Management Might Be the Top Clue to Your Next Investment
Summary
Investment Philosophy: Joe Bosovich emphasizes the importance of focusing on management quality when investing, likening it to buying a company rather than just a stock, and highlights the significance of management's role in company performance.
Value Investing: Bosovich, a deep value investor, discusses the potential in companies that are misunderstood by the market, emphasizing that a low stock price does not necessarily reflect the quality of a company.
Case Study - Bungie: The podcast highlights Bungie, an agricultural distribution company, as an example where new management under Greg Hecman has significantly improved company performance through strategic decisions like relocating headquarters and making substantial insider stock purchases.
Commodity Sector Insights: Bosovich shares his bullish outlook on the metals and mining sector, particularly in commodities like copper and uranium, which are essential for global electrification and have significant growth potential due to supply constraints.
Builder First Source: Another investment idea discussed is Builder First Source, a company catering to professional builders and contractors, which Bosovich finds attractive due to its strong balance sheet and innovative solutions addressing labor shortages.
Market Trends: The discussion touches on the current state of the housing market, noting the impact of high mortgage rates on home building and the potential for a robust construction industry driven by household formation and pent-up demand.
Investment Strategy: Bosovich advises partnering with great owner-operators and holding investments for the long term, emphasizing the importance of management's stock ownership and compensation alignment with shareholder interests.
Transcript
[Music] Hello and welcome to the Stanberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and the Ferris Report, both published by Stanberry Research. Today we're going to talk with Joseph Bosovich. Joe is the founder and chief investment officer of Old West Investment Management. He is a value guy just like me. So, I know we're going to have a great talk that you'll enjoy very much. Let's do it. Let's talk with Joe Bosovich. Let's do it right now. Joe Bosovich, welcome to the show, sir. Thank you for being here. >> Thanks for having me. >> So, Joe, you're a new guest. We haven't had you on the show before. So maybe we'll dive in and and you can just tell the the listener who you are and and what you do and and then we'll then we'll talk. >> Sure. Okay. Yep. My name is Joe Bosovich. Um I am a uh third generation Californian. Uh, I founded Old West Investment Management in 2008, [Music] right in the middle of the Great Recession. We opened our doors November the 1st of '08. >> Wow. >> When the entire economy seemed to be imploding. Um, >> great time to buy stocks. Well, I think I think I think you know the worst of times I think is the best of times to to start something, right? Um and and it turned out to be that to be the case. But my background is actually in agriculture. Uh my family has farmed in California for over a hundred years. And between undergraduate and graduate business school, I took uh what was going to be a temporary job with my family. Uh the temporary job lasted 22 years. Uh built a a big uh family company. It's still in business today. It's Bosovich Farms, California headquartered grower, shipper, processor of fresh vegetables. Uh >> a good part-time job you got there, Joe. >> I know. Right. Right. Yeah. Yeah. And then I uh as I approached my late 40s, I was approaching 50 years old and I thought, was I ever going to do what I always dreamt of doing, and that would be I I just had a a a lifelong um affinity for picking stocks and and analyzing companies. And uh so I did a I did a complete career change and uh to what I'm doing today. And it's right. I I I'm I'm blessed because I've had two different careers uh that have both been very fulfilling. Um you know, pretty hard to beat working side by side with your dad and your brother for for 22 years. Um and uh so that was great. Um, and then I've, you know, really, um, very for, but I think a key point would be that the fact that I ran a company, uh, most people that do what I do, they've been buying and selling stocks their entire career. And so, the fact that I actually ran a company for 22 years, um, and, um, I think makes me a different kind of an investor. >> I I really look at it like buying a company, not buying a stock. Um and I take a different angle towards the company I'm analyzing. I put huge uh weight on on management and the people that run these companies. Uh really a key to our invest investment process, but uh that's a long- winded answer to who I am and what I'm doing. >> Exactly the kind of answer we we like around here, Joe. Thorough, right? We're not we're not in for uh sound bites. we want the real story. So, um, focus on management is what really out of all that, boy, that's the thing that caught my ear. Plus, um, you reminded me of what Warren Buffett has said many times. Um, I'm a better businessman because I'm an investor. I'm a better investor because I'm a businessman. The two work together. And I've seen it in others, too. >> Sure. >> It's I'm not much of an entrepreneur myself, but I I'm a decent investor. Well, if you think about it, you know, um I mean companies are really just a a collection of people and uh and and you know, I think that the people that run the companies is just it's just beyond huge uh the importance of >> of uh of the people that that that run these companies and especially the CEO and uh you know um so yeah, no I I I uh and there's a lot more to it but but it's definitely a key part of our process. >> Right. This is fascinating in light of another famous investor. I'm I'm pulling famous investors out of my out of my hat left and right here. Um Peter Lynch who who often said something like uh you want a business that's so good anybody can run it. >> It doesn't quite work out that way in real life though, does it? You know, you can have a >> I think >> like you see founders coming back, you know, like Howard Schultz had to go back to Starbucks and all that stuff. The person matter. The people matter. >> No, they do. They do. um you know but I I I think um I think he I mean he's right in terms of say a Coca-Cola a Proctor and Gamble a Johnson and Johnson where in these in these you know real big classic old companies um you know the CEO in many cases is almost a placeholder but when you know we're value investors we're deep value investors and so it's it's a different kind of a game than than than than than buying uh you know um you know uh one of these a Coca-Cola uh what we do is much different and uh and where a and in many cases it could be a turnaround where where there's much more value placed on management >> right the far yeah to to get deep value you're you're farther down the quality trail than you know Bergkshire Hathaway or Coca-Cola or something or American Express or whatever right so you >> well I would I I I I would not I don't agree agree with that. You say deep down deep deep deep down the value trail, but but what it could it could be it could be an outstanding company that is just misunderstood by the market and and and and is cheap. But don't confuse don't confuse the stock price with the quality of the company. >> Well taken point well taken. I was think I and I was thinking of spec of specific I was generalizing about some specific instances. So um but but absolutely point well taken don't think the stock price or the market valuation to be really specific is a is indicative of the quality right it's just >> maybe the market maybe the market has it dead wrong >> right >> which does happen despite much bluster to the to the contrary >> right >> right so that's interesting deep value so can you give us an example >> yeah I mean I mean many many many examples but um I can give you an example >> I can give you an example of a company where um where where a new CEO made a huge difference and the company is Bunky uh this the symbol is BG and um it's uh it's it's a worldwide agricultural distribution company and the the a uh world which I mean think how big it is. It's you know not that food is important other than the fact that we do it all day long all of us. So um uh yeah big business it's dominated by four companies worldwide. Uh two are private, two are public. The privates are Drifus and Cargill. The Publix are Arch or Daniel Midland and which is you know probably better known and then Bungie but Greg Hecman came in as the new Bungy had been mismanaged for years uh and stupid investments and and and and misallocation of capital. And so Greg Hecman was a longtime Kagra executive that they brought in to write the ship. Uh it's interesting when you talk about does management matter. Uh one of the first things he did is he asked the question we're now we're an ad company. Why are we in New York? And um and so the first thing he did is move the company from New York to St. Louis. Right in the middle of the Don't you love that? Right in the middle of the bread basket. >> Yeah. >> And um do CEOs make a difference? and and along it reminds me of another one is is Boeing, you know, where the Boeing past CEOs lived in Connecticut and they lived in New York and they lived everywhere else and uh Boeing brings and Boeing I mean obviously Boeing you know really controversial uh really had a tough time. um they hired Kelly Orchburgg as the new CEO and you know the very first thing he did is he moved to Seattle and if you recall the nature of Boeing's problems uh what caused their problems were some were some quality issues the door blowing out the plane crashing I mean you know so where do they make most of the planes Seattle why has a Boeing CEO never lived in Seattle simple questions >> yeah Ellie Orberg was retired in Palm Beach, Florida, living the good life, playing golf, takes this job. First thing he does is move to Seattle. And and of course, >> that's a statement in light of that history. That's a real statement, isn't it? >> Well, and if you look at what's happened to Boeing since he took over and he's a he's a wonderful wonderful CEO and and so um um you know, they have I and the stock is up by I don't know maybe 30 40% since he since he took over. It's uh it's really um a great turnaround story. Uh but what a simple thing to move to Seattle, right? And so um but back to Bungie. And so Greg Hecman says, "Why are we in New York? We're moving to St. Louis, which by the way, you know, takes takes himself out of it." I mean, most people would rather live in New York than St. Louis, but uh was what's best for the company. Um so it's just one small example. Um, and how I got on to the idea, it's actually kind of a funny story. I follow insider activity very very closely. Um, I even though you know we have we have a team but one of my little exercises every morning is I go through every form for filing uh published by the SEC every day and um for all 4,000 companies >> form every day. That's amazing, Joe. >> Yeah, it takes about an hour of my morning. Um, and and but it's it's it's probably my favorite filter of looking for new ideas and of of what to own and also what not to own them. And so, um, but what I I saw, um, I had seen Bungie here and there, but, um, pretty funny. I didn't know how to pronounce it. It's bun n ge. So, is it bun? is a bungee or bungee or bungi. So anyway, but I see um I see a $10 million open market purchase by Greg Hec. Then I look at that, oh my god, he's the brand new CEO. $10 million purchase. And I said, well, it has to be a a stock grant. I'm I'm sure they gave him $10 million of the stock as a signing bonus to come in. But I thought, maybe not. What if he did? What if he did write a what if he did stroke a check for 10 million bucks? And so I called investor relations, no one called me back. >> Then I called a second time and nobody called me back. >> And I but something was really gnawing at me. And uh so I called a third time and one last time. And uh finally the assistant, not the head of IR who should have called me but the assistant IR person called me, a a young man and we start talking and I said let me I said I have my first question is how do you pronounce the company? And he goes bungy. Okay. All right. So get that out the way. It's Bungi. And uh that's my first question. My second question is Hecman I see a form four or five. So ju just in case the viewers don't know when a when an insider of a company buys or sells even a single share of stock they have to file a form for with the SEC uh within 48 hours of the transaction. And so um uh so I that's this is you know my so I'm looking at these every now you sit there there there's hundreds and hundreds of filings every day. How do I have time for that? I basically only look at transactions in excess of a million dollars. So that that narrows it down to maybe just a couple hundred transactions a day. Um and but the larger numbers pop out and so I I and so 10 million. Oh, so I call IR. They finally called me back, you know, the third time. And I said, um, let me ask you a question. I said, was did it was that really his did he actually write a check for $10 million or was that a grant? And they was both. They he had a grant for 10 million and he bought $10 million worth of stuff. And I go, "Wow, that's really impressive. >> That is >> I rarely see that that a new CEO would write a check for $10 million. That's pretty strong conviction. Um, and then I start looking deeper into it and I see the move from New York to St. Louis. I, you know, I I just, so I'm getting the idea that this just might be a real nononsense individual that really um uh uh is going to make a turnaround here. And uh but if you if you look at the you know, it's I want to say it's trading at 10 times earnings with a 3 and a.5% dividend yield. And um but when I said it's been mismanaged for years um um you know and it has been and so he uh cutting expenses uh uh just cut cut cut selling nonprofitable operations um uh cutting overhead um buying some uh new opportunities and just you know so it's kind of a almost like the conductor of an orchestra. a great CEO doing these things. And um and of course, you know, I I think one of the most important jobs of a CEO um is is how to allocate capital. And and now I'm not going to I'm going to give Will Thorndike some credit for this. Will Thorndike wrote a book called um the outsiders and and um um the greatest corporate CEOs of the last century and uh but you know he he says and I believe this there's the CEO has five choices on how to allocate capital and and I haven't come up with number six. Um you can reinvest in the company and grow it organically. You can buy other companies and grow through acquisition. >> Mhm. >> You can pay down debt. Um you can pay a dividend. Um or you can buy back your own stock >> or some combination of those. But um you know, companies are notoriously bad for buying back their own stock. Um, companies are buying back their own stock. Hand overfist today. >> Yep. >> They were buying back their own stock. Hand overfist in 1998 and 1999 and in 2004 and 2005 and 2006. >> No regard for fundamental value whatsoever. >> Stock correct. Stock repurchases by companies completely dried up in 2001 and 2002 and 2003. Completely dried up in 2008 and 2009. Um and and isn't it ironic? Um, wouldn't you think that a that a corporate CEO that's engineering stock buyback plans would want to buy back their stock when when when when it was, you know, hugely selling off and cheap and the market was horrible? >> And would and wouldn't you think they'd have their hands in their pocket right now? And and and it's just the opposite. Unless you're a huge shareholder of the company yourself and and you're running the company and and so when a new idea uh comes before me, the first thing I do is look at the proxy and the proxy is going to show me the level of ownership of management and it's going to show me compensation and how they compensate themselves and and so you know I love seeing companies where there's very very high ownership and and and and very modest compensation because when when the CEO is a big owner of the company and doesn't pay himself very much you know Warren Buffet pays himself $100,000 a year and and that's and that's all he's ever paid himself and so so basically when you invest in that company uh you know your interests are aligned with the people running the company um versus most companies where um you know there's is this giant compensation package and you know they're going to that CEO is going to knock down 25 $30 million a year no matter what and and and I really don't have much interest in that. So, >> right. And the the the stock uh repurchase plan becomes part of the compensation because they're compensated with stock, you know, they they they try to support the shares or whatever. And so, it's it's um the >> twist and that's a whole other issue is um is is gap accounting versus adjusted earnings. And of course, today all companies report adjusted earnings. Nobody gives a damn about GAP earnings anymore. And which is really a crime because one of the biggest differences between GAAP earnings and adjusted earnings are backing out stockbased compensation. And your viewers may not know that, but that's the single biggest. And I I would just challenge you when you look when you're looking at a company, compare that GAP earnings versus adjusted earnings and and all the these technology companies, you know, um uh Meta paying these hundred million bonuses for these new AI superstars, you know. I mean, I mean, it's it's all um uh adjusted out of earnings. um it's all backed out and and and so I I think it's very very important to to um to to look at gap earnings. >> Yep. And the the again the share repurchase turns it into a backdoor cash bonus, >> right? >> Correct. >> You know, just just a different way of getting in the cash. >> Correct. >> Um yeah. So Bungie, that sounds like a neat one. actually right now headline you know PE ratio just on uh what is it Yahoo Finance is like eight I mean and it's a dividend yield >> with a giant with a giant dividend yield now would you rather buy that or or Nvidia today I mean I would I would rather I'm a I'm a value guy I would rather own Bungie >> absolutely I' I've been writing a newsletter called extreme values since 2002 so >> Oh great >> so Bungie Bungy would qualify. >> Yeah. Yeah. You just put it on our radar screen. I'm going to shoot it to my uh partner in crime and and see what he thinks. >> Great. >> Yeah. >> And once again, you know, um manage management is huge and and and Greg Hecman is doing a wonderful job of turning the company around. >> Okay. So, you so Bungi's current idea. >> Oh, yeah. >> Yeah. And and uh you mentioned Boeing as well. Is that current or past or Um, you know, we we have we have a small position in it. Um, it uh you know, the airline business is just it's just it's so scary to me. Um, and and I mean, I know it's there. It's an essential part of life. Um, I I just uh boy, so many things can go wrong. Um, but we do have a we do have a small position in Boeing. So bringing Boeing up actually doesn't make me want to talk about Boeing for reasons of internal conversations and things that I've had over the past year or so. It makes me want to ask you if you have an opinion about Disney >> because of what what has happened with that company with their with the the output of their products has become a strange different thing than what it used to be. >> Right. Right. Yeah. you know, um I I I I I we don't own it. Um and I I I've I've never owned it. Um, I think the whole that whole content business is so difficult and and so fast changing with streaming and and and the competition been watching this Paramount Sky Dance thing, you know, which is a bit intriguing to me because I think that this David Ellison is like his dad is brilliant. Um, but but I I think it's just a tough it's it's a tough business. It's a tough place to play. It really is. And um and of course Disney, I mean, you know, the theme parks and and everything else. And uh um it's it's a great franchise. It's a wonderful American company. Um but really um you know, I I I don't it's not an area that we that we like to play in the whole content business. >> I see. Okay. Um, our our conversations that I've referred to internally have have focused on uh is the is the brand permanently damaged by the the woke what you might call the wokeness of the content? You know, have they really forgotten how to make movies? One person is the way one guy put it. But >> yeah, no, I I I I Yeah, I get that. I get that. Um, at the same time, I'm watching my, you know, my two-year-old granddaughter watching, uh, Mickey and Minnie, and she's just completely delightful. You know, it's kind of funny. Her first uh, she used to love this this show, Miss Rachel. Have you ever seen Miss Rachel? Uh, >> I have I know Miss Rachel well. I have two uh, grandsons who watch it. Yeah. >> And so, which I, you know, it's funny. I used to um uh turn my nose up at parents in restaurants that had the kids on iPads, you know, and I and I but then I have this little 2-year-old granddaughter that's very rambunctious and hard to keep in her seat and until you pull out Miss Rachel and then she's glued to her seat. >> But now she's now graduated from Miss Rachel to Mickey and Minnie. And so I'm sitting there saying, "Isn't that it's just such a wonderful wonderful franchise. My god." Um, but yeah, you know, it's all good. Um, but yeah, no, I I I think that uh Yeah, and I and I think they have management, you know, I mean, I had to come back and and and so that was all kind of botched and and they still have no air apparent. They have no replacement. Um, he is no spring chicken. Been at it for a long time. Um, so anyway, there's a lot to like about Disney, but uh but um I have no no stake in it, >> which speaks for itself, does it not? Yes. >> Sure. Right. >> Um Okay. So when you say um when you said deep value as you as we sort of realized my my mind went to a certain place and it went to you know when I think deep I automatically think distressed but Bungi isn't what you would call distressed right they it's a good business that's suffered from bad management for a number of years >> abs and it's also in an industry that's kind of um that uh you know known for like low margins and and and >> right commodity >> and intense competition but it but it doesn't need to be that way you know it you just need the right the right person to figure out you know get rid of the bad assets let's get involved in good things and I mean you have you know a a world of seven or eight billion people that need to eat for God's sakes there has to be a way to make money in and and and so yeah. Yeah. So I kind of it's out of favor which makes me like it. I think deep value you can have deep value. You can have you can have you know extreme quality you know. So um and then um you know um you mentioned you just briefly said commodities a second ago. Um and so in terms of deep value you know and we have really um found amazing amazing value in the commodity area and maybe it's my egg background a lot of money managers shy from anything to do with commodities >> and I understand why because it's hard enough to get the company right let alone to get the price of the commodity right so it's doubly tough >> um and And on the other hand, um boy, if you look at the, you know, the commodity uh uh uh sector of the S&P um has never been lower and and >> never been lower than today. um which I which excites me because I believe in in >> ultimate reversion to the mean >> and and and I think that I think the market eventually comes down commodities eventually become a bigger part of the market like they have been historically. But where we have found just extreme value is in the metals and mining area. And and you know we have right now which is kind of crazy but we have um half of our uh portfolio is in metals and mining companies uh which which is just like um you know uh where I think I think the the S&P is like 2% metals and mining and we're 50% metals and mining. There you go. >> Right. But but I think I've learned one thing. You the way you make you know you can't you really can't make money in this business by thinking and being like everybody else. Um you don't want to be different just to be different. Um but I think where you make money is is by having you know uh your own um thoughts and and ideas and basically you know um not going the penguins all go over the cliff together right >> and they again and again been it's been a while they the penguins haven't gone over the cliff for about 15 years but they will eventually they always too. >> They always do. >> Yeah. But no, we we have found extreme value in in the metals and mining sector. My partner Brian Lax um has, you know, really driven our our move in this area. Um when I first met Brian, uh when we first met about 10 years ago before he came to work for us and and the person introduced us said, "You you need you guys need to meet each other. you like you both like gold. And I said, I'd like to meet this guy. And and uh that's how we first met. And and you know, we liked gold 10 years ago. We finally been proven correct. It's taken a while. Um but but I think that and and then we'll go back to that. But you know, how do you own gold? Well, today it's all about ETFs. Today it's all about index funds. And so nobody buys stocks anymore, right? Um, everything's indexed, everything is passive, and if you're going to own gold, you're probably going to own GLD or GDX. You know, no one picks stocks anymore. And um but but I I I I believe that um that's another you know contrarian streak would be that I think stock picking is is probably not a better time in history to be a stock picker because the market has never been more expensive than it is today in history. >> And it's it's more expensive today than 1929. is more expensive today than 1999. Uh it's more expensive today than than than 2007 and and um >> and more concentrated. >> Well, yeah. And I but you know this whole move to passive investing in ETFs and index funds, you know, why why pay someone like me a fee when you can buy the S&P 500 for four basis points from Vanguard? And so um and and and make 15% a year. And so that's that's the thinking and that's everybody's drinking the Kool-Aid and everybody thinks that until lo and behold um the penguins all go over the cliff together, >> right? >> And and so but metals and mining um we went from gold but then Brian's first idea he brought to our team was um now this is eight years ago. Okay. >> Eight years ago and he had the idea uh to invest in um nuclear energy and uranium min miners. Um nobody but nobody was investing in uranium miners eight years ago. The only mention of nuclear energy eight years ago was Chernobyl U Fukushima. Uh nothing good. Yeah. >> And isn't that amazing eight years later how everybody loves nuclear today? >> Joe, do you know Rick Rule? >> I don't not personally, but I I know who he is. >> Yeah. Good friend. Known him for decades. Um he uh he's he's in the same boat with you guys. He he was on the uranium long before anybody else. When when everybody else was afraid of Chernobyl and Fukushima, he was talking about it, too. We've had >> Yeah. I mean, I I don't know. very few people like it eight years ago. >> Well, it was the two of you. It was >> There you go. There you go. Okay. And and uh but you know, we were buying Camo at $7 a share and it's $70 a share today and and um so anyway um but then we we that was then eight years ago. We we we've taken a lot of profits um but we've really parlayed into other um now first of all I say metals and mining. So we only invest in companies, right? And and no ETFs, no and and and no commodities. Okay. >> Uh just companies, but companies producing these commodities. Uh but but you know, really like we we love copper today. Uh we we love tin, silver, um uh uranium, but really metals that are tied to the electrification of the globe. and and um you know, everybody wants to own Nvidia. Everybody loves the fact that Microsoft's building these data centers, but really nobody's stopping to ask, "Where are you going to get the copper to do all this?" And Microsoft recently built a new data center near Chicago. It wasn't that big of a one either. and they they they they needed they put 4 million pounds of copper into this one data center and it's just I just blew my mind when I read that and I just go gee whiz. Um and then you uh you know Richard Aerson who runs Freeport who ran Freeport McMaran he he retired but he said it basically if they find a copper deposit today anywhere between 15 and 20 years to begin production >> right >> uh it takes a long time to build a copper mine and uh so in our opinion um I think the the the move is irreversible, the electrification. Um, and um, but I don't think that supply is going to be able to keep up with demand, which will equal higher prices. And the same thing goes for for uranium. Same thing goes for silver. You know, silver historically, precious metal, uh, gold's stepbrother. Um but today you know all half of all silver is used in industrially and it's you it's highly conductive and and and used in in solar panels and and all types of electrification and of course tin and tin you know few people know what tin is used for tin roof tin can no it's used for solder and electronics and every piece of electronics you know every piece electronics in the world tin is used for soler and and um anyway, so that's uh that's where we're finding extreme value today. >> Yeah, I I I love uran uranium story. I love copper to death. Um I don't know if you know Robert Freedelland probably. Yeah, he's he's got this thing he said a couple years ago. I don't know if he originated it or if he got it from somebody else where he said basically we need um eight Escandida mines in the next you know 10 or 15 years or something u and they don't Escandida the biggest copper mine in the world in Chile and they don't exist they presently those eight deposits don't currently exist you know he's got one of them and then you know where are the other >> but but here's the here's the other thing about you know mining is a lot of these mines are in areas, you know, that you that you you know, so Freeland's biggest mine, his biggest mine is in the Congo. >> Yeah. >> And you know, and and so I mean he's he's he's brilliant. Um uh amazing, but uh you know um the the a challenging thing. So when you when you pick a company to invest in, I mean, you really need to know where the assets are. You really need to know how safe they are. You know, Bareric, Bareric had a big uh gold mine in Mali that was I think 10% of their production and the government just took it. >> Yep. >> Just just took it. >> Yeah. And um um so you know um um you really need to to know you know there's that massive massive copper deposit east of Phoenix that Rio Tinto and and BHP are trying to co-develop. Um but it's it's an Indian burial ground. So, um, so there's just, you know, mining is really, uh, difficult. Um, um, but, uh, but what I love about it is they're producing products that that the world doesn't turn without these products. And so, um, you know, um, but what I like about it, it's just not a crowded field. And so where we our edge is in picking the best companies run by the best people with the best assets. And so that's why, you know, if you like gold and you want to own GDX, which is the, you know, all the big gold miners, you know, you're going to get Bareric, you're going to get Pneumont, >> neither of which I want to own, you know. Um and and and so that's where it comes down to stock selection and going back to my earlier comments to people that run these companies, you know, how much stock do they own in the company. You know, John McCluskey who founded Alamos is the biggest shareholder of the company. The guys at Numont own very little stock in the company. And and so um anyway, that's that's just our our methodology. >> Yeah. And in mining in particular, which I've covered a bit over the years, um there are several ways into it. Producers, royalties, exploration and development, then like what I would call like pure exploration and prospect generation, that kind of a thing. And in the case of Sprout, Inc., which is one of my big picks of the last several years, um finance. So, it's uh it's an interesting space. No, it is. I mean, the royalty stream you pieran, right? Franco, Nevada. I mean, >> it doesn't get any better than that. >> Yeah. Yeah. Yeah. No. Exactly. Exactly. Exactly. But our preference is really is is are the mining companies run by great owner operators. >> Okay. Oh, so do you own any royalties, royalty companies? Not at all. So, you're focused on the producers. That's interesting. >> Correct. Um, who I'm curious to know who who's a who is a great owner operator. Let's talk. >> Uh, John McCluskey at Alamos. >> Alamos. >> Yeah. Yeah. >> What do you like about him? >> Uh, Symbols is AGI. Um, he founded the company. He's a huge shareholder. He's he's run the company for 22 years. Um the company has no debt, sitting on a lot of cash and they have great great assets. Um, you know, mines were mostly all in North America, um, uh, Canada, uh, Mexico. Um, and, uh, you know, um, he it's his company and, uh, and he and he and he runs it, uh, um, you know, um, very shareholder friendly. >> Great. Um, Agneo's Agneo is another one, you know, Agneo which has really done so so well. But Sean Boyd uh ran the company for years and uh and just did a wonderful wonderful job. U once again uh safe assets and safe locations and the other thing is great, you know, great. I mean like Allen was their their mines are very very high grade. Um and uh you know the higher the grade, the lower the cost, right? and and so all these things go into the mix and um so yeah. >> Cool. Uh well, we're on we're on the same page there. I mean the um if any industry I'm sure you I bet you'd agree with this. If any industry will teach you how important the people are, it is mining and metals like more than any other because some of the people in that industry are outright criminals. And then when you find these high quality people, you you wonder how they got there almost because they're kind of few and far between. >> Did you ever hear Mark Twain's definition of a gold miner? >> Oh, yeah. Yeah. Tell our listeners. I I know it. Well, >> a liar standing next to a hole in the ground. >> Yeah, that's right. the the that's a joke, but the fact that it is so accurate so much of the time is is really, you know, you almost have to see it to believe it, but wow. >> I mean, some of these guys, the things they are doing, it's just um >> yeah, you know, and Mark Bristo and Bareric is is I think maybe one of the greatest mining executives in the world. >> Um the problem with them is that they just like I said, they they had their their their mine in Molly confiscated. Um they're they're in some they're in some pretty tough neighborhoods, you know. Their big new mind that they're bringing on is in Pakistan, you know. >> Yeah. >> I just man, would you do you want Pakistan or do you want, you know, Ontario, you know? I mean, and and uh so anyway, um it all m it's it's all uh in in the baking, right? >> It is. And uh that's that's another thing we're we're pointing out. Another thing, let's just kind of name it. To get scale, and there's no such thing as a really great small mine to get scale, you need to be in all these weird, you know, you need to be all over the world if you're not in say Canada or Mexico. >> Yeah. Well, you I don't know about that. If you if you look at Ago, >> I mean, you know, they're they're they're in Canada, they're in Australia, >> they're in Finland and Mexico. So that's that's that's a pretty good stable right there. >> Yeah. I don't I didn't mean to suggest you need to be in bad countries. You do need to you need to be in in several countries probably. >> Yeah. Yeah. Yeah. Yeah. No, they all are. They all they all are. Yeah. Right. Right. >> Right. >> Um so you know that >> the big the big ones are >> Yeah. You got to be you got to be careful. The one mining jurisdiction that I learned of from the folks at a gold and silver that I never knew about until the last few years was Morocco >> is apparently a pretty good mining jurisdiction. >> Oh darn. I didn't I didn't know that. Yeah. >> Yeah. I gold and silver is there and uh you know government's really friendly to them and and there's not a they don't have a lot of competition there right now. So it's kind of cool too. >> Okay. The stock has moved quite a bit, but you know, of course, the CEO U Ben Wahi, he he insists that it's still cheap, right? >> Sure. But but you know, I mean, so I I didn't want it to be all about metals and mining. And >> Okay. And by the way, and and if you did want to talk all about metals and mining, you need to have back my Brian my partner, Brian Lax. >> I was thinking that. Yeah. >> Yeah. No, and Brian Yeah, really. He uh I'm more of a I'm a much I mean well we're both we're both generalists but he's really engineered our our move in that area. U we we weren't always 50% metals and mining. In fact I think six seven years ago we were probably >> maybe uh less than 20% commodities mo and that was mostly gold. Um, so he's really engineered our move into but you know we honestly we just own a a collection the non-metals and mining the other half the portfolio just a collection of of just like Bungie just fantastic companies uh um that were you know that we really that were very high on >> Okay. Well, let's let's lean away from Metals and Mining because and we'll we would like to have him on. As soon as you mentioned him, I thought well, you know, we need to get him on here. carries half your portfolio. >> Yeah. >> You know, so uh let's do that. But let's lean let's, you know, for the rest of this thing, let's let's lean into your um your strengths. >> Um Bungi sounds like a great idea. What is there another one that you feel like talking about? >> Oh gosh, I love talking about all of them. And that's one thing that's one thing that kind of differentiates us from a lot of other people is that most people really, you know, now in the day of index investing and and um um um ETFs is stock picking is a bit of a lost art, you know, but yeah, I we have a new one in the portfolio um Builder First Source. >> Oh, we just wrote that company up in my newsletter. That's cool. >> Did you? Yeah. the symbol BLDR, builder first source once again in um monitoring insider activity. Uh going through my forum fours every morning and uh the chairman of the board is Paul Levy and he made a open market purchase of stock. He he wrote a check for $55 million. uh he bought at a at $111 a share and um you know you see that it's like you know the stock was down from 200 and 200 plus um but I like it you know um it's it's really an interesting company um it was um um originally it was the lumber supply arm of PY >> in in the very beginning. Um, and that was spun off from PY. Um, and so, you know, uh, in building supplies like Home Depot really caters to the do-it-yourself, uh, um, customer, right? >> And Builder First Source really caters to the professional builders and contractors. Um and they're they're they're the largest in the country uh at that. Um and uh the other thing kind of interesting about the company is that now especially now I mean I it's interesting you know I built a house in California a couple years ago and and um it was um the tradesmen were almost 100% Latino. >> Mhm. hund I mean almost 100% from demolition of the old house to to um to um uh finished carpentry of the new house >> almost 100% Latino workforce. Yeah, I live in Oregon, so I know what you're I know what you're >> Well, I mean, and thank God for these people, right? I don't know who would do it. And and my point is with this immigration uh move >> that we have um is to really put a squeeze on the workforce. Um and builders first source, one thing they specialize in are prefabricated window systems, prefabricated door systems, and wall systems to take labor out of it. and and and and uh which you know I think really plays into the hands of of of of tight labor conditions and cost savings for the for the for the builder and the framing contractor >> and and so one just one little caveat but you know um very profitable company a fortress balance sheet um and uh um you know I think last time I looked at it almost a 9% free cash flow yield Um and um so yeah, no um you know they have 600 distribution centers around the in 43 states. >> Mhm. >> Um and and they they they Yeah. No, it's uh there's a lot to like about the company. >> You mention what you mentioned Home Depot or something. These are guys are like the one-stop shop for for uh the professional, you know? They're the the Home Depot for the professional. Well, the I mean, Home Depot uh caters to the to the do-it-yourself and and and and Builder's First Source caters to the to the contractor. >> Yeah. >> Right. >> And it's um a lot of the revenue is for single family, which is, you know, kind of nice >> given that that's where the sort of that's where the the big issue is right now, I think, is there's just >> Well, that's what I I I would I would I would say not really. I mean, there imagine the multif family. I mean, you're you're you're building apartment buildings. I mean, you have to go to these guys, >> right? >> So, so they actually Yeah. No, they actually uh have have all of it. So, >> yeah, really cool business. And again, um if you if you described it to me real quick, I'd say, "Well, that's isn't that a commodity industry?" Well, >> yeah. No. Right. Right. you know, but >> well, I think the other thing I like about it that the contrarian part of it is is home building is is not in a good spot right now. >> Um, right. >> I think these these stubborn these stubbornly high mortgage rates um have really throttled um and then the other thing would be that, you know, people aren't moving because if you have a 2 and a half% mortgage rate, you're, you know, you're not going to leave that house. And so so that's that's that's been a but the pro the the issue the bullish side of it is household formations continue to develop and and and and and so I think you have a growing you have a ground swell of of demand that's building um and and so I think it's it's it's very very healthy. You know people complain about interest rates. It's funny you know the the the tenure what's the tenure now? 4.3. >> I know. No, no, no. But I'm saying it seems high because it was two and a half% a few years ago. >> Yeah. >> But if you look at I at what you know what is the average 10-year Treasury going back a 100 years. >> I think it's four and a half%. I think it's right about here. >> Yeah. >> So rates rates are higher than they are, but >> sure >> they're not historically high. They're historically right in the mean, >> right? I think the the bank rate 30-year, you know, fixed national average, something is in the sixes now, which I remember when I was younger, I remember people rejoicing, oh, mortgages are below 10% now, you know, so it it is all relative, isn't it? You need an appreciation for history to really get this and to get where we are with rates. But >> I agree that there, you know, we we cited household formation when we wrote this thing out and um the demand sort of the demand is there and if you get any movement, we're starting to get movement on inventories. You get movement on inventories, you're going to get movement on price and you're going to get movement on demand >> and it's and you need building you, you know, the the inventory isn't going to fulfill it however you look at it. You need the building. New homes need to be built. Period. >> Correct. Correct. We didn't do it. We had a crisis. We're still recovering from 2006. >> Yeah. >> But I'm My hunch is that you're going to see you're going to see um um um a very robust construction business the next five years is my hunch. >> What do you base that on? Just the what we've talked about the de the the household formation. >> Household formation demand pent-up demand. Yeah. >> Okay. Right. We we definitely agree. Okay, we're on the same page there. Well, we're value guys. All the value guys eventually want to page. >> Right. >> All right. Um, we are actually at the point where we where we like to ask our final question, Joe. And it's the same for every guest, no matter what the topic. And it's the same identical question. Sometimes we have non-financial guests and we ask them this same identical question. And it's for our listeners benefit. If you could leave our listener with a single takeaway, a single thought today, what would you like that to be? And you can take your time if you need to think about it for a minute. >> Yeah. No, I I think it would be um I I think the the emphasis on the people that run these companies and and I I think that when you analyze the company, I think I think you really need to zero in on the people that run the company and you study them and where they've been, what are they doing, um how much stock do they own in the company, how much do they pay themselves, and that's right there in the proxy for anybody to see. And and I and I think you want to really um invest alongside uh you want you want to partner with uh with with a great owner operator. Um you know there's these activist investors that want to come in and change things and we are just the opposite of that. Uh we want to partner with with a great management team and and hold that company for the long run. Um, you know, I hate to quote Buffab, but he does. What's the ideal holding time for an investment? He goes, "Forever, right?" And and and probably my the biggest mistakes I've made in my career are selling things too soon. Um, and I can I give you a long list of companies that I that I bought it. I owned it. I made great money. I'm long-term on it. I thought, well, I can, you know, and and and you know, why did I sell Costco? Uh why did I sell Cintas? You know, why did I sell Microsoft? I mean, just company after company after company that I where I I had it right. I had it right and I sold too soon. And and so um um I I love the idea of of of buying something and holding it for a very long time. Amen to all that, Joe. Uh, and and thanks very much um, not just for a great final uh, question, but but thanks for being here. I appreciate it. I thought it was I I learned a lot from you, and I know our listeners did, too. >> Well, that was that was a really fast hour, I'll tell you. >> I know it is. It's quick. We don't even necessarily go a whole hour. We just, you know, wing it. But, um, we certainly will be inviting you back, sir. >> Great. I really appreciate the opportunity. I had a lot of fun >> and we need to uh to get your partner on here, too. >> He'd love to do it. >> Okay, great. All right. Thanks, Joe. >> Thank you. Yeah. Bye. >> Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stanbury Research, its parent company, or affiliates.
Management Might Be the Top Clue to Your Next Investment
Summary
Transcript
[Music] Hello and welcome to the Stanberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and the Ferris Report, both published by Stanberry Research. Today we're going to talk with Joseph Bosovich. Joe is the founder and chief investment officer of Old West Investment Management. He is a value guy just like me. So, I know we're going to have a great talk that you'll enjoy very much. Let's do it. Let's talk with Joe Bosovich. Let's do it right now. Joe Bosovich, welcome to the show, sir. Thank you for being here. >> Thanks for having me. >> So, Joe, you're a new guest. We haven't had you on the show before. So maybe we'll dive in and and you can just tell the the listener who you are and and what you do and and then we'll then we'll talk. >> Sure. Okay. Yep. My name is Joe Bosovich. Um I am a uh third generation Californian. Uh, I founded Old West Investment Management in 2008, [Music] right in the middle of the Great Recession. We opened our doors November the 1st of '08. >> Wow. >> When the entire economy seemed to be imploding. Um, >> great time to buy stocks. Well, I think I think I think you know the worst of times I think is the best of times to to start something, right? Um and and it turned out to be that to be the case. But my background is actually in agriculture. Uh my family has farmed in California for over a hundred years. And between undergraduate and graduate business school, I took uh what was going to be a temporary job with my family. Uh the temporary job lasted 22 years. Uh built a a big uh family company. It's still in business today. It's Bosovich Farms, California headquartered grower, shipper, processor of fresh vegetables. Uh >> a good part-time job you got there, Joe. >> I know. Right. Right. Yeah. Yeah. And then I uh as I approached my late 40s, I was approaching 50 years old and I thought, was I ever going to do what I always dreamt of doing, and that would be I I just had a a a lifelong um affinity for picking stocks and and analyzing companies. And uh so I did a I did a complete career change and uh to what I'm doing today. And it's right. I I I'm I'm blessed because I've had two different careers uh that have both been very fulfilling. Um you know, pretty hard to beat working side by side with your dad and your brother for for 22 years. Um and uh so that was great. Um, and then I've, you know, really, um, very for, but I think a key point would be that the fact that I ran a company, uh, most people that do what I do, they've been buying and selling stocks their entire career. And so, the fact that I actually ran a company for 22 years, um, and, um, I think makes me a different kind of an investor. >> I I really look at it like buying a company, not buying a stock. Um and I take a different angle towards the company I'm analyzing. I put huge uh weight on on management and the people that run these companies. Uh really a key to our invest investment process, but uh that's a long- winded answer to who I am and what I'm doing. >> Exactly the kind of answer we we like around here, Joe. Thorough, right? We're not we're not in for uh sound bites. we want the real story. So, um, focus on management is what really out of all that, boy, that's the thing that caught my ear. Plus, um, you reminded me of what Warren Buffett has said many times. Um, I'm a better businessman because I'm an investor. I'm a better investor because I'm a businessman. The two work together. And I've seen it in others, too. >> Sure. >> It's I'm not much of an entrepreneur myself, but I I'm a decent investor. Well, if you think about it, you know, um I mean companies are really just a a collection of people and uh and and you know, I think that the people that run the companies is just it's just beyond huge uh the importance of >> of uh of the people that that that run these companies and especially the CEO and uh you know um so yeah, no I I I uh and there's a lot more to it but but it's definitely a key part of our process. >> Right. This is fascinating in light of another famous investor. I'm I'm pulling famous investors out of my out of my hat left and right here. Um Peter Lynch who who often said something like uh you want a business that's so good anybody can run it. >> It doesn't quite work out that way in real life though, does it? You know, you can have a >> I think >> like you see founders coming back, you know, like Howard Schultz had to go back to Starbucks and all that stuff. The person matter. The people matter. >> No, they do. They do. um you know but I I I think um I think he I mean he's right in terms of say a Coca-Cola a Proctor and Gamble a Johnson and Johnson where in these in these you know real big classic old companies um you know the CEO in many cases is almost a placeholder but when you know we're value investors we're deep value investors and so it's it's a different kind of a game than than than than than buying uh you know um you know uh one of these a Coca-Cola uh what we do is much different and uh and where a and in many cases it could be a turnaround where where there's much more value placed on management >> right the far yeah to to get deep value you're you're farther down the quality trail than you know Bergkshire Hathaway or Coca-Cola or something or American Express or whatever right so you >> well I would I I I I would not I don't agree agree with that. You say deep down deep deep deep down the value trail, but but what it could it could be it could be an outstanding company that is just misunderstood by the market and and and and is cheap. But don't confuse don't confuse the stock price with the quality of the company. >> Well taken point well taken. I was think I and I was thinking of spec of specific I was generalizing about some specific instances. So um but but absolutely point well taken don't think the stock price or the market valuation to be really specific is a is indicative of the quality right it's just >> maybe the market maybe the market has it dead wrong >> right >> which does happen despite much bluster to the to the contrary >> right >> right so that's interesting deep value so can you give us an example >> yeah I mean I mean many many many examples but um I can give you an example >> I can give you an example of a company where um where where a new CEO made a huge difference and the company is Bunky uh this the symbol is BG and um it's uh it's it's a worldwide agricultural distribution company and the the a uh world which I mean think how big it is. It's you know not that food is important other than the fact that we do it all day long all of us. So um uh yeah big business it's dominated by four companies worldwide. Uh two are private, two are public. The privates are Drifus and Cargill. The Publix are Arch or Daniel Midland and which is you know probably better known and then Bungie but Greg Hecman came in as the new Bungy had been mismanaged for years uh and stupid investments and and and and misallocation of capital. And so Greg Hecman was a longtime Kagra executive that they brought in to write the ship. Uh it's interesting when you talk about does management matter. Uh one of the first things he did is he asked the question we're now we're an ad company. Why are we in New York? And um and so the first thing he did is move the company from New York to St. Louis. Right in the middle of the Don't you love that? Right in the middle of the bread basket. >> Yeah. >> And um do CEOs make a difference? and and along it reminds me of another one is is Boeing, you know, where the Boeing past CEOs lived in Connecticut and they lived in New York and they lived everywhere else and uh Boeing brings and Boeing I mean obviously Boeing you know really controversial uh really had a tough time. um they hired Kelly Orchburgg as the new CEO and you know the very first thing he did is he moved to Seattle and if you recall the nature of Boeing's problems uh what caused their problems were some were some quality issues the door blowing out the plane crashing I mean you know so where do they make most of the planes Seattle why has a Boeing CEO never lived in Seattle simple questions >> yeah Ellie Orberg was retired in Palm Beach, Florida, living the good life, playing golf, takes this job. First thing he does is move to Seattle. And and of course, >> that's a statement in light of that history. That's a real statement, isn't it? >> Well, and if you look at what's happened to Boeing since he took over and he's a he's a wonderful wonderful CEO and and so um um you know, they have I and the stock is up by I don't know maybe 30 40% since he since he took over. It's uh it's really um a great turnaround story. Uh but what a simple thing to move to Seattle, right? And so um but back to Bungie. And so Greg Hecman says, "Why are we in New York? We're moving to St. Louis, which by the way, you know, takes takes himself out of it." I mean, most people would rather live in New York than St. Louis, but uh was what's best for the company. Um so it's just one small example. Um, and how I got on to the idea, it's actually kind of a funny story. I follow insider activity very very closely. Um, I even though you know we have we have a team but one of my little exercises every morning is I go through every form for filing uh published by the SEC every day and um for all 4,000 companies >> form every day. That's amazing, Joe. >> Yeah, it takes about an hour of my morning. Um, and and but it's it's it's probably my favorite filter of looking for new ideas and of of what to own and also what not to own them. And so, um, but what I I saw, um, I had seen Bungie here and there, but, um, pretty funny. I didn't know how to pronounce it. It's bun n ge. So, is it bun? is a bungee or bungee or bungi. So anyway, but I see um I see a $10 million open market purchase by Greg Hec. Then I look at that, oh my god, he's the brand new CEO. $10 million purchase. And I said, well, it has to be a a stock grant. I'm I'm sure they gave him $10 million of the stock as a signing bonus to come in. But I thought, maybe not. What if he did? What if he did write a what if he did stroke a check for 10 million bucks? And so I called investor relations, no one called me back. >> Then I called a second time and nobody called me back. >> And I but something was really gnawing at me. And uh so I called a third time and one last time. And uh finally the assistant, not the head of IR who should have called me but the assistant IR person called me, a a young man and we start talking and I said let me I said I have my first question is how do you pronounce the company? And he goes bungy. Okay. All right. So get that out the way. It's Bungi. And uh that's my first question. My second question is Hecman I see a form four or five. So ju just in case the viewers don't know when a when an insider of a company buys or sells even a single share of stock they have to file a form for with the SEC uh within 48 hours of the transaction. And so um uh so I that's this is you know my so I'm looking at these every now you sit there there there's hundreds and hundreds of filings every day. How do I have time for that? I basically only look at transactions in excess of a million dollars. So that that narrows it down to maybe just a couple hundred transactions a day. Um and but the larger numbers pop out and so I I and so 10 million. Oh, so I call IR. They finally called me back, you know, the third time. And I said, um, let me ask you a question. I said, was did it was that really his did he actually write a check for $10 million or was that a grant? And they was both. They he had a grant for 10 million and he bought $10 million worth of stuff. And I go, "Wow, that's really impressive. >> That is >> I rarely see that that a new CEO would write a check for $10 million. That's pretty strong conviction. Um, and then I start looking deeper into it and I see the move from New York to St. Louis. I, you know, I I just, so I'm getting the idea that this just might be a real nononsense individual that really um uh uh is going to make a turnaround here. And uh but if you if you look at the you know, it's I want to say it's trading at 10 times earnings with a 3 and a.5% dividend yield. And um but when I said it's been mismanaged for years um um you know and it has been and so he uh cutting expenses uh uh just cut cut cut selling nonprofitable operations um uh cutting overhead um buying some uh new opportunities and just you know so it's kind of a almost like the conductor of an orchestra. a great CEO doing these things. And um and of course, you know, I I think one of the most important jobs of a CEO um is is how to allocate capital. And and now I'm not going to I'm going to give Will Thorndike some credit for this. Will Thorndike wrote a book called um the outsiders and and um um the greatest corporate CEOs of the last century and uh but you know he he says and I believe this there's the CEO has five choices on how to allocate capital and and I haven't come up with number six. Um you can reinvest in the company and grow it organically. You can buy other companies and grow through acquisition. >> Mhm. >> You can pay down debt. Um you can pay a dividend. Um or you can buy back your own stock >> or some combination of those. But um you know, companies are notoriously bad for buying back their own stock. Um, companies are buying back their own stock. Hand overfist today. >> Yep. >> They were buying back their own stock. Hand overfist in 1998 and 1999 and in 2004 and 2005 and 2006. >> No regard for fundamental value whatsoever. >> Stock correct. Stock repurchases by companies completely dried up in 2001 and 2002 and 2003. Completely dried up in 2008 and 2009. Um and and isn't it ironic? Um, wouldn't you think that a that a corporate CEO that's engineering stock buyback plans would want to buy back their stock when when when when it was, you know, hugely selling off and cheap and the market was horrible? >> And would and wouldn't you think they'd have their hands in their pocket right now? And and and it's just the opposite. Unless you're a huge shareholder of the company yourself and and you're running the company and and so when a new idea uh comes before me, the first thing I do is look at the proxy and the proxy is going to show me the level of ownership of management and it's going to show me compensation and how they compensate themselves and and so you know I love seeing companies where there's very very high ownership and and and and very modest compensation because when when the CEO is a big owner of the company and doesn't pay himself very much you know Warren Buffet pays himself $100,000 a year and and that's and that's all he's ever paid himself and so so basically when you invest in that company uh you know your interests are aligned with the people running the company um versus most companies where um you know there's is this giant compensation package and you know they're going to that CEO is going to knock down 25 $30 million a year no matter what and and and I really don't have much interest in that. So, >> right. And the the the stock uh repurchase plan becomes part of the compensation because they're compensated with stock, you know, they they they try to support the shares or whatever. And so, it's it's um the >> twist and that's a whole other issue is um is is gap accounting versus adjusted earnings. And of course, today all companies report adjusted earnings. Nobody gives a damn about GAP earnings anymore. And which is really a crime because one of the biggest differences between GAAP earnings and adjusted earnings are backing out stockbased compensation. And your viewers may not know that, but that's the single biggest. And I I would just challenge you when you look when you're looking at a company, compare that GAP earnings versus adjusted earnings and and all the these technology companies, you know, um uh Meta paying these hundred million bonuses for these new AI superstars, you know. I mean, I mean, it's it's all um uh adjusted out of earnings. um it's all backed out and and and so I I think it's very very important to to um to to look at gap earnings. >> Yep. And the the again the share repurchase turns it into a backdoor cash bonus, >> right? >> Correct. >> You know, just just a different way of getting in the cash. >> Correct. >> Um yeah. So Bungie, that sounds like a neat one. actually right now headline you know PE ratio just on uh what is it Yahoo Finance is like eight I mean and it's a dividend yield >> with a giant with a giant dividend yield now would you rather buy that or or Nvidia today I mean I would I would rather I'm a I'm a value guy I would rather own Bungie >> absolutely I' I've been writing a newsletter called extreme values since 2002 so >> Oh great >> so Bungie Bungy would qualify. >> Yeah. Yeah. You just put it on our radar screen. I'm going to shoot it to my uh partner in crime and and see what he thinks. >> Great. >> Yeah. >> And once again, you know, um manage management is huge and and and Greg Hecman is doing a wonderful job of turning the company around. >> Okay. So, you so Bungi's current idea. >> Oh, yeah. >> Yeah. And and uh you mentioned Boeing as well. Is that current or past or Um, you know, we we have we have a small position in it. Um, it uh you know, the airline business is just it's just it's so scary to me. Um, and and I mean, I know it's there. It's an essential part of life. Um, I I just uh boy, so many things can go wrong. Um, but we do have a we do have a small position in Boeing. So bringing Boeing up actually doesn't make me want to talk about Boeing for reasons of internal conversations and things that I've had over the past year or so. It makes me want to ask you if you have an opinion about Disney >> because of what what has happened with that company with their with the the output of their products has become a strange different thing than what it used to be. >> Right. Right. Yeah. you know, um I I I I I we don't own it. Um and I I I've I've never owned it. Um, I think the whole that whole content business is so difficult and and so fast changing with streaming and and and the competition been watching this Paramount Sky Dance thing, you know, which is a bit intriguing to me because I think that this David Ellison is like his dad is brilliant. Um, but but I I think it's just a tough it's it's a tough business. It's a tough place to play. It really is. And um and of course Disney, I mean, you know, the theme parks and and everything else. And uh um it's it's a great franchise. It's a wonderful American company. Um but really um you know, I I I don't it's not an area that we that we like to play in the whole content business. >> I see. Okay. Um, our our conversations that I've referred to internally have have focused on uh is the is the brand permanently damaged by the the woke what you might call the wokeness of the content? You know, have they really forgotten how to make movies? One person is the way one guy put it. But >> yeah, no, I I I I Yeah, I get that. I get that. Um, at the same time, I'm watching my, you know, my two-year-old granddaughter watching, uh, Mickey and Minnie, and she's just completely delightful. You know, it's kind of funny. Her first uh, she used to love this this show, Miss Rachel. Have you ever seen Miss Rachel? Uh, >> I have I know Miss Rachel well. I have two uh, grandsons who watch it. Yeah. >> And so, which I, you know, it's funny. I used to um uh turn my nose up at parents in restaurants that had the kids on iPads, you know, and I and I but then I have this little 2-year-old granddaughter that's very rambunctious and hard to keep in her seat and until you pull out Miss Rachel and then she's glued to her seat. >> But now she's now graduated from Miss Rachel to Mickey and Minnie. And so I'm sitting there saying, "Isn't that it's just such a wonderful wonderful franchise. My god." Um, but yeah, you know, it's all good. Um, but yeah, no, I I I think that uh Yeah, and I and I think they have management, you know, I mean, I had to come back and and and so that was all kind of botched and and they still have no air apparent. They have no replacement. Um, he is no spring chicken. Been at it for a long time. Um, so anyway, there's a lot to like about Disney, but uh but um I have no no stake in it, >> which speaks for itself, does it not? Yes. >> Sure. Right. >> Um Okay. So when you say um when you said deep value as you as we sort of realized my my mind went to a certain place and it went to you know when I think deep I automatically think distressed but Bungi isn't what you would call distressed right they it's a good business that's suffered from bad management for a number of years >> abs and it's also in an industry that's kind of um that uh you know known for like low margins and and and >> right commodity >> and intense competition but it but it doesn't need to be that way you know it you just need the right the right person to figure out you know get rid of the bad assets let's get involved in good things and I mean you have you know a a world of seven or eight billion people that need to eat for God's sakes there has to be a way to make money in and and and so yeah. Yeah. So I kind of it's out of favor which makes me like it. I think deep value you can have deep value. You can have you can have you know extreme quality you know. So um and then um you know um you mentioned you just briefly said commodities a second ago. Um and so in terms of deep value you know and we have really um found amazing amazing value in the commodity area and maybe it's my egg background a lot of money managers shy from anything to do with commodities >> and I understand why because it's hard enough to get the company right let alone to get the price of the commodity right so it's doubly tough >> um and And on the other hand, um boy, if you look at the, you know, the commodity uh uh uh sector of the S&P um has never been lower and and >> never been lower than today. um which I which excites me because I believe in in >> ultimate reversion to the mean >> and and and I think that I think the market eventually comes down commodities eventually become a bigger part of the market like they have been historically. But where we have found just extreme value is in the metals and mining area. And and you know we have right now which is kind of crazy but we have um half of our uh portfolio is in metals and mining companies uh which which is just like um you know uh where I think I think the the S&P is like 2% metals and mining and we're 50% metals and mining. There you go. >> Right. But but I think I've learned one thing. You the way you make you know you can't you really can't make money in this business by thinking and being like everybody else. Um you don't want to be different just to be different. Um but I think where you make money is is by having you know uh your own um thoughts and and ideas and basically you know um not going the penguins all go over the cliff together right >> and they again and again been it's been a while they the penguins haven't gone over the cliff for about 15 years but they will eventually they always too. >> They always do. >> Yeah. But no, we we have found extreme value in in the metals and mining sector. My partner Brian Lax um has, you know, really driven our our move in this area. Um when I first met Brian, uh when we first met about 10 years ago before he came to work for us and and the person introduced us said, "You you need you guys need to meet each other. you like you both like gold. And I said, I'd like to meet this guy. And and uh that's how we first met. And and you know, we liked gold 10 years ago. We finally been proven correct. It's taken a while. Um but but I think that and and then we'll go back to that. But you know, how do you own gold? Well, today it's all about ETFs. Today it's all about index funds. And so nobody buys stocks anymore, right? Um, everything's indexed, everything is passive, and if you're going to own gold, you're probably going to own GLD or GDX. You know, no one picks stocks anymore. And um but but I I I I believe that um that's another you know contrarian streak would be that I think stock picking is is probably not a better time in history to be a stock picker because the market has never been more expensive than it is today in history. >> And it's it's more expensive today than 1929. is more expensive today than 1999. Uh it's more expensive today than than than 2007 and and um >> and more concentrated. >> Well, yeah. And I but you know this whole move to passive investing in ETFs and index funds, you know, why why pay someone like me a fee when you can buy the S&P 500 for four basis points from Vanguard? And so um and and and make 15% a year. And so that's that's the thinking and that's everybody's drinking the Kool-Aid and everybody thinks that until lo and behold um the penguins all go over the cliff together, >> right? >> And and so but metals and mining um we went from gold but then Brian's first idea he brought to our team was um now this is eight years ago. Okay. >> Eight years ago and he had the idea uh to invest in um nuclear energy and uranium min miners. Um nobody but nobody was investing in uranium miners eight years ago. The only mention of nuclear energy eight years ago was Chernobyl U Fukushima. Uh nothing good. Yeah. >> And isn't that amazing eight years later how everybody loves nuclear today? >> Joe, do you know Rick Rule? >> I don't not personally, but I I know who he is. >> Yeah. Good friend. Known him for decades. Um he uh he's he's in the same boat with you guys. He he was on the uranium long before anybody else. When when everybody else was afraid of Chernobyl and Fukushima, he was talking about it, too. We've had >> Yeah. I mean, I I don't know. very few people like it eight years ago. >> Well, it was the two of you. It was >> There you go. There you go. Okay. And and uh but you know, we were buying Camo at $7 a share and it's $70 a share today and and um so anyway um but then we we that was then eight years ago. We we we've taken a lot of profits um but we've really parlayed into other um now first of all I say metals and mining. So we only invest in companies, right? And and no ETFs, no and and and no commodities. Okay. >> Uh just companies, but companies producing these commodities. Uh but but you know, really like we we love copper today. Uh we we love tin, silver, um uh uranium, but really metals that are tied to the electrification of the globe. and and um you know, everybody wants to own Nvidia. Everybody loves the fact that Microsoft's building these data centers, but really nobody's stopping to ask, "Where are you going to get the copper to do all this?" And Microsoft recently built a new data center near Chicago. It wasn't that big of a one either. and they they they they needed they put 4 million pounds of copper into this one data center and it's just I just blew my mind when I read that and I just go gee whiz. Um and then you uh you know Richard Aerson who runs Freeport who ran Freeport McMaran he he retired but he said it basically if they find a copper deposit today anywhere between 15 and 20 years to begin production >> right >> uh it takes a long time to build a copper mine and uh so in our opinion um I think the the the move is irreversible, the electrification. Um, and um, but I don't think that supply is going to be able to keep up with demand, which will equal higher prices. And the same thing goes for for uranium. Same thing goes for silver. You know, silver historically, precious metal, uh, gold's stepbrother. Um but today you know all half of all silver is used in industrially and it's you it's highly conductive and and and used in in solar panels and and all types of electrification and of course tin and tin you know few people know what tin is used for tin roof tin can no it's used for solder and electronics and every piece of electronics you know every piece electronics in the world tin is used for soler and and um anyway, so that's uh that's where we're finding extreme value today. >> Yeah, I I I love uran uranium story. I love copper to death. Um I don't know if you know Robert Freedelland probably. Yeah, he's he's got this thing he said a couple years ago. I don't know if he originated it or if he got it from somebody else where he said basically we need um eight Escandida mines in the next you know 10 or 15 years or something u and they don't Escandida the biggest copper mine in the world in Chile and they don't exist they presently those eight deposits don't currently exist you know he's got one of them and then you know where are the other >> but but here's the here's the other thing about you know mining is a lot of these mines are in areas, you know, that you that you you know, so Freeland's biggest mine, his biggest mine is in the Congo. >> Yeah. >> And you know, and and so I mean he's he's he's brilliant. Um uh amazing, but uh you know um the the a challenging thing. So when you when you pick a company to invest in, I mean, you really need to know where the assets are. You really need to know how safe they are. You know, Bareric, Bareric had a big uh gold mine in Mali that was I think 10% of their production and the government just took it. >> Yep. >> Just just took it. >> Yeah. And um um so you know um um you really need to to know you know there's that massive massive copper deposit east of Phoenix that Rio Tinto and and BHP are trying to co-develop. Um but it's it's an Indian burial ground. So, um, so there's just, you know, mining is really, uh, difficult. Um, um, but, uh, but what I love about it is they're producing products that that the world doesn't turn without these products. And so, um, you know, um, but what I like about it, it's just not a crowded field. And so where we our edge is in picking the best companies run by the best people with the best assets. And so that's why, you know, if you like gold and you want to own GDX, which is the, you know, all the big gold miners, you know, you're going to get Bareric, you're going to get Pneumont, >> neither of which I want to own, you know. Um and and and so that's where it comes down to stock selection and going back to my earlier comments to people that run these companies, you know, how much stock do they own in the company. You know, John McCluskey who founded Alamos is the biggest shareholder of the company. The guys at Numont own very little stock in the company. And and so um anyway, that's that's just our our methodology. >> Yeah. And in mining in particular, which I've covered a bit over the years, um there are several ways into it. Producers, royalties, exploration and development, then like what I would call like pure exploration and prospect generation, that kind of a thing. And in the case of Sprout, Inc., which is one of my big picks of the last several years, um finance. So, it's uh it's an interesting space. No, it is. I mean, the royalty stream you pieran, right? Franco, Nevada. I mean, >> it doesn't get any better than that. >> Yeah. Yeah. Yeah. No. Exactly. Exactly. Exactly. But our preference is really is is are the mining companies run by great owner operators. >> Okay. Oh, so do you own any royalties, royalty companies? Not at all. So, you're focused on the producers. That's interesting. >> Correct. Um, who I'm curious to know who who's a who is a great owner operator. Let's talk. >> Uh, John McCluskey at Alamos. >> Alamos. >> Yeah. Yeah. >> What do you like about him? >> Uh, Symbols is AGI. Um, he founded the company. He's a huge shareholder. He's he's run the company for 22 years. Um the company has no debt, sitting on a lot of cash and they have great great assets. Um, you know, mines were mostly all in North America, um, uh, Canada, uh, Mexico. Um, and, uh, you know, um, he it's his company and, uh, and he and he and he runs it, uh, um, you know, um, very shareholder friendly. >> Great. Um, Agneo's Agneo is another one, you know, Agneo which has really done so so well. But Sean Boyd uh ran the company for years and uh and just did a wonderful wonderful job. U once again uh safe assets and safe locations and the other thing is great, you know, great. I mean like Allen was their their mines are very very high grade. Um and uh you know the higher the grade, the lower the cost, right? and and so all these things go into the mix and um so yeah. >> Cool. Uh well, we're on we're on the same page there. I mean the um if any industry I'm sure you I bet you'd agree with this. If any industry will teach you how important the people are, it is mining and metals like more than any other because some of the people in that industry are outright criminals. And then when you find these high quality people, you you wonder how they got there almost because they're kind of few and far between. >> Did you ever hear Mark Twain's definition of a gold miner? >> Oh, yeah. Yeah. Tell our listeners. I I know it. Well, >> a liar standing next to a hole in the ground. >> Yeah, that's right. the the that's a joke, but the fact that it is so accurate so much of the time is is really, you know, you almost have to see it to believe it, but wow. >> I mean, some of these guys, the things they are doing, it's just um >> yeah, you know, and Mark Bristo and Bareric is is I think maybe one of the greatest mining executives in the world. >> Um the problem with them is that they just like I said, they they had their their their mine in Molly confiscated. Um they're they're in some they're in some pretty tough neighborhoods, you know. Their big new mind that they're bringing on is in Pakistan, you know. >> Yeah. >> I just man, would you do you want Pakistan or do you want, you know, Ontario, you know? I mean, and and uh so anyway, um it all m it's it's all uh in in the baking, right? >> It is. And uh that's that's another thing we're we're pointing out. Another thing, let's just kind of name it. To get scale, and there's no such thing as a really great small mine to get scale, you need to be in all these weird, you know, you need to be all over the world if you're not in say Canada or Mexico. >> Yeah. Well, you I don't know about that. If you if you look at Ago, >> I mean, you know, they're they're they're in Canada, they're in Australia, >> they're in Finland and Mexico. So that's that's that's a pretty good stable right there. >> Yeah. I don't I didn't mean to suggest you need to be in bad countries. You do need to you need to be in in several countries probably. >> Yeah. Yeah. Yeah. Yeah. No, they all are. They all they all are. Yeah. Right. Right. >> Right. >> Um so you know that >> the big the big ones are >> Yeah. You got to be you got to be careful. The one mining jurisdiction that I learned of from the folks at a gold and silver that I never knew about until the last few years was Morocco >> is apparently a pretty good mining jurisdiction. >> Oh darn. I didn't I didn't know that. Yeah. >> Yeah. I gold and silver is there and uh you know government's really friendly to them and and there's not a they don't have a lot of competition there right now. So it's kind of cool too. >> Okay. The stock has moved quite a bit, but you know, of course, the CEO U Ben Wahi, he he insists that it's still cheap, right? >> Sure. But but you know, I mean, so I I didn't want it to be all about metals and mining. And >> Okay. And by the way, and and if you did want to talk all about metals and mining, you need to have back my Brian my partner, Brian Lax. >> I was thinking that. Yeah. >> Yeah. No, and Brian Yeah, really. He uh I'm more of a I'm a much I mean well we're both we're both generalists but he's really engineered our our move in that area. U we we weren't always 50% metals and mining. In fact I think six seven years ago we were probably >> maybe uh less than 20% commodities mo and that was mostly gold. Um, so he's really engineered our move into but you know we honestly we just own a a collection the non-metals and mining the other half the portfolio just a collection of of just like Bungie just fantastic companies uh um that were you know that we really that were very high on >> Okay. Well, let's let's lean away from Metals and Mining because and we'll we would like to have him on. As soon as you mentioned him, I thought well, you know, we need to get him on here. carries half your portfolio. >> Yeah. >> You know, so uh let's do that. But let's lean let's, you know, for the rest of this thing, let's let's lean into your um your strengths. >> Um Bungi sounds like a great idea. What is there another one that you feel like talking about? >> Oh gosh, I love talking about all of them. And that's one thing that's one thing that kind of differentiates us from a lot of other people is that most people really, you know, now in the day of index investing and and um um um ETFs is stock picking is a bit of a lost art, you know, but yeah, I we have a new one in the portfolio um Builder First Source. >> Oh, we just wrote that company up in my newsletter. That's cool. >> Did you? Yeah. the symbol BLDR, builder first source once again in um monitoring insider activity. Uh going through my forum fours every morning and uh the chairman of the board is Paul Levy and he made a open market purchase of stock. He he wrote a check for $55 million. uh he bought at a at $111 a share and um you know you see that it's like you know the stock was down from 200 and 200 plus um but I like it you know um it's it's really an interesting company um it was um um originally it was the lumber supply arm of PY >> in in the very beginning. Um, and that was spun off from PY. Um, and so, you know, uh, in building supplies like Home Depot really caters to the do-it-yourself, uh, um, customer, right? >> And Builder First Source really caters to the professional builders and contractors. Um and they're they're they're the largest in the country uh at that. Um and uh the other thing kind of interesting about the company is that now especially now I mean I it's interesting you know I built a house in California a couple years ago and and um it was um the tradesmen were almost 100% Latino. >> Mhm. hund I mean almost 100% from demolition of the old house to to um to um uh finished carpentry of the new house >> almost 100% Latino workforce. Yeah, I live in Oregon, so I know what you're I know what you're >> Well, I mean, and thank God for these people, right? I don't know who would do it. And and my point is with this immigration uh move >> that we have um is to really put a squeeze on the workforce. Um and builders first source, one thing they specialize in are prefabricated window systems, prefabricated door systems, and wall systems to take labor out of it. and and and and uh which you know I think really plays into the hands of of of of tight labor conditions and cost savings for the for the for the builder and the framing contractor >> and and so one just one little caveat but you know um very profitable company a fortress balance sheet um and uh um you know I think last time I looked at it almost a 9% free cash flow yield Um and um so yeah, no um you know they have 600 distribution centers around the in 43 states. >> Mhm. >> Um and and they they they Yeah. No, it's uh there's a lot to like about the company. >> You mention what you mentioned Home Depot or something. These are guys are like the one-stop shop for for uh the professional, you know? They're the the Home Depot for the professional. Well, the I mean, Home Depot uh caters to the to the do-it-yourself and and and and Builder's First Source caters to the to the contractor. >> Yeah. >> Right. >> And it's um a lot of the revenue is for single family, which is, you know, kind of nice >> given that that's where the sort of that's where the the big issue is right now, I think, is there's just >> Well, that's what I I I would I would I would say not really. I mean, there imagine the multif family. I mean, you're you're you're building apartment buildings. I mean, you have to go to these guys, >> right? >> So, so they actually Yeah. No, they actually uh have have all of it. So, >> yeah, really cool business. And again, um if you if you described it to me real quick, I'd say, "Well, that's isn't that a commodity industry?" Well, >> yeah. No. Right. Right. you know, but >> well, I think the other thing I like about it that the contrarian part of it is is home building is is not in a good spot right now. >> Um, right. >> I think these these stubborn these stubbornly high mortgage rates um have really throttled um and then the other thing would be that, you know, people aren't moving because if you have a 2 and a half% mortgage rate, you're, you know, you're not going to leave that house. And so so that's that's that's been a but the pro the the issue the bullish side of it is household formations continue to develop and and and and and so I think you have a growing you have a ground swell of of demand that's building um and and so I think it's it's it's very very healthy. You know people complain about interest rates. It's funny you know the the the tenure what's the tenure now? 4.3. >> I know. No, no, no. But I'm saying it seems high because it was two and a half% a few years ago. >> Yeah. >> But if you look at I at what you know what is the average 10-year Treasury going back a 100 years. >> I think it's four and a half%. I think it's right about here. >> Yeah. >> So rates rates are higher than they are, but >> sure >> they're not historically high. They're historically right in the mean, >> right? I think the the bank rate 30-year, you know, fixed national average, something is in the sixes now, which I remember when I was younger, I remember people rejoicing, oh, mortgages are below 10% now, you know, so it it is all relative, isn't it? You need an appreciation for history to really get this and to get where we are with rates. But >> I agree that there, you know, we we cited household formation when we wrote this thing out and um the demand sort of the demand is there and if you get any movement, we're starting to get movement on inventories. You get movement on inventories, you're going to get movement on price and you're going to get movement on demand >> and it's and you need building you, you know, the the inventory isn't going to fulfill it however you look at it. You need the building. New homes need to be built. Period. >> Correct. Correct. We didn't do it. We had a crisis. We're still recovering from 2006. >> Yeah. >> But I'm My hunch is that you're going to see you're going to see um um um a very robust construction business the next five years is my hunch. >> What do you base that on? Just the what we've talked about the de the the household formation. >> Household formation demand pent-up demand. Yeah. >> Okay. Right. We we definitely agree. Okay, we're on the same page there. Well, we're value guys. All the value guys eventually want to page. >> Right. >> All right. Um, we are actually at the point where we where we like to ask our final question, Joe. And it's the same for every guest, no matter what the topic. And it's the same identical question. Sometimes we have non-financial guests and we ask them this same identical question. And it's for our listeners benefit. If you could leave our listener with a single takeaway, a single thought today, what would you like that to be? And you can take your time if you need to think about it for a minute. >> Yeah. No, I I think it would be um I I think the the emphasis on the people that run these companies and and I I think that when you analyze the company, I think I think you really need to zero in on the people that run the company and you study them and where they've been, what are they doing, um how much stock do they own in the company, how much do they pay themselves, and that's right there in the proxy for anybody to see. And and I and I think you want to really um invest alongside uh you want you want to partner with uh with with a great owner operator. Um you know there's these activist investors that want to come in and change things and we are just the opposite of that. Uh we want to partner with with a great management team and and hold that company for the long run. Um, you know, I hate to quote Buffab, but he does. What's the ideal holding time for an investment? He goes, "Forever, right?" And and and probably my the biggest mistakes I've made in my career are selling things too soon. Um, and I can I give you a long list of companies that I that I bought it. I owned it. I made great money. I'm long-term on it. I thought, well, I can, you know, and and and you know, why did I sell Costco? Uh why did I sell Cintas? You know, why did I sell Microsoft? I mean, just company after company after company that I where I I had it right. I had it right and I sold too soon. And and so um um I I love the idea of of of buying something and holding it for a very long time. Amen to all that, Joe. Uh, and and thanks very much um, not just for a great final uh, question, but but thanks for being here. I appreciate it. I thought it was I I learned a lot from you, and I know our listeners did, too. >> Well, that was that was a really fast hour, I'll tell you. >> I know it is. It's quick. We don't even necessarily go a whole hour. We just, you know, wing it. But, um, we certainly will be inviting you back, sir. >> Great. I really appreciate the opportunity. I had a lot of fun >> and we need to uh to get your partner on here, too. >> He'd love to do it. >> Okay, great. All right. Thanks, Joe. >> Thank you. Yeah. Bye. >> Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stanbury Research, its parent company, or affiliates.