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- [00:00]
Steve from Unemployed Value DGEN
Foreign.
- [00:05]
Ryan Henderson
Welcome to Chitchat Stocks. On this show, hosts Ryan Henderson and Brett Shafer analyze businesses and riff on the world of investing. As a quick reminder, Chitchat Stocks is a CCM Media Group podcast. Anything discussed on Chitchat Stocks by Ryan, Brett or any other podcast guest is not formal advice or recommendation. Now please enjoy this episode.
- [00:33]
Brett Shafer
Welcome to the Chitchat Stocks podcast. The podcast to help you find your next great investment. Today we have a first time guest. It is Steve from Unemployed Value dgen. We're talking two stocks at a crossroads, Open Door and Portillo's two companies. I think listeners of our show will definitely know Open doors obviously, but been very popular in recent months because of the new investor base, the management shakeup and then Portillo's we've talked about. Unfortunately, I've held the stock for the last year as it's gone down about 50%. So that company's at a crossroads as well. But Steve, welcome to the show. As a first time guest, why don't you tell the listeners about the Unemployed Value degen strategy and the newsletter?
- [01:21]
Steve from Unemployed Value DGEN
Yeah, thank you very much for having me. I'm really grateful for the opportunity. My Unemployed Value DGEN substack. You know, every day I'm turning over rocks. I'm just trying to look at new small cap companies that I think might be mispriced. And you know, if you turn over enough rocks, you find some, some amazing treasure. And by being a bit of a generalist and seeing, you know, industry to industry, sometimes you learn things in one industry that helps you in other industries. So it's, it's been fantastic to be a generalist, just keep on turning over rocks. And sometimes the stuff you find is just incredible. What sort of unique things are out there that gets overlooked?
- [02:00]
Co-host (possibly Brett Shafer or Ryan Henderson)
And I think there's our audience. If you've listened to our weekly episodes and you like the small cap of the week, I highly recommend going and checking out the Unemployed Value DGEN substack as well. And I've heard you allude to it on other shows. But there's just, I guess I'll pose the question to you. Why do you focus specifically on small caps relative to other areas?
- [02:26]
Steve from Unemployed Value DGEN
Yeah, there's so much money floating around in large asset managers that they kind of fall into two categories. One, human being, even a professional, you really can't cover more than 30 things and know the company well. And if you're managing a billion dollars and you can have 25 positions, these small caps are just so illiquid. They're really off of your radar, they're off of your menu. So if you're thinking about where prices are going to be efficient or inefficient, the small caps have the best chance of being mispriced because some of the most skilled investors can't look at them. And at the other end of the spectrum, you have the quantitative funds that might have 2,000 positions, but nobody's listening to those earnings calls. Right? There are so many things that happens to a company. For example, a miner is building out a new mine and they're taking all of their cash flow and sticking it into the ground. Well, their quantitative metrics look terrible because all their cash flow is Capex. And then overnight the new mine turns on and the Capex turns off and their revenue doubles and their cash flow goes up by 10 times. And a human being that was listening to that earnings call can know what's happening and the Algos can't. So the large professionals with 25 positions that can't be in small caps and the quantitative strategies that are in 2000 positions, they'll miss everything important about them. So I'm in small caps for the mispricing and every once in a while large caps are mispriced. I remember when Facebook was like 100 bucks a share. I was listening. I was pitched the perfect information for that. Somebody was on a podcast and was saying, look, all this Capex that everybody thinks is for the metaverse, the vast majority of it is for artificial intelligence. This is going to drive their advertising revenue. And I didn't pull the trigger because I was stuck in my small cap mentality. But sometimes there's mispricing in large caps. Still kicking myself because I had every piece of information. I had the right thesis served up to me on a silver platter and I didn't buy it. You know what, what an idiot.
- [04:27]
Co-host (possibly Brett Shafer or Ryan Henderson)
Hey, we, we're in the same boat there. And it isn't, you know, it's not as if there aren't. Like you said, there are mispricings on occasion in some of the world's most followed companies. But there's a lot more room for mispricings in the small cap universe. Let's start with Open Door. Get to Portillo's in a bit. I think Brett mentioned that both these companies are sort of at a crossroads. Open Door has become, I, I guess a well known ticker, a well known stock for a lot of people. But maybe let's set the groundwork. For starters, what attracted you to this company? And can you Explain the basics of the business model and, and sort of the evolution over the last year, what all has happened.
- [05:13]
Steve from Unemployed Value DGEN
Yeah, I wrote about Opendoor on my sub stack June of last year and I had a really kind of salacious title. This is why I think this company could have a trillion dollar market cap. And that's, you know, that's, that's a little aggressive because I think when I wrote about it it was, you know, maybe 2 billion but there aren't, there aren't many. So there were two companies at the time, one was OpenDoor, one was Cardlytics. They had this real capacity to be a 50 bagger based on their position in the market. But they had bad management teams. Management was just not delivering. And a lot of value investing is just figuring out okay, what kind of problems can you solve and what kind of problems can't you solve. Which problems are going to go away on their own because of the macro? Which problems could a decent management team solve? Are they going to change the management team to somebody who's going to solve these problems if something's undervalued, if something's cheap, it has problems and which problems are going to get solved? Open doors position in the market. You know, so much of our lives are getting disrupted by tech. And we bought our house in 2019 with really lucky timing on that after our oldest was six months and we wanted to get out of an apartment and into a house. And the process was just archaic. The process we go to a know you search for months, you start the process to close on a house. That process takes over a month. You do the final document signing at a title transfer office. It takes all day just with stupid amounts of paperwork. And how home buying is going to get disrupted by somebody. And home buying is a huge market. It's more than $2 trillion annually trading hands. That sounds like a massive number because our GDP is what, 26, 28 trillion. And so people have a hard time believing how big the housing market is because homes aren't goods that are finished this year because they're existing. It doesn't show up on GDP. This is a $2 trillion market. It is enormous. And whoever disrupts that is going to be a trillion dollar company easily. And another thing about it is they have the possibility. So some markets, you know, one of the companies I like a lot is sofi, although I just, I just sold my st, taken it because the price had run up too much and maybe it'll keep going, but I'm into undervalued small caps and pricing growth is harder for me. Banks have no capacity to be a network good. There's no benefit that you have from being a part of the same bank as your friends, right? So SoFi is growing aggressively. They're trying to become a top 10 bank. But the banks are set up. The rules of the banking system are set up to be a cartel, not a monopoly. So no bank has any advantage over any others. But you take a company like Uber, the people that want a taxi go to the company with the most drivers, hoping there's one nearby. And the drivers go to the company that has the most passengers because they want the largest volume. So that creates a feedback loop, right? The customers go to Uber for the most taxis, the taxi drivers go to Uber for the most customers, and it becomes a winner. Take most market. And recently I've been trying to do really aggressive pricing around airports. So I actually, I installed Lyft on my phone just because they were wanted to charge me $200 or something absurd to go five miles from an airport. I just knew it was a massive ripoff. So if they just don't try to abuse the pricing so much. I would have never installed Lyft on my phone if that was a $40 ride instead of a $200 ride. So the market was theirs to lose. They're a network good. The housing market has the capacity to be a network good. And this is one of the most encouraging things I've seen out of this new management team is the new CEO Kaz was talking about. One of their first priorities is also connecting to the buyer and not just the home seller. And what that has the potential to do if they're successful is right now the whole housing market. It's like the banking system. No real estate broker has an advantage over any other because every house is listed on this NMLS database. National Mortgage Lender, whatever that acronym is. If Opendoor comes in there with this disruptive tech platform and the seller goes to them to put it on their system, not on an mls, and the buyer goes to them to go to their system, not on nmls, they have a chance to disrupt the whole package, the entire thing. And that means that that Open Door, they could fail. You know, I'm buying Opendoor stock knowing it could be a zero. This could be a goose egg. But they could also be the network goods sitting on top of a $2 trillion annual industry. And that's completely insane. So if you were to do a flip of the coin and say, okay, heads, there are zero, tails, it's a trillion dollar company. What should that trade at today and what probability weighting do you put that they're going to succeed at this thing? My answer is, I think they, after listening to interviews of the new chairman of the board, Keith Raboy from Khosla Ventures, he's a pretty famous venture Capital Fund and PayPal Mafia Guy and their new CEO who is the former chief operating officer of Shopify and the vice president of product development. Those guys are going to move quickly, they're going to iterate rapidly. I think the odds they're going to be successful, okay, be conservative. Put it at 20% chance that they're going to create a network and disrupt the housing market. That's, that's a minimum 100, $200 billion company, maybe a trillion dollar company. So what would you pay for a 20% chance of a 200 billion or a trillion dollar company? I think is extremely exciting.
- [11:02]
Brett Shafer
And for reference, for anyone listening today, I think the market cap, I just checked about $6 billion. So that's kind of the number we're working with now. Obviously a couple months ago was a lot lower. We'll talk about the actual business a bit, although it's kind of, well, what is the business going to be in the future? So we might be speculating on that. But you talked about in your newsletter, on some of the other podcast appearances you've been on that listened to before doing this interview talk about the importance of management. Why is it so important and why is it helpful to find in relation to that the quote unquote secret of an industry and matching that up with a competent management team?
- [11:41]
Steve from Unemployed Value DGEN
Yeah. So as a generalist, you know, you scratch the surface of a new industry and you just, you know, like, I do not know anything about this thing. And every once in a while you listen to some, some speaker at a conference and they give you the key to unlocking the whole industry. I think the first time that happened to me, it was shipbuilding or not shipbuilding, but the shipping industry. You know, tankers and cargo containers and dry bulk. And as a guy at a conference said, look, all you need to know is the order book, right? It takes, you know, the shipyards are booked out a couple years in advance. It takes a couple years to build a ship. So you can see the order book. You know, what all of your competition is going to be for the next three, four, five years. You know what the supply is and the demand. You know, the global economy grows 1, 2% a year. So that's all you need to know. About the shipping industry is look at the order book and you know what's going to be in short supply and what's not. And that really was most of shipping investing. There's, there's some other rules. Some are more of a joke, some are more serious, like don't invest in Greek ship owners. That one always struck me as funny. But then there's also geopolitical events. But that really does unlock most of the whole shipping industry. I was at, I was listening to a conference for tech, and somebody got up and says, all that matters in tech is how fast the CEO is solving problems. That's the only thing that matters. And the audience was having none of this. The audience was pushing back. What if they're in the wrong product? What if they're in the wrong business? Well, if the CEO is solving problems fast enough, they're going to get out of a bad business. They'll be in the right business. All you really need to do in tech is just invest alongside the right people. And I took that thesis And I wasn't 100% sure that that unlocked the whole tech industry for me. And then Carvana happened. And Carvana. Carvana was like the butt of a joke on CNBC and Bloomberg. Everybody was just laughing about Carvana. It was one of those scenarios where I knew, like the talking heads on CNBC, they have to know a little bit about 100 companies. None of them had looked under the hood. None of them had looked in this company deeply. And I was like, hold on. There was a false confidence in all these people just laughing about Carvana. So I dug into the company and this guy, Ernie Garcia iii, listening to him on earnings calls, he's a legitimate genius, like easily 160 IQ. The speed at which he was talking about the, his, the math behind solving all the problems of his inventory turnover, how he's going to get to profitability. And then on top of that, they had just done an acquisition and they had $2 billion of unencumbered land. So they had, at their burn rate, they had easily five years of liquidity and a CEO who was just solving problems so quickly. And also every step they did along the way, I would just see what the actions they were taking. I was like, that is genius. So I, I put my preconceived ideas aside. Listen to this guy that said, all you need in tech is a CEO who's solving problems quickly. And the day that CarMax missed earnings, Carvana sold off along with it on a sympathy crash. And I bought Carvana for $3.92 a share. And then like a total idiot, I sold calls on it at $5 a share. So I think it's probably going to be the largest investing mistake of my entire life to sell calls on Carvana at $5 a share.
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Brett Shafer
Yeah, it's 373 for listeners that want the to feel the pain that Steve has here right now.
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Steve from Unemployed Value DGEN
I bought 4000 shares of Carvana at $3.92 a share and I sold calls on it at $5 like a total idiot. But the underlying idea that investing in tech all you need is the CEO that's solving problems quickly, I think, you know, I think I genuinely believe that now after seeing Ernie Garcia, how quickly his brain was firing and how fast he was solving problems and finding out no, that is really is true. Even if every person on CNBC thinks you're a joke and you're going bankrupt, if you've got $2 billion of liquidity and a CEO that solves problem that problems that quickly, the smarter bet was on Ernie Garcia iii. I feel like a similar thing is happening now with Keith Raboy and Kaz Natajian at at Open Door that the, the structure of the market, the opportunity there, how fast those two are able to to iterate and solve problems. I think another thing that makes this opportunity so rare is that venture capital has become so systematized that a lot of, a lot of the venture capital in the tech world when these companies are small stays private and they IPO when they're $100 billion company. What, what makes I think the retail investor. This is sort of a unique experience for the retail investor because you usually don't see serious venture capital in small caps. Right. Serious venture capital is all private behind the scenes and you don't really know what they're doing. There's a lot of companies that people would love to own a piece of and they're not going to get a chance until they exit in the public markets at 10 times their current size. That's why I think it's such a rare and unique opportunity.
- [16:45]
Brett Shafer
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- [17:36]
Co-host (possibly Brett Shafer or Ryan Henderson)
Let's talk about the financials. At the moment they don't look great. To put some numbers on it. Negative 4.5 billion in cumulative free cash flow since inception. 8% gross margins. It's kind of the nature of the business model that they're going for and pretty capital intensive. Can this existing business model work, do you think? Or does is it going to require some sort of monumental pivot?
- [18:06]
Steve from Unemployed Value DGEN
Well, the business model is going to change and the CEO has been talking about this already and also announced a new product rollout I think next week. But whatever the business model is, they have to price a house. And pricing a house is a very difficult job. You have an information asymmetry and sorry to get into much jargon, I was a former finance professor, but we call this adverse selection. There was an old paper by a guy named George Akerloff, the market for lemons. And this adverse selection, when I was explaining it to my class, I would always talk about, do you want to get into the business of insuring against male pattern baldness? Do you think that's a, a good business idea? And try and let the class think their way through whether or not this is a good business idea? And I would ask them, you know, is your dad bald? And you know, a third of the class would say, yeah, my dad's bald. And like, well, does the insurance company know that your dad's bald? They're like, no, the insurance company has no idea if your dad is bald. But you know, if your dad is bald. Which means if I try to come up with an insurance business for male pattern baldness, I would only get customers whose father is bald. And since baldness is hereditary, I would go out of business pretty quickly. I wouldn't be able to price insurance for male pattern baldness. There are so many qualitative aspects of housing. You know, curb appeal, floor plan layout. There's so many aspects of housing which is going to affect the price of a house. And a large data set in the past was not able to really handle that. So Open Door had and also Zillow with it. It's inherent in this business where the person Selling the house knows more about it and the person buying the house, you're going to have the lemon market problem. You also have the problem that when Open Door was cash flow positive, money was at 0%. Right? You had, you had free money. And the CEO of Redfin was in an interview a couple months ago and said this business model does not work at 4% interest rates. And that's, you know, it's an aggressive take. His company lost $50 million and he gave up on that business. I think AI can solve a lot of this stuff now. You can feed pictures of houses into a machine learning program and you can come up with a curb appeal score. Previously we were talking about using LIDAR drones to map out the floor plan, but now they can do it all with pictures. If you have enough pictures of the interior, AI can fully map out the floor plan and you can figure out is this an awkward layout or is this an attractive layout? So every advantage that a local real estate agent has in helping to price a house, all those advantages are going to be destroyed by artificial intelligence. So the last time interest rates rose, Zillow lost $900 million and Opendoor lost a billion dollars on their inventory. And, you know, that's, that's a huge loss. But it's directly related to the lemon problem that people selling their house to your platform, they know more about it than you do and they have all these problems with it. Machine learning is going to 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. They have gone on the record and saying they're only interested in the middle part of the bell curve. They're not going to worry about high end luxury homes because the prices of that is, you know, that's more art than science. Which, by the way, that's one of the reasons I had written about the realtor Douglas Element in the past, and that's still one of my favorite picks for the real estate market, especially with Trump as president, they focus on the high end. I know you guys were looking at, I think, a realtor company on your last podcast. Anyway, even if Open Door disrupts the realtor market, I still think the high end luxury, you need to have some people involved in that. But the rest of the realtor space, I would be terrified about being a realtor, especially once. So you had that monopoly ruling against the National Mortgage Realtors association because they were, you know, they were a cartel and they were enforcing the 6% transaction cost in every Home. And now you've got Opendoor, who's going to come just aggressively like a gorilla into this room and come for the whole market. They're already talking about laying off 50 to 70% of the staff, flipping to net income, profitability, writing new codes, iterating quickly. I think you're going to be shocked to see what kind of changes roll out in the company week after week after week. And I think one of the, one of the first ones is going to be. So the chairman of the board, Keith Rabboy, who was also an initial startup funder in another company called Rome, which is a tech platform that'll help for people. If you live in a state where the mortgage is assumable or portable, you can bring your mortgage from one house to another. That's about 30% of the country. I bet. One of the first things that's going to happen is a stock based acquisition of Rome. And then Opendoor will be able to assist 30% of houses with unfreezing the market because you can take your mortgage with you or the buyer can come in and assume your old mortgage. That'll be a large game changing innovation. This thing is going to change so quickly. I know there were some, some pretty famous short sellers looking at how Open Door had done in the past and I think that they're gonna, it's not gonna be the same company in three months or six months. So I think it's very hard to judge it based on what it has done in the past. And I think some of my subscribers were shocked that I was talking about this because I talk about underpriced things. Two of my biggest holdings are offshore oil drillers and platinum miners. So I'm into some pretty low tech, salt of the earth sort of stuff in very cyclical commodity based industries. I think a lot of my subscribers are surprised that I'm this enthusiastic about a tech network. But I mean this has the capacity as far as underpricing goes, if they're successful, it's a trillion dollars. It's hard to get a deeper discount to valuation than where it is right now.
- [23:44]
Brett Shafer
So we've seen the stock price go from, I believe, and you can correct me if I'm wrong, in June it was at 50 cents, then it shot up to $10. It's gone on a roller coaster ride since then. Today I think we're around 8. As an investor, how do you manage a position? Position sizing, trimming, buying, selling, what have you. That has also become a meme Stock.
- [24:09]
Steve from Unemployed Value DGEN
Yeah, so. And I have a model portfolio on my sub stack and I had put open door at 1%. And then in July when, when it went from 50 cents to $1.50, I told all my subscribers to look at this really closely. So I think I, I think I brought it up to 3 or 4% of my portfolio. But because it's gone up so much since then, Now Opendoor is 15% of my personal account, which is, it's a sizable position. But I look at, okay, well, there's going to be huge ups and downs. This is a battleground of call buyers and put buyers. This is not. The price is not being determined by even on the margin of who wants to own the stock and who wants to sell the stock. The price is being determined by people who are buying call options and buying put options. And it is going to whipsaw and zigzag around. It is going to be a wild ride. So I wouldn't have a huge concentrated position in a company like this while I had, you know, margin or something. I can get margin call just from the volatility. This is going to be a very, very volatile stock. But I would not be on, I would not want to be on the short side of this because for one thing, tech companies routinely trade at 3, 4, 5 times price to sales. And this thing is still only about if it's maybe one and a half times price to sales. It has a really powerful, a really deep bench, really powerful leadership team that would usually give it some sort of a premium. It has the genuine capacity to be a network good. It has a huge total addressable market. So I. And then on top of that, you're going to get the positive benefit of whatever new products get launched. But you also have the free advertising from being a meme stock. You saw with GameStop, there were people on Reddit posting pictures of the receipts, like, for example, you know, doing my Christmas shopping for my nieces and nephews. I'm going to do 100% of that at GameStop. So there's the meme stock component where it actually drives revenue. You get all this free advertising. You get this really dedicated customer base. And because housing transactions go to these national databases, there's data services that track open doors, daily volume. And because of the meme stock behavior and the increased notoriety, they're on track to beat revenue guidance this quarter there, I think 20 million, $28 million above guidance for revenue this quarter. On the back of this increased attention, this is at a time where the housing market is dead. So on Top of that, you add the macro tailwinds. Everybody knows we're heading towards rate cuts. I suspect Jerome Powell is going to pause in October even though Goldman Sachs and JP Morgan thinks we're going to have a cut in October and December. I think Jerome Powell has one last turd for the punch bowl and he's going to pause in October and then cut in December. That's just my guess. But we're in a rate cutting environment. You have a real estate developer in the White House who has stated that he is going to unfreeze the housing market. You have a new Fed chair in May. May is just around the corner. You've got rapidly iterating tech Bros. In charge. I would not be on the short side of this thing. There's just no way. So 15% of my portfolio is already a massive weighting but at cost to me. It was like 3% of my portfolio and what would I rotate the money into that between now and call it May has. I think there's pretty good odds it could easily be 20 or 30 bucks by May. And when I look at all the other stocks in my portfolio, what else could I triple between now and May? There's a few things but there's not a lot. So I'm not trimming yet. I haven't. I under extreme pressure from some of my former students who I keep in touch with. I did trim 10% at about $8.60 and I, you know, I don't think I'm going to be trimming anymore until we get to the $20 or $30 range. I, I don't know. I might not trim any more for a couple years because after watching what happened to Carvana and being so scarred from I think the largest investing mistake that I've ever had. But I will be watching management. So if I see them doing the wrong things, if I see them, you know, rolling out products, they're going to burn through cash and doing the wrong stuff. But I don't think they're going to do that because for one thing, especially if you listen to Keith Rabboy because he was one of the co founders of his company, he's been thinking about this business model for the last 10 years and this was kind of his white whale. This is his one that, that got away and he's there like you know, call me Ishmael. He's, he's on this crusade to make this thing work and I think he's going to do it. This has been eating away at the back of his mind for the last 10 years and the guy is, is coming in with a plan. They're going to roll out some amazing innovations and unless I saw some, some really enormous mistakes coming from management, I think I would, I would ride this thing as long as the, the positive developments of the company keep on improving.
- [29:01]
Co-host (possibly Brett Shafer or Ryan Henderson)
And there is, I think you gave a. Earlier on in your answer you mentioned that let's peg it at a 20% chance this happens. I can already imagine that there's people in the audience or listening to this podcast right now that are thinking, oh, I don't think they're going to be able to turn around. They're hemorrhaging money and the business model is flawed for whatever their beliefs are of the business. If you are right, it's asymmetric upside and if you're wrong, it's not the end of the world. It's one stock potentially. Whereas as you mentioned on the short side, I think it kind of goes back to Brett, maybe you know, the name of the asset manager that the Australian guy who said it's like shorting some of these stocks has been like shooting fish in a barrel. But every once in a while they shoot back. When it comes to some of these cult like followings around stocks, even if they are potentially right on the business, they can easily be wrong with their investment. Is that a fair characterization?
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Steve from Unemployed Value DGEN
Yeah, I think if they're wrong because of the liquidity that they have access to from their banking relationships, even if they're wrong, I think it'll take us a couple of years to find out if they're wrong. And so there is a lot of time to take in information as it comes and to update your priors and to figure out if you still want to hold on. Especially when we're entering into this rate cutting environment. So you know, the, the macro tailwinds of it coming into a rate cutting environment with a new Fed chair, I, I don't think we're going to know the answer for a couple of years. And you could think you could look at this and say, yeah, maybe it's a, Maybe it's a 5% chance they'll take this market. Maybe it's a 10% chance they'll take this market. Okay. I'm okay with disagreeing on the probability personally. After judging Kaz and Keith Rabboy in long form interviews, I think it's much higher. I think those two are on fire and they're going to really surprise people. And it's not like people have, you know, low Expectations. I mean, they're seasoned professionals who've done amazing things at their previous roles. But yeah, I fully acknowledge that there is a chance they could fail. And this is a zero. And so right Now I have 15 of my portfolio on something that could be a zero. But I also think that it won't be a zero in a month. We won't know for a couple of years. And those couple of years are going to have a lot of new product rollouts, a lot of interest rate cuts on volume. Last time their last peak volume was $15 billion in a year. So. So when you have interest rates cut and you have the housing volume pick up, you're going to look at, okay, what's the price to sales on $15 billion of volume? And if you give it a two times price to sales on 15 billion of volume, it's a $30 stock. Three times is a $45 stock. So even if it does become a zero, I still think it's going to go to 30 or 45 bucks before it becomes a zero. But maybe the problem is unsolvable. Maybe whoever buys a house 30 years from now is going to sit in a dingy title transfer agent's office and sign 27 do pages of paperwork. It takes a whole day and it's terrible. But I think I would bet on tech disruption. And I think these guys have a pretty solid chance at being the ones who disrupt it. And five years later, because you know, they went public five years ago, machine learning is so much better now they do have better tools at their disposal and I think they've got a much better chance of solving this problem.
- [32:35]
Brett Shafer
Now let's talk about another stock, one that I personally have a love hate relationship with. It is Portillo's. I heard you on which people should go listen to value after hours talking about this company. I said, hey, look, I think that we should get this guy on the show would be a fascinating conversation to hear this pitch. You, I believe, own Portillo's, but tell the audience yes or no, what was the initial thesis on this business?
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Steve from Unemployed Value DGEN
So there's, as a value investor, I'm constantly finding companies with problems. There might only be two companies that I found in all the rocks I've turned over that it was a value, it was mispriced, it was cheap, but it was also a quality company. One of those I think was Jackson Financial and Portillo's, that it has that quality aspect. This is a company that is going to be incredibly profitable. It'll be incredibly profitable even in Bad years. It'll be massively profitable in good years. And I think they have, I think they have the right niche. One thing about food is it's highly competitive. But one, one good thing about it is that it's, it's forever. People are going to eat forever. I mean these, these restaurants can be there for decades. I think the niche they've carved out in this space is, is really perfect. I think it's just the right spot to be in. Their niche is if you look at restaurants, the cost of ingredients for fast food hovers around 20, 22%. So if you go to Taco Bell and you spend 10 bucks at taco bell, you got $2.20 worth of ingredients. If you go to maybe a casual restaurant like a Chili's or a Carrabba's, you're at like 30%. Well, Portillo's is doing 30% cost of ingredients in fast food. So when you eat it, you can tell, right? You go to Portillo's, you have a hot Italian beef, you're like, wow, this is real beef. You know, if you have the, the hamburger, you're like, wow, this is a nice third pound hamburger. This is a, this is like something you would get at a sit down restaurant. But it's fast food. This enormous quality that they do for a good price has created an absolute fanatic fan base. So there is an aspect in, in brands called Net Promoter Score. It's a, it's a one question survey. Would you recommend this to somebody? And Portillo's crushes any fast food chain that you think people are fanatic about, Portillo's beats them on Net Promoter Score. Even, even in and out burger in California, it doesn't matter. Portillo's comes in number one Net Promoter Score. The people who love it get absolutely fanatic about it. And in a world where Google and Facebook just soak up all the money of advertising, you know, having, having ways to get your story out there that is not expensive, having that word to mouth, word of mouth advertising I think is critical. I mean sometimes you get clever advertising campaigns like, like when Red Bull was just leaving crates of Red Bull with a parachute attached to it and it looked like it looked like they had like para dropped Red Bull onto your college campus was very cheap, highly effective advertising. But for most of it it's just Google and Facebook just take all your money and it doesn't do anything. So having the highest Net Promoter score of pretty much any restaurant I think is critical. And also because they have this such high Cost of ingredients. What's shocking is they also have the highest profit margins if their stores reach the volumes they're capable of reaching. So in the Chicago area where Portillo's was founded, even though they have the highest cost of ingredients, each location has a higher profit margin than your Chipotle's. Chipotle I think is running at about a 28% profit margin. And the Chicago area restaurants have an over 30% profit margin. So you ask how can they spend more on ingredients and have a higher profit margin? They do it with the most absolutely insane amounts of volume. These things are so busy. It was just, it's just shocking. So for 2023, I've got the numbers here. For 2023, Chick Fil A was doing about 7 1/2 million dollars per location in revenue in a year. McDonald's is doing about $4 million per location in a year. What else? In n Out Burger doing a little over 5 million in volume per location. I think Chipotle is, I think Chipotle is round about between 3 and 4 million volume per location. The Chicago area. Portillo's do over $10 million a year in revenue. So this, this 10 million dollar per year location in revenue is netting $3 million in profit per location. I mean $3 million. That's, that's most fast food restaurants, that's their gross, not their net. So one location can net $3 million a year. I think it's a perfect niche for restaurants, especially where a lot of sit down restaurants, you have really high costs. And then also the tipping culture has gotten insane. It's like you're a bad person if you don't tip 20%. And you take a place like Portillo's where you bust your own tray. But you're getting real food that feels like you're at a sit down restaurant and they sell beer. They have this enormous menu where they have something for everyone. So they have great milkshakes, they've got great slices of chocolate cake, they have salads. So I think Sweet greens does about $2 million a year. Portillo's locations do about six or seven hundred thousand dollars a year in salads. So I mean Sweet Greens, it's, it's not that much more than that for their salads. So they have this enormous menu, something for everyone. It feels, you know, they also have interior decoration that's a lot like a Chili's. You know, they got the, the bric a brac, they got the, the tchotchkes on the wall. So it feels like you're going to a sit down restaurant but you're paying fast food prices and you've got I think average ticket per customer at Chick Fil a is about $15 depending on the city. I think Chipotle's it's 18 bucks. If you like double steak is like 22 bucks for a burrito. The average ticket size at and this is 2023 numbers average ticket size for Portillo's was $11 a person. So you're, you're making $10 million in revenue, $3 million in profits on 11 bucks a person. That people are so satisfied that they become these fanatic aggressive promoters. They tell all their friends about it. I think it's a just a fantastic position and it's just the same as in value. So that's the quality aspect the value investing of it is. Right now they have problems and what kinds of problems are going to get solved on their own with the macro tailwinds? And what kinds of problems are they they in the process of solving with management? And there are a lot of problems right now.
- [39:31]
Co-host (possibly Brett Shafer or Ryan Henderson)
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- [40:24]
Brett Shafer
Let's talk about those. The guidance update that they had last, I think it was on around an investor conference. They reduced their full year guidance. Of course the entire as you mentioned restaurant industry is in a tough spot. Just take us through again how you're thinking about the current number deterioration, the activist investor and as of this recording a couple of days ago, the CEO resigning but most likely getting the gentle firing from the board of directors.
- [40:55]
Steve from Unemployed Value DGEN
Yeah, and usually when a CEO steps down they kind of keep it pretty vague. But I Think in this case, they. They were pretty open about it. We're. We're not happy with your performance. I personally believe, and I could be wrong, that the vast majority of Portillo's problems is because their chief marketing officer got poached to be the chief executive officer of Giordano's Pizza. They've been operating for the last year without a chief marketing officer. And I think the CEO, I think he would not have been fired if he rolled up his sleeves and just took over the chief marketing officer's job as opposed to, you know, having that job just lapse. There is a narrative that it's a tough time for restaurants, and it is, but the restaurants that are able to delight their customers are crushing it. So Texas Roadhouse and Chili's are doing fantastic. And also two of the big darlings and restaurants, Cava's and Sweet Greens, they started their growth trajectory in the Washington, D.C. area. And Washington, D.C. is really struggling with all the government employee job cuts. So I think the narrative that this is a tough time for restaurants is really dominated by Kavas and Sweet Greens saying like, oh, my God, it's Armageddon out there. And that's really just the Washington, D.C. area. You have private wages growing 5.1% year over year in this country. You've got IRS tax receipts up like 7.6% year over year. I know it is. You still have. You know, during COVID there was a massive inflation spike. Rents went up, wages didn't go up. But I don't think the consumer is as stretched as people are making them out to be. And also, we just had a record breaking back to school season. So I also follow the company that owns Sharpie and Expo, and Elmer's Glue is called Newell Brands. So I'm keeping an eye on the back to school season record breaking back to school season. I don't think the consumer is as bad off as people are making them out to be. I really believe most of Portillo's problems are from not having a chief marketing officer. And a narrative has taken root that Portillo's can't be successful outside of Chicago. So the Chicago area restaurants are doing $10 million a year in revenue. The 2024 cohort of restaurants, which was two in Florida and eight in Texas. So the 2024 cohort of restaurants is on track to do $4 million of revenue each, which is still more than a McDonald's. But the Portillo's buildings are significantly bigger than a McDonald's in anticipation of enormous volumes which aren't coming. Now, one of the reasons why I don't believe it's the case that they can't be successful outside of Chicago, and I don't think it's the case that it's because of the consumer is in the 2023 cohort of restaurants. They opened their first Texas location in Dallas, and it was in the same shopping plaza as Nebraska Furniture Mart. That location that was opened in 2023 when Portillo's had a chief marketing officer to actually take care of the launch of a new restaurant did $17 million of volume in one year, right? One, Portillo's did $17 million of volume in a year. That's the volume of five. McDonald's is as the volume of like two and a half Chick Fil A's in one. And that's at $11 per person. Not at Chick Fil A's $15 a person. That's absolutely insane. And the customers loved it. Now, the 2024 cohort, they did a hub and spoke and they opened more Portillo's in that area to siphon business away from the 2023 store that nailed it. And they also didn't have a chief marketing officer. So that's when you start having these restaurants only doing $4 million of volume in a year. I really think so many of their problems are from not having a chief marketing officer. And they just hired a new one. And she started on the 22nd of September. And I'm pretty encouraged by her story. So she grew up working in her family's Greek restaurant. She is a Chicago native. She's eaten Portillo, she loves Portillo's. And she was the chief marketing officer of Marco's Pizza and her three years as chief marketing officer of Marco's Pizza, the only pizza chain that beat their year over year. Same restaurant growth was Domino's, but her time as chief marketing officer, they were growing at over 8%, same store sales year over year. And they crushed Little Caesars and they crushed Pizza Hut. And her specialty, her area of focus while she was there was two things. One was online ordering and the other was the rewards membership. And another aspect that I'm so encouraged in the near term about Portillo's is they have a new chief marketing officer coming in. This chief marketing officer gets to inherit a rewards program that only started in March of this year. And since March of this year, Portillo's has had 1.9 million people register for their member rewards program. Now they only have 86 locations of 1.9 million rewards members for 86 locations. That's. That's insane. Chipotle has about 5,000 rewards members per location. Portillo's now has 22,000 rewards members per location. That is absolutely crazy. So 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. So I think they're going to come in and they're going to like, relaunch regrand, open some of the stores that kind of had a failed opening, maybe do a marketing blitz. And I think you're going to see a very different outcome now that there's a chief marketing officer. And I. Some of it is going to be macro headwinds versus macro tailwinds. But I really think the big story is just, you know, and I don't think the CEO would have necessarily had to have been fired if he had just rolled up his sleeves and taken over the marketing role more seriously. There's another company I wrote about recently. It's a little tiny tech company called Transact Technologies. It's kind of an odd1. Their CEO was actually the first CEO of Salesforce under Marc Benioff, old timer in his, I think, his early 70s. And he was an interim CEO after the other CEO stepped down. And he rolled up his sleeves and went straight to the marketing team. And he personally, you know, re devised their whole marketing strategy, their whole sales funnel and their commission structure. And it's, I think a CEO, that's one role you just can't leave vacant for a year. I don't think the CEO would have been fired if he had just, you know, realized that what the company. You can't have a vacancy in the chief marketing officer for a year and have your restaurants launch that when you, when you're capable of doing $10 million revenue, you do $4 million in revenue. And one last thing about this narrative, that they can't be successful outside of Chicago. They opened four restaurants in Arizona about 10 years ago. I think there was a lot of Chicago transplants that moved to Arizona. The four Arizona restaurants are doing volumes that are comparable to the Chicago area restaurants. And I think, you know, that could just be. It takes. If you don't have the right kind of marketing campaign, Maybe it takes 10 years for people to learn that you exist and for things to spread slowly by word of mouth. But I think the Dallas opening with $17 million of revenue is. You could also just tell people about your product. And food is so competitive. You really takes that aggressive marketing and the another thing that's so good about Portillo's is the kind of marketing that works the best is people just have to try the food. I mean, when you're trying a food that has a 30% cost of ingredients versus everybody else having a 20% cost of ingredients, you recognize right away how good it is and you become hooked. So their version of marketing is like they'll go to high school football games and set up a stand and make sure everybody tries the food. So that's what they're going to be doing more of. And we'll find out really quickly if I'm wrong with a new chief marketing officer coming in in September. So this upcoming quarter, I think, will not be a full quarter of her term here, but we'll see what happens to quarterly earnings calls from now and see if the problem really was just not having a chief marketing officer like I think it was. And I think it's going to surprise a lot of people.
- [49:06]
Co-host (possibly Brett Shafer or Ryan Henderson)
Yeah, it's such an interesting setup because like you said, the brand is so well loved by especially people from Chicago, but even people. It's been well received in Dallas. Obviously, there's probably some, some sort of a honeymoon period when you launch a new store in a certain city. But the, the Auvs are off the charts. And yet over the last couple years, we've just seen kind of negligible comp sales. Now the valuation seems to have priced that in. So maybe we can talk about the financials here. What does the valuation look like today? Why do you think it looks that way? And maybe you could talk about sort of the board and activist involvement as well.
- [49:55]
Steve from Unemployed Value DGEN
Yeah. So now Portillo's has been doing a lot of experiments and I'm not against this. So I, you know, I do think it is right for a company to try and figure out what works so that when they grow aggressively, they're doing the right stuff. But they also were growing aggressively when they experimented. So they opened 10 locations in 2024, and that would have been off of like a 76 location base. That is an enormously aggressive growth trajectory. And they were on Track to open 12 locations in 2025, but they just recently paired that back. They're going to open eight. And there's. So they're, they only have one so far. So we're talking about like in the next four months opening seven more locations. They're going to do another eight in the first half probably of 2026. So that's kind of 16 locations in the next 12 months. Give or take. So. But they did. They have pared that back. They've slowed it down pretty considerably. So on these experimentations, they're doing so for one thing, the floor plan of Portulo's is enormous. The one that I have here in Tampa, it's an enormous floor plan. And so they wanted to bring the cost of opening a restaurant down so that that location cost about 6.8 million to build. And they're on track to get a new build location down to being under 5 million. And that comes from having a smaller footprint, but also a lot of it is just a more efficient design in the kitchen. So there's a lot of just professionalization that has to take place. I'm of two minds about the floor plan, because if so much of the marketing is people just have to try the food, I think there is an advantage to being the only place in town where if somebody's having a large birthday party, or if you've got a bus full of, like, a traveling sports team, and you just need to seat 40 college athletes or 30 college athletes, a place that's big enough to handle that, that ends up becoming, you know, hey, here's 25 new customers that have never tried your food, and now they're trying it. So I'm not 100% sure that the smartest thing is to shrink the footprint. And they aren't. They shrunk the footprint a little bit. And mostly they're getting the efficiencies out of their kitchen space, which I think there is room to do that. There is room for efficiency gains there. Another experiment they did is four of the Texas locations, they experimented with no beer. Well, it turns out people like beer. So that was not a great experiment. But one of the experiments that was maybe more successful is they brought the salad menu down from eight salads to three. Well, maybe. Maybe you only need three salads. Maybe that was a good experiment. One of the problems of having a large menu is if you start making mistakes, if you start giving people a bad meal, you lose customers pretty quick. And so one of the problems in Dallas is you have this $17 million of revenue per location. Well, okay. But you start having people that have to wait too long, you start making mistakes, people get bad food. So that. That really was a problem. They really don't want to have a $17 million location. They do need to siphon some business away from that. So there were. And so going from eight salads down to three might end up having fewer mistakes. In Chicago, they were experimenting with breakfasts so they got now this new experience saying, can we do $10 million per location? They weren't even doing breakfasts. They've recently suspended that now because I think, and I'm not against that. So it's hard for me to say, just as an armchair general, you know, Monday night quarterback, what's a mistake and what isn't. But they're opening a location in the Dallas airport. And because an airport is, you know, all day, all night, they're. They needed the breakfast menu to service that restaurant. So their experiments with breakfast in Chicago area, you know, that gives them now the ability to open this location inside a Dallas airport. So again, it's hard to say, you know, as an armchair quarterback, what's a mistake and what's not. But what's important is that they're experimenting, they're taking the data and they're trying to do things better. I think the retail investors didn't like this experimenting. And also the financial metrics get really messed up if you try to grow too fast, you have too much capex. The operating cash flows of Portillo's is still really healthy even in this down market. Even with comp sales down like 0.7% year over year, operating cash flows are fat. But when you're opening $68 million of new restaurants in 2024 for a company with from going from 76 locations to 86, that eats through your cash flow pretty darn quick. And they're actually growing so aggressively. They were growing not just out of cash flow, but also with some debt. And the new activist that came in wants to slow down that growth trajectory so that they're free cash flow positive, like keep growing, but only keep growing in such a way that you're free cash flow positive. That might even open up the ability for some small amount of share buybacks in the future. So if you have something like Marco's Pizza was able to do, if you have instead of like 12% year over year restaurant count growth, what if you have 8% year over year restaurant count growth, and 8% year over year, same store sales growth, and you're still growing 16% year over year, which is amazing. And I think right now the price to sales is 0.66. Companies like Chipotle, it's five or seven times price to sales. I think that once the market believes that Portillo's is able to be successful outside of Chicago, I think it would go to a price to sales of at least three really fast. And they have a pretty deep bench of talent. That knows what they're doing. They just got the chief financial officer of Chipotle to come and sit on their board. I forget his name at the moment, but there is an incredible deep bench of talent that is. Is behind this company and an incredibly enthusiastic customer base. I think all it needs is a narrative shift and a rewriting from price to sales of 0.6 to 3 is A. That would be a 5X. And then on top of that, you'd be growing revenue. You know, again, 8% same store sales growth. 8% store count year over year would be a pretty aggressive growth story. I, I think that's at. At this price, I'm pretty excited because again, value investing, it's all about what kind of problems there are. And are those problems on track to be fixed by the current management team? Are those problems on track to be fixed just by macro tailwinds or headwinds? And I think all of Portillo's problems are going to get fixed. I'm very optimistic about the new Chief Marketing officer. I. I don't think the chief Executive officer really made all that many mistakes, but sometimes it's. You saw what happened with the CEO of Toyota. The CEO of Toyota successfully anticipated that electric vehicles were overblown and that the market needed hybrids for the next 20 years. And he positioned Toyota to be a market leader in hybrids. And he ended up being right, but he was still fired. So sometimes you just can't hang on long enough to be proven right. But Toyota is in a fantastic position. The CEO that just stepped down, you know, he wasn't a nobody. He was a former CEO of PF Changs. And I don't think everything that he did was a mistake the way that I think a lot of people on Twitter are beating up on him. But sometimes that's just how the dice rolls and somebody else is going to take over. They have a pretty deep bench of talent to choose from. And even the interim CEO who's handling it, he was the former CEO of another restaurant chain that was. I forget the name escapes me. But it wasn't small. They've got a lot of talent. And yeah, I think the real mistake was just not having a chief marketing officer for a year. And the CEO didn't step up and take that more seriously and handle it personally.
- [57:32]
Brett Shafer
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. Yeah, and I believe the CFO is from Domino's. Had a long extensive period there. As in the accounting position, I could be thinking of the wrong company, but I hope the thesis of 0.6 price to sales to 3 times works. As a shareholder I would be quite happy with that scenario. One note on the valuation and then I have a follow up as we wrap up this Portillo's discussion. If you look at their market cap per restaurant location, which I think you mentioned on your value after hours appearance, I think right now it's $4.7 million. And of course they have some debt on the balance sheet, they have that tax receivable liability that adds some things in the mix there. But from a market cap to location perspective, you're at $4.7 million when you have these locations that in Chicago can do $3 million in operating cash flow and then maybe these other locations in a conservative place can do one and a half million to two million. I mean that seems very, very cheap to me when you look at it that way.
- [59:32]
Steve from Unemployed Value DGEN
Most of the financial metrics once you look past the capex of the growth trajectory are amazing still. But obviously the quantitative strategies don't look past all the capex. I think it's really telling. So these professionals who all want to be a part of Portillo's, whether they're from Domino's or they're from P F Chang's or they're from Chipotle's, I mean really, really big chains, I think what they're looking at is a company that is going to have this amazing growth story over the next 20 years and they get to be a part of it. And I think that's really behind why Portulo's has such a deep bench of talent for such a, I mean an 86 location restaurant chain. And I think you have to you have to look through the eyes of these restaurant professionals that are jumping ship from their multi billion dollar companies to say, hey, I could be a part of this thing, growing it out for the next 20 years. And that's going to be an amazing and satisfying career and an adventure. I think that's a pretty strong predictor of the future success of the company is just how many really, really talented and seasoned restaurant professionals are just itching to be a part of this thing. But yeah, the, the, especially some locations in the Chicago area, they own the land underneath them and those are the ones that can do $3 million of just net income on their own in a year. The company, Berkshire Partners, the private equity firm that acquired it from the founder, they paid a billion dollars when I think they had a little over 40 locations. So at a market cap of 479 million for 86 locations, you're buying it at about a fourth of the price per store than the private equity firm who bought it initially. And again, it's, you know, short term problems, some, maybe some mistakes, maybe some leadership mistakes. I think this thing is when it, when it finally turns, I think you're looking at a company that you could own happily into one of those, if you're looking at one of those future, you know, outrageous compounders like people that bought Domino's pizza in the 1990s or people who bought O'Reilly Auto Parts in the 1990s, I think Portillo's has a chance to reach that sort of outrageous extreme compounding over the next 20 years as they, as they take over the country. And yeah, it's, it's, it's got this just amazing niche of providing everyday value, just great food and make people fanatic about it.
- [62:03]
Brett Shafer
As we wrap up, what are three? You know, for takeaways for listeners, what are three or maybe two or whatever, how many you have metrics you're watching for Port tales as a comp sales, restaurant level, operating margin, store count, expansion, operating cash flow. What are you going to be watching to see if saying hey, I'm right or I'm wrong over the next few quarters?
- [62:24]
Steve from Unemployed Value DGEN
The one thing that they could do that would make me cut my position and close out is if they abandon the everyday value approach, like if they start jacking up prices, if they want to trade, you know, hey, we could start charging, you know, $3 more per sandwich and then, you know, revenue will fall by 2 million but profits will go up. I think that would look good for a year, but that would be part of the death spiral that you'd lose your fanatic customer base. So the one thing they could do would be to start jacking up prices and to, and to, to abandon their 30% cost of, of tickets as being the food cost. That would be a structural change. Other than that, you know, I don't mind giving management time to work out their problems. And I think they are. There were only a couple of things that the activist investor that came in that were shooting for. There were only a couple things that struck me as, you know, probably a bad idea, like they wanted to modernize some of the Chicago locations. Like, that's. I don't think that's necessary. People that are there love it. Like, that's, that's. You're taking away their, their culture and their heritage. So there's, there's not much that I think that they are at risk of doing that I think would hurt them. But the, the real disaster would be jacking up prices. And we saw this like the private equity firm that bought out Subway, they were charging, trying to charge $13 for a sandwich. I, I just saw. So both Subway and McDonald's realize it's not working and they're re embracing more of a value approach. So I saw there was, it wasn't a $5 footlong, it was $6 each for two footlongs at Subway. So they're recognizing you have to do some kind of value to reach customers, which is going to be, you know, increased competition for Portillo's in the short term because it was great when McDonald's is overcharging for Portillo's because, you know, they get to be the only everyday value chain. But I just. As long as management doesn't try and make the same mistakes that Subway and McDonald's are making and try and overcharge, I'm willing to give management a long time to figure it out because even while they're making mistakes, the fan base is just so fanatic. And if you take places like Arizona, even if they're not marketing aggressively, you give them enough years and those restaurants become, you know, nine, $10 million of revenue because people have to learn the food. There was so looking at customer feedback when you, when Portillo's enters a new location, there's a certain amount of teaching them how to eat at the restaurant that has to happen. So their, their signature recipe is this, you know, hot Italian beef sandwich. And if somebody is not holding their hand, the customer can, can order it wrong. So this hot Italian beef sandwich, they can, they can dunk it in the, in the au jus in the broth. And if you dunk it too long, it's a soggy mess. And if you don't dunk it at all, it's. It's a dry sandwich and you, so you order it kind of like a medium dunk, or you can get the au on the side and dip it like it's an Italian or a French baguette sandwich that there's kind of like right in. Some of the Chicago addicts will have it like extra dunked. But if it's your first time there, they. People need to be handheld through their first Portillo's experience a little bit better. So there, there have been a rash of negative reviews, I think, because people just don't know how to order from the menu. And a lot of that just comes from, you know, either having a. Somebody handhold them through how to order stuff and, or just the restaurant being more established and people learn how to eat it from their friends. So this is just the, you know, I think time is on their side because the food is so good. Just over time, people will learn about it. So the one thing that would make me cut my losses and abandoned Portillo's is they start jacking up prices.
- [65:53]
Brett Shafer
Okay. We appreciate you taking the time to join us today, Steve. Thank you. I think the audience is going to really enjoy this episode. We know we have maybe more of a value investment play versus an interesting risk reward opportunity with Opendoor. Two fascinating companies, as I mentioned at the start, at a crossroads. Before we get out of here and before we hit the disclosure, why don't you tell the audience about what you do at value or, sorry, unemployed value dgen, the substack there, which we will have in the show, notes that people should go check out.
- [66:24]
Steve from Unemployed Value DGEN
Yep. So I, I've got a substack. It's $7 a month. I'm just turning over rocks every day. I don't publish every day, but I'm just always looking for new small cap opportunities. Just unique, interesting companies. Trying to expand my circle of competence, which is hard. There's a lot of sectors and industries that are tough nuts to crack. I have a model portfolio. You know, I do include a little bit of macro. So I have a macro opinion. I think we're heading towards, you know, maybe a decade of sustained inflation. And then it's. Inflation's been so tame for the last couple years. A lot of people think that that's barking up the wrong tree. But I have, you know, the. A model portfolio that includes half of that model portfolio is inflation protection, which is gold, oil and land, which is what worked in the 1970s. And so, you know, a lot of, a lot of gold bugs and a lot of mining stock enthusiasts like it when I write about those mining stocks. But as long as I can get my circle of competence around it, I'll go into any industry or sector if it's cheap and undervalued.
- [67:24]
Brett Shafer
Beautiful. All right, thank you to the listeners. And as a disclosure, actually, excuse me, say thank you to our sponsors, Portcido Interactive Brokers and Fiscal AI. Go check those ones out in the show notes. As well as a disclosure, we are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan I or any podcast guests 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 in. This is another episode of the Chit Chat Stocks podcast, and we'll see you all next time.
- [68:03]
Steve from Unemployed Value DGEN
Sa.