← Money And Wealth With John Hope Bryant
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John Hope Bryant
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- [05:35]
Alexander Rupert
Yeah, no, I do. It was part of a panel for the Mike Milken Hampton Dialogues with the title Finance as a force for Good. First of all, thanks for having me and great to be with you.
- [05:48]
John Hope Bryant
Well, I'm honored to have you with me. I'm honored to have met you through Michael Milken and I love the way you lead and I don't Just even I don't just love your cool house is exactly my style. Or your very cool wife who is got a wonderful soul and spirit. I loved your energy and soul and spirit. But I really loved our conversation. Not just because you were normal and being in a world of finance and high finance. Some people are just arrogant, they're obnoxious, they're self absorbed, they're in a different world because I think they're uncomfortable in their own skin. That's a whole different podcast on spirituality we're not going to do today. But somehow you became reasonably comfortable in your own skin. Maybe we'll talk about that as it relates to sort of unpacking your background. But you and I had two separate conversations. One was briefly at your house and another one was at a neighbor of yours home. And you laid some philosophy about the world down to me. Do you remember that conversation?
- [06:54]
Alexander Rupert
It was tied to the, to the subject matter of the panel session that we had at my house. In terms of education to the broader public out there in terms of basic finance and basic running your household, but more importantly, saving for the future and how important that is and how that actually fed us right into investment management on Wall street and certainly the way at Atlantic Investment and we go about picking our stocks. It's really at the household level of simplicity. People forget that when they buy a car or a dishwasher or a home. They do a ton of research. Actually, I do too. Why would you buy a dishwasher for $80,000 when you can buy it for $400? This is, I'm saying this crazy number because when people buy stocks, they don't do the homework and they just buy it because somebody told them it's a good idea or because it's going up and they heard some key phrase like artificial intelligence. And therefore they should be involved and they should just buy it. And they just fail to do any analysis. But yet we all are value investors. When you're buying a car or dishwasher, you have a sense of what it should cost. And if you don't, you go on the website, you go to a dealer or retailer and you figure out what do things go for. You take a look at them. In the end, you comparison shop, you become educated. And you can get educated in one minute or 10 minutes or an hour, depending on how much time you want to spend on it. And then you make a decision if you need one of these things, based on the quality of the product and the price you're getting. This is the same way you should approach selecting stocks if this is what you want to do with some of your money. If you want to be in the stock market, you can do it through an etf, which is an exchange traded fund. Simple way of saying this is a daily actively traded vehicle that can capture the index or a sector that you're interested in. So you don't have to stock pick, you just kind of get broad exposure, an etf, or if you want to pick an individual stock, then you need to roll up your sleeves a little bit and take a look at what is the value and do a little more analysis. But that might be too much time and beyond the reach of a lot of people and the interest. So then an ETF kind of makes sense to get broad exposure to the market. But I do recall us talking about this area where you bring it down to, you know, get basically educated and do your homework. When you buy stuff you need for the home, for your life, and then once you have some savings, it certainly behooves you to put it in equities, in my view. Because if you have a long term view, the return on equities has been between 8 and 10% on the indexes over long periods of time with volatility. But that far exceeds the return you've been able to get on cash or on fixed income investments.
- [10:11]
John Hope Bryant
So I want to back up and as we go through this and you hit a little bit about the magic of what I want to talk about, we're going to explain as we go, things that you never have to explain. We're going to explain what volatility means. We're going to explain what an index mean. I mean, we shouldn't assume there's no home economics class anymore. Alex, in school there are people who are highly sophisticated, advanced degrees, PhDs, master's degrees, white and black, Latino women, high class, who have not a clue what we're talking about here because no one taught them and they fake it. They don't admit that they don't understand how money works. A quarter of Those who make $250,000 a year are living paycheck to paycheck. Half of those making $100,000 a year are living paycheck to paycheck. Of course, 70% of America is living paycheck to paycheck. But I'm getting ahead of myself. I want to come back to our conversation because the it, what you just said just underscores that you're a decent human being. You're concerned about the least of these God's children. You understand that even though, you know, we were in the Hamptons where, you know, it was a very privileged, we all admit that's a very privileged environment. If you own a home there, you've been blessed with the American dream and the fact that you can live in that world. So understand another world and have compassion for it and empathy for it says a lot about you and your character and who you are. That's the reason that you're on my podcast. I think you're a great, a cool guy. It's not a smart one. What is what you said to me when we talked. You explained to me in mathematical, numerical, statistical terms your business philosophy, your investment philosophy. Do you remember that conversation?
- [11:56]
Alexander Rupert
Well, I'll try to recall the things we talked about, but maybe in a nutshell, I mean, you already gave that in your introduction. I came from the Netherlands, which is a very nice small country in Europe to grow up, but I wanted to definitely move out from there. This is in the late 70s when the country was quite socialist and tax rates were 60, 70% and a lot of young folks wanted to get out there, out of there. My hope was to come to the United States, which I managed to do by applying to an MBA program. Applied to a variety of them, got lucky to get into a really good one. But I came across, remember one way flight on a cheap airline finair with 2000 bucks in my pocket. Ended up in Binghamton, New York on a snowy January 5th in 1981 and went to the car dealership and bought an old mill. Starfire 1976 was my pride and joy and that gave me wheels. And I had a job which paid, you know, okay, but just paid the bills for a cheap apartment. And that's how I got started with a, with a nice job with a company that was an industrial machinery maker that helped automate the manufacturing of what made computers and TV stick printed circuit boards. So anyway, a nice couple of years there, went on to business school and from there I was lucky to find employee in New York in the field that I wanted, which is in finance. And learned a bunch of things during the first four years in that job that made me come up with an idea to start Atlantic at a pretty early age. I was 28 at the time.
- [13:50]
John Hope Bryant
Wow.
- [13:51]
Alexander Rupert
I had a good salary in those years after business school, but nothing outrageous. Certainly didn't have any start capital for my business, didn't have any investment capital from either family or friends. All I had was experience. Six years at this point, two years before business School four years after I learned a few things about analyzing investments and companies in those years and decide to take that toolbox, if you will, or the lessons I learned. Formulate specific investment strategy, which we still do to this day, which is a bottom up value analysis, kind of what I described earlier with your dishwasher in your car analysis. I don't know any other way to getting comfortable with an investment other than sticking to a known area. I don't go into areas you don't understand. In my case, all of technology. I don't understand it. I mean, I like to use technology products like we all do. But to invest in a company that sells technology, whether it's software or chips or high tech products, I'm uncomfortable with it because I don't know how it will change and how that will affect the business. So I want to invest in companies that are very analyzable and understandable, that make products that we all use and that we see and can touch and have been around for a long time. And then you pick companies that are leaders in those areas and then you wait until they're cheap enough. And so I decided to pick a strategy that is very comfortable for me in terms of competence and experience I've had. And also to avoid risk areas, not to go into areas like biotech and high tech, which for your audience. There's a lot of money to be made in these areas. I'm just personally uncomfortable with it. And I think if you invest in these areas you have to take that into account. And quite often it's better to go with very large companies that we all know like Apple and Microsoft, which are very, very big names within the universe. But back to the approach that I started with. It was basically middle sized industrial products and services companies where we could gain an edge by doing our investigation, our study, our review of these companies, meeting with managements and then put together a selection of 10 or 15 names that we liked for our clients. And that's how Atlantic started with that idea. And the idea was that through our stock picking and our focus, we could outperform, I. E. Do better than the index we need to, because if we don't, we have no right to exist. You can simply buy. My clients can buy, of course, the index back to the exchange traded fund that anybody who's listening to this call, if you have some savings, you can buy an etf, which is a way to participate in the US Stock market.
- [16:52]
John Hope Bryant
What's an etf?
- [16:54]
Alexander Rupert
An exchange traded fund. So it's like a stock it's available, it's liquid. It has a symbol like spy. Spy is the name of the spiders. They call them is the S&P 500, which is the largest stock index that most pension funds use and many other players use just to get access and exposure to the US Stock market.
- [17:21]
John Hope Bryant
So let's go back here because I've started, I've introduced you in a very luminous terms, which are appropriate. You've gone to the best schools, all that kind of stuff, and came from the Netherlands and the Nordic region. And people might assume that you again had a trust fund, you had inherited money. And what I heard, as you came here on a cheap ticket, you had a few thousand dollars and you went and got some. The most important thing you got was an education. Is that right so far?
- [17:53]
Alexander Rupert
Yep.
- [17:54]
John Hope Bryant
So you did not get a hookup, as we say in my neighborhood. You didn't have a trust fund, you didn't have daddy's money or grandpa's. It was. It was just hustle. Correct. Number one. All right, you work for somebody else if you got your education to get some experience, and then you started your own Investment House at 28 years old, is that right?
- [18:15]
Alexander Rupert
Correct.
- [18:16]
John Hope Bryant
Okay. And that investment house, without getting too much into your business, is now several hundred million dollars under management, correct?
- [18:28]
Alexander Rupert
Correct.
- [18:30]
John Hope Bryant
So you really built yourself literally up from nothing to become an American success story. Let's just say again, without getting in his business, he has a half a billion dollars under management in a company that he controls. No complicated management structure. He's the chief investment officer and he's been running it since he was 28 years old. I get that. Right, Correct. All right. And it's a very simple business plan, simple sense that you're very focused. So as I understand your investment philosophy, you've been known as your concentrated approach, your value driven investment approach. Talk a little bit about how you developed this strategy and how it's evolved over years. And at some point during this interview, you're going to go start, as we say in music, you're going to start rapping, riffing, and you're going to naturally go into that thing. Say the thing you told me when I met you that blew me away, which was literally just a mathematical statistical outline of how you go about, really a science in investing that I thought was brilliant. But what is your approach and how did you develop and how has it evolved over time?
- [19:42]
Alexander Rupert
Well, the approach is to first define your investment universe. So I've decided to be just in public equity. There's many ways to invest People can invest in real estate, people can invest in small or bigger companies if they have an opportunity. That's called private investing. So I'm only dealing with public investments. And then within public investments I want reasonable liquidity. So I don't go for very small companies. But I also want access to management in order to talk to them about the business and to give suggestions where it makes sense. And so we focus in the 2 billion at the minimum to $20 billion sized companies. These are very large numbers, of course, but within the public equity market, considered small to mid cap, large gap is much larger companies, as you know, Apple, Microsoft, they're north of $3 trillion market value. So we don't deal with these companies at all. Also, we like to focus on companies where we have an understanding of the business and where the risk factors of the business are reduced. And so we avoid, as I mentioned before, high tech and biotech because of the risk of what they call difficult word, technological obsolescence. Risk meaning that new products can come out that make the old products obsolete. We've seen so many technology changes, including everybody in the audience I'm sure will be very familiar with all the technological advancements we're all enjoying. But those things have tremendous impact on the profitability of a technology product that is being replaced or being made obsolete by the next invention. So we stay away from high tech and biotech for those reasons that just us, many other people love to invest in those areas, not Atlantic. And then we stay away from areas where we find transparency to be an issue. And with all due respect to banks, there are many, many great banks out there you can also invest in. But we stay away from them because we find that the transparency of a bank is difficult to assess. And so we don't invest in the area. So now you have an idea of these areas. So 2 to 20 billion dollars in size, enough liquidity, ability to access management with meetings and stay away from certain risk areas. And within that, we want companies with good balance sheets. A balance sheet is at home. You have your assets, you have some cash, you have some things you bought, you have a house, hopefully, and then you have a mortgage that's a liability. So you look at the balance sheet. Companies have the same, if you will, with cash and property and receivables and payables, etc. And so we want good balance sheets. You can evaluate that. It doesn't take a degree to figure out what's a good and a bad balance sheet. It's a quick glance at what's Publicly available to see if a company has affordable amount of debt, not too much debt. And so we make sure that our companies have good balance sheets and that they've always been profitable. One way to make sure of that is you look at a 10 year history of a company. Again, all of this is easily available online and you can see if they ever lost money. Simple idea is if you take a company that builds ships or does coal mining or as a pure chemical commodity company, they are very cyclical. Cyclical means that if the economy goes down, their revenues go down a lot and they'll probably lose money. And so we really are avoiding deep cyclical companies because we don't want a company that ever loses money even during a financial crash like 08 or during the COVID disaster of the beginning of 2020. And so we look for solid profitable companies in a familiar area that we can analyze of a size that we can get our hands around it and meet with management to do further due diligence. And then we want to wait very much like patient folks looking for a certain target. We wait until the share price falls down. In our lab, we're basically tracking a whole bunch of companies. It's not that many. I mean, it's obviously in our field with our business, we have computer models, we have screens. Don't expect anybody to do that. You can be much more focused than we are even. But then you look for companies that you track for a while that you watch the share price and what they say and you look for them to fall in your lap, meaning they come to a price level, valuation level that is very, very attractive. That is typically the bottom where they trade. And now we're talking about valuation multiples. And I don't want to get too far into it, but ideally we buy something at 10 times earnings. Okay, net earnings. That's a good guide for our kind of entry level purchase for a company. 10 times net earnings or 1 times revenues is about the area in which we are interested.
- [25:00]
John Hope Bryant
So let me break this down a little bit. So if the company had $1,000 of net earnings net, meaning minus the expenses and all of the overages that's tied to that particular enterprise, so net the, the money that flows to the shareholders and the management team for the company, that is $1,000, you would buy it in that case for as much as $10,000, is that right?
- [25:29]
Alexander Rupert
That is correct.
- [25:30]
John Hope Bryant
10 times net, or in that particular case that business might have $10,000 in revenue. So one times revenue, right?
- [25:41]
Alexander Rupert
Correct.
- [25:42]
John Hope Bryant
And that's Part of your due diligence. For those who are listening, due diligence means that he's basically going to do his research. They're going to unpack this company. Going to, they're going to, they're going to peel the layers back. Transparency means he wants to be able to see through to the other side. He doesn't like Wall street, doesn't like fog, doesn't like a lot of noise. They want to be able to be quiet and elegant and simple and you can see through. You want glasses that are all fogged up. You know, it's not good to drive on a foggy day. Not fast. So you want to slow it down so you have clear view transparency to what you're looking at. And he talks about this stuff, by the way. This is all, he's being very basic, he's breaking this stuff down. But they talk about this stuff in such a language on Wall Street. People are, they're, people are intimidated to read the Wall Street Journal, for God's sakes, because it's all these terms that no one unpacks. So I wanted to slow down for a minute. Now he mentioned he waited for things to fall in his lap. And I'm not going to mention this company's name, although listeners can probably figure this out. But today, a company that I believe is a good company, it's not a company he would track as too big market cap wise. They had a health situation that I think is episodic. In other words, there was something that dealt with the public and they had an episode of a little bit of an outbreak and the stock price dipped as a result of that. My sense was this was not the company's fault, that this was just something going to happen to any company. And my sense was it was going to happen once and it was done one and done. It was just one of these unfortunate situations. A delivery truck or whatever brought something and the stock dived. I bought it. So that fell in my lap. It's not the company. There's nothing wrong with the company. The company didn't do anything wrong. It's otherwise a great company, great brand. But I was able to get a 15% discount, I believe it was because I bought it today. And that stock at some point will recover because the cash flows, the profit, the brand, the company itself is very strong. So I wanted to just sort of give people a bit of summary wrap of what some of what you just of what you just said. And one thing I think people will find fascinating, Alex, is that you Say you talk to management. Now, when people listen to this, or the average American or the average citizen, wherever they're watching this in the world, they're thinking about going to the manager at the retail store or the grocery store, and they're hard. They can't get by the retail clerk. They're trying to. They're trying to get to the manager or supervisor. They have a conversation, that person is blocking them. We're talking. When you're talking about management, they might find it fascinating to hear that you literally pick up the phone and call the chief executive officer, chief financial officer, maybe a board member or two of the whole enterprise, and you're able to get these people on the phone because they want your investment dollars, is that right?
- [28:35]
Alexander Rupert
Correct. But we are very respectful of other people's time. So unless we are seriously interested to be a large investor in that company, we will first go, as a known institutional investor in the market, to the investor relation person, and I'll have my analyst talk to the investor relation person once we get up to a certain level of comfort and conviction, to our due diligence. And back to your unpacking of that word, due diligence is everybody on this podcast is doing due diligence just a fancy Wall street word for doing your homework? You know, checking things out. Right? You all do that. Looking at your purchase of anything you're doing. You, you check things out, compare prices on the shelves or whatever you're doing. That's due diligence. Going to the store, kicking the tires. But anyway, we get these conversations because we've been in business for a long time, we're respectful, we go first to the investor relations side. And once we are in a position to make this a large investment for us, we will request for a meeting first a call, then a meeting with the CFO. And yes, we meet with CEOs as well. But again, we don't want to do that unless we are a sizable investor potentially. And also that's one of the reasons we don't want to go above a certain size, which is in our case, 20 billion. I'm not going to call up Tim Cook from Apple. I have no chance to ever get a meeting with him, frankly, because it's a huge company and we're never going to be any size investor in Apple. So we want to stay with these companies where we have a chance to meet with top management for a normal retail investor. For anybody on the podcast, you're not going to get these conversations with a CEO or a cfo. Of a public company, but you don't need to. You can do a lot of your homework, a lot of your due diligence by yourself, with your friends. Maybe you make a little investment group and educate yourself and bring in occasionally a podcast like this or a friend who is in the business to have a chat, to have an hour long conversation about stocks or the investment world in general. And so that, that I would suggest. But you can do a lot on your own. Looking online, typing in the name of a company you're interested in or the one that you mentioned, which a lot of people will know if you would mention it. I guess we're not getting into it. That's a perfect example. We all know this company, it's a great company and something unfortunate happened, they'll iron it out. And I'm very convinced that this particular air pocket you want to call that, where the stock falls like this, will be corrected over time if it is indeed a one off situation, which I think you're right in your assessment. But that's the kind of thing where everybody in this podcast can pick a number of companies, where they are customers in their daily life, where they know the company, they're interested in the company. Maybe it's five or ten that you track a little bit and you'll find like yesterday, like, wow, if this is one of them, look at that 15% discount. Just like somebody on the corner saying, this dishwasher you've been looking at for half a year suddenly having a 20% off sale, right? You rush over, you buy it. Right?
- [31:49]
John Hope Bryant
Right.
- [31:49]
Alexander Rupert
Same with stocks, no difference.
- [31:51]
John Hope Bryant
That's right. And he mentioned another phrase, folks. He mentioned conviction that what he, what that translates is unless I know I'm really serious. And in other words, I've been dating you. I met you on a dating app. We were dating. You're cute, you know, you're fine. And, and I, we had a good time. But I'm not sure I want to marry you. But if ever I, if I propose to you, if I, if I give you a wedding ring, an engagement ring and we set a date, well, I've got conviction and yes, I may not get to the. Maybe something might happen. 2% of the time you don't get to through the ceremony because something, I don't know, something weird happens. But most times when you get to that point and you got an engagement ring and you got a date, there's a lot of conviction there. You told the family, everybody's all invested in this thing, you have a comfort. So when he's comfortable, when he's got that level of conviction, then he might go beyond investor relations person. Now I'm gonna tell you each a little bit of a secret here. And he wouldn't even. Alex is so sophisticated in the way he operates. He wouldn't think about this, but I'm sure you would agree with it. If you want to have some fun with your kids at Christmas about two months, two to two months before Christmas, go and try and find. Buy one share of stock and get one. Get one of these companies that give you certificates and they'll, they'll frame it for you and send it to you. The companies that do that, they don't. These companies don't, don't, don't do physical share certificates anymore, most of them. But you can get a company, they send you a certificate. I have one. And put it on the wall. Give your kid a share of stock for Christmas. Anyway, the point of that is once you own one share stock of any publicly traded company. When he talk about public equities, he meant publicly traded company. When you have one share of stock, you have the rights to all their financials. Hello. So you get to, you get to look into their. Under their hood of any company that's publicly traded with only one share of stock. Now, the investor relations. If you want to. I shouldn't tell you this, but I don't want anybody writing letters to boards of members and board directors. You get upset with some company, you have a real serious issue now much about suing them. You just want them to know that they could do better. And you can't find the board of directors anywhere. You can't find the management level either. It's a big retail company. Just go down in the website to investor relations is investor is something right? When you go there and you open that up, my God, it's like opening the hood of a Ferrari. Everything's in there, including the board and their most recent financial report. So I just wanted to say he goes and deals with the investor relations department out of respect. And he only goes one step further if he's got conviction. Did I get that right, Alex?
- [34:32]
Alexander Rupert
It's 100% correct. And again it goes back to what it's in your personal life. We went to the dishwasher example, but you went to the girlfriend, engagement, wife example. One needs to in any development in life, develop conviction that the decision you're going to make is the right one. And there's no shortcut to doing your homework. And it's just time and effort and depending on how big the decision or how big the purchase is, if it's something material, the more you need to roll up your sleeves. You have a T shirt on, you just leave it the way it is. But you get busy and you talk to people and you walk around blocks and you go to stores or in the case of a personal situation, you talk to more people, you talk, spend more time together, you talk to their friends, meet the family, etc. Etc. All the obvious stuff.
- [35:37]
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- [36:57]
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The holidays are officially here at the Home Depot, which means it's time to deck the halls and your home with festive cheer. If you're on the hunt for the perfect tree, we've got you covered. Explore our huge assortment of trees in all shapes, sizes and styles designed to fit any holiday vibe and every holiday budget. Like the Jackson Noble Fir, it's not only super easy to assemble, but it also comes Pre lit with 1200 color changing bulbs and multiple lighting functions. Or maybe the flocked starry light Frasier fir is more your style. With over 1900 pre lit memory wire branches that hold their shape, this tree's ready to shine right out of the box. Whether it's trees, wreaths or twinkling lights, we've got everything you need to make your home holiday ready. So shop now@home depot.com and enjoy fast and free delivery on select holiday decor subject to availability. See home depot.comdelivery for details.
- [37:58]
Amazon Advertiser
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- [38:27]
Alexander Rupert
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- [39:23]
John Hope Bryant
When I first started investing, I would just buy what I liked. You know, I like Walmart, I bought Walmart. I like whatever the company was, you know, whatever I was wearing, whatever I was using. I looked around my household like, what am I using? What am I wearing? What do I trust? And you know, Apple's an easy one. We already talked about Tim Cook. I buy Apple stock, whatever it is, If I liked it, my friends like it and we were comfortable with it. Probably a good, pretty good retail investment. And by the way, anybody listening to this, if you have a 401k plan, an investment account, if you work for somebody and they're matching your 401k, get as much of that as you can because that's free money, right? As, as Jay, as Jay Z would say, I'm gonna give you a million dollars worth of, worth of, worth of advice for 9.99. This is no. 99 because you're not paying a dime for it. But if, if your employer is matching your 411k, that is free money. Now, before we get on to, I'm going to run through the other Questions pretty quickly because I, because I want to make sure you have a chance to answer each one of them. But on this investment philosophy, which I think is so important, do you have a numerical, statistical, numeric, Is there a model that you use for your investment, something you wanted to share?
- [40:41]
Alexander Rupert
We use first to find the companies. We use pretty sophisticated screens that are available. You know, Bloomberg is a well known terminal we use for screening. But having done this for so long, we pretty much know all the targets. We have wake up calls literally on prices and valuation levels that bring them to our attention once they come to our.
- [41:04]
John Hope Bryant
What's the wake up call?
- [41:04]
Alexander Rupert
I'm sorry, Wake up calls. Let's say take a stock of a company that you just talked about without the name but that just fell down. Let's say the Stock was at 100 bucks, went up to 110, you're interested, but you said, yeah, I'm really interested at 80 bucks. And so you put a price limit in your computer. You can just do this actually at home fairly quickly with various financial websites and you can put a, like a wake up call. Let me know when the stock reaches 80. So you don't have to watch the news all the time. You just look at your computer and I say, look at this. It's like putting a fishing line out and a little bell went off. I think there's a hook there. Let's start yanking on that line and see what's on the other end of it. So that's it. So you do the alerts are important. And then once we are alerted to the situation, we will roll up our sleeves, the good old homework and due diligence we talked about. And yes, we have financial models. So now we have taken and downloaded all the financials that you can get from the company website, from the financials in Excel spreadsheets. And now it gets sophisticated. We do modeling, we look on, we make estimates as to where the business is likely to go. These estimates are determined based on our conversations with the management, with other people that know the company, with competitors, and then we come up with predictions and based on the predictions and based on where the share price is, we have very set discipline as to what valuation level we're willing to buy. This back to the example used earlier. Let's make it a restaurant. Everybody can relate to a restaurant. Let's say in a neighborhood, a restaurant that you know around the corner becomes available for sale. Let's say they do $1 million in revenues a year and they make $100,000 in profit, right? And they say it's available. And you know, maybe you don't have the money, but maybe a group of you are interested in buying into it because it's such a great place. You all go there anyway and maybe you can run it better and say, okay, how much does the seller, the restaurant owner want for this? Let's say he says $20 million. You got to be out of your mind. That's 20 times revenues, that is 200 times earnings. It's crazy. So to go away.
- [43:29]
John Hope Bryant
So, so this is a great example. Everybody listen, now listen. He just gave you, by the way, everybody's in the private equity business. If you're investing in, in your cousin's Nail Salon for 500, that's private equity. Private equity, right. So he's just doing it at a much sophisticated, much higher level. So if, if somebody's coming to you and they want to sell you a business or invest in a business, he just gave you a formula and he told you what's ridiculous and what's crazy when it falls outside of that box. He told you no more than 10 times net. Is it net income or net. I want to make sure it's your.
- [44:04]
Alexander Rupert
10 times net income and maybe one times revenue is a good measure for a pretty stable, nice business. We're not talking about a high growth business. We're talking about say a restaurant business that is good, solid, has been around. And if they offer you that for sale for like a million dollars, that's reasonable. Now we can talk about it. They say $20 million, it's a joke. $5 million is a joke. The funny thing is in the stock market, people are buying things that are based on what their friends told them at a barbecue or what they've heard on TV as something great about technology or artificial intelligence. And they just buy it. I mean, to put it in perspective, the greatest company everybody talks about these days is Nvidia, which makes the plumbing for AI, the chips that everybody needs. That Microsoft, Apple, Amazon, Google, these guys need it for their AI, artificial intelligence. So Nvidia is trading at three and a half trillion dollars, which is about 25 times revenues. Now that's ridiculously expensive. I wouldn't touch it. But of course it's done very well and it continues to go up because more and more people want to buy it and they do perform very, very well. But it is extremely expensive. And nothing can go wrong in terms of the growth slowing down or anything else. So that is to me, speculative. And yet it's one of the largest market caps in the world if in fact it's number two right now behind Apple. And so I challenge or I ask everybody, do your homework when it comes to stock market investing as well as you do your homework. When you buy a house, a car or a dishwasher or if you're offered an opportunity to invest in a nail salon or a restaurant around the corner, compare it the purchase price or whatever they're asking or whatever the stock is trading at against the total revenues and against the earnings that they have and then assess if this makes any sense to you.
- [46:12]
John Hope Bryant
So one thing that I'm going to push back on Alex and he won't mind it because he's. There's no self esteem problem. What is Alice already knows one of the reasons why people are goo goo gaga about about Nvidia and why it's. It doesn't make any sense on, on the numbers is at the moment they're perceived to be the primary backbone. He already said it for artificial intelligence which is the new, the new, the new du jour sexy investment and opportunity for the next five years. And it's not 20 of them, it's not a hundred of them. It's not a restaurant around the corner. It's not a nail salon around the corner. There's, there's not even an attorney. There's hundreds of attorneys, thousands, hundreds of thousands of attorneys. Law firms is one of these. So you can decide whether you want to invest in it or not. But that's why there's a lot of hype around this particular investment, which is why he calls it speculative, which is correct. Bitcoin could be the bitcoin. Sorry cryptocurrency could be the same kind of conversation. You can get lucky with a bitcoin but you might get unlucky with the thousands of other cryptocurrencies which are completely speculative. So just again comes back to do your homework. I've explained about Alex being this very successful guy and he's got this beautiful home I was in. He doesn't spend time in most of those rooms of his house as I don't either. We spend time, a lot of time in one room, our office and it's, it's late in the day in Manhattan. He's in his office. He's not at. I don't know what your perception is a successful people look at that desk behind them. For those who are watching this on video after you listen to it on audio and if you listen to an audio go and watch this clip also on video, behind his desk is nothing but papers, documents, stacks of analysis. And best I can tell, there's a highlight marks on the different reports, if I'm seeing this properly. And there's a pin, that's yours. There's a newspaper, there's a Wall Street Journal. You're looking at the market for today. There's a remote for the tv. You're looking at CNBC or some, or Bloomberg or whatever to see what's going on in the markets. In other words, this guy's not relying on other people and sit around drinking cocktails. Whatever your perception is of highly successful people. This guy is hustling, he's working. Am I, Do I have that right? Alex, were you working today?
- [48:28]
Alexander Rupert
I think so. You got it right? Absolutely.
- [48:32]
John Hope Bryant
So those were those documents behind you. That's not your assistant, that's not your chief of staff, that's your desk, is that right?
- [48:39]
Alexander Rupert
That's correct. And I'm looking at a whole bunch of screens on this side, including the one you and I are talking on. And when we're done, I turn around and go back to my, my reports that I'm reading on companies, cash flow models and papers, etc.
- [48:56]
John Hope Bryant
So you don't trust anybody else to do that analysis. When you're investing hundreds of millions of dollars or even tens of millions, you make sure as chief investment officer and a CEO, you do it yourself. Is that right?
- [49:08]
Alexander Rupert
Correct. Yep.
- [49:09]
John Hope Bryant
So let's now cut to the current situation, the current environment. We, you know, there's political socio instability and change and environmental. And the world's going, we perceive bonkers these days a little bit. But what do you, what's your view on the current economic environment and what's your advice for aspiring investors on opportunities, if you want to call it that, broadly defined for the future?
- [49:39]
Alexander Rupert
No, I think first of all, we're all very lucky to live in the United States of America. Number one, it's a democracy, it's a capitalistic society, it's the American dream. A lot of people want to come here, in fact, a lot more people want to come here than we can, you know, at any given time. But I came here, I'm an immigrant and I left, you know, beautiful Europe, if you will. But also I came here for opportunity. Many people do the same thing. And so we're all lucky to be in a country where you can educate yourself, you can work yourself up, even if you have modest means or very little means. You can really. There's a place everywhere for a job, for learning and for advancing yourself, the key thing is be disciplined, be focused. Try to avoid taking on debt where you can first pay down debt as much as you can and then try to save. And always try to put some money away. When you get going and things are going well, always save it. The sooner the better. The younger you are, the better. And if you work hard and you get the controllable variables, right, so what is a controllable variable? You can't control, you know, what the weather will be like. You can't control what all the others will do. What you can control is what you can do. You can be on time, you can be reliable, you can be trustworthy, you can be hardworking. These are the things you can control. Always control them. Don't mess up. Don't be reliable 90% of the time. Be reliable 100% of the time. The example I use is when somebody comes for an interview in a nice white shirt and there's a pizza stain right here, it will be where the eye of the potential employer will go. Even though 99.9% of your shirt is perfectly white, there's a pizza stain. And you kind of wonder, the employer wonders, like, why didn't you remove that? And why didn't you change your shirt before you got here? Same with the typo in your resume. These are controllable variables. You need to get that stuff right. Spend the extra time to review stuff to be on time. And once you have a job, be on time, be reliable, work hard, do the right thing, and be patient. It takes three years to get three years of experience. It sounds very obvious, but people, particularly in this generation, think they want it all right now. And it takes a while. You know, if you look at my business started at 28. The first three years, I didn't do very well at all. I had to borrow money from my brother after three years in business to pay the rent. He charged me 10%. Very nice of him, your brother.
- [52:41]
John Hope Bryant
I love it.
- [52:42]
Alexander Rupert
Well, mind you, at the time, interest rates were about 8%, so he figured he needed to charge a premium. You know, Mike Milken might relate to that. So. So I bought 10 grand. And this is. Now I'm 31. I got my MBA, I've been working for other people and obviously spent whatever savings I had on the first two or three years to keep my business going. And the business didn't go well. I had setbacks and I just stayed with it. And persistence. If you stay with something that makes sense, whether it's a job or a new business, that you're trying if you know it makes sense and you know you didn't get the breaks you wanted or the tailwind that you were looking for, stay with it. Keep at it. I mean, I'm certainly an example of that where 10 years into it, finally things started to go my way and even then you got to watch it. So stay paranoid. Meaning have the fear of failure. As an entrepreneur, always have to fear failure. That will keep you from falling into the complacency trap. Never get complacent unless you step out of the game. Then step out. And if you've achieved everything you wanted and you want to just play golf or sit on a bench or go for walks, that's fine too. But then you can be complacent. But if you're live, meaning like we're live on this podcast, if you're live in a business or in a career, never get complacent. Always have the fear of failure. Be 100% reliable, 100% on time. And these are controllable variables. Then you can still have setbacks, but you can also put yourself with that in a position to suddenly reap the benefits of your experience, your patience to make some real good progress, and money when the tide turns your way.
- [54:40]
Coca Cola Advertiser
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- [55:02]
AT&T Advertiser
The holidays are here and it's that time of year to think about. Yes, gifts, but not only gifts. It's the guests, the party planning, and the true meaning of the season. Spending time with family and friends. We know it's a lot, but we're here to ease your mind and share some tips so we'll make it through together. With the season getting underway, now is the time to shop early for amazing holiday deals at Amazon. Amazon has a wide selection for all your holiday needs. The reason I love this so much is because it is the holidays and there's things that I've had family members and friends ask me for throughout the year that I simply would not give them the money to get. But I will get them the actual items. So whether it's laptops, hair steamers, dining sets, makeup, better wigs for Lauren La Rosa, whatever it is they need, Amazon got it. So please remember that Amazon Black Friday Week is here with deals up to 40% off shop black Friday Week deals now on Amazon and visit Amazon.com black effect podcast for my favorite picks.
- [56:01]
Home Depot Advertiser
The holidays are officially here at the Home Depot, which means it's time to deck the halls and your home with festive cheer. If you're on the hunt for the perfect tree, we've got you covered. Explore our huge assortment of trees in all shapes, sizes and styles designed to fit any holiday vibe and every holiday budget. Like the Jackson Noble Fir, it's not only super easy to assemble, but it also comes Pre lit with 1200 color changing bulbs and multiple lighting functions. Or maybe the flocked starry light Frasier fir is more your style. With over 1900 pre lit memory wire branches that hold their shape, this tree's ready to shine right out of the box. Whether it's trees, wreaths or twinkling lights, we've got everything you need to make your home holiday ready. So shop now at home and enjoy fast and free delivery on select holiday decor subject to availability. See home depot.comdelivery for details.
- [57:01]
Amazon Advertiser
You could sit there and listen to ads or you could take a moment to have a Diet Coke break. First, grab a chilled Diet Coke because if you want it to be perfect, it needs to be crispy. Next, get a big cup of ice because everyone knows Diet Coke is best served swimming in ice. Then sip it slowly, feel that burn and enjoy your break for as long as possible. When you need a break, don't forget to grab an ice cold Diet Coke and take a Diet Coke break.
- [57:31]
Ulta Beauty Advertiser
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- [58:36]
John Hope Bryant
So I want people, as we wrap this up, I want the audience to listen very carefully, rewind this and listen to the last 20 minutes of this podcast. In particular, I really want you to get into this and I want you to remember what he just said. Now, controllable variables are things that are within your obviously control. I would say that this way most success is tied to good habits. It and execution. Good habits and execution. Execution means doing things. Good habits is having a set of standards about things that are consistent and do that consistently over time. Which is another what way of what he just said. My wife, Shacher, would say that most behavior is learned behavior. So you want to be nosy about or everything, but certainly the right things. When I, When Alex and I met, one thing was obviously both of us. We not talked about any of this, by the way, beforehand. We were both nosy. I mean, God gave you two ears and one mouth. You listen twice as much as you talk. I was nosy about his business, in his life. He was nosy about my business life. He was so nosy about inclusive economics, inclusive capitalism. We hosted the meeting in his house. That's how nosy he was. And he didn't hold him host a meeting and leave. He hosted the meeting and sat in the audience with a notepad to take notes because he wanted to learn. Who knows whether he's gonna end up investing in a business that may. That may be tied to an underserved neighborhood or community. They're huge market opportunity. But he, whatever his reason was, he was just passionate about education. It's something else I want you to notice again, I'm not gonna get into his business about his net worth. None of your business either. Let me say. Let me just say this. My man has done very well for himself. He's very comfortable now. If he walked down the street, you would never notice. He's got a. He. We didn't. We didn't talk about this. We can talk about our wardrobe. My guess is how he dresses every day. He's got a powder blue shirt, maybe light gray, Light blue. He's got it buttoned up to the second button. He probably has no fancy jewelry on, no watch or anything. I'm sure he doesn't have any fancy rings or that stuff. Let me see your hands, Alex. I just. I'm just curious. Let me see.
- [60:51]
Alexander Rupert
I do have a watch on. Okay, here we go.
- [60:54]
John Hope Bryant
No, it's a beautiful. It's a beautiful watch, but his wedding ring on. What's the other hand?
- [60:58]
Alexander Rupert
On the other hand, this is a ring. This is actually. No, no, commercially about. It's a ring for. That's it. Look at that.
- [61:06]
John Hope Bryant
No, no jewelry right now. He's got nothing and there's nothing. What he wants you to see him. He wants you to focus. If you're an investor, if you think about coming in his office and giving him some of your money to invest, he doesn't want you focused on that other stuff. He wants you focused on him. He also doesn't want you to think that if you give him some money that he's going to waste that money on stupid stuff. So it's a very simple mess. So you don't. So the creative class that's listening to this, you get paid for being loud. It's jewelry. It's sunglasses at night. It's, you know, brooches is, you know, it's fancy cars. I get it, I get it. But, but if you want to go from cashing the check to writing it and you want to become from a consumer to an investor, it's all right. If you want a job at, if you are, if you just forget the creative count, those are successful and creative, God bless you. But if you want to go to working at an investment house, don't walk in his office or anybody else's office with a lot of stuff on that distracts people from the one thing they're buying. Your brilliance, your, your intellect, your good habits. The things he just mentioned, he wants to focus. He wants to know you're going to be focused on his clients advancement period. It's very simple. Good habits executed over time. Alex, did I get any of that wrong?
- [62:28]
Alexander Rupert
No, you got it.
- [62:29]
John Hope Bryant
All right, so let's, let's wrap this up. Let me ask as a closing question, people are listening to this, that now they feel more successful. I'm sorry, they feel more comfortable that they can approach somebody like you, that you're, you're talking a language they understand. You've demystified Wall street and finance. And by the way, just for those who don't know, an investment house like Alex's is not FDIC insured like a bank would be. A bank is the only basically government backed business in America backed by the full faith and credit of the federal government. You don't care which bank you put money in is guaranteed. When he, what he's done is much more, much difficult, much more difficult because he had to get private capital to invest in an Investment House. 100 theoretically is at risk. And so what he's done is he's Got to be very, very precise and very, very clear on the numerical. The numbers, the KPIs, key performance indicators. Because he's going to be judging everything. He can't afford a moment of mistake. So it's really great what he's built. As you're looking, Alex, at the future, 2025, 2026. People here, listen, they become more comfortable. They feel like they know you a little bit. What advice do you have for them about. Are there any. We're last term, we're gonna unpack today. Is. Is it a. Is it a bullish environment or a bearish environment? Can you please explain what that means? And if you believe it's an environment that's opportunistic, meaning there's opportunity in all the chaos. Are there two or three or four categories, areas, industries that you encourage people to look at? And then I have one last question for you before we wrap.
- [64:13]
Alexander Rupert
Okay, so bullish means everything is looking positive, everything is looking up. The economy is good. Therefore, you know, the stock market may do well. Bearish is when people are very worried, they retrench, companies hire less people, people spend less money. The economy contracts, the earnings of the companies go down, and therefore the stock market goes down. So that's bearish versus bullish. I'm a bullish guy. I'm always optimistic pretty much all the time. So I'm looking at the next couple of years again with great optimism. Why? We have fortunately, very low unemployment overall. Of course, there are pockets where it's difficult, as always, but in general, it's a pretty good environment. We have interest rates which were high recently, but they're coming down as well, so that's positive. We've had a lot of uncertainties, and we continue to have some, but I think they will go and become less uncertain as time goes on. For instance, the US Presidential election will have certainty on that. Soon we'll have geopolitical issues that might bother people that are and all of us that will suddenly be less of an issue. These things do resolve themselves over time. So I'm looking optimistic to 20, 25 and 26 particular areas of interest. Of course, there's a tremendous amount of excitement in the technology area. But again, buyer beware. Beware of what you pay for certain stocks in these areas. In general, I think there's going to be an upturn in housing and automotive from very low levels. We've seen because of the higher interest rates and mortgage rates, a decline in existing home sales. People don't want to move from one home to the next. And therefore, if you don't move from one home to the next because you have a low mortgage rate that was locked in and you don't want to make the move. So right now, existing home sales are as low as they were in the crash of 2008, 2009. If they pick up, you see a pickup in appliance sales, in paint, in carpets, and all the things that people do when they get a new house, they renovate it, they freshen it up, they make it look like their house. And so existing home sales are at the bottom. They're likely to move up as interest rates come down in the coming year. So those are areas of interest. And if I may, and the companies.
- [66:48]
John Hope Bryant
And the companies that make paint and the companies that make fences and the company that make, you know, turf and the companies that sell that stuff, those might be, might be also moving up with them. Continue, Alex Correct.
- [67:00]
Alexander Rupert
So as a message to everybody on the podcast, I think as a maybe parting note, you're all about education and financial literacy, and I think everybody needs to take that to heart and do this at home as much as possible. Unfortunately, in school, they don't teach kids basic economics. And we're not talking about sophisticated stuff. We're talking about a checkbook. Balancing your checkbook, credit card spending, mortgages, all these basic things. You can just type in the words, get simple educational information that you can discuss at the dinner table with everybody, with yourself, with your spouse, with your loved one, with your with your young kids. Talk about balance sheets. What is an asset? What's a liability? What's debt? What is a mortgage? How do we save money? How do we grow money? Give, if possible, your kids when they're 12, 13, 14 years old, an account, I'm not saying any particular, but e trade account, some account where you can buy stocks. And then for Christmas or birthdays or for whatever holiday you celebrate, give another $100 or $200 or whatever you can give to this account instead of another toy and let them pick their own stocks. Or let's discuss those stocks together. I've done it with my kids. And at one point, if you start at 12 or 13, maybe at age 25, 26, it could be a meaningful amount. And then you have your job as a young person, but you also have your savings account. You shouldn't touch that and keep growing it. And as you said, your 401k, which you might get from the company. If they match it, maximize it for sure and then make sure it's invested properly and if you have choices, try to put it into equities. I think those are good points.
- [69:01]
John Hope Bryant
So I'm gonna. I've never done this before. I'm honored when I get a chance to meet a guy like you who's so successful and so approachable. I have a book that's financial literacy for all. Number one best business finance in the. In the country for the last eight months. I'm gonna say to anybody watching this podcast, if you were inspired by Alex and you're wondering, like, I'll never meet a guy like this. Like, I'll, I'll never run into him on the street. I, I never run into the elevator. He's probably got security, whatever. I never run it. I'll never be in the Hamptons. I just would love to spend 30 minutes with a guy like him and ask him questions and be inspired and may. And maybe even pitch my. Him for an internship for me or my son or daughter or whatever. But I love to have 30 minutes with this guy. I'm making commitment for him that hopefully he won't hate me for. But if you write me a note, write it to send it bill.fair bill.f a I r@operational.org My Deputy Chief of staff, and make a. Make a case for why you should have an audience with Alex and his firm. Why you're. You think that you are worth 30 minutes or 45 minutes of his time. The top 10 people for the letters I get, I'll give nine of them. A copy of my book Financial Literacy for all just writing the letter. The top 10 and the number one best one. I'm going to recommend to Alex that he. He actually meets with you for 30 to 45 minutes and give, you know, just give you an audience one on one, and hopefully it might inspire you to change the course of your life. Alex, would you mind doing that?
- [70:30]
Alexander Rupert
Not at all.
- [70:31]
John Hope Bryant
There we go.
- [70:32]
Alexander Rupert
My pleasure.
- [70:33]
John Hope Bryant
Closed mouths don't get fed, as they would say. And I knew he'd say that because Alex is a great guy. So we've gone over. Thanks for your time. Quick question. How'd you get so decent? It's a quick question. Just. And I know it makes you uncomfortable. I know you're a humble guy, but, like, you're just normal. Like, you're just a cool dude.
- [70:52]
Alexander Rupert
Parents, you know, it's. I think if the parents have good values and teach you all the controllable variables we just talked about earlier, that, you know, is something that stays with you from, from an early age. So lead by Example. My parents led by example and hopefully I'm leading by example for my kids. I think picking your friends is important. If you're around three brilliant people or fun people, you're probably going to be the fourth one. If you're around three really not so good people that are slacking off and hanging out, you're probably going to be the fourth one. So pick your friends carefully. You can't pick your family. And if you don't have the values from home, try to get it from somewhere else. Get it from people that inspire you. Read books about people that were very successful. There's so many out there where people write memoirs or write about them and read how these folks started and how they got somewhere and you'll learn that most all of them recommended or did the things that we were talking about today about the values and the variables you can control.
- [72:02]
John Hope Bryant
Amen. I'll tell you, Ambassador Andrew Young has a quote, Alex, coincidence is God's way of remaining anonymous. And you said something that you would never know, you would have no idea that, that, that makes you my brother. You said that if you hang around four or five successful people, you might become the fourth or the fifth one, right? Third. Fourth. Fifth one. I often say if you hang around nine broke people, you'll be the tenth. And those are the bookends of our lives. Watch who you hang around. Watch what you do, watch your habits. These are your controllable variables, some of them. And as Michael Milken, our mutual friend who introduced us would say, that we are all born with even or equal potential and equal intelligent intelligence, potential for that intelligence if you grow it, but not equal opportunity. Thank you, Alex, for being a beacon and a lighthouse for equal opportunity.
- [73:00]
Alexander Rupert
Thank you, John, and thanks to everybody for listening to the podcast. And it was my pleasure.
- [73:06]
John Hope Bryant
Ladies and gentlemen, this has been money and wealth. You've been listening to Alec Rupers, who is a chief Investment officer, effectively the CEO in the investment terms of Atlantic Investment Management. Go change your life. It's all in your hands. Money and wealth with John O'Brien is a production of the Black Effect Podcast Network. For more podcasts from the Black Effect Podcast network, visit the iHeartRadio app, Apple Podcasts or wherever you listen to your favorite shows sa.
- [75:23]
Coca Cola Advertiser
The holidays are about spending time with your loved ones and creating magical memories that will last a lifetime. So whether it's family and friends you haven't seen in a while or those who you see all the time, share holiday magic this season with an ice cold Coca Cola. Copyright 2024 the Coca Cola Company.
- [75:45]
AT&T Advertiser
The holidays are here. It's that time of year to think about, yes, gifts, but not only gifts. It's the guests, the party planning and the true meaning of the season. Spending time with family and friends. We know it's a lot, but we're here to ease your mind and share some tips so we'll make it through together. With the season getting underway, now is the time to shop early for amazing holiday deals at Amazon. Amazon has a wide selection for all your holiday needs. I don't care if you want to get your people's laptops, gaming screens, whatever it is they need. Amazon got it. So please remember that Amazon Black Friday Week is here with deals up to 40% off. Shop black Friday Week deals now on Amazon and visit Amazon.com black effect podcast for my favorite picks.
- [76:25]
Amazon Advertiser
Ready Set Shop the Black Friday sale at Ulta Beauty is on up to 50% off. The best gifts now through November 30.
- [76:33]
John Hope Bryant
Starting Tuesday, November 26 snag $12 mascaras.
- [76:37]
Alexander Rupert
From brands like Fenty and Tarte plus.
- [76:40]
Amazon Advertiser
$12 lippies from brands like NARS and Kylie Cosmetics.
- [76:43]
Alexander Rupert
But of course I had to show.
- [76:44]
John Hope Bryant
Out with the Mac Maximal Silky Matte Lipstick.
- [76:47]
Amazon Advertiser
Then I topped that off. I love a little glitter with the Morphe Shade Thrower eyeshadow palette.
- [76:52]
Alexander Rupert
Get all the best gifts all at Ulta Beauty.
- [76:55]
Amazon Advertiser
You could sit there and listen to ads or you could take a moment to have a diet coke break. First grab a chilled diet coke cuz if you want it to be perfect it needs to be crispy. Next get a big cup of ice cuz everyone knows diet coke is best served swimming in ice. Then sip it slowly, feel that burn and enjoy your break for as long as possible. When you need a break, don't forget to grab an ice cold diet coke and take a diet coke break.
- [77:24]
AT&T Advertiser
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