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Tesla Earnings Reaction, Betting On $HIMS, Google's AI Dominance, And An Asymmetric Opportunity In MGM With Travis Hoium
01:05:22
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- [00:00]
A
Welcome in, everyone. You are listening to the Chit Chat Stocks podcast, a podcast to help you find your next great investment. This is the Investing Power Hour live podcast recording. My name is Brett Schaefer and instead of Ryan Henderson on the other mic today, we have recurring guest Travis hoiam from Asymmetric Investing. We're going to talk about what asymmetric investing is, talk about some of the asymmetric stocks that some of our listeners are interested in as well. But we're also going to be covering Tesla earnings, Netflix earnings, a little bit of bubble Watch, which is an easy topic these days.
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B
Is there a bubble going on? What's going on? Where's their bubble?
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A
Yeah, it's a boom or a bubble. We're going to be talking about Google's position in AI. The update on the EV space. Travis covers gm Rivian and then Tesla as well. We have some asymmetric stocks, including mgm, Hims and Hers, Duolingo, Sofi, and more. Before we get started, Travis, why don't you give an elevator pitch on what Asymmetric Investing is?
- [01:03]
B
Asymmetric Investing is my newsletter. I have a newsletter and a YouTube channel, but the newsletter is really kind of the core there. It's where I do all my research. Think about it as a little bit like my investing diary. So all the things that I'm thinking about, but the idea here is to find 10x stocks over the next 10 years. So I'm leaning into the advantages that we have over the market. A lot of the things that I focus on are rooted in strategy, what strategies work long term. So, you know, things like the smiling curve is something that I talk about on a regular basis, aggregating demand, which is a concept Ben Thompson really pioneered. But those are the kinds of things you can look for that will 10 will lead to 10x returns over a long period of time. I'm not particularly interested in finding the rocket stocks that are going to, you know, jump into meme status over the next few, few months. I'm more interested in what is the world going to look like 5, 10, 20 years from now and riding those tailwinds, because that is a much more proven thesis. So I've got a portfolio there for paying subscribers, done pretty, pretty darn well. Beat the market by about 12% last year and doing well again this year. I think we're up. What do we got today? About 45% on the year. So not too bad. Beating the market by 3x or so this year. So yeah, it's just full transparency into everything. I'M doing in investing, and I think that's the way that we should all be doing it.
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A
I agree. All right, one more question on that. We've had people listening from the Motley fool we recently had David Gardner on for his new book. What would you say the similarities or differences is between you worked at the Motley fool, written for them for a long time. What's the, you know, contrast between asymmetric investing and molecule investing? Where does it overlap and where does it differ?
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B
A lot of similarities to what David Gardner with Rule Breaker Investing. What I've tried to do is, you know, Rule breakers was built at a time where you were just trying to find the companies that were literally breaking the rules. I think over time, with the Internet in particular, you've now seen, okay, what are the strategies that work? What are, are the things that, you know, Amazon did or Netflix did to become the massive, massive successful investments that they've been? And how can we replicate those? How can we see Spotify coming? That was the first company that I covered in spring of 2023 that was a really unloved stock at that time. I think shares are up about 600% since then. You know, what are the, what are the through lines there that we can learn from history? So I'm kind of throwing a little less spaghetti at the wall and trying to be a little bit more precise, I would say, but generally the same kind of a thesis. So I'm looking for the companies that are going to be 10x100x in returns because those winners are going to drown out any losers that you have in the portfolio. And I've got a, I've got a handful of losers, but, you know, they just simply don't matter when you look at the returns long term.
- [04:01]
A
Yeah, I think what is everyone needs to remember at the end of the day is no matter what type of investor you are, David Gardner, Warren Buffett style, Peter lynch style, stock can only go down 100%, but it can go up 10x100x over long term. And that's where almost all of your gains are going to be. Let's get into the topics today. I think I want to talk first. As usual, it's a company that people want to talk about. It's Tesla earnings. And this will lead into a broader EV discussion which you cover quite closely. Let's just go through the numbers. Basically, for anyone that hasn't seen them, their auto revenues were up 6%. Gross profit was pretty much flat in the period. So they're seeing declining Gross margins with increasing costs and decreasing sales prices. And their income from operations in the quarter was down 40%. That's not 4%, that's 40%. Other notes that I saw was that their market share continues to dip in Europe and China as a percentage of overall automotive sales. It recovered slightly in the United States, but I think that's probably almost entirely due to those expiring EV credits. At the end of September, their operating income is at their lowest level in four years. Their EV to ebit, which for any beginner listeners, that's similar to a PE ratio that it's up to 300, which is definitely not cheap. First question I have for you.
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B
You.
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A
See Musk talking about the humanoid robots, the AI, the cyber cab. Why? And I guess the leading question, because maybe listeners don't know that you're not a giant fan of Tesla. Why is this not an asymmetric stock?
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B
Asymmetric investing is all about finding the opportunity at an appropriate price. And I think that's where I really struggle with Tesla. I actually wrote, you can go back in the archives when Tesla was had about a market cap of about $2 billion. I wrote an article that said why I'm, why I'm buying shares of Tesla. The funny story behind that is we have these trading rules at the Motley fool and in those next two or three days, I think the stock shot up like 50%. And I was like, I'll just wait for it to come back down. Never came back down. So if you want to learn some from some of my mistakes, that would be a good one. But look, Tesla is already priced for perfection. And when you look at the EV market, I think that investors still think that it's 2019 or 2020, and it's not. The EV business is in decline and it will be in stark decline in the fourth quarter. You mentioned, you know, auto revenues were up 6%, but those margins are down. That means they didn't have any pricing power, even though there was a rush to buy EVs before that 7,500 tax credit ended at the end of September. So if you were going to buy an ev, you were going to do it in September, not October. That's going to hit Tesla more than it hits any other company. It's going to affect every other company out there. But that's the real headwind is that their core business is not really at a point of strength. They're now at the point where their margins are pretty industry average, which I think a lot of us who followed the Industry for a long time have never really understood how Tesla was going to remember when they were going to do a 25% gross margin. And everybody thought that that was the way the world was going to work. That was never going to happen. But Musk was able to sell that story. And if you actually go back and look at the numbers Tesla benefited dramatically for from the dynamics during COVID there was a ton of demand for vehicles and most automakers screwed up their supply chains. And so that allowed Tesla to actually not only increase volume, but they raised prices at that same time. I periodically tweet out a chart that I've made just with their prices. I think you can do that on, on fiscal AI too. But that's something that we can't overlook is that they have actually been lowering the prices of their vehicles and their volumes have been in decline. That's showing you that this is not a vehicle that's in very high demand. Then you look at something like fsd. Look, I've been critical of FSD for a very, very long time because I don't think fundamentally it's going to be able to do the things that Musk thinks it's going to be able to do. And until he proves me wrong, the that's going to be my opinion. Their launch in Austin has not been, not been great. You know, they've had to map all those areas. That's what he's been critical of. They've had incidents that any other automaker would be unacceptable. They, they even some of their incidents and accidents that they had to report, they basically got those like blacked out. So we don't actually, can't actually see what they are. But even the things that people are recording while they're in the vehicles are troubling. And we're in a world where waymo exists, where mobileye has 100 plus. Volkswagen ID buzzes driving around the US and Europe. I have may mobility vehicles. I'm in the Minneapolis area. We are not the first area to get autonomous vehicles and there are main mobility vehicles driving around here. So where are they a leader? Where are they going to live up to? This is a $1.3 trillion market cap today. You know, you can go out and buy. We'll talk about some stocks later. You can go out and buy a stock for 10 price. A 10 price earnings multiple. What is Tesla going to do to get to the point where they're making $130 billion a year in net income? That's always something I look at, right? Like you can you can buy that value today? How is the company that you're buying that is priced more highly than that going to grow to that number and more? I just don't see it. I don't see it. There's no. Asymmetric investing is all about buying the company before it becomes the growth stock, not paying for growth that doesn't necessarily exist. That's where you get into trouble. So this is where asymmetric investing is really more value investing than you might think. Because a lot of times it's not chasing these big trends that everybody's caught onto, it's buying into the trends before people figure out that that's what they are. That's why I like Mobileye, because it's a what, $10 billion company. It's possible that they're in 30 million vehicles in, in 10 years. That's a bigger upside than, than Tesla.
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A
Yeah. If you look at just the autonomous vehicle space, it is getting to be hyper competitive. It's a lot different than I think people thought five, 10 years ago where they said, oh, Tesla has this big lead, it could be a monopoly. That's really not turning out to be the case. And you can kind of see why Musk is pivoting to these. I have no idea how likely they are to succeed, the humanoid robots and the AI stuff, But there's also the Xai, which is not even a part of Tesla. It's a whole complicated thing. And then we have this existing pay package proposal which we could spend a whole show talking about how crazy that is.
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B
So, so let me, let me, let me highlight where I do see an opportunity in this space and hopefully this will sort of clarify what I mean by asymmetric investing. So, so Tesla has a $1.3 trillion market cap. It's not really clear that they're going to be able to do autonomy. They don't have the, the two sided market of having the demand for like a robo cab today. But the companies that are existing ride sharing businesses, Uber and Lyft, are doing everything in their power to bring as much autonomous supply to their businesses as possible. Okay, so if that plays out and you have dozens of suppliers, so there's no real supplier power. The power is in owning the customer demand. So what do you choose? I would say this, what do people choose to interact with? So you're looking for a ride, you're looking for Uber or Lyft. Those two companies are in the asymmetric portfolio because I think the opportunity is in them still owning that Point of demand and then supply, going from being humanoid human drivers to being autonomous vehicles. Then you expand your market potential by 10x, 100x. You, you just, you, you open up a whole new another world. Lyft, which is one of those companies. I think this is one of my most asymmetric potential stocks. Lyft has a price to earnings multiple on a forward basis of 16. That's despite the fact that year to date, shares are up 50, 51%. So, you know, I, when I was buying shares of Lyft, their price earnings multiple was like 11. That, that's asymmetric potential is if they become, if they take even a little bit of market share from Uber. And both Uber and Lyft are riding these massive tailwinds from Autonomy 10 years from now. This isn't an $8 billion company. It's a $80 billion company or a, you know, $400 billion company. That's, that's where you get that potential is the, that you're paying a cheap price for a company that has bigger upside than a lot of people think.
- [12:45]
A
Can we talk to close out the EV talk, Can we talk? General Motors and Rivian. I know that General Motors had some very interesting things to say this quarter and actually had, you know, the company better. I didn't take a deep look at the quarter, but seemed that they had very strong financial results.
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B
Yeah, great results. I think they're managing the, the tariff stuff better than anybody thought. I think the revenue was actually up more than Tesla's was. Look, the money in vehicles is made in trucks and SUVs. That's, at the end of the day, the answer. They're in an interesting spot trying to figure out what their Autonomy business is. They, they said they had $2 billion in revenue from their, basically their services, so Super Cruise and things like that. And they have $5 billion in deferred revenue. So when you buy a vehicle, you're kind of prepaying for three. I think it's three years of Super Cruise with, with some of their vehicles that's gotten really good ratings. So it'll be interesting to see if they're able to make that into a real recurring revenue business. But again, you're paying, I think, six times earnings. So limited risk upside potential. If you get not only growth, but margin expansion and multiple expansion, that's where, that's where the upside really comes from.
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A
Okay, before we go to another topic, we have some in the comments here asking about the recent podcast I did on Subsea or Cracking Robotics. The Subsea stock. They're asking if I still think it's a buy today. I will say during that episode, not to spoil what happened. I put it on my watch list because I thought it was overvalued and now the stock's up 100% since then in the last few months. So I'm definitely still keeping it on the watch list. That's another example of there could be, you know, I think it's a high potential business. I think it could 10x revenue over the next decade. But price matters, valuation matters, and I'm keeping it on the watch.
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B
Robotics is going to be one of these areas where if there is some sort of bubble burst over the next year or two or whatever it is, there's going to be a bunch of companies like this that just take it on the chin. And if you are watching them, this is where, you know, watch list is important because if you're watching them and you understand the business and you understand where the back the truck up moment is, that's where you get the real opportunity.
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A
Yep. This is, I would think, and we're going to talk about bubbles later. This is not the time to have FOMO whatsoever.
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B
Right.
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A
Okay. Other topics. Well, do you, do you want to talk Rivian, that all the electrician, what are they doing? They're, they're, they're pushing bikes. I didn't, I haven't heard any of this at all.
- [15:16]
B
Yeah, so Rivian, apparently as part of like a Skunk Works project, they started making an electric bike. They have now launched. It looks almost like a Kickstarter. You can put, I think it's $50 down to reserve a bike. We don't actually, they don't give a lot of details about, you know, when they made or delivered and things like that. It's, Rivian is such an interesting company because it's following in the tales of Tesla, who was obviously a very successful investment for a lot of people. So a lot of people are kind of making a correlation between those two and not looking at the fact that Rivian has a ton of debt. They're burning cash like crazy. They really have no path to profitability. I mean, if you just read, if you just look at where they're capacity is, how much money they would have to make per vehicle. They'd need to make that 25% gross margin that Tesla said they could make. They've never done that. So it's just, it's so interesting to me that they, they are chasing around these strange shiny objects that don't help their fundamentals. Like they don't. They're building these beautiful showrooms and then selling 45,000 vehicles a year. That's just a completely unsustainable business. Again, I. One that should be in the asymmetric portfolio because it's a really interesting high potential business. I love their, the look of their vehicles. But it. From a practical standpoint, they just make so many silly errors.
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A
Yeah. You can't invest in something on hope. Yeah. You got to look at the numbers.
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B
And, and this is an auto business. Like it's. Yeah. You got to build a big manufacturing plant and then you got to run it. Like if you have never been in manufacturing. I worked in manufacturing for a few years for 3M. And it is a really hard business. And there's a reason that, you know, some of the, some of the businesses that are just here forever. Like you go to a manufacturing plant, I'm in the Midwest. They've just. They're running the same machines that they were running 50 years ago because they figured out how to do it. And there's no way to do it cheaper by, you know, with, with more robotics or anything like that. And they're highly automated and, and it's, it's really hard to appreciate that. That just like making a Chevy Tahoe is really hard. And GM just does it year after year. Ford does it year after year. And breaking into that space and trying to, you know, it's just, it's. It's a, it's a product that is really cool. That's in. In a crazy price point. I think it's 74. It's $4,500 for the bike. You can like go buy an E bike for, you know, 1200 bucks. Like why do you.
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A
Yeah, it's kind of.
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B
I don't get it.
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A
But that reminds me of peloton. That's the first thing I thought of.
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B
When as I have my peloton sitting right here. I'll take the other side of that one.
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A
Well, the, I mean maybe from the products are good. Right. But from an investment standpoint, the. I think to. Before we move on to another topic, the one thing I'm just thinking about any electric vehicle company is these EV credits are going away and anyone that's a pure play. I feel like it's being underrated. How much of a headwind this will be in the United States. Not only to unit volumes, but profitability.
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B
Exactly. The pie is getting smaller.
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A
Yeah. That's a good way to put it.
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B
And that was, it was the case for a long time that the pie was getting bigger and Tesla was the only one to taking a piece. Now you got everybody taking a piece and it's getting smaller. By the way, full disclosure, I do have a option short position in Rivian. So that is part of my, my special situations in the asymmetric portfolio.
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A
So I like that and I should say full disclosure, I'm short a big, I think two or three shares of Tesla stock. All right, so you know, small, small position there that hasn't worked out so far but I think it's a lesson and never, never size up a short book too much because as everyone's heard, you know the price can say irrational longer than you can stay solvent.
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B
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A
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B
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A
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B
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- [20:09]
A
Dow Jones and Morningstar. Head on over to ibkr.com restrictions apply. Interactive Brokers is a member of SIPC. Yeah, I want to talk next Hims and hers. It's a company we've looked at on chit chat stocks before. I think it was in early 2023 or maybe early 2024 but we haven't looked at in the last few quarters. There's been a bit of unsurprisingly controversy with this company. I guess my question, I'll just leave it open ended. What are you thinking about Hims and her stock today? Let me look up the share price. You might have a better 48.26 today.
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B
Yeah, look I gotta give you guys credit. The your episode on hims and hers is one of the things that made me look at it more deeply and I like. I think you came up with the customer acquisition treadmill line which, which I have used more and more since then. Look, I think this is one of those Companies that if when you looked at it it was, it was before they came out with GLP1 because I did my spotlight on them. I think in, in April or May of 2024, they not. Did not come out with GLP1s until June or July. Since then it has become seen as a GLP1 company. And that has never really been the case. It's never been. I think if you look at their entire trajectory, it's more about bringing access to markets where it makes more sense to do these things digitally. Right. Like they started with. Their whole thing was they started with Ed. There's a difficult conversation to have. Not to mention all of the pain points of like having to schedule a doctor's appointment, having to go to the doctor, having to go to the pharmacy. Now you take all that and you just make it digital with someone you're never going to see in person. And it's like, that's great, that's great. We want access to things that we should be getting treated in an easier way. You can even have more information, right? Like I'm wearing a Garmin watch. If I take all this information that's coming from my Garmin watch and I give it to my doctor, they're going to be like, what am I going to do with this? They have no way to even do anything with that information. So I just think you look at what the future of medicine looks like and I, I have three kids. I wrote a lot about the pain points of like just getting a stupid prescription is. So you gotta take them into the doctor. We know it's an ear infection. It's an ear. Like just. I just want the thing. We got to take them in. They gotta look at you. You gotta wait. You're screaming in it. Then I gotta go to the pharmacy. Okay. The front. I'm the only one that's open is the one that's down. Like it's, it's, it's all a mess. Can't this be easier? And there are very few companies that are trying to actually fundamentally do things differently. And that's really where I come down with Hims and hers. They are fundamentally trying to do things differently. Are they pushing the envelope? Probably is. Is it uncomfortable sometimes, you know, dealing with. Maybe they're going to get sued here or there's. Sure. But look at Uber, right? Uber got sued by like every city they entered when they first launched. That's now what one hundred and something billion dollars company. The opportunities. This is how disruption works. It is uncomfortable. It is pushing the envelope. It is making pharmaceutical companies mad, doctors mad. When you see Eli Lilly suing companies like Hims and Hers, by the way, didn't actually sue Hims and Hers, but sued all the ones that are kind of like them.
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A
Okay.
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B
That tells you they're, that tells you they're, they're terrified of what they're doing. That's the only way that they maintain their, their power position. And so that's sort of a high level look at it on, on, on a more granular level. The fact that they keep adding specialties. They just, they recently added testosterone, they added menopause and param. Menopause treatments for, on the HERS app. The, the long term story is this is going to be a place we're going to go for more and more treatments for more and more things. Started with Ed, then went to hair loss and we got weight loss. Then we have testosterone and menopause. The next thing is longevity. I don't know exactly what they're going to do there, but that could potentially be a massive new market. Just think about all the things that they can expand into that it would be easier to open up your Hymns and Hers app rather than calling up a doctor. This is a multi hundred billion dollar potential business and it's still got a market cap of $10 billion. Again, that's a, that's asymmetric investing right there. Like if I'm wrong, I lose everything that I put into it. But if I'm right, what is this company worth? A trillion dollars? That's 100x.
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A
Yeah. Or at least a hundred billion dollars, something like that. And yeah, you weren't, you're not buying or you, your initial investment was at a much lower. Remember correctly. Yeah, yeah.
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B
I think my cost basis is. Yeah. Something like 30 or something like that.
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A
Yeah. Okay.
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B
And I bought, I bought a number of times too.
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A
Yeah, we have, we have a comment here. Curious if you agree or disagree from Simon. People don't understand the soft moat of a company like Hims. There's something to be said about a simple easy process that addresses pain points. And I'll agree if I think people like both of us that you know, do contract work for the Motley fool almost, you know, running your own business. You're not in the W2 health insurance provided world. You realize that doing this health insurance stuff and any medical stuff yourself is not fun. And Hims and hers improves on that significantly for things that a lot of people are looking to have just an easy solution in their, in their day to day Life.
- [26:00]
B
Yeah. And I, Andrew Dudham answered a question. I think it was the first quarter conference call, but somebody asked about if they're looking at adding insurance as a payment option. And he said no, because like, so my wife has our insurance, she has a corporate job. But you still have a high deductible plan, right? So you're still paying the exorbitant prices that the insurance company has negotiated with the doctor. And by the way, neither of those parties has an incentive to lower their costs because the insurance company can only make profit based on what it's spending. So if they have a hundred dollars in profit and, and they can only, or a hundred dollars in revenue and they have to spend $80 to service, you know, medical costs, the only way to increase their profit is to spend a hundred dollars next year on those medical costs. Now they can make, you know, a little bit more. That's the way that the, the business works today. And nothing about the existing structure is about lowering costs or, and improving quality. And so Duden basically said, look, if we're going to actually do something disruptive here, we can't live within that, the confines of the insurance structure. We can't do it because it becomes a whole big burden for us. It's a big burden for customers. Let's just do cash and be done with it.
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A
I'm looking at a chart here on fiscal AI right now. One of the KPR charts on number of subscribers. In 2020, they had 300,000 subscribers. Last 12 months they've had, or that'd be the last quarter they had 2.4 million. Growth was 60% annually from 2020 to the last 12 months. My question I have for you is what stops them from getting, say 2030, 2029, something, something along those lines, what stops them from getting to 10 million, 12 million subscribers sometime in the next five to 10 years?
- [27:59]
B
I mean, it could be a number of different things. You know, maybe that maybe the business isn't as sticky. Maybe there is a little bit of a customer acquisition treadmill. So you have something like, we'll see what the data looks like. The GLP1 stuff kind of muddled things over the, over the past few quarters. So that's something to keep an eye on as they expand their specialties. Does that actually increase the, the amount of sales that they're going to have and subscribers that they're going to have? That's gonna be a good question.
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A
All right, let's see, we had another comment here on margins, I guess. What do you think the Long term margin potential is for him to enter because I see 80% gross margin. But there's a big question as they're kind of inflection of profitability. Well, what can that bottom line, operating margin, free cash flow, net income margin. B.
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B
Right. So the, the operating margin is gonna be a lagging indicator. So what you're gonna do when you're acquiring a customer. So Hims and Hers is gonna be a much more direct to consumer customer acquisition funnel. So it's gonna be something like an Instagram ad. So you go, they spend money on an Instagram ad. Let's say they spend $100 on an Instagram ad where somebody actually clicks into the Hims and Hers app. When do they get that profitability from that customer? It's gonna be over time. So it's not gonna be necessarily the first month. It's gonna be, you know, maybe Your payback is 10 months or 12 months. You're not really going to hit that profitability point until year two. This is why growth at a company like this, you actually are less profitable the faster you're growing, which is sort of counterintuitive if they slowed down. Axon did this for a long time. They were spending all, basically every dollar that they possibly could to grow their sales. So you're signing these long term contracts. They're you know, Axon Senate signing a 10 year contract, but they're paying their salesperson today for, for signing this contract. And so it's the fact that their margins are going up over time I think is a really good sign. And management has said that those operating margins should increase 1 to 3 percentage points annually, kind of for the foreseeable future. So let's say over the next three, four, five years, if that's the case, and this becomes an operating margin of 10% even suddenly this is almost a value stock.
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A
Yeah, yeah, I agree. I mean, I get nervous about the, the regulatory stuff, but I am still kicking myself for not buying in the spring of 2023 because it's up 4 or 5x since then.
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B
Well, the other, the other thing on the regulatory stuff though that I think people need to keep in mind is if you are going to be disrupting any business, any market like Uber, Airbnb. Yeah, you have to be pushing the envelope. And the regulatory piece is, I think, not as scary as a lot of people think. The compounding thing, like compounding. My son got a compounded treatment from the children's hospital here when he was like four months old. It happens on a regular basis that people get compounded treatments. The way that they're doing it, the scale that they're doing it is not necessarily the way that that law was written. On the flip side, look, these pharmaceutical companies are gouging everybody for everything they make. I spend $500 every six months on EpiPens. The medicine that's in that EpiPen is like a dollar, you know, like who's right and who's wrong here. So we could, we could kind of play that, you know, regulatory who's gouging who game. I would rather be on the side of the company that's trying to disrupt the pharmaceutical companies. But that's just me.
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A
It's a great point. I want to talk Google and Alphabet. We do have one comment here or question I think can be maybe an interesting one for both of us to answer. I'm going to revise it a little bit maybe. And the person here is asking about a growth stock, but maybe we can say it's an asymmetric stock. What is an asymmetric stock that you have been buying recently? What's one that you think, you know, valuation makes sense? It's one that's coming to your radar, that you've been adding to your portfolio. And I can, I'll, I'll answer to for, for the audience.
- [32:12]
B
Yeah, I think, I think on holding on, on running as I've been calling them. I always hate the holding name. It's just like there's such a phenomenal company. It's such a. Fashion is tough but I live in a suburban environment. It's one of those things where what are the suburban moms buying? Everybody's wearing on, so they're buying their husbands on price. Earnings multiple on a forward basis is 30. Do you know what their three year compound annual growth rate is?
- [32:43]
A
I have no clue. But I'm going to guess since you're saying it's going to be high, I'm going to guess 30%, 43%. Wow, that, that is, that is impressive for, I mean a shoe.
- [32:55]
B
Right? And they're crushing their own guidance again, just like we talked about with hims. When you're making a physical good like a shoe or a piece of apparel, it's really, really hard to grow at 30, 40% a year and to be profitable. But they've done exactly that. And guess what they said about tariffs. We're just going to raise our prices. Like that's exactly what you want to hear from a company. Like that is we have so much pricing power that if we get screwed by tariffs. We're just going to pass it on because you know what Crocs is not saying. Crocs is not saying. I think, you know, you may have thoughts on Crocs too. It's another stock that I own. Cheap, cheap, cheap stock, but no pricing power. You don't, you can't, you can't go from a, you know, $30 crock to a $60 croc and still sell the same amount of volume on is in a different story. They can just go, you know what? Instead of charging $200 for this pair of shoes, we're going to charge 220.
- [33:48]
A
Yeah, it feels a little bit. And I know that stock is suffered recently Lululemon back in the day with, with their pricing power premium brand there. It's funny you mentioned Crocs because that was what my choice was going to be. It's the latest stock I've bought. I broke my never invest in apparel rule and I just think it's incredibly cheap. I think 6 times EV to EBITDA with the price under, the stock price under $80. I, I think listeners have heard my takes on the company. But when researching for you coming on this episode, I looked at some of the stock spotlights you've done saw. You looked at Crocs back in 2023 and maybe more recently as well. What are your thoughts on that brand? That, I mean, objectively it looks cheap, but people get worried about fad, virality and fashion trend risks.
- [34:35]
B
Yeah, I, I have not bought shares in a while in part because I just don't know. Like their last quarter was, was kind of tough and I think their guidance was really weak because they, they were a company that just kind of threw up their hands about tariffs and they, I think that everybody in the supply chain is cutting back inventory which you know, ends up impacting a company like Crocs. So I'm really interested to see what they say this next quarter. The other thing is the, the hey dude brand turnaround has been, I mean, I think when I wrote that it was kind of like it looks like hey dude's bottoming and they're going to be, you know, hitting an inflection point. And if Crocs is kind of the Crocs brand is kind of your rock to build on top of, then hey dude is kind of upside and hey dude hey dude is just continued to decline quarter after quarter after quarter. I don't know if that turns around. They have not gotten the Sydney Sweeney bump. I don't, I don't understand why but.
- [35:36]
A
I, I don't know if I get that. Why, why can't Croc shareholders. Right. I don't.
- [35:41]
B
Right, exactly. Well, they were first to it.
- [35:43]
A
Yeah. Now with their marketing though, and I'm stealing a lot of this from who I think is phenomenal investor Trevor Scott over at Tidefall Capital. When he did a short write up for I think his investor letter on Crocs, he mentioned this. They're bringing back some of the really strong designers that left the company was actually someone that left to work on the Stanley Drinkware brand actually, you know, basically 10x the revenue with that one. And now they're back. They brought them back to Crocs and then as well in various international markets as well as the United States. You mentioned Sydney Sweeney and other marketing brand or you know, celebrities that are marketing the brand. You have huge influencers, slash celebrities in China that are marketing the brand as well as India. I mean I saw that they're flagship influencer has is a Bollywood actress I'd never heard of. I don't even remember what her name is but she has 50 million Instagram followers and now she's wearing Crocs. A lot of her posts.
- [36:37]
B
Yeah. All the, all the pieces are in place now. We just got to see it. So I, again, I'm not selling my Crocs. I like where your head's at. It is asymmetric potential. But, but yeah, it's, it's. They just never quite seem to do the thing.
- [36:54]
A
Yeah. And it'll be an interesting one. People say it's kind of like hopefully Lilu's investment in Timberland back in the late 90s, early 2000s that went up 7x but it seems like, it seems like a good risk reward to me. It's not one that I want to make my largest position just because I'm worried about the moat a little bit. But I mean six times earnings feels like a good opportunity.
- [37:16]
B
Would you rather have them buy back debt or stock? That's my, that's my other question with that cash flow. Yeah, they've been doing a little bit of both, but the stock's so cheap that. Yeah. Do you want to leave a little leverage there?
- [37:26]
A
I think they've reduced the leverage a bit.
- [37:29]
B
Yeah.
- [37:29]
A
I think I'd rather do them stock right now. I think they have room to do a little bit of both. But I agree it's a interesting question. I would hope the larger shareholders such as Tidefall Capital are asking management right now. Let's talk Google slash Alphabet you had an interesting topic here. Let's see you. This is maybe provocative for people that are long Nvidia, Microsoft and what have you. It's Google bludgeoning the competition. You're very optimistic on Google slash Alphabet in AI. I am as well. I think if Ryan's listening to this episode, he's a shareholder of Alphabet and he will, this will be music to his ears. What are your thoughts here and why do you think they have the long term competitive advantage in AI? 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 fast 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.
- [39:19]
B
They invented a lot of the things that we're seeing now in AI so they were, they were ahead of the game, not only ahead of Nvidia building, you know, some of the, the chips and the concepts behind the chips. I'm not an expert in that, in that case but you know, they've been doing this for a very long time. You know, acquired DeepMind. I think the story came out recently that Elon Musk wanted to buy DeepMind and Sergey Brin but was just like no, we're gonna, we're gonna do it. I, I think we're starting to see now you could make the argument when ChatGPT came out that they were kind of caught flat footed. They're not the best product company. You know, look at, we're, we're in, you know, Google Docs, eh, they could have made that a little better sometime over the last 10 or 15 years but they're a phenomenal technology company. So when you look at their, their AI models, I mean VO VAO VO3 is just incredible. There's no way that they're, I don't think there's Any way that they're not a leader in image and video models going forward, since they own YouTube, they own can use all that as training data. And then when you look at what's going on with AI, even just with things like ChatGPT, they don't make money yet and they don't have a way to make money. So when you look at what they're doing, I mean this week they launched ChatGPT Atlas, a browser. I tried it out, I opened about six websites and I got two pop ups to upgrade my ChatGPT to a, you know, pro version or whatever, whatever the version. What, what are they doing with that? You know, Google owns Chrome, they're using all that data to make search smarter and to, you know, follow you all around the Internet so they can, they can serve you better ads and stuff like that. There's a business model behind it. OpenAI doesn't have a business model. So then you look at, we're, we're pouring all this money, you know, Oracle's pouring money, Microsoft's pouring money into OpenAI for what? And I just think Google's at the position where they can, when I say bludgeon the competition with cash. They're going to be able to build out these data centers faster, bigger, with better chips, with more money than anybody else and they don't have to generate a return so they can undercut on prices. So if you think about like, you know, the topic right now is is rare earths, right? Like there's plenty of rare earths in the US we could be doing all this stuff, but it's a pain in the butt. It's more expensive. The second there's a company called Molly Corp about a decade ago that went crazy because they were a rare earth company when a similar dynamic happened. Well, they said, hey, we're going to invest this money and start up this mine. Guess what China did. They just cut their prices so that, that mine was completely underwater. And then they, you know, didn't build it out. The, and, and you know, investors never got a return. Eventually investors in Oracle, in OpenAI and all of these other companies are going to have to make money. And I don't know how they're gonna do that. Especially when you look at the company that owns the distribution, YouTube, Android, search, all of these products are all Google products. And then you look at I, you know, the other thing I noted, they already own like 10 or 14% of anthropic, which they're potentially gonna sign another 10 plus billion dollar cloud deal. With their cloud is ins is growing at an insane rate and I think they're winning. They're the new AWS of AI and and that is just underappreciated today. And you know by the way, YouTube is bigger than Netflix. Let's not forget about that. Is it. There's just so much going for him. I just. Yeah.
- [42:59]
A
I agree. One note on OpenAI's new browser is that it's actually built with, you probably knows, built with Chrome's underlying architecture. Chrome is open source Chromium which is, which is most browsers are actually built on. So where are they actually innovating there?
- [43:20]
B
Well here's the other funny thing is I signed in because my OpenAI or ChatGPT account is through my Google account. So like downloading that browser and then signing in with my Google sign in was just a moment of irony to me that I'm just like who's, who's really running the show here? It's still Google.
- [43:41]
A
Yeah, it is interesting. With the next few years we could see Gemini is slowly taking market share on usage wise from ChatGPT. They're reducing their internal cost significantly and they could keep driving down costs as you're mentioning try to make a lot of this stuff free either through Google Search or Gemini free tiers and they have the financial capacity to do that especially because if you look at not just the Google Search profits but Google Cloud is now highly profitable. We've seen and I'm looking at this chart from fiscal right now it was doing $4 billion in revenue in 2017. Last 12 months were pretty much at 50 billion and they're seeing a giant profit inflection to I think 20 operating margins. You also have the Play Store. You also have plenty of other things out there that give them the cash to you know, invest $80 billion I think is the number into CapEx.
- [44:36]
B
I think it's 85 this year. And wasn't there a rumor this week it's going to be like 120 next year. We'll see what they say in their, their conference call. I think they're next week.
- [44:44]
A
I did. Yeah, I think they are next week and I did see that rumor as well. So who knows we might get an update on that next week. But they have yeah all these advantages. I guess I don't have bets on either. I'm trying to just stay out of the AI game whatsoever as an investor. But if you had to invest in Alphabet versus the Microsoft Nvidia. Microsoft's a whole got a lot of different business. But Microsoft, Nvidia, OpenAI Complex and the Oracle Complex, which they all seem to be intermingling together at least Nvidia, Oracle, OpenAI especially. And I know OpenAI is a private company, so you can't really invest, but I would much rather bet on Alphabet versus those stocks that also have earnings ratios that are about twice as high.
- [45:25]
B
Yeah, yeah. For some reason I think it's the best position to end. It's the cheapest. The other, the other thing to, to, to maybe end on is there was an interview that the guy from Semi Analysis did. I think, I think it was Patrick o' Shaughnessy's podcast. But one of the things that he said in there was if you're open AI, you basically have to do exactly what Sam Altman is doing right now. You have no choice. You can't stop because if you look at the scaling laws and their, you know, argument is, hey, the AI is just going to keep getting smarter and smarter and smarter. Well, the thing is you have to build exponentially more compute for it to actually get that much smarter. So you have to keep dumping more and more money in. So chat GPT or GPT2 was, you know, X level of smart GPT or he, he compared it to, you know, maybe GPT3 was like a sixth grader, a six year old GPT4 is like a junior high kid and eventually we'll get to like, you know, have being PhD smart. Well, that PhD smart is going to be a hundred times more CapEx and GPUs or a thousand times more. So you have to come up with that money before you actually build the thing that is that smart. So it's kind of like a house of cards, but you have to build it. If you're open AI, you have to keep churning forward and you have to keep these valuations going up. And this is the problem with this is where you get to bubble territory is eventually the market overall says, wait, are we ever going to get our money back? Are we ever going to get a return out of this? And if the answer is no, and we start to see that the answer is no, then stuff starts falling off a cliff. And when I say Google can bludgeon the competition, they can invest all of the money that all these other tech companies are doing to build out OpenAI's infrastructure. And at the end of it, if they win, that's all that matters because they don't have to have a cash machine as long as they aren't disrupted, they're going to come out in a much better position. And they eventually, if OpenAI says, oh, you know, crap, we can't do a trillion dollars of investment, it's got to be 100 billion, what does Google do? Maybe they keep going and they go, fine, we'll invest it, we'll build super intelligence, or maybe we won't and then we'll save ourselves $100 billion a year. Whatever happens, it's a great outcome for Google.
- [47:54]
A
Couldn't have said it better myself. Let's do Brett's Bubble watch. Pretty easy one this week. I have some. Well, we have a somewhat serious topic that I think leads into something that you wanted to talk on as well. The difference between bubbles versus asymmetric stocks and what a bubble can look like when we have historical examples that some people have lived through that are still investing today and some people that may be starting investing haven't lived through any bubbles. But I want to talk about this report last night that has since been, I guess, corrected of potential investments from the United States government into the corporate quantum computing startups. Here's a quote from the Wall Street Journal. Companies including Ion Cube, Rigetti Computing and D Wave Quantum are discussing the government becoming a shareholder as part of agreements to get funding earmarked for promising technology companies, according to people familiar with the matter. Other companies such as Quantum Computing and Atom Computing are considering similar arrangements. Say, as a note, when it's people familiar with the matter, that source is almost always the company. They don't want to say anything. Yeah. And we got an update today, on Thursday, October 23, that and this from Reuters. A U.S. commerce official told Reuters in an emailed statement that the department is not currently negotiating with any of the companies. We saw. I guess the stocks zoom up today and then come back down. What are your thoughts on some of these type of thematic stocks? Because I know I was writing for the Motley Fool. These are extremely popular companies. There are people that are very, very bullish on the quote, unquote, quantum revolution. But we have 10, 20 billion dollar market caps with zero revenue. So I want to tie this in and say thoughts on these. Plus the difference between a bubble stock versus asymmetric growth stock that can actually have, you know, a good risk reward for your portfolio.
- [49:57]
B
Yeah, I mean that's the thing is these, this could potentially be really interesting technology. But what's the business model? One of the things that I write a lot about is, is business models. And what you find over time is the best technology doesn't win. The best business model wins. So there was a, there was a couple dozen search engines out there. When Google came around, guess what they figured out? They were, they had maybe a little bit better technology, but they figured out how to make money a lot better than everybody else. That was how they survived the dot com crash and all that stuff.
- [50:27]
A
And distribution, the distribution advantage, Chrome, Gmail.
- [50:31]
B
Well that came later. That came later. But even, yeah, but even back in the, you know, 90s, there was ask Jeeves and there was all, you know, all kinds of other websites. It was not Google owning everything. They, they built that over time and it was because they had money. You can go back to like Chris Sacca talking about, like, we had so much money we had to go buy data center. Like we, we just, we didn't know what to do with it. They were buying dark fiber and the, you know, dot com crash because they just, they, they were like, okay, we got cash and here's a whole bunch of stuff we get. We'll figure out what to do with it eventually. So look, these are not real companies today as far as like businesses go. These are speculative investments. I, I hate the term thematic investing because I think a lot of the things that I'm investing in is our long term themes, if you will. But thematic investing has come to mean what's the next thing that's going to get the particularly like the retail investor excited?
- [51:27]
A
The meme.
- [51:27]
B
What's the next meme? Yeah, what's the next meme? And that's just a really dangerous way to invest. It is. And if you, if you got out in front of it, great, great. But Ionic, they've got a $20 billion market cap and they have $50 million in revenue. Their net income is negative $50 million or $500 million. Sorry, what are you, what are you actually getting there? And what I have learned, again, I'm an old man in investing, but you could have sat out all of the 1990s, just sat it out and waited until 2001 or 2002 and said, who's going to actually survive here?
- [52:17]
A
You could even have an interesting business model. Yeah, who's right?
- [52:20]
B
Who survived the crash? Okay, Amazon survived the crash. Pets.com did not survive the crash. Google didn't come public till 2004. Facebook wasn't started until 2004. You know, there's the, there's the concept of the Gartner hype cycle. It's real, man. It's real. We're in, we're in the, the hype cycle for a lot of different technologies. Right now, but what's sustainable and we're not going to know for another until we go through a crash. And just think about these companies like if, if they're, if they couldn't sell stock to fund their operations for the next five years, what are they going to do?
- [52:56]
A
Good point.
- [52:57]
B
Good.
- [52:57]
A
They don't yet. That's what, that's how I look at it as well where instead of saying all right, I'm going to bet on whether this is going to be a revolutionary company, grow a hundred percent year over year, what have you today versus an extreme price I'd rather figure out or wait for a potential bubble popping or not over the next five years, find a better entry point. If that entry point doesn't show up, that's fine. I got better stocks to own in my portfolio. But I don't want to take that risk today. I'd rather just stay patient and wait for the opportunity whether it shows up or not.
- [53:29]
B
And this is the thing that's so hard when you, when the headlines are all about things like quantum computing is just making the smart long term decision is often what leads to the 10x returns.
- [53:40]
A
Right.
- [53:41]
B
Like you look at just, just buy Chipotle in 2012. They make good burritos, people like them. It's a simple story. Google for 18 times earnings where I was buying it a few months ago. It's not sexy. It's not gonna, but you know we're up 50% since then.
- [54:00]
A
Yep.
- [54:00]
B
You do that. You know, you find a stock like that and you hold it for the next 10, 20 years, you're gonna, you're gonna do really well. It's, it's gonna be boring at times. But that's how you find great investments is taking that longer term view and understanding where is this company actually going to be in five years? If you know where Ioniq is going to be in five years or Rigetti is going to be in five years. Great. I have no idea. I have no idea and I don't think. Yeah, they can't even. Rigetti also made some comments I saw today. I think it was on cnbc, sort of threatening the government saying hey, if you're not going to fund us, we'll find somebody else that's going to like that.
- [54:36]
A
Well, who cares what. That doesn't matter.
- [54:40]
B
Yeah, I don't. It. Look, this is not intel, this is not rare earths. This is not, you know, a industrial policy that we need to figure out so that we're not reliant on Taiwan or China. So it's very different when you look at something like a government investment. And yeah, I don't know why they're even in the discussion, to be honest. When did making plans get this complicated?
- [55:10]
A
It's time to streamline with WhatsApp, the.
- [55:13]
B
Secure messaging app that brings the whole group together. Use polls to settle dinner plans, send.
- [55:18]
A
Event invites and pin messages so no.
- [55:20]
B
One forgets mom's 60th.
- [55:22]
A
And never miss a meme or milestone. All protected with end to end encryption.
- [55:27]
B
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- [56:03]
A
Already have Google, Microsoft, and the other big tech companies investing what I assume is probably a billion dollars, at least hundreds of millions of dollars a year into these technologies. We, we already got plenty of scientists working on it.
- [56:13]
B
Right? Right. Yeah, all these companies. Google came out with something yesterday and I was like, I don't understand what this means, but cool, they're making more progress.
- [56:22]
A
Okay, we have just over five minutes. We have time for maybe one, potentially two other stocks to cover. Since you're the guest, I'm going to list up all the stocks we have on the list of potential ones to discuss and you can choose which one you want to Talk about. Netflix, MGM, Duolingo, SoFi, Altas, and Robinhood as well. I know that's been a big winner for you. Or Celsius. Which one would you like to discuss?
- [56:45]
B
All right, let's talk about one that I think sort of falls under surprises people that it's in the asymmetric portfolio. Mgm. Here's a classic example of phenomenal risk reward. If you management has done this in a couple of conference calls recently. If you back out their ownership stake in China, which is actually publicly traded, so you could, you can actually know what the value is. Their stake in their 50:50 stake in BetMGM, which by the way just increased their own guidance, is going to pay MGM $100 million this year. So that's the online gaming business in the US they own 50% of that.
- [57:18]
A
Essentially, they get a dividend from this joint venture up to them.
- [57:21]
B
Right, right. So they're not putting money in, but it's sort of like, you know, what are you going to ever get out of that? Well, they're starting to get some cash now out of it. But just look at the core business. And that was trading for about four or five times ebitda, which is a proxy for the cash that's coming from a casino. Because you spend a whole bunch of money to build a casino. What you want from that casino is earnings before you pay for interest, taxes, depreciation, amortization, and now rent. So that's a pretty cheap multiple. Now, the upside is you got a little bit of growth in Las Vegas. I think Las Vegas is just going to kind of be steady as it goes. You got potential upside in Macau, but the real upside is online gaming, not priced in at all. So we got $100 million coming from that. What's that worth? A billion dollars there right now? A $9 billion company. Okay, so that's still not really valued by the stock at all. But the bigger thing is, okay, they're also buying back about 15% of their shares a year. Okay, so that's the other.
- [58:24]
A
I was gonna. I have the chart pulled up for you right now for any listeners down 52% since 2017, 9.3% annual rate since then. Stock's cheaper. So, you know, that 15% number makes sense. 566 million shares outstanding in 2017, only 272 million today.
- [58:40]
B
I mean, so buyback machine.
- [58:43]
A
Yeah, but here's.
- [58:44]
B
But here's the real upside. Okay, so let's say over the next five years, they buy back another, I don't know, 40, 50% of their stock. Then they open up the one casino that's going to open in Japan. The only proxy for that casino is Marina Bay Sands in Singapore. Marina Bay sands does about $2 billion. So I think it's over $2 billion now in adjusted EBITDA. Japan is bigger. It is wealthier. There is more money going through that area. It is very possible that that is the most profitable building in the world when it opens and you basically get it for free.
- [59:25]
A
You get to have a. I mean, East Asia is huge gambling market. China, huge gambling market. And you would maybe think, and tell me if I'm thinking about this wrong, it has less of the Macau risk because of the China geopolitical potential risks out there. Is that. Is that part of the right.
- [59:41]
B
And to put. To put the opportunity into perspective, Macau which most people have either never heard of, definitely never been at. A couple of years ago it was six times the gambling revenue was six times that of the Las Vegas strip. So Japan, we're talking about a similar market. I mean pachinko, I, I had it in my update. I forget what the number, but pachinko is the one game that's sort of analogous in, in Japan and it's, it's massive. Billions and billions. I forget if it's over $100 billion, but just a huge, huge market. So this should be a very, very big profitable casino. Management finally did. I've been, I've been making the Marina Bay Sands comparison for a long time. Management actually brought it up a quarter or two ago. So we'll see if that continues. But I think that's really underappreciated. Again, that's where you're getting, you're buying a value stock but what you're potentially getting is a growth stock. That's where you get 10x opportunities is okay, we're going to buy back shares. Buy back shares, Buy back shares. Oh, now we have this huge casino opening up and we're going to not only have higher upside from a revenue perspective, but also multiple expansions. So you may be going from a 4 or 5 enterprise value to EBITDA multiple to 10, 15x. That's how you get those 10x returns in 10 years. It's not just, you know, rocket rocket stocks. It's, it's those just fundamental things over and over, over again.
- [61:10]
A
Okay, two follows before we get out of here. One, what is the timeline in the Japanese casino?
- [61:14]
B
And two, it'll be 2030.
- [61:16]
A
2030. Okay. And second one, is Las Vegas dead? Because that's what people seem to be pricing in.
- [61:23]
B
Yeah, I've been hearing that for 20 years. So I, I started covering casino stocks when I first started at the Motley fool in 2010. You heard the same complaints then. The exact same complaints. You know, the drinks are too expensive, the games don't pay out what they used to. You know, entertainment.
- [61:41]
A
Ten dollars blackjack minimum.
- [61:43]
B
Ten dollar blackjack minimum. Yeah, it's, they're paying out five, five to six to five or whatever, like all that stuff. Those complaints go back a long, long ways. People want Las Vegas to be Las Vegas of, you know, 1985. It's not. If you go there, you're going to pay for what you get. But like there's a lot of phenomenal things you can do for free. If you don't want to spend $30,000 at the blackjack table, then don't.
- [62:07]
A
And it's more entertainment focused now these days. Right. With all this coming in plus the sphere, all this new entertainment, not just gambling.
- [62:15]
B
And you see all these criticisms and you don't see any of the negativeness in the numbers like the volatility in gaming there, the volatility even in visitation is just normal volatility at this point. And you know, you had a boom coming out of COVID because it was kind of one of the areas where you could go like meet up with your, with your buddies or your co workers or whatever. Then you have a little bit of a, you know, okay, okay, we did that in 2022. We don't need to do it again. And yeah, yeah, but it's still one of the top five places to meet up with friends, to have a conference, to, you know, have a business meeting, whatever. That's, that's not going to change anytime soon. So I, I just think at cities ago, if you get it for a good price, I think that's a, that's an asymmetric opportunity still.
- [63:01]
A
Yeah. And if, if, if the city does go into decline or MGM does go into client that's priced in, you're not going to lose that much. I wouldn't think. All right, I'm going to sneak this one in if, even if we go a little long because I think listeners are pro. A lot of listeners probably have this one. What about the online competition for MGM from DraftKings, FanDuel and others?
- [63:21]
B
I look at the online gaming business for MGM as just pure upside. So is there competition? Sure. We're not seeing that in the numbers negatively from, from MGM's perspective. I mentioned that they just increased their guidance for BetMGM. They're now going to be paying a dividend. So it's now a plus for MGM. That doesn't mean that DraftKings and FanDuel can't be successful. I've never understood they have a really hard customer acquisition challenge because they look, if you want to make money on this, like buy, buy Disney stock because they're, they're advertising all over the sports networks. So I think that's the real challenge is they're on a customer acquisition treadmill. And the other threat is prediction markets.
- [64:09]
A
You know, I mean, isn't MGM isolated than these other ones from prediction markets because you have the physical assets people want to go to.
- [64:17]
B
Exactly, exactly. And that's why if you're. I would not buy DraftKings stock, but I like having the optionality via MGM Resorts. I'm getting a cheap stock and I get upside if they figure something out. They've also got, you know, online gaming in Brazil and countries like that.
- [64:35]
A
I don't know.
- [64:35]
B
I'm not paying. I'm basically not paying for it. So I get it for free. Great. If there's some upside there, that's, that's the way that I look at it. But that's where you kind of have to go. What's the risk reward? What are you paying for and what are you potentially getting that's not priced in by the market? That's how you find those kind of opportunities. But yeah, their conference call after the BETMGM thing was, I think it was earlier this week or last week was interesting because they were not happy about prediction markets and they don't think they're legal. But, you know, CFTC says that could.
- [65:05]
A
Be your, the disruptor, the hims and hers of that market coming in. But we'll see. All right, we're. We're going long. I'll let you get out of here. Travis, thank you for subbing and for Ryan on this.
- [65:17]
B
Thanks for having me.
- [65:18]
A
And I'll put the links in the show notes, but again, tell people where they can find asymmetric investing.
- [65:23]
B
Asymmetric Investing. I'm on YouTube. Also have a newsletter, asymmetric-investing.com Also I am now on autopilot as well. So we'll put a link to that in, in the show notes. That's where they have the Pelosi tracker. You can now track the asymmetric portfolio. So pretty cool addition there.
- [65:40]
A
Beautiful. Okay, let me hit the disclosure and we can get out of here. We are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan I or any podcast guest may hold securities discussed in this podcast, may have held them in the past and may buy, sell, or hold them in the future. Thank you everyone for tuning in. We do these live, every Thursday, typically 5pm Eastern Time. This one is a little earlier to into Travis's schedule, but thank you guys once again. We'll go live next week and we'll see you guys next time.
- [66:24]
B
And Doug, here we have the Limu Emu in its natural habitat, helping people customize their car insurance and and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug. Uh, Limu is that guy with the binoculars watching us. Cut the camera. They see us. Only pay for what you need@libertymutual.com Liberty, Liberty, Liberty. Liberty Savings Fairy. Underwritten by Liberty Mutual Insurance Company and affiliates excludes Massachusetts.