Pitch Summary:
Plaid’s recent financial performance has been disappointing, with net revenue retention (NRR) declining despite price hikes. This decline is attributed to churn among small and medium-sized businesses (SMBs), which Plaid has deprioritized in favor of enterprise clients. Despite the current challenges, Plaid is expected to guide for 20–25% revenue growth in FY2026, with potential EBIT of ¥2.5–3.0bn. The company’s strategic shift towards enterprise clients and the anticipated recovery in NRR could present a compelling investment opportunity for long-term investors.

BSD Analysis:
Plaid’s focus on enterprise clients is a strategic move to tap into higher growth potential, as evidenced by stable NRR among larger accounts. The company’s decision to deprioritize SMBs has led to a temporary decline in NRR, but this is expected to recover as the effects of churn diminish and the benefits of price hikes materialize. The muted market reaction to recent earnings suggests that investors may not be fully appreciating the long-term growth prospects. If Plaid can deliver on its revenue growth targets and demonstrate a rebound in NRR, it could attract more attention from institutional investors, potentially leading to a re-rating of the stock.

Pitch Summary:
Nextage experienced a significant recovery in its gross profit per unit (GPU) after a scandal hit the used car retail industry in mid-2023. The market initially overreacted to Nextage’s issues, which were more about corporate culture than legal compliance. The company’s GPU recovery was largely driven by strong used car sales and improved inventory management. Despite the recovery, the decision to discontinue sales incentives led to a structural issue with GPU, prompting a reevaluation of the investment thesis.

BSD Analysis:
The recovery in Nextage’s GPU was supported by a strong wholesale market and better inventory management, allowing the company to sell unsold retail inventories quickly. However, the sustainability of this improvement is uncertain, as it cannot be solely attributed to wholesale market factors. Nextage’s strategy of leveraging the wholesale market as an active sales channel differentiates it from competitors like Idom. While the company has limited room to further increase GPU without improving add-on sales, its effective inventory management may help maintain current levels. The cautious expansion strategy, with only two new large-format stores, should support same-store sales and profitability.

Description:
In this episode of The Wrap, Chris Whalen discusses the structural conflict between President Trump and incoming Fed Chair …

Transcript:
You know, whenever you have a period of speculation where people throw caution and reason to the side, you you’re always going to have a retrenchment. I think we just ran out of runway, but ultimately things do come back. Cash flows do matter, and I think that’s where people are headed. They want a little bit more security this year than they were looking for last year. >> [music] >> Hey everyone, welcome back to this week’s episode of the rap with Chris Whan where we break down what’s happening in markets and the economy and also let’s throw in DC while we’re at it. Chris, great to see you as always. >> Why not? >> I know. Why not? And you’re you’re the guy for it, too. Um, great to see you. Love doing this weekly with you. we have to start. There’s a lot of topics this week, but I think let’s just start with the markets and what we’ve seen over the last week. What do you make of it? Um, how are you thinking about things? Um, we’ve seen a lot of pullback across various asset classes. So, let’s just start there. Big picture view on the markets. >> Well, I think you know, as we’ve written in the in the newsletter, the last year was a year of aspiration in many asset classes. You know, Donald Trump won the election. you had a whole uh herd of crypto folk descend on Washington and so it’s been a very speculative 12 months and you saw banks running double digits which is not normal behavior uh and you know the AI story of course but I think now that that is cooling off you know we mentioned in the uh institutional risk analyst that Elon Musk wants to put AI up in space so he can use solar power to do the work. Uh I think people are starting to reconsider a number of these uh themes that we were all chasing last year, interest rates, the rest of it. And it’s also very clear, by the way, that even though we may see Kevin War at the Fed and he wants to shut, you know, close or or lower short-term interest rates, that may not do anything for the long end of the yield curve. Mortgage rates, borrowing rates for big companies, that sort of thing. So, I think there’s a lot of questions people have in their minds as we go into, you know, kind of the the end of the first quarter in terms of what we should expect for the rest of the year and where should we be allocating cash to new investments? Should we be defensive and buying things with income, which I think is probably a good idea. uh you saw metals of course uh both gold and silver traded off and I think this kind of confirms what you and I have talked about which is that gold is a monetary play whereas silver is a commercial commodity and even though a lot of people love silver and I love them uh the fact of the matter is that mostly it’s a commercial play it’s not a monetary play so it’s traded off rather significantly but we had we had talked about that there had to be a correction >> and and you that Chris, you did talk about it on the last episode. Um, you’d said, you know, silver was a speculative commodity, not money. You made that distinction. So, I take it like, did the last week did it prove your point or is there still like room for a correction? >> It just No, but it’s always been this way. Silver has been kind of the the the stepchild to gold, and it’s always been more volatile. So it will lay there for a long time not moving and then all of a sudden it takes off. And last year I think was probably the most extraordinary case in point going back a 100red years when you look at silver prices it just absolutely took off. And again it’s partly because of the narrative in Washington the big budget deficit etc etc which really is coloring most conversations in the investment world. Um but you know people were buying it and buying it because you know when crypto slowed down I think a lot of the bandwidth that had been focused on crypto tokens suddenly goes into metals and the classic example of this is hyperlquid which is a a kind of alternative trading platform with perpetual uh futures. Suddenly they start trading gold and silver after being entirely focused on crypto. So it just shows you that there is a speculative crowd out there and they will move from one thing to the next based upon opportunities. >> That’s that’s really it. >> Interesting. Okay. So on the gold front then um we have seen it pull back from those all-time highs. What do you think? Just >> No, I’m sitting with both my gold and silver positions. You know, I’m not really a short-term trader when it comes to metals. I wouldn’t even begin to know how to uh inform a strategy like that. I like gold for the long term. I’m going to, if anything, add to it. Um, but I think, you know, I’m happy with my silver. I have uh some positions in some of the silver mining stocks, which I think are going to be interesting. People are going to be buying the junior miners. That’s why we have them in our our surveillance list. We’re going to publish a an update on that list by the way next week for our subscribers. >> Well, >> and I I think you know to me if anything you want to add to positions in both you know silver is more of a commercial play than a monetary play as we just discussed but both of them are going to be going higher and you shouldn’t ignore the other metals you know the copper the platinums the rest of them all of them are are sensitive to inflation and they’re sensitive obviously to commercial demand. Okay. So, just to recap, like you’re going to be buying when you see these dips, a little bit of nibbling here and there. >> Yes. >> Okay. >> Buying the dips. >> Yee-haw. >> That’s right. >> There you go. [laughter] >> Well, look, a lot of the volatility in this market comes from external factors, political factors. Uh we saw that very much in the past uh week with earnings. There was a lot of political noise in earnings in the mortgage market for example. >> So, these are all opportunities. >> Yeah. And as you point out, um, the metal’s kind of universe sensitive to inflation. You released your book, Inflated. I have it on the bookshelf. A lot of our viewers have purchased it as well. Um, >> we could have a book party. >> We could have a We could have a book party. Um, you know what we need though, Chris, is we need you to narrate the book. >> Well, you know, I was going to read it, but I talked to the guys at WY and that’s hard work. And they said, “Chris, leave it to us.” And they got the audio book out uh, pretty quickly. So, I I think that was good advice. >> Yeah. Um, okay. So, I want to go back to something you said about Kevin W because now we’ve had I kind of don’t like the term digest, but [laughter] we’ve had a week of like digesting the worsh news. Um, you were just talking about at the top there around the yield. You may not be able to do anything for the yield curve. Could you just elaborate a bit more on that? like what you were saying at the top. >> Yeah. Kevin Worsh has two big themes that he’s talked about for a long time. The first is, you know, obviously he’s willing to see interest rates go lower. That is to say, the Fed funds target that is governed by the Federal Open Market Committee. On the other hand, he wants to shrink the Fed’s balance sheet, which ultimately may uh be counterproductive because that could cause long-term interest rates, mortgage rates, rates that companies use to borrow uh all to go higher. Uh why? Because, you know, ultimately the Fed balance sheet soaks up some of the supply of Treasury debt. If the Fed stops buying, then the Treasury has to go out and sell that debt to public investors. And that means that you’re actually going to see shrinkage in the banking system. There’s a one toone correspondence between debt rolling off the balance sheet as we saw over the last couple years when they were doing quantitative tightening, that Orwellian term they like to use. What that meant was you were effectively not having the Fed as a buyer anymore. So the Treasury has to go out and sell those T bills to an investor. When they buy the T bills, what happens? A bank deposit disappears. >> Interesting. >> So, you know, it’s difficult for the Fed to control long-term rates. We’ve seen them try. Yield curve control didn’t work in Japan and it hasn’t worked in the United States. But politicians will never stop trying, you know, especially in an election year. They like the idea of being in control even though they’re not. >> They just don’t want to. >> So they will tell >> No, of course not. They want to be, you know, do politicians ever really do anything for the economy? No. They can screw up the economy if they’re not careful, but do they ever really help? Not so much. It’s best for them to stay away from it, but they can’t help themselves because they’re trying to be relevant. And the reality is is that politicians, members of Congress are not particularly relevant at the moment because they really don’t make decisions that have any impact. >> Okay. Let me ask you this then. Is one of the risks is is it if Worsh pushes to shrink the balance sheet, could that set us up to be headed toward like another repo blow up like what we saw in late 2018? Is that one of the risks then? Yes. Okay. >> Yeah. And I said that explicitly in our uh note this morning for the rap. I worry that from an ideological perspective and and an intellectual perspective, Kevin’s right. He wants the Fed to be smaller. He wants them to be less involved in trying to manage the economy. But the issue, Julia, is does he have that option given how much debt we have? you know, when the Fed rode to the rescue in 20120 and also at the end beginning of 2019 after the money market uh mess at the end of the previous year, it was about restoring market function. It wasn’t about, you know, manipulating interest rates. The Treasury market stopped working. So, the Fed had to come in and buy it. That’s the part that I think people have to be very careful of. Uh we don’t need experimentation anymore. We’ve had enough of that with Powell and before him Janet Yellen. >> So I guess the question for you Chris is can he can he actually like resume QT without breaking something then? >> I don’t think so. No. You know at the end of the note we put out we noted that Morgan Stanley actually paid 45% to raise cash in the repo market in the third quarter. I’m going to be very interested to see where that number is when they drop their financials at at the end of the year. their 10k. Um, you know, I I think that there’s a lot of pressure in the short-term money markets right now. The Fed has had to intervene in the past month, and we need to be really really careful of this because you could repeat 2018, as you said. >> Hey guys, thank you so much for watching this video. If you can just take a quick moment and hit that subscribe button, we are trying to hit our next goal of 100,000 subscribers. Really appreciate you. And back to the video, we got to also like throw in housing in here because um as you’ve off as you’ve you’ve also pointed out, Trump wants he does not sorry. Trump does not want home prices to fall. He made that clear at Davos. Worsh wants QT. Someone’s going to be disappointed. Who? >> Well, that’s a good way to put it, Julia. Yes. I think that there’s not much President Trump can do about a home price correction. You have one already underway. It’s just that the totality of the market is very big and it takes a long time for home prices to all head in the same direction. So, some are going up, some are going down. The overall average increase in home prices nationally is about zero today, which is pretty different from what we’ve seen over the past couple years. So, you are seeing weakening. But, you know, can President Trump do anything about that really with policy? No, not not really. It’s it’s ultimately up to buyers versus sellers, supply versus demand. Supply has been increasing, as you know. We’ve talked about this in some parts of the market, but not overall. In many blue states in the country, you just don’t have any home construction. And that’s one of the reason this prices here in New York, for example, have been relatively stable even postco. You know, we saw a remarkable bump up in prices in New York. Uh but that’s not going to continue. I think if anything, it may retrace and go back down a bit. >> I cannot remember where I saw or not that I know where I saw it. I saw it on X. I just don’t remember who posted on X about like how there’s a significant number. Maybe I was streaming cuz I was scrolling super early in the morning or late at night [laughter] about how a significant portion of realtors, real estate agents didn’t do any deals last year. I don’t know how true that is. I might be totally wrong, but I guess like housing, it is starting to see some headwinds. >> It is it’s a capacity problem in some respects. um you know margins on loans in terms of profits to lenders have been under a lot of pressure because we still have over capacity. I think that what we’ve seen so far with earnings and the the fiasco that occurred with pennymac last week is that you’re going to see more consolidation in the industry. I expect to see more mergers, uh, more firms just getting bought or even going out of business simply because, you know, it’s hard to make a living in the mortgage market today. And you’re right, a lot of realtors didn’t do any deals last year after having several years which were gang busters. >> So, you know, whenever you have a lot of activity, 2020, 21, 22, you pulled a lot of new people into the market. They got their real estate license. They’re out doing deals, but now things have quieted down. It’s a difficult industry to stay with during periods when you don’t have a lot of deals cuz they all get paid on commission. >> Well, you and I have talked about the state of the economy. Um, how much does this part of it like housing like how that market is doing? How much does that kind of dictate the direction of the economy? Because I know we’ve talked about like no recession on the horizon at the moment, but just kind of curious like is it more of a leading indicator or or is it a lagging indicator? I actually don’t know. So, >> housing is usually a bit of a lag because it takes a long time to turn. Um, but what I would say is that, you know, it’s still an extremely important part of the economy. The realtors are pieces of it. The homebuilders, what you’ve seen is that homebuilders have had to drop their prices dramatically in the past 12 months to continue moving inventory out the door. They’ve also been subsidizing mortgage loans. So what that tells you is is that when you see price weakness like that in terms of new home construction, there is pressure out there. Will we see a recession caused by housing? No. But I do think we are headed for a correction and that’s part of the reason that investors are starting to migrate to more defensive stocks to stocks that have cash flow as opposed to being entirely uh focused on capital appreciation. So, you know, I think this year, Julia, is going to be a year where people kind of regroup and try and figure out how they’re going to protect themselves in what may be a slowdown this year and next year. And this is ironic because, you know, obviously President Trump wants to keep things pumped up and run the economy hot. That’s why he’s been demanding lower interest rates. But I don’t think having the Fed cut interest rates down to let’s say we got the target for Fed funds down to 2% and maybe maybe we get mortgages down into the high fives. You still start you might see a little bit more activity, but you got 40% of the market still below 3%. In terms of coupons, I own I have a 3% mortgage on our house. So, in order for me to actually have a conversation with somebody about ref Yeah. Yeah. You’d have to have Fed funds below 1%. >> H Yeah. So, I guess like you would almost have to Yeah. You’d have to have it a certain level because why would Yeah. Exactly. As you point out, like why would you even have that conversation? And then what would even create the window or opportunity for like the first time home buyer to like want to get in there right now? I’m still waiting. That’s right. Prices are still too high. Affordability is the key political issue in America today. And I think one of the issues that we’ve got to face is that the only way we can get new families into new homes is if we let existing home prices normalize. That means they may retrace back down to 202122 levels, which a lot of people find horrifying. Obviously, the people who’ve been speaking to President Trump don’t want to see their home prices go down, but there isn’t a whole lot we can do about this. After a 12, 13 year period of boom in housing, you kind of almost have to have a correction. >> I wonder if that also provides some relief because of um I imagine too when you own a home, there’s the insurance costs that comes with it, taxes. Aren’t those just they’re all going to be tied basically to the the value of it? Maybe. I don’t I don’t I don’t own a home. >> Well, that’s the coming battle. There are many states and localities that have been increasing their assessments on homes to try and make up uh tax revenues. So, when home prices do crack down, you’re going to see a battle >> uh between local governments and homeowners over whether or not prices should or, you know, taxes should continue to go up. Big cities too by the way, big multifamily landlords, they are demanding decreases in property taxes in cities like New York and Chicago because the value of these properties has fallen. That’s not a very easy conversation for these governments to have because they are totally dependent on property taxes to to pay the freight. >> Yeah. So interesting to understand the dynamics. All right, let’s shift topics. What what is going on with penny mac? Like what is the penny mac bombshell? The story. Can you just frame it up for us? Because you’ve written about this too in the IRA. >> Uh Bill Py who is the regulator for Fanny May and Freddy Mack told them to start buying back their own debt in in a hope that they could force down mortgage rates for consumers. You then saw President Trump in early January come out with an actual announcement saying that they were going to buy $200 billion worth of their own debt again to force down home prices. Well, not the for or interest rates, excuse me. What this did though was it distorted the bond market and it caused uh the value of the servicing assets that lenders own to drop and it caused the estimates for prepayments to go up. What that means on Wall Street is that the models that are used to value these assets suddenly moved a lot and the hedges that these guys put down in the treasury market didn’t work. So penny came in and you know they missed their earnings target by half. Uh the stock went from $150 down to 90 uh in basically a day. And I think other lenders in the industry are going to have similar problems because a lot of the financials that come out of the industry for mortgages are modeled based on where the treasury market is and where mortgage back securities are trading. That’s what happened. This this was just a complete uh disaster for the shareholders of pennymac. It’s cheap. You know, if if you want to buy one of the leaders in the industry, this is a good day to take a look at it. But it just shows you that when politicians start playing around with the financial markets, Julia, bad things happen. >> Uh and you know, Bill Py owns this one. He he really uh messed up here. And again, you know, he went to the president and said, “Oh, I can help you. I can force mortgage rates down.” But he can’t. It’s just hubris on his part. >> Interesting. So, is it is it incompetence or do they just not understand like how the mortgage markets work? >> I don’t think they understand what they’re doing. You know, Peter Wall, who’s an old friend at American Enterprise Institute, he put out a piece last week talking about foreign policy and he said that the title of the piece was our leaders are not serious people. [laughter] And I think that kind of sums it up. When you have a conservative like Peter Wall publish something like that in in Washington and the fact that American Enterprise Institute would actually publish it, it tells you a lot about what’s going on in that town today. >> I guess like as someone who follows his space, how big of a deal is this? Well, it’s a big deal because, you know, if if large financial institutions start taking losses as a result of the U manipulation of the market by our friends in Washington, that is not going to be helpful and it’s certainly not going to give homeowners cheaper mortgage rates. Quite the opposite. Uh we’ve introduced more volatility into the market. So, when that happens, you know, if you’re running a company like Penny, you’ve got to be very cautious. And that means you’ve got to look over your shoulder, Julia, and make sure that the politicians aren’t creating another trap for you to fall into. >> If you were in a position of leadership or you were able to make decisions, whether it’s like in the mortgage market, housing more broadly, what would be some smart things like to do right now? Like what would be some smart moves to make? Well, there aren’t any really easy policy fixes for affordability. Uh, affordability is mostly a function of home prices. There have been a lot of uh proposals for reducing the number of credit reports that lenders have to pull when you apply for a mortgage, uh, waving appraisals and things like that. But those are all on the margins. You know, ultimately, we need to get home prices to come down 10 to 20%. and that will fix affordability. You can drop interest rates, but again, I don’t think the Fed or Fanny May and Freddy Mack really can control the long end of the yield curve. They could do things on the short end that are helpful. You know, for example, if you’re a lender, you price your your financing for new loans off the short end of the curve, off of what they call sofur. So, that’s kind of like the Fed funds target, right? But for the long end, that’s bond investors. That’s global investors looking at the dollar, looking at the US economy, looking at the federal budget deficit. They’re the ones who set long-term interest rates. So, politicians really can’t fix that. They like to talk about it and they like to play around with it, but you know, you can have some really negative results uh coming out of such actions. Mhm. Going back more broadly, Chris, to the top of the conversation and the markets, do you think the theme for this year is just going back into like just more riskoff? Is that fair to say for characterization? >> Yes. Yes. I I think what I you know what I’m going to be telling our readers over the next couple weeks is take a look at positions that are going to help you preserve capital. you know, you’re seeing the meltdown of the crypto trade. Uh there’s a reason for that. You’re seeing other speculative uh areas like gold and silver trade off. I think the safe place for people to be this year is in more defensive stocks and securities, uh things that throw off cash flow. That’s why I own analy. And you know, all of these are going to be under pressure, but you want to be in securities and assets that are going to weather that pressure better than something that’s more speculative in nature. So, you know, the AI complex, the tech stocks, uh, Oracle, Nvidia, all the rest of them have traded off. I own AMD, the chip maker, which has traded off a lot. I’m probably going to buy more now at these levels. Mhm. >> It was very expensive before. The banks have traded off. You know, JP Morgan, we just published our top 100. They’re in the middle of the group now. >> Wow. Yeah. >> They used to be they used to be the leader of the group. Uh American Express has traded off. All of the leaders that we saw in the first half of last year have now retreated. So, what that tells you is that people are being cautious. Julia, >> is it like the end of like kind of the speculation wave that we’ve seen? >> Yes. the the the latest Trumpian wave. [laughter] >> What do you think made it what do you think made it end? Like why? Like what was it? >> Well, it had to have an end point. You know, whenever you have a period of speculation where uh people throw caution and reason to the uh the side, you you’re always going to have a retrenchment. I think we just ran out of runway. >> Mhm. you know, these stocks all scream to the moon, but you know, as my friends on Wall Street taught me years ago, the trees don’t grow to the sky. They may look like they do, uh, but ultimately things do come back. Cash flows do matter, >> and I think that’s where people are headed. They want a little bit more security this year, uh, than they were looking for last year. >> Yeah. When you say like the defensives, like where exactly like what are >> uh consumer stocks things of that nature. Look at how Walmart has done this trillion dollars. >> Yeah. >> Yes. And and a cautious company. They they didn’t chase Amazon. Uh everybody wrote them off, thought that they were no longer going to be competitive, but they are. >> You know, they’re still invested in bricks and mortar. >> Yeah. I think it’s like Yeah. 90% of the US population lives within 10 miles of a Walmart. I think all industries are going to have a a weeding out of winners and losers. So, for example, you just saw Stalantis, which uh makes Dodge uh trucks here in the United States get crushed when they miss their earnings. All of the companies that miss expectations on the part of investors and the analysts that follow these companies are going to get punished very badly. Um, Chris, we have some viewer mail, so let’s get to it. All right, this one comes from viewer Chris. >> All right, viewer Chris. I >> love viewer Chris. Chris mentioned that Kevin Walsh is not afraid to talk about the budget deficit and put the onus on Congress. But how can Congress cut expenses without causing a recession and thus necessitating additional deficit spending to address it? Federal government spending makes up a material percentage of GDP. So cutting it in any department enough to affect the deficit could directly lower GDP outright and cause a recession. And indirectly cutting social security or Medicare could cause consumption to drop as folks tighten their belts and save more, which could also lower GDP and cause a recession. Feels like Congress and the Fed are stuck between a rock and a hard place. What am I missing? >> No, the reader is absolutely correct. If you don’t get the deficit under control, then you have higher inflation and those dollars that people earn every day buy less and less. This is the quandry that the United States uh finds themselves in in 2026. Um can you cut spending? Yes. But think of it this way. If if uh long-term interest rates rose uh say another point or so, the amount of money that we gather in taxes, Julia, would just pay the interest on the debt. >> In other words, we would basically be borrowing the money to do everything else we need to do. So, can we cut spending? Yes. You’d have to cut defense. So, the United States could not be the hgemon in the world. And you would have to make cuts in other areas. But the choice is either that or inflation. Uh those are the two bad choices that we have. And I think you know the reader is right from an economic perspective. If you cut government spending which is about half of GDP, uh you are going to see a slowdown. But I think that you know the nice thing about the US economy is that we still have a very dynamic private sector and there is a way for us to manage this. I’ve often said, “Look, free spending. Just let the natural inflation in the US catch up over time and force the executive branch to make choices based on that freeze.” And what that means is that you prioritize your spending and things that fall below the line, you don’t do. >> Mhm. >> You know, Americans used to know how to do that. in the in the age of hubris over the last 50 years when Congress thought they could legislate economic outcomes, uh we kind of forgot that the Congress doesn’t have time to pass budgets and things of that nature. So, we got to get back to a more conservative uh approach for these things. And ultimately, it’s a choice. Either we have hyperinflation or we have less growth. Those are the two bad choices that you have. Mhm. But if they keep going down this path and they don’t make those changes and those hard choices, it’s going to be the hyperinflation path, which I take. That’s probably the worst one. >> We’ll we’ll go back to using foreign currency just as we did in the inception of the republic. >> Oh, well, Chris, I hope that we can make the right choices. Um, I don’t know if I’m that hopeful, though. But >> Americans hate paying taxes. That’s the constant theme that we talked about in the in the book. Inflated. >> I think so. And I think they also don’t like seeing their money wasted either. >> No. Well, Secretary Bessant said that. He said 10% of all federal spending is stolen. >> Mhm. >> So, >> and that’s got to make you angry, too, like when you’re a hardworking American paying your taxes and you see it wasted on just dumb stuff. Yeah. Well, there’s a certain part of the political community that uh owes their existence to big federal spending, the Democrats. Obviously, if you start cutting that back, guess what? They lose their ability to survive politically. Uh, you know, the New Deal was really the creation of the Democratic Party. You shouldn’t forget that they were embedded in government. So if you roll back, you know, government spending at the federal level and you force people to finance things at the state and local level, that changes politics a lot in this country. >> I take it, Chris, like real quick on a history lesson, cuz you are kind of the guy like you know your history so well and that’s why I love your books, too. The New Deal, it feels like it kind of got glamorized in history, but I take it that was just it was not a good policy. Well, the New Deal came after the depression. People had run out of ideas. So, Franklin Roosevelt borrowed ideas from Hitler and Mussolini and Stalin very literally. Uh there were three new deals, remember? The US, Germany, and Russia. So, when you look at it that way, uh we largely socialized our economy in the 1930s and then World War II is what pulled us out of the depression. It wasn’t any government policy. It was just a vast amount of financing and activity which was led by big corporations and big big government. You know they were the only ones there. There was almost no private debt in this country in 1940. Everything had been liquidated during the depression. So you know we want to avoid extremes like that. That should be our objective. But we shouldn’t have any illusions that government is a solution. Not at all. Government just transfers money from one person to the next. Chris, um, love doing this with you every week. I love listening to you. Love learning from you. I know this audience does as well. Before I let you go, let And I apologize for anyone who hears my dog Winston. Uh, my little West part Westy barking in the background here. Chris and I are Westy fans, just so y’all know. Um, >> yes, we are. >> Yeah. >> I’ll have to bring one one day to audience. >> We’ll have to do a a p a Paul cast with our dollies. Um, Chris, before I let you go, let folks know where they can find and support your work. Everyone, go subscribe to the Institutional Risk Analyst. I know Chris puts out a lot of premium content. He puts out the rap there. Um, pick up a copy of Inflated. I have copy on my bookshelf. Um, and any parting thoughts that you’d like to leave for this audience? The floor is all yours. >> Well, thank you, Julia. Yeah, you can find us at the institutional riskan analyst.com and I also publish a column for nationalmortgage news which is always outside of the payw wall. Uh we’re active on X and LinkedIn under RC Whan. We always publish questions from readers on X because it’s easier for people to find them. And you know I I’m an optimist. I think we can turn everything around in this country. It’s just a question of can we get past some of the short-term political thinking uh that we have right now. The Trump administration’s running scared up to the midterm elections. So, be careful this year. We may see some rather novel and interesting proposals coming out of Washington. [laughter] But I’ll see you next week. >> There’ll be a lot to talk about. Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst, the very best independent analyst that you will find on Wall Street. Really appreciate you doing this with me every week and I will see you next week. Thanks again, Chris. >> Thank you, Julia. Have a great day.

Pitch Summary:
Mitani Corporation is a deep-value investment opportunity in Japan, demonstrating strong profitability and shareholder-friendly practices. The company has consistently grown profits nearly fivefold since 2008, despite a decline in revenues, and has been profitable every year since at least 1985. Mitani’s management has focused on disciplined capital allocation, resulting in high returns on equity and a strategic shift towards higher-margin niche businesses. The stock remains undervalued, with a market cap over $1 billion but limited investor attention.

BSD Analysis:
Mitani’s diversified business model spans several high-margin sectors, including cement trading, IT systems, and offshore wind power. The Corporate Supply segment, particularly the Cement & Ready-mix Concrete business, drives significant profits with strong margins. The company’s strategic acquisitions and focus on profitability have led to impressive returns on invested capital, calculated at 26% by management. Despite a massive net cash position, Mitani’s return on equity remains robust at 11.44%. The company has steadily increased dividends, with a 16% hike forecasted for FY26, reflecting management’s commitment to returning capital to shareholders.

Pitch Summary:
Nippon Carbon is an attractive investment due to its entrenched position in the growing aerospace sector through its Silicon Carbide (SiC) fiber division. The company is priced at roughly 1x Book Value and ~13x FY24 & FY25 earnings, with a high dividend yield of 4.2% providing downside protection. The SiC fiber division, part of a joint venture with GE Aerospace and Safran, is poised for significant growth as it is a critical material for Ceramic Matrix Composites (CMCs) in jet engines. Despite the core carbon business being stable but not particularly exciting, the aerospace segment offers a free call option on non-linear growth. The market undervalues the aerospace potential, as evidenced by the stock’s modest 18% increase over the last five years.

BSD Analysis:
Nippon Carbon’s SiC fibers are integral to the shift from metal alloys to CMCs in jet engines, offering higher temperature tolerance and improved efficiency. The company’s NGS Advanced Fibers JV holds a qualification moat, being the chosen supplier for GE/Safran engine architectures. Near-term growth is driven by the CFM LEAP engine, with future potential from the GE9X and RISE engines. The company’s valuation is supported by its cash-rich core business and stable dividend policy, appealing to yield-focused Japanese investors. The recent share buyback program further underscores management’s commitment to shareholder returns. While the core business faces cyclical challenges, the strategic pivot towards aerospace materials positions Nippon Carbon for long-term growth.

Pitch Summary:
Solesence has shown impressive growth since launching its proprietary zinc oxide formula in 2017, achieving over $40M in sales in 2024. Despite a significant rally in its share price, the company still trades at a reasonable valuation with strong operating leverage and sales growth. The potential for an uplisting to a major exchange and continued growth trajectory could lead to a significant re-rating of the stock, with the possibility of shares trading at 30x earnings, representing a 115% upside. The company’s strategic focus on high-margin, fully formulated cosmetics products has positioned it as a leader in the mineral sunscreen market.

BSD Analysis:
Solesence’s growth is driven by its largest customer, Colorescience, which has gone viral for its mineral SPF products, contributing significantly to Solesence’s revenue. The company’s ability to expand gross margins to record levels and its focus on onboarding new brands and expanding into the ‘masstige’ market are key growth drivers. The rising popularity of SPF makeup and mineral sunscreens, coupled with Solesence’s proprietary formulas, provide strong tailwinds. However, risks such as customer concentration, potential industry shifts, and tariff impacts need to be monitored. The company’s high insider ownership and management’s strategic focus on growth and execution without financial hurdles further strengthen the investment thesis.

Pitch Summary:
Alliance Entertainment is positioned for significant growth as it capitalizes on a strong music release schedule, new licensing deals, and expansion into the collectibles market. The company has successfully managed to increase EBITDA from negative figures to $37 million by cutting costs and optimizing operations. With a favorable multi-year video game cycle outlook, Alliance is expected to return to revenue growth for the first time in four years. The stock is currently undervalued at ~5x EBITDA, and as the market recognizes the company’s growth potential, shares could rerate to 7-8x EBITDA, offering 80-100% upside.

BSD Analysis:
Alliance Entertainment’s strategic cost management and operational improvements have set a new baseline for gross margins, which are expected to remain strong due to the Paramount deal and other distribution wins. The company’s diversification away from low-margin gaming and consumer products towards higher-margin segments like Vinyl and DVDs/Blu-Ray is a positive shift. The anticipated growth in the gaming segment, driven by major releases like GTA6, and the expansion of the HandMadeByRobots brand further support the bullish outlook. Despite industry challenges, Alliance’s ability to adapt and leverage its market position suggests a promising future with potential for double-digit growth in 2027.

Pitch Summary:
HireQuest’s stock experienced a sharp sell-off in Q4, reaching a low of $7.38, driven by tax-loss selling and non-fundamental factors. We took this opportunity to buy aggressively, as the company’s franchise model is cash-generating with minimal debt. The company announced a $20 million share repurchase program, representing most of the publicly traded float. The temporary staffing industry has faced a bear market, but we believe the headwinds are turning into tailwinds. HireQuest’s superior business model offers significant upside, especially if it can acquire TrueBlue.

BSD Analysis:
The temporary staffing industry has been under pressure due to factors like illegal immigration, but these challenges are beginning to subside. HireQuest’s strategic share repurchase indicates confidence in its valuation and future prospects. The company’s ability to generate cash and maintain low debt levels positions it well to capitalize on industry recovery. Additionally, potential acquisition of TrueBlue could further enhance its market position. As the industry dynamics improve, HireQuest’s stock is likely to benefit from both organic growth and strategic acquisitions.

Pitch Summary:
Consorcio Ara has been a long-term holding in our fund, and we believe 2026 could be a breakout year for the stock. The company has a pristine balance sheet, strong free cash flow, and a solid dividend, yet it has been undervalued at 30% of its book value. A historic leadership transition is reorienting the company to maximize Return on Equity, coinciding with a massive national push by the Mexican Government to address the housing shortage. This proactive management and favorable industry conditions set the stage for a significant revaluation of the company’s share price.

BSD Analysis:
Consorcio Ara’s undervaluation has been primarily due to under-earning its cost of capital. However, the new leadership’s focus on improving Return on Equity aligns well with the government’s housing initiatives, creating a strong growth environment. The company’s financial health, combined with industry tailwinds, suggests a potential for increased revenue, earnings, and dividends. As these factors converge, the market may begin to recognize the company’s true value, leading to a dramatic increase in its stock price. This could be an opportune time for investors to capitalize on the anticipated growth.