Market Outlook: The current market is described as a "tale of two cities," with AI-related stocks performing exceptionally well, while traditional sectors like retail and telecom are struggling.
Investment Strategy: The podcast highlights the use of Portrait Analytics for creating bespoke stock screens, focusing on companies with specific financial behaviors, such as buying back shares after an earnings miss.
Company Insights: Discussion on Crocs and other retailers facing significant stock declines despite buybacks, questioning the effectiveness of their financial strategies.
Media and Marketing: The podcast explores the concept of "hot girl marketing" and its questionable ROI, using Sydney Sweeney's involvement with brands like Hey Dude and American Eagle as examples.
Challenge Trade: A notable trade between John Paulson and Carl Icahn involving BHC shares is highlighted as a fascinating example of a direct challenge trade, raising questions about insider insights and financial engineering.
Investment Philosophy: Emphasis on the importance of identifying when to "swing" on an investment, especially when possessing unique insights or an edge, and the challenges of acting on new information.
Transcript
You're about to listen to the yet another value podcast with your host me, Andrew Walker. Today's podcast is my monthly ramblings for the month of August 2025. Look, I say this every ramblings, but this is my every ramblings I hang up and I say this was my most rambling ramblings yet. And I I definitely feel it on this one. So, it gets rambly, but hopefully you enjoy it. I get good feedback on these, so hopefully you enjoy it. Let's see the topics today. We're going to start out talking about just what a weird market is. I love to talk about both on here and on the blog. I love to talk about the overall market just it really helps me clarify my thoughts and I will tell you these are strange markets you know co was obviously a strange market but that was a panic market right now is just it is such a tale of two cities it's really pulling me apart so I want to talk about that uh talk a little bit about companies portrait analytics I believe they're going to be the sponsor of this episode they've got some great screens that I like to use and one that I've really been looking at is companies that miss earnings and the the company buys back stock aggressively into the earnings miss I I think it's such an interesting weird signal. You know, does the company not get it or is the value so high that they just have to do it? Then we're going to talk about just Sydney Sweeney hot girl marketing and owning a media company. I promise you I'm not trying to get on as a talking head hot taker hottaker, but I think there's really interesting business insights and questions there I had and especially around the Paramount UFC Paramount Larry Ellison deal connect them all hopefully in a good way. So, we'll talk about that. swinging when you have an edge. Just a lot of thoughts that I've personally been thinking about when news updates and you think you've got insight into situation, how you push yourself, how you process it, how you change your position. So, just really ramble on that. And then close down with a really interesting challenge trade. Uh BHC, the John Paulson buying 300 million stock from Carl Icon. Both of them have board seats. Thought that was just so interesting I had to put something there. So, going to get to all that rambled in the opening, but first a word from our sponsor. This podcast is sponsored by Portrait Analytics. People ask me all the time, what's your favorite stock screen to run to look at for ideas? Is it low price to earnings, high dividend yield? What what is it? And my answer is simple. I don't run screens. I somehow doubt that there's serious alpha and sorting through stocks that are trading under 10 times price earnings on Yahoo Finance. But portrait analytics has completely changed the game on screening. It lets you create bespoke screens to generate actually unique ideas. Let me give you an example of one that I've been using recently. I wanted to look for stocks with greater than 200 million market cap where the company has publicly discussed trading at a discount to peers and both the companies and insiders have been buying shares on the open market in the past 12 months. To me, that's an interesting screen. It's unique ideas. It's a blend of quantitative and qualitative. It's pulling things that aren't, you know, just purely numbers based that the insiders are talking about and it's building something that kind of fits with my view of the world and my view of the types of stocks that would be interesting. Portrait let me find a handful of companies that meet that criteria. The last time I did the screen, by the way, the screens run every day if you want them to, every week if you want them to. The last time I did the screen, it had four or five stocks that exactly hit that criteria. And then boom, I had a list of really interesting things that I actually might buy that I could sort through. Uh they it also showed me exactly where the company was talking about, how their valuation compared to peers, so I could see, hey, was this a one-off or are they consistently talking about in a way I think it's interesting. Anyway, I think it's completely changed the game for screening and for generating new ideas. If you're looking to up your screening game, you should check out Portrait Analytics at portraitanalytics.ai. I'll include a link in the show notes. All right. Hello and welcome to yet another value podcast. I'm your host, Andrew Walker. Uh if you like this podcast, it would mean a lot if you could rate, subscribe, review, wherever you're watching or listening to it. With me today, I'm happy to have on myself. It's time for my monthly random ramblings for August. It is August is it 15, 16th? I'm not sure. It's the middle of August. Uh, got a bunch of top topics I'm going to ramble about today. I hope you enjoy them. I'll get to the topics in a second, but before I do, quick disclaimer, remind everyone that nothing on this podcast is investing advice. Please consult a financial advisor, all that jazz. Full disclaimer at the end of the podcast or you can see the legal disclaimer on the website if you are interested in it. Okay, so today for August, I have a few ramblings. Uh, one, I just want to I I love to do these ramblings. You know, the ramblings, the state of the markets I publish at the end of every month in my monthly links. kind of helps me think about where we are in the markets and keep a clear head and everything. So, love to talk about the markets and ramble about those. We're going to start by talking about just what a weird market it is. Then I have, look, I'm not trying to become a uh talking news head or a clickbait artist, but I do have some thoughts on the Sydney Sweeney uh controversy and uh I want to throw that out there. But it's not it's not hot takes, it's business takes. I promise you that. And then I want to talk a little bit about Sween when you have an edge. And then to wrap it up, might talk a bit about Buffett's longevity. Yeah. I don't know. And uh there was an interesting what I like to call a challenge trade. I've got a post that I'm about to put up on that, but I'd love to talk about that as well. So, let's start with thoughts on the markets. Look, it is it is just a weird market. Like markets are up. You know, I'm guessing again, I'm recording this in the middle of August. I think the S&P is up double digits on the year. I think the Russell is up low single digits. So, it's it's been a pretty good year for the stock market. Albeit, you know, you think back to the beginning of April, a very volatile one. But I I I can't get out of my head. It is still just a weird market. You know, I see if if something touches AI, it is a golden god. The stock is up to the right. Doesn't matter, can do no wrongs. They're beating earnings every time. If they miss earnings, they're getting the benefit of the doubt. It is just a golden god of a stock. And curious thing about the market is, you know, the largest companies, we we've been saying this for a long time. The largest companies, they just keep outering. And, you know, a few years ago, Facebook, Google, all these, it was just infinite growth at unlimited roses because they were capital light businesses. And now they've all latched on to AI, they're all just generating huge returns apparently through AI. And they it's kind of like a shame for active investors because the market is if the if mag 7 is what 35% of the S&P 500 and all of mag 7 is pretty much tied to AI. Well then if you're an active manager with you know if you're dealing in the type of just poor businesses you know old economy businesses with no AI exposure. You are underweight AI and it's almost impossible to keep up if you're underweight AI when those businesses are doing that. So uh if you are AI you are a golden god. your stock can't go down. Uh you're beating earnings every quarter. Expectations are getting raised. The backlog looks incredible. I it's it is just nirvana for you. But outside of AI, it's just really weird. And I'll just give you a few examples. Deer, good old deer, you know, farm equipment reports earning the stocks down 10%. Retailers, I mean, it has been a bloodbath in retail. Lululemon stock, pull that up. Oh, you're going to barf on yourself if you look at the Lululemon stock chart. Crocs. I'm going to talk about Crocs a little bit in a second, but you know, they reported earnings a couple weeks ago and the stocks down 20% on earnings and you know, tariff hits. You've got people debating, hey, I thought it was cheap and I probably agree with them. I have no position, no plan to take one, but they thought it was cheap at 100 and the companies thought it was cheap at 100. It was like uh you know, I can't remember. Eight times earnings and now it trades to 80 or 85. So, it's six times earnings. So, if you thought it was cheap then and you believe in the brand, even cheaper now. Crocs. Telecom. My god. You know, telecom's supposed to be the stable sector, but every cable company reporting number and just imploding. A lot of the telecom infrastructure company's reporting numbers and just absolutely imploding. We're seeing implosions up and down the board. Oh, food. I forgot to mention my favorite one, food. You know, Chipotle, Cava, Sweet Green. These guys are, I guess, they're high-end fast casual concepts, but all of them are reporting, you know, Chipotle reporting negative same store sales if I remember correctly. All these stocks are just getting absolutely hammered. They're reporting negative same store sales. No. Yeah, I'm looking at as I pull this up. Chroy reporting negative 4% comps. And I know there's noise and everything, but it's just this really weird economy where AI just up to the right, can't stop, but you again, you look at like fast casuals down 4%. Uh you look at telecom's blowing up, you look at the retailers, like what is going on? I don't know how to explain this economy. I I I don't know how to explain it. I don't know how to think about it for you know last year a lot I'd say hey you look at these cyclical companies you know you look at mining companies or metals company US steel car makers whatever and they're going through a pretty deep recession and the stock market was not and obviously the max 7 wasn't but now it's like spread it's not just I think most of the I'm not a cyclical expert by far but most of the cyclicals I follow are are reporting pretty trout numbers and you know trucking companies are saying it it's pretty that up there now it's spreading to the retailers it's spreading it's spreading to the restaurants it's very weird for all these guys to be reporting I mean not just recessionary it seems to me high level deep recessionary numbers while on the other hand you've got the AI guys in just like absolute outrageous levels of growth and economic stats believe him don't believe him whatever seem pretty flattish so just this very strange dichotomy and I honestly don't know how to think about it right now I'm really still thinking about it if anyone if anyone's has got the answer. I'd love to hear it, you know. So, that's just kind of where I am. Uh, speaking of companies that got I I mentioned Crocs a few times and I guess they're a sponsor now, so I can mention it. Portrait Analytics, which I think is great for AI screening, AI tools. I I think it's a really interesting way to if you're looking for companies that, you know, you can do a price earning screen and get I I think you'll get if you say, "Hey, I want companies trading for under 10 times earnings." You're going to get 400 companies. A lot of them is going to be kind of the chaff. You're going to have to sort through the wheat. A lot of them are going to be outside your wheelhouse. It's a really dumb screen and I think it's probably been picked up by Quant. What I like about Porch is you can say specific stuff. So anyway, I guess no free plugs, but there are sponsors I can give it. Uh, one of the screens I have Porch run that I find really interesting is, "Hey, find me companies whose stock was down 20% on earnings who they've they bought back shares inter uh the miss was driven by one-time items." And I think that's a really interesting screen. And the reason I mention it is a when I do it a lot of the companies and right now I'm looking at the screen 14 or 15 companies show up a lot of them are retailers including Crocs and Lulu. I mentioned that for two reasons. A, I wonder if there's a signal in there, right? Hey, the company they is it the company saw, oh, our Q2 results aren't looking good, but our stock looks so juicy, we just can't help but going and start retiring shares. Or is it the reverse? You know, how many times have you seen a company buy back shares and then barf a quarter and their stock goes down 40% and the next quarter they're not buying back any shares and then you look at it and say, does this company know how to forecast? Like, what is going on on here? They were buying back shares when the results were terrible. Now the stock's lower and they they're not buying back shares. Uh not that you know if you buy back shares in 2021 at 100 and the stock goes to 10 and you're in distress. I'm not saying you have to buy back shares just because the stock's down, but it's really weird if you're about to barf the quarter to buy back shares and then stop after that. So I just look at that in Crocs is the perfect example, right? They intraquarter they buy back a hundred million of stock at about $100 per share and now the stock is at 85. in in Croc's case, you know, just reading between the lines, looking at their history, looking at what they said on the call, I think they're going to keep buying back shares. I I would be shocked if they didn't, but there are a lot of companies out there, you know, and oh, by the way, Crocs is a four and a half, five billion dollar company, so hundred million dollars of stock in a quarter is a big slug for them. There are a lot of companies out there, you know, I think Vivid Seats is one that I I've looked at recently where their business was falling has been falling apart over the past couple months and they are controlled by private equity owners who are sophisticated and they were buying back stock hand over fist as the business was falling apart over the past few quarters and then they report Q2 results which uh were way below where anyone thought they would be be and now the company's like kind of repurchased themselves into financial distress and they're certainly not even analysts aren't even bothering to ask if they're repurchasing in stock because it's so clear that they don't have the resources. So, it's just weird. Um I it's just weird. I don't know how to separate the signal from noise there. I find it very interesting. I am just such a sucker for sure by find it interesting. Oh, and the last thing I'll note, you know, this screen I mentioned portrait analytics. This screen company down 20% buyback shares management argues it's a temporary thing. I've looked a little bit at it historically. Again, portrait I didn't have access to portrait five years ago, but I've looked a little bit at it historically and generally three five companies will will hit the screen. Right now, 15. So, I'm not saying it's crazy crazy out of normal, but that's really high. And it's really interesting to me that you've got, you know, it makes intuitive sense, I think, where a lot of the companies are, especially the retailers are saying, hey, they're blaming the tariffs for why they missed one time, right? Again, the one time is one of the factors uh that's key there. And I think that's one of the interesting about using a screen that marries AI with quant. But uh they're saying it's a one-time miss. Historically, you'd see three to five companies, there's 15 here, but it it makes sense with the tariffs, but it's interesting that so many companies are blaming one time. And again, if I marry that back to the weird stock thing, they're saying it's one time, but I can't help but wonder if it's if there's other stuff there. You know, just on restaurants, we're deporting a lot of people, right? Is the deportation is it just kind of shifting demographic trends? And I know that sounds silly. It's not like we deported 1% of the population, but I think you could write a story where you say, "Hey, you deport five basis points of the population, but it's five basis points who are kind of working age and who would be eating at these restaurants. And by the way, the restaurant stop uh the restaurant overall stock has not changed. So now there's a little bit more of a knife bite for each customer because there's just that many fewer kn I don't know it's hard for me to describe weird market weird everything. I don't know. Weird world. Let's move on. Speaking of crops, I mentioned crots a lot and I told you I wanted to dive into the Sydney Sweeney debate. And I don't mean that as in I want to take one side or the other. I certainly don't. But there were two interesting things about the Sydney Sweeney debate that kind of had me thinking about the stock market. And the first was Sydney Sweeney. You know, speaking of Crocs, the reason I mentioned is she was the sponsor for Hey Dude. And Hey Dude is the brand that Crocs bought and they said it was going to be this great acquisition, diversify, all this sort of stuff. Has not gone that way so far. She was last year. She got named the head of creative for Hey Dudes or something. To my knowledge has not budged the needle one iota. So I was kind of surprised when she hopped onto American Eagle. I guess she's a big brand. And where I'm trying to go with this is look, she already failed to hate dudes and hat dudes is much different than American Eagle. But I do wonder there, if I just step back from Sydney Sweeney for a second, there are lots of companies that have what I call hot girl marketing. You know, I I'll talk to some CEOs of fitness brands. They'll be like, "Look at all these look at all these girls we've got pitching our things." You talk to people in medtech, especially aesthetics, right? Botox, plastic surgery, that sort of stuff. They'll say, "Hey, you know, we got we got the Kardashians sponsoring us or we got these hot fitness Instagram girls sponsoring us or hot men too to to be fair. Could be hot men." Uh, you know, I I think energy drinks especially and protein powders getting huge jacked men to sponsor them. You'll sell one guy. You'll sell to one guy right here if you do that. But I do wonder, especially on the hot girl side, is there real ROI here? Like, did American Eagle really look and sp get a movie star to sponsor this and run this buzzy campaign? And yes, their brand was in the the news quite a bit, but I saw there was reports earlier this week that their foot traffic is actually down year-over-year since they launched the Sydney Sweeney ad. And Sydney Sweeney, she's an A-list level movie star. You know, I'm sure she doesn't come cheap. I I'd be really interested like in these companies, how do they judge the ROI? or if it's just, you know, Botox going and talking to hot girl hot girl marketing or hot guy marketing saying, "Hey, we're going to give you some free botox injections if you put it in if you put it on your story." Like, how do they judge the incremental how do they judge the incremental demand? And the reason I worry about this is, you know, we've seen in public companies, I think you'll see this parallel very quickly. Movie studios, movie studios are a hot item for, you know, every decade or so, a rich guy comes along and buys a movie studio. And why do they buy the movie studio? There's always a business case. There's always a business. And this is dating back to Ko buying Paramount in the 1980s. There's always a business case to go and buying the movie studio. Right now, Larry Ellison's son, backed by Larry Ellison, is buying and taking control of Fairmont. There's always a business case. But what is it actually? I mean, I suspect it's an ego stroking thing. Right now, with the movie studio, you could be the head of the movie studio. You get to approve or not approve movies. You know, all the movie stars are coming up and hobnobbing to you. All of them are sucking up to you. Uh you can probably get a couple pet projects that you want you want to approve that might, you know, if you've got a worldview or something that speaks to that. But they're I they're not really financial purchases in my mind. Yes, I'm sure they convince themselves they're going to be a financial purchase, but it doesn't really work out well for them. You know, how'd it work for those guys with the hot girl marketing? I wonder how much these people look at them and say, "Hey, we've got a financial case." versus how much it's, you know, middle-aged men, high up men, just they they want access to they want to be able to talk to these hot girls or or anything. So, the Sydney Sweden thing really brought it back to my like I I I'd be pretty surprised. Now, it did take it really took off. So maybe you say all marketing is good. All word of mouth, all news is good, good news. Maybe it results in a lot of incremental sales. You know, obviously it's been hotly debated. It it certainly I'm guessing it went way more viral than they would have hoped for in their wildest imagination, but does it translate to sales to, you know, run that huge campaign, pay a huge movie star? I don't know. And when I go down the line of some of the smaller ones, I I do wonder if they're like, "Hey, you know, and a lot of the Instagram and Tik Tok influencers, they're smaller, so it's smaller dollar figures, but I'm I'm guessing the ROI is like absolutely zero or negative." And I wonder how much it is just stroking the egos of the management teams and getting access to that. Uh, you know, last one on movie studios as I think about it. You know, Larry Ellison, he bought control of Paramount and then they announced a massive, massive deal to bring the UFC to CBS and it was uh I think it was $7.7 billion. Huge, huge deal. I mean, that is how much they're paying. That is NFL. It It is way way bigger. The UFC was making I'm just looking at a news article. It was making 550 million per year from ESPN. It's going to 1.1 billion per year on CBS. It's a big number. And I wonder how much of that was like, hey, I'm not saying sports rights don't have value. No one believes they have more value than I do, but that is a huge number for the UFC, which is not as good a property as to take one, the NFL, the NBA. And I wonder how much of that was you you got a movie studio titan in there, and he wants to flex the muscles, you know, he wants to sit ringside at UFC. He wants to hobnob with the celebrities. I don't know if that's a financial deal so much as a uh ego munch. All right, I have rambled on long enough about that. Let me switch to something I talked to with my friends a lot. You know, uh I don't have an answer here, but one thing that I've tried, especially my friends, and I even tried this on the podcast now. It's difficult to do, but when someone has an edge, when someone has something really unique, how do you push them to swing? And I I think it's really interesting. You know, uh, one thing I've thought about asking on the podcast before is, hey, there's the Buffett punch card rule. You know, if you had 10 stock, if you could only invest in 10 stocks with a punch card, every time you invest money, you punch it, you would be a much better investor because you would be so selective. And I've thought about asking people, hey, you know, this idea you're pitching, most people are long the stocks they pitch on the podcast. You know, I kind of have that requirement. You're long it you believe in it. But I've thought about asking, hey, is this, you know, is this a once a month idea? Is this a once a year idea? Is this a once every five years idea? Is this a punch card idea? The reason I don't ask it is because it's an awkward conversation, right? People run portfolios, there's different sizes and everything. Uh maybe how how is somebody going to come on and pitch a podcast and then come and say, "Oh, I think this is just, you know, an average good idea." You're just putting them on the spot in a bad way. But the reason I ask is when I talk to people and I try to sus this out and I hear them say, "Hey, this is a punch card idea." Or they've got some information that's really flipped it. uh you know just pushing them to say hey if this is such a good idea why aren't you bigger you know if you're nothing is investing advice obviously but if you're 10% why aren't you 15% why aren't you 20 why aren't you 50 uh I it can be good or bad right but I think it's a really interesting way of talking and thinking to people about it and kind of quantifying the edge and the reason it's on my mind look I'm just rambling but I've had a few recently where for me personally and I'm not going to name stock names or for friends there was a new bit of information out and sometimes the new bit of information was out there for a month and sometimes was out there for a day. But there was a new bit of information out that materially changed the thesis. Sometimes in a very positive way, sometimes in a very negative way. And again, I'll just speak for myself. Uh I have trouble when the new piece of information comes out if something particularly something size large already increasing it. You know, going for the jugular. And I don't know if that's good or bad on my part. Like you know, I had one recently where piece of information came out. I thought it was almost certainly to be good news. Already had a big position. I didn't increase it. And then in hindsight, I was talking to someone and they were like, "Hey man, you had real edge. You had a differentiated view on that news. You knew what was coming or you thought you knew what was coming. Why didn't you increase it?" And to me, you know, push back and forth. It's like, "Hey, I was already huge here, man. This was already a big position. One of my biggest like how can you get bigger?" But on the other side, it was like, hey, if you were running the, you know, the Kelly criterion or whatever and your model, uh, it would tell you to get bigger based on this new information. So, just like re-underwriting, talking to people and I I do the podcast a lot. I talk to a lot of friends. It's one thing that I've tried to step back like when I'm talking to a friend and they mention an idea to me last month and then they mentioned something new this month. I really do try to push them and say, "Hey, this seems like new incremental information. Are you buying? Are you selling? Pushing? I don't really have a ramble there, but it's just something I really think about and it's one of the hard things about investing. You know, in in blackjack, it's very it's very easy in blackjack, you're dealt 11, the the dealer is delta six. So, it's very easy to know it's double. You're delta six, the dealer is delta six, you get a five. It's very easy to know to hit again because you've got 11 now, right? Very easy to update because it's very mathematical. Investing, it's not mathematical. You're always dealing prob you're dealing probabilities, but it's unknown probabilities, right? What does this AK mean? What is that press release for you? You never really know. And it's just having people to talk about and think through with it can can be really helpful. And look, real edge comes along rarely. And when you have it, sometimes having somebody push and say, "Hey, is this real edge?" If you really believe that, why aren't you buying? Can really help. And the counter, you know, I know a lot of times, especially my friends who know names really well, they'll say, "I have this big position. I've got this check, right? or I understand the industry it's starting to have a cyclical downturn right and analysts aren't on to it yet be like oh cool or you selling you reducing position be like no no no no the the long-term value is too great and they might be right but you know if you've got a check that numbers are going down you probably want to trade around that in some form now could it be it could be reducing your position it could be shorting a basket of stocks with similar beta and then just saying hey this companyy's so good I'll short a basket with a similar beta it could be buying puts what whatever it is But I, you know, if you're really following a company, oftent times there is news that you will have edge and you have insight into and I think updating the trade around that is critical. Okay, that was rambly. I don't even know where I was going with that, but I had notes. It's obviously been my mind. I've think been thinking about a lot. So, just wanted to rant on that. Let me go to the last one. I'm about to put a post up on this, but I I think it's worth mentioning and discussing. So, in fantasy football, normally when you do a trade, it's I have three running backs, you have three wide receivers. I have zero wide receivers. You have zero running backs. Let's do a trade. Now, obviously relative value and everything, but that's the trade. But there's what I call a challenge trade. You have a running back. I have a running back. I think your running back is better than mine. You think my running back is better than yours. We trade. That is a direct challenge trade. You know, I if in the wide receivers's running back conversation, it could work out well for both of us, right? My running back does great for you, your wide receiver does great for me. We both got what we needed. In this trade, we trade running back for running back. it is either my running back does better than yours or your running back does better than mine. But one way or another, one of our teams improves, one of our teams uh gets worse. There's no cutting it. Uh you can relate. I I know a lot of people might not listen to football, but I think you probably get what I'm saying. In investing, all investing is basically a challenge trade, right? You buy a stock on the market, you are challenging the anonymous seller on the other side. They are saying, "I think there's better riskadjusted opportunities elsewhere." and you're saying I think this is a good riskadjusted opportunity. Lots of different things can come into factor but that it core that's it. What's interesting is most investing is anonymized. So when the person if you're buying and someone is selling you don't know who's selling and you don't know their thesis. Every now and then that's not true. For instance, private equity firm owns 20% of a company. They announce a secondary. You know who's selling but you don't know why. They could be selling selling because they're at the end of their fund life or they could be selling because they think the business is about to implode. So you're taking some risk there. Uh why do I mention this? Uh BHC is a stock. I own nothing in it to for full disclosure. So I don't have a position. I think it's very interesting that this is the former Valiant. They are overlevered with I believe they've paid their shareholder lawsuits from the Valiant days out, but Valiant went on an acquisition binge and they've got all the debt from the acquisition binge and obviously the company exploded. It is now a creature of financial engineering and there are two there are two sophisticated shareholders who are in here John Paulson and Carl Icon both own roughly 10% of the stock and they both own roughly 10% of the stock and for the past two years maybe longer the key thesis on BHC has been pretty simple a financial engineering story can you get they've got tons of debt but it the debt is cleverly structured and if you can get assets out of the debt into equity holders hands then you can shift value from the debt to equity and because they've got so much debt any value you can shift from the debt to equity creates a fortune right I'm simplifying a little bit but this is basically right and the one big asset they have is BLCO balian loan and uh that is worth quite a bit per share and there that most of it sits in an unrestricted sub and the thesis for the past three years and the company said this where they want to get it to shareholders right and the the best way would probably be they IPOed BLCO about three years ago. Uh 19% of it trades on the public stock exchange. You can see it. The best way would probably be if you could spin out the remaining shares of BLCO to BHD shareholders. The remaining shares are worth sometime some days it's been worth more than BHD's share price. Someday it's been worth most of it. But if you could do that, that would create enormous divide. Why do I mention all that? Well, Icon and Pollson both sit on BHD's board. Both own 10%. So both of them are very privy to all the internal negotiations. Hey, are there risks that we can't do any of the spin-off stuff Andrew just talked about? What are the opportunities? What are the other factors? They they are privy to all of that. Both own 10%. On Friday, Pollson bought all of Icon stake over $300 million from Icon. And not only did he buy all of Pollson of Icon Stake, but he did it, you know, the stock was trading at seven. It had been trading as low as six a couple days before, but there was a rally and Pulson was actually buying stock on the open market as well. He did it at nine. And that is just a fascinating fascinating challenge trade to me, right? Normally, if you're selling 10% of a company in a block, you have to take a huge discount. But what were Pollson and Icon seen that made them get together? And Icon said, "Hey, I want to sell this block." Could be for any reason, right? I want to sell this block. And Pollson said, "Hey, based on what we both know, I think I will generate a fantastic return if you get nine." Because if you came to me and said, "I own 10% of a company. The stock trades at seven. I'd like to sell it to you. I'd say, "Okay, my first bid is $4." And then we'd probably negotiate and settle around $5. If you went to an investment bank and said, "Hey, I want to unload this 10% block. I'm a sophisticated shareholder with a board seat. I'd like to blow out of this stock." The investment bank would probably say, "Cool. We think we can get it done for $450 and maybe $5, right?" You'd be trading a huge discount. So, icon goes to Pollson, or maybe Paul goes, I don't know. I we don't know the whole story here, but they go and something they say gets them to say, "Hey, yes, if icon wanted to exit this, normally he'd be take trading at a huge discount, but both of us think it should go for nine." Like, what did they know? What was going on there? Because here's the other thing. Icon has to sell, right? So, if they know tomorrow they're going to sell BLCO for $100 per share and all the proceeds will go to BHC shareholders and the stock's worth 50, Icon's not selling for nine. He's holding on for that. uh in on the contrary if they know everything's terrible Paulson's not buying at nine he's taking a huge discount or he's not doing the trade at all so I just think it's such a fascinating challenge trade I I've been looking at I have no position but you know the stock is as I as it where did it close it was oh okay so it spent most of Friday trading in the seven high sevens range it looks like it kind of ticked up to the mid to low eight ranges at the end of the day but you know you're you're buying a sophisticated shareholder who sits on the board just bought 10% of the company $300 million at $9 per share and normally I'd say hey sophisticated shareholders anything could happen but here it's such a financial engineering story and the person has so much insight into the financial engineering stuff I think that's a very interesting signal and buying a discount to that very very interesting um okay anyway I've rambled enough these ramblings are always hard because I'm like hey man I'm rambling but I don't know if I'm making any sense Do people want to hear this? Do people generally pretty good feedback, but I, you know, every one I do, I hang up and then I say, "That was the rambliest one I've ever done." And then the next one I hang up and I say, "I feel like that was even more ramblier." So, thank you for listening to my ramblings. Uh, got a couple of great podcasts coming up, especially uh my friend Art Boken is coming on for one on process improvement and stuff that I I think people are really going to enjoy to some really interesting ideas on the podcast as well coming up. So, thank you for listening. Looking forward to sharing those with you guys and we will talk next month. A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.
August 2025 Random Ramblings
Summary
Transcript
You're about to listen to the yet another value podcast with your host me, Andrew Walker. Today's podcast is my monthly ramblings for the month of August 2025. Look, I say this every ramblings, but this is my every ramblings I hang up and I say this was my most rambling ramblings yet. And I I definitely feel it on this one. So, it gets rambly, but hopefully you enjoy it. I get good feedback on these, so hopefully you enjoy it. Let's see the topics today. We're going to start out talking about just what a weird market is. I love to talk about both on here and on the blog. I love to talk about the overall market just it really helps me clarify my thoughts and I will tell you these are strange markets you know co was obviously a strange market but that was a panic market right now is just it is such a tale of two cities it's really pulling me apart so I want to talk about that uh talk a little bit about companies portrait analytics I believe they're going to be the sponsor of this episode they've got some great screens that I like to use and one that I've really been looking at is companies that miss earnings and the the company buys back stock aggressively into the earnings miss I I think it's such an interesting weird signal. You know, does the company not get it or is the value so high that they just have to do it? Then we're going to talk about just Sydney Sweeney hot girl marketing and owning a media company. I promise you I'm not trying to get on as a talking head hot taker hottaker, but I think there's really interesting business insights and questions there I had and especially around the Paramount UFC Paramount Larry Ellison deal connect them all hopefully in a good way. So, we'll talk about that. swinging when you have an edge. Just a lot of thoughts that I've personally been thinking about when news updates and you think you've got insight into situation, how you push yourself, how you process it, how you change your position. So, just really ramble on that. And then close down with a really interesting challenge trade. Uh BHC, the John Paulson buying 300 million stock from Carl Icon. Both of them have board seats. Thought that was just so interesting I had to put something there. So, going to get to all that rambled in the opening, but first a word from our sponsor. This podcast is sponsored by Portrait Analytics. People ask me all the time, what's your favorite stock screen to run to look at for ideas? Is it low price to earnings, high dividend yield? What what is it? And my answer is simple. I don't run screens. I somehow doubt that there's serious alpha and sorting through stocks that are trading under 10 times price earnings on Yahoo Finance. But portrait analytics has completely changed the game on screening. It lets you create bespoke screens to generate actually unique ideas. Let me give you an example of one that I've been using recently. I wanted to look for stocks with greater than 200 million market cap where the company has publicly discussed trading at a discount to peers and both the companies and insiders have been buying shares on the open market in the past 12 months. To me, that's an interesting screen. It's unique ideas. It's a blend of quantitative and qualitative. It's pulling things that aren't, you know, just purely numbers based that the insiders are talking about and it's building something that kind of fits with my view of the world and my view of the types of stocks that would be interesting. Portrait let me find a handful of companies that meet that criteria. The last time I did the screen, by the way, the screens run every day if you want them to, every week if you want them to. The last time I did the screen, it had four or five stocks that exactly hit that criteria. And then boom, I had a list of really interesting things that I actually might buy that I could sort through. Uh they it also showed me exactly where the company was talking about, how their valuation compared to peers, so I could see, hey, was this a one-off or are they consistently talking about in a way I think it's interesting. Anyway, I think it's completely changed the game for screening and for generating new ideas. If you're looking to up your screening game, you should check out Portrait Analytics at portraitanalytics.ai. I'll include a link in the show notes. All right. Hello and welcome to yet another value podcast. I'm your host, Andrew Walker. Uh if you like this podcast, it would mean a lot if you could rate, subscribe, review, wherever you're watching or listening to it. With me today, I'm happy to have on myself. It's time for my monthly random ramblings for August. It is August is it 15, 16th? I'm not sure. It's the middle of August. Uh, got a bunch of top topics I'm going to ramble about today. I hope you enjoy them. I'll get to the topics in a second, but before I do, quick disclaimer, remind everyone that nothing on this podcast is investing advice. Please consult a financial advisor, all that jazz. Full disclaimer at the end of the podcast or you can see the legal disclaimer on the website if you are interested in it. Okay, so today for August, I have a few ramblings. Uh, one, I just want to I I love to do these ramblings. You know, the ramblings, the state of the markets I publish at the end of every month in my monthly links. kind of helps me think about where we are in the markets and keep a clear head and everything. So, love to talk about the markets and ramble about those. We're going to start by talking about just what a weird market it is. Then I have, look, I'm not trying to become a uh talking news head or a clickbait artist, but I do have some thoughts on the Sydney Sweeney uh controversy and uh I want to throw that out there. But it's not it's not hot takes, it's business takes. I promise you that. And then I want to talk a little bit about Sween when you have an edge. And then to wrap it up, might talk a bit about Buffett's longevity. Yeah. I don't know. And uh there was an interesting what I like to call a challenge trade. I've got a post that I'm about to put up on that, but I'd love to talk about that as well. So, let's start with thoughts on the markets. Look, it is it is just a weird market. Like markets are up. You know, I'm guessing again, I'm recording this in the middle of August. I think the S&P is up double digits on the year. I think the Russell is up low single digits. So, it's it's been a pretty good year for the stock market. Albeit, you know, you think back to the beginning of April, a very volatile one. But I I I can't get out of my head. It is still just a weird market. You know, I see if if something touches AI, it is a golden god. The stock is up to the right. Doesn't matter, can do no wrongs. They're beating earnings every time. If they miss earnings, they're getting the benefit of the doubt. It is just a golden god of a stock. And curious thing about the market is, you know, the largest companies, we we've been saying this for a long time. The largest companies, they just keep outering. And, you know, a few years ago, Facebook, Google, all these, it was just infinite growth at unlimited roses because they were capital light businesses. And now they've all latched on to AI, they're all just generating huge returns apparently through AI. And they it's kind of like a shame for active investors because the market is if the if mag 7 is what 35% of the S&P 500 and all of mag 7 is pretty much tied to AI. Well then if you're an active manager with you know if you're dealing in the type of just poor businesses you know old economy businesses with no AI exposure. You are underweight AI and it's almost impossible to keep up if you're underweight AI when those businesses are doing that. So uh if you are AI you are a golden god. your stock can't go down. Uh you're beating earnings every quarter. Expectations are getting raised. The backlog looks incredible. I it's it is just nirvana for you. But outside of AI, it's just really weird. And I'll just give you a few examples. Deer, good old deer, you know, farm equipment reports earning the stocks down 10%. Retailers, I mean, it has been a bloodbath in retail. Lululemon stock, pull that up. Oh, you're going to barf on yourself if you look at the Lululemon stock chart. Crocs. I'm going to talk about Crocs a little bit in a second, but you know, they reported earnings a couple weeks ago and the stocks down 20% on earnings and you know, tariff hits. You've got people debating, hey, I thought it was cheap and I probably agree with them. I have no position, no plan to take one, but they thought it was cheap at 100 and the companies thought it was cheap at 100. It was like uh you know, I can't remember. Eight times earnings and now it trades to 80 or 85. So, it's six times earnings. So, if you thought it was cheap then and you believe in the brand, even cheaper now. Crocs. Telecom. My god. You know, telecom's supposed to be the stable sector, but every cable company reporting number and just imploding. A lot of the telecom infrastructure company's reporting numbers and just absolutely imploding. We're seeing implosions up and down the board. Oh, food. I forgot to mention my favorite one, food. You know, Chipotle, Cava, Sweet Green. These guys are, I guess, they're high-end fast casual concepts, but all of them are reporting, you know, Chipotle reporting negative same store sales if I remember correctly. All these stocks are just getting absolutely hammered. They're reporting negative same store sales. No. Yeah, I'm looking at as I pull this up. Chroy reporting negative 4% comps. And I know there's noise and everything, but it's just this really weird economy where AI just up to the right, can't stop, but you again, you look at like fast casuals down 4%. Uh you look at telecom's blowing up, you look at the retailers, like what is going on? I don't know how to explain this economy. I I I don't know how to explain it. I don't know how to think about it for you know last year a lot I'd say hey you look at these cyclical companies you know you look at mining companies or metals company US steel car makers whatever and they're going through a pretty deep recession and the stock market was not and obviously the max 7 wasn't but now it's like spread it's not just I think most of the I'm not a cyclical expert by far but most of the cyclicals I follow are are reporting pretty trout numbers and you know trucking companies are saying it it's pretty that up there now it's spreading to the retailers it's spreading it's spreading to the restaurants it's very weird for all these guys to be reporting I mean not just recessionary it seems to me high level deep recessionary numbers while on the other hand you've got the AI guys in just like absolute outrageous levels of growth and economic stats believe him don't believe him whatever seem pretty flattish so just this very strange dichotomy and I honestly don't know how to think about it right now I'm really still thinking about it if anyone if anyone's has got the answer. I'd love to hear it, you know. So, that's just kind of where I am. Uh, speaking of companies that got I I mentioned Crocs a few times and I guess they're a sponsor now, so I can mention it. Portrait Analytics, which I think is great for AI screening, AI tools. I I think it's a really interesting way to if you're looking for companies that, you know, you can do a price earning screen and get I I think you'll get if you say, "Hey, I want companies trading for under 10 times earnings." You're going to get 400 companies. A lot of them is going to be kind of the chaff. You're going to have to sort through the wheat. A lot of them are going to be outside your wheelhouse. It's a really dumb screen and I think it's probably been picked up by Quant. What I like about Porch is you can say specific stuff. So anyway, I guess no free plugs, but there are sponsors I can give it. Uh, one of the screens I have Porch run that I find really interesting is, "Hey, find me companies whose stock was down 20% on earnings who they've they bought back shares inter uh the miss was driven by one-time items." And I think that's a really interesting screen. And the reason I mention it is a when I do it a lot of the companies and right now I'm looking at the screen 14 or 15 companies show up a lot of them are retailers including Crocs and Lulu. I mentioned that for two reasons. A, I wonder if there's a signal in there, right? Hey, the company they is it the company saw, oh, our Q2 results aren't looking good, but our stock looks so juicy, we just can't help but going and start retiring shares. Or is it the reverse? You know, how many times have you seen a company buy back shares and then barf a quarter and their stock goes down 40% and the next quarter they're not buying back any shares and then you look at it and say, does this company know how to forecast? Like, what is going on on here? They were buying back shares when the results were terrible. Now the stock's lower and they they're not buying back shares. Uh not that you know if you buy back shares in 2021 at 100 and the stock goes to 10 and you're in distress. I'm not saying you have to buy back shares just because the stock's down, but it's really weird if you're about to barf the quarter to buy back shares and then stop after that. So I just look at that in Crocs is the perfect example, right? They intraquarter they buy back a hundred million of stock at about $100 per share and now the stock is at 85. in in Croc's case, you know, just reading between the lines, looking at their history, looking at what they said on the call, I think they're going to keep buying back shares. I I would be shocked if they didn't, but there are a lot of companies out there, you know, and oh, by the way, Crocs is a four and a half, five billion dollar company, so hundred million dollars of stock in a quarter is a big slug for them. There are a lot of companies out there, you know, I think Vivid Seats is one that I I've looked at recently where their business was falling has been falling apart over the past couple months and they are controlled by private equity owners who are sophisticated and they were buying back stock hand over fist as the business was falling apart over the past few quarters and then they report Q2 results which uh were way below where anyone thought they would be be and now the company's like kind of repurchased themselves into financial distress and they're certainly not even analysts aren't even bothering to ask if they're repurchasing in stock because it's so clear that they don't have the resources. So, it's just weird. Um I it's just weird. I don't know how to separate the signal from noise there. I find it very interesting. I am just such a sucker for sure by find it interesting. Oh, and the last thing I'll note, you know, this screen I mentioned portrait analytics. This screen company down 20% buyback shares management argues it's a temporary thing. I've looked a little bit at it historically. Again, portrait I didn't have access to portrait five years ago, but I've looked a little bit at it historically and generally three five companies will will hit the screen. Right now, 15. So, I'm not saying it's crazy crazy out of normal, but that's really high. And it's really interesting to me that you've got, you know, it makes intuitive sense, I think, where a lot of the companies are, especially the retailers are saying, hey, they're blaming the tariffs for why they missed one time, right? Again, the one time is one of the factors uh that's key there. And I think that's one of the interesting about using a screen that marries AI with quant. But uh they're saying it's a one-time miss. Historically, you'd see three to five companies, there's 15 here, but it it makes sense with the tariffs, but it's interesting that so many companies are blaming one time. And again, if I marry that back to the weird stock thing, they're saying it's one time, but I can't help but wonder if it's if there's other stuff there. You know, just on restaurants, we're deporting a lot of people, right? Is the deportation is it just kind of shifting demographic trends? And I know that sounds silly. It's not like we deported 1% of the population, but I think you could write a story where you say, "Hey, you deport five basis points of the population, but it's five basis points who are kind of working age and who would be eating at these restaurants. And by the way, the restaurant stop uh the restaurant overall stock has not changed. So now there's a little bit more of a knife bite for each customer because there's just that many fewer kn I don't know it's hard for me to describe weird market weird everything. I don't know. Weird world. Let's move on. Speaking of crops, I mentioned crots a lot and I told you I wanted to dive into the Sydney Sweeney debate. And I don't mean that as in I want to take one side or the other. I certainly don't. But there were two interesting things about the Sydney Sweeney debate that kind of had me thinking about the stock market. And the first was Sydney Sweeney. You know, speaking of Crocs, the reason I mentioned is she was the sponsor for Hey Dude. And Hey Dude is the brand that Crocs bought and they said it was going to be this great acquisition, diversify, all this sort of stuff. Has not gone that way so far. She was last year. She got named the head of creative for Hey Dudes or something. To my knowledge has not budged the needle one iota. So I was kind of surprised when she hopped onto American Eagle. I guess she's a big brand. And where I'm trying to go with this is look, she already failed to hate dudes and hat dudes is much different than American Eagle. But I do wonder there, if I just step back from Sydney Sweeney for a second, there are lots of companies that have what I call hot girl marketing. You know, I I'll talk to some CEOs of fitness brands. They'll be like, "Look at all these look at all these girls we've got pitching our things." You talk to people in medtech, especially aesthetics, right? Botox, plastic surgery, that sort of stuff. They'll say, "Hey, you know, we got we got the Kardashians sponsoring us or we got these hot fitness Instagram girls sponsoring us or hot men too to to be fair. Could be hot men." Uh, you know, I I think energy drinks especially and protein powders getting huge jacked men to sponsor them. You'll sell one guy. You'll sell to one guy right here if you do that. But I do wonder, especially on the hot girl side, is there real ROI here? Like, did American Eagle really look and sp get a movie star to sponsor this and run this buzzy campaign? And yes, their brand was in the the news quite a bit, but I saw there was reports earlier this week that their foot traffic is actually down year-over-year since they launched the Sydney Sweeney ad. And Sydney Sweeney, she's an A-list level movie star. You know, I'm sure she doesn't come cheap. I I'd be really interested like in these companies, how do they judge the ROI? or if it's just, you know, Botox going and talking to hot girl hot girl marketing or hot guy marketing saying, "Hey, we're going to give you some free botox injections if you put it in if you put it on your story." Like, how do they judge the incremental how do they judge the incremental demand? And the reason I worry about this is, you know, we've seen in public companies, I think you'll see this parallel very quickly. Movie studios, movie studios are a hot item for, you know, every decade or so, a rich guy comes along and buys a movie studio. And why do they buy the movie studio? There's always a business case. There's always a business. And this is dating back to Ko buying Paramount in the 1980s. There's always a business case to go and buying the movie studio. Right now, Larry Ellison's son, backed by Larry Ellison, is buying and taking control of Fairmont. There's always a business case. But what is it actually? I mean, I suspect it's an ego stroking thing. Right now, with the movie studio, you could be the head of the movie studio. You get to approve or not approve movies. You know, all the movie stars are coming up and hobnobbing to you. All of them are sucking up to you. Uh you can probably get a couple pet projects that you want you want to approve that might, you know, if you've got a worldview or something that speaks to that. But they're I they're not really financial purchases in my mind. Yes, I'm sure they convince themselves they're going to be a financial purchase, but it doesn't really work out well for them. You know, how'd it work for those guys with the hot girl marketing? I wonder how much these people look at them and say, "Hey, we've got a financial case." versus how much it's, you know, middle-aged men, high up men, just they they want access to they want to be able to talk to these hot girls or or anything. So, the Sydney Sweden thing really brought it back to my like I I I'd be pretty surprised. Now, it did take it really took off. So maybe you say all marketing is good. All word of mouth, all news is good, good news. Maybe it results in a lot of incremental sales. You know, obviously it's been hotly debated. It it certainly I'm guessing it went way more viral than they would have hoped for in their wildest imagination, but does it translate to sales to, you know, run that huge campaign, pay a huge movie star? I don't know. And when I go down the line of some of the smaller ones, I I do wonder if they're like, "Hey, you know, and a lot of the Instagram and Tik Tok influencers, they're smaller, so it's smaller dollar figures, but I'm I'm guessing the ROI is like absolutely zero or negative." And I wonder how much it is just stroking the egos of the management teams and getting access to that. Uh, you know, last one on movie studios as I think about it. You know, Larry Ellison, he bought control of Paramount and then they announced a massive, massive deal to bring the UFC to CBS and it was uh I think it was $7.7 billion. Huge, huge deal. I mean, that is how much they're paying. That is NFL. It It is way way bigger. The UFC was making I'm just looking at a news article. It was making 550 million per year from ESPN. It's going to 1.1 billion per year on CBS. It's a big number. And I wonder how much of that was like, hey, I'm not saying sports rights don't have value. No one believes they have more value than I do, but that is a huge number for the UFC, which is not as good a property as to take one, the NFL, the NBA. And I wonder how much of that was you you got a movie studio titan in there, and he wants to flex the muscles, you know, he wants to sit ringside at UFC. He wants to hobnob with the celebrities. I don't know if that's a financial deal so much as a uh ego munch. All right, I have rambled on long enough about that. Let me switch to something I talked to with my friends a lot. You know, uh I don't have an answer here, but one thing that I've tried, especially my friends, and I even tried this on the podcast now. It's difficult to do, but when someone has an edge, when someone has something really unique, how do you push them to swing? And I I think it's really interesting. You know, uh, one thing I've thought about asking on the podcast before is, hey, there's the Buffett punch card rule. You know, if you had 10 stock, if you could only invest in 10 stocks with a punch card, every time you invest money, you punch it, you would be a much better investor because you would be so selective. And I've thought about asking people, hey, you know, this idea you're pitching, most people are long the stocks they pitch on the podcast. You know, I kind of have that requirement. You're long it you believe in it. But I've thought about asking, hey, is this, you know, is this a once a month idea? Is this a once a year idea? Is this a once every five years idea? Is this a punch card idea? The reason I don't ask it is because it's an awkward conversation, right? People run portfolios, there's different sizes and everything. Uh maybe how how is somebody going to come on and pitch a podcast and then come and say, "Oh, I think this is just, you know, an average good idea." You're just putting them on the spot in a bad way. But the reason I ask is when I talk to people and I try to sus this out and I hear them say, "Hey, this is a punch card idea." Or they've got some information that's really flipped it. uh you know just pushing them to say hey if this is such a good idea why aren't you bigger you know if you're nothing is investing advice obviously but if you're 10% why aren't you 15% why aren't you 20 why aren't you 50 uh I it can be good or bad right but I think it's a really interesting way of talking and thinking to people about it and kind of quantifying the edge and the reason it's on my mind look I'm just rambling but I've had a few recently where for me personally and I'm not going to name stock names or for friends there was a new bit of information out and sometimes the new bit of information was out there for a month and sometimes was out there for a day. But there was a new bit of information out that materially changed the thesis. Sometimes in a very positive way, sometimes in a very negative way. And again, I'll just speak for myself. Uh I have trouble when the new piece of information comes out if something particularly something size large already increasing it. You know, going for the jugular. And I don't know if that's good or bad on my part. Like you know, I had one recently where piece of information came out. I thought it was almost certainly to be good news. Already had a big position. I didn't increase it. And then in hindsight, I was talking to someone and they were like, "Hey man, you had real edge. You had a differentiated view on that news. You knew what was coming or you thought you knew what was coming. Why didn't you increase it?" And to me, you know, push back and forth. It's like, "Hey, I was already huge here, man. This was already a big position. One of my biggest like how can you get bigger?" But on the other side, it was like, hey, if you were running the, you know, the Kelly criterion or whatever and your model, uh, it would tell you to get bigger based on this new information. So, just like re-underwriting, talking to people and I I do the podcast a lot. I talk to a lot of friends. It's one thing that I've tried to step back like when I'm talking to a friend and they mention an idea to me last month and then they mentioned something new this month. I really do try to push them and say, "Hey, this seems like new incremental information. Are you buying? Are you selling? Pushing? I don't really have a ramble there, but it's just something I really think about and it's one of the hard things about investing. You know, in in blackjack, it's very it's very easy in blackjack, you're dealt 11, the the dealer is delta six. So, it's very easy to know it's double. You're delta six, the dealer is delta six, you get a five. It's very easy to know to hit again because you've got 11 now, right? Very easy to update because it's very mathematical. Investing, it's not mathematical. You're always dealing prob you're dealing probabilities, but it's unknown probabilities, right? What does this AK mean? What is that press release for you? You never really know. And it's just having people to talk about and think through with it can can be really helpful. And look, real edge comes along rarely. And when you have it, sometimes having somebody push and say, "Hey, is this real edge?" If you really believe that, why aren't you buying? Can really help. And the counter, you know, I know a lot of times, especially my friends who know names really well, they'll say, "I have this big position. I've got this check, right? or I understand the industry it's starting to have a cyclical downturn right and analysts aren't on to it yet be like oh cool or you selling you reducing position be like no no no no the the long-term value is too great and they might be right but you know if you've got a check that numbers are going down you probably want to trade around that in some form now could it be it could be reducing your position it could be shorting a basket of stocks with similar beta and then just saying hey this companyy's so good I'll short a basket with a similar beta it could be buying puts what whatever it is But I, you know, if you're really following a company, oftent times there is news that you will have edge and you have insight into and I think updating the trade around that is critical. Okay, that was rambly. I don't even know where I was going with that, but I had notes. It's obviously been my mind. I've think been thinking about a lot. So, just wanted to rant on that. Let me go to the last one. I'm about to put a post up on this, but I I think it's worth mentioning and discussing. So, in fantasy football, normally when you do a trade, it's I have three running backs, you have three wide receivers. I have zero wide receivers. You have zero running backs. Let's do a trade. Now, obviously relative value and everything, but that's the trade. But there's what I call a challenge trade. You have a running back. I have a running back. I think your running back is better than mine. You think my running back is better than yours. We trade. That is a direct challenge trade. You know, I if in the wide receivers's running back conversation, it could work out well for both of us, right? My running back does great for you, your wide receiver does great for me. We both got what we needed. In this trade, we trade running back for running back. it is either my running back does better than yours or your running back does better than mine. But one way or another, one of our teams improves, one of our teams uh gets worse. There's no cutting it. Uh you can relate. I I know a lot of people might not listen to football, but I think you probably get what I'm saying. In investing, all investing is basically a challenge trade, right? You buy a stock on the market, you are challenging the anonymous seller on the other side. They are saying, "I think there's better riskadjusted opportunities elsewhere." and you're saying I think this is a good riskadjusted opportunity. Lots of different things can come into factor but that it core that's it. What's interesting is most investing is anonymized. So when the person if you're buying and someone is selling you don't know who's selling and you don't know their thesis. Every now and then that's not true. For instance, private equity firm owns 20% of a company. They announce a secondary. You know who's selling but you don't know why. They could be selling selling because they're at the end of their fund life or they could be selling because they think the business is about to implode. So you're taking some risk there. Uh why do I mention this? Uh BHC is a stock. I own nothing in it to for full disclosure. So I don't have a position. I think it's very interesting that this is the former Valiant. They are overlevered with I believe they've paid their shareholder lawsuits from the Valiant days out, but Valiant went on an acquisition binge and they've got all the debt from the acquisition binge and obviously the company exploded. It is now a creature of financial engineering and there are two there are two sophisticated shareholders who are in here John Paulson and Carl Icon both own roughly 10% of the stock and they both own roughly 10% of the stock and for the past two years maybe longer the key thesis on BHC has been pretty simple a financial engineering story can you get they've got tons of debt but it the debt is cleverly structured and if you can get assets out of the debt into equity holders hands then you can shift value from the debt to equity and because they've got so much debt any value you can shift from the debt to equity creates a fortune right I'm simplifying a little bit but this is basically right and the one big asset they have is BLCO balian loan and uh that is worth quite a bit per share and there that most of it sits in an unrestricted sub and the thesis for the past three years and the company said this where they want to get it to shareholders right and the the best way would probably be they IPOed BLCO about three years ago. Uh 19% of it trades on the public stock exchange. You can see it. The best way would probably be if you could spin out the remaining shares of BLCO to BHD shareholders. The remaining shares are worth sometime some days it's been worth more than BHD's share price. Someday it's been worth most of it. But if you could do that, that would create enormous divide. Why do I mention all that? Well, Icon and Pollson both sit on BHD's board. Both own 10%. So both of them are very privy to all the internal negotiations. Hey, are there risks that we can't do any of the spin-off stuff Andrew just talked about? What are the opportunities? What are the other factors? They they are privy to all of that. Both own 10%. On Friday, Pollson bought all of Icon stake over $300 million from Icon. And not only did he buy all of Pollson of Icon Stake, but he did it, you know, the stock was trading at seven. It had been trading as low as six a couple days before, but there was a rally and Pulson was actually buying stock on the open market as well. He did it at nine. And that is just a fascinating fascinating challenge trade to me, right? Normally, if you're selling 10% of a company in a block, you have to take a huge discount. But what were Pollson and Icon seen that made them get together? And Icon said, "Hey, I want to sell this block." Could be for any reason, right? I want to sell this block. And Pollson said, "Hey, based on what we both know, I think I will generate a fantastic return if you get nine." Because if you came to me and said, "I own 10% of a company. The stock trades at seven. I'd like to sell it to you. I'd say, "Okay, my first bid is $4." And then we'd probably negotiate and settle around $5. If you went to an investment bank and said, "Hey, I want to unload this 10% block. I'm a sophisticated shareholder with a board seat. I'd like to blow out of this stock." The investment bank would probably say, "Cool. We think we can get it done for $450 and maybe $5, right?" You'd be trading a huge discount. So, icon goes to Pollson, or maybe Paul goes, I don't know. I we don't know the whole story here, but they go and something they say gets them to say, "Hey, yes, if icon wanted to exit this, normally he'd be take trading at a huge discount, but both of us think it should go for nine." Like, what did they know? What was going on there? Because here's the other thing. Icon has to sell, right? So, if they know tomorrow they're going to sell BLCO for $100 per share and all the proceeds will go to BHC shareholders and the stock's worth 50, Icon's not selling for nine. He's holding on for that. uh in on the contrary if they know everything's terrible Paulson's not buying at nine he's taking a huge discount or he's not doing the trade at all so I just think it's such a fascinating challenge trade I I've been looking at I have no position but you know the stock is as I as it where did it close it was oh okay so it spent most of Friday trading in the seven high sevens range it looks like it kind of ticked up to the mid to low eight ranges at the end of the day but you know you're you're buying a sophisticated shareholder who sits on the board just bought 10% of the company $300 million at $9 per share and normally I'd say hey sophisticated shareholders anything could happen but here it's such a financial engineering story and the person has so much insight into the financial engineering stuff I think that's a very interesting signal and buying a discount to that very very interesting um okay anyway I've rambled enough these ramblings are always hard because I'm like hey man I'm rambling but I don't know if I'm making any sense Do people want to hear this? Do people generally pretty good feedback, but I, you know, every one I do, I hang up and then I say, "That was the rambliest one I've ever done." And then the next one I hang up and I say, "I feel like that was even more ramblier." So, thank you for listening to my ramblings. Uh, got a couple of great podcasts coming up, especially uh my friend Art Boken is coming on for one on process improvement and stuff that I I think people are really going to enjoy to some really interesting ideas on the podcast as well coming up. So, thank you for listening. Looking forward to sharing those with you guys and we will talk next month. A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.