Chit Chat Stocks — October 1, 2025

Episode: Is Opendoor Actually a Value Stock? Plus, Another Investor's Take on Portillo's

Hosts: Ryan Henderson and Brett Schafer
Guest: Steve (Unemployed Value DGEN Substack)

Episode Overview

In this episode, Ryan and Brett are joined by Steve from the Unemployed Value DGEN Substack to dissect two "at a crossroads" companies—Opendoor ($OPEN) and Portillo’s ($PTLO). They dive deep into what makes both companies compelling or potentially hazardous investments, emphasizing the importance of management, business models, and the interplay of macro and micro factors. The conversation is thorough, with a candid look at value investing, network effects, company culture, and capital allocation.

[00:33] Meet Steve: Unemployed Value DGEN Strategy

• Background & Approach:
  • Steve explains his “turning over rocks” philosophy to uncover small cap mispricings.
  • He believes being a generalist offers cross-industry insights.
  • Quote:

    "By being a bit of a generalist… sometimes you learn things in one industry that help you in other industries. Sometimes the stuff you find is just incredible." — Steve [01:21]

• Small Cap Focus:
  • Large asset managers cannot efficiently cover small caps due to liquidity and position limits.
  • Quant funds miss key qualitative changes—like impending operational shifts—because they don't track details as closely as humans.
  • Quote:

    "Small caps have the best chance of being mispriced because some of the most skilled investors can't look at them." — Steve [02:25]

[05:12] Opendoor: Investment Thesis and Business Model

What Attracted Steve to Opendoor?

• Wrote a bullish piece in June 2024, calling it a potential "trillion dollar company" (provocative given its sub-$2B valuation).
• Sees Opendoor as a true disruptor in an archaic, $2 trillion US housing market needing modernization.
• Quote:

  "Whoever disrupts [the home buying market] is going to be a trillion dollar company easily." — Steve [05:12]

• Opendoor has a shot at being a "network good" like Uber, meaning scale could create a self-reinforcing competitive advantage if both buyers and sellers flock to the platform.

Recent Changes & Potential

• New management: CEO Kaz Natajian (ex-Shopify COO) and board chairman Keith Rabois (Khosla Ventures, PayPal Mafia).
• Quote:

  "Those guys are going to move quickly, they're going to iterate rapidly. I think the odds they're going to be successful... be conservative, put it at 20% chance they're going to create a network and disrupt the housing market." — Steve [10:15]

• Management’s focus is now on solving core industry problems and shifting beyond just sellers to fully engage buyers (potentially creating a new MLS alternative).

[11:41] The Role of Management & Industry Secrets

• Industry Unlocks: Learning the “key” of an industry (e.g., shipbuilding’s order book, tech’s “speed of problem-solving”).
• Bets on management’s ability to solve problems faster than the market realizes are key in technology investments.
• Shares his experience with Carvana’s CEO (Ernie Garcia III)—an overlooked genius—leading to his biggest investing regret by selling calls too early.
  • Quote:

    "All you need in tech is a CEO who's solving problems quickly... Even if every person on CNBC thinks you're a joke and you're going bankrupt." — Steve [15:09]

• Draws parallels between Carvana and Opendoor’s new leadership.
• Importance of retail investors accessing "venture-like" upside pre-IPO in unique small caps.

[17:35] Opendoor’s Current Financials and Path Forward

• Financial Realities:
  • Cumulative -$4.5B in free cash flow, 8% gross margins, highly capital-intensive, “roller coaster” stock price.
• Key Bottleneck:
  • Business model relies on accurate home pricing (historically hampered by information asymmetry/adverse selection, e.g., "market for lemons").
• Steve believes AI/ML is changing the game—leveling information asymmetry with curb appeal scoring and automated floor plan analysis.
• Quote:

  "Machine learning will solve so much of this that I think that problem is going to get solved, that they are going to be able to price houses correctly." — Steve [19:34]

• Macro context: Last rate hiking cycle devastated the model, but interest rates are poised to drop, potentially reviving transaction volume and margins.

[23:43] Opendoor—Position Sizing & Volatility (Meme Stock Status)

• Managing the Position:
  • Started at 1%, raised to 3-4%, now up to 15% of personal portfolio due to price appreciation—not trimming yet.
  • Cautions about extreme volatility:

    "This is going to be a very, very volatile stock... The price is being determined by people who are buying call options and buying put options." — Steve [24:08]

  • Reluctant to short; "meme" attention brings both volatility and customer flow.
• Macro and sentimental tailwinds: Meme stock attention, rate cuts, new White House/fed chair, management creativity.

[29:00] Opendoor—Risk, Asymmetry, and Time Horizon

• Recognizes the risk of total loss ("could be a zero"), but believes short-term upside is more probable (“won’t be a zero in a month”).
• Quote:

  "If they're wrong, I think it'll take a couple of years to find out if they're wrong... Personally, after judging Kaz and Keith Raboy in long form interviews, I think it's much higher. I think those two are on fire." — Steve [30:11]

• Projects a price target: $30–$45 if sales and multiple expand before risks play out.

[32:35] Portillo’s: The Investment Case

Quality & Brand

• One of very few “value with quality” names Steve has found.
• Portillo’s stands out with:
  • Fast-casual format, but Chicago locations run $10M revenue/$3M profit per store.
  • Top Net Promoter Score in the industry, generating passionate word-of-mouth with little advertising.
  • High ingredient quality: 30% COGS (compared to ~20% in fast food), yet higher margins because of immense foot traffic.
  • Quote:

    "Portillo's comes in number one [for] Net Promoter Score. The people who love it get absolutely fanatic about it." — Steve [33:48]

• Menu offers something for everyone, including salads and beer, with low average ticket size driving volume.

[40:23] Portillo’s—Challenges: Guidance Cut, Marketing, & CEO Change

• Why the recent struggles?
  • 2024 guidance cut, CEO ousted—a "gentle firing."
  • Steve pins most issues on the loss of the Chief Marketing Officer (CMO) in 2023; sees lack of marketing (not macro or product) as key.
  • Successful launches (e.g., Dallas: $17M first-year store) had an active CMO; lackluster results elsewhere during CMO vacancy.
• Recovery Path:
  • Newly hired CMO: Chicago native, strong track record at Marco’s Pizza (8%+ comp sales growth, rewards program focus).
  • Portillo’s loyalty program added 1.9M members since March 2025—22K per location (vs. Chipotle: 5K/location).
  • Quote:

    "The new chief marketing officer comes in with experience on how to use rewards programs and gets to inherit a rewards program with 1.9 million members on it." — Steve [45:55]

[49:54] Portillo’s—Valuation & Expansion

• Aggressive recent expansion (10 new locations in 2024 off a base of 76).
• Experiments with store size, menu simplification, and alcohol sales—all in pursuit of efficiency.
• Growth paired back in response to muted new-cohort sales and activist investor pressure; now focusing on sustainable, free cash flow–positive expansion.
• Valuation Callouts:
  • Trading 0.66x sales vs. Chipotle at 5–7x.
  • Market cap per store ($4.7M) is 1/4 the price Berkshire Partners paid when it owned 40 stores.
  • Board has former CFOs of Domino’s and Chipotle—deepening executive bench.
  • Quote:

    "Once the market believes Portillo's can be successful outside of Chicago, I think it would go to a price to sales of at least three really fast... that's a 5x." — Steve [52:25]

• Activation of rewards program, potential for marketing "re-launch" of underperforming stores.

[62:03] What Would Change Steve’s Mind on Portillo’s?

• Major Red Flag: Abandoning "everyday value" to chase higher ticket prices (as happened with Subway and McDonald's), risking loss of the devoted fan base.
• Otherwise, comfortable giving management time to fix operational/marketing gaps.
• Negative reviews outside Chicago often stem from lack of customer education on menu/ordering (solvable as customer base matures).
• Quote:

  "The one thing that would make me cut my losses and abandon Portillo’s is if they start jacking up prices." — Steve [62:23]

[65:53] Closing Takeaways

• Episode closes with Steve reintroducing his Substack—focused on small-cap mispricings plus macro insights and a model portfolio designed for inflationary times.
• Both Opendoor and Portillo’s are framed as classic value plays with idiosyncratic upside, provided management executes and macro conditions are supportive.

Key Episode Quotes (with Timestamps)

• On Small Cap Mispricings:
  "Small caps have the best chance of being mispriced because some of the most skilled investors can't look at them." [02:25]
• On Opendoor’s Network Effect Potential:
  "Whoever disrupts [the home buying market] is going to be a trillion dollar company easily." [05:12]
• On Management's Primacy in Tech:
  "All you need in tech is a CEO who's solving problems quickly." [15:09]
• On Opendoor’s AI Advantage:
  "Machine learning will solve so much of this that I think that problem is going to get solved." [19:34]
• On Meme Stocks:
  "You also have the free advertising from being a meme stock." [26:00]
• On Portillo’s Brand Strength:
  "Portillo's comes in number one [for] Net Promoter Score. The people who love it get absolutely fanatic about it." [33:48]
• On Loyalty Program Advantage:
  "Portillo's now has 22,000 rewards members per location. That is absolutely crazy." [45:41]
• On Valuation Reset Potential:
  "Once the market believes Portillo's can be successful outside of Chicago... that's a 5x." [52:25]
• On What Would Make Him Sell:
  "The one thing that would make me cut my losses and abandon Portillo’s is if they start jacking up prices." [62:23]

Important Timestamps for Key Segments

• [01:21] Steve’s investment process
• [05:12] Why Opendoor could be a trillion-dollar business
• [11:41] How management makes a difference in tech—and Steve’s Carvana story
• [17:35] Opendoor’s financials and the AI edge in pricing
• [23:43] Managing meme stock volatility and position sizing for Opendoor
• [32:35] Portillo’s—brand, financials, and Chicago success
• [40:23] Portillo’s—problems, leadership changes, and why marketing is the real issue
• [49:54] Valuation, expansion strategy, and activist involvement at Portillo’s
• [62:03] Metrics and warning signals Steve watches for Portillo’s

Summary for Non-Listeners

• The episode provides an in-depth, candid analysis of two mid-cap stocks that could offer outsized returns if management executes as hoped—Opendoor as a tech “network” play in the huge, archaic U.S. real estate market, and Portillo’s as a unique, underappreciated fast-casual restaurant levered to grassroots brand advocacy and operational discipline.
• Steve is bullish on both, while being realistic about their risk: both could flounder if execution misfires, but the upside is dramatic relative to current valuations.
• Listeners are encouraged to look for management’s strategic moves, reversion to historical strengths (Portillo’s value menu), and the compounding effects of loyal user-bases, both in tech and restaurants.
• Both investments are positioned as risk-tolerant bets within a diversified portfolio, not as “sure things.”

For further insights from Steve, check out his Unemployed Value DGEN Substack.