LONG TERM INVESTING

Space Summary

The Twitter Space LONG TERM INVESTING hosted by WOLF_Financial. Dive into the world of long-term investing, social media, and wealth-building with a seasoned Goldman Sachs Analyst turned CEO, who has hosted over 5000 hours of insightful Spaces. Learn about the fusion of traditional financial wisdom with digital platforms, the importance of community engagement for financial growth, and strategies for balancing online exposure with diligent research. Discover success stories, educational opportunities, and the impact of social media on financial literacy and investment decisions. Explore the future of wealth management in the digital age and the significance of networking in investment circles.

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Questions

Q: How did the transition from a Goldman Sachs Analyst to CEO impact your investment approach?
A: It allowed for a more diverse and inclusive strategy, blending traditional finance with modern community-driven insights.

Q: What role does social media play in shaping long-term investment decisions and wealth creation?
A: It offers a platform for education, engagement, and collaborative learning, essential for informed investing.

Q: Why is community engagement pivotal for successful wealth-building through investments?
A: Communities provide support, diverse perspectives, and networking opportunities crucial for long-term financial growth.

Q: How can one effectively balance social media exposure with personal investment research?
A: By setting clear boundaries, utilizing reliable sources, and fostering a balanced approach to information consumption.

Q: What are the advantages of hosting over 5000 hours of Spaces in terms of investment knowledge sharing?
A: It signifies dedication, expertise, and a commitment to knowledge exchange, fostering a strong community of informed investors.

Q: In what ways can social media platforms be utilized for investment education and research purposes?
A: They can serve as hubs for market insights, expert opinions, and community discussions, enhancing investment literacy.

Q: How do traditional financial practices align with the dynamic nature of modern social media platforms for wealth growth?
A: By adapting to digital trends, fostering transparency, and engaging with audiences through relevant financial content.

Q: What key elements differentiate long-term investment strategies from short-term gains?
A: Long-term approaches focus on patience, research, and steady growth, while short-term gains may be more speculative and volatile.

Q: How does social media impact the financial literacy and investment decisions of the general population?
A: It democratizes access to financial knowledge, cultivates interest in investing, and promotes financial empowerment among the masses.

Q: What critical factors influence successful investment journeys and wealth accumulation over time?
A: Consistency, informed decision-making, risk management, and adapting to market changes play key roles in long-term wealth creation.

Highlights

Time: 00:12:45
Transition from Finance to Fintech Exploring the evolution from traditional financial roles to tech-savvy investment approaches.

Time: 00:25:19
Building Communities for Financial Growth Discussing the impact of social media communities on wealth-building and investment success.

Time: 00:39:02
Personal Investment Journeys: Success Stories Sharing personal anecdotes of successful investment strategies and wealth accumulation.

Time: 00:48:30
Educational Platforms on Investment Highlighting the role of social media as an educational tool for aspiring investors.

Time: 01:05:14
Balancing Social Media Exposure with Investment Research Tips on maintaining a healthy balance between online engagement and focused research for investment purposes.

Time: 01:20:55
The Future of Wealth Management in the Digital Age Exploring the intersection of technology, social media, and traditional investment practices in wealth management.

Time: 01:35:40
Long-Term Investment Mindset: Patience and Strategy Emphasizing the importance of patience, research, and strategic planning in long-term investment success.

Time: 01:50:22
Community Engagement for Investment Education How engaging with online communities can enhance financial literacy and investment knowledge.

Time: 02:05:11
Unlocking Wealth Through Informed Decisions Strategies for making informed investment decisions that lead to long-term wealth accumulation.

Time: 02:15:44
The Power of Networking in Investment Circles Exploring how networking and community connections can open doors to lucrative investment opportunities.

Key Takeaways

• Importance of combining social media and investment research for wealth building.
• Insights on long-term investment strategies and their benefits.
• Understanding the transition from a Goldman Sachs Analyst to a successful CEO.
• The significance of hosting over 5000 hours of Spaces for knowledge sharing.
• Tips on effectively utilizing social media platforms for investment purposes.
• Discussion on the fusion of traditional financial expertise with modern social platforms.
• Building wealth through informed investment decisions and strategic planning.
• Learning about successful investment journeys and the role of research.
• Exploring the relationship between social media engagement and financial success.
• Insights on leveraging social media for community engagement and investment education.

Behind the Mic

Initial Greetings and Market Sentiments

Hey. Hey. What's going on? Chilling. Waiting for earnings season. Very nice. Very nice. What are you up and looking at? In the market today? I mean, really just sitting on my hands, maybe taking a little profits here and there, but I've just been sitting in China for, like, almost a week now. David Tapper. David tappering it. Just buy everything. Buy, buy. Yeah, I understand. That makes sense. See the godfather coming in.

Investment Strategy Discussion

So, Sam, we talked about this a little bit last week, but maybe you can reiterate, what's your long term investing strategy? How does it differ from what you do day to day? So, day to day, I think about 20% of my portfolio is more on the active side, and then the 80% is more long term. But I like to find the long term trends, the secular trends. Right now, it's obviously AI, but mostly. Accelerated computing and data center expansion. And then cybersecurity is probably the second. Secular trend that I'm really looking at. So what I do is I do. I do a little bit of research. To find the leaders in those markets. And depending on how big the secular trend is, like for AI specifically, there's many arms to it. There's the data center, there's the hyperscalers for public cloud. There's something more in the software sector. But then that even breaks down itself. And I just try to get the leaders or position myself in the leaders, whether that's shares, whether that's leaps or whatever.

Allocating Portfolio and ETF Considerations

But for the most part, it really. Is the leaders in the sector. Then the 20% of the portfolio is. More short term, where it's mostly technical plays, fundamental plays that are tied in with technicals and so on. Got it. Got it. And then I suppose. What's your thoughts on ETF's versus individual stocks and pieces like that? Well, I mean, on a bi weekly basis, I just. Dollar cost average, probably, like close to 40% to 50% of my portfolio, depending on how. Depending on how big the concentration of the other 80% of the long term trade, long term investing goes. But I just buy Q's and spy. Or the Voo and qqqm. I just put throw money at it, like every other week, just holding it. Those are really, like the only two ETF's that I hold in terms of a long term basis, only because those are more accurately managed based on market cap.

Investment Philosophy Insights

And the leaders tend to have a. Larger market cap, so I don't really. Need to worry about it. And the Voo also pays like, you know, pays an outright dividend. And so on. Indeed it does. All right, good points. Well, I see you got Jay up. Here, and I'm pretty excited to have him on. It's been a little while. I know that most of the other folks in this panel have been pretty active throughout the day on these spaces. With us, so I'm going to kind of give them the floor first here. Jay, we've typically talked about more just. What'S going on in the market, and we can definitely cover that today. But I wanted to also hear from. You on your long term investing strategy. Especially around stock picking and other items. Like that and how you go about this.

Concepts of Capital and Experience

And maybe we can get maybe ten minutes or so of thoughts from you here, and then we can see if there's some questions from the panel. Sure. Yeah, absolutely. So we can start with the concept of investing itself and why it's important for the future. There are many types of capital in the world. There's human capital. That's your career potential and your ability to earn in the future. There's financial capital. That's the capital that you saved and that allows you to compound right through investments in equities, commodities and other asset classes. And then what people tend to forget is that your time and your experience in the former, especially when you're young, the mistakes you make, what you learn, the time value of your experience is actually more powerful than the time value of money. And that's why it's very important to, you know, to practice delayed gratification. It's something that we don't really do in the us, consumer focused, consumerism focused society.

Investing and Inflation Concerns

And as a result, you know, I think the majority of Americans have less than 500 in savings. They don't have enough in their 401 ks. They can't afford to buy property. And there are other structural issues why these things exist. So I didn't really prepare anything, and I'm just going to kind of wing the next few minutes of my investing strategy. But to reiterate, human capital is a potential you have in the future. Financial capital includes your cash or stock holdings, your real estate, other forms of investment. Then you also have your relationship capital, which is the power of your network that you can leverage. There are various ways of thinking about capital, but once you have savings and you practice delayed gratification because of something called inflation, which will only become a worse problem, in my opinion, because the amount of global government debt, because you have inflation, the value of your dollar is not fixed.

Long Term Growth and Real Assets

If you look at the value of the dollar 100 years ago or 200 years ago, thats depreciated almost 99% in order to keep up with inflation and to preserve your purchasing power. What you really need to do is to put your capital to work in things like real assets. Real assets can be a host of other things. Host of things. Buying a share. You should think of buying a share as buying part of a company, not like buying a piece of paper. People tend to really take a gambling mentality, especially in todays society where they trade futures and options. And I think its like sports betting. These are all little bets. In reality, when youre buying a company and youre investing, youre not making a very short term bet on anything. What youre doing is youre taking a long term view on a business and youre taking ownership in that business.

Advantages of Long Term Ownership

And there are a lot of advantages in having long term ownership in real estate, in businesses, their tax advantages, long term capital gains are taxed at a different rate. Same thing with real estate. You get various deductions. And so its encouraged in todays society and I hope it doesnt change. And when you allocate, you know, an investment portfolio, that investment portfolio is supposed to allow you to convert your human capital into financial capital and then compound that at a rate that allows you and your family to be able to make important life purchases in the future, including your education, a means of transportation, shelter, God forbid medical needs that you'll have in the future.

Self-Reliance and Financial Planning

Because, you know, we all know the government can't provide anything, right? And today your family can't provide everything because at least in the United States and many parts of the world, right, the nuclear family is all you have. Like 100 years ago, you know, places like Italy, you know, South America, India, all over the world, people used to live in big extended families, big support systems, and that doesn't really exist today unfortunately. Right. So you have to be, you know, be self reliant. You can't, you can't rely on others in this, you know, in today's age. And a very responsible way to do that is you have to allocate to tax deferred accounts, right?

Investment Opportunities and Strategies

And you can do that through your, if you have an employee sponsored 401K, you can also do that in IRA. And there also, you know, there are other plans available to entrepreneurs and there, you know, there are different plans available overseas as well. But I'm not going to go into all those details that could be in a separate space. So outside of tax deferred options, because there's limit, there are limits on how much you can contribute every year. Just having a brokerage account invested index funds that track the broad market indices is something really powerful for the long term and well go into individual security section in about two minutes.

The Importance of Index Investing

Jack Bogle, you should read Bogleheads and a couple of books that hes published was really revolutionary in the seventies and eighties. They really pressed this idea of index investing because you're indexing to essentially the winners in the United States, for example. So the S and P 500 is the 500 best companies that are allowed into the index. Most of the companies in that index have survived and the underperformers have been removed or bought out or have gone bankrupt over the years. So you're essentially what you're doing is you're benchmark to the best companies in the world. And the us market today is 60% of global market cap. Okay, we're only 300 million people but 60% of global market cap.

The U.S. Market Performance and Historical Context

You compare that to Germany. Germany today is only 2% of global market cap. Think about how much since the eighties and the nineties someone has compounded 30, 40, or 50 times the amount of capital that they put into the market. And it's simply because the US has been the best place over the last 30, 40 years to put your capital. And there's several reasons for that. And this isn't a pitch on the US, but it's just an explanation on how well you can do investing. So because of the S and P 500 and the fact that it owns the best companies in the US, it benefits from the vast education system, top institutions, the IP protections that we benefit from in the US, the rule of law, and also the fact that historically we've attracted the best legal immigrants where, you know, they come educated and motivated from other countries and they contribute their ideas, right?

Spotting Long Term Trends

Think about some of the best entrepreneurs in the country, right? You think about, you know, Jensen, look at what his background is, right? Look at what Steve Jobs, you know what his background was, right? We're an amalgamation of the brightest minds and the hardest working people. And I think the US is one of the last capitalist countries in the world that really focuses on productivity and innovation. And you see that with a lot of the biggest market caps in the US today. Everyone from Oracle, Larry Ellison, half a trillion all the way up to Nvidia at over 2 trillion, and Apple and Google and Microsoft in meta, et cetera.

The Importance of Investing Over Time

So I'm not saying that those types of trends are going to continue at the same rates as they were. But if you look at $1 invested in any of the companies that I mentioned 20 years ago or you wouldn't. If you invested $100 a month in any of those companies starting 20 years ago, you wouldn't need to work today. You only need a small amount of capital to start investing, especially if you're indexing single security selection, I think, is more of a passion. And there are very few people that have been able to beat the market.

Reasons for Investing in Single Securities

There are various reasons to invest in single securities and in single assets. Number one, if you're investing in real estate or small businesses, you have the benefit of leverage. You can get a loan. Oftentimes you can get a 30 year fixed loan in the United States for a four unit multifamily property. In 2012, I was buying those in the midwest and places like Ohio. I was buying apartments at like 20,000 a unit and then renting them out, you know, at fair rents. And, you know, just with the compounding over time. Right. Made multiples of my money in a very short period of time.

Summary of Leverage Benefits

In a little bit more than ten years, same, you know, so you have the benefit of leverage. And number two, right, in small businesses, right, you also, in real estate, you often get tax deductions. Now, in public equities, there are also very big benefits, because in private companies and real estate, you can't get out without high friction costs. And sometimes there's no willing buyer at the price that you want to sell at. With liquid markets, there's a huge benefit. And liquid markets are vast. We think about global equities like a 30 trillion in us equity market more. Now it's probably around 50 trillion in us global equity market.

Understanding Market Cap and Value

Captain, about a little bit under 100 trillion in global equity market cap globally. And what that represents is the net present value of the residual interest of the capital structure of all those companies combined. Now, what does that simply mean? It is the net present value of the earnings of all those companies. So when you buy a share, you own the residual interest in a company. So a company, just like a house, has debt and equity. So, for example, if you buy, you know, a share of McDonald's, right, you fall below the revolving credit facility, which is the credit card for a company.

Understanding Company Value and Tax Implications

And below that, you usually have like some term debt or bonds, right, which are backed by the IP and assets of the company. If they're unsecured bonds, they're just a claim on the business. Below that, you know, you might have converts that have some equity and debt characteristics. And at the very bottom, right, you have something called the common equity. The common equity, okay, basically gets all of the earnings that are left over. That's why they call it residual interest after paying off the revolver. The bank debt, the unsecured debt and the government, right, the taxes.

U.S. Government Backing and Economic Stability

So what you're, and you know, that's why the us government people say, what is the us government backed by? It's a really, you know, really silly question, right? Even, you know, even if you stop thinking about the defense budget, the us government is backed by the net present value of the tax streams coming from the best companies and the richest people in the world, right? If you don't think that's worth something, you know, and you think that the economy, I hear people every day, oh, you know, everything's gonna blow up, dollar's going to zero. You know, we're going to see hyperinflation. The Brics are going to take over.

Investment Principles and Market Misconceptions

If you just use your common sense, you realize, okay, if the US is 60% of global market captain, and like half of the world's wealth, right, and the government has the ability to tax that wealth, don't you think that the government actually has a lot of power and just taking a step away from that. So when you buy a stock, you own the residual interest, right? And that residual interest is levered, right? Companies borrow money and they're levered. So you get the benefit of operating leverage and financial leverage.

Leverage and Company Growth Dynamics

And as those companies grow, for example, if a company grows top line by 2%, a stock might go up by 10% because it has operating leverage and financial leverage. And let me explain how operating leverage works. Hopefully you understand financial leverage. It's the same as, you know, buying a house for $100,000. We have calls every Sunday where we kind of go through this stuff on my educational discord. But let's just simplify it. You have $100,000 house, you put 20,000 down and you borrowed 80,000 f 5%. If that value of the house goes up by 20,000 next year, then you made 20,000 on your down payment -5% times 80 minus four.

Calculating Investment Returns

So this is super simplified example, and I'm probably not doing the math yet because I'm not even in front of a computer or writing anything down. You think about that. That 20,000 on 100,000 is only a 20% return. But 16,000 on your 20,000 is an 80% return. That is the power of leverage. The same with companies. With companies are levered, you’re getting magnified returns through their equity. Now there's also something called operational leverage. Operational leverage is companies have an income statement just like I talked about, their balance sheet, they have assets.

Understanding Operating Leverage

The assets are financed with debt and equity. They have an income statement. That's a flow statement. Balance sheets are a snapshot. In the flow statement, you will have the benefit of operating leverage. So company will have sales. Sales minus cogs or gross profit gets you gross profit. Cogs are your variable costs. You take gross profit and you subtract out your SG and a sales, general marketing, administrative, et cetera. Right? That gives your ebit, your operating profit, that SG, and a right that creates fixed operating leverage.

Enhancing Margins through Factory Utilization

So, for example, actually, there are many ways to look at it. If you have companies, if you have factories that can create fixed operating leverage as well, because as your utilization of goods that you sell through those factories goes up, your margins improve. For example, at Tesla, the more utilization that Tesla or Ford or GM has at their factories at 75% utilization at the average steel company. Go ahead, Wolf.

Closing Thoughts on Investment Strategies

Well, I was going to let you. Finish the thought, and then I wanted to bounce it because you were mentioning Tesla there. Maybe you can finish the thought on Tesla and then I want to hear. Omar's thoughts on that kind of same point there. Sure. So the more you see an asset utilized, the more leverage you're getting out of it. So in steel, for example, I know that, you know, once a steel mill gets to 75% utilization, right. Not only do your costs start to fall rapidly, you start to get pricing power in the market because there's less, you know, excess capacity.

Conclusion: Investing as a Life Skill

So that's, you know, that's how to think about operating leverage. When you're thinking about something basic like a factory. But also with companies, when you have high fixed costs and you have high SG and A, and your sales go up by 1%, you get a multiplier effect through your eBiT. And so you. So with companies, you get advantages in many ways. You get the financial leverage. You get the operating leverage. And if a company, you know, wants to really juice up its equity returns, it can also then buy back its stock. And, you know, if it's borrowing at low, at, you know, a lower rate than its earnings yield, it could, you know, for example, the earnings yield is the inverse of the PE.

Understanding Company Metrics

And doing the work means in order to calculate all these metrics, right, you have to at least, before you use tools like Bloomberg or Capiq or Factset, you have to at least once or twice do them out by hand. And doing that work means going to the company's website, going to investor relations. When it's free information, you go to investor relations. They'll have the last investor presentation. They'll have the last press release that summarizes the quarterly results. They'll have what they call the ten q, which is the quarterly report. They'll have the ten k, which is the annual report. Or in Europe and other parts of the world, they'll have the 20 f, which is the annual report. And what you'll do is you'll go into those and you'll look at three statements, the income statement, the balance sheet, and the cash flow statement. And just with those three statements, you can calculate every single ratio that I'll share on here.

Analyzing Financial Statements

Now, once you understand how to look at those three statements, the income statement will tell you the profitability of a company. The balance sheet will tell you the assets and the leverage and equity of the company. And the cash flow will tell you how they’re converting income into cash flow. And then what they’re spending on plant property and equipment, right. And then finally, how they’re financing the business on a yearly basis. And once you have all that information, you’re extremely powerful because now you have all the numbers and you can go and you can understand those numbers by reading what they call the MD and a, the management discussion and analysis in every annual report. And then the last couple earnings calls, which are usually free in the form of a webcast on the company's investor relations page. Or you can often get a free transcript on something like Seekingalpha.com dot. Once you understand the basics of a company, what you need to do is form a view.

Evaluating Company Performance

Is this company growing? Is it flat? Is it declining? Is it a company that is defensible? So there are various types of companies that people don't tend to understand. Ideally, you want to invest like Bill Gates in oligopolies. So the best type of company is a company that has very little competition. So you want to invest in those types of companies that have high barriers to entry, that have unique IP, that have very few competitors, that have a very strong brand, they have a very strong asset base, and they may have long term contracts or recurring revenues like the mega software and tech companies. And those businesses, okay, are very few and far between. And it's not just tech and software, right, but it's like the biggest railroads, right? You think about them, right? Historically it was companies like Airbus. They're only two big aircraft manufacturers in the world. So you think about barriers to entry, brand value defensibility.

Understanding Market Ratios

And those companies have a better opportunity to compound over time because they're less susceptible to competition. So you can use these types of ratios to identify which companies are better positioned. There are ways to do that. For example, with a company like Microsoft, one way to do that is just look at its margin profile over time. It's very defensible margin. Why is that? Because they have something called network effects. So many people use it that as the network grows, they can raise prices, they can build new products, synergistic products, and overlay them. It's become this huge network effect. Same with Apple and iOS. It's a big network effect. Big brands, various entry, enterprise level contracts with Microsoft, look at the margin over time and the consistent growth. They can raise prices every single year. That means it's probably, you know, an oligopoly at that size.

Investment Strategies and Opportunities

And if you can buy those oligopolies at a very cheap price, right? And when people are scared and you have cash available, that's why I always say, I always have at minimum 15% to 20% cash available. I don't care if it's a drag, because when everyone's scared, like in the beginning of August when everyone was freaking out about the yen carry trade, right, there, a number of companies you could have bought, you know, 15, 20% cheap in the mid cap space and made 20% in three or four days. We'll get into margin of safety, maybe in another space, but you should definitely look up Seth Klarman's book. But when you're thinking about investing, you can screen for these metrics. The way you screen is there are a number of free databases, and you can even create your own database by downloading through, you know, the easiest way to do it without getting technical is look up your favorite ETFs.

Strategies for Stock Selection

Okay. If you want to know the 1 minute way to do it. Look up your favorite ETFs. There are more ETFs today than there are companies. Okay. In the Russell 3000, look up your favorite ETF. Download all the companies. Once you have all the companies, a number of those companies will likely be competitors. If it's a sector ETF, then start going through them and ranking them. Okay. Look at their performance. Why is this company performed well? Okay. Once you've started to get an idea, create a spreadsheet and start with the ticker, the name, and some basic valuation metrics, like we talked about earlier, price to earnings, EVA free cash flow yield, and then some risk metrics like debt to equity. Right. Sales growth. Is sales declining? That could be a profitability or a risk metric.

Understanding Margins and Performance

And then look at their margin profiles, gross margin, EBITDA margin, net margin. And then try to understand why the companies have the margins they do. Why they’re growing or why are they declining? And the stock prices will tell you a story. There’s a lot embedded in price. When you look at the price of something or the change in the price, oftentimes the price will tell you what is happening before you even know what the fundamentals are. Unless you're following the company very closely and you're a hedge fund guy and you know the information before, you know, before the price moves, that's very rare. So the price will tell you a lot about a company. You can often tell what the good companies are by looking at the book, combining the fundamentals and then looking at the price history and how the company's evolved over time.

Conducting Comprehensive Business Analysis

So once you have that information, once you have the columns for the company, I would also include some sector information. What sector is it in? What industry is it in? The, when did it IPO? How long has the track record been? How long has management been in place? You can get very, very detailed. And then you can compute some more complex metrics, especially industry specific. Right. So you can calculate things like ROIC for retail or same store sales, which tells you the sales in each location. For example, you have a Chipotle. You know, you might be concerned about, okay, how much are sales growing in every unit location. Right. That's more important, necessarily, than how fast this overall sales are growing, because the overall sales might be growing because they're opening stores and the new stores might be, might not be as good as the old stores.

Industry Metrics and Investment Insights

Once they're fully ramped, then you can look at same store sales. You can look at ROIC. Right. You can look at return metrics. On a per square foot basis. And there are different metrics for different industries and REITs. You might look at FFO or AFFO. So I'm going to stop there and try to bring this all together. Now, once you have all the information in columns, okay, you have your profitability metrics, you have your valuation metrics, you have your risk metrics, and you have your descriptives, four sections. You can then sort those companies by valuation, by growth. Right? There are two major types of investors.

Investment Styles and Strategies

They're value investors and their momentum and growth investors. If you are a value investor, what you want to do as a contrarian is to buy a company when it's selling off. And there's, you think there's a lot of value to the business because of the defensibility. I talked about earlier, like when Carl Icahn bought Apple in 2013 in Netflix, right. He saw, so he looked at a couple of very easy metrics, like for Apple, he looked at the PE ratio and he looked at cash as a percentage of market cap. And he said, oh, my God, this company is trading at a very low double digit, if not high single digit PE. And it has a very high percentage of cash on its as a percentage of market cap that it could dividend to investors. Right? You don't need to PhD; you don't even need a college degree to do that type of analysis.

Identifying Market Opportunities

And then he bought it at an opportune time, like right after the pigs crisis in Europe, where everyone was freaking out. They thought the eurozone was going to break up and stocks were cheap. And so a lot of things have to come together. Sometimes you have to be very patient. You have to find opportune times every year. Okay, there are a bunch of videos on my timeline, but there are a lot of great investors that point this fact out. Historically, over the last 50 years, there are usually two 5% corrections every year. And every two or three years, you have a ten to 20% correction. When you have a ten to 20% correction, people are like, oh, you know, I'll make 1020 percent.

Pricing and Timing in the Market

Why not have any cash? When you have a ten to 20% correction, there are stocks that are down 40%. Right. And when a stock is down 50% and it goes back to where it was, that’s a 100% return. So within the market, there are often a lot of really good opportunities that happen when there’s volatility. Which is why while you’re doing your screening, think about how much you’re going to allocate depending on your age and how much cash you’re going to have. Now let’s go back to the screen. Once you have those valuation metrics, what you want to do is you want to identify those companies that are good businesses, that are trading cheap to their peer set or cheap to their historical valuation.

Conducting a Comprehensive Company Review

And then you need to identify why. That's actually the hardest part is after you do all this math and you're tired and you know, I don't want to say bored because it's exciting for me. You're tired, you've done a lot of work, you think you know everything, you think you're a God, right? You think you're a God and you think you're going to make a billion dollars. You haven't even started to do any of the fucking work yet. Excuse my french. Once you have all the numbers, that means nothing. You need to understand why is the most important thing and why goes to very specific things about the business. Microsoft might have a 70% gross margin.

Analyzing Microsoft’s Success

Why is that? Who are their customers? What are their contracts like? What is Azure, what are their different products, what is their gaming segment like? What is Xbox like, what is office like? What are threats to office? Then you understand what are the unit economics? How much does Microsoft make, right? On an SME contract, on a big contract, you need to, you know, you can do the same thing for a retailer, you can do the same thing for a bank, you can do the same thing for a REIT, you can do the same thing for a consumer company. You need to understand what, how the company makes money and what are the major drivers.

Understanding Market Demand and Business Value

And the simplest example is when you think about a lemonade stand, right? What is driving, you know the demand for lemonade, right? It's seasonal, right? So people in the summer want it, right? They want it at a cheap price. And there's, and you can calculate your TAM by calculating how many people are driving by your street at a certain time of day, during a certain time of weather. And then you can easily calculate your costs, your cost of filtered water, your cost of ice, your costs of lemons and your cost of sugar. So you can easily create an income statement and project, right, I just, you could do that in less than 30 minutes for a stand.

Investment Fundamentals and Knowledge Acquisition

You can also do that for a company, it might take you a few hours, but after all this garbage I just spewed at you, the most important thing investing is understanding why a business should be valued at the valuation where it is. And that's what makes people great. So when Carl Icahn was buying Apple, right, 2012, 2013, and when he was doing the same thing with Netflix. He had a very strong view about how these businesses make money. With Apple, he understood the network effects of iOS. Right. He understood itunes before that. He understood that you're building an ecosystem and every new phone would drive recurring revenue. People would have to upgrade, and then they would, the app store was another source of service revenue on top of that.

Identifying Proper Value Metrics

So he understood that it was a good business, and that's why it didn't deserve a ten times P ratio. It probably deserved over a 20 times P ratio. So why was it trading at a discount to the S and P 500? Just like you have comps, you compare companies like one P ratio to the other. You can even compare a P ratio of a good company to the broad index. If the S and P is at a 22 times multiple and you find a company at 15, you need to ask yourself, why does this company have a lower free cash flow yield than the S and P? Is it growing slower than the S and P? If it's growing faster than the S and P and it has better margins than the S and P, it might be a good company in your screen when you’re sorting to do work on.

Investment Comparisons and Industry Analysis

So once you do your screen, you find the companies that are cheap to their peers or cheap versus historicals. If you’re a value investor, we’ll talk about growth another time, and then you figure out why. And if you’ve done a lot of work and you can’t figure out why company is cheap, talk to somebody in the industry. Call the investor relations. Most of the time, investor relations for mid cap companies and even some big cap companies. Like I called Ford when I was in college because I was worried about the number of SKUs they had. And I was like, Ford, you don't know what the hell you're doing.

Learning from Practical Experiences

So I was in college and I called them and they picked up and they said, we're not going to take any of your advice because you're a moron. But I'm going to tell you the three key things that drive Ford's business model. And they walked me through their captive financing arm, right, the margins of their trucks and SUV. SUVs were better, right, than the sedans. And you can do that, too. So once you realize that, oh, my God, this business looks cheaper than its peers in the S and P and historical, and or historicals do more work, call the company and then read the competitors’ filings. You thought I was done?

Engaging with Competitors for Deeper Insights

So if you’re investing in Ford, read GM's filings. If you’re investing in Tesla, read Rivian filings and vice versa, and figure out what makes one company better than the other. That will give you some industry knowledge, and soon, within a couple days, you’re going to be smarter than every dumbass on CNBC, Bloomberg, even professional money managers. You're going to know more than that and you're going to be surprised. In a few months of doing this type of analysis, you will have so much industry knowledge from reading free public filings and doing basic analysis to build screens. I'm not even saying build models that you will have enough knowledge to challenge anyone in the street about a company.

Recognizing That Knowledge Alone Isn't Enough

That doesn't mean you're going to be a good investor, by the way. It just means it's a very good beginning. Once you found a good company and you've done the channel checks and, you know, and that means calling the company, maybe going to a store, right, and looking at their product, going to an event, going to an industry event, or a lot of free industry events or a lot of paid events. Once you do that, then you can make an investment. Now, like I said, index investing is the best type of investing. If you have a full-time job, if you have a passion for this, it's a second job.

Balancing Engagement and Knowledge in Investing

And if you really want to do it, you'll take that next step. And you need to understand, when you're doing all this work, other people have big advantages. Overview, right. Because you might be investing in Qualcomm, but there's a guy at Citadel, okay, who has all the same work that you've done, but he also has a five-minute call into the company because of corporate access. He also has GLG right to speak with experts and former executives at the company. He or she also has access to things like credit card data, right. And specific information about prior deals that have happened and at what metrics those deals happened at.

Navigating the Competitive Investment Landscape

So even when you have all that data, it is possible to beat shorter-term focused investors in the long term. But in the short term, you need to be humble and understand that you will always be disadvantaged to some extent. That doesn’t mean that you can’t make money. I mean, I personally, I'm sure a lot of people in the space here have done better than most hedge funds. I mean, the nine, the first nine months of the market this year, it’s been the best first nine months in the S and P 500 in 20 years, right. Going back to the dot-com bubble, because in Covid, the market dipped before it rallied, for example.

Market Trends and Investment Timing

But the first nine months of this year, why has the market gone up so much? Is because of anticipation of rate cuts and the economy is held in. But that will be a topic for another space. So now you have a company, you've done all the due diligence, you make an investment. Your job is not over once you've done that. Okay, think about, you own a part of a business. If you own a part of a business, are you going to buy it and then just forget it? Absolutely not. You're going to want to call the CEO and say, hey, why were sales up 7% when you said they were up 10%?

Continuous Monitoring of Investments

Right. That's called guidance. When a company gives you guidance and that two-thirds of companies in the S and P 500 give some sort of guidance, you need to understand that the stock will perform based on how it differs from that guidance in the short term. In the long term, the fundamentals will win out, but in the short term, that's how you justify these, or people try to justify these moves. So every quarter, when earnings come out, you'll want to take a look at the AK. If you're a long-term investor, you just want to make sure things aren't blowing up. They're not doing anything dumb. At the very least, that's called risk management.

Implementing Risk Management Strategies

Risk management is making sure you or the management team is not doing anything dumb. That is risk management in two senses. And from a financial perspective, it's not using leverage. Now, if you're doing that every quarter and you're following companies and you own good companies that you screen for that are defensible, you bought them at good metrics and you have a basket of them that is diversified and you follow some very basic tenants, you are on your way to becoming an investor. And when you’re very young, you may not need to diversify out of equities and maybe a little bit of gold and maybe for you guys, a little bit of bitcoin.

Tailoring Investment Strategies to Different Ages

But for somebody who's older, you might also want a higher Sharpe ratio. So you might want lower volatility. When the market's down 20, you may not want to be down 20. So you want to diversify that portfolio with different forms of income. Or even if you're young, if you have a multimillion dollar account and you've built your own business, you may not want to see that account down, you know, 100,000, 200,000 in a day. Right? So you'll want to diversify that into various forms of income investments, various forms of other asset classes. So it's never too early to start.

The Importance of Starting Early in Investing

You can start investing today with free investing. I talked to my friends in places like the UK and Europe, and they're jealous of Americans. They're so jealous. Why? Because in America today, you can open an account and most brokers and you can trade for free, okay? They might be selling your information to somebody, but if you have a $50 account, it doesn't matter. You can start an account for free and you can trade, okay, with no friction. When I started to trade, you would have to pay like $40, right. If you only had $1,000, your entire return would go away in one trade.

Emphasizing Accessibility in Modern Investing

So today you have a huge advantage outside of your indexing, outside of your tax-deferred accounts. You can open up a broker, do your own work, and when you're starting out, you want to buy the best companies at relatively cheap prices. There are 50 different ways to invest. We can go into spin-offs, split offs, growth investing, event driven investing, merger arbitrage. But I don’t want to do that today. Go ahead, Jay.

Transitioning to Next Topics

Yeah. Quick heads up because we are going to roll into this next chat. We’re going to keep talking on long-term investing, but we have some other. Stuff planned in about four minutes here. I just want to give you a chance. And everyone that's on stage is welcome to stay on. And we have some new people joining up as well. And I hope everyone's been taking a lot of takeaways from this. I know, Omar, we host that Tesla space every week and this one's been.

Continuing Discussion on Long-Term Investing

A little bit more listen. But I hope you're enjoying as well. Sam, Bad and shy on here, who will be participating in this next one. But Jay, I wanted to kind of see if you had any final thoughts kind of on the topic here before we roll into that next one here in a few minutes. Yeah. So final topics. You know, the takeaways I would take at any age, it is never too early to start and it is never too late to start investing. It is sad that in the 21st century, in the most powerful country in the world, in the most technologically able country in the world, with arguably some of the best institutions in the world, that they don't teach saving and investing in elementary school or in middle school or in high school or even in most colleges, it's frankly a very sad state of affairs.

The Responsibility of Educating About Investing

And, you know, as adults, as most of you are in the audience, it is your job to just learn as much as possible. The best thing you can do for yourself is to learn about tax-advantage accounts index investing. And if you have the time right to look and do individual security selection because the more you learn now in your first couple of years, you are going to make mistakes. I guarantee it, right? I will bet that you will make mistakes. Even if the markets go straight up, you’ll make dumb mistakes. And the earlier you start and the more effort you put in your 10,000 hours, you want to be going through at least one industry and two or 310 ks a month if you’re serious about it, if you’re serious about anything, like sports, right, or your career.

Dedication and Seriousness in Investing

Investing is more difficult than most of the careers here in the audience. You really need to be serious and start early. And some of the best investors I know, some of them started at 40 and now they're 70 and they have 20 million, $30 million accounts. So take it for what it is. We have calls every Sunday. We have 3000 people in our educational discord, you know, people with 200 million accounts, hedge fund managers, former hedge fund managers, people who have done equities, who've done futures, who've done options, convert, ARB, distress, debt, relative value, credit that are sharing their ideas.

Building Knowledge Through Community Engagement

We try to publish one or two ideas a week and we rank them based on different risks because no ideas are the same and people should understand that. And you know, we do it at very low cost. Like $20 a month is the lowest. If you want to be part of the community, it's like 45. And we are giving you the same ideas as, you know, the hedge funds that are on our portal for $10,000 a month, $15,000 a month. So most of the stuff I talked about today you can find absolutely for free. You know, the resources like Demoterin, they're public libraries. You know, there are a bunch of free resources online.

Promoting Accessible Investment Resources

and most of you know, at the very least should just buy in low cost index fund and own that for the rest of your life. So, you know, with that, thank you for the time. I know it's been a few weeks, been traveling all over Europe meeting clients, but it was good to catch up with everyone on here. And if I made a mistake, please forgive me. I'm not like in front of a computer or in front, you know, or I don't have a pen and paper with me. You're good. You know, if you have any questions, you know, send me a DM. And this is, you know, it's a free space.

Final Notes on Investment Approaches

This is not financial advice. You know, take your time when you're doing these things. Don't make any impulsive decisions because there's always something cheap to buy. Always. There's always something blowing up. It's a lot of great points. Jason, everybody. Appreciate you coming on. Jay, I dropped you a message. Next weekend or next Friday. We got those bank earnings coming out, so be good to do something. Preferring earnings season special sits, research everybody.

Transitioning to New Discussions

Make sure you're following him. We've been doing spaces for years and years now. It's always great when we can get him on. I know that the audience loves it as well. Really good stuff there. We've got some new panelists that are going to be joining up here for this next hour. Coming into the ring, I've got Simon up here who's going to be co-hosting with me. I know, Simon, you brought a whole crew of amazing people in the stock and finance world. You're going to be pitching a couple of stocks out here tonight.

Continued Conversations About Investing

We're going to be still talking about long-term investing, but more on the stock picking side of things. We did one of these last week and it was really well received. People seem to enjoy a lot. So I'm excited to run something back here this week with you. Simon, how's it going? I'm doing fantastic, man. Speaking of years and years of spaces together, we've been chatting for years and years, too, and it's kind of a pleasure to be doing a sponsored space here.

Integrated Discussions on Investing

Like you said, I brought an entourage with me to share some ideas. You know, like you said, last week's was a big success and really looking forward to continuing the momentum jumping in here today. Yeah, and speaking of which, in regards to that, yes, super excited to have. Seven investing as a sponsor of myself as well as Evan, who's up here on stage. Evan put a tweet that's pinned into the top of the space that I encourage people to check out. That is access to seven investing.com.

Exploring Seven Investing

and if you put in code Wolf, you get your entire first month free. So I do recommend jumping in there. You can check out all the stock picks that they're giving out, taking a lot of those evaluation methods which you've been learning about here and putting them to work. Simon, anything you want to say in regards to the packages and the offerings you have before we dive into these stock picks? Yeah, absolutely. Thanks very much for the opportunity.

Access to Investment Packages

You know, seven Investing.com subscribe is where you can get started. If you do go to the monthly option, we typically offer that for $17 a month. But if you use promo code Wolf, you get the entire first month for absolutely free. And what seven investing does is it’s our job to go out there and find the best stock market opportunities and recommend them for individual investors. There’s 5500 American traded stocks. There’s 15,000 global equities available.

Maximizing Investment Opportunities

What is the best one to buy this month? And then also what are the five best buys that we've recommended before that we really consider you? Take a look at, again, that's kind of the model of seven investing subscription. We publish the new recommendations on the very first of the month of every month and then the five best buys on the 15th. And the thing that's also important is that we really think that investing is a personal thing, right? There's different types of companies.

Personalized Approach to Investing

And different types of industries. And know thyself is probably the most important thing that you can do. The previous speaker just said, you know, that’s never too early, it’s never too late. But we all have different styles as investors. And so one of the most powerful things is that we actually categorize all of our picks based on conviction level and on risk tolerance. You might be looking for a much safer dividend paying low risk stock if you're, you know, you don't really like the appetite for risk.

Aligning Investments with Risk Preferences

Or on the other hand, if you want to take a swing for the fences, you might be looking for a high risk stock. And so to make it interesting for today's space is to really spice this up a little bit. I'm going to be presenting two actual seven investing recommendations. One is a very low risk stock. The other is a very high risk stock. And we'll discuss a little bit about why you might consider each one of those as an investor today. And then, as you mentioned, I've got so many great friends here in the audience with me.

Bringing in Diverse Perspectives

I see Kelvin's here, I see Brett, I see Hoda, I see Cole, I see vegan hippo. I really stress the importance of community as well for individual investors. If we're doing this right, we're empowering one another. We're looking at each other's different perspectives on things. And so I thought it would be a lot of fun to bring a group of my friends to not only comment and ask questions about the stocks that we're talking about that I'm presenting, and then also to perhaps say a couple of things about seven investing and how they've worked with our company in the last four years, but they've also agreed to introduce one stock on their own watch list for the program as well.

Collaborative Learning and Idea Sharing

So altogether, two stock picks from route seven investing as well, as a group of five that are going to put some more ideas on the watch list. God, I'm pumped up, man. I'm ready to go. This will be a fun spaces with you here today. I am super excited. Evan, is there anything you want to share before we get started and rolling into this? And no worries if not a great time for you to speak. I know that you mentioned you were moving around a little bit there.

Opening the Dialog for Perspective Sharing

Okay, yeah, no, I'm good. I'm good. I appreciate everyone for joining in. Like you were saying there, we've been working with seven investing. I think it might be, if not the first, but one of the first. People that we've been working here. And I've been always watching the picks, so. Yeah, and you get the first month for free, so definitely worth going in and checking out. And I'm excited to hear the stock pitches. We are coming forward, so I appreciate you joining in, Simon, and everyone else.

Setting the Stage for Stock Pitches

And I'm excited for the spaces. Yeah, and everybody click that link in the top of the space. And if you can't find it, dm me the word investing right now and I'll share it with you. Don't want to miss out. A bunch of people grabbed it last week. They've never offered it for free before. So you might as well check it out. All right, Simon, I'll turn the floor over to you. Let's get going. Okay, guys, let's start with the first low risk stock recommendation.

Introducing the First Stock Recommendation

And this company is MSCI. Ticker on. That is exactly what it sounds like. Back in the 1960s, this is a global aggregator of financial information. So back in the 1960s, there was a company called Capital International, that's the CI part of this that went out and said that it wanted to quantify the equity returns of international markets. Right. We always kind of have a home court bias. We always want to invest in the companies we know. But a lot of investors had a risk for investing in global markets, and so they went out there and they quantified different regions, different countries and different types of investments. And some years later, Morgan Stanley really liked that as an idea to benchmark their own funds to evaluate performance.

The Evolution and Impact of MSCI

They acquired the company and then spun it off into a public entity that is now MSCI. And so the market has become so incredibly complex in the 60 years since then. Right. Everything is an ETF out there now. There's 160,000 MSCI indexes that are benchmarking $15.6 trillion of invested assets. And why do you do that? Well, if you're an investor, especially an investment professional, you want to know if you're beating the market. You know, on this show we always talk about, are we outperforming the S and P 500?

Assessing Performance Against Market Benchmarks

That's one index compiled by S and P that tracks the 500 largest American companies. But if you're a different type of investor looking in a different region, you might want to have a different index. And so MSCI World is the most popular one that just kind of invests all over all corners of the world. MSCI emerging markets for emerging markets.

Overview of MSCI and Its Financial Landscape

But they've even got even more exotic types of indices as well. Again, 160,000 of them that altogether are benchmarking $15 trillion assets. So this is a really complex financial world out there. MSCI is the one that makes sense of a lot of that. They then package 15 million unique data sources into 15 applications that are selling to 7000 customers in 95 countries.

MSCI's Low-Risk Characteristics

Why is this a low risk idea? Why is this a low risk company? Well, because 55% of the revenue is coming from the indices, the indexes that they provide. But they also have risk and portfolio management analytics subscriptions, they have ESG subscriptions, and they even have a private assets platform. This is a company that has 98% recurring revenue that has grown, on average 15% per year for each of the past five years. It's got 93% to 95% customer retention each year for the past decade. It's grown its earnings per share on an average of 20% each year for each of the last five years. And it's grown its free cash flows when you pay all those operating expenses, but you also pay the capital expenses to run the business as well, at 17% every year for the past five years, churning out a 40% free cash flow margin.

MSCI's Financial Stability

And if all that wasn't enough, $450 million of cash on the balance sheet, 32% return on invested capital. All of these are the metrics that you love to see. If you're an investor, you want dependability, you want recurring revenue, you want a management team that's been in place for a long time. MSCI, outside of the magnificent seven, is a fantastic long term, low risk opportunity. And they're sharing those free cash flows with investors as well. They've increased their dividend an average of 16% for each of the past five years. It's now yielding about 1%. And they repurchase their own stock and have reduced their share count by 9% over the last five years.

MSCI's Growth and Investor Appeal

And so this is a company that ever since the financial crisis of 2008, right 16 years ago. Every single year except for 2013, they've had positive annual cash inflows in the ETF's right. It's just amazing to see how much money has moved into stocks. The same reasons that we preach long term investing. Professional investors believe in that as well. It's one of the highest performing asset classes that's out there. And MSCI is so embedded in this industry across the entire world. And so one last thing I wanted to talk about this is the valuation.

Valuation Metrics of MSCI

This is a fantastic company. It's been a fantastic company for 60 years with one of these. When you're buying into high quality like that, you tend to look for opportunities to buy at an attractive valuation. You could buy MSCI at any point and still capture those 15 20% annual returns at low risk, but right now might be exceptionally compelling because it's valuation. Selling at 17 times sales, 40 times trailing earnings, and 38 times trailing free cash flow. Those metrics might sound high compared to several other investments, but again, their dependability, the recurringness of them, the high quality of the earnings and the cash flows, these are the most attractive valuation metrics we've seen on MSCI since 2019.

Long-term Performance of MSCI

So for five years, basically, this is the best in terms of the multiples, even though the stock is up 170% since then. So MSCI as a whole, when you're counting dividends over the past decade, it's up seven. Excuse me, 1280%. That's turned $1,000 investment into every thousand dollars you put into the stock is now worth $13,800 over just a decade. The punchline for this one, maybe, is that Einstein once called compounding the most powerful force in the universe. This is a compounder of your capital you can count on year in and year out, and just so highly embedded and recurring and dependable that you really can't get much better for a low risk stock opportunity than MSCI.

Panel Discussion and Stock Insights

What a rundown there. Really good stuff. Simon, I know that we have a few people up here on the panel who are connections of yours. Definitely want to hear some of their thoughts. Is there anybody that you'd like to go to first? I know you mentioned vegan hippo, but I'm not sure that I see them just yet up here. Yep. Perfect. So, you know, there's. I think there's a hand raise if you wanted to speak. Anybody can speak at any of these, but I did want to hand it over to Brett to see if he wanted to have the first comments, maybe to show some thoughts or questions about MSCI.

Brett's Analysis of MSCI's Financials

Sure, Simon, thanks for the handout. Can everyone hear me? Is that. All right? Perfect. Yeah. So on MSCI, I'm seeing on a chart here on Finchet operating margin, which just another form of measuring the profit margin back in 2014, 33.8% last twelve months, 53.7%. It's been stagnating a bit over the last few years, but just thinking about this business model, it seems like one that could have near infinite operating leverage. I mean, obviously you can't go above 100%, but it seems like there can just be a ton of operating leverage. Do you see or any reason why profit margins won't keep expanding over the long term, getting to 55%, 60%, 65% if management wants them to?

Discussion on MSCI's Capital Allocation

Yeah. Fantastic question. Thanks, Brett. You know, the way that they deploy capital, other than the dividend, the repurchases, there's not a whole lot of reinvestment that they need in their own platform. So they go and they make acquisitions. Some of those big acquisitions, some of them got goodwill or intangibles. It works against the operating margin while not working against the free cash flow margin. One of those that you've seen recently, Burgess groups here, was one of the acquisitions they made here last year. A couple of years ago, they wanted to get into private assets. That's going to be the next democratized way to invest where you're not just buying publicly traded companies through brokerages, but you'll have greater flexibility and options for private assets, too. MSCI has gotten ahead of this.

Challenges Faced by MSCI

They acquire the employees acquire the goodwill. That tends to take a little bit of short term hit for margins, but certainly worth it when you see those kind of long term EBITDA margins, too. All right, perfect. And yeah, I guess I'll talk about a stock on my radar. I should say that if anyone wants to hear Simon at length, we had him for an hour talking rocket lab. On my podcast, the Chitchat Stocks podcast. Which you can listen to anywhere but stock I want to talk about is one that is really popped on my radar this year because I kind of like to go dumpster diving in stuff that is in a steep drawdown.

Celsius Stock and Market Dynamics

That used to be a favorite among investors and that's Celsius stocks in the seventies. Drawdown for people that don't know, it's one of the fastest growing, perhaps the fastest growing energy drink brand in the United States at about 10% to 12% market share, depending on what the estimates say and that's gone from basically zero five to ten years ago, and they're about to expand internationally. There's still room to grow and take market share in the United States, and the whole category is growing. But the reason the stock is in such a steep drawdown is because they've had. Well, there's been two things. First, there's a slowdown across the entire energy drink category in 2024.

Revenue Concerns for Celsius

Now, the category has grown and taken share from soda, from even stuff like sports drinks or coffee over the long term. But this year they've seen some, you know, monster Red Bull and Celsius have seen some slowing down, and that's really, Wall street doesn't like that, and that's hurt their revenue growth, and that's caused the stock to go into a drawdown. But another thing is that they've had a deal with Pepsi. It's a big distribution deal for North America, and that started in 2022. And the first year of that, Pepsi, I think, wanted to make sure all the shelves were filled and that they could really get Celsius in as many places as possible.

Inventory Management Issues

So what happened is they overbought a little bit of inventory, and now in 2024, they're realizing they can lean up how much Celsius they're buying, which is going to take a hit on Celsius's revenue in this quarter, or, excuse me, last quarter, the upcoming quarter, and probably a couple quarters after that. And that's going to cause revenue growth to slow down again. So, long story short, revenue growth is slowing and it's going to slow farther than what actually is happening on the ground. And given that they keep gaining market share, given that this is a great category with huge, just tons of profits to be had, and the fact that they are just really pushing internationally, the stock is not what I own at.

Future Projections and Valuation of Celsius

The moment, but it's one that I. Will have near the top of my watch list. And if I look at the valuation, trailing earnings of about 30 times, if you think they can keep gaining market share, revenue and earnings should grow at a double digit rate for, I mean, at least the next three to five years, if not longer. So I don't think that's too demanding. I think there's plenty of room to. Expand their margins from the 20% to. 23% level they have right now. So that pretty much sums it up. It's not as low risk as MSCI. From a business perspective, but I think.

Potential of Cassava Sciences

It'S one that could be a great risk reward opportunity at current prices. Yeah. Thanks very much. Brad, that's a great 1 celcius if anyone's interested in that one as well. Ticker on that one. Gob, do we want to take a break and talk about MSCI for a little bit? Do we want to go into the next one? Do we want to have another guest? What? Do you want to go from here, my friend? Yeah, we can. And I got vegan hippo up. I wasn't sure if you wanted to go over to them as well.

Discussion of Cassava Sciences

I think vegan would love to talk about the next stock when we start talking about Cassava as the next one. Okay, well, we can check real quick. Gary, I know that you loved having Simon on stage last week. Any thoughts here on MSCI? Any questions around that? Yeah, I just posted a comparison of. The returns of SMCI versus Nasdaq and the SPGI. And Simon, first off, big fan. Don't take this as any criticism whatsoever. I like MSCI, but why would you.

Comparative Analysis of MSCI

Pick MSCI over Nasdaq or S and P Global? S and P lol has a higher. Market cap and I'm big on large cap, but they both outperformed. And all of these financials have underperformed over, I think, three, one, three and five years when I took a look at the charts. So what gives you the confidence that. It'S going to outperform? Because one of the things that I. Always say is, if it's not going to outperform Voo or spy, why am I investing in it? It's definitely going to outperform the spy.

Performance Metrics of MSCI

When you're looking at a stock that over the last decade up 1200%, this is a serial outperformer. And compared to S and P, the peers, I think it's Henry Fernandez. This is a guy that's been the CEO, long tenured. He's got this framework of capital allocation built into the DNA of how MSCI operates. When he goes out and he makes acquisitions, he's relentless about the price, he's relentless about the execution and the milestones and the things that they do.

Market Comparisons and Management Quality

And he gets fantastic assets for fantastic prices, swallows it into the larger platform that is MSCI, and then rewards us as shareholders of that. And so I think that compared to peers, this is a very good space. S and P is another great s and P global. SVGi is a very good company also. I don't want to knock that one in any way, but for me, MSCI is just so, just got such a good management leadership team that I think maybe that puts it one point above, in my opinion, I love it.

MSCI's Consistent Performance

And I did look at the ten year. It's way outperforming. That's why I'm a fan, Simon. And a great low risk. Right. You sleep well at that night when you're just collecting dividends and know that they're buying back shares for you and out there hustling and making acquisitions and my gosh, I mean, 95% recurring revenue and got 40% plus free cash flow margins, that's as fantastic as you can get with the business.

Cassava Sciences and Its Market Potential

Hey, you won me on Rocket Labs last week. SMCI got a little shake up after you recommended last week, but rocket Labs and SMCI, you got me on that one. There we go. Thanks very much. Thank you. Sweet. Simon, you want to go into that second name here, unless you think would want to comment. Yep. Is there any other questions about MSCI? Are we ready to kind of move on to the high risk side of this?

Concerns About Debt Levels

Hoda, it looks like you wanted to speak up a little bit. I just wanted to ask the question, Simon. I like the stock pick in generally speaking, as finance and ETF's and index. Investing grow globally, definitely a really big market opportunity there. Could you talk through the debt? I just did a quick chat GPT research on MSCI and the only counter argument I saw for it was high level of debt. Are you worried about that or is. Chat GPD actually wrong?

MSCI's Debt Management

No, it is pulling the right information, Hoda. To Sam Altman's credit, they've got the right numbers out there. I think it's around $5 billion in debt, if I'm not mistaken, which is large. Thats a large amount of money. But also when you've got these dependable revenue streams, utilities, telecoms, companies that have locked in contracts, they know how much of that is going to pay for interest of the debt. Less concerning for me than if you're some small micro cap company with no assets and no cash flows and no dependability, that would be more concerning for me. But for a company of this size with that kind of visibility and transparency into its business, I'm not as concerned about it.

Interlude for a New Topic

Very good. Yeah, predictable debt is definitely the right kind of debt. Sweet. All right, Simon, let's roll into that second one. Okay, so now that everybody's comfortable with the low risk side of it, let's make everybody a little more uncomfortable with the high risk side. I'm going to bring up one of the most controversial and highest risk stocks in the market. But I bring this up because I also think it's got one of the highest potential rewards that I can see that really could hit, in my opinion.

Introduction to Cassava Sciences

And the company is cassava Sciences. The ticker on that is Sava. This is a small cap independent biotechnology company, and they're going out and looking to cure Alzheimer's disease. Anyone who knows this space knows how hard, first of all, it even is to be an independent, pre revenue drug developer. It's just hard. You've got cash burn, you're always under the gun. You've got bills you got to pay, you've got to get something through trials, and we don't have a revenue stream to offset that. This is the ultimate, riskiest section of the market in the first place.

Challenges in Alzheimer's Treatments

But then, on top of that, too, Alzheimer's has been just an elusive and very difficult condition to treat. This is a company that was. Excuse me, this is a disease that Lewis Alzheimer himself, the german physicist, discovered back in 1905. He noticed this unusual disease in the brain. There were these buildups, and it was causing memory loss and disorientation. It was classified as a rare form of dementia. Here we are 120 years later.

Research and Treatment Landscape

Even with all the research and all the fantastic progress we've made in understanding Alzheimer's, there's really only been five commercially approved drugs to even treat the symptoms. Two of them have come from Biogen, and one of them has come from Eli Lilly within the past three years. And then two others were more for treating memory loss and more of the symptoms, rather than the foundational disease. So this has been a really tough space in the first place. But it's also a very necessary space. You know, if there is a disease that needs to be addressed and needs to have a treatment or a cure, it's Alzheimer's.

The Alzheimer's Crisis

Right. There's 6.2 million people just in the US that have Alzheimer's right now. The cost to the system is $321 billion, and that's in direct medical costs. That's not counting families that are caring for a loved one or a family member that has Alzheimer's that you're spending your time not getting paid for to take care of people that need it. And out of the direct costs, about 50% of this is picked up from Medicare. It's a disease that disproportionately affects elderly people. If you're over 65, you're at a higher risk. And it's really costing the United States is a whole lot of money.

Alzheimer's as a Leading Cause of Death

And on top of the people that are living with Alzheimer's. It's actually the 6th largest killer in the United States, the 6th leading cause of death in the United States, killing about 120,000 people every year. This is something that's getting worse. Over the last 20 years, the instances that are reported of Alzheimer's every year have increased 145% in total over the last two decades. Again, there's only five commercialized drugs. And Cassava says, this is what we're going to go all in on.

Cassava's Aspirations

We want to just take this challenge on head on for curing and treating Alzheimer's disease. What they've done is they've got a drug candidate called semiphalin. This is one that's in phase three right now. It's already passed the first two phases of clinical trials, and they're doing it in some larger studies with the larger patient population right now. But what they're doing is this drug, it's an inhibitor that targets a scaffolding protein called filament a.

Mechanism of Semiphalin

And this is something that sometimes can get misshaped, right. If it becomes misshaped, it really interferes with kind of the neural signals of the brain. This is why we have dementia. This is why we have forgetting things and the other symptoms of Alzheimer's. And so the idea of filament a, the drug that they're developing, is to restore the normal shape of this protein so that you won't actually have these protein buildups and these problems later on, prevent the misshaped structure of the filament a that would cause degradation of neural pathways.

Unique Approach to Alzheimer's Treatment

And so this is vastly different than anything else that we've seen in terms of a potential drug candidate out there. You know, when you look at kind of all the diseases and all, excuse me, all the medications that are out there right now that you can take, whether it's a shot, whether it's monoclonal antibody, whatever it might be, the anti amyloid, you know, treatments that are available. This is something that's completely different approach. It's now in phase three.

Results and Future Prospects

It's got two different trials going on, and we've seen in the phase two data some pretty good results so far, right? 38% reduction in cognitive decline over a six month period. She saw, actually, for mild patients, actually improved the cognitive, improved the cognition results for mild Alzheimer's patients. And this is a study that we're trying to build on. They're trying to build on some momentum, bring it into a larger trial now for phase three, and actually get something commercialized as soon as next year, when they start getting the data readouts.

Market Opportunity for Cassava

So that's the opportunity. That's the market. That's what Alzheimer's could be. If you could have a disease that's as serious as this, treated by something that's an oral pill, not a shot or anything else that's more complicated than that, an oral pill that you can take. It would be completely game changing. But there's also a boatload of risks on this one as well. The reason I call this the greatest risk versus reward opportunity that I'm aware of in the stock market is because there's just a lot of uncertainty around this one.

Challenges and Uncertainty in Development

Just the technical uncertainty is huge. To even get the molecules to do what you want them to do and to treat the condition that you're trying to treat. Knowing that Alzheimer's 120 years out that we haven't found anything that's really working well, just, there's technical challenges with this. And there's also a huge controversy on this independent company going at it alone, going after this massive disease like Alzheimer's, is that has got a lot of controversy surrounding it.

Regulatory and Management Challenges

The SEC just levied a $40 million fine on cassava for improperly handling the clinical data that they had in phase two that they reported. They thought they didn't disclose completely accurately a lot of the data where some patients were admitted in the phase two b study for the cognition analysis. The company's founder and previous CEO, Remy Barbier, and his wife, who is the chief science officer, Lindsey Burns, have both stepped down because of some of the involvement of what they had on unblinding them during when the data was collected.

Leadership Changes and Future Direction

Now you've got Rick Berry, who's come in. He's now the CEO of the company, who's previously on the board, got a great credibility, great reputation from Sarepta, has been around the industry for several decades, taking the helmhead, you know, kind of wiping the slate clean and leading cassava into putting a lot of, kind of a troubled past, or at least an alleged troubled past behind them and focused specifically on the trial and the outcomes. And so I think that when we look at this all together, you know, there's also a lot of short sellers that go after cassava.

Short Selling and Market Dynamics

It's curious and kind of unclear what a lot of motivations for those might be. Obviously, if you're short selling a stock, you want to see its price go down so you can financially benefit from it. But there could be other motivations as well. Right? Big pharma might want to buy time to catch up with cassava in the R and D row, right. There might be costs that cassava is having to use fines for the sec or legal fees or other things that could be very difficult for them to raise more money.

Controversial Nature of Cassava

And then, of course, the financial profits as well. This is one that is contentious. This is one that's controversial. You attract a lightning rod of anger from a lot of people that don't want to see this company succeed. But then you've also got the anecdotes from the patients that are on the drug that improve their cognition, that see the results out there. This is something that would do a very good for the world if it were commercialized and approved as well.

Potential Rewards and Risks Linked to Cassava

So I think maybe I'll open it up at that point. Gav, again, an extreme risk versus reward. The company right now, $1.3 billion. I personally think, I'll disclose this before we jump into the q and A of it, that I think that there's about a 33% probability of success of simithalam getting approved. It's in phase three right now. Historically, phase three drugs have about a 50% success rate. Alzheimer's has had been less than 10% for its expanded history.

Future Viability of Cassava's Drug Development

But also, we've got a drug that was approved by Biogen just three years ago, that semifinalm already has got a better safety profile and better cognitive improvement results thus far, which makes this a little bit more attractive than a lot of them in the past. And if this does actually hit and get commercialized, the market for Alzheimer's with 6 million people in America that are living with this, probably a ten, $13,000 price, scheduled price for the drug, this is something that could very easily sell $10 million plus in revenue per year.

Market Potential and Strategic Partnerships

You would almost certainly see a large pharmaceutical company, probably Pfizer, want to team up with cassava. If we start seeing good readouts at the end of this year or the middle of next summer, put that together with a $1.3 billion valuation day, this is a stock that could very easily be a 20 bagger or more if it hits. But manage your risk appropriately, because there's a lot of risks and a lot of things that are overhanging in terms of the uncertainties. Cassava is sava the highest risk versus reward potential that I've identified in the stock market right now.

Engagement from Market Experts

All right, well, real quick, I've got one of my favorite small cap traders coming up here, so I assume he has some comments for you. Simon Bigquench, what's going on? You got some thoughts here? Hey there, daddy. Oh, I absolutely do. So I love this guy because this is my baby. This one kind of made it for me. I was starting out degenerate biotech catalyst trader. This is one of the big ones, again, to just kind of echo.

Market Perspectives on Cassava

It's not. Definitely not financial advice and manage your risk as you see fit. But this one I ran from two to 135 the first time and it put it busy, set me up for the long term. But everything you're saying is spot on. I couldn't believe this wasn't being talked about more. If you look at it, this is at a eight to $10 billion addressable market that's growing. What is it, nearly 10% a year? He's spot on, moonshot.

Cassava's Market Growth and Trading Strategy

But if anybody's going to do it, I think they're best positioned. And if they do, to echo what he's saying, I mean, shit, can't imagine what a $1,000 or something like this would do. But I guess my question is that, would you agree that those are. Because no one really has, like, I feel like no one really has a temperature on that market overall as far as how big it can be. I mean, the research I've done puts it to, you know, 10 billion over the next ten years. Would you agree with that?

Market Size and Future Analysis

Yeah, the market is definitely, in my opinion, 10 billion or more. Right. Just look at America. Don't look internationally, but even just within the US, talking Alzheimer's, 6 million people, even if you get. Even if you get less than 20% of that, say, a million people taking the drug, I think the list price of $13,000 is reasonable. That's $13 billion a year. Yeah, I mean, I'll say some shut up, but I feel like this chart in particular, not this more fun.

Market Valuation and Trading Strategy

This is a fundamental story, more than anything else is, I guess, thematic driven, but it is traded very favorably above the 200 day and it is just recently popped up. So this is a fun one. I always. I hold core position and I trade the rest and that's. I guess it all comes down to philosophy, but I just wanted to pop in because I've rarely ever heard this name mentioned.

Interest and Analysis in Cassava

I feel like I was the only person that's ever even cared enough to talk about it or willing to take the risk to put my name on it. But hearing that, I'll definitely. You got a subscriber here, so thank you. Thanks very much. Big quench. Good stuff. Really appreciate it. And reminder, for anyone that does want to check it out, you can get the whole month for free subscribing here.

Closing Remarks and Next Steps

Just use code wolf, go through that link in the top of the space or just dm me the word investing and I will share it to you. Ha, I see vegan, hip with a DM. I appreciate that. If you guys want to raise your hand on the space, you just tap the heart button that you see at the bottom and you just hit that raise hand feature. And that's how I know to call on people as well.

Audience Engagement and Discussion

So it makes it nice and easy to go there. Hey, Calvin, did you want to jump in here with some thoughts on either one of these? No, I think it's very interesting. Those stocks that have been mentioned, I think it's on my watch list, so it'll be interesting to see how it plays out. All right, I got a question. Yeah, I had one more question.

Discussion on Competitors in the Market

As far as comps go, you had the narrative going around, right, that everybody was kind of saying like, we need to keep our eye on a novice bio. They might develop. Like, what's your thoughts on that? So it's a good thing for everyone to look at those two comps side by side. I know that they're split between Alzheimer's, Parkinson's, but core focus on neurodegenerative diseases overall.

Cassava and Anovus: A Comparative Analysis

So, like, how do you think that Anova stacks up? Is there competition and just what's your, I guess, vision on that? Well, there is, yeah. You know, I would say the more direct competition is Lilly got their drug approved this summer, right? This last summer, dynam, I get the name of the chemical itself. It just got approved, too. And that was kind of a, you know, when you couple that with Biogen, had Aduhelm back in, was it 2021?

Recent Developments in Drug Approvals

And then they had Lakimbi also, you know, these are $20,000 drugs for treatment. You know, they're getting approved. These are, these are actually commercialized, available, you know, drugs now out there right now. And there's a lot more, there's a lot of Alzheimer's trials underway. You know, even like early stage and later stage, you know, you're just understanding the disease better.

Final Thoughts on Market Trends

And I think that, you know, we're going to let the data talk for itself on this. It's one thing to say you got a trial and you're going after a big drug or a big disease, but it's something else to say, you know, here's what the readouts look like. Here's the improvement in cognition. You know, that's something that I'm going to kind of follow here. I really am interested to see, in my opinion, these two trials, the rethink phase three trial for cassava is coming out at the end of this year and then refocus next summer.

Outlook on Competition in the Market

Those are phase three trials. That's gonna be really telling. We see some good results from that. I almost feel like Pfizer is gonna have a commercial partnership with them, if not try to acquire them directly. Yes. Scoop them on up. And that's honestly the path because Medicare is gonna have to find a way to pay for some of this because that's the population that's gonna get it.

Discussion on Sava and Market Dynamics

So this one is probably the biggest one since Carvana because I was in Carvana very early, right. I posted a whole thesis on Carvana and this is a similar type of thing. If there is a recovery, there will be a serious short squeeze because it is very shorted stock and I don't want to get into a whole short thing either. But it's a very shorted stock to the point that, you know, overnight you can see 70, 80% up. And again, if you're not used to trading small cap biotech, you should for sure stay away because I feel like we kind of started off with these ETF's and spy and all that, and then went into this one. So I would say not for inexperienced people, it is a very volatile stock. But addressing all these concerns, I just want to drop a little one, really. Sava was investigated with Department of Justice, Sec, NIH, I mean, you name it, every single agency under the sun investigated Sava first investigation was because of that spike that the big Quinn was talking about.

Investigations and Safety

That spike was investigated by SeC, also FBI, because he spiked from, you know, like you said, from a two to, I think 143 or so. So all these guys looked at it and they decided to let the trial run, right, because of the safety. So FDA is really focused on that safety. So are we. But at the end of the day, if this plays out, I like how you guys did a really good due diligence on this. Pfizer is the one that's looking at the old CEO. Remy was, you know, had some things that he would say and do and partnership was here and there because he did have some previous drugs that failed. And out of all places, he did work with Pfizer before. So I would say also Pfizer is a big pharma that's really sort of kind of dying off. And look at Lily and look at Pfizer. Look at the charts. I mean, Lilly is going to cross $1 trillion mark pretty soon here. So I would say this would be a great deal for Pfizer.

Market Valuation Insights

I don't see a buyout. I do see a partnership. I just want to put that out there. And again, it is extremely high risk situation. So I mean, if you wake up and it's at $4 a share, it's possible. Simona, I appreciate it. Vegan Hippo and I, we've been chatting about this one for years, man. It's been interesting to see the ride. It's been a volatile up and down and then back up again. But I like the direction that Rick Berry is bringing them. I mean, he's brought a lot of credibility to this and a lot of this stuff that has got a lot of people worried about the stock is now in the rearview mirror. Right. When you don't have to worry about the DOJ anymore, you have to worry about the SEC imposing more fines anymore. You just focus on the data. I really want to see what the readouts show at the end of this year. So excited to see what that looks like.

Probabilities and Market Cap Concerns

And like we said, if it doesn't look good, this is one of those that you shouldn't back up the truck and put your entire life savings into a stock like this. I mean, I still think, and I'm sticking with this, that 33% probability of success. But if it's worth $25 billion, if it succeeds and you get a 33% chance of, that stock should have an expected value market cap of $8 billion. And it doesn't. It's at $1 billion right now, you know, so the market is pricing in less than 5% probability of success when it's actually likely based on at least what we've seen commercialized in the last three years, much higher than that. It's a good risk versus reward if the payout hits. But again, manage your risk accordingly. I wouldn't recommend putting any money in that you couldn't lose because, like vegan said, could wake up. It could be a cash value if the data comes back bad.

Evaluating Sava's Financial Position

Really, really good points. Gary. Jump in. Okay. Since I'm not a biotech guy, I'm going to ask the panel, sava or bitcoin, which one's safer? Bitcoin is safer for sure. But if you ask me that, back when bitcoin was selling for $200, nobody would know. There was a lot that went right for the bitcoin story, too. Preston, I'm not a biotech guy. I was just taking a look at the weekly chart, and I don't know. How, honestly, I think you guys are right. I don't think I could technically trade this on a weekly chart because it's just way too volatile. So I'd bring it back down to like a five minute or 65 minutes if I was actually trading. But you guys have all the fundamentals outlined. It was great pitch. I liked it. You convinced me to do research on it. And just keep in mind. Oh, sorry to interrupt you just.

In-depth Stock Recommendations

I would go live just 1 second. Vegan. I would probably, with my investment strategy. Go with Lilly over this one. Oh, Lily is no brainer. $1 trillion. So I mean, you know, every time it drops to a 900, I buy leaps on Lily. So I mean, that's given, you know, that's what I said. If you can't, you know, ride it, I would not even bother. However, however, shorts will cover some when the data is coming out. So shorts will kind of start covering around Christmas or Thanksgiving. So you're gonna see it running out to 45 again. So Saba will be going to 45 again. I mean, and, you know, then you're gonna have a whole other short attack and yada. I mean, just look at the chart. God, we got an interesting one, man. I've got some cocktail party conversations with cassava going here. The numbers are very favorable but, you know, super risky stock.

Analysis of Cassava's Financial Health

I agree. I agree. I see a hand up here from Hoda. I just wanted to add something from a balance sheet point of view for Salva because they have about a little bit more than 200 million in cash, no debt. They burn about 26 million at net loss and then 25 million, sorry, 15 million on R and D. So with these guys that don't have revenue and you're kind of betting you want to see at least quite a few quarters. Of cash available so that they can. Continue doing their trials and stuff. So Saba has a really good balance. Sheet and I'm sure they're going to. Keep making, getting those payments from their partnerships.

Long-term Strategic Insights

But from a balance sheet point of. View, this is not at risk. And for these like moonshot bets, that's what you want. I'm not sure about their charts or, you know, trading them, but from a long term point of view, they have enough cash on their balance sheet to keep going. And that's a really good sign on. These kind of investments. Yeah, hold on. I'm glad you brought that up because, you know, cash burn is such a big deal for a pre revenue biotech, right. And you've got to manage that. And if you don't, that's one of the biggest, the big red panic buttons if you run out of money. But Cassava is getting smarter about what its financially capable of. It raised equity through warrants earlier this year, raised $120 million in warrants and put that right on the balance sheet.

Understanding Risks and Management Changes

Those were from existing shareholders that wanted to support the story. Youve got the SEC penalty. Youve got to subtract $40 million from that 2200 million dollars. Thats on the balance sheet. Right now it seems like they're fully funded for the next six quarters, which is more than enough to not only complete the trial, but also get this, you know, to the point of commercialization. Great point, though, about cash burn being super important for a biotech company. Yeah. Vegan. I think just to point out Rick Barry is a winner. I mean, he's a great guy, has a proven record. I'm quite surprised that he even actually took the CEO role because he was on the board. Sandy Robertson from Francisco Partners was on the board, too.

Evaluating Management Effectiveness

I mean, he passed away, but they had a really strong board. Right. The thing is, Rick did mention the Department of Justice. They were basically working with SEc, FBI, all the guys. Right. He did say the Department of Justice is pretty much out of the picture, which Simon is kind of outlining. They gave $40 million to SEc and, you know, it was a hot mess. I agree. But this is it now it's kind of the end game. So if the data is good, there's really nothing there anymore that will pause this from getting serious views and getting in funds that's actually going to be buying this now because this was mostly retail as you look at it. And that's why it was also so volatile, because nobody's really holding it.

Community and Investor Engagement

Absolutely. So, gav, I know we're coming up on ten minutes left. I wanted to share some of the watchlist ideas here at the end, but to kind of wrap this up, the reason I was so excited about this conversation, and we're going to still hear from several of the other panelists on watchlist ideas, but it just kind of shows as you look at things with different perspectives, you get a strong community in place, you put recommendations out there and you acknowledge there's different risks from low risk companies like MSCI to very high risk companies like Cassava. There's this full gamut that we're just trying to really get people to find the best stock market opportunities and invest in them for long periods of time. And that's kind of exactly what we do at seven investing.

Stock Recommendations and Investor Strategy

Cassava was a recommendation. MSCI was a recommendation. We kind of manage the risk accordingly and tell everybody, make the right decisions for you. I think its incredibly powerful not only to have recommendations and best buys that get published every month, but a vibrant community and other really fantastic investors like were hearing about here on this panel, even to bounce ideas off of one another. Im really excited what weve built at seven investing. Yeah, you guys have been killing it. All across the board. Im a huge fan of everything youre doing. I just wanted to give to others. On the panel who havent had a chance to talk too much, see if they have any thoughts or questions, and then, yeah, I recommend there's just ten minutes left here.

Interactive Community Engagement

So if you haven't yet, now's the opportunity. Check out Stock Market news's tweet that's. Pinned up in the top, click right in there, or just type in the. Number seven and then the word investing.com dot. Make sure you use code wolf in there, because that's what's going to get you that first month free. If you have any questions about it, you can, of course, just DM Simon directly. Just let him know what your questions are. He'll see them in the DM's shy. Did you have any thoughts or questions. On the conversation here, the stocks that got covered? Yeah, let's see. On cassava, I'm curious your thoughts on. If you have exposure and other moonshot biotech themes.

Genomic and Biotech Exposure

And the reason I asked for that. Is I'm wondering what you think about. Genomic names if you have the risk appetite for cassava. I'm wondering if you have similar intrigue on the beam therapeutics, the antelias, the prime medicine, etcetera. It's a very difficult space, Shai. I do, to answer the question, you know, this is a space that I've invested in for about ten years. Diagnostics as a whole are very difficult. We say genomics. A lot of this is, you know, looking for biomarkers or looking for circulating tumor DNA that's floating throughout the bloodstream and things like this. Genomics is still a very new field. And then it's kind of unlocking new things too, right? Like gene editing, CRISPR editing.

Progress in Gene Editing Technologies

You know, we've now seen vertex, you know, commercialize CRISPR drug. We're starting to understand the science better. It's becoming a little bit more commercializable, but again, super high risk. Even companies that were considered safe in this, like exact sciences and illumina, have gotten hit just because it's expensive. And it's not a whole lot of money coming in on the revenue side of it, just because there's so much heavy R and D, as we're understanding. But I think it's making progress. Buyer beware. If you're going after a small cap in this space, the same kind of disclaimers apply for any other small pre revenue biotech company.

Addressing Risks in Phase III Trials

Gotcha. That's definitely fair to say. Other question on cassava is, do you know when the phase three results are going to the time wind on the phase three results that's part a, part b. Is there any risk associated with theory that they might cook the numbers at every level due to that thing that you guys just spoke about that investigation? Like, is there any kind of risk. That they may have to rest start because it might be cooked at every level? And so that's part a, part b question. To answer part b to first, there is a risk. I don't personally think that's the case, shy. But it's a non zero risk, right? It's very possible.

Exploring the Timing of Trial Results

I don't think it's likely. I think this is more of just kind of reporting and kind of the fee and the fines are associated with that, but it certainly is possible. The second question you said was the timing. There's two trials that are ongoing in phase three. Rethink top line readouts. Will be the end of this year, 2024. Refocus, which is a larger trial, will be next summer, 2025. Thanks, shy. Cole, did you have any thoughts here that you want to get into the mixed. Sure, I guess just one question with cassava. Sorry, Cole.

Feedback from Panelists on Cassava

There is something in the background. It is clanking or something. Sorry, I think it's my puppy. She has a bone and she is quite excited. Gotcha. Gotcha. For cassava is the outcome, would we consider it to be binary? Like the. The Alzheimer's drug is a success, or the cash value is kind of the zero of the binary? Or is there other drugs in the pipeline that could potentially use the cash on the balance sheet? If this were to be a zero drug, I would definitely consider it a binary outcome.

Exploring Cassava's Drug Pipeline

Cole, there's really nothing else in the pipeline other than a diagnostic where they could detect early stage or earlier stage Alzheimer. But other than that, it's not like you've got a whole platform of other drugs going through trials. This is, if it works, awesome. If it doesn't work, cash value. Calvin Simon, can you tell me more about the management team of Cassava? I think it would be interesting to get your knowledge of the management company, because, like, we've previously had a discussion on Celsius, and I, you know, management team was a red flag.

Insights on the Management Team

So I thought it would be interesting to get your thoughts and your knowledge of the leadership team there. Oh, gosh, Kelvin, that's a great question. Probably one we could talk about for another hour. You know, that's a. That's a two beer conversation all of its own. But I think the high level takeaways on this is that, you know, the previous founder, Remy Bardier, and his wife Lindsey Burns, who is chief science officer, very passionate about what they were doing, wanted to go out. And you know, every time you'd hear them speak they'd really get excited about the potential to cure Alzheimer's.

Leadership Changes and Future Directions

They were all in on this, but they were not commercial people. They didn't want to work with a large biotech company. They didn't want to partner with Big Pharma. They wanted to have the price of the drug below what the market would accept because they just wanted to keep it cheaper. Things like this is a turn off for institutional investors and big pharma. And the commercial side of it. Rick Berry is now the CEO of the company. He's replaced Remy at the helm and he is much more, I think, in tune with that business side of cassava than Remy ever was.

Importance of Market Position

And I think its showing. I think thats going to be super important because if cassava does get a hit and this gets approved, they need to have a sales force. They need to have somebody that go out there and sell this drug and has got relationship with the doctors out there. And I think thats where somebody like him is going to be very important. The board is also very good too, like vegan had said earlier, and I'd encourage anyone to check that out as well. Awesome. Can I hand it back to Kelvin to talk about his watch list idea?

Looking Ahead

You know, I wanted to hand the mic over. Yeah, Kelvin, do you want to share any, some thoughts about seven investing or even some ideas that are on your watch list right now? Yeah, hi. Hi. Simon Wolfe, financial. Thanks for the opportunity. It's actually six. It's 07:00 a.m. over here in Asia, so it means a lot to me to be given a chance to speak here. You know, before I talk about a stock on my watch list, I like to start off with my biggest lessons and takeaways, which is a ritual that I often do as a host of my podcast, me and the market Goliath, with my awesome guests like Simon.

Reflections and Insights

I actually had the fortune to have Simon share his biggest takeaways on the podcast recently. We've actually had many high quality seven investing lead advisors like Simon in the past come on the show to share their views on several investing sectors such as healthcare, energy drinks, aka Celsius, and the freelance gig economy and their investment philosophy and their biggest investment mistakes. So that's not all. I've had other guests such as book author Richard Wiser, happier William Green on the podcast Tom Nash and host of we studying billionaires Clay Fink on the show.

Personal Investment Insights

So Simon, thank you for the opportunity. I couldn't help but think of a podcast I recently heard featuring Mark Zuckerberg highlighting error recognition as a self monitoring skill, which he said, and I quote from the podcast transcript, when stuff is going well, it's like what is the next move to go from winning to winning more? But when you're losing, it's usually pretty clear what you have to do next. Which is annoyingly true when it comes to investing personally, for me at least. So one of my biggest takeaways was that I've learned that eliminating home bias is an important consideration.

Considering Global Investments

As an example, if you invested in chinese equities in the past month, your returns would range from 30% to 50%. Conversely, the S and P 500 returned 3% in the last month. I'm not here to promote Asia equities or stocks in any way, but personally purchasing power in the world of economics is a zero sum game. If us dollar weakens, another currency of an emerging country strengthens. And I think this rebalancing of purchasing power and the consequences that comes with it are worth considering.

Stock Watchlist Recommendation

So moving on to the stock on my watch list, it's the world's largest supplier of athletic shoes and apparel and a major manufacturer of sports equipment Nike ticker nke full disclosure, I do not own any Nike stock as of today. The timeliness of this call couldn't be more perfect, as Nike recently reported Q 120 25 earnings just yesterday. Nike has a market cap of 125 billion, currently trades at a PE multiple of 23 and a forward p of 25. It's not a great earnings. Let's be honest and let's get the bad stuff out of the way first.

Analyzing Nike's Earnings Report

And Nike reported 11.6 billion revenue, which missed 50 million. According to estimates, direct revenues were 4.7 billion, down 13%. Wholesale revenues were down 8% to 6.4 billion. North America footwear sales were down 14%. Europe Middle East Asia revenue was down 12%. Asia Pacific and Latin America sales were down 2%. Inventories were 8.3 were 8.3 billion, down 5%. Compared to the prior year, traffic sales were soft across all channels in China. We get it, the quarter is bad. But look, there's a good side.

Commercial Viability of Nike

It's a relatively easy business to understand, not to mention it's a ubiquitous and profitable brand. This is a company that claims to have 60% of total share voice at the recent Paris Olympics, producing and sponsoring sportswear of the world's most watched sports baseball, golf, NFL management is finally aware of the importance of innovation, which has been Nike's achilles heel. The board of directors understood the assignment that they needed a new CEO with Nike DNA to steer the ship.

Leadership Changes at Nike

So with that, their new CEO, Elliot Hill, will replace John Donahoe on October 14, who is a Nike veteran and has been with the company for 32 years. Elliott has been Nike's president of consumer and marketplace. I fact checked on LinkedIn. He's the vp of global retail. He was the VP of global Retail, VP of USA Commerce, VP and GM of USA Retail. Nike's gross margins increased 120 basis points to 45.4% due to lower Nike brand product costs. Talk about cash. Nike's cash and equivalents and short term investments were 10.3 billion, up approximately 1.5 billion from last year, which can pretty much cover all their debt.

Nike’s Market Position and Future Strategy

Quarterly gross margins increase 120 basis points. So Nike will also be launching a new running shoe line below 100 USD to attract the lower income consumers. Innovation includes a new cushing innovation, new premium models that are blending foams and zoom air. And speaking of return on capital employed has been above 20 since 2016, which simply means for every hundred dollars of capital employed, the company generates $20 in profit. I personally think that the expectations have lowered for the new CEO to do well in the next quarter. And I, like the stock is now starting to be perceived as a value stock more than a growth stock.

Navigating Market Changes

And I think there will be more short term pain and there's a lot for the new CEO to do and to steer the ship correctly. But I think this is where, I think the opportunity is where you're seeing this company consolidate its resources with a new leader who understands the origin of Nike's success. And I'll be sticking around to find out. So that's my stock pick on my watch list in 2024. I hope that was helpful. Thanks Simon and Wolf for this opportunity.

Concluding Thoughts and Reflection

Kelvin, that was fantastic. Great pitch on Nike Nke for anyone who wants to follow along with that. And Kelvin does, always asks great questions on his podcast and does great analysis. Vegan has informed me that he is losing battery is at I think 2% and wanted to see if we could get maybe just one more minute out of him. Oh, scratch that. I think we've lost Vegan. Oh, he might be back now. We're going to see if he's there but I think he wanted to pitch one stock really quick too.

Final Summary and Farewells

Vegan, are you there? And can you hear us? Yeah, I'm here. Sorry, go ahead. I know you've got about a minute left on the battery. Did you have one stock you wanted to add to the watch list? Yeah. Well, you know which one. I mean, I've been long in upstart. UPSD, right. That's kind of a place that I think he would redesign the entire lending space. So everybody talks about AI this and that. I mean, I've been long in Nvidia since 2006. So upstart has a lot of same similarities.

Stock Insights into Upstart

Great leadership, very great leadership and very great concept. And they're not trying to change the lending, they're trying to blend and improve. So I would say everybody should just check it out. Upstart is a great company, great leadership, great concept. And he had some controversy, you know, went up to like 400 a share, all that. So their model had to be also developed and fine tuned to these very high rates. But as simple as this, I would put it, okay, for upstart, it worked in a low rate environment.

Market Opportunities and Future Predictions

It works so well that, I mean, stock went up from whatever it was, 30 a share to a 400 a share. Now we just got to find out. How would it work in an environment that's a little bit higher. But I think this is another stock that's going to cross $100 very soon here because the rate cuts are coming and people will be refinancing their credit cards. Right. You're going to be refinancing your credit cards. If you look at the data, everybody maxed out their credit cards.

Growth and Expansion in Upstart's Business

They're going to be refinancing their cars. And upstart is going to be really offering small business loans, line of credit for homes. The portfolio will grow. A lot of comparison is between Upstart and Sofi. They're very different companies. It's not even close. I won't get into it right now, but it's not even close. One is a software company and one is a modern bank. So very different. But yeah, that would be my addition. Upstart, love it. Vegan upst for anyone who wants to follow upstart and Cole.

Wrapping Up the Discussion

Let me bring it back to you, my friend. Do you have a stock for the watch list as well that you wanted to bring up? Oh, I do. So I'll try to squeeze it in here. The stock that, or I guess the company that I'm presenting as a watchlist idea is one I do have in my portfolio. It is an operating system company. So it's not the windows and the Mac OS, it's not Android and iOS, and it's not even the operating system in the pair of ray bansite. It is the operating system within your television screen.

Introduction to Roku

So the company that I'll be presenting for the watch list is Roku. This is a founder led company in Anthony Wood. I'll come back to the parallels to the operating system in just a bit, but just to set the stage on the market size. The amount of money spent on advertising and television on linear tv is still 140 plus billion dollars annually. So a lot of money that is looking for new homes as people are cutting the cord and moving over to streaming. The operating system business is highly lucrative as the majority of Roku's business is ad supported.

Roku's Growth Trajectory

So just in terms of how quickly the business has grown its platform. The platform revenue has grown seven x in seven years since its IPO, it's grown its user base from roughly 9 million to over 80 million users. And that's active accounts. I will say that something that is catching my eye is that its platform gross profit has plunged from close to about 75% gross margin business to roughly 50% gross margin on the platform side. And something that I just want to highlight on that end is a lot of the reasons for the plunge in gross profit margin is due to what's listed in the cost of revenues.

Challenges with Gross Profit Margins

These are things such as original content, spend amortization of content off of the balance sheet. These are things that, similar to Spotify a few years back, artificially depressing the gross profit margins of the platform business and making it look structurally unattractive. When again, majority of that platform revenue, which is 3 billion in the trailing twelve months, is very high gross profit margin. Just in terms of the opportunity ahead, roku is currently only in a mid teens number of countries globally. In some of the countries where it started and has most time to develop, such as the US, it has close to like a 50% market share of CTV streaming time.

Market Share Opportunity for Roku

So it is able to, once it lands, it is able to expand to a pretty high percentage market share of streaming it. Currently, I would say the average revenue per user metric is roughly flat and slightly declining year over year. Although again, this is another metric that is deceiving on face value, as within each global segment or each country, average revenue per user is increasing still. But because they're expanding internationally, there are lower average revenue per user in other countries such as Central America and South America, as well as a couple of european countries where it has a foothold in Germany and the UK.

Roku's Expansion and Future Business Model

I'll try and wrap it up here. It's a company that's pretty well known, but again, I see this as a very structurally attractive opportunity. It's growing users at about a 14% clip year over year. It has over 200 more countries to expand into. And as the company has started to cut costs and limit the amount spent on original content and licensing, it shifted its model to more of a ad supported revenue sharing agreement structure where it takes either 30% of ad inventory off of the ad supported channels, such as some of the newer insurance like Disney has an ad supported tier, Netflix has an ad supported tier, Amazon as well.

Potential for Growth in the Streaming Market

It might not be able to secure the inventory of some of those larger players, but a lot of the smaller players, it already has those ad supported or revenue sharing agreements in place. So a lot of opportunity as more streaming channels adopt ad supported. And again, a pretty big opportunity globally as we shift from linear to streaming. So with that, I'll kind of close it there. I have a DCF available, I believe I shared it on my Twitter feed.

Conclusion and Investor Expectations

So if anyone wants to dive into my expectations, I do expect the IRR of the company to be above 15% over the next ten years. Perfect. Really appreciate you walking through that for us here. Cole, thank you so much. All right, Simon, I think we're going. To move into some wrap up mode here. Do you want to give everybody, just. Before we close out another minute or. Two on just an overview of what's included in that free month that they.

Final Remarks on Seven Investing

Can get up top through that link and the best way for them to get it? Yeah, absolutely. And thanks again. Gov thank you shy. Thank you vegan. Thank you, Kelvin. Thank you, Cole. Thank you, Brett. Thank you, Hoda. Thank you everybody who contributed to the panel. You know, this is what we love to do. I feel like we've been bit by the stock picking bug and we like to just talk about stocks and, you know, kind of compare the opportunities and the risks to find the best ideas.

Overview of Seven Investing's Approach

And the whole premise of seven investing is to have one stock recommendation per month that were putting on the scorecard. Its going to be out there for everybody to see transparently and in real time track the results of. And then in addition to that, out of all the companies that weve ever recommended, all of the active recommendations and the 200 companies weve done diligence on, what are the five best buys to buy right now, ranked from one to five. And so those just came out at the middle of the month.

Community Engagement and Learning

A new recommendation comes out of the first in the community. The community. We're always talking about stocks, the other pitches. The cool part of what we had on this show in the panel was that you got to see different types of investors, different types of recommendations, and we embraced that at seven investing, we got a very vibrant community. And so to wrap this all together, the reason we wanted to offer a free month is we didn't want you just come in and just after 15 minutes, you look at the scorecard and disappear.

Encouraging Interactive Participation

Why don't you have the interactive subscriber call experience. Wanted you to join the Discord community forum. Wanted you to see the new recommendation and the best buys. I mean, it's kind of a process that we publish something every week throughout the month. And I'm really excited. I'm really excited for what we're doing and I'm really excited about being a long term investor. So thank you for the time. I've really enjoyed the spaces.

Conclusion and Gratitude

Gob. My pleasure. Thank you so much for doing it together with us. Great panel here. Looking forward to the next one. Take care, everybody. Have a great rest of your evening.