A (3:22)

I would say the last thing to add to make sure you are supporting the show. Use our discount link Fiscal AI chitchat. That link will be directly in the show notes make. You just make sure to sign up using that link to get the discount. It's not going to change the exact discount, but it'll help us with our advertising partner. All right, I think we can get right into it. My first stock, and this is again in no particular order. We're just going one through five. It is unsurprisingly for longtime listeners here, Grupo Aeroportario del Sur Este. My Spanish accent is not very great. We're going to call it the Southern Airport Operator of Mexico. It's not one that I actually own. I own a different operator that I wanted to just talk about a different company here today, which is the Northern Airport Operator. But this is a company that has benefited greatly from the tourist boom to Cancun over the last two decades. It has really been known as the Cancun Airport Operator. But it has recently made a transformative acquisition to make it less reliant on the what we might call potentially oversaturated tourist hub. What do you think about that? Take Ryan. Is Cancun, has it gone through a multi decade growth tail when it has it peaked? Because if you look at the traffic numbers, it's. It's quite staggering how many people visit that area every year.

B (4:46)

Yeah, I haven't been in a while, but if you have been, maybe you have better boots on the ground. Tell us how that airport is. Tell us if the city feels a little too packed. My guess is that people are still loving Cancun and that probably hasn't changed.

A (5:02)

Right. But I guess the thing is, and what has concerned investors is Cancun has been a huge growth driver from basically nothing to millions and millions of traffic through that airport each year. And is it going to keep growing at that rate? Maybe there could be a debate to be had there. But if you look at our friends at Fiscal AI Groupo Soeste, or the Southern airport operator has produced a 20% annual total return since going public in 2000. So, so close to 25 years. 20% total returns, that is knocking on the door of being 100 bagger. Clearly it is a good business, I think, or at least it has been a good business for shareholders over the last 25 years. Now we can discuss what makes the airport operators an interesting model and why it's interesting for outside shareholders to benefit from as people. And I'll keep this brief because we've discussed this plenty of times on the podcast and I've written about it on the newsletter plenty of times as well. But the airport operators do not own the airports in Mexico, but they have a contract to manage them. And the land is owned either by, you know, the Mexican government, something like that. And they have these long term multi decade contracts to manage the airport, invest in the airports, kind of. Okay, well, is traffic going to grow in this place? We're going to build a new terminal, we're going to plan all this stuff out here and the government will give them concessions to do that. And every time a airline or a plane docks at its gate and every time it leaves, I forget exactly which one they charge either leaving or arriving, but it doesn't really matter which one they're technically charging for. They get a fee. So they have a fee basically per passenger on the plane. And they also make money from commercial revenue in the airports, which is duty free. Shops, restaurants, VIP lounges, parking, what have you. And what's great about airports and why I like them and why we're studying next week. Chris Hone, a famous investor, he seems to like them as well. And I think a lot of investors do like these type of companies is their natural monopolies. You're going to have one airport in your city, maybe multiple, but building another airport is going to be difficult. No matter how well or badly it's operated, no matter how great or bad the management team is, it's going to generate profits year after year after year. And the airline industry grows, or air traffic grows globally, at least it has for the last 50 to 100 years, pretty much indefinitely, except for some short periods there. And the profits of the airlines aren't really that great. That's a famous example of just a hyper competitive industry that doesn't necessarily bring a lot of value for shareholders. But airports are the opposite. I think it's because of this competitive advantage of the single infrastructure asset. It's not going to be replicated in your city and the regulatory moat that you have there. So with that being said, today, the Southern airport operator ticker is sur for people that are interested. The stock is in a 19% drawdown and it's actually trading at an EV to EBITDA, which I think is a fine multiple for an airport operator of nine. Now why is this happening? Because Cancun traffic has stagnated in 2025. Total traffic to Cancun, which is about half or just under half of company traffic today, is down 4% year over year through the first nine months of 2025, while the other airports they own, Puerto Rico up 5%. Colombia traffic is up 3.4%. So tourism hasn't died. But Cancun is either as people are worried about peaking or going through a rough patch with travelers searching for other options. This is going to present a headwind to traffic growth at Cancun, if that continues and is likely why the stock has traded down to below nine times ebitda, even though it has been a gem of an asset to own over the last 25 years. I think there are a few things that can mitigate these concerns. First, there are inflation adjusted for all intents and purposes given the contracts, they have passenger traffic revenue. Second is commercial revenue per passenger, which has grown at 8.8% year to date compared to underlying passenger traffic that is flat. I think these are dynamics that can continue over the next decade. It's kind of one of the beautiful things about the airport operators is even if your traffic is flat, there are general east in Mexico dynamics with their contracts that allow them to keep growing revenue, especially commercial revenue, as long as they can execute and getting enough commercial stuff within their airports. Now the one thing in here, and maybe I'll let Ryan add in anything here before we get to the merger, is this acquisition. They just had a purchase price of $936 million in cash or $2.56 billion when adding on debt for a true enterprise value of what is called these motiva airports, other Latin American airports. But Ryan, before we get into that acquisition, how that changes, what do you think about the existing, you know, legacy Southern Airports Business Co. Yeah, for regular.

B (10:18)

Listeners, you know that we generally like the airport business model, the like you said very much local monopolies. Even if you wanted to stand up a new airport in most of these cities, it would be very hard to get regulatory approval. There's all these massive hurdles to doing so. So the major airports in those cities tend to be monopolies. I Like the business model. I like the economics of it. I don't worry too much about the lease versus own structure that people seem to really worry about. And then I also like Mexico. Even if you think like Cancun's traffic growth flatlining, to me, when I look out 10 years, do I think more people or less people will be traveling to Cancun? My gut says more people.

A (11:13)

Maybe I'd be a little less optimistic. I'd say, I'd say my guts say would be least flat. But you. There's one thing I didn't write down in our numbers here that you may not know about, but Tulum now has its own airport, which could steal some traffic. So there are some potential headwinds that I didn't mention that could affect that.

B (11:34)

Yeah. And it accounts for what, half of volume at the moment, right?

A (11:39)

Just under half. And that's a good segue as we're going to be almost doubling their existing traffic with this acquisition. For $2.56 billion. I'll go through what they're acquiring. It's essentially equity interest in 20 different airports in Brazil, Ecuador, Costa Rica and Curacao. You have the Quito, the biggest city in Ecuador's airport. You have the San Jose airport in Costa Rica, their largest airport, the Curacao International Airport, and then a variety of different airports in Brazil. I forget the one that's sizable, but generally this isn't Rio or Sao Paulo or something like that. These are smaller airports. These airports generate $243 million in EBITDA when considering Motiva's ownership. And that compares to about $1.1 billion over the last 12 months for the group, the Southern Airport Operator. This group does about 45 million passengers, all outside of Mexico, but still in Latin America. And the Southern Airport operator did around 71 million passengers over the last 12 months. So we have 71 million, you have 45 million. That's more than half of their existing ones. They're not doubling their traffic, but what is that? Just over 50%. And I think depending on how the deal shakes out, is it looks like they are acquiring these assets at about 10 times EBITDA, give or take. However, they may be able to refinance some of the debt and make it less costly. They could increase revenue per passenger at some of these airports by, for example, adding on better commercial opportunities just using their playbook that they've applied to Puerto Rico, the Mexican airports, the Colombian airports, and I think cash flows may be able to grow, grow significantly if efficiencies can be made because look at these aren't as again like there's a difference between domestic and international passengers. There's a difference between a passenger that's going to, you know, somewhere in the United States versus like a inter Colombian route or something like that. Just because what you can charge versus the incomes in these regions. But if you look at their passenger levels, 45 million and then EBITDA 243 million versus 1.1 billion for the southern airport operator at 71 million passengers, it seems like there's a disparity there that can kind of close that gap and there might be a lot of room for efficiencies to be made. I, I like the San Jose airport a lot. That seems like a very stable place. You have U S tourism that continues to grow to Costa Rica, Quito, they may be buying on the dip a bit just because Ecuador's had a lot of safety issues. It's one of the most dangerous places in Latin America at the moment. Curacao, not so much. I don't know. It seems like a fine place to own an airport will be stable. And Brazil, you know, it'll be okay. These aren't any game changing airports. These aren't like amazing assets like a Guadalajara or a, you know, a Bogota or something like that that are kind of these hubs or a Panama city. But if we look at that, I think all in all they're able to deploy a lot of capital here at a very reasonable price. They can de risk from Cancun and they can still pump out healthy dividends to shareholders each year feels like a very interesting opportunity here. And I will flag and give a shout out to who I like to call jokingly because he doesn't just cover Latin American stocks. Ian Bizek from Ian's insider corner who just came on the show to discuss different Latin American stocks in the Argentina, Chilean and Colombian political situations. He did a lot of good research on that on this company and the merger. So I looked at that in his premium newsletter. So give a shot. Go check him out for the true expert on this stock. But I think it's interesting. Ryan, any final thoughts before we move on to your first one?

B (15:38)

I think when people look at international stocks and especially stocks in Mexico, there's this tendency to think that like we're reinventing the wheel here and that we are looking for returns where they haven't been. Brett mentioned it the, the total returns over the last 20 years. But to just illustrate it a little more, this is a good this is a great business and it has been a great business for a long time. $10,000 investment in Del Suriste, the Southern Hard, isn't it?

A (16:11)

With the American accent.

B (16:13)

Yeah. Ten thousand dollar investment twenty years ago would be worth just under a million dollars today. 819K. So 80 bagger over 20 years. That's phenomenal returns. I don't see why there would be a massive change. Well, sorry, I shouldn't say that. I'm not expecting. I don't think Brett's underwriting an 80 bagger here, but there shouldn't be a structural change in the business model moving forward. Maybe Cancun doesn't grow quite as quick, but like you said, it's after this acquisition it's going to be about a quarter of volume. So it's becoming less and less essential to the thesis, right?

A (16:56)

It's not going to be as high growth. I would not expect that. But I still think it is quite the wide moat business. Somebody at your first stock Ryan Grab Holdings, a company that I really don't know much about. Well, besides what you've talked about on the podcast and written on in the newsletter, take us through Grab Holdings. Why do you think it's interesting here and how has the business developed? Because I think you did a full research report on them back in the summer. If you're a regular listener to chit chat stocks, then you know that we love investing in international stocks. And no brokerage compares to interactive brokers, otherwise known as ibkr. When it comes to international trading, you can easily trade assets worldwide using a multi currency IBKR account in 160 markets, 36 countries and 28 currencies with low fees. Compare that to your existing brokerage and its limited trading ability and high fees on foreign exchange, there truly is no comparison. Trade stocks, options, futures, currencies and bonds globally with IBKR's unified brokerage platform. I wouldn't use any other brokerage for my investing needs. Switch to IBKR and level up your international trading game today. If you're interested in checking them out for yourself, head on over to IBKR.com Interactive Brokers is a member of SIPC.

B (18:20)

Yeah, the stock hasn't moved a whole lot since I did the report, so a lot of that is still very much intact. There's one big development that I think could be sort of a thesis changer here, but for anyone that doesn't know, Grab is considered a super app in Southeast Asia. And that means basically you can get ride Ha. Like ride sharing services, Uber. Think of it. That way, but there's also a lot of bikes down there as well. That's a common mode of transportation. There's food or grocery delivery, and then they even have financial services. So think like E Wallet. You can pay with your Grab app. Grab Pay. You can either pay for Grab services or you can go to like a third party merchant, go to the grocery store, whatever, pay with Grab Pay. And then you earn rewards into your Grab Wallet, which if you're a regular user could be a pretty compelling upsell. But it's important to understand that this is not just like great marketing. By Grab being a quote unquote super app, they very much are a household name across pretty much every all of Southeast Asia. So within the mobility segment specifically, and that is ride sharing, think of it as the uber. They've got 97% market share in Malaysia, 91% in the Philippines, 85% in Thailand, 67% in Vietnam. The only notable market where it's still very competitive is Indonesia. And it's about a 50, 50 market share split there. Now Indonesia is the largest market in Southeast Asia, so it's a big one. But they split that with Gojek. So the parent company is go to, but Go Jek is probably another one. Anyone that's traveled to Indonesia, you'll, I assume you've probably seen that brand. But yeah, that's kind of the basics. This is a super app. A lot of delivery, a lot of mobility services. That's kind of the bread and butter. And then they're layering on these financial services as well, which does. It introduces some risk to the business that existing investors or like tech analysts might not love being added because it is outside their circle of competence or whatever. And it obviously brings credit risk. So there's some small micro loan lending segment in there as well. But in general, I like the Grab business for a few reasons. So number one, network effect. The more drivers that are on your service, the more supply. The more supply equals cheaper rides. Cheaper rides drives more customers, more customers drives more drivers. So very much this positive feedback loop between the driver side and the rider side. We've seen this play out very clearly in the US in the market with Uber, and we've even seen it play out clearly in Southeast Asia with Grab. If you look at the monthly writers, quarter after quarter, which fiscal AI does report, it continues to grow for Grab. The second thing I'd like here is once you are the leader, you're pretty hard to replace. So for example, Uber ended up exiting all these Southeast Asian markets eventually because partly because they were hemorrhaging money but they were not gaining share against Grab. So they were pouring money into user acquisition in Southeast Asia and they weren't able to steal share from Grab. So eventually they folded. Grab ate a lot of that market share and now Grab really is sort of the primary player in most of their markets other than Indonesia. One other one slightly. I don't know if this is like something I like about the business but when it comes to Uber in America a lot of people think about the self driving risk of disruption. I think that's a long ways away in some of these Southeast Asian markets there. I mean a we're just not seeing. I haven't seen quite as much news around it but it's also a much tougher problem to solve when you think about the population density in some of these cities along with how people drive. It's a lot of bikes, it's a lot of pedestrians, you're kind of weaving. It's not quite as, not quite the same infrastructure as you see in the United States. And then the last thing that I really like about this business is that there are some natural next step type markets. So we've seen this with Uber and Uber Eats, we've seen this with Grab now delivery, grocery and food delivery. But it's very easy to kind of move into an adjacent market like that and they've done that very successfully. Deliveries now accounts for more revenue than mobility for Grab, albeit it's a lower margin business but it's, it's a bigger on the top line. So I like where grabs at. I think it's a very, I would be very surprised if they did not have more drivers and riders in five years. I, I would bet on that for sure that's going to happen I think. But the other part and what kind of gets me excited here is they're the largest competitor. I mentioned Gojek. They are rumored to be acquiring them. So these rumors have been going on for a while but nothing has really come of it. And then over the last couple months they, these rumors have sort of started back up again. So a little bit of background here. Go Jack. Also heavily VC funded like Grab. I think they might have both been softbank portfolio companies. They both had big splash IPOs and then they had years of operating losses. Grab has gotten to profitability now gap profitability whereas Gojek is still losing money. But it's also gone in the right direction. Grab is about three times larger on a revenue basis and there seems to be more and more mounting pressure for the two companies to merge. So I was looking at the news and here's a quote from the diplomat which I believe is popular in Korea if I'm not mistaken, maybe could be getting that market wrong. But I, I thought I said I.

A (24:29)

Can'T help you on that one.

B (24:31)

Yeah. Anyway, so here's a quote. It says one reason the deal has gained traction again after months of dormancy is that reports surface that Indonesian state owned investment fund Donantara would possibly be involved perhaps by holding a golden share conferring special voting rights. I wrote a few months ago that a major obstacle to any such merger is that the Indonesian government would resist majority foreign ownership of Goto. The involvement of Donatara in the shareholder structure of a merged Goto Grab entity would address this. Some of Goto's major shareholders are pushing for CEO Patrick Walujo to be replaced which would presumably help clear the way for a deal to go through. The CEO has now stepped down and the CEO is taking over. So it seems more and more likely if this deal does happen Grab will be an unencumbered monopoly in Southeast Asia. They will have the majority market share, vast majority of market share in I believe what accounts for like 90% of the Southeast Asian population. So it, I like the position they are already in. I think it'd be even better if they had the go to merger. Obviously price dependent, you don't want them to just pay anything. But there's a lot when it comes to evaluating grabs financials. I went through that in a full episode. You can go back and listen if you want. My estimates get grabbed to around $2 billion in EBITDA by 2030. That could be, that could be high but they have an enterprise value of about $16.5 billion today. So call it eight times 2030 EBITDA. I like the CEO Anthony Tan. He seems honest, he's hardworking and it's not one like sometimes a barrier for me is that I can't understand the CEO or what like I'm not able to get a full grasp on how he communicates with shareholders. Anthony Tan speaks great English. I think he went to Harvard I believe is where he actually founded the business was when he was in Harvard Business School. The stock is not dirt cheap by any means but I think they're in a very good position to grow. And I'll talk about this in my next stock too but I look for, I try to basically with any investment when I'm researching stocks I want 5 year out earnings. I want the market cap or EV to be less than 10 times my estimate of 5 year out earnings. Assuming that it's a good business. If it's like a. Just a value player, whatever. I want it to be a little more, a little cheaper than that, but less than 10 times 5 year out earnings. And if you get that, the reason I like it is like I could be wrong with Grab. They could generate far less EBITDA and I probably lose money in that scenario. Like if it grew at half the rate I'm projecting, I probably lose money. But if I'm right, you probably get a little bit of multiple expansion potentially and you make more than double your money. It could be obviously a multi bagger. So I like the returns, the return potential when it's that kind of setup and it seems like grabs are right in that wheelhouse.

A (27:54)

You own any today?

B (27:56)

No. Top of my watch list for. Well, it's for 2026, Brett.

A (28:01)

That's true, I guess. Hey. All right. When the calendar strikes January 1st, you can buy. I like this chart that you showed here too. They were when they ipoed a heavy loser of just operating earnings, especially as a percentage of their revenue, I think it was over double their revenue from the last 12 month period. And now it's flipped over the last 12 months to positive operating earnings and it steadily moved up and to the right. So now they're in a much healthier financial position and they can probably become much more aggressive when it comes to that acquisition or even trying to just put their pedal down and gain more market share of. You know, they already have a vast majority of market share of ride sharing, but just outside of the core rides business, they can subsidize delivery, stuff like that and try to build the super app and do so without worrying about any liquidity.

B (28:56)

Yeah, they seem to be in a good spot. I think when, when Uber was successful in the States, you saw a lot of copycats in Southeast Asia and a lot of them were heavily VC backed. Probably grabbed the most. I think what you see in terms of the operating margins in 2022 is what you could call the soft bank effect where you run at negative 200% operating margins because you have a ton of cash from Masa sun and softbank. The yeah, now there's not nearly as much competition. A lot of the subscale players have gone bankrupt or been acquired or whatever. And now you pretty much have Grab as the dominant market share provider. And as long as drivers and riders continues to grow on the platform, those two core drivers I keep using the term drivers, but mobility and deliveries, those two business segments should continue to grow. Financial services, I kind of shrug my shoulders. I'm not sure what's going to happen there. I hope they don't hemorrhage money in.

A (30:04)

It, make a bunch of loans that are opaque. Yeah, that would add some risk to the business for sure. But seems like a good, interesting investment I guess. Let's move, move on so we don't go too long on this episode. Let's get my second stock. It's one we haven't discussed recently, but one we studied a lot. I believe in 2023 or maybe late 2022. It's been a while, but it's a high quality business. It's Hermes International or simply Hermes. I'm a believer that Hermes is one of the best businesses in the world. Has a wide moat for, you know, you might ask why, why them over Prada, Gucci, what have you like. Oh okay. You know, isn't there just a ton of luxury companies out there? I think one, they have a long enough heritage multiple, I think centuries at this point, if not close to 200 years to be durable in the mind of the luxury consumer. And they even have more and more growing, you know, lore, history, all the stuff that makes up the mystique of things like the Birkin bags and stuff like that, that's more modern. They are run by people who understand proper luxury branding, they understand proper luxury heritage and they have a vision for durability instead of the concerns and the things that have happened with some of the other luxury brands in Europe of boosting short term earnings, flooding the market with products and reducing that brand cachet, which has happened to a prime example, Gucci. And third, they have sustained pricing power because of a limited supply, consistent limited supply and then the pricing at retail being under aftermarket prices because if the aftermarket price is double the price of your retail price, well then that means you have the room to double the price of your retail price without impacting demand. Over a multi decade period, the company has grown in 2025 despite a continued slowdown across the broader fashion and luxury space. Here's a quote from the recent report. Sales grew 9% at a constant exchange rate compared to the year earlier period, accelerating from a 7.2% increase it recorded in the first quarter. Demand for luxury goods has weakened recently after a post pandemic spending boom, particularly among less affluent shoppers who close their wallets in light of the difficult economic landscape. Essentially what they're saying is the post pandemic boom is over, but it's okay because we only cater to the people that the economy doesn't matter to the ultra rich. Sales in the third quarter grew at 10% year over year, constant exchange rates. And this is at a time when they are still getting dragged down by slow China growth. So if you look at Japan, Europe and the Americas, they're all growing faster than 10% year over year. We're seeing consistent 40% plus profit margins. And today shares traded an EV to EBIT of 33. It's come down a little bit. My question is, is this cheap? I'll go first and let maybe Ryan give some analysis here too. I think investors do fine here owning Hermes. Probably nothing spectacular. I would be looking to buy below 25 times earnings, maybe even lower, which has occurred historically. If you look at these charts, I mean just go back right into the chart going I think a little 10 years, maybe a little bit longer there. There's been plenty of opportunities to buy Hermes at a lower price. And this is a business if you buy right, given the sustained pricing power, I think it's one you can buy and hold forever. And I'd really like to get in at a greedy price. Here's a quote from I believe the Wall Street Journal that illustrates exactly what is happening with the fake luxury brands versus the true luxury brands like Hermes. Quote. A number of luxury companies, including Hermes, already had adjusted prices to offset the impact of the levies. The French group was considered one of the companies with the most room to maneuver as it is exposed to more affluent buyers who continue to splurge money on luxuries. Other brands that target a less affluent clientele could encounter greater difficulties in pushing up prices as hikes in recent years have put off some shoppers. And I'll close here with something that it takes time to learn as an investor, which is just simplify things. And if the stock has gone up a ton, it's probably a good business. Since 1994, Hermes has caggered at a 18% annual return. That is 30 years. Over 30 years at this point. And it has returned 56,000% to shareholders. That is over a hundred bagger, right? Almost a thousand bagger. I think it's going to be a thousand bagger at some point. This is a great business. It's one you want to keep on the watch list. It's one I think you want to own at a reasonable price.

B (34:55)

This episode is presented by our favorite portfolio tracking tool, Portcido. Do you know what your actual Investment returns are. Well, if you're like me, then the answer is probably no. And that means you need to try Portcito. Portc is the ultimate portfolio performance tracker. With PortCyto, you can easily aggregate your various brokerage accounts and instantly see your actual investment returns. That includes all your investments too. Stocks, ETFs, and even crypto, if that's your thing. You no longer have to guess what your returns are. With Portcido, you can find out in minutes how your returns stack up versus the market. And that includes a dividend tracking dashboard and even tracking of short positions. I've been looking for a tool like this for a long time because I was sick and tired of trying to track it manually. And Portcido has finally built it. And for the first time ever, Portcido is running a platform wide discount to celebrate Black Friday Friday from November 26th to December 1st, you can get up to 40% off. That means you would get three months of Port Cido Pro for just $27. Again, that is portcido.com the link will be in our show notes. Yeah, they have one of those. I like when companies have really good heritage. It's like Ferrari in that sense. Because 200 years of being a premium brand and having and being known as luxury for that long is very. You can't be. It can't be replicated by a startup. You cannot replicate 200 years of heritage with VC money.

A (36:28)

Right. You can't just speed up time like that. Yeah, that is a good point. That's a good point.

B (36:32)

And it's like, remember the. What's the Buffett thing where it's like, if you gave me $10 billion, could I replicate it? No, you can't replicate Hermes with $10 billion even. You know, give it to the entrepreneur. Yeah. If you look at the revenue per store. Now, people have probably heard some of the stories of Hermes stores. People going in and not being allowed to be a customer, which I think is funny that people get out.

A (37:03)

You can only buy it. You had to start out with something like a scarf and then probably a $300 scarf. And then you can level up. Almost like a game. They do really incentivize their customers quite well if they have large wallets.

B (37:17)

Yeah. So in 2013, the average Hermes store was doing about $12 million in sales. I think this is in Euros, but not sure where the translation is at right now. $12 million in euros per Hermes store. A decade ago. Last year, they were doing $52 million per store. I guarantee I would bet 85, maybe 80% of that growth has come from price growth, not them selling more items because they're not. They, they do generally try to restrict supply. If they just went the Gucci style and just gave everything away and had a bunch of fakes, whatever, it would have deteriorated the brand. That is the beauty of pricing power. And you can just picture the operating leverage there. And they haven't gone cheap. They are true luxury. They have French artisan handcrafted bags that are literally handcrafted. They're not manufactured in a low cost labor market. So yeah, I think they do a really good job Ev to EBIT at 32, I would wait, I'm probably the same as you, but this should be if you like quality, long term, easy to sleep at night type investments. This should be at the top of your watch list heading into the new year.

A (38:39)

Did you hear about the scandal with the family member and his financial advisor for the Hermes family member?

B (38:47)

No, I have not.

A (38:48)

So there was a long, I mean it's like sixth, seventh generation down the line. Now this person I think has no impact on running the business, but they were a family member that owns stock and it given how Hermes has performed in the last two decades, he was supposed to have a stake worth like $15 billion. But it turns out his financial advisor stole his or sold his shares, unwillingly stole the money and he has nothing.

B (39:20)

Well, that's horrendous for him. Yeah, that's terrible. I assume the advisor is in prison or something.

A (39:28)

I think he's being investigated. It's a whole Swiss, French thing. It's, it's, it's like a, it's like a movie. It's pretty cool. But apparently he was seen.

B (39:35)

Yeah.

A (39:35)

Flying coach, which is a tough, tough thing. You know. Hold on to your winners. Don't let your financial advisor steal stuff. Yeah, it was a whole complicated story we don't have to get into here. But let's get to your second stock. Ryan Wise company I know you own and one that. Would you call it a battleground stock or maybe one that's misunderstood by investors? How would you clarify this? Where do you see the opportunity with this business?

B (40:03)

Yeah, it seems like maybe digital remittances broadly seem to be battleground area. There's the valuations have just soured on a lot of these companies. I own two digital remittance companies, Wise and Remitly and investor sentiment is certainly worse than it was a few years ago for both these companies.

A (40:24)

But stable coins, Ryan, it's coming. They're Going to kill them both seems.

B (40:30)

Unlikely but we shall see. I guess as soon as someone solves the off ramping issue. It's possible but that we're yet to see that happen yet. So Wise, this is a service I use all the time. It's one of two companies that I already own. Like I mentioned, they are based in London. Let me double check that I didn't break my rule here and that they don't have majority of their revenue in the United States.

A (41:01)

I feel like if you include Europe as one region that's probably higher.

B (41:07)

Yeah, the majority of vault North America is not their highest revenue geography. So I'm good.

A (41:15)

Okay, I'll. I'll let it pass.

B (41:17)

All right, shout out to Fiscal AI for the quick numbers there. But WISE is it's basically a platform app slite that gives users a multi currency account where they can hold, receive, send or spend money. I know that was kind of sounded a little promotional, but that's literally what it is. And they're fundamentally a bit different than other other remittance providers. So instead of working with partner banks or sort of being a correspondent banking wrapper where a lot of these, there are some online remittance providers that are they send money through the correspondent banking system but then they layer on a nice user interface user experience where you're still charging high fees. But it seems a little more seamless than doing a traditional bank wire transfer. Wise, they set up local banking licenses in various countries so that it can just adjust the balances in their different bank accounts within those countries as opposed to actually sending the money across borders. So might be a. I hope everyone followed that. But basically just picture Wise has a US account Wise has a account in Thailand. Someone wants to send money from the US to Thailand, it will deduct money in their in the wise US bank, add money in the wise Thai bank, send it to the wise recipient in that case. This direct banking model enables WISE to charge much lower rates than other remittance platforms and that is exactly what they do. So WISE is actively trying to be the lowest cost cost remittance provider globally and this shows up in their take rate. If you look at the once again Fiscal AI has the cross border take rate which WISE reports every quarter. In June of 2020 it was 3/4 of 1% so 0.75%. Today it's 0.52%. This is not competition bringing price down, this is them driving their own prices down intentionally. So this global direct banking system is what I'm referring to when I say digital infrastructure. So when I say, I've said this before on other podcasts where it's like WISE has a really strong digital infrastructure and that provides them an advantage. It's that global direct banking system that, that network of banking licenses. And it's not super easy to replicate, at least I haven't seen it replicated yet. From what I hear, it takes quite a long time to acquire banking licenses in most countries and then it often requires like a strong track record. Probably means currying favor with some government sometimes or whatever, you know, building those relationships over many years and being the low cost provider, as most people would imagine, has helped WISE attract more and more volume. And more volume means they can invest more in their digital infrastructure, they can invest more in marketing, kind of reinforce their growth. When we look at volume over the last five years they have gone from $13 billion in total send volume to 44 billion. And I'm looking at the Q3 numbers here. So their quarterly send volume five years ago was 13 billion. Today it's 44. The. Well, there's been growth from the personal side, so just people like me sending money across borders, but also particular strength in the business customer segment. So more and more business customers are using WISE to send money across borders. We're seeing that both in their customer count. So they report business customers, which has grown really quickly. And then the business customers are also sending more, which is, it's a more attractive customer base because it's stickier, higher volume, higher ticket sends. Anyways, that's the digital infrastructure. A lot of tailwinds in the business. Being the low cost provider, it attracts more money. And then they've used that infrastructure to build out sort of four revenue generating methods. So there's transfers, that still accounts for about half of their revenue. The Wise card accounts about 25% of revenue. And then interest on deposits. And the WISE platform, when I say interest on deposits, it's exactly what it sounds like. You can store your money on Wise and it's like a high yield cash account and then they just take a tiny spread. And the WISE platform is, it's growing, it's a growing part of the business. But they're basically just licensing their digital infrastructure to banks. So banks can send money cheaper or other fintechs can send money cheaper across borders for their customers. The accounting's a little tricky. I kind of. Maybe I'll pause there, Brett, but does that lay groundwork for understanding why the business has been successful so far?

A (46:19)

Sure, yeah, I think so. I think that's a good summary of the Wise business I should mention for anyone that is curious of what the Wise platform is. They did sign a long term partnership with Nubank. So this isn't small players out there. Nubank has 100 million customers in Latin America and using Wise, they can now let people send money across borders. Or maybe that's something they're building and they do this with all sorts of banks around the world. But I think it makes sense. Maybe anecdotally we use wise. Unfortunately their interest rate on deposits has declined along with the Federal Reserve declining their interest rates. That's just kind of the product out there. But I'm pretty happy with it. I would like them to maybe innovate more and add more business solutions because sometimes we get a bit frustrated on not having that robust of a product set out there. But still early days for their business solutions and if that's the only gripe, feels like a good business. All right, yeah, Ryan, go ahead.

B (47:23)

Yeah, it's validation that their digital infrastructure is better than what's out there. So like when you see these new banks and I'm saying new banks and nubank in this case, uh, when you see them signing up and latching onto the Wise infrastructure and using that to send money across borders, it, it's basically them saying yeah, this is, you are offering the lowest cost transfer solutions and we want to give that to our customers as well. With the accounting it can be a little tricky because they're the interest income and expensing process is a little messy. They have like a weird 1% threshold after the fact revenue recognition thing and it's wonky. But the number to pay attention to is what they call underlying profit before taxes and that equates fairly well to underlying free cash flow. Also last year they earned 282 million pounds British pounds in underlying profit before taxes. This year is going to be lower partly due to lower rates. So they're going to see lower interest income. But then there's also it's quote unquote, an increased investment period from the company. So underlying profit before taxes, UPBT for short is expected to come in around 260 to 270 million pounds, slightly lower than last year. But they've given out sort of long term guidance figures and they, they expect over the quote, medium term. I don't know what exactly that means, but I would guess three to five years. They're guiding for 15 to 20% annual revenue growth and 13 to 16% UPBT taxes or not taxes margins. So if they hit those figures over the next five years, which I, I personally think is like conservative, especially on the margin side. Revenue, I, I think they can beat it, but we'll see. They should be around 500 to 600 million pounds in 2030 earnings. It's an enterprise value of about 7 and a half billion pounds today. So EV to 5 year out earnings is, doesn't quite meet my threshold that I'm looking for. It's at 12 times instead of the sub 10 times that I typically want. But I think that's reasonable. It is a very high quality business. You're seeing the validation of that in the wise platform. Like we've said, it's not easy to replicate the digital infrastructure. And once again, if I'm right and you get 25% revenue growth and 20% margins, you're getting a much better return. If I'm wrong, yeah, I'll probably lose a little bit of money. But if I can find a company where it trades at less than 10 times 5 year out earnings, I think it's a high quality business and it's got honest management with skin in the game. And Carmen Christo, Carmen, the CEO owns 18% of the shares. I tend to just end up becoming a shareholder. I think they're in a good spot and it's close enough to meeting those hurdles that I'm very happy to continue owning it. I don't know if I'd necessarily be buying new right away, but below sort of a 15% drawdown here, I would probably add shares.

A (50:51)

So to sum things up, you are a buyer on the dip. All right, let's get the last stock here. It's another one in Mexico. Unsurprisingly, I do like some of these cheap Latin American names out there. It's Bolsa Mexicana de Valores or just the largest Mexican or largest stock exchange in Mexico with I should mention close to a monopoly. About 80% market share of all trades. And they also have some other assets relevant to the exchange business, similar to something like the New York Stock Exchange or something like that. I did a long form podcast and write up on the stock back around a year ago so people can go get a full history of the business and the whole business model for a full hour. Actually almost exactly a year ago at this point it was in the low 30s. I then sold earlier this year, wanted to back up when it was up into the 40s. Now it's back down to $34.50 as of this recording. So could be a good opportunity to Begin it currently has an earnings yield of 8.5%. So talk about starting earnings yield at close to 10 times earnings. We have a, given Ryan's metric of kind of a three to five year outlook to 10 times earnings. Not a high hurdle to get there. And they have a dividend yielding just over 6%. If we look at Bolsa, which I might just call them that they make money through equity trading, derivatives trading, capital formation, which is, you know, listings for either stocks or bonds or REITs or what have you, central depository services and selling pricing and market data to third parties. If we look at revenue, it was up 10% year over year in pesos last quarter. But growth slow, excuse me, Revenue is growing, I think this year, 10% year over year. But growth slowed down in the third quarter. The company's EBIT margin is declining because it's going through a multi year process to update its systems to modern cloud cloud technology. They're partnering with the NASDAQ in some cases in this, there are all sorts of, you know, this is what if you read the conference calls, pretty much anyone talks about, quote unquote, modernizing initiatives such as debt clearing, stuff like that. We don't need to bore the listeners with all the intricate details here, but they're moving to the cloud. They're trying to make their systems more modern, they're trying to connect better with other exchanges out there, make it better for their core customers. And this is costing money. They're doing increased capital expenditures, stuff like that. There's just going to be some 2025, 2026, 2027, one time increases in expenses, that should level out, but hopefully get a good return on that investment. And if we looked about that or if we just look at the business as a whole and kind of ignore that and say, okay, they're going to do this, it's smart, but they're going to normalize over the long term. It the business is doing really, really well. When the new Mexican stock exchange competitor debuted, Bolsa was worried about losing market share and they actually asked regulators for the flexibility to lower prices because of this new competitor. But they have not lost market share and therefore they have not had to lower prices, which I think is a nice moat test for the business. If we look at listings in Mexico, I guess I have a screenshot for the earnings release, but it'll be really hard to see on the share video. But look at that, listings are down. There wasn't even any new listings for stocks last quarter. That has been a drag. On revenue, however, that is changing. They just had. I forget what it was. I think it's Aeromexico and some other ones that are either formally announced or in the process of getting ready to file to list on the Mexican stock exchange. So we're seeing with that bull market in Mexico more stocks that are going to be listed and if we look at the debt offerings, it's doing quite well. Short term, medium term debt, there's more that is getting listed each quarter on the exchange. And this is important because you don't only get the listings revenue, but you also get the maintenance fee revenue. That is a durable recurring revenue stream year after year after year when a company is listing on the exchange. And then it leads to more equity trading, derivatives, revenue, stuff like that. Because the more stocks that are available on the exchange, the more people are going to trade. You get those economies of scale and reinforcing effects. I think the company is rational with regards to its dividend buybacks and Capex plans. Capex is going to be elevated for the next few years, as I mentioned, but then it should tame down again. We have a quote from their conference call that I think really illustrates that they understand capital allocation well. Quote, we don't see or don't expect much movement there regarding the buyback program. What I said is we are ready to be active. We operate depending on the stock price. The stock price during the first six months of the year or seven months was higher than what we expected. So we operated less than we would originally thought. We cannot have high capex, high dividend and high buybacks all at the same time because we're going to run out of cash. I like that straightforward nature. So that's something that we will divide. The dividend will be a balance between, between the buyback and the dividend. Our strategy will be to give back as much cash as we can and not keep cash that we do not need and keep that number as high as possible, whether it be through a dividend or buybacks. That's music to my ears for a high mode asset that's probably not going to be that aggressive of a grower just through solid inflation adjustments, economic growth and a little bit of pricing power. And if we look at 2025, the peso is appreciating versus the US dollar which is a headwind but a little bit unpredictable. I guess it doesn't much matter for US based investors because it kind of, if you buy the stock, it circles back around. But if listings pick up, the Mexican bull market continues and the modernization plans bear fruit then Bolsa will be a solid performing stock over the long term. Again, you're buying at close to a 10% earnings yield today. The downside is that if they don't grow, you probably own a bond paying a 6% dividend yield every year. So I think that's your downside and your upside is this could be a really nice. Is it going to be a 10 bagger? Maybe not, but a really nice multi bagger over the next decade if the bull case bears out.

B (57:09)

Yeah, for me, when I look at a new market, the first two and when I say market geography, the first two business models I look for are two, two companies we've talked about today. Airports. Are there any publicly traded airports? And stock exchanges. The stock exchanges always have this reputational advantage where it's almost like a network effect where on the one hand you have capital, on the other hand you have listings or investors and listings on both sides of the network. And if you want to list where the most capital is and in Mexico, it sounds like Bolsa Mexicana has that advantage. I like the way you lay it out too, where it's like worst case scenario. Maybe not worst case, but in a likely bear case scenario you're sort of just getting a 6% coupon price doesn't go anywhere. You get steady dividend yield. But in a good scenario, listings grow, debt offerings grow, you're getting revenue appreciation, higher cash flow, higher dividend payments and maybe buybacks as well. There's a recipe for 10% plus annual returns easily.

A (58:22)

Yep. And a listener wanted to compare the say American stock exchanges to Mexico. I can look at ice, which is I see is their ticker. Intercontinental Exchange. They own more than just the New York Stock Exchange. But today they're trading at a PE of 28. It says other trailing twelve months. Enterprise value is higher than their market cap. So the EV to true earnings is going to be higher than that. To me, sure, that's a good asset that'll earn you okay returns over the long term. But you have just as, not just as high of quality, something that's still very high quality that you can buy in Mexico, which might be trading at 10 times earnings over the next few years. And over the long term, if the growth process plays out, it could grow to five times earnings based on today's price with a dividend yield that is quite healthy. Intercontinental Intercontinental exchanges dividend Yield is just 1.2%. So when you compare that, I think the risk reward opportunity for just a slightly like still very high quality business. Just makes much more sense to buy Bolsa over Intercontinental Exchange.

B (59:34)

All right, I think that's gonna do it. That's our top five international stocks for 2025. We also own plenty of others, I guess. Let's go quick honorable mentions you mentioned. Who was it at the top of the episode?

A (59:50)

Nintendo, I guess. I own Grupo Centro Norte, the northern Mexican airport operator. I also own Coupong, which operates in South Korea as an E commerce player. So I'd say those would be my other international exposure. But lots of other ones I looked at as well. Any ones that you want to mention, Ryan, that float around your watch list.

B (60:10)

And your radar coupang is one I own. Although we've talked about them a bajillion times, so I thought maybe we'd go elsewhere.

A (60:18)

Yeah, we decided not to put them in today. Yeah.

B (60:21)

The other one that's moving more and more up my watch list is Mercado Libre. Saw an interesting stat that they are the only company, the only current public company that has delivered more than 30% revenue growth for 22 consecutive quarters. And that's year over year revenue growth and they've done it for 27 consecutive quarters. So that was a. That was the CEO that tweeted that out and I thought that was kind of interesting. And then the last one I'll mention. Well, two more. Taiwan Semiconductor. I actually do technically own a few shares. Very large moat there. And then C Limited is another one I've been looking at.

A (61:07)

Seems the 2021 gem.

B (61:10)

Yeah.

A (61:12)

Making a comeback.

B (61:14)

The fundamentals have gotten better over since the peak, the 2021 peak. But people seem to be soured on them and I kind of like situations like that where it's been in the gutter for a while and people remember it for one thing. And then the business models evolved because at the time it was like a huge gaming business and now it's primarily sort of an E commerce business. So yeah, that one might be. Might need a little revisit.

A (61:43)

All right, I think that's going to do it for this episode. 5, 5 international stocks for 2026. Didn't choose 6 because I wanted to be better and a little different in the search results. Either way, five companies. Let's list them off. Southern Airport operator in Mexico. We have grab holdings wise Bolsa Mexicana de Valores and Hermes. A good mix. Smaller, larger businesses. And I'll mention once again we're closing out the episodes here, so feel free to tune off if you already heard about fiscal AI. But just As a reminder, for one week they are doing their Black Friday sale. Double the regular discount 30 off. Use our link fiscal debt AI/chit chat 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 listening to this full episode. We'll see you next time.