here. The financialization of these deals. We aren't going to go through the specifics of all these deals because I don't think that this makes good podcast, it's not good audio. But what I will say is you can kind of look at some of these directional errors of where money is flowing. For example, Nvidia agrees to invest up to $100 billion in OpenAI who is then going to return that and buy Nvidia chips. And there's actually some here that are three ways where Nvidia is investing in investments and services in Core Weave. So they're spending money on Core Weave and Core Weave is going to turn around and then buy hardware and software tools from Nvidia. This is a lot more financialized than what Bezos is referring to and could overlap these two bubbles and I think could what you're mentioning as the danger there is this is the maybe the next step that turns it from the dot com telecom boom into a hybrid with the mortgage backed securities boom. Although I'm not saying it's guaranteed to be like that. But this is what a lot of people said that industry look like what 2005, 2006, 2007 of that market look like. You look at what OpenAI is doing with for example AMD where they get these warrants on the stock at like $0.01. And then if the stock price booms and it's I think three, four or five times from now, or maybe it's a market cap level, well then they get a bunch a large ownership in amd. But if they just keep doing these type of deals, it's just going to lead to more revenue for AMD and it becomes extremely circular and at the end of the day maybe I should stop sharing the screen here. At the end of the day we are taking for example, let's just hypothetically we're taking the capital expenditures, the invested capital of the return on invested capital equation and we're 100xing it. So the denominator is going up by 100x which means to maintain return on invested capital for these big tech companies we need to increase the return aka the profit by 100x. That's all I got.

[A]

Here's where I okay, I think yes, that is signs of a bubble. But where at the, at the very bottom of it there is advancements going on that are actually like tangible benefits. Right. So whatever it is, we're building advanced GPUs, we're automating processes that used to be done manually. You know there, there are obviously clear product market fit for AI, clear end markets benefiting so yes, it is a bubble, but I would argue that it's not a financial bubble. And I think that's the point Bezos is trying to make. The bubble is a bubble. And this same thing happened in the dot com though, right.

[B]

They are building a financialized bubble with.

[A]

These deals that's just a part of the industrial. But like it's not just an industrial boom. He's saying it's an industrial bubble. Yes, here's another quote. Let me, let me read another quote. Now what the stock market does, which is when we think of bubbles, we think of valuations and market caps and things like this and how many billions of dollars are being invested in these six people. Like for example, he calls out this one case where it says investors don't usually give a team of six people a couple billions of dollars. Apparently that recently happened where they had.

[B]

No problems pre, pre revenue AI startups. Yep.

[A]

And he, he relates it to like the biotech bubble where they are, people are wasting money and a whole bunch of money gets sent out the door that will never generate a good return. But the biotech bubble of the 90s ultimately saved a bunch of lives because the few drugs that did work were lifesavers. So I think what he's saying is yes, it is unquestionably a bubble, but when, like he says, when the dust settles, there will be benefits to humanity.

[B]

But what I am saying is that his definition between industrial versus financialization, we're making the transition to financialization because we look at some of. Here's there's another tweet. I don't think I linked it in here. It was a very comprehensive tweet, almost like a Bill Ackman post going through some of these deals. If we look at what OpenAI is financing here, they are committed to spending a trillion dollars. Now if we look at just Project Stargate, the total funding needed is $114 billion. Then if this guy, I think it was anonymous accountant, maybe this Korean analyst, apologies, I would tell everyone to go follow him if I forgot to, but I forgot to get his handle. For the funding for Project Stargate, you need 75% external capital dependency, 17% from internal revenue contributions based on OpenAI's revenue estimates, and then 8% vendor financing. And he sums it up pretty well. And he says, in short, OpenAI's own cash flow is far from sufficient. Its future hinges entirely on continued inflows of massive external capital. This colossal, colossal AI infrastructure empire cannot be sustained without liquidity from financial markets. This is turning into the financialization which can. Even if again the benefits are there industrially or from a consumer standpoint this can ruin companies if things go poorly. You have an oracle of the world that is levering up their balance sheet to do this with basically slim gross margin deals on all of this. Sure the people are still going to use chat GPT but what happens if the equity goes to zero?

[A]

That company doesn't benefit, but there will be some winners. And so okay, I think that's what he's. When I think of a pure financial bubble, there's nothing going on under the hood that's benefiting like when it's industrial. I think you could argue that GFC was a pure financial bubble.

[B]

Now do you think there will. We're betting on a lot of benefits.

[A]

Homes were built maybe so call it an industrial bubble.

[B]

You can benefit as a what an investor in Homes in 2012. Aaron Edelheit Move to Santa Barbara.

[A]

Yeah, yeah, maybe.

[B]

I mean what one doesn't have any tangible benefit.

[A]

I think at the end it's.

[B]

The.

[A]

Valuations do get stretched. Even when it's a quote unquote industrial bubble, the valuations get stretched and money gets wasted and companies fail. OpenAI seems like sort of the most talked about one, but they are aggressive.

[B]

Yeah, I mean they're talking about spending $100 billion and building 10 gigawatts of data centers specifically with Nvidia. Do you know what the current entire data center gigawatt capacity is in the United States?

[A]

I do not.

[B]

54 gigawatts. So they're going to create 20% of the current data center. AWS, Azure, IBM, Oracle, Google Cloud, any internal systems, any non cloud.

[A]

Here's my prediction. OpenAI is just good at press releases. That's they're good at press releases. And what's going to happen is that whatever the deadline is on these is going to be like 10 years early. So maybe they do end up spending a certain amount coming 20, 40 or whatever by the time they've actually spent it. Because I, I just, I mean there are literal constraints like obviously energy, general contractors, specialty contractors, like they probably, they probably cannot literally build these if even if they tried in that speed or at that time. So but that is unless you have anything else I want to add.

[B]

We have comment here that says crypto bubble and Tulip mania. Neither of those bubbles built anything. Also the 4,000 year bubble in gold. I just congrats to anyone that holds a lot of gold. You've had a great run. But that technically is not A non productive asset could also say quantum stocks, which could lead into another topic here. Although we could save the bubble watch for later in this episode. Those ones are maybe purely unproductive. I think the last thing I'll say is there was an article and Tyler mentions this in the chat from the publication the Information Oracle. I didn't. I don't have access to the payable but the only thing I noticed is that they are signing deals here with really really low unit economics, which I think if you are an Amazon investor or a Microsoft investor that should make you sleep better at night. Because the reason Oracle probably won this large deal is they're going about it uneconomically. AWS wants.

[A]

What they're renting GPUs.

[B]

Yeah, it's a little bit more super microcomputer than AWS.

[A]

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[B]

You own too. So really I'll be curious.

[A]

Okay, why don't you start first one.

[B]

Unitedhealthcare now this is not one. I thought you would known. I don't think either of us has ever owned this. People are bullish. Berkshire is clearly bullish because of the There was a downturn this year in the whole ACA market. The Obamacare market. We talked about this at depth in our Oscar Health episode. And now it's recovering because apparently in 2026 we'll get a repricing of the ACA market and the subsidies might come back. But the thing I look at is players such as Oscar Health and others are taking market share within the ACA space. And if you look at UnitedHealthcare, they have all of these investigations into their not only morals with processing claims, I'm not going to claim to be an expert here on the health care space, but the legality of some of their practices. And I think you could be walking into a value trap here by saying, oh, Buffett bought it, probably not even him. Berkshire bought it. It's cheap. The healthcare industry is going to just be entrenched forever and ever and ever. And I think you could be walking into picking up some pennies in front of the steamroller.

[A]

So maybe we should have asked this first. How do you define a value trap?

[B]

Yeah, stock looks cheap, but it's not like, not like the price looks cheap, the earnings ratio looks cheap, but it's not. That's how I define it.

[A]

Yeah, it's basically the same way. I've got it. It's when a stock looks optically cheap based on their trailing numbers, but growth in the future will be much slower than growth in the past. Or the biggest value traps of all are probably the ones where they just don't grow anymore. And typically I would say the biggest value traps are when you've got a company that's going against a massive, like, shift in the industry. So, for example, Blockbuster going, maybe it looked cheap at some point. I wasn't really investing then, but obviously streaming was taking over and I think there's actually a lot of examples like that. So I'll go with one. So you can answer Value player, value trap. I'll give my take. Western Union, I think it's a value trap and I think it's very similar to kind of like a, like a blockbuster in a way, where Western Union has an 11.7% dividend yield. That sounds great, it's juicy. But remittances. Every day, more and more people are choosing to download an app and send money because it's lower cost, it's more convenient, you don't have to go anywhere to ship money physically. And the, the functionality for it to be received in physical cash on the other end has been built out. So it's. More and more people every day are sending remittances digitally. Western Union has. It's not like they were Oblivious to this. They've tried to build it out but they are just innovators dilemma that you know, they aren't as digital native and they're struggling to build out the same sort of consumer experience or erode their current unit economics the way someone like a remitly or a wise can come in and do so even though it's.

[B]

It'S why Remedy is one of my largest holdings.

[A]

So yeah, 11.7% dividend yield. Don't reach for yield. Don't fall for the value trap. That's my, my number one Western Union.

[B]

Only, only reach for yield and tobacco. Right.

[A]

Well, I've got a value trap here in a second that we can talk about.

[B]

Yeah, hey, I might agree with you on that one. But we'll look, we'll, we'll make sure to check on that total return over the last 10 years. All right. I have one that I think this is the one you own. And it's not that I think it's a value trap, but I worry it's a value trap and I've heard your worries on this company as well. Ally Financial Deposit growth is stagnated. Stock looks cheap. But we see the sofas of the world gaining market share on them and kind of disrupting the original disruptor in online banking. I feel like they could be a value trap.

[A]

I agree with you. I sold it. That's for that exact reason.

[B]

There we go.

[A]

It could, they could double their earnings per share over the next four or five years, which would make me kind of look dumb, I imagine. But I'm not worried. Like I didn't sell it because of the net interest margins. I sold it because I think their advantage as the disruptor is going away. And it's so much more competitive today between.

[B]

We're not, we're not saying these are 100% value traps. This is something we'd be worried about being a value trap. And if you're right that it's not a value trap, the stock is going to do phenomenally well. But that doesn't mean you should own it in the first place just because the outcome is in your favor. I'd rather own something I'm not worried about as a value trap. Or is the one, you know, taking the value a la versus Western Union.

[A]

Okay, here's a controversial one. PayPal, where do you stand?

[B]

That was the next one on my list. The numbers keep looking better though, and they keep. The Venmo notifies me every day that I need to sign up for their debit card. It's about 10 years late. We all got debit cards. You should have been doing that whenever one was 17, 18, 19 years old. Adopting Venmo, which we all did 10 years ago for people our age. But I would like to look at PayPal's like, earnings per share growth. I mean, we can probably pull that up on fiscal AI pretty quickly here because we've called it a value trap for the last three years and the stock hasn't gone anywhere. But I feel like all of their financials just keep getting better.

[A]

Yeah, I'm pulling it up on fiscal AI right now. So I initially, when I wrote this one down, I thought for sure I was going to be saying this is a value trap. Like that was the take I was ready to have. But the more I looked at the numbers, it is not as bad as I would have thought. So my. When I think of PayPal, I think of branded checkout, and I think that's still probably the cash cow for their business. Maybe it's a little more opaque the way they report it now, if I'm not mistaken. But basically that really was the cash cow. And that is basically the button when you think of like going to check out somewhere, you see the PayPal button. The margins on that are really good. Same with. They used to have make a lot of money from remittances, but I imagine that's kind of disappeared as well. The branded checkout, I think is at complete risk of disruption from the mobile wallets. And that's probably why PayPal gets the multiple that it does is the pressure on that business specifically. But when we look at like total payment volume across all their apps.

[B]

Keeps growing.

[A]

It keeps growing. And you can say, oh, well, that's coming from Braintree. That's lower margin. Revenue is still growing too.

[B]

Analysts inflation protected. Yeah.

[A]

Analysts are expecting about 5 to 6% annual revenue growth right now. PayPal trades at an EV to free cash flow of 12 times.

[B]

What about PE? I think they have some net interest stuff, so cash flow might get wonky.

[A]

Let me check real quick. Shout out to our friends.

[B]

This is a test on fiscal AI's new updates and the speed of the platform. Right.

[A]

16 times.

[B]

All right, that's quick. We can do that. Load it up during the live stream. That's the fastest test because he does slow down when we're live streaming in HD to YouTube. I have earnings per share growth 2014, 2013. Excuse me. To the last 12 months. 0.8 cents a share to $4.70. 17% compound annual growth rate just hit an all time high. Hey, could work.

[A]

I think I may have convinced myself that this is more, more on the side of Value Play than Value Trap.

[B]

All right, here's my last one match group. You might have had it on your list.

[A]

Well, it was a value trap and I was wrong about it.

[B]

And I think it still could be a value trap.

[A]

Yeah, it could, but. So we thought it was a value play when this was sort of. And you see this a lot with value, like companies that end up getting really terrible multiples is it's like good company, bad company situation where you've got Tinder, which is losing users and you've got Hinge, which has better economics, better spend per user and users are surging. But I don't think I appreciated how much earnings would be impacted by the demise of Tinder. Yeah, because Hinge, it just wasn't big enough. And even though they've now I think they're on pace for almost like a billion or they said they're like projections or 2026 for a billion in revenue for Hinge, now it can start to make up a decent portion of the earnings line. So I still don't want to own it because I don't trust management. I think it's a poorly run company, but I would, it would be right in the middle for me between Value Play and Value Trap. Whereas I think if you asked me a year ago, I'd say it's more Value Trap.

[B]

So you'd rather own it than PayPal?

[A]

I'd rather own PayPal.

[B]

I'd rather own neither. But they're cheap, they look cheap and if they stabilize and they buy back a lot of stock, shareholders will do fine. Do you have any others?

[A]

Yeah, give me your gut take on this one. Altria.

[B]

What'S the share price? Because if it's. If the share price is low enough and they have that buyback, it's fine. But we. Share price is 66 PE of 13.

[A]

I mean 6% dividend yield. 6%?

[B]

Yeah, six and a half when the PE was 7 to 8 versus 13. That's a whole different question. And I think you could be very comfortable with large volume declines and still make money and come out of it. I think now they. I don't even know if I define them as a value trap because the stocks up 31% in the last year, 62% in the last five. And that's just nominal. But I agree, people, maybe today, if they were overrating volume declines when the Stock was at 40 in January of 2024. I think they may be underrating them right now because they have nothing in next generation products.

[A]

Yeah, this is 100% a value trap for me. The. And it's weird to say that for the comp. I guess you could have asked like is this a value player value trap for the last 20 years for Altria, maybe even longer. And they are technically, if I'm not mistaken, the best performing stock of the last 150 years. If you held like the old Philip Morris company till today and got it when it's split. But cigarettes dominated for a century and now it's. I do think there's like a complete industry shift going on and they're being left by the wayside as people move to elicit vaping and other forms of nicotine. Yeah, I think that's showing up in the volume numbers because at first it was like, oh, it's just like cycle. Sometimes they have worse volume declines in the cigarette portfolio than normal. But now we've seen pretty much three years in a row of 10% volume declines annually, which is way worse than they were seen seven, eight years ago. So I would lean towards value trap here. Plus the stock's up a lot so it kind of helps me there.

[B]

Yeah, there's difference between 10% dividend yield and six and a half. I kind of think they are eke out earnings per share growth and dividend yield of six and a half percent. You do fine, but you're not going to crush it like the last two to three years. Total return level if you reinvested dividends. Very, very good for Altria the next five years, I would think. Yes. I'm not buying. Yeah, no way I'm buying that here.

[A]

Okay. One more and I think we'll be on the exact same side of the fence here. I'll. I'll read off some multiples for you first.

[B]

Okay.

[A]

EV to free cash flow 16 times dividend yield of almost 4%. The company, which I know not, not, not that cheap. The company is SiriusXM.

[B]

Oh yeah. It was a dying company.

[A]

Hate to say it's insane that it's tra. It's not even a value trap. It's just a short. Honestly, this is, this is going to.

[B]

Be your first short ever.

[A]

It is so. And it helps that I hate the business. Like yeah, a huge part of their model is making their plans uncancellable. Like they, you know, you got to go through the gauntlet with customer service in order to cancel your plans. But the, the Headline numbers, if you look out 20 years, pretty good 15 annual revenue growth since like 2004. But now with audio streaming moving completely to mobile, total subscribers and ARPU are they just decline every single quarter for like the last, I think like 10 quarters. It's been bad.

[B]

So yeah, you got to worry about people worrying about Spotify. You got to worry about Spotify getting disrupted by the YouTube bundle like this. This isn't even a question. No one is debating on what if to use SiriusXM because of their exclusive podcast strategy. Yeah, I agree with you completely, Value Trap.

[A]

And there's a couple businesses that are like this where it's not necessarily, it's not like you're gonna see instant churn where like customers just automatically leave. Like there's probably Sirius XM customers who have had it in their car for whatever, 30 years and they're 60 years old.

[B]

Oh yeah, they'll be around for 10 more years, sure.

[A]

Right. But it's just a melting ice cube because the younger generation is nowhere near signing up for those products. It's same with Western Union. So I assume people that have just stuck with Western Union might continue to do so. Same with SiriusXM, but ultimately as the population ages out, they're going to have probably half the customers in 10, 20 years. So yeah, those are the ones. I, I don't think you want to end up, as you said, picking up pennies in front of the steamroller because they just have to fight a terrible headwind.

[B]

All right, here are my last two. Argentina and China.

[A]

Oh no, that's too tough. China. I have no clue. Truly, I have no clue because I actually don't track that many Chinese stocks. I know Alibaba is up a lot this year, but that's like it in terms of who I follow. Argentina. We just did a whole episode on George Soros and it gave me a lot more confidence that I have no clue what I'm doing when it comes to currency bets or country like risk.

[B]

Well, that's a good segue to this next topic because Argentina is running out of pesos, apparently. There was a good long form thread that I found from Brad Setzer. I think he's an economist and I guess the too long don't read for the podcast. Argentina. Excuse me, they're running out of dollars to sell in their foreign currency reserves to defend the peso peg to the USD exchange rate. There was actually a tweet just today from Treasury Secretary Scott Besant which is sent. It was very long, but they're trying to create confidence here, for example, he says, we had intensive meetings, blah, blah. We talked with their. I'm assuming that's their Treasury Secretary equivalent. We discussed. Discussed Argentina's strong economic fundamentals, including structural changes already underway. Argentina faces a moment of acute illiquidity, and we need to act swiftly. And act swiftly we will. To that end, we have directly purchased Argentine pesos. Additionally, we have financed. Excuse me, finalized, a $20 billion currency swap framework with Argentina's central bank. For anyone that hears news that we gave Argentina $20 billion, that's technically not true. We're swapping it for pesos. If the peso depreciates by 90%, then we lost a lot of that money. But it's not. Then we give them money.

[A]

What, then we gave him 20 billion?

[B]

Yeah, yeah. Kind of. Yeah, yeah. But we still technically didn't give them. It's. It's a swap.

[A]

This is. This is good, though. I mean, if you're. I think this would be reassuring if you're. Yeah.

[B]

To get 20 million people out of poverty. I think it's worth it if that's what happens.

[A]

And just to have Scott Bessant as sort of an ally in this situation, I. I think they're in a good spot.

[B]

I agree. Now, the question is, do you buy cap, the Argentine airport company?

[A]

Famous shareholder.

[B]

You're a shareholder.

[A]

Tiny starter position. Because I was worried exactly about this was like, what's going to happen when there's some big currency or country risk, how will I respond? And I realized pretty quickly, like, I feel uncomfortable with it, but I'm trying.

[B]

To get our Latin American correspondent Ian Bizek back on the podcast to reassure you. Right. Because he's an expert on all this stuff.

[A]

I need to borrow.

[B]

Hopefully we'll have that sometime in the near future.

[A]

Would certainly reassure me and feel. Make me feel more confident in buying shares of any Argentine companies that I like. And yeah, I actually think that quote from Bess, and I'm glad you said it, because maybe I will add to my Corporation American airports position, which is just the main airport operator down there in Argentina. What else?

[B]

Eight times ebitda.

[A]

Yep.

[B]

Yeah, that's a good ask.

[A]

Do we want to talk about Pepsi earnings?

[B]

Let's do it. Pepsi. Then we can do Delta and then we can do the stock that I bought.

[A]

Yeah. So Pepsi reported earnings this morning as recording. Will have been October 9th. It depends on when you're listening, so could be a little outdated, but organic revenue grew 1.3%. And the story here is pretty simple. They have reported 13 quarters in a row of volume declines and that includes. So that literally means like year over year growth in volume has been negative for 13 quarters.

[B]

And you're worried about Altria. This is the CPG staring you right in the face.

[A]

Yeah, well, I'm not. It might be a value trap as well. The. Every single quarter though for the last. Honestly maybe for like the last two decades they have raised prices and so far they've been able to raise prices enough to offset the volume declines that they still get positive revenue growth. They said part of the reason for this dynamic. I think you might like this quote. The company has been. Oh no, no. It says they are shifting to smaller packaging sizing to appeal to price conscious consumers. Tricking your customers to appeal the price conscious consumers. AKA giving them like whatever, two Doritos in their bag of chips. It's. Yeah, that to me like you shouldn't say that publicly. And the other part, the worst performing division for them is the. Actually the Pepsi Foods. So the Frito Lay business, which is Doritos Quaker, trying to think of some of the other big ones in there. I think those are the two biggest brands because Doritos is a lot of Fritos.

[B]

Yeah.

[A]

Within there Fritos is kind of the whole chip category. But here's a quote from an article I read. It says the company has been investing in more permissible snack offerings like Stacy's pita chips and Quaker rice cakes.

[B]

It has more chips. That's going to save the company. Stacy. Come on. Stacy.

[A]

Wait for this. It has more snack options on the way like Doritos protein which aims to cash in on a consumer shift towards protein rich foods. Are you going to be buying Doritos protein chips?

[B]

I don't think so. That sounds like.

[A]

This actually sounds like a horrible idea.

[B]

Yeah, don't.

[A]

It's. You're going completely against your brand and it's not that. Okay. Protein chips has been like a growing category. You see them a lot in the grocery store.

[B]

God, it's so dumb though.

[A]

Whatever. But it's, it's hard for the bad brand to pivot like that. I think to, to, to be the like you have to be a separate company. Like Quest is one of the big ones for, for that category.

[B]

Right, right.

[A]

They're kind of like a protein brand where it's mostly protein bars but they like moved into the chips.

[B]

Doritos and Munchies.

[A]

So I guess my question to you, how much of this do you think comes down to like WeGovy and all the other weight loss drugs just putting a dent in their consumer base.

[B]

I think that's most of it. That's what my gut instinct says. It correlates very strongly with the adoption of these drugs. And they're going to grow again. They're going to grow volumes again. You're going to need to see GLP1 drug usage stabilize. All right folks, before we move on, we need to tell you where we get our financial data. Fiscal AI Fiscal AI is the complete stock research platform for fundamental investors. I use the platform pretty much every single day. You'll see the charts on our podcast and you'll see it in our newsletter. This is our one stop shop for stock research. They've got up to 20 years of financial data on all companies globally, including company specific segment and KPI data. That means Amazon AWS revenue, SoFi's total members, Google's paid clicks growth and literally millions of more data points. They've also got earnings call transcripts, ownership data, company specific research reports and much more. If you want complete financial data at your fingertips, then you need to check out fiscal AI. And if you use our link fiscal AI chitchat, you will get 15% off any paid plan. Again, that is fiscal AI chitchat. The link will be in the show notes.

[A]

That's Elliot Management invested in Pepsi. Did you see this?

[B]

I did.

[A]

I don't know what the plan is here, but do you think they're going to be able to get some value out of this?

[B]

Create value? Probably. Stock was fairly cheap even if volume declines are there because what you're looking at pricing growth here still solid. I guess during that inflationary period they took a lot of pricing which probably impacted their volume growth. I mean you have this fantastic chart here from Fiscal AI that has pricing versus volume and you can see that the volume decline started when they took a ton of price but now it's normalized and they're still seeing these volume declines. I think that is definitely these weightlight drugs have to be. I mean you see that survey data where they go I never ate chips again like half of the people. That's. That's got to impact your market.

[A]

Yeah, yeah, I, I agree and it's the timing seems about right as well.

[B]

What are they trading at?

[A]

Let's go check our friends at fiscal AI here. Pepsi price is $144 a share which makes their market cap or their EV to EBITDA. Come on here, let's load EBITDA.

[B]

EBITDA of 13. Now maybe that's a fine Proxy they're not that capital intensive so I don't.

[A]

Think 4% dividend yield so here's Would you rather own them or Sirius xm?

[B]

Oh I mean Pepsi but would I rather on them or TlT 4 1/2% yield.

[A]

I think I might take Pepsi.

[B]

There over TlT long term treasuries. I mean not.

[A]

Not really but like in theory like I'm not actually gonna. I don't have any interest in buying Pepsi for my personal portfolio but if I were betting which one had better returns from here I would probably take Pepsi. The only I use TLT as like just waiting like so it's so I know I'm getting a positive return until I get a better until I see a better opportunity with my other stocks. That's basically how I use it.

[B]

Yeah and it's a good hedge for it should do well during a downturn unless it's super high inflation.

[A]

Let's do want to talk Delta earnings or the stock you are buying let's.

[B]

Talk Delta quickly because I think and they they report first always for quarterly earnings and given the fact that a lot of the macroeconomic data is tough to decipher there's estimates people argue over the time what CPI is what GDP growth is and what the inputs and outputs are supposed to be with all that stuff with their spending I think they are a fantastic proxy for the health of the economy especially consumer discretionary stuff as one of the largest airlines in the country with a huge partnership with American Express so you also get broader consumer spending on consumer discretionary stuff and the quarter looks solid. You have 10% operating margin premium corporate and loyalty led the quarter and importantly for consumer health American Express I can never say this correctly. Remuneration remune remuneration grew 12% year over year. That's the revenue from their card partnerships. So just think growth and card spending and card fees that are spent are sent back to them. You know with that revenue sharing there 12% year over year growth driven by double digit co brand spend growth economy's not dead yet.

[A]

At least the American Express card holders are not dead yet.

[B]

I think can play it doesn't talk to the bottom 25% of spenders but it talks to the top 25% which drive 75% of spending.

[A]

It has been just in like the companies I read their earnings reports for it seems like more so than during other periods lower income consumers are struggling more than the higher income consumers. I know that seems to like always be the case but when you look at like dollar store comp sales, the, the fast food comp sales, it's really been weaker when they're targeting the lower income. And you even see like that sort of management commentary as well from like McDonald's CEO stuff like that. But yeah, I think the good, the high income earners are just fine. A little anecdotal evidence for you. I do have a Delta American Express card but I went to a festival, music festival here in Austin and there was like an American Express.

[B]

I know you're doing the full on yuppie stuff, huh?

[A]

Yep. The, there was an American Express like exclusive lounge. You know, they, they were a big sponsor for the event. The longest line I've ever seen which I don't know whether or not to think that's good or it's going to hurt the brand.

[B]

That's. God, come on. That's good. It's so crowded no one goes here. And I'm still going to do this.

[A]

I know, but okay, that is like a funny oxymoron of it's so crowded no one goes. But it does genuinely ruin like the allure of an exclusive lounge. If anyone can go. Right.

[B]

Well, you have to have a card.

[A]

I know, but the barriers to entry are non existent for that.

[B]

I think it's a nice business. They people were complaining that the platinum card fee hike was not large enough because not people aren't going to get rid of it and therefore the loungers won't be.

[A]

I see.

[B]

Yeah.

[A]

I guess if anything that just means there's more pricing power. All right, so let's talk the stock you're buying and then I want to do some quick hitters rapid fire on a couple stocks in big drawdowns and then we've got an audience question as well.

[B]

Yeah, there are a lot of stocks in big drawdowns and this is one of them. Actually don't have the exact numbers here. It's a company here that we've talked about and I'm breaking one of my rules on investing in apparel. I am buying Crocs and I listed in the substack chat. I just wrote out a little. I didn't do a full newsletter. I think I'm going to do one here shortly on the company and why I'm buying. I don't know the exact allocation. Again, I'll do that in the newsletter. If you want to talk about stuff I'm buying or selling, do that. I do that in the chat and the newsletter which the link will be directly in the show notes. I just have A couple of lists of what made me want to buy a little bit of an invest versus then investigate scenario where I've followed the company for many years but I don't have my full on model and write up in thoughts fleshed out. So first up investors I trust are long stock such as Tidefall Capital, Trevor Scott plus others I think he's great follows similar strategy that we do. I do not mind tailing what looks like his ideas. Second, low expectations. Crocs trades in EV to sales of 1.4 EV to gross profit 2.4 EBITDA EBIT of 3.5.8 Third is the brand Revitalization and Smart Ambassador program. Look people joke all they want. They're partnering with Sydney Sweeney, they're partnering with Millie Bobby Brown who's a famous actress. They have a partnership with a Bollywood actress in India. I checked she has 50 million Instagram followers. These I think are very very smart things to do in order to drive sales for young customers. Fourth, Crocs has great capital allocation. Their buyback yield is greater than 10% right now while they're also retiring debt and management is taking out stock wallet is cheap. That's about it. I feel like it's a good risk reward here. Not a never sell position but one I think has the chance to do similar to and I saw this analogy from someone I believe it was Trevor Scott on Twitter. Similar to the Lilu Timberland investment where if things go right we can get a 5 to 7x return in a year or two, maybe more, maybe a little longer. Things go wrong, it's not going to be the end of the world.

[A]

Yeah they I remember reading the last either earnings call or conference earnings report or earnings call and management was talking a lot about the tariff worries and that seemed to catch all the headlines. But you're right, I mean it does seem like sort of a heads I win tails I can't lose too much situation because EV to EBIT of 5.8 and if I'm not mistaken the balance sheet is just fine. Let me check real quick.

[B]

It's okay, it's okay and not terrible.

[A]

They're looking to sell the hey dude brand aren't they?

[B]

Again, this was an invest in that investigate. I have to go in and see if that's the activist talking people doing news articles or the company actually saying it question here in the comments. What do you think will cause Crocs revenue to accelerate again? I think in the US it's a bit of a toss up Sydney swing possibly. I think the Momentum they have internationally is a lot more bankable. Their stuff is way more affordable than Lululemon, Nike, Adidas, what have you and can play better in emerging market economies like India. And they're already doing quite well in China. So I think that gives them a leg up especially because those markets have knockoffs across the board.

[A]

I like it. I, it kind of intrigues me. I, I might look into it myself, but I remember reading one of the worst responses I've ever seen to criticism from shareholders from its CEO or maybe it's former CEO now, I'm not sure. They asked why did you buy? The hate. They, the CEO blamed shareholders for him buying hey dude. That's why the stock said six times EBIT probably is. He was like, well shareholders wanted us to diversify. I kept saying no, but you know, had to, had to buy. Hey dude. It's like, oh yeah, you're the victim here. Sure. Anyways. But no, the, the brand is still strong and I, I could see this totally working out. Multiple expansion.

[B]

Yeah, come on. That buyback is going to work eventually. It's, it's a high risk, high reward position. I don't have the calculation in front of me, but I'd make it probably max 3% at cost. And if it go like this is one where if it goes up by 3x I'm just gonna sell. It's not one of my never sell positions where I'm comfortable holding at a premium valuation. That's how I'm looking at it going.

[A]

In because I would always be uncertain about future growth with Crocs I, no matter how well they do for the next 10 years, I would still in 10 years be worried about future growth. I think that's just kind of the nature of apparel, honestly. All right, rapid fire stocks for you. Let's just go first impressions. I'm gonna actually pull the drawdown numbers up first. One old flame of ours should have been Farmers market down 42% from all time highs.

[B]

I pulled up some numbers for this one because I am tracking it EV to EBIT 1810 com store sales growth last quarter. Although I kind of read into their drawdowns and how the stock is going as a proxy for the third party data people have on. Com store sales. So I'm probably expecting a slowdown this quarter. I wrote basically a question myself. When is it a buy? I'd probably be interested at an EV to EBIT at 15 or below, but I'd have to compare it to some other stuff and I would really be interested to Buy after a flush. The stock price flush after a very bad quote unquote bad quarter where comp store sales was 3% and people were expecting 4.

[A]

Yeah, it's certainly one that I could feel comfortable getting back into. This is definitely some anchoring bias for me because when we bought this it was trading at like 7 times free.

[B]

Cash flow and the price was 15 when I first bought it. Yeah it's painful to see it at.

[A]

This price today and it just feels uncomfortable to buy it at 18 times EBIT or whatever. So I'm with you. I think I'd wait for kind of bad reaction from investors and maybe sentiment to worsen from here. All right, second stock for you shift for payments down 36% from all time highs EV to EBIT I believe like the forward EV to EBIT. If I can pull this up fast enough is 11.6 thoughts.

[B]

Complicated to analyze them since the acquisition strategy CEO Sharp was going to be the NASA administrator. I I think Isaacman who's that is back could be could be good.

[A]

I could see this one working out really well.

[B]

The I I payments is tough but they do well.

[A]

I think some of the valuation numbers people are maybe some of the numbers I've seen people float around are off. But I think Isaac Min is Sharp. They it's kind of been like the opposite of the addien strategy where Adyen is build everything from the ground up so you don't have to have this patchwork of payment systems. Whereas shift 4 is more than willing to acquire but you don't have to.

[B]

Buy it at 35 times earnings.

[A]

Yep. And even on a per share basis they've grown really quickly. Maybe I can make a little custom metric here and process look up total processing volume per share but I would guess it's grown at 30 or 40%.

[B]

That'd be a good way to use fiscal.

[A]

All right, third one here. Hot stock of the day because it dropped it had its largest single day drawdown ever today.

[B]

It's like 10%.

[A]

Yeah. Ferrari.

[B]

I'm pulling up the earnings ratios right now on fiscal because it's going to disappoint you. I think PE. Yeah. What do you want to use PE. Sure.

[A]

PE.

[B]

40.

[A]

Yeah. It doesn't surprise me. The here's the thing is they have they gave out guidance today out to 2030. They had like a capital markets day where they were basically forecasting I think it was like 5% annual revenue growth which when you're at a 40 PE and and sort of like minimal operating margin expansion when you're at a PE of 40. You have to give out the most aggressive guidance on a capital markets day to not have this kind of stock reaction. And.

[B]

Yeah.

[A]

And then you don't. Then you hamstring yourself and you make yourself have to be more aggressive on, on certain operational decisions because you gave out all these aggressive targets.

[B]

There's a type of comedy that doesn't need a capital markets day.

[A]

Seriously. Yeah.

[B]

They're better doing a capital markets day.

[A]

No, they, they don't need to say anything. Let the mystery and the.

[B]

Yeah, that's part of the branding.

[A]

Yeah. It is like making them feel elusive. Management is elusive. So is the brand. Yeah, that would be great. No, It's. The last 10 years have been great for Ferrari but I think they're running into a sort of an awkward situation where they have grown shipment volume like grown the number of cars that they're delivering by a good pace. I'm going to double check the exact numbers right now. Okay. Total shipments have grown by 5% a year. Keep in mind this is a company that very much intentionally limits supply because the average car costs more than $400,000 for a new Ferrari. Deliveries has increased by 5% a year and so has price. Average price per vehicle has grown at about 5% a year for the last decade. It's it. You can't keep up both. I don't think, I don't think Ferrari is going to be able to keep up both. There are not enough billionaires in the world to keep up that. That maybe they can keep the pricing growth but I don't think they can keep the volume growth.

[B]

Yeah. Russian sanctions are finally hitting well now let's do the last one.

[A]

Dutch Bros.

[B]

I just pulled up the price to gross profit which they have this weird ownership structure so sometimes it's very difficult to get the true numbers. And for this company specifically I don't know if they cleaned it up but maybe go look at the SEC filings to look at those LLC units and the three different share class structures. But the price to gross profit 16.

[A]

Really?

[B]

Yeah.

[A]

Is this primarily franchise revenue? Doesn't look.

[B]

Wrong question to ask. You're asking the wrong person. I don't follow closely enough. EV to EBITDA30EB to EBIT54.

[A]

I I shout out to fiscal AI again. I know we've been using them a lot today. Company operated stores, revenue 1.1 billion. Franchising revenue 100 million.

[B]

So main mainly store now. Yeah.

[A]

Right. Yeah. I'm not interested. I love the concept. Well, customer but they do a good job. And there seems to be good, like, I'm in Texas here, which is an expansion market for them. And the brand affinity seems to be pretty strong. The stores I see seem to be pretty busy.

[B]

So they're like the opposite of the pioneers. They're moving. They're moving east.

[A]

Yeah, yeah, that's true. All right, that is four companies, Rapid fire. If there's one that stood out to you the most to be interested in, which would it be? From those.

[B]

Yeah. Got to say Sprouts, it's the most close to buying. And I'm very confident that they are astute capital allocators. If Sinclair and his team are still.

[A]

There, I think I'd probably go with shift four. But obviously with Sprouts, it wouldn't take a whole bunch of research to get back involved. True.

[B]

It's a very clean story.

[A]

Yeah.

[B]

Clean food, clean story.

[A]

Okay, last question. We can hit this really quick, so I know we're running out of time. Listener question. One of our listeners asked what sectors are underappreciated at the moment? Do you have any that are top of mind for you?

[B]

Stuff that looks cheap to me right now? It's hard to say any specific sector because I'm seeing a lot of opportunities internationally as well as just random situations of companies that are facing what I believe are temporary headwinds. But I look at consumer goods, consumer discretionary, because you're seeing stuff and I know you can't buy everything. And I say never invest in apparel. But there's companies like. And not just apparel Crocs, Lululemon and others that could be good opportunities if you're confident in the moat management team, what have you. What do you think?

[A]

Consumer. Yeah, I agree. And especially because you've actually seen sort of a material slowdown in the numbers for some of the brands like Pepsi, like McDonald's. Actually, I think McDonald's has been all right, but some of the other fast casual and fast food restaurant chains, so maybe they're underappreciated. But I think the valuations, last I checked, I'm not that enticed. One of the ones that seems to be neglected and you kind of have to be choosy here is legacy. No, I would say older software businesses. Anyone? I mean, Salesforce, Adobe, a lot of these. Monday.com. the valuations are still a little stretched, but relative to history, they've come in because they all. I mean, Monday.com dropped a ton because OpenAI launched some marketing thing. Are we gonna. Are we really gonna do this whole thing again where Every press release OpenAI has it affects some publicly traded company. I guar you money.com's customers don't care. So it's those are ones where I think there's a people are underrating the customer lock in and everyone's just saying AI disruption. Here it comes for Adobe and Salesforce and you know, work operating system type businesses, it takes so long to switch those systems out and most people just don't do it. So I would be. And they're definitely not going to do it for like the new AI solution and risk their job by buying the terrible software that everyone then has to use. So I think some of those are worth a look.

[B]

Yeah, you're not going to be able to go Claude, kill Adobe for me.

[A]

Write me, write me. Perfect creator software code. Make no mistakes.

[B]

Yep, exactly. All right, that's going to do it everyone. Thank you for listening. These go live most Thursdays, 5pm Eastern Time. You can join on the YouTube page Wednesday or you can watch the replay on YouTube. Listen to the replay out Friday mornings on Apple Podcasts, Spotify. Wherever you get your podcast, give us a review, preferably five stars if you want to support the episode that can or, excuse me, the show. That's the best way to help us grow. 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. Once again, thank you to everyone joining in the chat and we'll see everyone next week.