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The 100 Year Thinkers | Chris Mayer and Robert Hagstrom on Finding the Next Great Compounders
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- [00:00]
Matt Ziegler
We're excited to announce the launch of a new podcast, the 100 Year Thinkers. In a world where most investors think in quarters, this new show offers insights from investors who think in decades. Hosted by Matt Ziegler and Bogomil Baranowski and featuring Robert Hagstrom and Chris Mayer, this monthly roundtable will tackle many of the issues all of us face as investors, but look at them through the lens of investors who operate over very long time frames. We have included this episode in the Excess Returns feed, but if you want to keep receiving new episodes, you can subscribe to the 100 Year Thinkers on all major podcast platforms or our YouTube channel using the links in the episode description below. Thank you for listening. We hope you enjoy the new show.
- [00:32]
Bogomil Baranowski
When investors want to run a concentrated portfolio, which in my mind be something like, I don't know, 10 to 15 stocks, where they tend to get in trouble is they don't realize that when you're going to run that concentrated, there's a lot of stocks and businesses that just should be off the table completely.
- [00:48]
Robert Hagstrom
If the S&P 500 was made up of the economics of the 490 stocks, this market wouldn't be up anywhere near where it's now. I mean the reason why the market is up is because the, the weight of the market happens to be coinciding with the stocks that have the highest returns.
- [01:05]
Bogomil Baranowski
I don't know how pre people appreciate how big the top seven are. So I looked at this maybe a couple days ago. The smallest market cap of the big seven is Tesla at 1.4 trillion.
- [01:15]
Matt Ziegler
Little baby.
- [01:16]
Bogomil Baranowski
A little baby and then, and then Nvidia is like four and a half. I mean first just give you like they're, you're talking about market caps that are the size of like GDPs of European countries.
- [01:24]
Robert Hagstrom
It's a frequency versus magnitude, you know, issue. It's not how many times you're right, less how many times you're wrong. It's how much money you make when you're right, less how many how much money you give back when you're wrong.
- [01:37]
Chris Mayer
In a world that moves tick by tick, second by second and inch by inch, one secret of the best investors, it remains zooming out is still a superpower. Extending your timeline, I'm told it's an edge compounding your compounders, the results, they're astounding. You're watching excess returns and we have a brand new show for you. We're calling this the 100 year thinkers. I'm Matt Zigler and with me Today we've got Bogomil Baranowski of talking billions in Blue Infinitas Capital, Mr. Hundred Bagger and Woodlock House Family Capital founder Chris Mayer and CIO of Equity Compass Investment Management Global Leaders Portfolio PM and author of books including the Warren Buffett Way, Robert Hagstrom so where we're starting is with the concentrated, momentum driven, almost unbeatable major market averages. What does it really take these days to outperform? That's our topic du jour, if you will, that we're going to sprinkle across this. Chris, I'm leading this one off with you because mega cap tech, these dominated industries, I mean 10 stocks, the top 10 of the S&P is at like 38% of something like that. Top 10 of the NASDAQQs at like over 50%. It's a quasi concentrated index fund scenario. Do you think are there any hundred baggers hiding in plain sight in those top tens? Is there, is there any, is there a hundred in the Mag 7?
- [02:59]
Bogomil Baranowski
The easy, the easy answer would be say no, because this size, right? But there's another, there's another reason I think people don't think about that would be a good reason not to fish in that top 10 or 7, but just to get a sense for the size. And I don't know how people appreciate how big the top seven are. So I looked at this maybe a couple days ago. The smallest market cap of the big seven is Tesla at 1.4 trillion.
- [03:25]
Podcast Host/Moderator
Little baby.
- [03:25]
Chris Mayer
A little baby.
- [03:26]
Bogomil Baranowski
And then, and then Nvidia is like four and a half. I mean first just give you like they're, you're talking about market caps that are the size of like GDPs of European countries. I think, you know, Germany's GDP is four and a half trillion. So that's like, you know, that's Nvidia and like France is three. So that's you know, Apple or whatever. So I mean it's enormous the size. So to get a hundred bag from there is. Yeah, it's a big number. But there's another reason why you might not and that is that historically if you looked at the top 10 on the S&P 500 anytime, there's been some different academic research on that. Maybe it's not academic research, but I know it's some institutions have done it that show the top 10 when it goes over like a 20% concentration that the top 10 underperform like 88% of the time over the next five year period or something like that. And there's A variety of different flavors of that type of research but they all directionally point in that direction, which is that the very top tend not to perform that well over some rolling 5 or 10 year period after that. So that would be the reason to stay away. And you can see this historically too. Like just for kicks, I would looked at like the top market caps in like the year 2000 and it's amazing, like all those companies except Microsoft was the only one that still did well. But some of those, I mean it took, I think General Electric only recently got over its 2,000 high. You know, Cisco I think still hasn't gotten over its 2,000 high. And some of these have gone nowhere for a long time. You know, even Microsoft had a lost decade before it really, really took off. So again, I think the way to history and research there would at least say that these top names are probably not going to be the top performers we talk about over the next five or ten years.
- [05:09]
Podcast Host/Moderator
Robert, you've shared how, how active managers need to maintain a concentrated portfolio that's different from the index. But Matt hinted that the top 10 stocks in the S&P 500 represent 40% or so. So are we trying to beat one concentrated strategy with another? And what are the concepts?
- [05:26]
Robert Hagstrom
Well, Bogomil, I think, you know, couple of different answers that we have to qualify here. First of all, yes, you know, high active share investing, concentrated low turnover investing, we know academically defensible as the way in which to outperform the market. So that's, that's the first layer. And then the second layer is, you know, what, what are you comparing against? And that being The S&P 500, if that's your benchmark, you know, you're comparing yourself against another had a quasi concentrated portfolio though I would argue even at the top 10 or 40%, you've got 490 stocks that are 60% of the portfolio. So I'm not sure that is a pure concentrated portfolio. So I do think concentrated low turnover is the way to do it. And then the question then becomes, you know, how are you judging your, your, your progress, your performance? And that's where, that's where this all becomes problematic because the cap weighted index, you know, one of the things that I was, you know, would propose that if there was no market cap weighted index and it was just all equal weighted index, we wouldn't have a topic today, wouldn't be any controversy. But that doesn't mean that Nvidia didn't go up. That didn't mean that Microsoft didn't go up or Google, they all would have gone up because their earnings went up. And they all would have outperformed a greater number of the stocks in that equal weighted index because their earnings went up more faster, greater percentage change than the other 490 stocks. So we still would've had the performance that we have today. It just wouldn't have been as controversial. That our performance related to a cap weighted index looks suspicious. And I'm not so sure that it is as suspicious as most people think. I basically follow economics first. I mean first and foremost is economics. And what became very clear over the last three, four, five years is that the economics of the mega cap stocks was outperforming the economics of the 409th in aggregate. So I don't really get into should I do this? I just let the economics tell me where I should be fishing. And it's very clear that the economics of the top 10 stocks have been far superior both in returns on capital and margins and, and sales and earnings. You know what go down your KPI. But you know they're just outperforming the bottom 490. I mean we took a look at the 490 or we took the S&P 500 and said if the S&P 500 was made up of the economics of the 490 stocks, this market wouldn't be up anywhere near where it's now. The reason why the market is up is because the weight of the mark happens to be coinciding with the stocks that have the highest returns. The KPIs are the highest there and that's why the market is up so much.
- [08:20]
Chris Mayer
Chris, I want to push that logic. I'm just. How do you think through it? S and p equal weight versus S&P market cap weight or the 490 versus the 10 or.
- [08:29]
Bogomil Baranowski
Yeah, I mean it's sort of, sort of depends, you know what you want to measure. Because if you're just trying to capture like the typical or typical experience of an individual investor in equities, the cap weighted is probably not right because from that individual investor point of view All 500 stocks are on the menu and they can buy as much as any of those they want. And so if you're going to try to measure some skill, probably the equal weighted might be a better measure. Of course I saw some research on this just this week. Somebody had written, I think his name was Carl Gavin, someone pass this on to me. But he ran just a random portfolio, like 10,000 different portfolios randomly from the S&P 500 last year and compared that, you know, to what the actual S and P did. And some, I think most of them wanted to beat the, the equal weighted index, but none of them beat the, the cat way because they, because the returns are so extreme. You know, they, like Robert said, I mean, they, they, you know, that's why, that's what's really driven the index. But it makes it interesting to think about, you know, is that a fair way to evaluate managers, to compare them, you know, to the S and P that way? Because I, I, I think of an analogy like let's say you're the manager of the Boston Red Sox. What if I made your goal you have to have more wins than the New York Yankees, you know, is that a good goal? Probably not. You don't have any control with the New York Yankees do.
- [10:05]
Robert Hagstrom
Right.
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Bogomil Baranowski
You could win a hundred games, which would be a very good season for a manager. You could still have below New York Yankees, or you could have 60 wins and 100 losses and you could beat the New York Yankees if they have a really horrible season. And so that's what we're doing when we say, when we're comparing a manager to the S and P, I mean, they're just saying you're, you're setting that kind of a benchmark. So I don't know what the answer is, what it should be. But I think as an industry, we have set ourselves a challenge in how we evaluate managers if the bar is always the S&P 500. So I would say that I would.
- [10:39]
Podcast Host/Moderator
Add, and maybe remind all of us, including myself, that the 10 stocks are almost 40% today. But even at the peak of the tech bubble, they represented 25%, not 40%. Very different names, but that's one thing. The other thing, building on what you both said, historically, the equal weighted and market cap weighted actually are not that different. If you look over some periods of time, they are not that different. And then there are certain moments where they're completely disconnected, usually in favor obviously of the market cap weighted and on the way down, which is not that surprising, in favor of the equal weighted. So I think you have to just, you see the menu at a restaurant, you choose whatever works for your stomach. Right? That's how I would look at it at the end of the day.
- [11:24]
Robert Hagstrom
Well, you know, I think we have to recognize this is just a failure of composition. Wilshire does not have this problem. The Russell does not have this problem. Misky does not have this problem. The problem is in the s and P500. And that's because there's nine people on the S and P Global committee that make the decisions about weights in the market. They could easily change the weights of the top 10 and make them less, you know, of an impact that it's up to the S and P committee. So you know this. If you take the. Let's just take the benchmarks away. All right, let's not talk about the benchmarks right now. What would have been the best decision in the last five years to invest in? Well, the answer is there's the stocks in the s and P500. So that was the right economic call. You made the right economic call if you own that. I find it curious now that you're being criticized for owning the top 10 stocks in the S&P 500, not because they weren't the economic winners, and I would argue that they continue to be the economic winners, but because what you compared against has an overweighting of these 10 stocks. You know, listen, I would have loved to gone against the equal weight. We would have beaten the market even greater, you know, but, you know, this is not a problem about that picking the right stocks, in my judgment. This is a problem about we're comparing. Oh my God. Every time this happens, the role of the top 10 stocks is suboptimal. Going forward, we'll see. It's based upon the economics of what they earn. And I wouldn't make an argument that the increasing returns economics of these network economic businesses are far different than even Cisco, intel and Microsoft. Those weren't network economic businesses, much less the oil companies in the 60s. Every time we've had these peaks in market cap, they're brick and mortar type stocks, not network economic stocks, which is a totally different animal. So it'll be interesting to see who wins going forward. But that doesn't escape the problem that the S and P committee should probably get in there and cut the weights down. That would solve a lot of this problem.
- [13:28]
Bogomil Baranowski
Well, I think, again, it depends on what you want the S and P to do. What is this purpose? I mean, they've created something that's a pretty good return or has been a very good return vehicle for the average investor. So. But again, what do you use it for? If you, if the thing is you want to try find some way to evaluate an active manager, then maybe the s and P500 as it is constructive is not the best thing. So again, I think it really comes down to what you're trying to achieve with it.
- [13:56]
Podcast Host/Moderator
To me, the Powerful. There are two things that I'm seeing. One, the two equal weighted market cap weighted. It's the same collection of stocks when you really think about it. Right. Because we're, the four of us talk a lot about stock picking. It's the same 500 stocks, right?
- [14:10]
Robert Hagstrom
Yeah.
- [14:10]
Podcast Host/Moderator
But the outcomes are so different. I think it's a lesson for all of us when we build a portfolio.
- [14:14]
Bogomil Baranowski
Well, I would also say it's not the same all the time. Every year the S and p swaps out 20 names. Right. So you know, over a period of a decade or two decades, the S and P starts to look very different. And in fact, a lot of people don't even appreciate that. You know, it wasn't until like 76 that they even included financials.
- [14:28]
Podcast Host/Moderator
Yes.
- [14:29]
Bogomil Baranowski
So we always have these long term charts of the S&P 500 as if you're comparing the same thing from year to year. But it's not the same. It's very different. And you can see it also in just looking at the top stocks, as you mentioned, the top 20 and top 10 in 2000 included, you know, General Electric included, ExxonMobil. It's totally different now.
- [14:51]
Podcast Host/Moderator
Yeah.
- [14:52]
Chris Mayer
So if we look beyond the index construction and Robert, you're already starting to make this point. When we look at 13F holdings and we look at some of the most respected active managers, we, we see a lot of those stocks and. And you would argue that's still a correct part of positioning.
- [15:09]
Robert Hagstrom
Yeah, well, I, you know, we don't think there are, we don't think there. Listen, you know, Chris might relate to this. Ben Graham gave a, a talk in front of the Senate banking committee in 1955, I think it was. Fulbright was the senator back then and the Dow had gotten to record levels the first time since 1929 and everybody was freaking out. And so Fulbright asked Ben Graham, he said, what do you think of the market? Graham said, well, you know, the market's high. Yeah. And some stocks are high, but not all stocks are high. And there's the trick, as Chris well knows. Right. And you're trying to figure out what's mispriced. And so there's some things in the market that look very, you know, I hate to use this word bubblicious or bubble because I think there's a bubble in bubble talk. But I, there are some things that are, that are massively overpriced that, that, you know, I wouldn't, you know, touch, you know, with a ten foot pole. And some of them are in technology, I'd argue that there are also some massively overpriced stocks and consumer staples. There's no chance that Walmart is worth the same multiple as Nvidia. If you do a reverse DCF on Walmart, they've got to earn 19% per year for 10 years to justify their current price, which is never going to happen. So Walmart's overvalued, Costco's overvalued, and there's some tech stocks are overvalued, but there are some tech stocks that look to be very reasonably priced and very attractive investments. And a few of those are also in the top 10. So I'm not going to sell those that are in the top 10, no matter the controversy. And oh my God, they're, you know, they're 40% of the S and P. Robert, you're setting yourself up for disaster. I follow you, that's all I do. Just tell me what the economics are and that's what I want to invest in.
- [16:45]
Podcast Host/Moderator
Can we pull on that thread? Because I think it's a very profound truth. So when we look at the index, it's not that somebody decided the weights, but it's also the economic success of the businesses behind those stocks. Right, that put them in that place. It's not the five people or nine people that decided that Nvidia has to be 7% of the index. Nvidia got there through its own success and obviously the valuations, everything else, but it wasn't given to Nvidia or the other ones. The position that they have, they earned it. And I think that's what.
- [17:13]
Bogomil Baranowski
No, but, but I think also you have to say, you know, what we see is the track record, that's the record of success to this point. It doesn't say anything about the future at all. Yes, market could be completely wrong and it has been completely wrong. That's what, that's the point of looking at the top 10 in years past, over a long period of time. You can see the dangers. You know, nobody stays on top very. It's a very competitive marketplace. So somebody's going to figure that out. Now there's always exceptions. Like Microsoft, again we mentioned, has been very good even, you know, from 2000, although you did have to go through a decade where you were not going anywhere. But it's very, very difficult to stay on top. I mean, Robert knows that. I mean, you go back even to like 1980. If we looked at the top 10, it would be even more astoundingly different than did in 2000. So again, over long periods of time, you know, next few years, who knows, it's probably they got enough momentum with, they may continue for a while. And like Robert kind of hinted at, I mean this is much different kind of companies than, than were in 2000. You know, now we have this huge AI spending but they're doing it out of cash flow. So it could go on for a long time.
- [18:20]
Robert Hagstrom
But you know. Point well taken, Chris. So the other thing that there's certainly a Darwinian nature to all these, you know, the, the better economic performers go to the top of the class. But I'm always remembering, and Chris is pointing this out, which is the, the biggest problem for buy and hold investors and Warren talks about this is he admits the mistakes. The biggest mistake that he has made and the one that has cost him the most money is trying to figure out the favorable long term prospects of company like is it going to continue to do what it's going to continue to do? Is it going to continue to earn high returns on capital? Is it going to continue to maintain the margins? And when he looked back at his failures, it was, you know, he thought it was going to do better than it did and end up doing not as good. And that's how we lost money. So Chris is exactly right. You know, today we've made the right decision. The question is over the next five years, what's going to be the right decision? And that's what makes markets.
- [19:12]
Bogomil Baranowski
Yeah, absolutely. And you know, the nature of those DCFS too, you really appreciate that for the value of these companies. You know, most of that value is in years, five years out, you know, the next five years are not really worth very much. You can kind of play around whatever you want. But it's that, you know, terminal values used a technical term or that's really drives it. Especially for the kind of companies that we like, which are the, you know, the ones that are economic successes, they usually carry multiples because the market knows they have create enormous value. They have high returns on capital, lots of reinvestment opportunities. And so yeah, the market gives them a good market cap as opposed to something that's trades at 10 times earnings. There's a reason, it's because it's probably low return. There's not a lot of reinvestment opportunities, probably more existential risk. And so there's less of that terminal value you're relying on. You're getting more than your value in the next say five, six, seven years or whatever. So it's, yeah, it's the challenge of investing in a nutshell.
- [20:06]
Chris Mayer
Let's talk about personal concentration and personal position building and position sizing. How big, like Chris, apply this to yourself now. How big will you let a position get? How big will you let one run to?
- [20:20]
Bogomil Baranowski
Well, I mean, I think this is, you know, comes down, I don't know there's a right answer to this. It comes down to kind of personal preference of what you can do. And you know, I have a hedge fund that my documents allow a stock to get as high as 25% and I would never put one quarter of the of the fund's assets into that. And my kind of top would be somewhere around 8% or so. And then if it appreciates to get to that, that's a nice high class problem to have and I would be happy. And individual investors could probably tolerate, you know, pretty high levels of individual concentration. If you've worked at some business for a very long period of time and you've got a lot of stock in it, and then, you know, that's probably, probably pretty natural. So that's the way I would think about. I think one way, one thing I would say is that when investors want to run a concentrated portfolio, which in my mind be something like, I don't know, 10 to 15 stocks, where they tend to get in trouble is they don't realize that when you're going to run that concentrated, there's a lot of stocks and businesses that just should be off the table completely. Things that are highly levered. I would argue that if you have a 10 stock portfolio, you can't own a bank. You just can't because they're inherently very leveraged and they can go to zero. I mean, we saw not too long ago Silicon Valley bank was a great, great bank for long time and then became a zero in a matter of days. You just can't have that when you're concentrated. So you can't have leverage securities. You can't have things that are super cyclical. You can't have, you know, have something even like a REIT that has, that has to have regular access to capital markets would be a big risk to have in a concentrated portfolio. So it raises the bar for what you can own. And that would be, I think, an important message for people, you know, trying to do something concentrated, not just the amount, but the types of things that you own.
- [22:08]
Robert Hagstrom
Chris, I had not heard it framed like that before. I think it's brilliant. I mean, if you're going to do this, there's a template of companies that would qualify in a concentrated portfolio and others that should be excluded not because they're not mispriced or whatever, but when you right size the bets. If you're going to do a 10% bet, there's certain qualifications that should be required to make a 10% bet. I've never heard frame like that before, Chris. Well done. Thank you. Yeah.
- [22:38]
Bogomil Baranowski
If you had, like 30 or 50 stocks, sure, you have a room for, you know, a basket of five or six banks or whatever, but it's different when you're running concentrated.
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Podcast Host/Moderator
I want to tie it back to a couple of things that came up so far. Ronald Reagan had this saying about government policies. If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it. And you'll see why I bring it up when we. When you look at the top 10 from S&P 500 from 20 years ago, Chris, you just talked about banks, three major banks that received government bailouts soon after that. You have GE that keeps on restructuring, and then you even have intel that's getting propped up by federal help right now. And these are the top 10 from 20 years ago. Should we expect something similar from the Magnificent Seven? Is it different today? Are they all waiting for government help at some point? What's the context? It looks like to me, it's unimaginable that the winners from 20 years ago found themselves in a position that they. They were.
- [23:39]
Robert Hagstrom
You want that one, Chris?
- [23:41]
Bogomil Baranowski
Well, I'll throw out an idea, Robert, and you can see what you. What you. What you say.
- [23:46]
Robert Hagstrom
I would.
- [23:46]
Bogomil Baranowski
I would say almost the opposite when it comes to the big seven today. I think it's more government hurting them and forcing them to break up or forcing them to sell off something or. Or split. I mean, you know that, you know, you remember when AT&T had to be broken up and we had the sisters and all. Yeah. All that. Right. So, I mean, could these things get so large that the government said, okay, you know, we can't have, you know, Facebook also own, I don't know, whatever, Instagram. I just, you know, whatever it is, it just forces these businesses to split or something like that. You know, I could see that. I mean, because every once in a while you see these headlines already where there are these enormous fines being handed down.
- [24:24]
Podcast Host/Moderator
Yeah.
- [24:25]
Bogomil Baranowski
From some EU competitive body. It's like, it's not much for any of these companies to pay relative to the amount of cash they have and so forth, but in just absolute dollars, it's an enormous amount of money. So I almost look at the government as almost targeting them in a different way. Not so much helping them, but almost breaking them apart.
- [24:43]
Robert Hagstrom
Yeah, I think the, you know, when the government has gotten involved in the past, let's not include the last year or two, but particularly in the great financial crisis, because if that company or companies were to fail, it would have been an existential threat to the entire economy. So the Federal Reserve or the government has to step in for the sake of the economy. So then you have to reframe your question. I think, Matt Bougamill, is that, is that would the top seven qualify as something that if they didn't succeed, would be an existential threat to the country that introduces Intel? I mean, intel should have probably gone away, but I think under the current administration they perceive that would it be in our national security interest to probably have a foundry here in the United States even though they can't make GPUs? You know, maybe they're getting there. You know, it may, it is obviously the government's idea or decision at this point that intel needs to stay. But despite the fact without that help it probably would have gone away. So they, they view it from a national security threat, which is different than an economic threat. But that, that's just kind of the world that we're living in. So Nvidia went down and they were the only producer of GPUs for the Western world. I don't think the government would let Nvidia go down. And the Chinese have their GPUs with us not having a GPU. So it's how it's framed as an existential threat either to national security or to the economic well being of the country.
- [26:06]
Chris Mayer
I keep thinking of Professor Demidoran and that whole idea of the age of an investor. And it's like, is intel just on Social Security and Medicare now? Is that what had happened? The ARPA mailers came in, they took the ownership stake. Yeah, you've seen a lot of these cycles. So Robert, for, for you specifically, are the companies today that much different than companies 10, 20, 30, 40 years ago? How do you think about that difference and what's different? What's the same?
- [26:34]
Robert Hagstrom
Well, let's go back 20 years because I think the, you know, 25 years because I think, you know, where everybody is spending a lot of time or telling stories of metaphors that today is 1999. I managed money in 1999. I had a growth portfolio. I worked with Bill Miller, he had the value portfolio. And you know, Bill had, you know, he was manager of the decade and, and you know, did phenomenally well. And he, you know, thinking about concentration. Chris, I don't know if you remember Life Mason Value Trust at one time had 24% of the portfolio in Dell Computer and that was Cedar. That had gone up 8,000% in the decade of the 90s. Now Bill didn't get 8,000%. I think he got like 6, 6,000%. But so he made a very large bet. You know, it's interesting though that at the time the market was totally different in 2000 than it is today. I think the 10 year totally different was, you know, 7%. The economy was slowing, interest rates were higher. The multiple of the market, I think if I remember it at that time was 32, two times forward. GE was probably 40 times. But here's the kicker.
- [27:37]
Bogomil Baranowski
Coke was 50.
- [27:38]
Podcast Host/Moderator
Remember Coke was 50M.
- [27:40]
Robert Hagstrom
Yeah. Microsoft, you know, intel, all those, those were the four horsemen, right? Cisco was a hundred times forward earnings. Okay, that's a totally different world than when you look at today. Nvidia is 40 times, you know, Amazon is 37 times. You know, Meta and Google are 20 some odd times. The 10 year is 4%. The forward market's 23 times. So when you do these comparative systems analysis and you compare your periods, we have a tendency to latch onto that which is in common, which is a lot of tech stocks went up in 2000 and the biggest tech stocks were what caused the market to go down. Well, it's the differences when you do comparative systems analysis that you spend most of your time on. And the differences today versus in 2000 are dramatic. And so simply to say today's like 1999. It's like Professor Demidorin, you know, Timothy. And you know, investing is building a bridge between stories and numbers. We're really good at storytelling. People do storytelling because it's easy. That's how we communicate. It's very lazy also because unless you do the numbers with the stories, you're not, you don't have a credible argument in my mind. So people are talking stories today, but they haven't done the work, they haven't done the numbers. And if you do the numbers, I think your argument that today is 1999 doesn't carry what?
- [28:59]
Bogomil Baranowski
Well, speaking of Bill Miller, one of my favorite little anecdotes, you know, he, he had beaten the market for however many years in a row. I think he wrote about this in 2005 letter if I remember. So the streak was probably 10 or 11 at that time. I think it ended at 13. But he said in his letter that if you looked at it, you know, by month it happened to be the, that was the only period where they beat the market, you know, 1%. Yeah.
- [29:24]
Robert Hagstrom
He said if the market would have ended on November 30, it was a 15 year streak that ended, I think 2007. And he said the market ended on 9:30. I think he only would have beaten the market, I don't know, 10 out of 15 years, but it wouldn't have been 15 consecutive. So he did say in his writing I got lucky because the calendar worked out in my favor. Yeah, yeah.
- [29:47]
Bogomil Baranowski
But I remember that time also because one thing that was very different about that market than now too is that in the late 90s and up to 2000s you had the huge multiples on the tech stocks, but it created this vacuum otherwise, like you could buy oil related stocks for hardly anything. REITs were trading for, you know, very cheap prices. So there was anything that smacked of old economy. Even Warren Buffett's Berkshire Hathaway was kind of thrown in the penalty box for a while because I think for years it went nowhere and the market was up like 200% and Berkshire went nowhere for years. So that, that was where it's different where we are now. Yeah, I mean there isn't that kind of divide. I mean anything that says quality even is still getting a pretty decent multiple compared to that.
- [30:30]
Robert Hagstrom
Well, I think, you know, I'd like to hear, Chris, you know, when we look at the bottom 493, we're very unimpressed. I mean, there's always exceptions. Right. But if you look at the economics of the bottom four 93, they're growing single digits. Right. Earnings are basically single digits, revenues are single digits, margins are mediocre. So you go, okay, what's the big deal? I mean.
- [30:51]
Bogomil Baranowski
Well, you know, it's interesting there, there's a bias too in the construction of the S and P that we haven't mentioned, which is that, you know, there are liquidity constraints. So one of the things I love to invest in companies where insiders own a lot of stock and so those by, by nature tend to get excluded from the S and P because they, they don't meet them. Because if you have 40% of the stock held by insiders, it's not going to meet liquidity requirements to be in the S and P. But if you look at those collection of companies that could be in the S and P but aren't because of that, their economics are higher than the 490 as well.
- [31:20]
Robert Hagstrom
So. Yeah, quite. Very, very well. You know, taken in, obviously liquidity in that index with so many trillions of dollars, you know, that they have in management, they've got to have liquidity. But it begs the question, if there were no AI stocks, that AI had not been invented. Right. And there was no AI, what, what would have been the return of the s and P500 for the last three years?
- [31:43]
Bogomil Baranowski
Been a lot lower. I know, just for this year, you probably saw as well, I think it was a JP Morgan research where they said 75% of the S&P 500s returned this year is from AI related stocks.
- [31:51]
Robert Hagstrom
Yeah, but, but, but.
- [31:53]
Bogomil Baranowski
And it probably is that high for the last three.
- [31:54]
Robert Hagstrom
I mean, yeah, it's, you know, I was keeping the piece of paper, but you're right about that. But I think AI stocks, the top 10 have contributed almost 80% of the earnings of the S and P. Absolutely, absolutely. Yeah. In my mind, the market got it right. The market said this is where the earnings are, so these stocks should go up. But the anomaly is, and you know, I'm so glad to have Chris here, is that in the old days, that was the Russell 2000. You know, in the old days, the Russell 2000 was the cradle of innovation, the cradle of earnings growth, the cradle of revenue growth and all that. It's so ironic today that the Russell 2000 no longer is the, you know, it's the nursery of that anymore because, you know, venture capital and private equity.
- [32:36]
Bogomil Baranowski
Exactly.
- [32:36]
Robert Hagstrom
Guys. Private for so long, when they come out, they're 50 billion. They never show up in the Russell 2000. So the irony is that the innovation and the earnings growth that we used to, you know, depend upon the Russell 2000 for is actually at the top part of the S&P 500. I mean, that's just, you know, that's just mind blowing.
- [32:54]
Bogomil Baranowski
Yeah, there's a lot fewer companies listed now in the US than there were in 2000. I think we probably lost 30 or 40% is a high number.
- [33:02]
Robert Hagstrom
Yeah.
- [33:02]
Bogomil Baranowski
Oh, yeah. And just like Robert said, And the Russell 2000 used to be kind of the, you know, you'd see all these companies come out and they'd be young and, you know, growing. But now those companies are largely private and when they go public, they're enormous compared to.
- [33:16]
Robert Hagstrom
Well before David Swensen got onto the private equity gig in the late 1990s, they had to go public because they. That was the only place they could get money.
- [33:24]
Bogomil Baranowski
Yeah, that's right.
- [33:25]
Robert Hagstrom
Back to the liquidity argument. You had some private investors with you. You had to keep your lights on. You didn't have that much revenue. You're building a company. The only way that you could go stay in business was to go public. And so they went public in the Russell 2000. Today they can stay private for a long private equity give you as much money as you want to stay private. They almost want you to stay private. So when you do come public, you're going to come public at a mammoth number that's going to be a huge payoff for these guys. So the Russell 2000, you know, if I hear one more time, you know, the Russell 2000 in 1980 did this and you know it's going to do this again. You know, the data is non stationary. It's not the same data today.
- [34:02]
Bogomil Baranowski
It's not the same index.
- [34:04]
Robert Hagstrom
Right. Totally different.
- [34:05]
Bogomil Baranowski
Yeah. And of course now I think one other difference is it's much easier to buy international stocks than it was back then. Like, yeah, you know, you can have an interactive brokerage account. You can buy things on Stockholm Exchange, you can buy UK stocks, you can buy very easily. And I remember it used to be a big deal to try to get your, you know, your account to be able to trade stocks in the uk, let's say, and it was expensive. So that, that's all that in that sense the opportunity set is much larger. And when, if you include just even, you know, Western Europe.
- [34:38]
Robert Hagstrom
Yeah. So, well, you know, then the question is why is the US market outperforming the European markets over the last five years? And Michael Maubouson, I know we all know Michael did a really good research report looking at the role of intangible investing. Intangible investing, you know, software model building, things like that. Intangible Investing in the US is almost 10 times the level of intangible investing in Europe. So when you think about, you know, intangible investing can lead to very dramatic moats, franchises and high returns on business if done correctly and successful. And we gravitated to, you know, these types of companies that are dependent upon on that actually are intangible investing companies where Europe is still very much a brick and mortar world.
- [35:25]
Bogomil Baranowski
And so European, European markets are still dominated heavily by banks and energy companies and things like that, where you're going to have a Telcom, where you have much lower multiples, lower growth rates, but there are still some interesting pockets of things where, you know, like don't disagree. Yeah, yeah, yeah. I always think of, yeah, in aggregate.
- [35:46]
Robert Hagstrom
It's just not the same horsepower that it is in us.
- [35:51]
Podcast Host/Moderator
You're touching on something profound on both ends. The smaller companies, when they get listed, they're actually much larger. I mean, Facebook went public when it was, I think, $50 billion market cap. They have a lot longer Runway as a private company. But at the top, these are different businesses. From what I'm hearing today, they're different businesses than 20 years ago. They don't need government help. They have very high profits, very high margins. They're just successful, huge businesses. But there's also this phenomenon of winner take all kind of thing where you have so much growth at the top, so much growth among those companies. As Robert said, that growth used to belong to much smaller companies, the Peter lynch kind of companies. A hotel chain that has only 100 locations but could have 1000 locations. Now all that growth is at the very top. I want to ask you about something that a friend of ours mentioned, Daniel Paris, who was a dividend investor. You might be familiar with his writing, but he wrote a piece this summer. He called it Dr. Frankenstein's benchmark, the S&P 500 and the Observer Paradox. You might have read it. But he said how the S and P was supposed to be a measurement tool, but it evolved into a dominant market participant that actually influences the market. Even the thing that Chris mentioned, if you're not in the S and P, you might be a totally forgotten stock. I think there's a very powerful thing there. And if you join the S and P, you get a whole different attention from the market participants. So the S and P is no longer just an observer, it became participant. Do you have a thought about it? I think it happens a lot with different measures we use in life where the measure disturbs the whole experience.
- [37:29]
Bogomil Baranowski
Yeah, I guess that started with the ETFs and the ability to suddenly market those indexes because for a while they were just, you know, they were just something you read the newspaper. SP's up, Dow's up.
- [37:40]
Podcast Host/Moderator
Yeah.
- [37:41]
Bogomil Baranowski
And. And it was. It took a while before they actually became viable investment vehicles that average people were pouring their 401ks in and things like that. And, and Vanguard had a big play in that. I mean, they're, you know, John Bogle and his message. And so, yeah, I don't know. I mean, I guess it's true. I guess it started out more as a measurement, but it's become more of an investment vehicle now. And. And for better or for worse, it is kind of the opportunity cost most people think of when they think about investing, which is why Active managers are often judged by beating the S and P or not.
- [38:13]
Robert Hagstrom
Well, you know, in the 1950s when Warren was managing money, the index was a Dow, as Chris rightly points out. That was Jack Bogle who said, you know, let's do 500 of these, not 30. But what happened is, I guess it became, Chris, no better than I maybe is that it came institutionalized in people's thinking that this is the more appropriate benchmark or comparison than just 30 names in the Dow. And so it came to Fed on itself and it became institutionalized. And now it's hard to imagine any large consultant as a US manager doesn't have an S&P 500 as the benchmark. Even clients, you know, used to be they talk about the Dow, now it's all about the s and P500.s and P500. It's just become ingrained in people's thinking which would, you know, really that kind of asks the question that the s and P500 committee, investment committee maybe has a larger responsibility here than maybe we, you know, are criticizing them for. It's like, you know, maybe you've got to get this right because things are getting a little squirrely. That doesn't mean that Nvidia is not a good investment or, you know. No, no, but just, you know, how it's constructed causes some distortions in people's think.
- [39:32]
Podcast Host/Moderator
I'm just thinking that I'm laughing to myself that it's no longer passive what we're talking about.
- [39:37]
Bogomil Baranowski
I mean, I'm thinking of like all the endowment money and just a lot of money is tied to the S&P 500 now. So in effect, it's kind of a big bet now on the, on the Mag 7. But.
- [39:49]
Robert Hagstrom
And the big number let's give, let's give credit where credit's due. The s and P500 for the last 20 years has beaten active managers.
- [39:59]
Bogomil Baranowski
That's why I say they've succeeded in creating an awesome wealth generating machine. You know, maybe you can criticize it as a method of measuring something, but as far as an investment option goes, it's been magnificent.
- [40:11]
Robert Hagstrom
So, you know, that asks the question, well, all right, so, you know, Bill used to give us this thing. He goes, what? You know what, what could be the reasons why the s and P500 beats all the other backed advantagers? Then we'd sit there and kind of twiddle our lips going, I don't know, I don't know, Bill. And he goes, well, guess what? The S&P 500 doesn't make any market calls. The S and P committee or S and P index doesn't make any interest rate calls or think about interest rates. It doesn't think about inflation. It doesn't change sector weighting. It doesn't do all these things that active managers are all trying to figure out. So he said, well, could it be that active management. It's not a question that it doesn't work, active management works. It's just a question that the way in which it's being practiced by most people doesn't work. So active management does work. It's just the strategies used by most active managers that doesn't work. And he said the s and P500 actually has got a pretty good portfolio strategy. Keep themselves out of trouble.
- [41:10]
Bogomil Baranowski
I think that's fair. I would also say that some institutional investors have different goals. So they don't particularly care whether they beat the S and P or not. Like I an advisor for an endowment and they're not really thinking about that. But they, you know, they want a certain amount of income off it and they don't want to have to. Even if you make a rational argument that you should be fully invested and they take a bit of your capital every year or whatever, they're not going to go for that. So they want certain amount of income and don't want to touch the principal. So that's a, you know, they have just different goals. They're not care about the sb so there's. And there's insurance money and there's other pockets in the institutional world that has to be managed a certain way. And they really probably should not compare themselves to the S and P because they are constraining themselves in different ways. But other than that. Yeah, agree.
- [41:53]
Chris Mayer
Well, operating inside of those constraints as somebody who talks to a lot of pension plans, endowments and other things too, private equity, private credit, like things that aren't volatile and promise to give you these things have really. The proliferation is just. Yeah, I'm pulling the pin on this hand. Do you want to play. Do you want to play hot potato with this live action grenade first? Robert, like what's.
- [42:19]
Bogomil Baranowski
Robert, take it away.
- [42:20]
Chris Mayer
What's up with.
- [42:23]
Robert Hagstrom
I'm already no pain. Yeah. On record that I'm highly skeptical of private equity in pretty much all forms going forward. I think we have to realize that what David Swensen accomplished at Yale in the 1990s was extraordinary. And he figured it out. And the illiquidity premium and the opportunity set was just gold. It was just gold. And he killed It. But like any, you know, any good idea, people imitate it to the point that you get to extremes, and all of a sudden it's not gold anymore. And the thing that I'm struggling with is, you know, I think the. If you look at just, let's just stay with equity and stay out of credit and real estate or whatever the case may be. But if you look at the private equity returns for the last, I'd say 10 years, but easily the last five years, it's been atrocious. It's horrible. I can put it just plainly. It is very bad. Right? And they would say, well, you know, it's the S&P 500 and the Nvidia and all that stuff. But. But the point is the economics. Let's go back to the economics. If you look at the economics of a private equity portfolio, it's nowhere near the economics of Nvidia. It's nowhere near the economics of Microsoft. Are the guys that are. Nvidia earns 100% return on capital. Show me one private business that earns 100% return on capital. Right? And so all of a sudden, private equity world. And Chris might like this. A woman from KKR was doing a show in London, and she was even saying, you know, this is getting out of. There are 19,000 individual private equity funds in the United States alone. And she said, you know what? There are only 15,000 McDonald restaurants. Well, that's good. And so I looked up funds. I said, all right, how many funds are there? Closed end funds, ETFs and mutual funds. They're only 13,000 mutual funds. So there are 19,000 private equity funds looking for returns today. Okay, That's a different world than the 1990s when there were probably a dozen, like, trying to do this. So the opportunity set is nowhere near what it was. Right. All right, so we have that going for us then. The second thing is Buffett says, you know, illiquidity. There's no illiquidity premiums left. But even if there was an illiquidity premium, you have one advantage by being in the public markets, one distinct advantage relative to private equity. You get an opportunity to buy really good businesses at 50 cents on the dollar. And you'll never get that in the private market. You know, the private market is so competitive, even Warren's talked about this, that I can't even compete in the private equity with Berkshire. I mean, the prices that they now compete for to close a deal make it such that I would never invest in it. So you're never going to get a big discount on your investment price in the private equity world. So I say, okay, I'm never going to get a big margin of safety. I don't have liquidity to make changes in my portfolio. And I've got some pretty mediocre returns as I look at them in aggregate. Why would anybody go there? I mean, why would. Why would you say, I want to sign up for that? Then I went to a presentation. I'll leave the company out of it. And here was, here was the opening line for the salesman trying to sell it to a retail group. As you know, it's moving into retail. And this was the opening line. How many of you are sick and tired of the volatility in the stock market? Yeah. How many of you sick and tired of the drawdowns? How many of your sick and proud of your clients calling you, busting you about the stock market? How would you like for that to go away? I can give you market rate of returns and I'll take your all the volatility away. That's all they're selling right now. That's it. That's. That's what they're selling is no volatility. As Cliff Asput says, it's nothing more than volatility washing. Okay, so that's the game. The other thing that you have, if you drill down to it, if you look at the mutual fund companies and sadly Vanguard's right in the middle of. I'm sure Jack Bogle has rolled five times over in the grave already, is that if you look at the earnings per share of BlackRock of Franklin Templeton, go all through them, the earnings per share is actually starting to decline, not only because active money's moving out, but the 40 ACT funds are moving to ETFs, which are lower fees. Right. And so their earnings economics are going there. So somebody had a brilliant idea. Well, how can we get new product with higher fees? And somebody said, you know that private equity stuff, it's a new product and has higher fees. Why don't we try that? And now everybody's in the game. I can't. Everybody has signed up, Chris. I don't know what we're going to do, but the entire public equity marketing business world is all in on private equity. And I think it's going to end badly. I mean, I just don't see how it's going to be an 80. 20. 20% will do. Well, 80% are going to really struggle in my mind. Tell me I'm wrong. No, I can't see it.
- [47:12]
Bogomil Baranowski
No. I think another aspect of private equity that I find interesting is that a lot of these funds, all these funds have some sort of end date. You know, it's not like they're just open ended, permanent vehicles that can own stuff forever. So yeah, you know, I'm thinking there's an industry I follow closely, like the insurance brokers, commercial insurance brokers. You know, there's a lot of private equity funds that have gobbled up small commercial insurance brokers over the last decade and now they're coming to the end of their life and they're worth, you know, two, three billion dollars and they need exit, they need exits.
- [47:43]
Robert Hagstrom
Yeah.
- [47:43]
Bogomil Baranowski
So yeah, I, that creates, that could, maybe that creates some opportunities for the companies we like. I don't know. But that's a problem too when you're an investor that you have this short, relatively short life where you got to get out of the thing.
- [47:58]
Robert Hagstrom
Yeah. Well, that's why they built all these continuation funds because they can't find anybody to buy it.
- [48:03]
Bogomil Baranowski
It's very popular now.
- [48:06]
Robert Hagstrom
Evidentiary point, if you can't sell what you own, it must not be worth that much because believe me, Wall Street's looking for good ideas around the world. And if you can't sell it and you've got to come up with more money to keep it private longer until you can find a way to make it more appetizing, it must mean that your pat hand that you own is not that attractive. Well, why would I want to be in something like that? It just doesn't make any sense to me other than they say it's a diversifier. I don't know, maybe it is or isn't, but illiquidity and having mediocre economic returns and not being able to buy them at a discount and heavy fees.
- [48:43]
Bogomil Baranowski
Heavy fees as well.
- [48:44]
Robert Hagstrom
The fees, God, I didn't even. The fees. Well, but that's the reason why, you know, all of them are embracing private equity because those fees will help their income. So you know that that's the, I mean if I'm proven wrong, I'll, I'll be the first to stand up and say I'm wrong. But as I read the tea leaves or the challenges, it's a pretty big challenge. And by the point, you've got sovereign wealth funds, endowments and family office saying I'm up to here with private equity, I can't take anymore, I took the gilts. And the next place you can go to sell money as the individual investor, the gig's up this is the last place this is. The gig is up. You know, if, if, if it was that good of a gig, I would guarantee you the endowments and the Sarman funds would be there. They'd be buying all they could get their hands on.
- [49:30]
Podcast Host/Moderator
How about we zoom out, take everything we talked about. And I'm thinking if we can't outperform The S&P 500, many of us cannot. Or maybe the investors listening cannot. Maybe there's another way to change our mindset about it. So, you know, we're chasing this momentum driven index. Maybe there's a lot of ego and FOMO in it. Maybe if we look at personal goals, something that I think Chris hinted on, maybe some risk adjusted returns, like some of the volatility is not for us, doesn't mean you have to go to private equity. But maybe we should redefine what we consider good, sustainable, respectful, sufficient performance from an individual perspective. Or even if you're running somebody else's money, not trying to chase the s and P500. Let it be.
- [50:15]
Bogomil Baranowski
Yeah, I think you can't start with your goal being to beat the S, P 500. That's, that, that, that would be the, the end result of a very good process is that, yeah, maybe over, you know, over a long period of time you could look back and say beat the index anyway, but you can't start off with that again. It's kind of like, I don't know, like if sports analogy you, you, you start, you can't start necessarily just saying you want to beat, you know, everyone else or something. You have to try to create the team that's going to score the most runs, give up the fewest, that kind of thing and you start building it that way. I think you start your portfolio the same way. You, you have some circle of competence, some businesses you're capable of, of analyzing and understanding and, and so you got.
- [50:57]
Robert Hagstrom
To work with that.
- [50:58]
Bogomil Baranowski
You got your own temperament issues and I mean there's certain people are not going to be able to own, you know, some of these stocks are maybe too volatile, they don't understand them. And so that, that's a limiting factor as well. But certainly. Okay, I, I totally agree with what you just said, Bogamil. I don't know how to frame it. I mean, you did, you said it, said it very nicely there, personal goals and, but I don't know how to put any numbers around that specifically. But it does have to, it does have to be suited to your personal temperament and skill set at some level.
- [51:31]
Podcast Host/Moderator
I think that the challenge is the time frame. Because a lot of us don't want to fall behind the s and P500 over a quarter or two, but then we want to outperform it over a decade. We're talking about a hundred year thinking on this podcast, right? And I think that you can't have it both ways. And I think that's Robert's point from a lot of things that he mentioned. You have to allow that you're going to fall behind. Buffett fell behind, we all fall behind so that we can gain a lot of ground later on. And I think a lot of managers, and I think back to Robert's point about active managers, they want to hug the benchmarks so they don't fall behind, so they don't get fired from the job they have. But then they hope that doing that they can still outperform this benchmark.
- [52:13]
Robert Hagstrom
It doesn't work.
- [52:13]
Podcast Host/Moderator
It doesn't work.
- [52:15]
Robert Hagstrom
I think Warren was saying at best that he doesn't rely on the stock market to tell him whether he's right or wrong. He relies on economic returns of his businesses. And we follow that quote too. I mean, in our annual report quarterlies, we have to report price, obviously, as you say, requires it. But we, we, we, we show them what the cash, what the revenue growth is, what the free cash flow growth is, what the return on invested capital is. We show it changing from year to year. And our point is that these are above average economic returns and we haven't overpaid for them. You know, we're gonna, we're gonna, you know, we're gonna ride along with that. And, and when we looked at our portfolio, now 11 years old, beaten our index, we're fine. 1, 3, 5, 7, 10, 11. Beat the frequency though, by which we outperform. So we looked at, you know, our monthly returns, our quarterly returns and our annual return, we only outperform the market on a core on a monthly basis 50% of the time. We only outperform the market on a quarterly basis, 60% of the time, and then on an annual basis about almost 70% of the time. So it's a frequency versus magnitude, you know, issue. It's not how many times you're right, less how many times you're wrong. It's how much money you make when you're right, less how many, how much money you give back when you're wrong. And if you're a value based investor, hopefully as you make money, you're doing well and you just don't get back as much when the market goes against you or if you're wrong with the market, safe. So then I looked at Henrik Besseminder. Henry Besseminder is a great guy and he, he's killing it, you know, with his performance. And I think he said, what, 2.4% of the stocks, 1500 stocks worldwide over the last 30 years were responsible for all the market value growth. Yes, it's a great argument, right. And so he then in his last, it was Financial Analyst journal, he had 50 stocks that he thought were the, were the best global performers that had the most impact on capital appreciation, market appreciation for the last 20 years. 20 years. And in that 50 stocks, 35 of them were US. So we took the 35 US stocks and we just did for the last 10 years, 2015 through 2024, and we said, oh, of these 35, 17 outperformed the market, 17 underperformed the market. One was QI, but because it split up in 2024, we didn't include it. So we said, okay, let's look at the 17 outperformers. I mean, these are the best of the best of the best, right? The hit rate was 60% on a monthly basis. They only outperform the market 50 to 60% of the time, quarterly basis. So then you say, you now know, had you put a portfolio together and said this is going to be the best winning portfolio for the next 10 years, you'd have been wrong about half the time on a month basis. So that, there you. So now we're back to loss aversion, because people price my epic loss aversion. So the question is, what do we do? And I think, you know, my, my thing is that you've got to give them something else to look at. If the only shiny object they can see is price an index, that's what they're going to focus on. And so what we're trying to do, and it's very hard because people are ingrained with their viewpoint, is we say, look, if our economics are okay and our economics are progressing at a satisfactory rate, okay, we're going to be fine. And by the way, I want to tell you, and I tell people when they sign up, we're only going to be good at 50 to 60% of the time, and the other times we're going to look like a goat. I mean, you wrote a really good book, but, you know, anything to know about portfolio management? You stink. You know, it's not me. We own what we own. Our turnover ratio is less than 15% and our economics are pretty good, but it's the market sloshing back and forth that causes all these problems. And so my solution would be we've got to spend a lot more time talking about the economics, what we own and its progress and getting people to focus on that and show them the price. But say, you know, every once in a while these things, you know, get out of whack, but we're going to be fine. And, and we've gotten some traction on that. I would tell you, our best, best clients, our best clients have always been business owners. And yeah, because I say, I say, you know, and I said, well, tell me about your business. And I said, I said, what's the most important thing for you? And they go, cash, I need cash. I go, that's pretty good. That's kind of what I'm looking for too. And he goes, and what's that? Well, we want to grow it. I want to grow it too. And he goes, and they do get capital because if they borrowed money from the bank or in front of, you know, they have a cost of capital.
- [56:47]
Podcast Host/Moderator
Yeah.
- [56:48]
Robert Hagstrom
And I said, well, everything that you're doing, that's the same thing that I'm doing here. And they went, oh really? That's what you do? And I go, yeah, that's what we do. So the business owners get it. The attorneys, the dentists, the, everybody else had no clue. They only see the S&P 500. Focusing on economic returns makes a lot of sense.
- [57:06]
Podcast Host/Moderator
That's okay.
- [57:07]
Chris Mayer
All those guys are just going to sell their family owned businesses to private equity, further contributing to the problem. I think we've got a lot of great hundred year thinking wisdom that's coming out of this one. The Hallmark card looks something like you can't outperform the S&P 500, but you can perform pretty well with your self and your personality if you're willing to know it. I'll, we'll send that, I'll send that to them, see if we can get it on a card. Robert, people want to find you on the Internet these days, read some of your writing or should they look you up?
- [57:35]
Robert Hagstrom
Well, you know, we're, you know, I don't even know if There's a Robert Haxer.com but you know, books are on Amazon. We're at, I'm CIO at Equity Compass. You can go to Equity Compass, all1word.com and see the portfolio. The portfolio is transparent. You can see anything that you want. And we do have a list of our literature there. Quarterly commentaries and things like that. So everybody's welcome to take a peek. And they know how to get in touch with us via that website.
- [58:03]
Chris Mayer
Go take a peek. Chris, same question for you. They want to bug you on the Internet. Where are they from?
- [58:07]
Bogomil Baranowski
Yeah, I mean very similar. Same thing. My books are on Amazon. You can find them in there. And then probably the easiest way is to go to Woodlock House, Google it comes right up and you can reach me through there. My books are there, blog is there and I don't write for it very much anymore. But there's a lot of material there still.
- [58:24]
Chris Mayer
Go mine the material. Send your AI to do it. Boost those early Bogomil what do you think? Should we do this again in about a month? You have a good time?
- [58:32]
Podcast Host/Moderator
100% I loved it.
- [58:34]
Chris Mayer
100%. That's what you heard it here first, even from Bogamil. You're watching Excess Returns. Like subscribe.
- [58:41]
Robert Hagstrom
Leave a comment.
- [58:42]
Chris Mayer
All the things they're all below. Thanks for joining us guys.
- [58:46]
Matt Ziegler
Thank you for tuning in to this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the Excess returns network@excessreturnspod.com. if you have any feedback or questions, you can contact us@xsreturnspodmail.com no information on.
- [59:05]
Chris Mayer
This podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the firms of the hosts or their clients.