13-F Season: Berkshire, Fundsmith, and Superinvestor Moves
Summary
13F Season Insights: The podcast discusses the significance of 13F filings, which reveal the investment moves of large fund managers, providing insights into market trends and potential opportunities.
Berkshire Hathaway Moves: Notable sales include a 46.5% reduction in Charter, likely linked to Ted Weschler, and continued trimming of Apple and Bank of America positions by Warren Buffett.
Investment Themes: The discussion highlights the importance of studying other smart hedge fund managers to identify where capital is being invested and to spot potential opportunities.
Company Analysis: The podcast delves into specific companies like Lamar Advertising, noting its high returns and potential as a Buffett-style investment, despite not being particularly cheap.
Market Efficiency: The hosts debate whether markets have become less efficient, particularly in the context of large, well-covered stocks like United Health, which can experience dramatic price changes.
Quality Stocks Under Pressure: High-quality companies like FICO and Copart are discussed, with attention to their recent price declines and the potential for long-term value.
Fund Manager Strategies: The podcast reviews strategies of notable fund managers like Terry Smith and Lindel Train, emphasizing their focus on high-quality, low-turnover investments.
Investment Opportunities: The discussion includes potential opportunities in sectors like insurance and financial information services, as well as the impact of stock-based compensation on valuations.
Transcript
Welcome, welcome, welcome. How's everybody doing? Hope you are doing well. My name is Andrew with Focus Compounding on Air Live with Jeff Ganon. Jeff, how's it going today? >> It's going very well, Andrew. How's it going with you? >> It's going great. We hope it's going great with everybody else as well. If this is the first time you're tuning in with us, thank you so much for joining us. Be sure to check out all of our content that we push out into the investing universe. The best way to do that is to follow me on X, formerly known as Twitter, at focuscompound. All the information is in the description below. If you're interested in learning about our money management services, you can reach out to me at andrew focuscompound.com. And of course, be sure to hit the subscribe button wherever you are listening or watching us here today so you can be notified every time that we upload a new podcast. So, in today's podcast, Jeff, we're going to be going over 13Fs. um as it is 13F season. Um when you are over a size of $100 million and you have an investment portfolio that's over that $100 million um on US exchanges, you have to follow 13F and it's a great way to look for, you know, what's going on, what other fund managers are looking at. Charlie Mer has always said, study other uh smart hedge fund managers carefully, see what they're doing. So, it's a great way just to see what's going on in hedge fund land and investment land really and get an idea of where other people are investing capital and potentially seeing opportunity. Um, of course, we have to start with Mr. Buffett, Berkshire Hathway. Now, of course, embedded in this are Ted and Todd's picks, which we always do go over as well. Uh, but we could see what, you know, throughout Q2. Of course, these are delayed a little bit because I think you have like what 30 or 40 days from the end of the quarter uh to update it, but um we can see some notable uh sales, right? That's what I typically look for. I look for the big stuff. I don't really look for like the small trims or whatever. I look for the complete ads, the complete sales, or the big reductions. Um so, uh one that obviously stands out is Charter, which was reduced 46.5%. We talked a little bit about charter on the last podcast, but that's probably if you had to guess, if I had to guess, I would say it's probably a Ted Wesler position. >> Yeah, that's very possible. Yeah, very possible. Yeah. And I think also in the last podcast we talked about the secret stock and I believe they still probably have some sort of confidential treatment for something. But if whether they do or not, I also am not sure that based on what we've seen some of those calculations about how big it was, it may not have been one stock because it would be grouped together. You know, they people were looking at the cost basis under industrials and that group and now looking at it, it's possible that other, you know, we'll never I don't know if we'll know exactly if that was always one stock whenever we do find out about it. Mhm. >> So >> yeah, was disclosed like many other fund managers that unh they bought it which I was like okay >> insurance who could that be? My guess would be that would be Todd especially with the size of it one point just under 1.6 billion. >> Yeah, that would seem most likely. I mean Buffett was involved in trying to come up with a solution to company's health uh care issues but that also was Todd leading that too. So if you remember I don't know if you remember >> Yeah. Oh yeah, Jamie Diamond, Jeff Bezos, Warren Buffett, >> and then it just kind of quietly went away, right? >> Well, not I mean, yeah, it quietly went away, but they did announce that they stopped doing it. A lot of companies don't even say that and they said, "Yeah, it didn't work." And but we they said, "We learned some things, but you know, it didn't help anyone else out." >> Mer would talk about it after that, be like, "Yeah, Warren tried and failed. >> It's a hard system." Any other notable sales? He's continuing to sell Apple um and Bank of America, you know, that's Buffett. >> He's been selling Bank of America and Apple obviously for a while now. >> Yeah. Pretty constantly. And those aren't fast sells for this period. So, he might be more okay with the price and he's probably much closer to what he wants to be at. I'm guessing I don't think he ever intended to sell all of Apple or anything. So, that's rare because like we said, he he doesn't usually trim, but there have been rare cases where he sold the largest position down a little bit even if he liked it. Um, yeah. And the others are a lot smaller. They're way below kind of Buffett type levels. Um, the last thing I would guess was him is Chub, but I don't know that that was him, but I would guess it could have been him. So, um, which is not, you know, hasn't changed recently, but that's the last like totally new position of a of a few billion dollars or whatever. I would guess that that is a Buffett one. I don't it would be very big for someone else's and it just seems like a Buffett pick. But like you said, Todd's very involved in insurance. It could have been Todd, you know. >> What was the size of it? It was 7.8 billion. So yeah, that's that's obviously a larger position. >> Yeah. It also just has certain similarities with like management things and things that Buffett would know and everything. And it's a good insurance company. I don't think it's super cheap or something, but yeah, >> we've talked about before these new buys. Obviously, we don't know if they're still buying or whatever, but it could just be a good >> industry signal, right, of of different things that they're looking at. So, Lamar Advertising new buy. It's only $142 million position, but for all we know, they just have continued to buy. >> Um, so we can look that up on QuickFs, which if you do sign up for QuickFs, uh, tell them that you came from Focus Compounding, super important. Um, but 12.3 billion market cap, $15.4 4 billion enterprise value. I mean really when you look at this thing I mean high returns returns on equity return on vested capital but decent but EV to free cash flow 21 times. >> No it looks really good compared to other stocks today. It doesn't look that cheap, but I mean I was looking at uh you know people asking about stocks being overpriced and everything and I was looking at um so you see the price to sales on this. This is a billboard company, right? So it it dominates in some areas and in some it's highly competitive and some it's not. Um you know at a company I'm involved with you know in one of the markets it's 90% of the billboards. You know in other ones it's you know 20 or 30 or whatever but when you're 90% of the billboards it's a pretty good business. Um, so the thing is if you look at this, what's interesting is it doesn't seem like overly inflated in terms of price. So price to sales, Evida for instance, I these are literally lower than US lime is right now. And what do you think is more predictable for the long run of billboards or of like you know a commodity like that? Now I don't know if you think billboards are going away or something then it's a different story. But um you can look at the gross margins, the persistency of things like gross profit and operating profit and revenue growth over time. It looks exactly like the kind of thing that Buffett himself would buy. Uh the price doesn't look like it and the size doesn't look like it, but this is in every way like a Warren Buffett way type uh investment. Yeah. Now, it's not a particularly low price, but like I said, compared to other, you know, other businesses that I'm seeing that have those kinds of um quantitative looking things, if we just didn't know what business they're in, they they're so much more expensive. So, and maybe because it's an old economy type thing, maybe because it hasn't done particularly well in the last few years compared to other sorts of businesses, I don't know. But uh yeah, it has, you know, um it's a quality type stock or whatever and it has really good um numbers on that. On the other hand, like it's still you're talking about paying 15 or more times EBA or something that's that's never that cheap for a business. >> So I mean don't want to talk about I mean I guess the general question about UNH since a bunch of funds have piled into this company is you think like when there's just such a knife fight on both sides, is that just better to stay away? you think? >> Um, no. So, my view on this is maybe a little different. We talked about do I think you know there was a thing published by AQR the guy actually by the guy who runs AQR a year two ago or whatever when we talked about it which was the less efficient market have markets got less efficient over 30 years and this is the kind of thing I think the markets have gotten less efficient about. Um, it's true there's a fight over it. I don't know that anyone knows the company that well and this is like a huge, you know, um, Dow type stock or whatever. Um, so I just I find that interesting. Um, it it had things happen with it. Some of them were really unexpected and so that kind of drew a lot of attention to it, but it had things happen that are consistent with like sort of what happened with GE, you know, 20 years ago or something. um where there's a lot of bad news and things that aren't that well understood by the market and then suddenly all this stuff comes out at once and then the stock responds in a big way instead of responding slowly over time to to news even though it's officially very well covered and everything. So I kind of find that fascinating. So you mean you can see the stock price somewhere uh it rerated in a huge way in a short period of time. uh >> the business did announce things itself, but those shouldn't be surprising, you know? I mean, um the the the business can't be it's a really big business that a lot of people can see different parts of, so it shouldn't be that opaque. There was like one analyst that kind of was expecting that kind of thing. Everyone else wasn't. But it's more a question of timing and everything. It's it's it's not a business that we don't know anything about. There's lots of things to be able to follow. So, it's interesting that it happened that way. And so, it's in other words, I think that there's a lot of focus on the actual reported earnings of the company and not a lot of focus on analyzing the business that it's in and um whether it's a good business or not for the long term and whether it's kind of over um reporting what it was capable of doing and especially whether it would continue to be able to do that. So, I find all that really interesting. So you went from kind of a premium price on the stock, not a super premium price, but a somewhat premium to now it's priced like a value stock. Um, so that's that's just really interesting. I think both can be true. Um, that it could be overpriced at the price it was before and it could be attractive now. Um, I just find it really interesting that that was possible because look how long it stayed at a certain price >> and then repriced dramatically. And it was um that's the kind of thing that you know there should have been information that was gathered and talked about a lot outside of the company more probably than there was. So um and I think in the past there would have been but I think it's that might be less likely now. So when we talk about indexing quant things, people hugging indexes and things, I think that tends to be what you see is like this where uh if people are kind of negative on a stock, it's not reflected in the stock price of some big stocks until something like this happens and then it's highly reflected. So I think that's what's happened here. >> Yeah. Now 12 and a half times free cash flow has good value investor characteristics if you look at it like on QuickFs. >> Yeah. and it's it'll be around for a long time. It's one of the biggest companies and something that's one of the least likely things to go away over time. Um and uh it's not particularly growing fast versus um neither the company nor nor the industry really is likely to grow that fast versus GDP anymore, but um yeah, so it's this really big um part of this really big industry that is very settled at this point. Um, so it's not impossible for them to report kind of somewhat higher earnings all the time. I think it's impossible for them to report as much higher earnings as they were before. Um, but you know, same sort of thing as like when I said GE, there were legitimate parts of that business that were big and stuck around and when they broke it up and everything, you can see that that doesn't it's not inconsistent with also reporting more in earnings than they should have for a while, which is probably what happened here. >> Yeah. >> Cool. So let's hop over to um the grand portfolio, right? So you could look at um uh what is this? This is the holdings of super investors where it's a larger part of the portfolio at least 5%. >> And then it's good to look at it these securities that are trading close to uh the 52- week low, right? This is a company that has been popping up everywhere. Portillos my eyes. >> Yeah, >> because I'm from Chicago and um outside of the city though. So like Illinois. It's kind of like being like, "Oh, I live in Plano, but yeah, I live in Dallas." You'd be like, "No, you live in Plano." Um but this was a company that was, you know, founder led for a very long time, >> sold the private equity, and then went public. >> And it's a huge has a huge cult following in Illinois and various areas in the Midwest. and they've been trying to go elsewhere with it. Right. So, we actually >> I've been to a couple. Yeah. >> Yeah, we've been to one. And did we go to one together in uh in Dallas, Richardson, I believe is where it was. Somewhere. >> Yeah. And so, they opened one up not far from where I lived in Texas. Um I think they opened in like Grandcape, you know, area. So, like maybe by the Colony, not far from Nebraska, furniture probably. And um uh of Texas. And then also where I live now, they also um have one fairly recent. Uh, the scary thing is it reminds me a little bit of like um what was the company called? Is it Fairway? What's the one? The the high-end um grosser in New York City that got taken by private equity and then went from like two locations to 10 and then went right into bankruptcy. It just reminds me of that like um I don't know if you took over In-N-Out and suddenly opened them everywhere, how well that would go or whether that's the best thing. You know what I mean? But uh yeah, but I mean >> Fox nowhere since it I mean look at I mean they went public in Yeah. What was this? 2021. I remember. >> Yeah. I wasn't looking at it for Yeah. We when we talked about when it went public the price was crazy. So yeah. A and we should also say though that like um fast casual, quick service, whatever restaurants like all the high-f flyers are, you know, down dramatically like huge declines in re very very recent times. They're just >> Yeah. Famous one Jack this one. >> Yeah. 100 >> Cabba's down a lot. Um yeah. Mhm. Some of that so some of that can be economic um and some of that is like more so what it is is the combination of the two, right? So like um they were kind of high flyers. Yeah. So there you see you see Wendy's restaurant brands on that list, right? Um you see Chipotle. So those are all things that were owned by some big um super investors, but also I have to be, you know, somewhat near within 10% or something of their 52- week lows, which is not that common right now because what's the market up? The market's probably, you know, of 10% just in the last eight months or something. So not a lot of those kinds of stocks tend to be near their lows, but there's there's more of them now. So, and some of them is they had high multiples and so if there's any negative news on them they go down like uh you know some people were surprised that Walmart went down but Walmart's 45p or something when it started dropping so that's why it went down. It's not that the quarter was that bad but you know if you price a giant stock at 45 times P and a quarter is anything but surprisingly good uh you'll always go down you know. >> Mhm. And so that's the issue with some of these. I don't know the numbers, but like price to sales and things like that, it was no value stock when it went public where it was, you know. So, >> yeah, we could look at Chipotle. >> Let's see what I want to see what the uh could see what multiple is that and what it came down to. So, let's see. It looks like a peak multiple in June of 2024 70 times. >> Okay. at uh price of $69 and so you've had multiple contraction and then the stock obviously the price itself it's at $43 today and a LTMP of about 39 times. So >> yeah and it's not we look at quick FS on it. It's not um it's more I guess it's more debatable or whatever you would say. I mean, there are some warnings here if you look at like the 10-year type numbers and things like that. Um, right now it actually, you'll notice it's not very different from United Health and it's it's a lot more expense, right? It's three times the price of United Health. So, that's one thing to keep in mind. Um, we also see on things like price to sales, even price to book, it's as high or higher than Lamar, which we just saw. Now, the reason for that is it has higher growth. So it has high, you know, except for when it had the food safety issues, it has high um returns on capital. Now it leases all its locations, so there's significant financial leverage there compared to owning them all. But that doesn't change the reality. It just increases the risks. Um so it has high returns on capital. It doesn't have to reinvest that much to grow a lot. So if it grows a lot, it creates a lot of value. Um, so what I'm saying is like QuickFest shows the return on invested capital is like 13% or something. That would be true if the leasing didn't help you out, but considering how much the leasing does help you, the return on equity is more in the 20s and then you only have to reinvest a portion of that to be able to grow, you know, double digits. The question is just how big can it get from where it is and everything. We talked about like Portillos. You know, the thing is with with Chipotle, which is also everywhere I've lived is right next to it, but literally everywhere I lived, I lived in a rural part of Texas. It was a city, but as a rural city, and they put Chipotle's there, as they put Starbucks there, but that's usually a sign that there's not much else except for Starbucks and Chipotle that think that they can be in every little 30,000 person town in America, you know. Um, so at some point they got to stop. So, I mean, it's interesting, but it, you know, there's a much cheaper stock in the UK called Gregs, and that's literally what the concern is, I think, there is that, uh, you know, they said something like, "We're going to put one for every 19,000 people in the country." Um, you know, and I think some analysts said, "No, you know, we we don't really believe that at this point." Um, there might be other things going on too a little bit, but I think that's one of the ones is like, okay, before you said it was 30,000 or something and then you said 20 something and now you're saying like less than 20. How many of these can we have? Um, and and so and at 11 times earnings, not a problem. So like it's really not a problem for Gregs. It becomes a problem at Chipotle or one of those. And you know, if it's um that high a multiple, that multiple is not a you know, Peter Lynch would pay that multiple 37 times or whatever. Not a problem. if you're the size you were a long time ago, but it can be a problem if you don't have that many millions. >> Yeah. Yeah. But it it otherwise has the characteristics you'd like, which is high um return on capital and high growth. Um the thing that throws it all off, of course, is the it went through that period, the fir, you know, of the decade we're seeing here. There was about a five-y year period where it was just getting back to where it was before. Honestly, it wasn't until COVID that it really exceeded where it was before. It it had like five years that were um very flat in terms of the uh business performance after it had those food safety issues. It really took gross profit and operating profit and stuff to did not get back to where they were for 5 years, which is very unusual for a grown concept, but it grew really fast and then it had high-profile problems, but then since co it's it's grown beyond what it was before, you know. Um, biggest issue for it now, I think, would just be price. I mean, it has a lot of protein and stuff. It's It's a very expensive price. I mean, and it's not that people won't have that, but what I'm saying is I don't know that people in the the town of 30,000 people will have it. And I don't know if they'll have it if you're adding it for the first time in a town like that. It might still sell in the older stores that you have in the bigger places, right? But if this is the first time that you've ever put a Chipotle in some lower income, more rural area or something and you come in with a price that's so high compared to the competition, I don't know if the if it will work as well, which is fine. They just, you know, stop doing that. But I just mean that that's a limited growth. I don't think the return on capital will like plunge or anything if they're smart about it. But I do think that at some point you just can't have the same reinvestment rate, which is a problem if your PE is 30 or 40. It's not a problem if it's, you know, 10 or 15. So, >> yeah. I mean, what are we going to have? $25 burritos. >> If there's inflation, you you'll have, you know, Yeah. I mean, yeah, if you're old enough, uh the prices on things like that meat and stuff will shock you because you'll remember a time when they were much lower. So, um yeah. And it's just hot. I mean, that's not necessarily a problem, but as compared to other kinds of businesses, I mean, we've talked about like Cracker Barrel or something, they're also heavy in things that inflated a lot. So, and they respond in a different way and it didn't work out that well, but that's cuz they're more of a value proposition, right? And what Chipotle was doing worked really well, but it does mean that the price kind of gets out of line over time, you know. Um I'm sure you're familiar with Cracker Real over the past few days. >> Yeah, they had a rebrand, right? >> Yeah, rebrand. And people are, I think, upset by it. But that's another stock where 1.2 billion market cap price earnings talking 20 times. >> Well, but that's not 20 times peak earnings. So that's the issue that the company has that you know we need to keep in mind is that you know that's why we use price to sales or price to book or something because often and I just mentioned Greg's Greg's when I looked at um the stock's best point was probably a decade or maybe even a little more than a decade ago now 12 years ago or something um it would have the PE would have been low but it would have been the lowest in it history but things like price to sales have been really really low so I think that price to sales makes sense because it's the same issue that happened here their operating margin basically get cut in half during COVID and then it's h haved again since then. So that's what happens with these things. So the answer is if it's a 2% operating margin it's going to be hard for to like this business no matter what. If it goes back to 5% 10% like it was before it's going to do really well and there aren't a lot of you know results in between. I think the least likely outcome is that that PE ends up mattering. You know, I don't think the the it's unlikely that it's just going to stay at a 2% operating margin and kind of chug along from here and you're going to see that PE be 20 for a while. It's either going to have that margin get worse than it is now or better. If it gets better, then even though that PE looked high, it's going to be on future earnings with super low PE, right? Because the operating income and everything will go will double or triple or whatever. Um, and every year before CO it was making what, four times this. It doesn't have like a lot fewer stores or different things or whatever. And there's been a lot of inflation. So, it's just the business is so much worse, right, than it was before. The stock's a lot cheaper, but the question is just the stock reflects that fully or a little bit more than fully. See what else we got here that are trading just above the 52- week low. Uh, FICO on that list. >> Yeah. FICO. Impressive. >> Yep. >> Waters. I feel like we've talked a lot about these companies recently. Charter. >> Charter. Yeah. All those are near lows. I did know that. Yeah. >> Lululemon. >> Mhm. A lot. I I have noticed that a lot of the super high quality strong performers. You know, high quality in the sense of I sent you something where I'm like here's like a quality these are quality investors, right? So all the things that quality investors own, not all of them, but the 52- week list is loaded with a lot of quality investors. Even things that would surprise you like CNX resources sounds like a commodity thing, which it is, but it the one ownership thing that's why that's showing up is it's slightly popular for reasons of who's involved with it with um some value investors from like the outsiders type stuff. And so it's a kind of a capital allocation type thing. So on a quantitative basis, it's not a value stock in any way, but it still falls into the same group of the quality type uh um investors. So >> yeah, who's on the board there? Um >> uh so you remember the book The Outsiders, right? >> I do. Yeah, it's >> You remember William Thorndike? >> Yeah, Thorndikeke. That's right. The director. >> Yeah, that's CNX. And I think the other one that he was involved with was Perimeter. um systems or per there's a couple companies called perimeter but I think it's perimeter um and then uh and then he's also talked about and done things with like transdime and a few other businesses but um you know there's things about CNX that talks about free cash flow and uh some things like that and they have a different strategy with hedging buying back things whatever that's a little different from other energy companies it's not that it's the only thing and the only reason why it's showing up on this list is because of that but I just pointing it out because um it is literally the first commodity thing I think on this list like the closest to its lows and um it falls in the same category of quality type things even the ones that are showing up Heinek and Nestle because of like Tom Russo things like that um are high quality type things there there's uh we talked kind of about what things worked and are working now and everything momentum stuff is definitely working in in some ways, but it's not always momentum connected with underlying business quality right now. In some cases, it's momentum that's that's kind of unrelated. It's stock momentum that isn't very closely related to uh to strong business position. So, Progressive is the strongest in its industry like >> these are very like dominant highquality companies that just is not part of Mag 7 really. That's the summary here. Mhm. And so why is it happening? Uh I don't know. Bergkshire is even, you know, it's not that close to a low, but it's actually has gone down since the Buffett announcement. Um and it was doing pretty well before then. And even ones there's uh they're not I mean, you know, some of these are kind of not ones people would know that well, so I don't want to get into all of them, but there's a couple on this list that are even like pretty good at cap allocation, culture, things like that, and probably why people own them. And some of that is because we're looking at a list of super investors. But if you go down the list further, that's that's less true. Um, you know, there's not as much to talk about with, you know, uh, some of the other kinds of companies where it's just more of a mix that makes sense that way. So, um, you know, they own a wide variety of things, but it is noticeable, uh, that that like the top of the list, you are seeing a lot of that, which is what I've noticed the most. The things I've noticed the most are like the big declines and things like FICO and and Progressive. We already did quick service type stuff, so that could help explain Domino's and those, but it's not a lot of those are actually pretty good businesses in those areas. Chipotle is, you know, very good business model in what it's in. Domino's is very good in what it's in. Um, you know, Berkshire and Progressive are some of the stronger insurance companies. Marsh is one of the stronger brokers. Yeah. Manderly, cure egg. I mean, these are all just Yeah. like sort of the >> Yeah. Now, >> some of these are getting to within 20% of their uh lows, but if you go, you know, but >> Yeah. And and so >> yeah, >> it's also helpful sometimes if you look at the versus the um 52- week high to see the ones that are off by a lot versus the ones that aren't off by that much. Right. So, some of the ones that I we picked out are ones that are off a lot versus their um uh we we can look at on the other page because it's easy to read that way. Still, if you just look across, right, you can see the current price and the uh I mean, we can pull up the current price, but you can see on the 52- week highway, there's a big difference. So, between the 52-W week high and the 52- week low. So, that's more of the ones that I meant. So, Chipotle, you know, it's not wild in a normal year. It's not weird to have a 52- week low that's two-thirds of your 52- week high, but um some of the other ones are large declines recently. Like Fair Isaac is a good example. FICO dropped at one point about 50% I would say from top to bottom. And it dropped it pretty fast. Now, it dropped it because it I think there was perception the government was turning on it, but the government was turning on it because it had increased its prices, which is why people really like the stock, you know. Um so it's interesting how that works. But and it's not a cheap stock now, but we talked about it. It's a question of like is it 20 times sales, 10 times whatever um 30, 15, whatever. Um you have this issue with stocks that are really expensive. And so in a case like that, you might drop from being, you know, 80 times free cash flow to 40. 40 times free cash flow might be an appropriate price, but it's not a low price, you know, and and that's what happened with a few of these. So that's why we look at them and we go, "Oh, it's not too bad, but it's not too I mean, Chipotle was 1.5 times higher." And we just said, you know, 35 40 times PE is is not low. So we probably would have said 60 is kind of high, you know. So it's a combination of those factors. That's just the issue with quality things. If there's any when they get priced so high, if there's any kind of change of people's, it's not even feelings about them sometimes, but even feelings about strategies, it doesn't take much air to go out of it to to cause people to have it drop a bit because you're still at like you're not attracting a ton of pure value type people or strategies or quantitative things or anything at, you know, 40 times P. Whereas United Health, it shows up, it, you know, suddenly goes flashing on everyone's screen when it drops to 10 times PE or something. >> Let's look at uh a 13F you've talked about before in the podcast. Terry Smith, Fundsmith. >> Yep. Terrific uh thing to look at and a strategy I mentioned. I should point out I think that Fundsmith has probably underperformed like every year for the last few years, but not badly or anything. It just I I do want to say you know kind of what question I was answering is more like what strategy and I was saying in the way that academic things talk about it high active share low turnover with a quality type you know focus here which is the Warren Buffett approach in terms of a fund manager fundsmith is like that. I did not mean that it would outperform more frequently than other things. And I think he did outperform more frequently in the early 2010s and then since the 2020s has maybe underperformed by a percent or two like year after year after year. So um which isn't unusual for this kind of strategy anyway and definitely not in this environment. But so I didn't want to make him sound like it was Bill Miller doing whatever he did. How many did he do? 135. He beat the S&P year after year. But uh just his strategy and stuff. Yeah, this is for a fund manager. This is one of the most Warren Buffet type strategies there is. He's a UK. Well, he doesn't live in the UK, but he is a um is British and that was where he lived his life and everything. That's kind of where the fund was created and everything. So, um but they invest more in the US than the UK actually. >> And we're only looking at US here. >> Yep. >> Tons of sales. >> Uh yeah, that's why I said the part I did at the beginning. that probably means people are taking money out of the fund. Um I was trying to be polite about that, but >> yeah. >> Uh usually that's I mean so I mean we could you know there there's lots of ones where you see this all the time. Um another one that's like this is like you know the Tom Russo's fund and stuff but it wouldn't be unusual to see small reductions in it all the time just because there's probably small amounts of uh net you know redemption type stuff. Um and then not much change to a lot of the other stocks. probably would like to keep it more even, but it's possible that those are actual sales. The things at the top are larger than lower down. That's for sure, right? So, there are some sales of Meta, Microsoft. Um, and then he owns some things that aren't on this list in the past, but no longer owns them. And he's gotten in and out of a couple companies. The ones that stood out to me is he used to own Dominoes in a big way. Domino's was in the US was his best performer for almost a decade or something. Though, like Buffett with Cap Cities, he also like sold it and then came back into it. He did that with another stock or two, but um very Buffett like that way. Sometimes he'll sell because it's too expensive, got ahead of itself, and then regrets it and will actually go back into the same stock years later, but no longer on the list, but I think might have been one of his probably the biggest contributor to results for a long time. Um yeah. Yep. So, and he's somewhat accounting focused. He wrote a famous book about accounting like 40 years ago. I don't know if it's it's I'm sure it's not still in print, but it can be found. It's um what was it? It's not that relevant today because they changed most of the rules about it, but it was basically exposing accounting shenanigans um techniques that companies in the UK use to um over report their earnings and adjust for things and stuff. That's kind of his background. It's accounting sources. >> Another another 13F that you look at, what is it? Lindel Train. >> Yeah. So, it's just the same sort of thing. I mean, honestly, if you have um Fundsmith, then you're probably going to have the same sorts of things that are in here. You'll notice common holdings among a lot of these things. This is why I was grouping them together as kind of quality things, the Fair Isixs and and and such of the the world kind of are owned by the same sorts of uh investors. And there's sometimes some pretty serious overlap in that they have very small positions in like Visa, S&P Global, Equifax, CME, Vary, you know, those are tiny tiny positions, but show that they're interested in them sometimes, but fair Isaac into it, you know, those PayPal. So, they have a lot in that same area of uh financial information services, uh, payment processing, and you see that a lot with these um these high quality type investors because those have basically infinite returns on capital and they grow all the time. So these are your investors. >> Yeah. So that I mean they kind of because of the way this website tracks it data roma you know um that's almost like a new buy but for whatever reason they didn't they didn't mind that at the end of the quarter they'd have a tiny Google position and so it says that they added you know 11,000%. But that basically means it's a new buy at 8%. Yeah. >> Click at another one. Ako Capital. >> Yep. same things. You see the same stocks repeat, right? Um yeah, everyone owns a lot of Microsoft. Now, Microsoft's big in the indexes. This is just overweing that. There's um a few that are not the same. Um this one, the ones that stand out are probably Marsh and Ferrari, which are good businesses, but not in other people's lists for the most part. There's actually a few that overlap with um uh what we just saw. Yeah. What's the ticker for Marshm? >> Yeah. >> You familiar with this company? >> Yeah, I'm familiar with this company. >> That that's a joke for Andrew and Jeff. >> Yeah. >> Yeah. >> Mhm. Yeah. Very familiar with Marsh. Um nothing negative just so people know. I'm not saying anything bad about it. It's just what I don't bring up everything. I'm familiar with UNH for similar reasons too and familiar with um what do we say? Lamar. So, um yeah, and like all of those, we don't get a lot of choices about which ones to pick. Um yeah, so uh yeah, um you know, to access certain things in the insurance industry, people uh firms, you know, use Marsh and uh it it's not a bad business. Um and you know, these aren't crazy prices or anything. So, I mean, does anyone want to stand out >> to other stocks? >> It's it's like Lamar. It looks like Lamar to me. I mean, the price looks like Lamar. That looks like if if I owned it, I wouldn't sell it. Uh I might buy it now because other prices are high, but in a normal year, I would just, you know, be happy it's in the portfolio the same as Lamar at 17 times EBA or whatever and think it's going to do. I mean, you look at that gross margin or something, you know, you can look at other numbers, too, but how much does it vary from year to year? We have one year. Yeah, there's one year in the last 10 where there's any revenue growth decline. It was a fraction of a percent. There's barely a year co was the most dramatic. It, you know, did weird things to it, but there's barely a year where any of the margins move by more than a couple percent. And what margin does is probably operating margin and it probably doesn't stay changed for too many years in a row. It kind of bounces back. You don't see many long-term trends in their results. Um, so you can kind of look at it and say, "Okay, can I afford to have something that grows EPS at this percent, pays out this amount if I, you know, um, uh, pay this price?" And, uh, uh, compared to other stocks, it's okay. Uh, you try to do the math, not compared to other stocks, it's it's not amazing. I mean, what's the stock? What do you see the literal price if you score all up? Yeah. I mean, so dividend yield is very small. And then the growth is what it is. Your returns are almost all from growth. If you assume you don't have margin expansion or contraction, oh sorry, PE expansion or contraction, it looks like a normal type stock return to maybe a little bit lower, you know, in like real terms, but it's like >> you know, it's a good business. It's a predictable business and it might give you returns like people used to get in stocks for the long term if you hold it for the long term. So, you know, and and I also don't know though if people expect it to be more I don't know enough about if people see threats to them or to Lamar from like, you know, disintermediation of things. I don't know what those would be, but you know, I guess that's kind of maybe the only things people could think of as technology change and whatever. >> Company that I've seen pop up a lot, Copart. >> Yeah, they've been down a bit recently, I think. um rerated a bit um just because their their their multiple is so high. Um >> yeah, we're going from let's say peak multiple looks like of low 40s to 32. >> Yeah. Cheap. Um yeah, but I mean that could be cheap. >> Compared to its past it would be cheap. I mean I remember analyzing them and stuff and saying that at 30 times that you know mathematically that was cheap for a company like this. Um, again, there's a limit to what that is when you get to be a certain size and everything, but yeah. Um, you know, their past numbers are terrific. They look like a Mag 7, right? Like 14% revenue growth, 24% EPS growth. Uh, you know, I mean, the top margins of gross profit and stuff don't look like a Mag 7 thing, but all the other numbers do, and those type stocks were fine when you paid 30 times for Meta or something. And this has metype numbers, right? Let's pull up another 13F famous investor that people follow. >> Yeah, I will point out again it was 10 time sales which I've mentioned before. We try to avoid 10 times sales. Now Cobart is kind of almost like an exchange. Marsh although a broker is kind of like an exchange too in terms of what it's doing. So those aren't if you had to pay 10 times earnings for you know people ask like what could you pay? You know we mentioned FICO and stuff. There are things that are probably worth 10 times sales, but they're incredibly rare in the real world. So, I would avoid paying 10 times sales. >> So, for Chuck, two notable buys. Copart, which we just spoke about, and FICO. >> Yeah, there you go. Um, Nibbles probably, you know, at this point, but then they might get bigger if those stocks continue to fall or whatever. >> I'm sure there's lots of people, >> lots of people be looking at um FICO and saying, "Okay, it's half the price that it was before. Now I'm interested." Uh that's exciting. Uh and um Copart, yeah, I mean years ago it was a reasonably priced stock, but in recent years it's spent more time above a 30P probably than below it. >> So >> yeah, FICO 556 times earnings. Yeah, my issue with FICO, you know, and I know a lot of people like this the stock um is so I tried to come up, yeah, the price of sales is 17 and what did I say? I said, you know, it could be worth 10 or whatever, but I didn't say it could be worth 17. Um though it can be if you can raise prices forever. The thing is the the book I was trying to remember I think it's called like better simpler strategy or something like that but uh in a previous podcast I was talking about um kind of a book that talks about sort of consumer surplus or in this case it' be they're not consumers that are using the the score I mean consumers might be using the score but the score is priced for for business users. Um but there are businesses it's the seized candy type thing. you buy it and um you can raise the price. But what is concerning here with FICO and things like that, we also only talk about is the market less efficient in some ways. Um those things show up when you raise the price, but the value creation really isn't when you raise the price. It's having that ability to raise the price. And sometimes it drives more volume because you have, you know, Costco or whatever doesn't raise the price as much as it could gets more volume. Sometimes it doesn't like FICO or something, but you were a very valuable thing to the um the firms that use your your score and your score wasn't a significant part of their expenses over time and you became deeply embedded in everything they do and they didn't really mind and then the government ignored you and everything. If you've raised your prices too fast, uh too too much too fast and too visibly uh you do long-term harm to the business. So, you want a trajectory where that's not felt in that way. And uh I don't know if in very recent years they've they've kept to that as appropriately as they should have. Um, and it has a weird feedback because I actually think that at the moment that they're making decisions that might be the least amazing for the long term potentially. We don't know. They could be good. They bring more money immediately and will add to the value of the stock in a million ways and all that, but I'm not sure if they're good or not. Um, at that moment the that sends signals that, you know, we have to um bid the stock up to to much higher price. And so the multiple goes up at a time when the future pricing power might actually be be going down. And so certainly they've raised prices recently faster than the increase in their ability to raise prices. You know, the we don't know what that number is. It's theoretical number, but the the ceiling on what they should raise prices doesn't grow as much as what they've raised prices recently. So they've pulled forward a lot of things by doing that. Um, and and that's fine, but that was always present and people should have always recognized that when the stock was cheaper and it's it's no more present that ability now when the stock has better results. Um, if it's due to price increases and so, you know, and the way to get rich is like Buffett buying sees when it isn't raising prices and then raise the prices. You want to buy into the stock when it's not going crazy with price increases and then see it increase prices while you own it. So that that's my only concern with that and it's a pretty big concern in their case because that wasn't always what they did. >> What about Airbnb? Seen that name pop up a few times price sales six times 77 billion market cap. I think for a company like this, we have to look at cash flow because the way that free cash flows got good here and and everyone is a little bit of a concern because it's not always the best measure of what's really happening because here we have included yeah 1.5 billion in stockbased comp which is kind of a real I mean if if you're the banker you don't care but if you're the owner of the business you really want to take that cash flow from operations and subtract that stockbased comp. Now there's complications there tax things what it you know it's not theoretically a beautiful way of doing it but what I'm saying is you want to make sure that cash flow from operations and free cash flow isn't overstating that and that's significant because in this case if we were to do that um if you go back to the overview let's see if we go to there we can see the um enterprise value and stuff um we could see that yeah so like um in that case Yeah, I mean it's it's still pretty good, but it would increase the price to free cash flow, you know, several turns to bring it more in line with all the numbers we see in the low 20s. Um versus >> You want to see the craziest version of this? >> Yeah. >> Snapchat. >> Oh, they're like a Twitter, right? They've just been selling the company to insiders the whole time they've been public. >> I mean, basically. Yeah. >> Yeah. >> I mean, Stockface compensation. I mean, you could just see it's just like crazy. >> Yeah. Um, I don't even know why this thing is public or why anyone would buy it, honestly. It's the most egregious form of corporate greed that you could honestly come across in the market. >> Oh, wow. The market cap's only like 12 billion and they >> Yeah. So they're giving like five stocks 10% of the company away in some years, >> dude. I'm telling you, it's it's it's been going on for years as you see. It's crazy. Absolutely crazy. >> So there's a really really small example of this which I think is totally legitimate, but there's a company in the UK called I think they're called Science Group or something now, but they their their ticker I think is Sag. They should have it in Quicks because Quicks has UK stocks. Um yeah and the ticker is SAG because of what it the name used to be which means something in a different language but uh it's unimportant they changed the name of science group. Um so this company's always fascinated me. The one issue is that they do attract um people with PhD type degrees and stuff and uh they give them quite a lot in the way of um equity type things which changes the calculation a bit from um being so you can see the sideways comp is not large in what you see here um from being like um definitely a good business to a little harder to know because you're giving away a couple percent um years ago in terms of what you're giving people um and if you paid them in cash high amounts, you know, would that work? But the company's point was we can't do that because of where they are in the UK and who they're competing with. Uh tech companies and things would give them would give them equity. Um in the UK US there's uh what is it? Exponent which is fail partners originally. Um who's the other one that does expert witnesses and things like that. There's another one in the US. Um and there there's a legal group in in the UK that doesn't give any uh equity to their to the lawyers who join it. Uh which changes the it pretty dramatically. So it can be interesting that way if you start like the thing is with something like Snapchat or something. I guess the idea would have been it would just get a lot bigger, right? And you wouldn't have to give people that that's always the argument is like, well, we don't have to give away 5 to 10% of the company all the time. If the company, you know, 5x, 10x, whatever, we we'll be able to give away less and less of the company even though it's more and more in dollars. And so maybe what happened with with Snapchat, with um Twitter, like I was saying, is if they had just grown as fast as Meta or something, then that would have looked okay eventually that they gave so much of it away. But if you flatline a bit more, then it gets ridiculous. And that's kind of what's happened in that case that you showed me. Yeah. That must not be good for the long-term performance of the stock, though, because the business performance is only okay. The stock performance can't be good if they're giving away that much to people who aren't um public investors. Maybe one more here. Another common one. $182 million market cap is one to pay attention to. I like paying attention to the smaller uh aums at least that they report, right? So the AUM could be different than what's on a 13F of course. >> Yeah, Francis Tr is um Canadian probably is some of the stocks, but you know there's lots of US stuff in there. >> Syria, Synchry, Ally Financial, Accidental, >> Apple, >> Stalanthis. Yeah, Stalantis. Um so >> good amount of it. >> Yeah. But so those are all those do those are kind of similar a lot of them not all to what you do see among other value investors though too. So it's interesting. So Sirius we talked about that's a big Bergkshire holding. Bergkshire is also a big holding um synchrony to some extent ally definitely are the the ones that people own a lot of that way. And even something like the tech stock is a large tech stock there is Apple and one of the largest commodity ones is Oxy which is a Bergkshire one. So I just find that interesting when you look at these that there is um it's the same issue that I bring up with the like active passive and whatever. I don't really think it matters that much that there's an index. Um I think it matters that fund managers know there's an index and know what's in it and what the weights are. Um, this is interesting because I'm sure you know fund managers would on their own be looking at Sirius, accidental, Apple, Ally, etc. But you do notice that all the ones that follow Bergkshire and stuff. Those show up more commonly in their portfolios than just like in general, I think. So, and we're contributing to that by going over who what's in whose portfolio and everything. We didn't go over some of the biggest Buffett um followers though, but you you just noticed that like Sirius is more popular among those. I mean, Sirius was a little more extreme because it also the John Malone background and stuff. People who follow him specifically follow all of his companies, too. So, um there's some unusual ones in there. The biggest unusual one is Pool Corp. um which is has a long history as a strong growth stock with high returns and strong in its industry but has often been a really expensive stock um could pull that up. >> Yeah. >> Yeah. It got ahead of itself with >> 30 times earnings. >> I'm noticing a theme here on all these companies, Jeeoff earnings. >> Pool was a very good company. Um but then what happened to it and it was it was a good company but also you know probably presented itself as at least as good a company as it really was but it was a good company and um then co happened as you can see here. So so they make they make their money a few different ways but let's put it this way their biggest money maker really over time is sort of consumable pool stuff. So stuff that you use up and then next season you need more of right you got a pool and so it's based on the installed base of pools. They also then make money on um new pools and obviously they make money on new pools even just because people who aren't going to use the pools and everything have to buy one of everything when you when you get a new pool. So it's like you have a pool fine you have the cost of putting that in but then you also have to buy tubs of every chemical and every whatever thing and it might take you forever to go through them. Maybe you're not going to really use your pool that much. You're never going to go through them, you know? So, it has a little bit of that thing of like if you had a bunch of people join some diet or something and you make them buy this powder and that thing and it just sits in someone's closet and doesn't get consumed, you know? And that's what happened for like 2020 through 2022. I mean, if you notice uh like some people started thinking things have changed dramatically for this company and everything just because everyone wanted to have a pool from co on, you know. Um, so it's not as bad as some other ones. I mean, was the one, do you remember Trager, the um company that does the uh smokers and things like that? There were some other companies that were outdoor things that got extreme where where people were really excited by, you know, something spiked for a year or whatever, but people aren't going to buy at this rate for COVID forever. So, the company had never grown at 20 30% a year and then, you know, for three years or something, pool grew at those rates. So that was just co threw things off. Yeah. Same thing with with Trager there. I mean, what was that? 50% 40% revenue growth and then since then they've been down in revenue each year um >> at operating profit. 58 million in operating profit. >> Yeah, that is the thing that's amazing about these companies that are planning to grow on a gross profit basis. It's not that different than it was three years ago. It's a little different, but on an operating basis, they continue to grow their operating costs. Um, I mean, that's why the growth stuff works really well when we talk about intangibles, investing through your income statement instead of capex. That works really, really well. If you're the winner in the industry and it goes well, because then that number gets smaller and smaller over time. But if you do that, you know, on sales on the top line that isn't growing, then we see how that works out. Um, in terms of the same gross profit translates into less less income. Um, again though, it's more of a problem for companies that grow fast and are wrong about how fast they're going to grow in the future or kind of get into a habit of growing in a way that's unlike the uh recent past. So, it's harder with companies that are cyclical. Fast growth companies. you want a fast growth company like uh you know whatever a meta or something like I was saying because they're kind of super fast growth but they're fast growth non you're assuming they're going to be not cyclical which actually is easier even though there's a lot of technology change and everything um it's more secular you either win or you don't over 10 years or something and it's not like you have to predict oh we need to grow really fast for two years and then we need to stop growing because that doesn't happen many companies can't handle that and that's what you saw with pool definitely you see with Trager. Um, >> accidental petroleum started buy up a bit following Mr. Buffett. >> Yep. I feel like there was more talk about this a while back when Buffett was buying it and I've heard less about Oxy from Value type people, but you might know better. >> It's gone kind of quiet. No, for sure. That's definitely true. >> Yeah. Okay. >> Definitely gone quiet. >> Yeah. My favorite part of Data Roma is just looking at these little blocks that they have here, right? And then obviously the one that we went over 5% or greater holdings near 52- week lows. >> Fresh Pet >> near 52- week low. Just >> Yeah. >> off at about four and a half%. >> You ever looked at that company? >> Uh, no, never. >> $2.9 billion market cap. Let's see. food products together with subsidiaries, manufacturers, distributes, and markets natural, fresh meals and treats for dogs and cats in the United States. >> It's headquartered in Bedminster, New Jersey. That's interesting that I've never heard of it. >> There you go. >> Grew up. >> Yeah, I grew up right next to Bedminster. I'm trying to think of where it might be. Um, that's not a big place. There's not many places to stick a headquarters. Um but uh it's also where um the president has his golf course. That's what makes it famous today is just that he's at the golf course um half the time and stuff. You know when so whenever there's behind the scenes books and things, you know, they'll be like the meeting in Bedminster, New Jersey, that's the only reason why someone would mention Bedminster, New Jersey. Um >> you know, betting the vice presidential candidates or cabinet people or whatever. Um, so don't know anything about brush pet. Um, I'm trying to think if Yeah. Have you ever found a stock from a 13F that you ended up buying? >> So, not really. No. Um, I found stocks that then I bought a different stock in the same category or something. The issues with it are if we go to um if we go to data roma there uh and look at like the top buys and things can be interesting. If we go to like the I don't know the the portfolio things that gives you an idea. It would be better if in some ways you could kind of subtract out, you know, indexes or something that gives you an idea of what's widely owned because what is interesting is the extent to which they own things that aren't widely owned. But that signal is hard to get through with all of the fact that the grand portfolio and stuff is full of what everyone owns. So um Microsoft, Amazon, Meta, like what are the biggest you have it sorted by ownership count or max percent? Okay. Percentage. Okay. In the grand portfolio. Yeah. So, let's start at the top and just look through this for people on the podcast who aren't hearing this um or who aren't seeing this. Uh it takes a while before we hit things that aren't um like the biggest weights in indexes, right? Microsoft, Amazon, Meta. We hit Bergkshire. Now, Bergkshire should be more represented probably indexes and things than it has been historically. And obviously with value investors hugely represented, but it's also huge. Um Carvana, now we're in different territory. Um, you know, St. Joe has one owner, right? So, uh, but the answer is no. I mostly find industry things with it to see. So, is someone buying up airlines, oil, whatever. Is that interesting with what they're doing? Banks, whatever. Um, insurance things like we talked about. So, it's it would be less likely that Buffett is buying Chub and that's going to make me go out and buy Chub, but it would make you think, well, what does he see here? Especially if you know the investor more. Um, and they have more of a long-term outlook on the business quality and all of that. So, you know, what is Glenn Greenberg buying or Buffett or uh Terry Smith or whatever? And what industries are those in? And do some of them look like they don't make any sense, right? So, when people start buying Taiwan semiconductor, that was interesting. Um, I can't understand it. So, it's not an industry that I'm likely to be able to invest in, but it'll cause me to look at Taiwan Semiconductor and and look at their uh numbers and think about what they're seeing there. Um, now that's not real recent. That's most of those are from further back, but you know, so a good example on this one is lithium motors. So, when they buy up a bunch of um car dealers or something, then I'd notice and pay attention to it. Um it takes a while to find stocks that aren't, you know, well seen by a lot of people. The other thing, of course, is just these are huge portfolios that people have already performed really well. So, I'm not sure how well they're going to do in the future. Generally, I don't think they're great, you know. Um, so there's not even that many, like you said, that even are on the smaller side of 13Fs and you said it exactly correctly. It's not really a hund00 million portfolio. That is the requirement. It's $100 million in 13F securities. So, you know, most managers aren't going to well, a lot of managers aren't going to have to report until even well beyond hundred unless they they keep everything in, you know, NASDAQ and NYC US stocks and nothing else. Um, so you're going to be a few hundred million dollars before you even show up on one of those lists. >> Got it. Cool. Well, I want to thank everybody so much for tuning in with the both of us on the Focus Compounding Podcast. the first time you're joining us, be sure to hit the subscribe button so you'll be notified every time that we upload a podcast. And of course, if you want to get access to QuickFs and you do sign up, tell them that you heard about them from Focused Compounding. It helps support everything that we do here on the podcast. I want to thank everybody so much for all the support and we will see you in the next podcast. Take care.
13-F Season: Berkshire, Fundsmith, and Superinvestor Moves
Summary
Transcript
Welcome, welcome, welcome. How's everybody doing? Hope you are doing well. My name is Andrew with Focus Compounding on Air Live with Jeff Ganon. Jeff, how's it going today? >> It's going very well, Andrew. How's it going with you? >> It's going great. We hope it's going great with everybody else as well. If this is the first time you're tuning in with us, thank you so much for joining us. Be sure to check out all of our content that we push out into the investing universe. The best way to do that is to follow me on X, formerly known as Twitter, at focuscompound. All the information is in the description below. If you're interested in learning about our money management services, you can reach out to me at andrew focuscompound.com. And of course, be sure to hit the subscribe button wherever you are listening or watching us here today so you can be notified every time that we upload a new podcast. So, in today's podcast, Jeff, we're going to be going over 13Fs. um as it is 13F season. Um when you are over a size of $100 million and you have an investment portfolio that's over that $100 million um on US exchanges, you have to follow 13F and it's a great way to look for, you know, what's going on, what other fund managers are looking at. Charlie Mer has always said, study other uh smart hedge fund managers carefully, see what they're doing. So, it's a great way just to see what's going on in hedge fund land and investment land really and get an idea of where other people are investing capital and potentially seeing opportunity. Um, of course, we have to start with Mr. Buffett, Berkshire Hathway. Now, of course, embedded in this are Ted and Todd's picks, which we always do go over as well. Uh, but we could see what, you know, throughout Q2. Of course, these are delayed a little bit because I think you have like what 30 or 40 days from the end of the quarter uh to update it, but um we can see some notable uh sales, right? That's what I typically look for. I look for the big stuff. I don't really look for like the small trims or whatever. I look for the complete ads, the complete sales, or the big reductions. Um so, uh one that obviously stands out is Charter, which was reduced 46.5%. We talked a little bit about charter on the last podcast, but that's probably if you had to guess, if I had to guess, I would say it's probably a Ted Wesler position. >> Yeah, that's very possible. Yeah, very possible. Yeah. And I think also in the last podcast we talked about the secret stock and I believe they still probably have some sort of confidential treatment for something. But if whether they do or not, I also am not sure that based on what we've seen some of those calculations about how big it was, it may not have been one stock because it would be grouped together. You know, they people were looking at the cost basis under industrials and that group and now looking at it, it's possible that other, you know, we'll never I don't know if we'll know exactly if that was always one stock whenever we do find out about it. Mhm. >> So >> yeah, was disclosed like many other fund managers that unh they bought it which I was like okay >> insurance who could that be? My guess would be that would be Todd especially with the size of it one point just under 1.6 billion. >> Yeah, that would seem most likely. I mean Buffett was involved in trying to come up with a solution to company's health uh care issues but that also was Todd leading that too. So if you remember I don't know if you remember >> Yeah. Oh yeah, Jamie Diamond, Jeff Bezos, Warren Buffett, >> and then it just kind of quietly went away, right? >> Well, not I mean, yeah, it quietly went away, but they did announce that they stopped doing it. A lot of companies don't even say that and they said, "Yeah, it didn't work." And but we they said, "We learned some things, but you know, it didn't help anyone else out." >> Mer would talk about it after that, be like, "Yeah, Warren tried and failed. >> It's a hard system." Any other notable sales? He's continuing to sell Apple um and Bank of America, you know, that's Buffett. >> He's been selling Bank of America and Apple obviously for a while now. >> Yeah. Pretty constantly. And those aren't fast sells for this period. So, he might be more okay with the price and he's probably much closer to what he wants to be at. I'm guessing I don't think he ever intended to sell all of Apple or anything. So, that's rare because like we said, he he doesn't usually trim, but there have been rare cases where he sold the largest position down a little bit even if he liked it. Um, yeah. And the others are a lot smaller. They're way below kind of Buffett type levels. Um, the last thing I would guess was him is Chub, but I don't know that that was him, but I would guess it could have been him. So, um, which is not, you know, hasn't changed recently, but that's the last like totally new position of a of a few billion dollars or whatever. I would guess that that is a Buffett one. I don't it would be very big for someone else's and it just seems like a Buffett pick. But like you said, Todd's very involved in insurance. It could have been Todd, you know. >> What was the size of it? It was 7.8 billion. So yeah, that's that's obviously a larger position. >> Yeah. It also just has certain similarities with like management things and things that Buffett would know and everything. And it's a good insurance company. I don't think it's super cheap or something, but yeah, >> we've talked about before these new buys. Obviously, we don't know if they're still buying or whatever, but it could just be a good >> industry signal, right, of of different things that they're looking at. So, Lamar Advertising new buy. It's only $142 million position, but for all we know, they just have continued to buy. >> Um, so we can look that up on QuickFs, which if you do sign up for QuickFs, uh, tell them that you came from Focus Compounding, super important. Um, but 12.3 billion market cap, $15.4 4 billion enterprise value. I mean really when you look at this thing I mean high returns returns on equity return on vested capital but decent but EV to free cash flow 21 times. >> No it looks really good compared to other stocks today. It doesn't look that cheap, but I mean I was looking at uh you know people asking about stocks being overpriced and everything and I was looking at um so you see the price to sales on this. This is a billboard company, right? So it it dominates in some areas and in some it's highly competitive and some it's not. Um you know at a company I'm involved with you know in one of the markets it's 90% of the billboards. You know in other ones it's you know 20 or 30 or whatever but when you're 90% of the billboards it's a pretty good business. Um, so the thing is if you look at this, what's interesting is it doesn't seem like overly inflated in terms of price. So price to sales, Evida for instance, I these are literally lower than US lime is right now. And what do you think is more predictable for the long run of billboards or of like you know a commodity like that? Now I don't know if you think billboards are going away or something then it's a different story. But um you can look at the gross margins, the persistency of things like gross profit and operating profit and revenue growth over time. It looks exactly like the kind of thing that Buffett himself would buy. Uh the price doesn't look like it and the size doesn't look like it, but this is in every way like a Warren Buffett way type uh investment. Yeah. Now, it's not a particularly low price, but like I said, compared to other, you know, other businesses that I'm seeing that have those kinds of um quantitative looking things, if we just didn't know what business they're in, they they're so much more expensive. So, and maybe because it's an old economy type thing, maybe because it hasn't done particularly well in the last few years compared to other sorts of businesses, I don't know. But uh yeah, it has, you know, um it's a quality type stock or whatever and it has really good um numbers on that. On the other hand, like it's still you're talking about paying 15 or more times EBA or something that's that's never that cheap for a business. >> So I mean don't want to talk about I mean I guess the general question about UNH since a bunch of funds have piled into this company is you think like when there's just such a knife fight on both sides, is that just better to stay away? you think? >> Um, no. So, my view on this is maybe a little different. We talked about do I think you know there was a thing published by AQR the guy actually by the guy who runs AQR a year two ago or whatever when we talked about it which was the less efficient market have markets got less efficient over 30 years and this is the kind of thing I think the markets have gotten less efficient about. Um, it's true there's a fight over it. I don't know that anyone knows the company that well and this is like a huge, you know, um, Dow type stock or whatever. Um, so I just I find that interesting. Um, it it had things happen with it. Some of them were really unexpected and so that kind of drew a lot of attention to it, but it had things happen that are consistent with like sort of what happened with GE, you know, 20 years ago or something. um where there's a lot of bad news and things that aren't that well understood by the market and then suddenly all this stuff comes out at once and then the stock responds in a big way instead of responding slowly over time to to news even though it's officially very well covered and everything. So I kind of find that fascinating. So you mean you can see the stock price somewhere uh it rerated in a huge way in a short period of time. uh >> the business did announce things itself, but those shouldn't be surprising, you know? I mean, um the the the business can't be it's a really big business that a lot of people can see different parts of, so it shouldn't be that opaque. There was like one analyst that kind of was expecting that kind of thing. Everyone else wasn't. But it's more a question of timing and everything. It's it's it's not a business that we don't know anything about. There's lots of things to be able to follow. So, it's interesting that it happened that way. And so, it's in other words, I think that there's a lot of focus on the actual reported earnings of the company and not a lot of focus on analyzing the business that it's in and um whether it's a good business or not for the long term and whether it's kind of over um reporting what it was capable of doing and especially whether it would continue to be able to do that. So, I find all that really interesting. So you went from kind of a premium price on the stock, not a super premium price, but a somewhat premium to now it's priced like a value stock. Um, so that's that's just really interesting. I think both can be true. Um, that it could be overpriced at the price it was before and it could be attractive now. Um, I just find it really interesting that that was possible because look how long it stayed at a certain price >> and then repriced dramatically. And it was um that's the kind of thing that you know there should have been information that was gathered and talked about a lot outside of the company more probably than there was. So um and I think in the past there would have been but I think it's that might be less likely now. So when we talk about indexing quant things, people hugging indexes and things, I think that tends to be what you see is like this where uh if people are kind of negative on a stock, it's not reflected in the stock price of some big stocks until something like this happens and then it's highly reflected. So I think that's what's happened here. >> Yeah. Now 12 and a half times free cash flow has good value investor characteristics if you look at it like on QuickFs. >> Yeah. and it's it'll be around for a long time. It's one of the biggest companies and something that's one of the least likely things to go away over time. Um and uh it's not particularly growing fast versus um neither the company nor nor the industry really is likely to grow that fast versus GDP anymore, but um yeah, so it's this really big um part of this really big industry that is very settled at this point. Um, so it's not impossible for them to report kind of somewhat higher earnings all the time. I think it's impossible for them to report as much higher earnings as they were before. Um, but you know, same sort of thing as like when I said GE, there were legitimate parts of that business that were big and stuck around and when they broke it up and everything, you can see that that doesn't it's not inconsistent with also reporting more in earnings than they should have for a while, which is probably what happened here. >> Yeah. >> Cool. So let's hop over to um the grand portfolio, right? So you could look at um uh what is this? This is the holdings of super investors where it's a larger part of the portfolio at least 5%. >> And then it's good to look at it these securities that are trading close to uh the 52- week low, right? This is a company that has been popping up everywhere. Portillos my eyes. >> Yeah, >> because I'm from Chicago and um outside of the city though. So like Illinois. It's kind of like being like, "Oh, I live in Plano, but yeah, I live in Dallas." You'd be like, "No, you live in Plano." Um but this was a company that was, you know, founder led for a very long time, >> sold the private equity, and then went public. >> And it's a huge has a huge cult following in Illinois and various areas in the Midwest. and they've been trying to go elsewhere with it. Right. So, we actually >> I've been to a couple. Yeah. >> Yeah, we've been to one. And did we go to one together in uh in Dallas, Richardson, I believe is where it was. Somewhere. >> Yeah. And so, they opened one up not far from where I lived in Texas. Um I think they opened in like Grandcape, you know, area. So, like maybe by the Colony, not far from Nebraska, furniture probably. And um uh of Texas. And then also where I live now, they also um have one fairly recent. Uh, the scary thing is it reminds me a little bit of like um what was the company called? Is it Fairway? What's the one? The the high-end um grosser in New York City that got taken by private equity and then went from like two locations to 10 and then went right into bankruptcy. It just reminds me of that like um I don't know if you took over In-N-Out and suddenly opened them everywhere, how well that would go or whether that's the best thing. You know what I mean? But uh yeah, but I mean >> Fox nowhere since it I mean look at I mean they went public in Yeah. What was this? 2021. I remember. >> Yeah. I wasn't looking at it for Yeah. We when we talked about when it went public the price was crazy. So yeah. A and we should also say though that like um fast casual, quick service, whatever restaurants like all the high-f flyers are, you know, down dramatically like huge declines in re very very recent times. They're just >> Yeah. Famous one Jack this one. >> Yeah. 100 >> Cabba's down a lot. Um yeah. Mhm. Some of that so some of that can be economic um and some of that is like more so what it is is the combination of the two, right? So like um they were kind of high flyers. Yeah. So there you see you see Wendy's restaurant brands on that list, right? Um you see Chipotle. So those are all things that were owned by some big um super investors, but also I have to be, you know, somewhat near within 10% or something of their 52- week lows, which is not that common right now because what's the market up? The market's probably, you know, of 10% just in the last eight months or something. So not a lot of those kinds of stocks tend to be near their lows, but there's there's more of them now. So, and some of them is they had high multiples and so if there's any negative news on them they go down like uh you know some people were surprised that Walmart went down but Walmart's 45p or something when it started dropping so that's why it went down. It's not that the quarter was that bad but you know if you price a giant stock at 45 times P and a quarter is anything but surprisingly good uh you'll always go down you know. >> Mhm. And so that's the issue with some of these. I don't know the numbers, but like price to sales and things like that, it was no value stock when it went public where it was, you know. So, >> yeah, we could look at Chipotle. >> Let's see what I want to see what the uh could see what multiple is that and what it came down to. So, let's see. It looks like a peak multiple in June of 2024 70 times. >> Okay. at uh price of $69 and so you've had multiple contraction and then the stock obviously the price itself it's at $43 today and a LTMP of about 39 times. So >> yeah and it's not we look at quick FS on it. It's not um it's more I guess it's more debatable or whatever you would say. I mean, there are some warnings here if you look at like the 10-year type numbers and things like that. Um, right now it actually, you'll notice it's not very different from United Health and it's it's a lot more expense, right? It's three times the price of United Health. So, that's one thing to keep in mind. Um, we also see on things like price to sales, even price to book, it's as high or higher than Lamar, which we just saw. Now, the reason for that is it has higher growth. So it has high, you know, except for when it had the food safety issues, it has high um returns on capital. Now it leases all its locations, so there's significant financial leverage there compared to owning them all. But that doesn't change the reality. It just increases the risks. Um so it has high returns on capital. It doesn't have to reinvest that much to grow a lot. So if it grows a lot, it creates a lot of value. Um, so what I'm saying is like QuickFest shows the return on invested capital is like 13% or something. That would be true if the leasing didn't help you out, but considering how much the leasing does help you, the return on equity is more in the 20s and then you only have to reinvest a portion of that to be able to grow, you know, double digits. The question is just how big can it get from where it is and everything. We talked about like Portillos. You know, the thing is with with Chipotle, which is also everywhere I've lived is right next to it, but literally everywhere I lived, I lived in a rural part of Texas. It was a city, but as a rural city, and they put Chipotle's there, as they put Starbucks there, but that's usually a sign that there's not much else except for Starbucks and Chipotle that think that they can be in every little 30,000 person town in America, you know. Um, so at some point they got to stop. So, I mean, it's interesting, but it, you know, there's a much cheaper stock in the UK called Gregs, and that's literally what the concern is, I think, there is that, uh, you know, they said something like, "We're going to put one for every 19,000 people in the country." Um, you know, and I think some analysts said, "No, you know, we we don't really believe that at this point." Um, there might be other things going on too a little bit, but I think that's one of the ones is like, okay, before you said it was 30,000 or something and then you said 20 something and now you're saying like less than 20. How many of these can we have? Um, and and so and at 11 times earnings, not a problem. So like it's really not a problem for Gregs. It becomes a problem at Chipotle or one of those. And you know, if it's um that high a multiple, that multiple is not a you know, Peter Lynch would pay that multiple 37 times or whatever. Not a problem. if you're the size you were a long time ago, but it can be a problem if you don't have that many millions. >> Yeah. Yeah. But it it otherwise has the characteristics you'd like, which is high um return on capital and high growth. Um the thing that throws it all off, of course, is the it went through that period, the fir, you know, of the decade we're seeing here. There was about a five-y year period where it was just getting back to where it was before. Honestly, it wasn't until COVID that it really exceeded where it was before. It it had like five years that were um very flat in terms of the uh business performance after it had those food safety issues. It really took gross profit and operating profit and stuff to did not get back to where they were for 5 years, which is very unusual for a grown concept, but it grew really fast and then it had high-profile problems, but then since co it's it's grown beyond what it was before, you know. Um, biggest issue for it now, I think, would just be price. I mean, it has a lot of protein and stuff. It's It's a very expensive price. I mean, and it's not that people won't have that, but what I'm saying is I don't know that people in the the town of 30,000 people will have it. And I don't know if they'll have it if you're adding it for the first time in a town like that. It might still sell in the older stores that you have in the bigger places, right? But if this is the first time that you've ever put a Chipotle in some lower income, more rural area or something and you come in with a price that's so high compared to the competition, I don't know if the if it will work as well, which is fine. They just, you know, stop doing that. But I just mean that that's a limited growth. I don't think the return on capital will like plunge or anything if they're smart about it. But I do think that at some point you just can't have the same reinvestment rate, which is a problem if your PE is 30 or 40. It's not a problem if it's, you know, 10 or 15. So, >> yeah. I mean, what are we going to have? $25 burritos. >> If there's inflation, you you'll have, you know, Yeah. I mean, yeah, if you're old enough, uh the prices on things like that meat and stuff will shock you because you'll remember a time when they were much lower. So, um yeah. And it's just hot. I mean, that's not necessarily a problem, but as compared to other kinds of businesses, I mean, we've talked about like Cracker Barrel or something, they're also heavy in things that inflated a lot. So, and they respond in a different way and it didn't work out that well, but that's cuz they're more of a value proposition, right? And what Chipotle was doing worked really well, but it does mean that the price kind of gets out of line over time, you know. Um I'm sure you're familiar with Cracker Real over the past few days. >> Yeah, they had a rebrand, right? >> Yeah, rebrand. And people are, I think, upset by it. But that's another stock where 1.2 billion market cap price earnings talking 20 times. >> Well, but that's not 20 times peak earnings. So that's the issue that the company has that you know we need to keep in mind is that you know that's why we use price to sales or price to book or something because often and I just mentioned Greg's Greg's when I looked at um the stock's best point was probably a decade or maybe even a little more than a decade ago now 12 years ago or something um it would have the PE would have been low but it would have been the lowest in it history but things like price to sales have been really really low so I think that price to sales makes sense because it's the same issue that happened here their operating margin basically get cut in half during COVID and then it's h haved again since then. So that's what happens with these things. So the answer is if it's a 2% operating margin it's going to be hard for to like this business no matter what. If it goes back to 5% 10% like it was before it's going to do really well and there aren't a lot of you know results in between. I think the least likely outcome is that that PE ends up mattering. You know, I don't think the the it's unlikely that it's just going to stay at a 2% operating margin and kind of chug along from here and you're going to see that PE be 20 for a while. It's either going to have that margin get worse than it is now or better. If it gets better, then even though that PE looked high, it's going to be on future earnings with super low PE, right? Because the operating income and everything will go will double or triple or whatever. Um, and every year before CO it was making what, four times this. It doesn't have like a lot fewer stores or different things or whatever. And there's been a lot of inflation. So, it's just the business is so much worse, right, than it was before. The stock's a lot cheaper, but the question is just the stock reflects that fully or a little bit more than fully. See what else we got here that are trading just above the 52- week low. Uh, FICO on that list. >> Yeah. FICO. Impressive. >> Yep. >> Waters. I feel like we've talked a lot about these companies recently. Charter. >> Charter. Yeah. All those are near lows. I did know that. Yeah. >> Lululemon. >> Mhm. A lot. I I have noticed that a lot of the super high quality strong performers. You know, high quality in the sense of I sent you something where I'm like here's like a quality these are quality investors, right? So all the things that quality investors own, not all of them, but the 52- week list is loaded with a lot of quality investors. Even things that would surprise you like CNX resources sounds like a commodity thing, which it is, but it the one ownership thing that's why that's showing up is it's slightly popular for reasons of who's involved with it with um some value investors from like the outsiders type stuff. And so it's a kind of a capital allocation type thing. So on a quantitative basis, it's not a value stock in any way, but it still falls into the same group of the quality type uh um investors. So >> yeah, who's on the board there? Um >> uh so you remember the book The Outsiders, right? >> I do. Yeah, it's >> You remember William Thorndike? >> Yeah, Thorndikeke. That's right. The director. >> Yeah, that's CNX. And I think the other one that he was involved with was Perimeter. um systems or per there's a couple companies called perimeter but I think it's perimeter um and then uh and then he's also talked about and done things with like transdime and a few other businesses but um you know there's things about CNX that talks about free cash flow and uh some things like that and they have a different strategy with hedging buying back things whatever that's a little different from other energy companies it's not that it's the only thing and the only reason why it's showing up on this list is because of that but I just pointing it out because um it is literally the first commodity thing I think on this list like the closest to its lows and um it falls in the same category of quality type things even the ones that are showing up Heinek and Nestle because of like Tom Russo things like that um are high quality type things there there's uh we talked kind of about what things worked and are working now and everything momentum stuff is definitely working in in some ways, but it's not always momentum connected with underlying business quality right now. In some cases, it's momentum that's that's kind of unrelated. It's stock momentum that isn't very closely related to uh to strong business position. So, Progressive is the strongest in its industry like >> these are very like dominant highquality companies that just is not part of Mag 7 really. That's the summary here. Mhm. And so why is it happening? Uh I don't know. Bergkshire is even, you know, it's not that close to a low, but it's actually has gone down since the Buffett announcement. Um and it was doing pretty well before then. And even ones there's uh they're not I mean, you know, some of these are kind of not ones people would know that well, so I don't want to get into all of them, but there's a couple on this list that are even like pretty good at cap allocation, culture, things like that, and probably why people own them. And some of that is because we're looking at a list of super investors. But if you go down the list further, that's that's less true. Um, you know, there's not as much to talk about with, you know, uh, some of the other kinds of companies where it's just more of a mix that makes sense that way. So, um, you know, they own a wide variety of things, but it is noticeable, uh, that that like the top of the list, you are seeing a lot of that, which is what I've noticed the most. The things I've noticed the most are like the big declines and things like FICO and and Progressive. We already did quick service type stuff, so that could help explain Domino's and those, but it's not a lot of those are actually pretty good businesses in those areas. Chipotle is, you know, very good business model in what it's in. Domino's is very good in what it's in. Um, you know, Berkshire and Progressive are some of the stronger insurance companies. Marsh is one of the stronger brokers. Yeah. Manderly, cure egg. I mean, these are all just Yeah. like sort of the >> Yeah. Now, >> some of these are getting to within 20% of their uh lows, but if you go, you know, but >> Yeah. And and so >> yeah, >> it's also helpful sometimes if you look at the versus the um 52- week high to see the ones that are off by a lot versus the ones that aren't off by that much. Right. So, some of the ones that I we picked out are ones that are off a lot versus their um uh we we can look at on the other page because it's easy to read that way. Still, if you just look across, right, you can see the current price and the uh I mean, we can pull up the current price, but you can see on the 52- week highway, there's a big difference. So, between the 52-W week high and the 52- week low. So, that's more of the ones that I meant. So, Chipotle, you know, it's not wild in a normal year. It's not weird to have a 52- week low that's two-thirds of your 52- week high, but um some of the other ones are large declines recently. Like Fair Isaac is a good example. FICO dropped at one point about 50% I would say from top to bottom. And it dropped it pretty fast. Now, it dropped it because it I think there was perception the government was turning on it, but the government was turning on it because it had increased its prices, which is why people really like the stock, you know. Um so it's interesting how that works. But and it's not a cheap stock now, but we talked about it. It's a question of like is it 20 times sales, 10 times whatever um 30, 15, whatever. Um you have this issue with stocks that are really expensive. And so in a case like that, you might drop from being, you know, 80 times free cash flow to 40. 40 times free cash flow might be an appropriate price, but it's not a low price, you know, and and that's what happened with a few of these. So that's why we look at them and we go, "Oh, it's not too bad, but it's not too I mean, Chipotle was 1.5 times higher." And we just said, you know, 35 40 times PE is is not low. So we probably would have said 60 is kind of high, you know. So it's a combination of those factors. That's just the issue with quality things. If there's any when they get priced so high, if there's any kind of change of people's, it's not even feelings about them sometimes, but even feelings about strategies, it doesn't take much air to go out of it to to cause people to have it drop a bit because you're still at like you're not attracting a ton of pure value type people or strategies or quantitative things or anything at, you know, 40 times P. Whereas United Health, it shows up, it, you know, suddenly goes flashing on everyone's screen when it drops to 10 times PE or something. >> Let's look at uh a 13F you've talked about before in the podcast. Terry Smith, Fundsmith. >> Yep. Terrific uh thing to look at and a strategy I mentioned. I should point out I think that Fundsmith has probably underperformed like every year for the last few years, but not badly or anything. It just I I do want to say you know kind of what question I was answering is more like what strategy and I was saying in the way that academic things talk about it high active share low turnover with a quality type you know focus here which is the Warren Buffett approach in terms of a fund manager fundsmith is like that. I did not mean that it would outperform more frequently than other things. And I think he did outperform more frequently in the early 2010s and then since the 2020s has maybe underperformed by a percent or two like year after year after year. So um which isn't unusual for this kind of strategy anyway and definitely not in this environment. But so I didn't want to make him sound like it was Bill Miller doing whatever he did. How many did he do? 135. He beat the S&P year after year. But uh just his strategy and stuff. Yeah, this is for a fund manager. This is one of the most Warren Buffet type strategies there is. He's a UK. Well, he doesn't live in the UK, but he is a um is British and that was where he lived his life and everything. That's kind of where the fund was created and everything. So, um but they invest more in the US than the UK actually. >> And we're only looking at US here. >> Yep. >> Tons of sales. >> Uh yeah, that's why I said the part I did at the beginning. that probably means people are taking money out of the fund. Um I was trying to be polite about that, but >> yeah. >> Uh usually that's I mean so I mean we could you know there there's lots of ones where you see this all the time. Um another one that's like this is like you know the Tom Russo's fund and stuff but it wouldn't be unusual to see small reductions in it all the time just because there's probably small amounts of uh net you know redemption type stuff. Um and then not much change to a lot of the other stocks. probably would like to keep it more even, but it's possible that those are actual sales. The things at the top are larger than lower down. That's for sure, right? So, there are some sales of Meta, Microsoft. Um, and then he owns some things that aren't on this list in the past, but no longer owns them. And he's gotten in and out of a couple companies. The ones that stood out to me is he used to own Dominoes in a big way. Domino's was in the US was his best performer for almost a decade or something. Though, like Buffett with Cap Cities, he also like sold it and then came back into it. He did that with another stock or two, but um very Buffett like that way. Sometimes he'll sell because it's too expensive, got ahead of itself, and then regrets it and will actually go back into the same stock years later, but no longer on the list, but I think might have been one of his probably the biggest contributor to results for a long time. Um yeah. Yep. So, and he's somewhat accounting focused. He wrote a famous book about accounting like 40 years ago. I don't know if it's it's I'm sure it's not still in print, but it can be found. It's um what was it? It's not that relevant today because they changed most of the rules about it, but it was basically exposing accounting shenanigans um techniques that companies in the UK use to um over report their earnings and adjust for things and stuff. That's kind of his background. It's accounting sources. >> Another another 13F that you look at, what is it? Lindel Train. >> Yeah. So, it's just the same sort of thing. I mean, honestly, if you have um Fundsmith, then you're probably going to have the same sorts of things that are in here. You'll notice common holdings among a lot of these things. This is why I was grouping them together as kind of quality things, the Fair Isixs and and and such of the the world kind of are owned by the same sorts of uh investors. And there's sometimes some pretty serious overlap in that they have very small positions in like Visa, S&P Global, Equifax, CME, Vary, you know, those are tiny tiny positions, but show that they're interested in them sometimes, but fair Isaac into it, you know, those PayPal. So, they have a lot in that same area of uh financial information services, uh, payment processing, and you see that a lot with these um these high quality type investors because those have basically infinite returns on capital and they grow all the time. So these are your investors. >> Yeah. So that I mean they kind of because of the way this website tracks it data roma you know um that's almost like a new buy but for whatever reason they didn't they didn't mind that at the end of the quarter they'd have a tiny Google position and so it says that they added you know 11,000%. But that basically means it's a new buy at 8%. Yeah. >> Click at another one. Ako Capital. >> Yep. same things. You see the same stocks repeat, right? Um yeah, everyone owns a lot of Microsoft. Now, Microsoft's big in the indexes. This is just overweing that. There's um a few that are not the same. Um this one, the ones that stand out are probably Marsh and Ferrari, which are good businesses, but not in other people's lists for the most part. There's actually a few that overlap with um uh what we just saw. Yeah. What's the ticker for Marshm? >> Yeah. >> You familiar with this company? >> Yeah, I'm familiar with this company. >> That that's a joke for Andrew and Jeff. >> Yeah. >> Yeah. >> Mhm. Yeah. Very familiar with Marsh. Um nothing negative just so people know. I'm not saying anything bad about it. It's just what I don't bring up everything. I'm familiar with UNH for similar reasons too and familiar with um what do we say? Lamar. So, um yeah, and like all of those, we don't get a lot of choices about which ones to pick. Um yeah, so uh yeah, um you know, to access certain things in the insurance industry, people uh firms, you know, use Marsh and uh it it's not a bad business. Um and you know, these aren't crazy prices or anything. So, I mean, does anyone want to stand out >> to other stocks? >> It's it's like Lamar. It looks like Lamar to me. I mean, the price looks like Lamar. That looks like if if I owned it, I wouldn't sell it. Uh I might buy it now because other prices are high, but in a normal year, I would just, you know, be happy it's in the portfolio the same as Lamar at 17 times EBA or whatever and think it's going to do. I mean, you look at that gross margin or something, you know, you can look at other numbers, too, but how much does it vary from year to year? We have one year. Yeah, there's one year in the last 10 where there's any revenue growth decline. It was a fraction of a percent. There's barely a year co was the most dramatic. It, you know, did weird things to it, but there's barely a year where any of the margins move by more than a couple percent. And what margin does is probably operating margin and it probably doesn't stay changed for too many years in a row. It kind of bounces back. You don't see many long-term trends in their results. Um, so you can kind of look at it and say, "Okay, can I afford to have something that grows EPS at this percent, pays out this amount if I, you know, um, uh, pay this price?" And, uh, uh, compared to other stocks, it's okay. Uh, you try to do the math, not compared to other stocks, it's it's not amazing. I mean, what's the stock? What do you see the literal price if you score all up? Yeah. I mean, so dividend yield is very small. And then the growth is what it is. Your returns are almost all from growth. If you assume you don't have margin expansion or contraction, oh sorry, PE expansion or contraction, it looks like a normal type stock return to maybe a little bit lower, you know, in like real terms, but it's like >> you know, it's a good business. It's a predictable business and it might give you returns like people used to get in stocks for the long term if you hold it for the long term. So, you know, and and I also don't know though if people expect it to be more I don't know enough about if people see threats to them or to Lamar from like, you know, disintermediation of things. I don't know what those would be, but you know, I guess that's kind of maybe the only things people could think of as technology change and whatever. >> Company that I've seen pop up a lot, Copart. >> Yeah, they've been down a bit recently, I think. um rerated a bit um just because their their their multiple is so high. Um >> yeah, we're going from let's say peak multiple looks like of low 40s to 32. >> Yeah. Cheap. Um yeah, but I mean that could be cheap. >> Compared to its past it would be cheap. I mean I remember analyzing them and stuff and saying that at 30 times that you know mathematically that was cheap for a company like this. Um, again, there's a limit to what that is when you get to be a certain size and everything, but yeah. Um, you know, their past numbers are terrific. They look like a Mag 7, right? Like 14% revenue growth, 24% EPS growth. Uh, you know, I mean, the top margins of gross profit and stuff don't look like a Mag 7 thing, but all the other numbers do, and those type stocks were fine when you paid 30 times for Meta or something. And this has metype numbers, right? Let's pull up another 13F famous investor that people follow. >> Yeah, I will point out again it was 10 time sales which I've mentioned before. We try to avoid 10 times sales. Now Cobart is kind of almost like an exchange. Marsh although a broker is kind of like an exchange too in terms of what it's doing. So those aren't if you had to pay 10 times earnings for you know people ask like what could you pay? You know we mentioned FICO and stuff. There are things that are probably worth 10 times sales, but they're incredibly rare in the real world. So, I would avoid paying 10 times sales. >> So, for Chuck, two notable buys. Copart, which we just spoke about, and FICO. >> Yeah, there you go. Um, Nibbles probably, you know, at this point, but then they might get bigger if those stocks continue to fall or whatever. >> I'm sure there's lots of people, >> lots of people be looking at um FICO and saying, "Okay, it's half the price that it was before. Now I'm interested." Uh that's exciting. Uh and um Copart, yeah, I mean years ago it was a reasonably priced stock, but in recent years it's spent more time above a 30P probably than below it. >> So >> yeah, FICO 556 times earnings. Yeah, my issue with FICO, you know, and I know a lot of people like this the stock um is so I tried to come up, yeah, the price of sales is 17 and what did I say? I said, you know, it could be worth 10 or whatever, but I didn't say it could be worth 17. Um though it can be if you can raise prices forever. The thing is the the book I was trying to remember I think it's called like better simpler strategy or something like that but uh in a previous podcast I was talking about um kind of a book that talks about sort of consumer surplus or in this case it' be they're not consumers that are using the the score I mean consumers might be using the score but the score is priced for for business users. Um but there are businesses it's the seized candy type thing. you buy it and um you can raise the price. But what is concerning here with FICO and things like that, we also only talk about is the market less efficient in some ways. Um those things show up when you raise the price, but the value creation really isn't when you raise the price. It's having that ability to raise the price. And sometimes it drives more volume because you have, you know, Costco or whatever doesn't raise the price as much as it could gets more volume. Sometimes it doesn't like FICO or something, but you were a very valuable thing to the um the firms that use your your score and your score wasn't a significant part of their expenses over time and you became deeply embedded in everything they do and they didn't really mind and then the government ignored you and everything. If you've raised your prices too fast, uh too too much too fast and too visibly uh you do long-term harm to the business. So, you want a trajectory where that's not felt in that way. And uh I don't know if in very recent years they've they've kept to that as appropriately as they should have. Um, and it has a weird feedback because I actually think that at the moment that they're making decisions that might be the least amazing for the long term potentially. We don't know. They could be good. They bring more money immediately and will add to the value of the stock in a million ways and all that, but I'm not sure if they're good or not. Um, at that moment the that sends signals that, you know, we have to um bid the stock up to to much higher price. And so the multiple goes up at a time when the future pricing power might actually be be going down. And so certainly they've raised prices recently faster than the increase in their ability to raise prices. You know, the we don't know what that number is. It's theoretical number, but the the ceiling on what they should raise prices doesn't grow as much as what they've raised prices recently. So they've pulled forward a lot of things by doing that. Um, and and that's fine, but that was always present and people should have always recognized that when the stock was cheaper and it's it's no more present that ability now when the stock has better results. Um, if it's due to price increases and so, you know, and the way to get rich is like Buffett buying sees when it isn't raising prices and then raise the prices. You want to buy into the stock when it's not going crazy with price increases and then see it increase prices while you own it. So that that's my only concern with that and it's a pretty big concern in their case because that wasn't always what they did. >> What about Airbnb? Seen that name pop up a few times price sales six times 77 billion market cap. I think for a company like this, we have to look at cash flow because the way that free cash flows got good here and and everyone is a little bit of a concern because it's not always the best measure of what's really happening because here we have included yeah 1.5 billion in stockbased comp which is kind of a real I mean if if you're the banker you don't care but if you're the owner of the business you really want to take that cash flow from operations and subtract that stockbased comp. Now there's complications there tax things what it you know it's not theoretically a beautiful way of doing it but what I'm saying is you want to make sure that cash flow from operations and free cash flow isn't overstating that and that's significant because in this case if we were to do that um if you go back to the overview let's see if we go to there we can see the um enterprise value and stuff um we could see that yeah so like um in that case Yeah, I mean it's it's still pretty good, but it would increase the price to free cash flow, you know, several turns to bring it more in line with all the numbers we see in the low 20s. Um versus >> You want to see the craziest version of this? >> Yeah. >> Snapchat. >> Oh, they're like a Twitter, right? They've just been selling the company to insiders the whole time they've been public. >> I mean, basically. Yeah. >> Yeah. >> I mean, Stockface compensation. I mean, you could just see it's just like crazy. >> Yeah. Um, I don't even know why this thing is public or why anyone would buy it, honestly. It's the most egregious form of corporate greed that you could honestly come across in the market. >> Oh, wow. The market cap's only like 12 billion and they >> Yeah. So they're giving like five stocks 10% of the company away in some years, >> dude. I'm telling you, it's it's it's been going on for years as you see. It's crazy. Absolutely crazy. >> So there's a really really small example of this which I think is totally legitimate, but there's a company in the UK called I think they're called Science Group or something now, but they their their ticker I think is Sag. They should have it in Quicks because Quicks has UK stocks. Um yeah and the ticker is SAG because of what it the name used to be which means something in a different language but uh it's unimportant they changed the name of science group. Um so this company's always fascinated me. The one issue is that they do attract um people with PhD type degrees and stuff and uh they give them quite a lot in the way of um equity type things which changes the calculation a bit from um being so you can see the sideways comp is not large in what you see here um from being like um definitely a good business to a little harder to know because you're giving away a couple percent um years ago in terms of what you're giving people um and if you paid them in cash high amounts, you know, would that work? But the company's point was we can't do that because of where they are in the UK and who they're competing with. Uh tech companies and things would give them would give them equity. Um in the UK US there's uh what is it? Exponent which is fail partners originally. Um who's the other one that does expert witnesses and things like that. There's another one in the US. Um and there there's a legal group in in the UK that doesn't give any uh equity to their to the lawyers who join it. Uh which changes the it pretty dramatically. So it can be interesting that way if you start like the thing is with something like Snapchat or something. I guess the idea would have been it would just get a lot bigger, right? And you wouldn't have to give people that that's always the argument is like, well, we don't have to give away 5 to 10% of the company all the time. If the company, you know, 5x, 10x, whatever, we we'll be able to give away less and less of the company even though it's more and more in dollars. And so maybe what happened with with Snapchat, with um Twitter, like I was saying, is if they had just grown as fast as Meta or something, then that would have looked okay eventually that they gave so much of it away. But if you flatline a bit more, then it gets ridiculous. And that's kind of what's happened in that case that you showed me. Yeah. That must not be good for the long-term performance of the stock, though, because the business performance is only okay. The stock performance can't be good if they're giving away that much to people who aren't um public investors. Maybe one more here. Another common one. $182 million market cap is one to pay attention to. I like paying attention to the smaller uh aums at least that they report, right? So the AUM could be different than what's on a 13F of course. >> Yeah, Francis Tr is um Canadian probably is some of the stocks, but you know there's lots of US stuff in there. >> Syria, Synchry, Ally Financial, Accidental, >> Apple, >> Stalanthis. Yeah, Stalantis. Um so >> good amount of it. >> Yeah. But so those are all those do those are kind of similar a lot of them not all to what you do see among other value investors though too. So it's interesting. So Sirius we talked about that's a big Bergkshire holding. Bergkshire is also a big holding um synchrony to some extent ally definitely are the the ones that people own a lot of that way. And even something like the tech stock is a large tech stock there is Apple and one of the largest commodity ones is Oxy which is a Bergkshire one. So I just find that interesting when you look at these that there is um it's the same issue that I bring up with the like active passive and whatever. I don't really think it matters that much that there's an index. Um I think it matters that fund managers know there's an index and know what's in it and what the weights are. Um, this is interesting because I'm sure you know fund managers would on their own be looking at Sirius, accidental, Apple, Ally, etc. But you do notice that all the ones that follow Bergkshire and stuff. Those show up more commonly in their portfolios than just like in general, I think. So, and we're contributing to that by going over who what's in whose portfolio and everything. We didn't go over some of the biggest Buffett um followers though, but you you just noticed that like Sirius is more popular among those. I mean, Sirius was a little more extreme because it also the John Malone background and stuff. People who follow him specifically follow all of his companies, too. So, um there's some unusual ones in there. The biggest unusual one is Pool Corp. um which is has a long history as a strong growth stock with high returns and strong in its industry but has often been a really expensive stock um could pull that up. >> Yeah. >> Yeah. It got ahead of itself with >> 30 times earnings. >> I'm noticing a theme here on all these companies, Jeeoff earnings. >> Pool was a very good company. Um but then what happened to it and it was it was a good company but also you know probably presented itself as at least as good a company as it really was but it was a good company and um then co happened as you can see here. So so they make they make their money a few different ways but let's put it this way their biggest money maker really over time is sort of consumable pool stuff. So stuff that you use up and then next season you need more of right you got a pool and so it's based on the installed base of pools. They also then make money on um new pools and obviously they make money on new pools even just because people who aren't going to use the pools and everything have to buy one of everything when you when you get a new pool. So it's like you have a pool fine you have the cost of putting that in but then you also have to buy tubs of every chemical and every whatever thing and it might take you forever to go through them. Maybe you're not going to really use your pool that much. You're never going to go through them, you know? So, it has a little bit of that thing of like if you had a bunch of people join some diet or something and you make them buy this powder and that thing and it just sits in someone's closet and doesn't get consumed, you know? And that's what happened for like 2020 through 2022. I mean, if you notice uh like some people started thinking things have changed dramatically for this company and everything just because everyone wanted to have a pool from co on, you know. Um, so it's not as bad as some other ones. I mean, was the one, do you remember Trager, the um company that does the uh smokers and things like that? There were some other companies that were outdoor things that got extreme where where people were really excited by, you know, something spiked for a year or whatever, but people aren't going to buy at this rate for COVID forever. So, the company had never grown at 20 30% a year and then, you know, for three years or something, pool grew at those rates. So that was just co threw things off. Yeah. Same thing with with Trager there. I mean, what was that? 50% 40% revenue growth and then since then they've been down in revenue each year um >> at operating profit. 58 million in operating profit. >> Yeah, that is the thing that's amazing about these companies that are planning to grow on a gross profit basis. It's not that different than it was three years ago. It's a little different, but on an operating basis, they continue to grow their operating costs. Um, I mean, that's why the growth stuff works really well when we talk about intangibles, investing through your income statement instead of capex. That works really, really well. If you're the winner in the industry and it goes well, because then that number gets smaller and smaller over time. But if you do that, you know, on sales on the top line that isn't growing, then we see how that works out. Um, in terms of the same gross profit translates into less less income. Um, again though, it's more of a problem for companies that grow fast and are wrong about how fast they're going to grow in the future or kind of get into a habit of growing in a way that's unlike the uh recent past. So, it's harder with companies that are cyclical. Fast growth companies. you want a fast growth company like uh you know whatever a meta or something like I was saying because they're kind of super fast growth but they're fast growth non you're assuming they're going to be not cyclical which actually is easier even though there's a lot of technology change and everything um it's more secular you either win or you don't over 10 years or something and it's not like you have to predict oh we need to grow really fast for two years and then we need to stop growing because that doesn't happen many companies can't handle that and that's what you saw with pool definitely you see with Trager. Um, >> accidental petroleum started buy up a bit following Mr. Buffett. >> Yep. I feel like there was more talk about this a while back when Buffett was buying it and I've heard less about Oxy from Value type people, but you might know better. >> It's gone kind of quiet. No, for sure. That's definitely true. >> Yeah. Okay. >> Definitely gone quiet. >> Yeah. My favorite part of Data Roma is just looking at these little blocks that they have here, right? And then obviously the one that we went over 5% or greater holdings near 52- week lows. >> Fresh Pet >> near 52- week low. Just >> Yeah. >> off at about four and a half%. >> You ever looked at that company? >> Uh, no, never. >> $2.9 billion market cap. Let's see. food products together with subsidiaries, manufacturers, distributes, and markets natural, fresh meals and treats for dogs and cats in the United States. >> It's headquartered in Bedminster, New Jersey. That's interesting that I've never heard of it. >> There you go. >> Grew up. >> Yeah, I grew up right next to Bedminster. I'm trying to think of where it might be. Um, that's not a big place. There's not many places to stick a headquarters. Um but uh it's also where um the president has his golf course. That's what makes it famous today is just that he's at the golf course um half the time and stuff. You know when so whenever there's behind the scenes books and things, you know, they'll be like the meeting in Bedminster, New Jersey, that's the only reason why someone would mention Bedminster, New Jersey. Um >> you know, betting the vice presidential candidates or cabinet people or whatever. Um, so don't know anything about brush pet. Um, I'm trying to think if Yeah. Have you ever found a stock from a 13F that you ended up buying? >> So, not really. No. Um, I found stocks that then I bought a different stock in the same category or something. The issues with it are if we go to um if we go to data roma there uh and look at like the top buys and things can be interesting. If we go to like the I don't know the the portfolio things that gives you an idea. It would be better if in some ways you could kind of subtract out, you know, indexes or something that gives you an idea of what's widely owned because what is interesting is the extent to which they own things that aren't widely owned. But that signal is hard to get through with all of the fact that the grand portfolio and stuff is full of what everyone owns. So um Microsoft, Amazon, Meta, like what are the biggest you have it sorted by ownership count or max percent? Okay. Percentage. Okay. In the grand portfolio. Yeah. So, let's start at the top and just look through this for people on the podcast who aren't hearing this um or who aren't seeing this. Uh it takes a while before we hit things that aren't um like the biggest weights in indexes, right? Microsoft, Amazon, Meta. We hit Bergkshire. Now, Bergkshire should be more represented probably indexes and things than it has been historically. And obviously with value investors hugely represented, but it's also huge. Um Carvana, now we're in different territory. Um, you know, St. Joe has one owner, right? So, uh, but the answer is no. I mostly find industry things with it to see. So, is someone buying up airlines, oil, whatever. Is that interesting with what they're doing? Banks, whatever. Um, insurance things like we talked about. So, it's it would be less likely that Buffett is buying Chub and that's going to make me go out and buy Chub, but it would make you think, well, what does he see here? Especially if you know the investor more. Um, and they have more of a long-term outlook on the business quality and all of that. So, you know, what is Glenn Greenberg buying or Buffett or uh Terry Smith or whatever? And what industries are those in? And do some of them look like they don't make any sense, right? So, when people start buying Taiwan semiconductor, that was interesting. Um, I can't understand it. So, it's not an industry that I'm likely to be able to invest in, but it'll cause me to look at Taiwan Semiconductor and and look at their uh numbers and think about what they're seeing there. Um, now that's not real recent. That's most of those are from further back, but you know, so a good example on this one is lithium motors. So, when they buy up a bunch of um car dealers or something, then I'd notice and pay attention to it. Um it takes a while to find stocks that aren't, you know, well seen by a lot of people. The other thing, of course, is just these are huge portfolios that people have already performed really well. So, I'm not sure how well they're going to do in the future. Generally, I don't think they're great, you know. Um, so there's not even that many, like you said, that even are on the smaller side of 13Fs and you said it exactly correctly. It's not really a hund00 million portfolio. That is the requirement. It's $100 million in 13F securities. So, you know, most managers aren't going to well, a lot of managers aren't going to have to report until even well beyond hundred unless they they keep everything in, you know, NASDAQ and NYC US stocks and nothing else. Um, so you're going to be a few hundred million dollars before you even show up on one of those lists. >> Got it. Cool. Well, I want to thank everybody so much for tuning in with the both of us on the Focus Compounding Podcast. the first time you're joining us, be sure to hit the subscribe button so you'll be notified every time that we upload a podcast. And of course, if you want to get access to QuickFs and you do sign up, tell them that you heard about them from Focused Compounding. It helps support everything that we do here on the podcast. I want to thank everybody so much for all the support and we will see you in the next podcast. Take care.