Chit Chat Stocks — Drafting Our Dream Portfolios; 6 Quality Stocks At Record Low Valuations; A Friday 8-K For The Ages

Episode Date: December 5, 2025
Hosts: Ryan Henderson & Brett Schafer

Episode Overview

This "power hour" episode is a lively and insightful discussion about quality investing, portfolio drafting, and headline financial news. The core of the episode focuses on a listener-suggested game: building hypothetical “dream portfolios” by snake-drafting the best wide-moat, high-growth businesses at 15x "normalized" earnings (ignoring current valuations). Ryan and Brett debate their picks, share investment frameworks, and sprinkle in memorable anecdotes—including Brett’s on-the-ground perspectives from Argentina.

The episode also covers:

• Wild developments at Rick’s Cabaret (a public “gentlemen’s club” operator facing fraud allegations).
• A detailed dive into Michael Burry’s critique of stock-based compensation.
• Macro takes on Black Friday/Cyber Monday spending.
• Mark Zuckerberg’s pivot on Meta’s Reality Labs spending.
• “Six quality stocks at record low valuations” and which ones intrigue the hosts.

Key Discussion Points & Insights

1. Anecdotes from Argentina & Timeless Consumer “Moats”

(00:58 – 01:48)

• Brett, broadcasting from Argentina, observes the expanding opportunity for payments and personal finance innovation there (“Long Mercado Libre, I guess, would be the number one thing... they got a long runway to reinvest”).
• He notes the underappreciated value of big-box retail in the U.S.: “People take it for granted back there, but they do have an insanely good value proposition.”
• Brief mention: “Long line at passport control...those are some high international fees coming in for Corporation America.”

2. Dream Portfolio Snake Draft: Top Moat + Growth Businesses at 15x Normalized Earnings

(03:08 – 30:11)

The Rules

• Listener Simon Becker suggests: each host builds a five-stock portfolio, choosing any business at a set multiple of 15x “normalized” earnings.
• Emphasis: Ignore actual market valuations; focus on the highest quality, widest moat, longest-growth-runway names.

Investment Frameworks

• Brett: Looks for “high quality, high growth... wide moat combined with runway to grow.” Points out that even Visa, a perennial favorite, didn’t make his cut due to size constraints.
• Ryan: Wants a blend of strong moat and 10%+ annual top-line growth (“Wouldn’t just want purely the best business if it can only grow the top line 5% a year”).

Draft Picks (with Notable Discussion Highlights)

| Draft Order | Brett’s Picks | Ryan’s Picks | |----------------|--------------------------------------------------|------------------------------------------------| | 1st | Interactive Brokers | Also wanted by Ryan. Brett: “Very, very confident in their growth characteristics over the next 10 years.” [06:50] | | 2nd | | Airbnb – “Very wide moat...in North America you could truly call this a monopoly...large reinvestment runway, especially internationally.” [09:05] | | 3rd | | Coupang – “Large reinvestment runway...vertically integrated...still growing top line in Korea despite population decline.” [11:30] | | 4th | Adyen – “Enterprise customers, minimal churn, extremely profitable...if you could buy this with Interactive Brokers at 15x earnings, I’d make them huge positions.” [16:18] | | | 5th | Mercado Libre – “Still so much runway for growth in E-commerce and finance...I think people still underappreciate the runway.” [19:08] | | | 6th | | Taiwan Semiconductor (TSMC) – “Maybe less top-line growth, enormous moat...if they fulfill the 40% growth in high-performance chips, this will work out.” [21:47] | | 7th | | American Express – “Of the card networks, I think Amex has the highest growth rate over the next five years.” [24:17] Honorable Mentions: Netflix, Google (would be ahead of Amex), Uber (“I know you hate that”). | | 8th | Wise – “Building an emerging moat...long runway to reinvest.” [25:33] Honorable Mentions: Ferrari, Hermes, Autodesk, ASML, Nubank. | | | 9th | Kraken Robotics – “Where is the moat today? Maybe not super wide, but enormous runway, literally no competition, could 5x or 10x revenue.” [27:13] | |

Key Quotes:

• On Airbnb’s pricing power:
  “People forget...take-rate businesses like American Express, Airbnb, Uber—they are inflation protected.” — Brett [10:25]
• On Coupang:
  “South Korea’s population shrinking, still growing top line...delivering more and more value...scaled economies shared.” — Ryan [12:39]
• On Mercado Libre:
  “Hard to imagine a company that’s the only public business in the world to grow 30% YoY for 22 quarters still has this much runway, but the data is there.” — Ryan [20:46]
• On Adyen/Payments stickiness:
  “It is such a pain to switch payment processors once you’ve scaled...the public equivalent of Stripe, three times the operating margins.” — Ryan [17:28]

Honorable Mentions & Audience Interaction

• Companies floated in chat: Microsoft, Netflix, Hermes, MasterCard, Nvidia, ASML, Uber, Booking.
• Quick shout-outs to Ferrari, Axon, New Holdings, Autodesk, Google, and Uber.
• Riff on passing up stocks because of prior missed opportunities (“I hold a grudge when I miss the boat…” — Ryan [28:25]).

3. Scandal & Lessons: Rick’s Cabaret and the Friday 8-K

(30:11 – 36:18)

The Saga

• Rick’s (a public chain of strip clubs) faces fraud and bribery allegations.
• Notable 8-K filings:
  • Sept: Indicted by NY Supreme Court (“...allegedly took auditors to the clubs and gave them $10K in services…” [30:51])
  • Thanksgiving Friday: Buyback from ADW Capital at a huge premium.
  • Friday after Thanksgiving: CEO & CFO both resign.

Lessons & Reactions

• Red flags galore. “You could make money, but there’s gotta be easier places to make money than this.” — Ryan [35:29]
• Brett quips: “The CEO is resigning and his pay isn’t changing. Isn’t that just hilarious?” [35:59]
• “If everything else goes to shambles, you just basically become a crypto [company].” — Ryan [34:13]

4. Michael Burry on Stock-Based Compensation

(37:25 – 43:56)

The Core Argument

• SBC (Stock-Based Compensation) is greatly underestimated as an expense in GAAP accounting, especially for fast-growing or high-return stocks.
• If you have two identical companies—one pays cash, the other dilutes by 1% annually (to employees)—the latter is worth 16.4x earnings vs. 20x for the pure cash payer, per Burry.
• Great example:
  Nvidia — Reported $20.6B in cumulative SBC, but actually required $91B in buybacks to offset dilution. “The original cumulative GAAP SBC expense for Nvidia is now irrelevant and may as well be imaginary.” — Michael Burry, quoted by Brett [40:44]
• Astounding stat: “There are 36,000 Nvidia employees, $630 billion of RSUs outstanding—that's $17.5 million per person!” [42:05]

Big Picture

• SBC is a real cost—either by buybacks or permanent dilution.
• Investors should either:
  1. Set aside future cash flows for continuous buybacks, or
  2. Model increasing share count in DCFs, even at “just” 1% a year.

5. Six Quality Stocks at Record-Low Valuations

(44:41 – 47:50)

Ryan’s List:

1. Airbnb (22x EV/EBIT)
2. Salesforce (28x EV/EBIT)
3. Lululemon (9x EV/EBIT)
4. Adobe (16x EV/EBIT)
5. Duolingo (21x EV/FCF)
6. Monday.com (21x EV/FCF)

• Brett is intrigued by Lululemon: “Nine times earnings...just so damn cheap.”
• Monday.com: “Revenue growth is highly impressive...the field is hyper-competitive, but software is sticky.”
• Adobe/SaaS “AI bear case” is flawed: “Just because you can build the bones for a website doesn’t mean you have a legitimate competitor to Salesforce.” — Ryan [48:49]

6. Macro/Micro News Quick Hits

Black Friday/Cyber Monday Spending

(52:24 – 54:03)

• Online sales for Cyber Week: $44.2B, up ~7.7% YoY.
• Brett: “Any stock that blames ‘consumer spending’ for underperformance—look yourself in the mirror: is management pulling your leg?” [53:42]
• “Cough, cough, PayPal,” jokes Ryan, referencing macro excuses [53:42].

Meta’s Reality Labs Cuts

(54:13 – 55:57)

• Reports of 30%+ potential budget cuts—up to $5 billion annually.
• “Are you really gonna try to do [another rocket company] out of your spat with Elon?” — Brett on Sam Altman’s space ambitions [50:51]
• The hosts poke fun at the “Metaverse” bubble.
• “Every company had to have a Metaverse strategy. Did anything actually materialize? No.” — Ryan [56:17]

Bubble Watch & Sam Altman

(50:00 – 51:18)

• Altman supposedly eyeing a SpaceX competitor amid OpenAI drama: “Total Icarus situation—getting too close to the sun.” — Brett [50:51]

Notable Quotes & Moments

• On portfolio construction:
  “You always think, why don’t I just own those?” — Ryan [03:00]

• On interactive brokers:
  “I believe they have about 4 million active accounts right now...They can take a ton of market share.” — Brett [06:50]

• On investing in messy situations:
  “There has got to be easier places to make money...” — Ryan [35:29]

• On Meta’s Reality Labs:
  “You’re still burning $20 billion on nothing right now, on science experiments...” — Brett [55:31]

Timestamps for Important Segments

• Dream Portfolio Draft Rules/Setup: [03:08]
• First picks (Interactive Brokers): [06:50]
• Airbnb discussion: [09:05]
• Coupang growth story: [11:30]
• Adyen and payment processors: [16:18]
• Mercado Libre & Latin America: [19:08]
• TSMC and semiconductors: [21:47]
• American Express & honorable mentions: [24:17]
• Wise/Kraken Robotics/honorable mentions: [25:33], [27:13]
• Rick's Cabaret & “8-K for the Ages” deep dive: [30:11]
• Michael Burry on SBC: [37:25]
• Six stocks at record-low valuations: [44:41]
• Black Friday/Cyber Monday macro: [52:24]
• Meta/Reality Labs and Metaverse legacy: [54:13]

Closing Thoughts

This was a highly interactive, dynamic episode with valuable takeaways on building a quality-focused investing framework, the risks of management dilution, and the pitfalls of chasing hype (or ignoring red flags). The light, conversational style—with plenty of quips and grounded anecdotes—offers both practical stock ideas and food for thought.

For listeners seeking:

• A process for identifying and ranking high-quality, durable growth businesses.
• Vigorous debate on real investing risks (SBC, poor governance, bubbles).
• Entertaining, actionable macro and micro perspectives.

This episode delivers—whether you care about portfolio construction, cautionary tales, or simply want new ideas for your watchlist.