How to Find 100 Bagger Stocks

Summary

Podcast Summary: The Compound and Friends

Episode: How to Find 100 Bagger Stocks

Original Air Date: May 1, 2026

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Episode Overview

This episode delves into the process of identifying “100 bagger” stocks—stocks that return 100x on the original investment. Host Josh Brown, with co-host Michael Batnik, welcomes guests Neeraj Kamlani (author of The Coffee Can Investor and industry executive) and Matt Ankrum (portfolio manager at Ankrum Capital), whose life’s work and family legacy are woven into the hunt for these rare, transformative investments. The discussion moves from investing philosophy and history to modern market challenges (including AI disruption), personal stories, and the role of patience, tenacity, and quality in compounding wealth over decades.

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Key Topics and Discussion Points

1. The Coffee Can Investor & Origin Story

Timestamps: [09:40]–[14:07]

• Core Premise:

  • Matt Ankrum’s mission: build generational wealth for his daughters by assembling a concentrated portfolio of high-quality stocks—his metaphorical "coffee can."
  • Historical origin: The Robert Kirby “coffee can portfolio” story, where true generational wealth was built not by trading, but by never selling, letting quality positions compound over decades.
  • "The basic premise is Matt. He's trying to leave the ultimate lottery ticket to his three daughters. And it's a coffee can full of stocks that he hopes someday will be worth half a billion dollars." – Neeraj Kamlani [09:40]

• 100 Bagger Defined:

  • A stock that returns 100x over ~30 years, requiring compounded returns around 16.6% per year [14:07].
  • Returns are nonlinear—most of the gains come late, testing the investor’s patience.
  • “If you can compound 16% a year, you can be a hundred bagger stock after 30 years of that.” – Josh Brown [15:39]

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2. The Power and Challenge of Compounding

Timestamps: [14:07]–[17:49]

• Exponential vs Linear Thinking:
  • Early years of compounding look unremarkable; enormous wealth accrues late (“get-rich-slow” approach).
  • Analogy: Most of Buffett’s wealth came after age 65.
  • “98% of his total wealth was created after 65.” – Matt Ankrum [16:11]

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3. Endurance: Surviving Drawdowns and Business Cycles

Timestamps: [18:41]–[28:47]

• Staying Power Needed:

  • 100 baggers must withstand significant declines—50%+ drawdowns are common.
  • Most successful 100 bagger stories include periods of existential crisis.
  • “It's not just the length of time to hold the stock, it's the willingness to endure 50% drawdowns. Not everybody has that.” – Josh Brown [23:54]

• Catastrophic Risk:

  • Citing a JP Morgan study: 40% of stocks in the Russell 3000 fall 70% and never recover [24:41].
  • The key is differentiating between those that recover and those that are “permanently impaired.”

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4. What Separates a 100 Bagger?

Timestamps: [26:02]–[37:05]

• High Quality from the Start:

  • All 100 baggers identified started as high-quality companies (not merely “growth” stocks).
  • High and consistent returns on tangible assets over years is a hallmark [27:18].
  • Matt’s cutoff: 15%+ returns on tangible assets, with 30%+ being exceptional [27:55].
  • Low-quality companies rarely escape mediocrity; most 100 baggers start and remain in the high-quality cohort.
  • “These are companies that don't regress toward the mean.” – Matt Ankrum [28:31]

• Process of Elimination:

  • Step one: Disqualify as many stocks as possible—declining industries, over-levered, low/no cash flow.
  • “If you're looking for a needle in the haystack, pull all the hay out.” – Josh Brown [36:44]
  • Matt applies a “Rain Man”–like screen and only begins deep research on a handful of companies that pass [37:05].

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5. The “High-Quality” Anomaly

Timestamps: [30:31]–[35:43]

• Statistical Rarity:
  • Over 1926–2022, just 4% of publicly traded stocks accounted for all net wealth creation, per Bessembinder study [32:29].
  • 84% of the top 50 wealth creators were “high quality” names [33:00].
  • Jeremy Grantham’s research: High-quality companies defy risk/return orthodoxy—higher returns with lower volatility [33:29].
  • These companies are frequently overlooked as “boring,” yet perpetually undervalued.

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6. Case Studies & Hallmarks of 100 Baggers

Timestamps: [53:30]–[60:09]

• Company Examples:

  • Cintas, Adobe, Microsoft, Fastenal, Nike, Intuit, Monster Beverage, UnitedHealthcare, Oracle, Nvidia, Pool Corp, etc.
  • These examples span multiple sectors, not just tech.
  • “Technology ... only made up about a third of the total. You actually had a lot in retail....” – Matt Ankrum [54:52]

• Traits in Common:

  • Many are industry “unsexy” leaders—nuts and bolts (Fastenal), precision scales, last-mile trucking.
  • The “law of large numbers” is routinely misunderstood—giant companies can and do keep compounding faster than intuition would suggest (“good companies become great and stay great” [51:01]).

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7. Navigating Disruption and Market Panic

Timestamps: [60:09]–[77:45]

• The AI Scare and Its Limits:

  • A major theme of 2024–25: Will AI destroy SaaS/software businesses?
  • Matt’s process: Don’t sell at the first sign of trouble; rigorously recheck the company's thesis and essentiality to customers.
  • “For the incumbents...they have their own way of actually looking at it. So if it's already deeply embedded into the workflows, they already have that trust.” – Matt Ankrum [71:38]

• High Stakes Use Cases:

  • Municipal/enterprise software (e.g., TechnologyOne): Mission-critical, sticky, highly regulated—unlikely to be displaced by generic AI tools.

• Stock-Specific Examples:

  • Toast (restaurant POS) and ServiceTitan (contractor/home services software)—examples of “vertical” SaaS with deeply entrenched network effects, despite market drawdowns [74:23].

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8. Philosophy and the Personal Side

Timestamps: [77:45]–[90:52]

• The Coffee Can as Family Legacy:

  • $5 million divided into 20 stocks, each a $250k position, intended to remain untouched for decades for Matt’s three daughters [83:03].
  • Emotional challenge of discussing legacy and money with family; the goal is not just wealth, but financial literacy and character.
  • “The first thing that they started talking about is if this works, how can we help other people?” – Matt Ankrum [85:36]
  • On what he hopes for his kids: “They just want to do things on their own. And they want our love along the way.” – Neeraj Kamlani [87:10]

• Literacy and Inheritance:

  • Daughters are learning to invest, one made a 14x return in Nvidia [89:15].

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9. Lessons for Listeners & Aspiring Coffee Can Investors

Timestamps: [60:09], [91:04]–[92:03]

• The “coffee can” method requires rare discipline—most can’t withstand 5–10 year periods of underperformance, let alone 50%+ drawdowns.
• High conviction and deep research are paramount; disqualify first, then dig deep on the few companies that truly matter.
• Psychology and behavior (tenacity, patience, ability to tune out noise) matter as much as analysis—“get rich slow.”
• This is not the only way to make money in markets, but is a proven, evidence-backed way to enable life-changing, generational outcomes.

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Notable Quotes & Moments

• “This is a get-rich-slow kind of concept. Right. And that's why a lot of people ... make their 100%, then they're on to the next.” – Matt Ankrum [17:51]
• “They have such a strong, enduring competitive advantage that that’s what keeps the returns high over that timeframe.” – Matt Ankrum [28:38]
• “4% of companies accounted for 100% of the net wealth, and 84% of those were high quality.” – Matt Ankrum [33:00]
• “If you're looking for a needle in the haystack, pull all the hay out.” – Josh Brown [36:44]
• “For me, given I’m looking to hold things for a long time, the last thing I’d want to do is actually buy one that didn’t even have the likelihood of being viable.” – Matt Ankrum [39:41]
• “If we logged the management before and we thought they were brilliant and they ran the company, why do we think they all of a sudden got stupid?” – Matt Ankrum [80:02]
• “They just want to do things on their own. And they want our love along the way.” – Neeraj Kamlani [87:10]
• “It's not a what to think, it's a how to think.” – Neeraj Kamlani [91:37]

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Essential Takeaways

• Finding 100 baggers requires:

  • Strict avoidance of low-quality or cyclical companies,
  • Patience to let time and compounding do the work,
  • Courage to hold (and occasionally add) during extreme drawdowns,
  • Willingness to focus on the “boring but essential” over flashy narratives,
  • Continuous re-examination of thesis, but a high threshold for selling,
  • A mindset oriented toward generational—not quarterly—results.

• For Families/Legacy:

  • The greatest investing lessons are psychological and strategic, not just analytical.
  • Financial literacy is a powerful inheritance, cultivating not just wealth but wisdom and intent.

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Episode Structure with Timestamps (Highlights)

• [09:40] — The Coffee Can concept/history
• [14:07] — Definition & math behind 100 baggers
• [18:41] — Fastenal case study; enduring drawdowns
• [23:54] — Human psychology in long-term holding
• [24:41] — JP Morgan’s “Agony and the Ecstasy” study
• [26:02] — Traits & definition of high quality companies
• [32:29] — The 4% that create all the net wealth
• [33:29] — Grantham’s “weirdest efficiency”
• [37:05] — Matt’s screening/elimination process
• [53:30] — List/sector breakdown of historic 100 baggers
• [71:30] — AI and the fragility/resilience of software businesses
• [83:00] — The mechanics and emotional side of the Ankrum Coffee Can for family legacy
• [91:04] — The point: Philosophy and process, not stock tips

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Final Notes

• The episode’s energy is a mix of hard-nosed investment process, dry humor, and real family warmth.
• The philosophy discussed motivates listeners to look past market noise and favor “boring excellence” over gamble-and-glory investing.
• Whether you want to build generational wealth, sharpen your research, or just admire “get rich slow,” this episode gives a detailed map—and a dose of inspiration—for finding the rarest and most rewarding wealth compounds in the stock market.

Transcript

[Josh Brown]

All right, guys, this is gonna be great. Super excited to have. Have you here. How. How long did the process of getting this together, once you committed, like, we're doing it, then what?

[Neeraj Kamlani]

I think it was about a year to put it together. And then, you know, the book industry is slow.

[Josh Brown]

Yes.

[Neeraj Kamlani]

So it takes a year from submission to publication.

[Josh Brown]

There's, like, three drafts back and forth. I did four books.

[Neeraj Kamlani]

Yeah.

[Josh Brown]

I think it's enough. I think I'm done.

[Neeraj Kamlani]

It's. It's. And, well, I'll tell you, the Columbia process, there's a peer review committee.

[Josh Brown]

Okay.

[Neeraj Kamlani]

There's an editorial committee, and there's an academic committee.

[Josh Brown]

And they take it seriously.

[Neeraj Kamlani]

They take it seriously.

[Josh Brown]

Like, they read everything.

[Neeraj Kamlani]

Yes.

[Josh Brown]

Okay.

[Neeraj Kamlani]

So I. I actually enjoyed the process.

[Josh Brown]

Okay.

[Neeraj Kamlani]

Because I wanted to be challenged in every direction before it came out.

[Matt Ankrum]

Okay.

[Neeraj Kamlani]

And so many people will write stuff now, and there's very little oversight. You know, there's copy editing.

[Matt Ankrum]

Yeah.

[Neeraj Kamlani]

But you know what you're talking about. You invented Halo.

[Josh Brown]

That's true. It's very. It's very true that I did do that. The thing with the book that threw me was I write about markets, and I write. And I write in present tense. And then they're like, okay, we got your manuscript. Be back to you in a few months. And I'm like, all right, great. I'll just rewrite everything I wrote because the whole world will have changed by then. And my publisher, Craig from Harriman House, he was just like, you're capturing a moment in time. It doesn't have to be the moment the person opens up the book. And I found that helpful because keep in mind, I'm not a book writer. I'm a blogger. Like, that's. And blogging is what was immediate. Like, this is happening now, and that's not what this is.

[Matt Ankrum]

Yeah.

[Josh Brown]

This is, like, write things down that people will get something out of years from. From that.

[Neeraj Kamlani]

It's got to stand the test of time.

[Josh Brown]

Yeah, I agree.

[Neeraj Kamlani]

The electronic edition makes it a little bit easier. You can update if.

[Josh Brown]

If you so choose, if you want to have a book that goes on for the rest of your life.

[Neeraj Kamlani]

That's right. That's right.

[Matt Ankrum]

Okay.

[Josh Brown]

Well, listen, it's.

[Michael Batnik]

Well, speaking of updates, I can't wait to talk to you about, obviously, the process, but it's a good thing that we have you on now instead of six, eight months ago, before some of the software AI stuff started to happen.

[Matt Ankrum]

Yep.

[Michael Batnik]

So we could. You could digitally update. Although I know. Yeah, I know you're not. You're not. You're a long term investor.

[Matt Ankrum]

Yeah, no, we are literally in the first year of a 30 year kind of run. So yeah, definitely have got some thoughts. And Neeraj and I know when we were writing the book, we actually talked a lot about AI and so, you know, I think this one of the things that, you know, a lot of people, you know, are going to be surprised that there are going to be winners and there's going to be losers.

[Michael Batnik]

Matt, here's a teaser for the audience. A teaser for the audience. Before we get into the meat of the conversation, is AI wrong about your portfolio or some of the names in your portfolio?

[Matt Ankrum]

Yes.

[Michael Batnik]

Love it.

[Neeraj Kamlani]

Wait, what do you mean?

[Josh Brown]

Is AI? Why would AI be wrong?

[Matt Ankrum]

AI is not wrong, but the invest interpretation. Yeah, the interpretation of what AI is going to do. I believe that they're.

[Michael Batnik]

Well, because there was a lot of names that you've given out that have been taken to the woodshed and you're holding your ground. Yeah, I love it.

[Matt Ankrum]

Yeah.

[Michael Batnik]

Okay.

[Matt Ankrum]

Yeah. And you know, it's going to be transformational. But you know, at the end of the day, you know, for a lot of these companies, they, they can use the same technology and you know, the incumbents have a lot of, lot of power that.

[Josh Brown]

Oh, I, I have a lot of thought. I have a lot of thought. I very much agree with that. I have a lot of thoughts. I have a lot of thoughts on that. Let's, let's put a pin in that though. I, I don't want to do the show before the show.

[Neeraj Kamlani]

All righty.

[Josh Brown]

All right.

[Neeraj Kamlani]

This is the Compound and friends.

[Josh Brown]

Yes, it is. Episode 2 40.

[Michael Batnik]

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[Michael Batnik]

Extremely special. This is unlike anything we've ever.

[Josh Brown]

Very special. It's like when Blossom went to the prom. It's a very special episode.

[Michael Batnik]

We focus on the noise most episodes.

[Josh Brown]

Yeah, we're big on noise.

[Matt Ankrum]

We love it.

[Josh Brown]

We're Put the noise aside and we're gonna talk about some of the biggest truths about investing. The process, stock selection, gumption, tenacity, sticking through different market environments, shibboleth, shibboleth. We're going to do a lot, but let's do our traditional intro while we're all here. What do you say? All right, Bear with me, guys.

[Michael Batnik]

You need a minute?

[Josh Brown]

I do. All right. Ladies and gentlemen, welcome to the Compound and Friends. I'm in the wrong document. That seems to be the. That seems to be the problem. There we go. All right, here we go.

[Michael Batnik]

I'll do some crowd work. I got some jokes. We're good, guys.

[Josh Brown]

Ladies and gentlemen, welcome to the Compounded Friends. And we have two first time guests here on the show. Neeraj Kamlani is the author of the Coffee Can Investor, A Stock Picker's Journey to Build Generational wealth, and is the former president and and CO head of CBS News and stations where he oversaw flagship programs including 60 Minutes, Face the Nation. They like that one. CBS Evening News. Before CBS, he held senior roles at Hearst and Yahoo Finance. Neeraj, thank you so much for being here. Welcome to the show.

[Neeraj Kamlani]

Thank you. It's an honor.

[Josh Brown]

And to Neeraj's right, Matt Ankrum is a portfolio manager at Ancrum Capital, which runs a concentrated portfolio for his family office and is an institutional investment advisory. Matt has spent years researching hundred baggers and applies those lessons to his concentrated ultra long term portfolio. His process is the subject of the coffee can investor, earning endorsements from Howard Marks and Dan Rather. Previously, he was an analyst and portfolio manager for Janus and Lateef Investment Management. Matt also served as head of Strategy for a Fortune 500 company, co founded a fintech SaaS and was CEO of a brain neurorehabilitation company. Additionally, he is an adjunct professor at umkc. Matt, welcome to the show.

[Matt Ankrum]

Thank you.

[Josh Brown]

Quite a vibe.

[Matt Ankrum]

Yeah.

[Josh Brown]

All right, keep yourself busy. So we're gonna do this show in stages. The first thing we're gonna do is get into the basic premise of the book, the coffee can Investor. Michael and I have a lot of questions about that and then we'll get into the stock selection portion of the conversation and then we're gonna open up to each other and we're gonna get a little bit personal and we're gonna go deep and we're gonna get into it. So here or carbon. We'll do it all here, do it all. I'm on a carbone diet and we

[Matt Ankrum]

watched the last episode. So it's not tip to tip, right?

[Josh Brown]

No, we will not be going tip to tip today. Thank you for watching. All right, Neeraj, tell us the basic premise of the coffee can investor.

[Neeraj Kamlani]

The basic premise is Matt. He's trying to leave the ultimate lottery ticket to his three daughters. And it's a coffee can full of stocks that he hopes someday will be worth half a billion dollars.

[Josh Brown]

Metaphorically.

[Neeraj Kamlani]

Metaphorically, right.

[Josh Brown]

We're not printing out stock certs and putting them into coffee cans. It's a way of thinking about like people put like, think about coffee can money. Like, we'll keep some change in the coffee can. This is obviously a much higher concept version.

[Neeraj Kamlani]

Yeah, I mean, the old western pioneers used to put their valuables in coffee cans and, you know, bury them under the ground somewhere and then come back to them a long time ago. And so that's where the idea comes from, the story and the hook. For me, as a Reporter was Matt telling me a story a couple of years ago. And I've known Matt for about a quarter of a century as a sort of deep background source. 60 minutes, we used to call them Marvin the Explainers. And so I would always call up Matt and say, what's going on in Wall Street? What's going on in corporate America? And a couple years ago he tells me this goddamned a story about a guy named Robert Kirby. And Robert Kirby was at the Capital Group in Los Angeles. And very distinguished har who worked for Ronald Reagan. He was on the Brady commission after the 86 stock market crash. Very conservative. Anyway, Kirby approaches one day an LA heiress says, can I manage your money for you? And she says, sure, I like you, I like what you're about, but I don't really know a lot about this. Can you deal with my husband on day to day matters? He's a lawyer, sir. Kirby says, sure. And over the years, Kirby would call the husband and say, buy this stock for your wife. And so the husband would dutifully buy the stock for his wife.

[Josh Brown]

Okay.

[Neeraj Kamlani]

But without telling anybody, he bought the same stock for himself. And he would put the stock certificate in a coffee can.

[Josh Brown]

Literally.

[Neeraj Kamlani]

Literally. And over the years, Kirby would call the husband and say, sell this stock for your wife. And he would dutifully sell the stock for his wife. But he was like, screw it, I'm keeping the stocks. I'm buying with my own money in my coffee can. I'm never selling.

[Matt Ankrum]

Right.

[Josh Brown]

Churn the wife, but then keep the position on.

[Neeraj Kamlani]

You said that, not me.

[Michael Batnik]

I love it. I thought you were gonna say he's short of the stocks for himself.

[Neeraj Kamlani]

No, no, he just kept them. He just kept them. And he put $5,000 in each one of the positions.

[Josh Brown]

What era is this?

[Neeraj Kamlani]

80s in the 80s. And so over the years, so husband unfortunately passes away. They find the coffee can, gives it to the wife. Wife's like, I don't know what this is. Gives it to Kirby. And in a hot minute, Kirby realizes what's going on, that the husband's been piggybacking on all the buyer recommendations but never selling. Some of the $5,000 positions trended down to $3,000. A half dozen of them went from $5,000 to $100,000, and one went to 800,000, probably Apple. It was at that time it was Xerox.

[Josh Brown]

Okay, close up.

[Neeraj Kamlani]

Okay. And so he decides to write a paper on this for the Journal of Portfolio Management that five people, including Matt Reed, jpm, and they do the quantity of the year award specials.

[Josh Brown]

It's like Obscure Sports Quarterly.

[Neeraj Kamlani]

Exactly, exactly.

[Josh Brown]

I actually, I read it.

[Neeraj Kamlani]

You read it. Okay.

[Michael Batnik]

No, he doesn't.

[Josh Brown]

Yes, he does.

[Neeraj Kamlani]

I trust Michael on this. And so he writes his paper and he describes his whole experience. And at the very end of it, he says, I hope someday someone somewhere will repeat this experiment. And Matt tells me this story, and he's preoccupied not with Kirby's short and midterm stocks that he was putting into the can, but the ones that multiplied a hundred times. And he started to study hundred baggers. So I was completely hooked at that point.

[Josh Brown]

Right now, the concept of 100 bagger, just for people that they're investors, they're traders, but they haven't come across it. How do you define, I mean, obviously mathematically a stock that goes up 100x, but how do you define what these stocks are that you're looking for?

[Matt Ankrum]

So I guess the first thing to do is actually define my definition of a hundred baggers. I don't know if we can pull up the slide.

[Josh Brown]

We can.

[Matt Ankrum]

Yeah. Slide number two.

[Josh Brown]

Use the AI, John.

[Matt Ankrum]

There we go. So for those of you on the audience who just on audio, what this is is a graph of there's a red line and what that's doing is going up. That's the s and P500. And it's using the long term average of 10.8% and showing that over 30 years, kind of where it goes. The blue line is actually what a hundred bagger would be over a 30 year time frame. Okay. And the reason why I chose 30 years is because that's about double of what the S and P was doing. And so if you look at that, that's going up about 16.6% a year, essentially doubling about every five years. Couple takeaways from that graph though, as you notice as you get out towards the end years, you actually have a massive difference kind of between the two. It's actually about an 80 fold difference. But the shorter one is probably the more interesting one, is that in the first kind of 10 years, there's not a whole lot of difference between that. That's where people don't really see it. And this is the concept that people struggle with is when we talk numbers, we think of things linearly. So when I say things are going up 15% a year sounds great, right? And you kind of think every year is kind of going up, but if you go through time that actually goes to that exponential curve, it goes up.

[Josh Brown]

If you can compound 16% a year, you can be a hundred bagger stock after 30 years of that.

[Matt Ankrum]

That's correct.

[Josh Brown]

And so much of the dollar amount, the wow factor, will happen in the last five years.

[Matt Ankrum]

Exactly.

[Josh Brown]

And to put this is like Buffett like.

[Matt Ankrum]

Exactly.

[Josh Brown]

Buffett's wealth went after he passed 65 or 50. That's when it really exploded.

[Matt Ankrum]

Well, it's even later than that. After the age of 65, he created 98 to 98.9% of his total wealth. Right. Which gives hope for all of us.

[Josh Brown]

98% of his total wealth was created after 65.

[Matt Ankrum]

Yes.

[Michael Batnik]

Wait, so he was in the bottom 2% before he. I'm not a math guy.

[Josh Brown]

Yeah. That's how it works. So I think people know what compounding is, even if it's hard for them to imagine it. Everybody knows the story of the chessboard where the guy challenges the emperor or something. He says, I want you to put a grain of rice on every square, but double it each time, and it goes 1, 2, 4, 8, 16, 32. And then by the time you get to the end of the chessboard, it's every grain of rice that has ever

[Neeraj Kamlani]

been grown in human history.

[Josh Brown]

Yeah.

[Neeraj Kamlani]

We actually assigned a dollar value to a grain of rice in that example. Okay. And it takes like nine or ten days just to get to a dollar.

[Josh Brown]

Right.

[Neeraj Kamlani]

And then it keeps compounding, and you start to blow past the net worth of Elon Musk and Warren Buffett combined. And by the time you're done at 64, you're more than the entire US GDP.

[Josh Brown]

Somebody told me, I forget the number, so maybe it's not interesting, but you start with a regular standard domino, and each domino it knocks into is twice the size. I think after the 13th domino, you're knocking down the Empire State Building or something like that. That's a good example. So, yeah, it might not be 13th, but the point remains. People understand the concept of compounding and that. But what people don't know is what you just said, which is like, just how much of the astounding return happens at the very end, which, of course, it's hard to get that far, and it's boring.

[Michael Batnik]

Who wants to be rich at the end?

[Matt Ankrum]

Right, Right.

[Michael Batnik]

I want to be rich right now.

[Josh Brown]

Yeah.

[Matt Ankrum]

This is a get rich slow kind of concept. Right. And that's why a lot of people, you know, kind of look at it and they make their 100%, and then they're, you know, on to the next.

[Josh Brown]

Before we go into your slides, I want to. I want to make sure that for the audience, they Understand where you're coming from. So you and Niraj meet. This story is something that kind of like binds the two of you. Okay. And you have this obsession that you want to learn. Learn more about what it means to find these stocks and how to do it. And. Okay, I love it. But your background, super unique. You were at Janice and you sort of tell this apocryphal story of you find out as an analyst that a company called Fastenal is going to miss earnings and you go running into, I guess, the boss.

[Matt Ankrum]

Yeah, my portfolio manager.

[Josh Brown]

So tell us the story.

[Matt Ankrum]

So I was a young analyst and we followed this company, Fastenal. It was one of the first companies that I had followed. Got to know the team really well, Knew the CEO, Bob Kierna, very well. This was in the day and age before Reg fd. So what that meant was I got full access.

[Josh Brown]

You were allowed to know more than other people by virtue of your closeness.

[Matt Ankrum]

Exactly. It was kind of the work that we did. We got. Would benefit from that. So I got to go on tours, if you will, with the branch managers going on customer visits and doing that well. I got to meet a lot of the regional vice presidents. And what I was able to do is kind of going through that process. I was able to figure out that they were going to miss that number. Now, at the time, it was actually about 8% of our portfolio at that time. But what we didn't know at the time was how great a company this was. I mean, we obviously were fascinated by who they were and kind of what they had, and that's why it was our largest position.

[Neeraj Kamlani]

And I'll just say that it's a company that sells nuts and bolts.

[Josh Brown]

I was going to say it's literally nuts and bolts.

[Neeraj Kamlani]

Nuts and bolts on construction sites, in vending machines. So they really penetrated. So those site visits were important.

[Matt Ankrum]

Oh, yeah.

[Josh Brown]

So construction company doesn't have to run back and forth to the supply house.

[Matt Ankrum]

Yeah.

[Josh Brown]

They will literally set up. Here are all the screws and nails and fasteners you might need.

[Matt Ankrum]

Yeah.

[Josh Brown]

And you just pay as you go.

[Michael Batnik]

It's like Mobile Home Depot.

[Matt Ankrum]

Yeah, yeah, yeah. Well. Well, the greatest thing that a lot of people didn't understand, but we actually had figured out was that the cost of what they were selling, all the nuts and bolts, was less than 3% of the total project costs that the customers had. And so why that was important is that what really mattered is the service that Fastenal could provide. So think about it. If they didn't have that nut there or they didn't have certain things. You would have an entire labor crew that didn't have waiting for a part. Yeah. Couldn't do it. And, you know, and you'd have the machines that they had to have. So this was a really big part of that story. And what they realized, what Fastenal really created was we're going to be your supplier of choice. We will make sure you will have the right part at the right time and do that. And if you don't have the right part, we can actually machine, you know, tool them so that you actually have that. That's what made them so special.

[Josh Brown]

And you're running around worrying about they're going to miss the earnings this quarter.

[Matt Ankrum]

So what had happened was, you know, given it was a large position in the portfolio, I had figured out that they were going to miss. And so we went out, went to my boss and we sold the stock. Well, from there, the stock actually went down 55%. Now the market at that time had gone down about 15%. So I look like a genius over that time frame.

[Josh Brown]

Yeah. You saved the day. 8% position.

[Matt Ankrum]

Yeah, yeah. On a split adjusted basis, it was about $1.45. Went down about 70 cents. Right. Somebody thereabouts 65 cents. But if we had actually held our position that it then went up from there by 19 fold.

[Josh Brown]

19 fold.

[Matt Ankrum]

19 fold from where we sold it.

[Josh Brown]

Did Berkshire end up buying it?

[Matt Ankrum]

No, Berkshire hasn't bought that.

[Josh Brown]

Oh, who bought Fastenal? Or is it still publicly traded?

[Matt Ankrum]

It's still publicly traded. Yeah. Yeah. And it's still exceptionally well run. CEO now is Dan Flornis. He used to be the cfo. I mean, this is one of those companies that just, you know, is so well run.

[Josh Brown]

What's a 19 fold return over, like, what's the average annual return of that stock?

[Matt Ankrum]

So to put it in terms versus the S and P. Yeah, the S and P went up over that time frame four times. Okay. So you can tell if we would have just held onto that position even though you had that downturn. You know, we were.

[Josh Brown]

You should have done what I did. I sold at the same time you did. And then when it fell 55%, that's when I bought it back.

[Matt Ankrum]

You're brilliant. Yeah.

[Josh Brown]

Why don't you do that?

[Matt Ankrum]

You know what I'm saying?

[Josh Brown]

That's an approach.

[Matt Ankrum]

Yeah, no, it's absolutely approach.

[Josh Brown]

Okay, so. But that's a very. That's a moment where you say to yourself, I just learned something really important.

[Matt Ankrum]

Absolutely. And this is what you're actually getting into is the real important thing that we talk.

[Josh Brown]

Epiphany. I was trying to say it's an epiphany.

[Matt Ankrum]

It is. It was an epiphany is that it's human psychology that plays such a role in how we do as investors. And that was a great one right there. Because to your point, if I had known, I knew that to sell it, guess what, when it was down 55%, it's really hard to go back and buy it again. Right. Because at that time too, one of the things that was playing out was Amazon. Amazon's going to enter the market, they're going to destroy Fastenal. They're going to do that. Never turned out that way. And in fact, now Amazon is one of Fastenal's largest customers.

[Josh Brown]

So here's the problem though. And this is what I think our audience, you probably too, everyone, this is what we struggle with. When it's down 55%, you now know it's a great company because you've been on the road with management, you've met the customers and you understand whatever's going on this quarter is not existential. You know this. But most people, they're not that close to the situation. They have a stock that just dropped cut in half on earnings. They don't know it's going to go up 19 fold after they think it's going to zero.

[Matt Ankrum]

Right.

[Josh Brown]

Or, or, or best case scenario, they get stuck in a down stock. So that to me, that it's not just the length of time to hold the stock, it's the willingness to endure 50% drawdowns. Not everybody has that.

[Matt Ankrum]

No, they don't. And that's what makes the long term investing special. Right. You have to be willing to go through that.

[Neeraj Kamlani]

I'll just add Matt, in Matt's study about what these companies have in common, nearly every single one of them experience an existential event.

[Matt Ankrum]

Yeah, okay.

[Josh Brown]

That they survive and come back.

[Matt Ankrum]

Exactly. Yeah. And over that time frame, from the max drawdown, 70%.

[Josh Brown]

So it's almost like the hero's journey. It's like, it's like the Campbell books.

[Neeraj Kamlani]

That's right, Campbell.

[Josh Brown]

Like you have to come back from the dead to Act 3. Right. To have your Act 3.

[Michael Batnik]

So, Matt, you just said this about the 40% number or the 70% number. I read this in 2014, I believe, and this really stuck with me. There was a research report from JP Morgan called the Agony and the Ecstasy of Stock picking.

[Matt Ankrum]

Yep. Read it.

[Michael Batnik]

And they said 40% of all stocks in the Russell 3000 experience a catastrophic decline, meaning a 70% decline from which they never come back.

[Matt Ankrum]

Right.

[Josh Brown]

So four out of 10 never, never, never come back.

[Michael Batnik]

So I think what Josh said is so right that you have unique information that the average investor does not. And I think the reason why it's so hard, I mean, for a million reasons to stick with the winner is because a, you know that at some point you will get cut in half. It's just part of the, part of the deal. None of these stocks go up 100x in a straight line.

[Matt Ankrum]

Right.

[Michael Batnik]

And you don't know which of those are going to come back. And so if you double your money, that's a great investment, it's a great trade, whatever you want to call it. I better not be part of that 40%. Let me just take my, my, my money and just leave. So for every fastenal, there's thousands of companies that do go to zero.

[Matt Ankrum]

Right. So it's actually one of the basis of my entire study. So think about what you have is what were those stocks that went down by that and never came back?

[Josh Brown]

Because those are the ones you have to avoid on the road to 100 Bagger. You might have a few zeros, but you can't have a lot.

[Matt Ankrum]

Right, Right. And the biggest difference, what I found after going through the hundred bagger is that all of the companies that kind of turn out to be hundred baggers were high quality. A lot of the stocks that Morgan Stanley talks about are the ones that actually were lower quality.

[Josh Brown]

But do they start out as high quality or do they become that in time?

[Matt Ankrum]

They actually all did that. They were high quality.

[Josh Brown]

They started as high quality.

[Matt Ankrum]

Yes, from the study. So what I started out with is from the ipo, what happened was that these are really high quality companies.

[Josh Brown]

What's your definition of high quality?

[Matt Ankrum]

They had high returns on tangible assets, which before you guys roll your eyes, that's.

[Josh Brown]

We don't care about that anymore.

[Matt Ankrum]

Yeah, exactly. It's just a definition of efficiency of how kind of how much operating profit they do relative to their assets.

[Michael Batnik]

But what about in the modern economy? Because not a lot of companies have tangible assets like they used to.

[Matt Ankrum]

Right, Right. Well, but that's actually a great definition. Right. Because if they can generate those profits and obviously turn that into cash flow, that is a great thing. That means the faster that they grow, the more cash flow that they generate. And that's one of the reasons why when people like to look at multiples today versus multiples 40 years ago. I don't know if that's always apples. Apples comparison.

[Michael Batnik]

It's not. But what about the consistency of the returns, intangible assets or whatever you use? Because any company can have a good couple of quarters or whatever. But what do you look for consistent wise?

[Matt Ankrum]

Yeah, no, it has to stay there.

[Neeraj Kamlani]

Right.

[Matt Ankrum]

This is. So think about, you take an energy company, right, in any kind of given time frame, they can actually have very high returns on capital. You know, because oil prices are really high, the margins that are running really high. They're running utilization on the refinery is really high. So you can look at it that. What I do is I look at it over a 10 plus year time frame and look and say are these returns consistent all the way through that?

[Michael Batnik]

Stable and up and to the right slowly?

[Matt Ankrum]

Well, it doesn't actually have to go up always. But to give you an idea, it's Warren Buffett's favorite way of looking at the quality of a business. So he and I guess can't speak for him, but for me what I would say is that 15% or more is actually a decent business, 20% or more is a good business, 25% is a great business and then 30% more is an exceptional business.

[Josh Brown]

Don't high quality companies though become low quality companies? And if they're shoved into the coffee can, what can you really. So you have to bet that it'll become high quality once again.

[Matt Ankrum]

Absolutely. You're hitting on the most important point from what I learned from the study. These are companies that don't regress toward the main.

[Josh Brown]

They don't.

[Matt Ankrum]

They do not. And what happens is that they have such a strong, enduring competitive advantage that that's what keeps the returns high over that timeframe.

[Michael Batnik]

It's like anti disruptors.

[Matt Ankrum]

Yeah, yeah. So think about when they actually have something that people can't just throw a bunch of money and you know, like that they can't go in and kind of turn their own.

[Josh Brown]

So let's say, all right, so let's do like real world examples. Let's take a company, Cheniere Energy. I'm not saying it's a hundred bagger. I'm not even saying it might fit your conventional definition of high quality. What I will say is nobody in the next 10 years is going to stand up a liquid natural gas export terminal on the Gulf. Nobody. Like literally nobody. We know this. So now it's only a question of can they run the business in a high quality enough way I guess to generate the profitability. But we know the mode is there what do you do with a store? Like, what do you do with a story like that?

[Matt Ankrum]

So I think that's actually a great example of one that I would not invest in.

[Josh Brown]

Okay.

[Matt Ankrum]

And the reason being, I don't know Cheniere very well, but the reason being is that my guess is that Cheniere's margins are a function of what the price of the natural gas is to some extent.

[Josh Brown]

They have to be.

[Matt Ankrum]

Yeah. So what I always kind of look for, and this is kind of part of the kind of the replacing, making sure that you don't buy the lower quality ones. I look for ones that the management has the most control.

[Josh Brown]

Pricing power.

[Matt Ankrum]

It's not only pricing power, but actually control over kind of the inputs within that so that they can actually be the ones that can control that. So.

[Josh Brown]

So a lot of commodity stuff gets screened out by that one factor alone.

[Matt Ankrum]

Yeah, yeah. So one of the things that, you know, and maybe this is a good time to bring it up, it is the slide that I'd sent you.

[Michael Batnik]

So I don't know, guys, we are looking at chart a small percentage of outlier companies. One of the first ones.

[Matt Ankrum]

Yeah, 16, I think it is. Yeah, There you go.

[Josh Brown]

What's going on here?

[Matt Ankrum]

So these I think are Michael's, you know, kind of favorite things.

[Josh Brown]

Niraj, this is from the book.

[Neeraj Kamlani]

This is new.

[Matt Ankrum]

Yeah.

[Josh Brown]

Oh, this is new.

[Neeraj Kamlani]

This is new.

[Matt Ankrum]

This is new. So the reason why I actually put this together was that Michael's quoted this a lot. And I think this is a really important one for your listeners to understand. And for those of you who are listening, can't see the screen. The first part is at 2/3. And what it is is 2/3 of companies actually underperform the kind of rolling 10 year index numbers that they have.

[Michael Batnik]

That's a large number.

[Matt Ankrum]

That is a very large number.

[Josh Brown]

Let me the fine print over rolling 10 year period, 71% of individual stocks fail to match the market return. 71.

[Matt Ankrum]

Yes.

[Josh Brown]

So like buy 10 stocks, the probability is that not for me, but for most people, seven of them will underperform the index. That's a damning very much so.

[Michael Batnik]

This is from Bess and Bender's famous study, and I forget what the exact number was, but he looks at the number of stocks that fail to beat inflation.

[Matt Ankrum]

Right. That's the third column. So I'm getting to that. So the second one is, you know, one out of five of the stocks survive and outperform over 20 years.

[Michael Batnik]

One out of five.

[Matt Ankrum]

One out of five, yeah. So let me go to the one, and this is a seminal paper done by Besselman from asu. And what he found is, to your point, Michael, when you were looking at relative to the T bills, right, that only 4% of the companies, and this is from 1926 to 2018. And then he redid it in 2022, he found that only 4% of those actually had actually created net wealth. Is what he calls. Think about it. We all know the pareto principle of 80, 20. This is 100.

[Josh Brown]

80% of the gains will come from 20% of the.

[Matt Ankrum]

Right. This one is 100 to 4.

[Josh Brown]

So much worse.

[Matt Ankrum]

So much worse. So what I haven't seen a lot of people do is actually go to the last one. And so what I did is I took Bessembinder's numbers and he had that the top 50 companies from the study that created 50% of the net wealth. I then said, well, how many of those are high quality companies? What I found out is 84% of those were high quality.

[Josh Brown]

Wow.

[Matt Ankrum]

And here's the other side of that is Morgan Stanley and Atlanta Capital then actually did a study that showed that over a 35 year period, high quality companies outperformed low quality companies three to one. Now you guys had Jeremy Grantham on the show the other day. I love the guy, he's fantastic. Their firm has actually done a lot of research on high quality companies and what they found, they call it the weirdest efficiency in the market.

[Josh Brown]

It shouldn't exist.

[Matt Ankrum]

Yeah, it shouldn't exist.

[Josh Brown]

Right.

[Matt Ankrum]

And so, you know, say what it is.

[Josh Brown]

Say what it is.

[Matt Ankrum]

Yeah, so what it is is that you can actually have higher returns with lower volatility.

[Josh Brown]

Makes no sense. Nothing else in finance works that way.

[Michael Batnik]

I think it does make sense, only it's counterintuitive, of course. These stock, these companies are so boring that they're underpriced and they're underpriced for perfection.

[Matt Ankrum]

That's right.

[Josh Brown]

Serially underpriced.

[Matt Ankrum]

Yeah. And what I'd also tell you, I think a lot of it is time because they just, they're so boring that people, you know, kind of, you know, just, you know, don't watch them, don't, you know, kind of go, oh, they

[Michael Batnik]

sell nuts and bolts. I Let me put 100 grand.

[Neeraj Kamlani]

Exactly.

[Michael Batnik]

Nobody wants.

[Josh Brown]

So, so for the, so for the listeners benefit, this is so important what Grantham is saying and now what Matt is saying, like if you buy a one year treasury bill, two year treasury bill, like you should have very little volatility.

[Matt Ankrum]

Right.

[Josh Brown]

And as a Result, you should have very little upside because risk is rewarded in the markets. And then if you buy a junk bond, you're taking more fluctuation, therefore you should have a higher total return. Doesn't always work out, but you're at least putting yourself in line to make more money. What Grantham is saying is this makes no sense. These are the highest quality companies, therefore you have the least amount of terminal risk. This is a zero. Why is it that these are the best performers too? You should be getting less return per unit of based on the lack of

[Michael Batnik]

risk that you're taking in finance, academia. It makes no sense.

[Matt Ankrum]

Yeah, right. And they actually proved this over not just high quality kind of big cap stock, they looked at small cap stock, they looked at junk bonds. Nearly every single category showed this high quality market inefficiency. The reason why I'm bringing this up is let's go back to Bess and Binder's finding, right? And one of the things that I love is Charlie Munger's kind of idea of invert. Always invert. So if you look at Bessembinders finding, the easy thing to say is wait, 4% created 100% of the net wealth. Let's do it.

[Michael Batnik]

Just buy those.

[Josh Brown]

Just buy the 4%. Buy the 4%, obviously.

[Matt Ankrum]

But the bigger thing is how do you start to eliminate that 96%? That puts you in a much better position to find that 4%. It doesn't guarantee you you're going to find that 4%. But what a lot of people do is that they're constantly looking for what's working right here, right now. And so what they're not doing, in my opinion, is that they're not focusing on trying to kind of winnow the entire kind of the universe to the things that in the companies they really want to own. So let's look at what's in that 96%. These are companies that are in declining industries.

[Josh Brown]

Go to the next chart.

[Matt Ankrum]

These are companies in declining industries. They're over levered. They don't have free cash flow, they're not growing, they don't have. These are all things that you can go through the process. And once you figure that out, you screen those out. Now maybe you take that 96% and you can cut that in half, probably cut it down by 2/3. You dramatically improved the probability that you can now look to find out.

[Josh Brown]

So you're saying if you're looking for a needle in the haystack, pull all the hay out.

[Matt Ankrum]

Yes, exactly. And actually go get A better sieve.

[Josh Brown]

You could put that as a blurb on the back if you really like. I'm not dead. Rather. I understand.

[Neeraj Kamlani]

But I had a chance to. On the next one.

[Josh Brown]

Okay.

[Neeraj Kamlani]

I had a chance to just watch Matt go through this process and forgive me, it was a little bit like Rain man because he'd be mumbling to himself. He'd put up the screens.

[Josh Brown]

Kind of quality he'd have. Am I allowed to do that was good.

[Neeraj Kamlani]

But you know, he would do that and he would just. I would hear his pen. You'd just be scratching them off. Talking to himself. Including things like, no, that's dependent on the price of oil. I don't even want anything in that space. And he would constantly do this and he'd narrow it down to just a couple and then his research would begin.

[Josh Brown]

Right after getting rid of all.

[Neeraj Kamlani]

Exactly.

[Josh Brown]

Disqualify first, right?

[Matt Ankrum]

Yes.

[Josh Brown]

Okay. Do you think a lot of investors work that way?

[Matt Ankrum]

No.

[Josh Brown]

You don't?

[Matt Ankrum]

No.

[Josh Brown]

Despite how like, as we say it out loud, despite how obvious it sounds, you don't think that there's a lot of people that are managing money this way.

[Matt Ankrum]

And I think it's actually a couple reasons. One is, you guys know this. The average holding period, you could take that off. Yeah. The average holding period is five and a half months today. Back in the 1950s, 1960s, it used to be eight years. Well, if we're only holding something for five and a half months, they didn't

[Josh Brown]

have Robinhood back then.

[Matt Ankrum]

Well, yeah, exactly. But one of the problems have is not only are you not doing all the research upfront, but in a five and a half month time frame, really good businesses don't, you know, get the benefit of that. So you're not seeing that compound go back to that slide that first 10 years. The differentiation between the market and, you know, these really high quality companies is not. Is not particularly large.

[Josh Brown]

Some of the most money I've ever made in individual stocks has come from buying, I wouldn't say low quality, I would say high revenue growth pre earnings. And then eventually when the earnings kick in, that's when the stocks start to work because a new category of institution is willing to take a look. Whereas previously you're sort of like paddling in front of a wave. If the growth rate is substantial and the revenue is there and you can see management executing its plan, you sort of know you're gonna make money or you know the company will get profitable. You don't know what that will mean for the stock price. Of course if you did, you'd mortgage your house and buy. But I have 10 examples at the tip of my tongue where that's worked for me. I think what I'm trying to say is that is very far away from what you're attempting to do. But for the listener, this is not the only way to make money in stocks. This is a very specific project that you're embarking on and it requires you to throw situations like that away because by definition, if you're not profitable, you're not high quality.

[Matt Ankrum]

Yes. But here's what I will tell you. Once it becomes that if everything that you said before kind of plays out and it's a high return and you get the growth now you got the compounding. And these are the ones. If it has an enduring competitive advantage, I can own that for the long term. Right. So I'm actually. I might be. I might be the buyer, you know, from. From you. And you're going out and finding another one. I'm actually.

[Josh Brown]

But you are not opposed to coming into a Stock after it's 3x?

[Matt Ankrum]

No, not at all.

[Josh Brown]

Because you would not have bought it earlier, prior to it becoming a quality compounder, and now it is one, and now it's in your universe.

[Matt Ankrum]

Right.

[Josh Brown]

Okay.

[Matt Ankrum]

Because you and I are taking a different risk.

[Josh Brown]

That's right.

[Matt Ankrum]

And so for me, one of the things that I learned from the study is that you actually, these are lower risk stocks because they've already proven out the business model, they've proven out the product fit, they've proven out the economics that they have. So it's just kind of a different game that the two are playing. But what I'll tell you is it's whatever you kind of get comfortable with and what your own investment style is. For me, given I'm looking to hold things for a long time, the last thing I'd want to do is actually hold buy one that didn't even have the likelihood of being viable.

[Michael Batnik]

Matt, I'd be curious what your. I know it doesn't especially matter if you're holding a stock for 30 years, where you buy it at the price you hold something for 30 years, then a lot will be forgiven. But last week we were talking about would you be more likely to buy a stock that doubled or that just got cut in half? And the four of us said, well, doubled, obviously that means it's working. Are you more likely to buy. Buy a stock that has just doubled or doubled again? Or one that's new position.

[Matt Ankrum]

Right?

[Michael Batnik]

New position or one that's Been cut in half and you think the market is wrong?

[Matt Ankrum]

Personally, I'm more to the one that's been cut in half.

[Michael Batnik]

Okay, interesting.

[Matt Ankrum]

Because what I'm. But, but I can feel comfortable buying both. And the reason why I can have that is I'm not looking at the near term of kind of playing that game. What I'm actually doing is all the research to say is this a company that I want to own for the next 30 years? That's very different than like somebody who comes in and I think a lot of people can make good money on this. Where their view is, you know, is this stock going to go up? My view is, is this a company that I want to own for the next 30 years if there is no market?

[Michael Batnik]

So how important is the current multiple to you? Because if you say it's trading at 40 times or 60 times 400 earnings, I don't care. It's earning $2 today. I think it's going to earn $50 in 2042. Like how do you think about the earnings trajectory and the current valuation?

[Matt Ankrum]

So you've heard, you know, Charlie Munger saying, right, that you know, the return of the stock held for a long enough time frame is going to be match the return of the business. So this goes back to what we were talking about before with high quality. These are high quality companies that have a high return. So what happens is if I buy those, even if I might pay a little bit too much in the short term, you know, to your point, it covers a lot of sin on the launch.

[Neeraj Kamlani]

And I'll just add in Matt's study on the revenue growth that you were talking about. When you follow those companies over time, they have insane growth profiles. I mean I'm talking about 20% growth year over year over year over year. And that gets harder to do the bigger you become. So I think 20%, I mean it was 20% growth 20 years into their.

[Matt Ankrum]

So it's the 20% CAGR 20 years

[Josh Brown]

after the IPL, you by definition you have to become one of the largest stocks in the market. If you can do that, those are all gonna become blue chips.

[Matt Ankrum]

Yeah, okay. And that's the whole idea and kind of when you buy it.

[Josh Brown]

So before we get into the hundred baggers that are in the study and start talking names, I wanna come back to the philosophy and the origin story itself. You worked at a firm called Latif. This is kind of an old line money manager that had this sort of concentrated long term, low turnover portfolio mentality. Like is that where you first adopted some of these ideas that became core to the type of investor that you are.

[Matt Ankrum]

Absolutely.

[Josh Brown]

So.

[Matt Ankrum]

So when I was at Janus, you know, it was great because it was all about really deep fundamental research. I was on that team when I

[Josh Brown]

started there and got to beat the market this quarter.

[Matt Ankrum]

Yeah, exactly, exactly. So, you know, they were always kind of, you know, kind of chasing different things. Then when I went to Lateef, you know, we actually held 15 to 17 names. That was kind of the, you know, kind of the spot geographically. Oh, it was out in California, so it was in Marin County.

[Josh Brown]

What kind of guys were these? Like hippies or. No, what kind of guys are these?

[Matt Ankrum]

These are actually great guys. What. What I loved about the Grateful Dead, but what I loved about Latif, it was almost all separately managed accounts.

[Josh Brown]

So this is a very important statement.

[Matt Ankrum]

Exactly.

[Josh Brown]

They are not in the mutual fund derby trying to get Morningstar to add a fourth or a fifth star. They're not worried about their ranking this quarter. I'm sure they wanna perform. But because they're not in the mutual fund derby, they can afford to act differently than everyone else who is.

[Matt Ankrum]

That's exactly, exactly the point. And one of the things that I actually loved is that we spent a lot of time with the fund holders. Right. Because we'd be talking about how, you know, how they're going to pay for their kids college, you know, what are they going to do with retirement?

[Josh Brown]

This is what we do here.

[Matt Ankrum]

Yeah, exactly. And so one of the things that we spend a lot of time on is we would educate them on the stories on the companies that we actually owned. And what that allowed us to do is that then when things were down, we just were able to come back to them and say, remember what we talked about with this company? Here's where they're at. Here's how the, you know, kind of how the business is trending. Stock market may not like it today, but, you know, this is a business that we're going to want to story

[Josh Brown]

has taken on a negative connotation in recent years. But I find that investors don't care about the disdain that professionals have for, for that negative connotation. Investors like stories and that works out great for me because I like to tell them big story. Like, yeah, no, but listen, I could recite, here's the earnings, here's the book value, but that doesn't mean everybody could recite that. It's right off a screen. Yeah, investors do when they own individual stocks, they do want to know what they own you could talk them out of it. You could tell them it's irrelevant. You could tell them, blah, blah, blah, blah, blah. But they still want to know. Okay, yeah. That was a powerful way to keep people in these low turnover portfolios.

[Matt Ankrum]

In the. One of the best ways is by helping them understand what the company does.

[Josh Brown]

Especially business owners.

[Matt Ankrum]

Yes.

[Josh Brown]

They especially appreciate a portfolio manager who's willing to spend a minute and say, here's why we're invested in this.

[Matt Ankrum]

Well, what they really, actually appreciated, we actually understood the business so that we could explain it to them. Yeah. Because ultimately, when things go up and things go down, the most important thing you're going to be able to say is, here's why they still are relevant, here's why they still are important.

[Neeraj Kamlani]

I think feeling the confidence from the person you're working with and the conviction behind the idea is important. And I remember, you know, I had to go up through a big learning curve on this one. And there were times where there are certain stocks that Matt was following. I'm like, but, you know, something happened. And he's like, I still believe, in fact, this is a buying opportunity.

[Josh Brown]

You're a story guy.

[Neeraj Kamlani]

Yeah.

[Josh Brown]

You're a producer.

[Neeraj Kamlani]

Yes.

[Josh Brown]

So you understand the idea of these are the characters 100%. This is how the story starts. Then we run into trouble. This is how it resolves. Like, you innately understand that. So here you have a source who's a Wall street source.

[Neeraj Kamlani]

That's right.

[Josh Brown]

But he's not in Wall Street. He's in Kansas City, which we will talk about later. So he's very far from the melee of quarterly, monthly, daily reports on performance.

[Neeraj Kamlani]

It's Omaha.

[Josh Brown]

Right. And he knows this, and he knows the stories of the companies that he's invested in.

[Neeraj Kamlani]

He's calm, he knows what's going on. He's following the numbers. He's been following it over time. So I think Matt spends more time choosing the stock than ever thinking about selling it.

[Michael Batnik]

So one of the hundred beggars is Amazon. And Amazon reported today. And what these companies are able to do is unlike anything we've ever seen at this scale. So Andy Jassy said we're reporting $181 billion in revenue of 17% year for the quarter. But you, you mentioned, Niraj, how hard it is for these big companies to continue to grow. He said starting with AWS growth, growth continued to accelerate, up 20% year over year. The fastest, fastest growth rate in 15 quarters. AWS is now a $150 billion annualized revenue run rate.

[Matt Ankrum]

Business.

[Michael Batnik]

It's very unusual. This is a quote. It's very unusual for a business to grow this fast on a base this large. And the last time we saw growth at this clip, AWS was roughly half the size. Unbelievable.

[Matt Ankrum]

Yeah.

[Michael Batnik]

Is this the classic Hundred bagger, founder led B2B?

[Josh Brown]

When people say the law of large numbers, they are saying it wrong. It doesn't mean what people think it means. There is this human tendency to think what goes up must come down.

[Matt Ankrum]

Right.

[Josh Brown]

We call it the Gambler's Fallacy. The roulette wheel is red. It's red. It's red, it's red. It's gotta be black next, right? So we have that as part of our DNA. It's the way our minds work and we're programmed right. After winter, there's spring. We just. Okay. And then people trot out this. This trope about the law of large numbers. The law of large numbers, meaning like no way it can. It can grow its earnings 20% for much longer. And then it does. And then it does, and then it does.

[Michael Batnik]

They think it means what goes up must come down.

[Josh Brown]

Yeah.

[Matt Ankrum]

It is a regression towards a mean. Yeah. Right.

[Josh Brown]

The base is too big to sustain

[Neeraj Kamlani]

a growth rate in the mode.

[Michael Batnik]

So the actual definition. I'm so glad you mentioned this, Josh. The law of large numbers states that as the number of independent identically distributed trials increase, their average result approaches the expected value. That's not what we're talking about.

[Josh Brown]

I have no idea what that means, but it's not what we're saying.

[Michael Batnik]

First, I was just talking about if you spin heads or tails, you're not going to get 99 tails in a row.

[Matt Ankrum]

Right.

[Neeraj Kamlani]

Can we look at slide 25? Because I think it hits that right on the head, Matt.

[Matt Ankrum]

So this plays into what we were talking about before. So remember the one on the left, for those who are just listening, it is the, you know, the Morgan Stanley, Atlantic Capital One, talking about over 35 years, how the high quality outperformed 3 to 1 over the low quality. And on the right, we actually had the Grantham mail showing on that. But what you're getting at, Josh, was the key thing that came out of that study is that. So I'm a University of Chicago grad, right? And we were taught everything regresses towards a means you got, you know, efficient market. Fama. Yeah, Fama.

[Josh Brown]

Come from fama land.

[Matt Ankrum]

Yeah. So that was fama. On the other side, I actually had Richard Thaler from University of Chicago too. Who? Behavioral finance.

[Michael Batnik]

Thaler 1.

[Matt Ankrum]

Yeah.

[Michael Batnik]

That chart, the High and low quality stock. The fact that low quality stocks have lower performance and higher annualized volatility, Thaler 1, that should not be a thing.

[Matt Ankrum]

I'm in agreement with you. But what a lot of it came down to is these were good. Remember we talked about before, these are good companies that came great and they stay great.

[Josh Brown]

Yeah.

[Matt Ankrum]

That's why I actually own Google. I own Amazon, you know, and I've owned these for years because they have, you know, they had these characteristics that you feel very comfortable.

[Michael Batnik]

When did you buy Amazon?

[Matt Ankrum]

It's probably about seven, eight years ago.

[Michael Batnik]

Okay. Amazon was so crazy because it was B2C, founder led, and then it went B2B. And that was like where the explosive growth came from.

[Matt Ankrum]

Wait a minute.

[Josh Brown]

So they, so the stock worked. They lost money every year. The street wanted them to lose money. The street looked at them losing money as validation of Jeff Bezos overarching worldview. Which is a lot of companies have profit margins that we don't think they need to have. We're gonna take the customer. So every time they lost more money, the street said, this guy is amazing. And then the switch flipped. With the advent of cloud computing, they just, it was too profitable. They couldn't help but start to report profits. Okay, that's. At that point you get in. That's nowhere near the end of the run. That's where the run begins.

[Matt Ankrum]

Right.

[Josh Brown]

That's so important for our listeners who

[Michael Batnik]

think I missed it.

[Josh Brown]

How could I buy Nvidia?

[Matt Ankrum]

Right?

[Josh Brown]

How, how could I.

[Matt Ankrum]

Right?

[Josh Brown]

How. How could I buy Eli Lilly? This is, this is how you can. Because companies reinvent themselves and they keep growing.

[Matt Ankrum]

So one of the things I think a lot of people missed about Amazon is how much of their revenue they're investing in R and D. You guys remember that? I mean, it was. They were, you know, quote, unquote, unprofitable and a lot. But if you looked at it and you took out the, you know, the R and D, which. Why would a retail company actually invest in R and D? What they were doing is they were rebuilding the future revenue. And so, you know, a lot of

[Josh Brown]

people, people don't even know they built their own ups.

[Matt Ankrum]

That's right.

[Josh Brown]

People don't even understand that. Yeah, I mean, they do now, but at that time.

[Matt Ankrum]

Right, right. But that's one of the things I look for in the companies I buy now is these are companies that are putting a lot of money back to work. And, you know, Jeff Bezos talked about it. It's like the numbers we're putting up this quarter were from things we spent three years ago. Yeah, five years ago. These were things that we're putting in place. That's a great management team that don't try to go back and you know, hit a quarter just because, you know, you know, they. And pull back on the R and D for that. They are looking at and say five years from now, 10 years from now,

[Josh Brown]

they're sitting in the shade of trees that they planted 10 years ago. And you had to have believed. Okay, can we get into some of the names in your study? Can we do that slide now?

[Matt Ankrum]

Absolutely.

[Josh Brown]

Okay, John, put up the hundred baggers included in this. Oh, here we go. Okay, so for the listener who's not looking at this, looking at this tableau of tickers, Cintas, Adobe, Microsoft, Fastenal, Heico, Cognex, Nike, Intuit, Cisco, Tractor Supply, Monster. I think Monster is the best stock of all time. I'm pretty sure. UnitedHealthcare, Oracle, Nvidia, ExpediTers, Landstar, Copart. First observation, with maybe one or two exceptions. This is every sector in the S and P. Okay. I don't see real estate, I don't see oil, I don't see chemicals or utilities. But you told me why on the chemicals and the energy. I don't see. Good point. I don't see.

[Neeraj Kamlani]

He actually sorts this by sector.

[Matt Ankrum]

So if you go two slides down,

[Josh Brown]

these are not stocks to buy today. These are the stocks that are in your study of the best stocks ever, the hundred baggers.

[Matt Ankrum]

And I'm not saying they're not. Not worth buying today.

[Josh Brown]

Some of them may be.

[Matt Ankrum]

I mean, Warren Buffett actually just went out and bought last year. Pool carb. So he put a.

[Michael Batnik]

Bad timing.

[Josh Brown]

Yeah, it looks like death. And we don't know if that was Todd Combs or Warren Buffett.

[Matt Ankrum]

Right. So here is what you're getting at, Josh. Right here. So for those listeners who can't see the screen, what it is, is we broke all the 50 names in the study. We broke it out by the industry. And this might surprise a lot, but technology, which I put is both software and the technology sector only made up about a third of the total. You actually had a lot in retail.

[Josh Brown]

That's interesting.

[Matt Ankrum]

Yes. And so you look at like tractor supply company, which you guys probably know, sells directly to farmers in rural markets, or AutoZone, Home Depot, the like. But then you get into the manufacturing. You've got, you know, Amphenol, Heico.

[Josh Brown]

I don't know what half these companies do.

[Matt Ankrum]

Yeah, exactly.

[Josh Brown]

Maybe more Than half.

[Matt Ankrum]

Yeah. And most people don't. Yeah, that's one of the big takeaways. What, you know, we're going to talk about here in just a second.

[Neeraj Kamlani]

We use the term unsexy a lot in the book and it's funny because Matt considers himself personally to be unsexy.

[Josh Brown]

Oh, that's not true.

[Matt Ankrum]

That's totally true.

[Neeraj Kamlani]

He likes to do the research. He does a lot of reading on each of these companies and really gets into them.

[Michael Batnik]

Do you think we'll get another retail 100 bagger? It seems unlikely given the current makeup of the market that these names don't come public. And if they do, like a retail name, like, how would that even happen? These are such like iconic names and I know they had to come from

[Matt Ankrum]

somewhere, but here's what I'll say. I can't predict the future. And so I don't know. You know, think about, you know, if there's a new category.

[Josh Brown]

There is and we have them. They're not in the United States. Zara, which. What's the parent company, the Spanish fast fashion Inditex or something. What is it called? Yeah, I was like the biggest fast fact. That's what it's called. It's a Spanish business guy's now one of the 10 richest people in the world. He's selling schmatz. Yeah, it's like literally selling like $10 sweaters. But like the business is completely on. So we're still getting new retail. Like we're still getting new consumer brands. Yep, it does happen.

[Neeraj Kamlani]

They keep coming up. So I think the next high looks at them by five year increments. So if you think they all happened.

[Josh Brown]

Oh, this is great.

[Matt Ankrum]

Yeah, go explain.

[Josh Brown]

Explain this.

[Michael Batnik]

Oh, this one here's some of something else. But they didn't all just come out in 1985.

[Matt Ankrum]

Right, right. So if you could go back to slide five.

[Michael Batnik]

There we go.

[Matt Ankrum]

So here's how I went through and I broke it out because it's the same question you guys are having. I was at all. You know, first off, we looked at it. You know, they're all in the same industry where we're at. Then I actually looked at and said by five year increment. So to make sure your viewers understand, so I looked at all companies that went public from 1980 to 2000. The reason why I had to go there is before 1980, there just wasn't very good financial information. Not easily being able to take it.

[Michael Batnik]

But then why did you stop there at 2000?

[Matt Ankrum]

Because when looking at a 30 year. I wanted to give the companies plenty of time.

[Josh Brown]

You need more hindsight.

[Matt Ankrum]

Exactly. And so we looked at that and said, all right, we had this from 19. So we broke it down by five years from 1980 to 1984.

[Josh Brown]

Look at that. By the way, look at the class of 1980-84. Home Depot, Apple, Nike, UnitedHealth, Amgen, all in one graduating class. That's pretty epic.

[Matt Ankrum]

It's a great cohort. But then look at the others. So I go the end of the 80s, right now you have companies like Oracle, Microsoft, Adobe. These are ones people have heard of. But look at like a Jack Henry, you know, that does the back office software for banks or Autodesk. That is the architectural engineering, electronic arts. Yeah. Then you get into the early 90s in 1994, and you have names like Starbucks, Autozone, Old Dominion Freight Lines, which is the trucking company that's at Last Mile. You then get into late 90s, and you're looking at, you know, Pool Corp, Amazon, Cognizant, Nvidia, and one of my favorites. Unfortunately, in the book we talk about this Mettler Toledo, right? They make precision scales, you know, like in the laboratory. These are the ones that can get to the, you know, finest of, you know, precision. But they also make the same scales that when a truck pulls off on the highway, they have to weigh them. They do that. This is a hundred bagger. I had met with them on their ipo. Loved the company, loved the management team. You know, stock went up about 30% in the first, like four months. We sold it. Never got back in.

[Neeraj Kamlani]

The other interesting thing here is when I was interviewing him about all of these and he's trying to identify future hundred baggers. I said, well, what about some of these companies? They're still growing. He's like, yeah, I won't say which company, but he said, that's only another 30 or 40 bagger.

[Josh Brown]

Oh, that's it.

[Neeraj Kamlani]

That's it.

[Josh Brown]

I'll take that one.

[Michael Batnik]

I notice a lot of these companies start with the letter B. Is it that easy? Is it just that simple?

[Matt Ankrum]

Good question. I'll have to do a little more research. Yeah.

[Michael Batnik]

Matt, do you think if the average person, like, listen, I like this guy style. This all makes sense to me. Analyze the business. Invest in things that you think probably aren't going to radically change, like nuts and bolts. I'm going to try this. Do you say to them, whoa, whoa, whoa, stop the clock. Or do you say, yeah, you could do it too.

[Matt Ankrum]

So let me answer into kind of Two parts, right? I think the first part is can they do it? And I think it's people like you guys helping educate, helping them learn about companies, helping them do that. I think people can do the research, they can do it. It takes a lot of work. The second part of the question is the bigger one. Should they do this? And the reason why I say should is what we were talking about before. It's the upfront psychology of that. Can they withstand the volatility? Can they actually have the intestinal fortitude to say, this is that great company. I know this.

[Josh Brown]

Double click on that. Let's double click on that. Then this would be a good time. A lot of the stocks that you talk about are as we speak, being thought of on Wall street as literally marked for death by anthropic. And Gemini and ChatGPT. And we're talking about both horizontal SaaS, you know, like enterprise software companies that serve companies in every industry. And what they do is a very critical layer to help manage these companies. And people think, well, these new tools are coming along that are gonna enable anybody to build their own. Okay, that might be true, it might not. Maybe in some cases. Okay, then the vertical software companies is a company called Constellation that owns, I don't know, a thousand tiny software companies that are specific to all these little niches like travel agency software. And I make the software that goes into the drive through window for fast food companies and anything you can think of that's under siege. Then you've got Microsoft having the answer for itself and Adobe, Fortune 100 software companies, Salesforce, which is in the Dow. So we're in that moment. And up until the last six months, these SaaS software companies looked as though they were the highest quality, highest profit margin, best growth stories anywhere on the planet. The customers were sticky, they made a ton of money. It was very clear that they were a system of record for these businesses. And they almost were impervious to competition once they got in. Right. And all of a sudden that story that we were all great with for 15, 20 years just turned on its head. So what do you do as the coffee can investor? If you've got these types of names in your coffee can, do you pull them out and you do, or how do you know and you do. So tell us.

[Matt Ankrum]

So the first thing I think is always fair is that when the market does a radical kind of down move,

[Josh Brown]

we rate lower for a whole sector.

[Matt Ankrum]

Yeah. The first thing you have to do is be honest with yourself, intellectually honest, and look at it and Say, is this real?

[Josh Brown]

Check your priors, they call it.

[Matt Ankrum]

You never want to put yourself in a position that you're not open minded in understanding where things are. The second thing that you have to do is then go back to the numbers, go back to the thesis and really kind of double click on that and understand that a lot better. So let's talk about the SaaS companies, right? What's fascinating to me when we look at this, and maybe it's because, you know, the market right now holds things for five and a half months, but they hear a narrative and the first thing they do is if it sounds plausible, must be, so what am I going to do? I'm going to just kind of throw in the towel.

[Josh Brown]

Sell first, ask questions later.

[Matt Ankrum]

Yeah, they're shooting right now and they're certainly not asking many questions. One question, I don't hear them asking a lot yet. What do the customers think? Right. I mean we talk a lot about, oh, you can kind of build this and it's 10% of the cost to actually develop software. Well, let's actually put this into what I like to term kind of low consequence versus high consequence. So the low consequence is we go out and we use the software if it is close enough, you know, we're okay with that. Think about like marketing technology or me building a website and I'm not making comments on any specific company but that, you know, if I'm off a little bit, you know, I can go back, I can fix it. No harm, no foul, right? Well, those, you know, there's a reasonable chance that, you know, somebody could come in and you know, offer a much lower price. And they had that. Right. But let's talk about high consequence. Right?

[Josh Brown]

Cybersecurity.

[Matt Ankrum]

Yeah, cybersecurity is definitely one. I don't. Or taxes. Yeah, right, yeah.

[Josh Brown]

But can't get little things wrong in certain arenas.

[Matt Ankrum]

Right? So if you guys indulge me for just a minute here. Yeah, so take a company, one of the companies in the book that we own, Technology one, right? Here they are. You take, assume that or imagine that you're the CEO of the Brisbane, you know, local council, the largest local government in Australia. You have 470,000 property owners there. You have to actually get, by August 15, you actually have to get each one of them your tax assessment. There's 186 different categorizations of that, of those taxes. It's things like owner occupied, it is, you know, short term rental, it is industrial, it's, you know, on and on. Right. And then you get into the levies on, you know, kind of. They have a Queensland reserve levy that they have to kind of put on there. These things change every single year. In addition to that, their subdivisions are going up, so you get another 1500 more every single month coming up. You have to actually get these accurate and correct at that time. Otherwise, say you're off by 1%. That's $14 million of miscollected funds that you've already spent the money on.

[Josh Brown]

Not to mention the phone's lighting up.

[Matt Ankrum]

Exactly.

[Josh Brown]

If, God forbid, you make an error against the homeowners.

[Matt Ankrum]

Oh, and this is the big one, right. They actually can take you to the tribunal, right. They can take you to court. But here's the one that nobody probably understands you as a CEO. You're actually personally accountable. That's high consequence. That's what. In their business, they are actually highly regulated, highly compliant. I mean, they're not worried about saving 20%, 30%.

[Josh Brown]

This is a software provider to a municipality that you're describing.

[Matt Ankrum]

Then universities. Yeah. And so think about from what they have. So they're in there and they're actually kind of developing this, making sure you don't go to court, you aren't personal. That's why I said nobody's talking to them. Kind of the users, they're not hearing that side of the story. They're also with universities, same thing, right. So they are very niche players. They're in local councils, they're in universities and like. But here's the next one. So we got is on the cost side, one of the consoles that they have, they're paying less for the Technology One than what they pay for Microsoft Office Suite for their council. Yet Technology One is what they run their entire business on. You have to pay. You have your residents actually have to pay taxes or they have to go get a dog permit. It goes through Technology One. But here's the reason why I really, you know, kind of love Technology One, because this is the other side of the story. Everybody's concerned about what, you know, the downside is. Let's look at the opportunity. One of the things that they've done, they've. They've been doing AI now for six to seven years. They just actually went out and launched about six months ago there. It's called plus, it's their AI. Well, what they've done is they've actually gone through because of the system of record, they actually own, you know, kind of the. Kind of the workflows that they have. They have access to all the data, they just, you know, here they have all these local councils, universities, they actually created the AI for the orchestration layer. What they're able to do there is now for these, take the university, let's say that you're the CFO and you're trying to figure out, you know, that I need to actually go in and figure out the profitability by degree program, by, you know, student or whatever it might be. Well, today, you know, or before, what they would have to do is they'd have to go get a junior analyst, pull all the stuff together and put it together. It was all coming through technology wants, now technology one's doing that for them. Okay? So the university, they actually have an opportunity to not actually have as much labor.

[Josh Brown]

So this is that software company made itself even more sticky.

[Matt Ankrum]

Right? Software is labor. But let me take it one step further. What they've actually also come out with is they've actually gone B2B now they're going B2B to C. So think about who their, their, you know, customers. Customers are. They're the residents. They are the, you know, kind of these students. They've gone out there and said, all right, say you're a student and it is 4 o' clock on a, you know, Thursday night and you're sitting there, you have a paper due tomorrow. What they've actually done is gone in through an app. They can actually just sit and talk and do and say, hey, I've got a paper due tomorrow. I can't get it done. What do I do? They've set it up so that they go through and look at all the curriculum, look at all the stuff, and they actually find out, oh, the paper that you're talking about is this the volcanoes that are due tomorrow. Well, we found out that you actually get one late assignment per semester. When do you think you're going to be able to get your paper done? I can get it done in five days. Fantastic. Let me actually send an email off to your professor, let them know that you're going to be. You get it in by next Friday. Right, Right.

[Neeraj Kamlani]

Can I add one thing on this? What I love about it is, you know, as someone who's operated businesses, there were times where we were looking at Salesforce and all of these big sort of ERP systems. No one ever tells you you have to hire a whole bunch of consultants to put this thing in.

[Josh Brown]

Oh, I know.

[Neeraj Kamlani]

And it takes six months a year to get it done. One of the things that I discovered through Matt's research on all of this is because you're dealing with universities and because you're dealing with local governments. It's just a simple platform. There is no installation. You automatically use it. So one of the key things that is a common theme throughout the book is Matt's looking for companies that have essentiality and the idea that these people need to use this in order to operate and can do it at the cost that he's talking about. Whereas de minimis, those are part of the ingredients that he's looking for.

[Josh Brown]

So to button this up and to get. To finish out what Michael's getting at, let's say there's 150 of these SaaS companies trading in the United States. Some of these went from being the biggest winners of the market to this year being the biggest dogs. Broadly speaking, how wrong would you say the market is? Is the market completely 180 in the wrong direction and they don't get it? Or will there be genuine winners and losers? Where before all of these companies look like winners, what do you think?

[Matt Ankrum]

The way that I describe it, I think AI is transformational. I use AI every day. I think it's going to keep getting better and we're going to go forward.

[Josh Brown]

However.

[Matt Ankrum]

However it is. Again, back to this. It has to become more discerning because you're going to see companies that have tremendous network effects that no AI native software company is going to do. I used to run my own software as a service business. I know how hard it is to compete against an incumbent. In fact, for the incumbents, they have their own way of actually looking at it. So if it's already deeply embedded into the workflows, they already have that trust. And again, going back to the customer, what do you really care about? So you guys are probably gonna get a kick out of there. So remember being a Janus, I was there at the, you know, we're the epicenter of the new economy versus the old economy.

[Josh Brown]

Yes.

[Matt Ankrum]

Right. Between 99, 2000 era, you guys were

[Josh Brown]

the center of the whole thing.

[Matt Ankrum]

We were the center. Right. And at the kind of the biggest baseline was in retail. Right. That's what was gonna get disrupted by.

[Josh Brown]

Yeah.

[Matt Ankrum]

So just for giggles, last week I went and looked and said, what are the largest e commerce websites out there today? By Vine.

[Josh Brown]

Yeah. Walmart.com, target.com? No, no.

[Matt Ankrum]

So the top 20, how many would you say is new economy versus old account?

[Josh Brown]

Oh, probably two or three new economy and the rest old line retailers that created their own websites.

[Matt Ankrum]

Close. There's only five. Five new economy 15, old economy.

[Josh Brown]

What are the new economy? Chewy Amazon.

[Matt Ankrum]

So it's Chewy Amazon, Etsy, ebay, and

[Josh Brown]

Wayfair and everything else is a chain of stores that got their shit together eventually.

[Matt Ankrum]

It's Walmart, it's Home Depot, it is Best Buy. I mean, I was blown away by that because going back that time, that's what we thought. So I'm not saying that's necessarily going to be the same thing going forward, but I think too often the market is very quick to say, this is cool, this is neat, this is going to take over. And then they forget that there's execution.

[Josh Brown]

So I have another category of where I think people are wrong on this. I think there are some verticals where the average willingness to adopt new technology is so low that once you get the workers in that world to do it once, ain't no way you get them do it twice. I own two software stocks that I'm underwater. 30, 40%, both of them. I can't imagine a scenario where these companies get disrupted. One is called Toast Restaurants. They already vanquished. They already vanquished the bigger competitor, which is Block Square.

[Matt Ankrum]

Yep.

[Josh Brown]

And Fiserv, which owns Clover. Toast. Toast One. They have 150,000 restaurant locations. In a universe of 600,000, they're gonna get them all. And now they're getting hotel chains like Marriott. Every point of sale in a Marriott is Toast. I think they won. They're going overseas. I think they'll win there, too. And the reason that's important is that every hospitality worker now knows how to use Toast. And the next job they get, thank God there's Toast here. I know how to immediately slot in. The stock is cut in half from a tie. I know for a fact once you convince a guy that owns a diner to adopt this, he ain't never taken it out. He's definitely not replacing it with something harder to do. So that's one the other service titan, which came public a little bit over a year ago. You won't like it. They're losing money. This is basically contractors, construction, people that will dig a swimming pool, people that will put up a fence, alarm companies, home services, exterminators, Home services. They literally show up to your house holding the device and they'll print you out a bill right there, or they'll do the invoice right there on the thing that they're holding. Once you have people that are in that world that adopt the technology, they're not like, oh, how quick can we get rid of this and do something different. So I don't. So I understand why the stocks are lower because people are saying the LTV calculations are going to be lower. Right. Like the, The. The. The value of this customer is not going to be what we thought. And I say, bullshit. These would be the same companies that have this market share. They might even have more market share three years from now. Wall street doesn't care what I think. And you must have that same feeling. Wall street doesn't care what you think.

[Matt Ankrum]

No. Could you Pull up Slide 28?

[Josh Brown]

Don't tell me you're long toast.

[Matt Ankrum]

I'm not long toast, but I have looked at Service Titan, and one of the things I actually love about that story is the founders.

[Josh Brown]

They're still there.

[Matt Ankrum]

Yeah, they're still there.

[Josh Brown]

Two brothers, the sons of an immigrant.

[Matt Ankrum]

Yep. And they know the industry well.

[Josh Brown]

They came from the industry.

[Matt Ankrum]

That's exactly right. That's one of the key things that I try to look at. So I think this actually tells the bigger story of what's going on in the software stocks. I do think the fear of AI is real. And I think not all AI companies, I'm sorry, software companies are going to survive. But look at what's kind of happened to the multiple.

[Michael Batnik]

So they were too expensive to begin with.

[Matt Ankrum]

Yes, exactly right. So this is from the guys at Maritech who put out some phenomenal research. But if you look what they did is they break it down by 25th percentile, 50th percentile, 75th percentile, and then the 90th. And. And so what they're showing here is a lot of the companies, the software companies came public back in the 2021 era where the business was just on fire and they had, you know, and the market was more than happy.

[Josh Brown]

Investors didn't care. They. They would pay any price for any stock.

[Matt Ankrum]

Right.

[Josh Brown]

Because for a moment.

[Matt Ankrum]

Because they were high growth and it was Covid.

[Josh Brown]

Yeah, right.

[Matt Ankrum]

Exactly. And so this, I think, is actually one of the big stories in the market here is that we've not only have this big fear that's going on, but you played right in when the multiples were high.

[Michael Batnik]

So I have two questions for you as we get to talking about the book and why you're even doing something in the first place. So you're doing something incredible for your three daughters. You're putting $5 million into a metaphorical coffee can. The idea was, I'm going to do 20 $250,000 investments into stocks, and we're going to put it away forever. You've done 13 at least as of the writing of the book, unfortunately eight of them at least according to Claude, ironically, but seriously are software stocks. So my two parter is you want to do over my two parters this. If you knew that Claude and Anthropic were going to be a thing in 2017 or whenever you started to buy these stocks, would you still own these? Would you still have decided to buy these names? And part two is how permanent is this portfolio really like, because some of the businesses are disrupted. Are you going to say, all right, this is obviously not going to happen. I'm just going to take whatever I have left, whether it's 40,000 or the 250 or whatever the number is, and we're going to reallocate those resources elsewhere. And of course I want to hear about the kids.

[Matt Ankrum]

Yeah. So the first to your, to your question, where I've set it up is that the barrier to entry to get into the coffee can is high, very high. I go through all the different steps. The barrier for me to sell it is even higher.

[Josh Brown]

Wow.

[Matt Ankrum]

And the reason why I do that is the whole thing that we've talked about in the past is that. Yeah, because you have that psychological. I'm not gonna let the market tell me how to think. I have to better understand what is going on with the companies now. With that said, it does not mean I won't, you know, these are not, I'm not looking at this and literally burying it in my backyard and not looking at them. What I'm actually doing is saying I am going to hold myself to a very, you know, kind of high standard to make sure that I don't, you

[Josh Brown]

know, there are false narratives all the time. Last summer myself, including many people thought Google was in big trouble because AI would cannibalize search. Google knew they were in trouble and they responded and they fixed their own future. Stock hit a new all time high today. It's not impossible that some of these almost on the verge of being disrupted. SaaS companies do the same thing.

[Matt Ankrum]

So here's a question I always ask. If we logged the management before and we thought they were brilliant and they ran the company, why do we think they all of a sudden got stupid?

[Josh Brown]

Right, That's a great point.

[Matt Ankrum]

So what a lot of people don't understand is that a lot of these have already been doing AI. One of the companies in their CCC intelligence solutions, they've been using AI for 11, 12 years now. In fact, they were one of the first users of the Nvidia chip. So it's not like they don't know what AI is and it's not like they're not actually building that into their business. So. So that's what I kind of keep coming back to is where you have to be careful is that one you have an industry that is going to be easily disrupted. You talked about like the horizontal. That kind of is all things to all people. The value add doesn't run particularly deep in there. Yeah, but this is. Yeah, this is. I don't, I can't make up. But this is one of those where, you know, this is competition. They faced this before, right? When we moved from the on prem to the cloud, there was those transitions that they had to go through.

[Josh Brown]

I think you have high mode companies, low mode companies, you have industry specific dynamics. Michael and I looked at the. When they finally got around to selling CrowdStrike and Palo Alto, we looked at each other and started laughing and we said, okay, this is a joke.

[Michael Batnik]

And schwab. Schwab felt 10%.

[Josh Brown]

This is literally a joke. So you're gonna take a quarter. What are the. Walk us through the numbers of the coffee can endeavor. What are we doing?

[Matt Ankrum]

So first and foremost, what I did this for is my three daughters, right? And so my wife and I, you know, came together and we said, look, how do we leave a legacy for our girls? How do we, you know, how do we leave something that matters? And so this is where, you know, Neeraj and I have talked a lot about is we want our kids to actually have true financial literacy. You know, in my opinion, it's just abominable that we don't teach financial literacy in high school. And so one of the things that we do with our kids all the time is talk to them about how to think about not just getting a career, but actually building out your portfolio and how to think about investing and going into kind of the kind of the two forms of income that you can have. So that was where we were doing it. So then as we talked through it, it's like, well, what would be kind of, you know, how do we say that best? And that's why when we're talking about writing a book is explaining my process, explaining how that kind of goes through. Now, as you guys said before, everybody has to have their kind of have their own. I always like to say, you know, outside of your spouse and your, you know, your kids, there's no more personal relationship people have than would money. So what you need to do is kind of figure out what is the right kind of direction for you and how you can kind of go forward with that. So we. That's why we put this together. But it is, you know, 20 stocks, $250,000 per stock, and the. The goal is over 30.

[Josh Brown]

So you're putting 5 million into 20 stocks.

[Matt Ankrum]

Right, right.

[Josh Brown]

Okay.

[Matt Ankrum]

And so the goal is, you know, it should be right around there.

[Josh Brown]

Each kid have their own coffee can, or. This is the coffee can. I don't know if this is actually a coffee can. If you wanted to put $250,000 in there, you could.

[Michael Batnik]

So. But you. But you wrote about this in the book, about the story of how you sat your girls down, and that must have been quite emotional for you. Your wife.

[Morgan]

You.

[Michael Batnik]

You. You and your wife did not come from money.

[Matt Ankrum]

No.

[Michael Batnik]

So you obviously did incredibly well financially for you and for your family.

[Matt Ankrum]

Yeah.

[Michael Batnik]

And the girls, I'm sure you grew up fine, but they weren't driving the nicest cars and wearing the nicest clothes like you grew them up in a very normal. You live below your means.

[Matt Ankrum]

Right.

[Michael Batnik]

So this must have been.

[Josh Brown]

He's not from Long Island.

[Michael Batnik]

No, definitely not.

[Josh Brown]

Okay.

[Michael Batnik]

So this must have been like a.

[Neeraj Kamlani]

In fact, the car. He won't buy a new car. Yeah, he won't buy it.

[Josh Brown]

Just dip into the coffee can, get a new car.

[Matt Ankrum]

Yeah.

[Neeraj Kamlani]

His daughter's car has dents on both sides, a hole on the passenger seat, and a magnetic band aid on either side of the car.

[Josh Brown]

Morgan, you did that.

[Michael Batnik]

You could do better.

[Josh Brown]

You did that.

[Matt Ankrum]

Yeah. They call it Wilbur Andy.

[Michael Batnik]

But that must have been an emotional shock to their system to see those kind of numbers.

[Matt Ankrum]

It was. And to be honest, we were terrified, you know, as parents, to tell our kids.

[Josh Brown]

What were you afraid of? That they would start acting different or start asking for things.

[Matt Ankrum]

Exactly. I mean, I grew up in an era that, you know, I had no idea how my parents were doing and they didn't share, you know, with us.

[Josh Brown]

It's very different now. Yeah.

[Matt Ankrum]

We never had, you know, kind of, you know, wants for deeds, but we. I never knew kind of what my dad, you know, kind of where he stood or how we did versus neighbors and all that. So when we told them, our biggest fear was that, oh, you know, now I'm going to act different or I'm going to do this. And, you know, I've got a poem. Yeah.

[Josh Brown]

Hey, moneybags, I want to go to Taylor Swift this weekend.

[Matt Ankrum]

That's right. I mean, one of my favorite poems is Max Airman's Desiderata and I don't know if you've ever read that, but he has a line in there and said, do not compare yourself to others because you will either become vain or bitter. And that's.

[Josh Brown]

I like. Comparison is the thief of joy.

[Matt Ankrum]

Exactly, exactly. And so when we told them, we didn't know what to expect. Right. And here was the greatest gift I think that we got, and we talk about that in the book, is that my girls from my side, you know, first they're like, how much? You know, kind of. And one was asking how much we're going to put in. The other one's asking kind of where it could go if we did that. But the first thing that they started talking about is if this works, how can we help other people? What can we do? And then they ask, how can we help you with your research? How can we be part of this journey?

[Josh Brown]

Because what we're talking about is an extraordinary proposition. You've done all this research into 100 bagger stocks and you are literally aiming to land on the moon. You're saying, I'm going to take $5 million, invest it in companies that I've researched, and by the time we're taking the money out of it for you, it could. We don't know.

[Matt Ankrum]

We don't know.

[Josh Brown]

We're hoping it can approach half a billion dollars. I mean, it's an incredible thing.

[Matt Ankrum]

Right. And to be fair, you know, and to make sure all your listeners understand this, I don't know if it's going to get there.

[Josh Brown]

Nobody knows.

[Matt Ankrum]

But here's.

[Josh Brown]

But nobody thinks this way.

[Matt Ankrum]

Right.

[Josh Brown]

People, you ask people on the street. We're in Bryant Park. Right. Noraj, you go ask somebody, why are you investing? I don't make more money.

[Neeraj Kamlani]

Yeah.

[Matt Ankrum]

Right.

[Josh Brown]

So I have more money. More money for what?

[Neeraj Kamlani]

Look, I think for both of us, this project was really important because we were doing this for our kids.

[Josh Brown]

Yeah.

[Neeraj Kamlani]

It's kind of like, you know, when I took a golf lesson when I turned 50. It was stupid. I had to unlearn all of these bad habits forever. We wanted the kids to understand how to invest in companies and not be a trader. Right. And you know, the five and a half month hold time for a stock and declining is terrible.

[Josh Brown]

Yeah.

[Neeraj Kamlani]

The average American retirement is between 300 and $400,000.

[Josh Brown]

Right.

[Matt Ankrum]

Good luck.

[Neeraj Kamlani]

And so the idea of being able to start early for your own retirement and in our case, to do something for our kids was incredible. And not only do they have a hard time understanding 5 million, half a billion is beyond their Comprehension. And not once ever had they ever thought about the term inheritance. They just want to do things on their own. And they want our love along the way.

[Josh Brown]

Let's test this. Morgan, can you come around this side? All right, let's see. I hear you're a smart cookie. What do you think? Okay. She doesn't need the headphones. She doesn't need the headphones.

[Matt Ankrum]

If you want to.

[Josh Brown]

All right. You don't go anywhere. I need you after. Yeah, just stay right there. Okay. How do you feel you're gonna be an heiress someday? What do you think? Do you like it? Don't be nervous. We won't keep you here that long.

[Morgan]

It's definitely a shock. I mean, it's exciting. I hope I don't become one anytime soon.

[Josh Brown]

You don't wanna be Paris Hilton anytime soon.

[Morgan]

No, definitely not.

[Josh Brown]

Here's what I wanna ask you.

[Matt Ankrum]

Yeah.

[Josh Brown]

So how, when you heard about this, had you thought about stocks at all before the markets? I know it's your dad's life's work, but had you given a lot of thought to just what he does all day and. And what he's working on?

[Morgan]

Yeah, he's walked us through his process a lot of times before because his big thing was we should always have a second income in case anything happens. You get fired, you, you know, taxes, all this stuff. It's always important to have a second form of income. And so him being so passionate and brilliant on the subject, he wanted to get us started on it young. And so we actually have a few stocks that were invested in, and we started at a very young. Like, he got us into this at a very young age before we could even fully comprehend.

[Josh Brown]

Are you and your sisters now passionately tracking the ticker symbols of these stocks? Because I know that that's antithetical to the approach of holding for 30 years, but you must be curious.

[Michael Batnik]

Yeah. Have you tried day trading yet? It's a lot of fun.

[Josh Brown]

That's what I've heard.

[Morgan]

That's what I've heard.

[Matt Ankrum]

I gotta give her some kudos. She actually bought Nvidia.

[Josh Brown]

Come into the mic.

[Matt Ankrum]

Sorry, I gotta give her kudos because she actually bought Nvidia. Made a 14 fold on it.

[Josh Brown]

Come on.

[Matt Ankrum]

So I'm just turning the money over to her.

[Josh Brown]

Okay, Good idea.

[Morgan]

No, it's been great. Just at the very beginning, he's gotten us involved, and it's wonderful to have such brilliant parents who understand business.

[Josh Brown]

Oh, look at that. Look at that. You can't hear, but the crowd is going wild right now. Okay.

[Morgan]

And who's taught us financial literature? Because truly, that is not something that is taught at schools and you have to learn it on your own. And so I'm still.

[Josh Brown]

You're in college.

[Morgan]

Yes.

[Matt Ankrum]

Okay.

[Josh Brown]

University of Wisconsin.

[Morgan]

Yes.

[Josh Brown]

Okay. How do you like it?

[Morgan]

I love it.

[Josh Brown]

All right, you're going to be. You're going to go into nursing.

[Morgan]

Yes.

[Josh Brown]

In the nursing school. Congratulations. We're rooting for the portfolio for you and your sisters. All right, you can have a seat.

[Matt Ankrum]

Okay.

[Josh Brown]

Morgan, you're off the hot seat.

[Morgan]

Awesome. Thank you. It's so great talking to you.

[Josh Brown]

Thanks, thanks. Thanks for coming on the show. Well done round for Morgan. All right. Not easy to do. All right, you got. And you got two more of those.

[Matt Ankrum]

I got two more.

[Josh Brown]

All right, Good for you. Congratulations.

[Matt Ankrum]

Very lucky.

[Michael Batnik]

But now. But now their boyfriend, their potential boyfriends are going to know.

[Josh Brown]

Yeah.

[Michael Batnik]

It's going to attract some unscrupulous.

[Matt Ankrum]

I thought you're going to just keep them from having boyfriends.

[Josh Brown]

Suitors. What century are we in? All right, guys, I want to tell everybody. I want to tell everybody. First of all, the book is for sale as of came out in April. Okay. What's the feedback been so far? People are into it. Like, people are excited.

[Matt Ankrum]

Yeah.

[Josh Brown]

Okay.

[Neeraj Kamlani]

I think a lot of people have really liked the idea. They kind of look at it as a cross between rich dad, poor dad, and Jim Collins is good to great based on his research and the family relationship.

[Michael Batnik]

Okay.

[Neeraj Kamlani]

And they love that it's a narrative as opposed to just a how to.

[Josh Brown]

You know what? That's a great point. There's enough books about how to invest. There's not enough. There's not enough books that marry that with a great story and a personal connection between.

[Neeraj Kamlani]

It was an investing adventure.

[Matt Ankrum]

Yeah.

[Neeraj Kamlani]

Tracking him through this.

[Josh Brown]

I love it. And people will come away from this, not just with your story, but with. Like here, if you were to begin to search for 100 baggers, this is how you would go about it. So there is a how to invest component to it wrapped in that story.

[Neeraj Kamlani]

It's not a what to think, it's a how to think.

[Josh Brown]

Yeah, I love it. Okay. I love it.

[Matt Ankrum]

And one other thing I'd add on that, too, is that this isn't just for a hundred baggers. I mean, this is literally looking for high quality companies. You know, you can do that. The hundred beggars one is where kind of where you might be a starting point. You know, I go kind of smaller companies, but you can use this at any level. That quality Paradigm is important across the entire spectrum.

[Josh Brown]

Did you guys have fun on the show today?

[Matt Ankrum]

Loved it.

[Josh Brown]

All right, are you ready for hour two, or should we leave it there? All right, guys, this has been amazing, and we've learned a lot, and now we're rooting for the portfolio, and we encourage everybody to go ahead and check out this book. I want to let people know, in addition to the book, where else will you guys. I mean, I know there's a media push, and you guys are gonna be doing a lot of stuff, like, what's your ultimate goal? Like, how big do you want this story to get? Or, like, could this be an Oprah thing at some point?

[Matt Ankrum]

Or.

[Neeraj Kamlani]

Look, I think there's a lot of different forms that this can take place and different outlets to share the education.

[Josh Brown]

You're a media guy. You have connections.

[Neeraj Kamlani]

I'm a media guy. And in fact, you know, I would say to you, what I really am trying to do with this is to create a series of investing adventures. So I'm actually almost done with another book right now where I've been following a billionaire who's a real estate investor and how they built everything from the SNL crisis to the GFC to Today.

[Josh Brown]

Okay.

[Neeraj Kamlani]

And so I don't think we get inside the minds of these investors as much as we should, and not only to follow the story arc in which they're making a giant bet now, in this case, $5 million.

[Josh Brown]

Right.

[Neeraj Kamlani]

So it takes a lot of conviction and fortitude, and I respect what you guys do.

[Josh Brown]

Oh, thank you.

[Neeraj Kamlani]

Thank you.

[Josh Brown]

So thank you.

[Neeraj Kamlani]

Thank you. And I think you're some of the best storytellers in the media, in the business news business.

[Josh Brown]

Thank you so much. Niraj Kimlani, ladies and gentlemen, Matt Ankrum. Guys, thank you so much for being part of the show. I really enjoyed this, and we will follow your career with great interest. All right. All right, guys, thank you. Thank you to all the listeners. Thanks to the viewers like, and subscribe. We'll see you soon.