EM Portfolio: November Stock Pitches & Portfolio Update

16 November, 2020

It’s time for our November investment committee meeting, and what an episode we have.

Once a month, we take everything we’ve learnt on the podcast and try and apply it to a hypothetical portfolio. Remember, we aren’t experts and we are not giving advice. We just wanted to have a bit of fun and make our journey of investing public. So join us as we continue learning through our hypothetical portfolio.

In this month’s portfolio episode we review both the core and the satellite portfolio and add a number of positions to the satellite portfolio.



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Bryce Leske: [00:01:28] Welcome to another episode of Equity Mates, the podcast where we follow our journey in the markets, we break down the world of investing from beginning to dividend so that you can hopefully make some returns. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going, bro? [00:01:43][15.2]

Alec Renehan: [00:01:43] I'm very good. Bryce ready to take another look at our hypothetical portfolio in this episode? [00:01:49][5.3]

Bryce Leske: [00:01:49] Yes, it is that time of the month where we dust off the Excel spreadsheets, dust off the analytical frameworks and add to the Equity Mates hypothetical portfolio, both core and satellite that we've been building over the last few months. So this episode, we're going to hear a stock pitch from you, Ren. And then I'm going to be doing a quick fly stock pitch to you, given that we have about 16000 sitting in the bank that we should do something with considering interest rates at the moment and next to nothing. [00:02:23][34.3]

Alec Renehan: [00:02:25] So firstly, for people who are new to the show, welcome. You've picked a great episode to come join our journey of investing and learning to invest, but to introduce what we're doing here, we are running a hypothetical portfolio to, I guess, apply a lot of what we've learned in the last three and a half years, last four years. And, you know, to talk about some individual stocks and some individual ETFs. And the second thing in that vein, just a reminder for everyone, as we always say, this is not a recommendation by any stretch of the imagination. It is purely us trying to get a little bit more practical and to try and, you know, apply what we've learned to real stocks and real companies. But always do your own research, always make your own decisions. We are not experts. We are not financial advisors. We got to just make that very clear from the jump [00:03:12][46.7]

Bryce Leske: [00:03:12] nisso core portfolio Ren. The rules were that we had a grand or two to spend each month on that so that we could just demonstrate the idea of consistently putting money into a portfolio made up of ETFs. Last month, October, we increased positions in a two hundred which was in Australian equities ETF by better shares and we also put money into VQ, which is the Vanguard Footsie Europe shares. So that leaves a number of options still in the core portfolio for this month. We've got the US equities, we've got Asia and then we start going into property, infrastructure and gold. [00:03:47][34.1]

Alec Renehan: [00:03:48] I am going just try and make a rule on the fly here without speaking to you about it before. But I think the principle of a core portfolio is all about dollar cost averaging, regardless of what's going on. And so I don't think us having a conversation and deciding which ETFs we're going to dollar cost averaging to in a particular month is really in keeping with what dollar cost averaging is all about. Dollar cost averaging is about. [00:04:10][22.5]

Bryce Leske: [00:04:11] That's exactly what we did last night. [00:04:11][0.7]

Alec Renehan: [00:04:12] I know. I know. But it's not taking the human judgment out of the process and automating the process. And so I think what we should do if you'll allow it, is we just say if we've got a thousand dollars every month to put in a core portfolio, we just go down the list. [00:04:26][13.7]

Bryce Leske: [00:04:27] Sure. That was the suggestion last month. But we didn't like. [00:04:29][2.7]

Alec Renehan: [00:04:30] OK, well, let's just do that. And potentially on the portfolio page of the website, which we know needs a little bit of work, but we should just put a rules based approach there and just follow it. [00:04:40][10.2]

Bryce Leske: [00:04:40] Sure. So this week we have VAT's, which is US Equities and Asia VÉ, which is the Vanguard Asian ex-Japan shares. So that leaves the satellite portfolio Ren. You're coming in hot with a pitch just to remind everybody. Currently, we have Magellan Financial Group Citadel, which was a pitch from Ben, which was awesome. Atama Diagnostics, which was also a listener pitch from Ewin. And then we had the Viva Leisa stock pitch from Daniel as well. So we've got four stocks in there and now it's time to add some more. [00:05:14][34.1]

Alec Renehan: [00:05:15] Yeah, let's do it. I love it how you've positioned this as I'm pitching stocks and somehow you're not, whereas.. [00:05:20][5.0]

Bryce Leske: [00:05:21] think it's going to be. Yeah. [00:05:22][0.8]

Alec Renehan: [00:05:24] So I have two companies that I've been looking at recently that I'm happy to talk about both, if you'll allow it. [00:05:30][5.5]

Bryce Leske: [00:05:30] Sure. I mean, you probably talk for two hours, I think just keep it to one and you can put one on the watch list. [00:05:37][6.9]

Alec Renehan: [00:05:38] I'm going to talk about two and you can decide which one goes in. OK, don't be to start with an Australian one. An American one goes OK. So the theme of both of these stocks is unlove the faming. My stuff is OK, but there's a company that is in an industry that's incredibly unloved. But I think is quite interesting. And that's The New York Times. So traded on the New York Stock Exchange with the ticker and why today? And I guess as a bit of a preamble, we all know the situation that newspapers are in at the moment. You know, it's a tough business. News Corp, the Australian giant, is struggling. Fairfax got bought by nine and The New York Times was in a similar situation. So as a. Appetizing dried up, the print newspaper suffered in the US industry, ad revenue peaked around 50 billion dollars and it's now 15 billion dollars. So a big drop off that was buried in the circulation drop off. So print newspaper circulation peaked at around 60 million and now it's below 30 million across most Western countries across much of the world. A lot of print newspapers have shuttered Warren Buffet, once a famous newspaper investor, throw in the towel and divested from his newspaper holdings. And The New York Times specifically has also suffered so their ad revenue and their print circulation more than halved. And at about 2010, they were in about a billion dollars of debt. And during the GFC, those questions, whether they could even pay their interest bill on the debt and paper we're talking about, can we imagine a world without The New York Times? So that was the narrative around the newspaper business and around The New York Times in particular. But what The New York Times has done in the last 10 years, I think is pretty phenomenal and has really set them up for the future. And specifically what they've done is turn themselves from a print newspaper business to a digital content business, and they have really disrupted themselves. So in 2010, they were in a lot of debt because they had made a string of bad acquisitions and taken out debt to do it. They've divested of most, if not all of those acquisitions. They've paid off all their debt and they now have an extremely strong balance sheet. But probably more interesting is that they've decided that they're going to be distribution agnostic. I guess they're not going to worry about how people read the news. They're just going to produce quality content and distribute it however they need to. So they've really doubled down on digital in 2014. They released, I guess, an internal report that was basically just savaging themselves in terms of their tech. And they really disrupted themselves and they a business that has changed with the times pun intended. So as part of this transformation, they've really focused on growing digital subscriptions. At the peak of their print era, they had one point six million subscribers for their physical newspaper. They've just announced they have over seven million digital subscribers. So their subscriber base is a lot bigger. But for me, the really interesting thing is the unit economics of digital is very different to the unit economics of print and with print. As your subscribers increase, your distribution costs increase. You got to print more papers, you've got to deliver more papers. And so the cost scale with the revenue. But the beauty of these digital businesses and what The New York Times is trying to turn itself into is that the costs remain fixed and then the distribution is, you know, next to nothing because it's all digital. And so for me, that creates a really interesting tipping point. If The New York Times can keep growing their digital subscribers and keep growing their content because the unit economics are just so much better. So the question then becomes like, if we need to stop thinking about them as a print business and start thinking about them as a digital content business, I'll, you know, Netflix or something like that. Is the content actually good? Is the content defensible to The New York Times? Have a more that is going to be meaningful, you know, five, 10, 15 years down the line and more and more, I'm coming around to the answer being yes. And the reason is that while a lot of businesses and a lot of news businesses in particular are really cutting costs and in particular cutting journalists numbers, The New York Times have taken a philosophy where their core product is journalism and they're going to invest everything they can in journalism. And that's going to be their sort of compared to the rest of the industry and to put some numbers to it. So while the total number of journalists employed across America has fallen massively over the last two decades, The New York Times has actually increased the number of journalists. In 2010, they had twelve hundred in twenty twenty. They have 1750. But more importantly, they're investing in the quality of each of those journalists. So just the average reporter salary in the US, 42 grand, the average starting salary for a New York Times journalist. One hundred and four grand. Wow. So they are just trying to poach all the best journalists from all the best newspapers and be the best news producer in the world with the best journalists. They already have won the most Pulitzer Prizes, but they're going to keep trying to just produce the best quality news. At the same time, they're doubling down on tech and the list of tech talent they've poached from Facebook, Google, all of that is is pretty astounding because they say their future is a tech play in a content business. And to give you an idea of just how disruptive they're being internally in 2012, they had 400 people employed in the advertising department. By 2015, the company had fired all. They had turned over 85 percent of those heads, replacing them with. With more data and digital skills, they're internally reinventing their business, and so the question becomes like, does this actually create a sustainable model? And I think it does because there becomes a flywheel for a lot of these content businesses. So The New York Times is really investing in great journalists and trying to really separate themselves from their competitors with the best journalistic talent, which then leads to better reporting, which then leads to more writers, because people want to read that reporting, which then leads to more subscribers and more revenue, which then allows them to reinvest in better journalism. And so one way that this whole news disruption could play out is that while a lot of their competitors, you look at what News Corp are doing are cutting costs and cutting journalism numbers and shuttering underperforming papers because they can't get the readership and they need to find a way to stay profitable. The New York Times may have cracked this and may be able to create this virtuous cycle where they can continue to create better and better reporting and really separate themselves from their competitors. And in doing so, they could become a very strong digital content business in the likes of Netflix. But whereas Netflix is producing TV and movies, The New York Times digital content that we're talking about is news and is reporting. That's my thesis. [00:12:41][423.3]

Bryce Leske: [00:12:42] Nice. Do they do anything other than written it in their paid off? I'm not a subscriber. I'm just looking here, though. A Dollars a week. Not bad. [00:12:48][6.4]

Alec Renehan: [00:12:49] It's not bad. And so, like, there's growth opportunities like there. They're opening bureaus overseas. So they've opened an Australian bureau. They've opened a couple of other bureaus in other countries. And look, they mainly do written news, they do some video. They've obviously moved into podcasting in a big way. The Daily is probably one of the biggest podcasts in the world, and that's what I quite like their channel agnostic. I don't care how their news is digested. They just want to do the best reporting and distribute it however they can. And I think The New York Times doing that really well. I think Vox I don't know if you're familiar with them. Yeah, they're doing that really well as well. They're, you know, just doing reporting and then finding as many ways as possible to distribute it, podcasting, documentaries with Netflix, all this stuff. And I think that's the future of these news organizations to see themselves as reporting is their core product and then being distribution agnostic. So, yeah, they trade at an expensive Payet at the moment, The New York Times. But I think, as with a lot of these, I mean, it's relative. So, yeah, as with a lot of these digital content businesses, there becomes a tipping point where your revenue is more than all your fixed costs and then your operating leverage becomes really quite special. And all that means is really that because your costs aren't scaling, but your revenue is growing, all of that incremental revenue starts was a majority of that incremental revenue starts flowing to your bottom line. So, you know, Microsoft is a classic example of a company with unbelievable operating leverage where I think it's now like 70 cents on the dollar of revenue flows down to their profit. Wow. I'm not saying that New York Times will get there, but I think the turnaround that they've done, the balance sheet that they've built and the opportunity they have to really be different to anyone else in that field is quite interesting. Nice. Now, I say this in the full knowledge that there's a lot of free news out there and a lot of consumers aren't willing to pay for news and that, you know, Facebook and Google continue to suck up all the advertising spend. And so there's a lot of reasons why this wouldn't work and this wouldn't be a good investment. But I find the business story really compelling. [00:14:55][126.9]

Bryce Leske: [00:14:56] And that was going to be kind of my next question. And I don't expect you to have an answer, but you've said they've gone from one and a half million to seven million subscribers with the turnaround that they've done. I wonder what they're sort of utopia is, what they consider their addressable market, given how much free news is out there, given how a lot of our generation turned to the likes of social media to actually access their news. And I would be interested to know, I guess, the demographic breakdown of that seven million. [00:15:23][26.5]

Alec Renehan: [00:15:23] Yeah, yeah, yeah. I completely agree. And I also I am also acutely aware that news has just had four years of an unbelievable tailwind in terms of one Trump American president just made people desperate to read as much news as possible. So The New York Times reported their quarterly numbers recently and reported over seven million digital subscriber numbers. If we put this in the portfolio, I'll be watching this like a hawk to say the next maybe like three or four quarters. Can they hold that or does it start dropping away? Because if people are like Trump, we can all relax. I'm going to stop paying for news. Then all of a sudden maybe this thesis falls away. And it was just The New York Times looked really good when Trump was in it. [00:16:10][46.5]

Bryce Leske: [00:16:10] So say like, how do you think about this business in terms of who its competitors are now? If it is, as you say, becoming much more of a digital content business, then you start competing with the likes of Vice and. All of those businesses that perhaps and I guess analysts look at the metrics and will be comparing their growth versus New York Times growth versus Netflix growth. I'm not sure what bucket will be. I feel like I feel [00:16:35][24.8]

Alec Renehan: [00:16:35] like Vyse isn't the best example because vises really fallen away. News Corp bought it and it still has it. Yeah, yeah, yeah. It's not great. But I know what you're saying. There's a lot of digital players with lower cost base. And this is the problem with the legacy print media businesses is that they try and turn into digital businesses, but they operate off such a higher cost base that they struggle to compete with, I guess, the vices or the Vox's of the world. But I think quality is going to be really important. And what separates them? And, you know, if The New York Times is getting this superstar lineup of journalism and if they're pulling in all those Pulitzers and doing all this really quality reporting, I think that's how they separate themselves from the competition, even if they do have a higher cost base [00:17:22][46.9]

Bryce Leske: [00:17:22] or Renaissance Technologies is one of the largest shareholders who must be doing something right now. That's Ren. Well, before we did you want to do another one or. [00:17:31][8.4]

Alec Renehan: [00:17:32] Well, I was I was pretty uncertain about this. And like I know my track record of pitching stocks on this show is not great. So I was going to hedge my bets, [00:17:41][9.2]

Bryce Leske: [00:17:42] hedging their hedging. I like the story behind it, the transformation that they've gone through. It's hard to know where their peak is going to be and where they're, you know, in 10 years time, am I going to be paying for The New York Times like I don't pay for it? Is that just because it's an American newspaper at this stage? I don't know. [00:18:01][18.7]

Alec Renehan: [00:18:01] Like, yeah. Yeah, it's a good question. Probably not. I know one of my housemates has just signed up for The New York Times. And so maybe maybe that's one scenario that plays out. I mean, there's an argument to make that news continues to get more centralized. You know, like we've gone from local papers to state based, you know, like the Sydney Morning Herald and the ages of the world to national media. And that was really TV field, a lot of that. And now, like potentially the fact that we all really just care about what's happening in the US politics more than we do Australian politics. Potentially, you can start making an argument that things are becoming more globalized and potentially the Times has an opportunity there. I don't actually think that's that's probably the thesis. I just think they can be an incredibly strong American content player. [00:18:50][49.3]

Bryce Leske: [00:18:51] All right. I'm not going to argue with too much of your thesis. I think it makes sense. [00:18:55][4.1]

Alec Renehan: [00:18:56] The thing is, if I was assigning probabilities to this, I would be assigning, know, massive probability to them blowing the lights out. [00:19:02][6.2]

Bryce Leske: [00:19:02] But I mean, if you look at the stock price, it's not something that we expect. I don't anticipate you expect this to be sort of 10 bagging. I know it's not. Yeah. This is just going to be a slight slowly take away if it can continue with the with the growth that it's been having and with the with the, I guess, execute on its strategic plan. [00:19:20][17.7]

Alec Renehan: [00:19:20] So let's do it. Yeah. All right. [00:19:22][2.2]

Bryce Leske: [00:19:23] I'll lock it in. So it's currently trading at and we are recording this on Friday the 13th of November or it's currently trading at thirty eight. Eighty three. So that's the price that we're going to be throwing it into the portfolio and we'll put out a social to update everyone on where the is at. So nice one Ren. I recall you actually sent out something that backed this all up in thought status, [00:19:50][27.2]

Alec Renehan: [00:19:51] is that right? Yeah. So this, this has been I mean, there's a long back story to this. The reason that they piqued my interest was when you remember the whole Google and Facebook policy around the Australian government making campaign News Corp and Fairfax for News, that annoyed me a little bit. And if people want to understand my annoyance, I actually posted something on the Equity Mates website about that, because really I think the need for the policy is more borne out of poor management of News Corp and Fairfax than it is anything else. And so then I started looking at other media businesses that were doing better, and that sort of led me to The New York Times. And then there was actually like one hundred and fifty page slide deck that really spelled this out that I sent out. We thought started maybe in lieu of me writing a thesis. I'll just post that slide deck on our website. [00:20:39][47.4]

Bryce Leske: [00:20:39] Yeah, nice. [00:20:39][0.3]

Alec Renehan: [00:20:42] But I think it really does sum up what I'm talking about here. And, you know, it's just a fascinating business story. You know, businesses that are able to disrupt themselves in the face of changing technology and changing consumer preferences are good businesses. And I think anyone working at News Corp online newspapers can maybe time. [00:20:59][17.7]

Bryce Leske: [00:21:01] All right. So we'll add that in Ren could pitch lobs it. So we'll keep you second one on ice for now. But if you want to make a mention of the name, just so we can record that it's on the watch list and we can add it into the watch list. [00:21:14][12.9]

Alec Renehan: [00:21:14] Sure. So in keeping with the theme of unloved and loved, my second page was going to be an essay on. Listed investment company and asset class that Bryce Heights. But these particular allies say, I find quite interesting. It's Bayardo Technology Investments, ASX Ticker, Bayti. We've interviewed Paul Wilson on the show before and we actually have him coming up again. But the reason that I like them is they're investing in mainly software as a service businesses, Australian software as a service, businesses. They and so that that sector is very interesting. Some of the businesses that they hold are world beaters in their own right. One in particular site, MINDE, is the really compelling business. I think if it was publicly traded based on some of its metrics around revenue and customer base and stuff like that, it would be the third largest Australian software as a service business in its own right. Two reasons that I like by little one, it trades at a discount like a lot of listed investment companies, but it trades at a discount, even though it's incredibly conservative in the valuations that it holds its investments. And so it's almost already building in a discount and then it trades at a discount. So there's a lot of value there. But that value is meaningless unless there's a realization of that value for investors. And so that leads me to the second reason that I like it, which is a lot of its businesses are becoming quite mature. And so it's likely that there may be some catalysts in the form of IPOs in the coming years. Site Mind Lendee and a few other businesses are probably nearing that stage. And so, you know, Julia Lee always talks about what's the catalyst for a stock. And it feels like some of those IPOs may be catalysts for a rewriting of the I say in the discount that it trades up nice. [00:23:02][107.3]

Bryce Leske: [00:23:02] So that was a semi pitch. [00:23:03][0.8]

Alec Renehan: [00:23:04] I snuck it in there. [00:23:04][0.8]

Bryce Leske: [00:23:05] Yeah. Ren, you are all about getting fit. You've bought the Garmin, you bought the golf membership, you bought the gym membership, and you're on the mind MasterChef. And even in lock down last year you bought those resistance bands of Instagram that from memory didn't even come. [00:23:21][15.8]

Alec Renehan: [00:23:22] No, look, they didn't come, but all of that effort really was canceled out by the numerous menu log orders that were a real staple of my lockdown experience. [00:23:31][9.5]

Bryce Leske: [00:23:32] Well, we've just headed into a new financial year, so I think it's time you get money fit with Virgin Money, our latest sponsor. [00:23:39][7.0]

Alec Renehan: [00:23:40] That's right, Bryce with a high interest savings account bundled with a seriously rewarding everyday transaction account. You can manage your money easily on the go smash your savings goals and be rewarded for it. [00:23:52][12.0]

Bryce Leske: [00:23:52] And with the Virgin Money Go transaction account, you can earn rewards on your everyday spending with zero monthly fees. Sounds like just what you need. Ren. [00:24:02][9.3]

Alec Renehan: [00:24:02] Yeah, the FBI twenty one get Ren fit. Didn't quite work but if y twenty to get Ren money fit might be to go [00:24:11][8.4]

Bryce Leske: [00:24:11] back to your own Bayt Virgin money terms and conditions and monthly criteria apply. Now let's get back to the show. OK, cool, so we'll add that to the watch list taken note that we've added that on the 13th of October. So Ren, I don't necessarily have a specific stock pitch, but I've got an idea that I think we should execute on, you know, given that we've got about 16000 sitting in cash at the moment. And, you know, we always harp on about it's probably not the best idea with a long term view for us to be having a whole bunch of cash sitting in a bank account. I think that rather than beat around the bush and add a stock a month, there's probably an opportunity for us just to do a mass purchase of a number of the big hitters that we always want in the portfolio. The stocks aren't really going to require a thesis because [00:25:03][51.1]

Alec Renehan: [00:25:04] you always find a way to get out. [00:25:05][1.4]

Bryce Leske: [00:25:05] No, I mean, OK, so what do you want me to say Alphabeat and give you a thesis for why not what? I think there's probably you know, there are 10 or 12 stocks that we could go through and we probably should at least choose seven or eight. So to put I like I like it. So, I mean, to kick it off, would you be adverse to putting excluding any of the following obviously alpha alpha that put it in Amazon. [00:25:28][22.6]

Alec Renehan: [00:25:29] Apple. Are Apple is a funny one. OK, now put it in. [00:25:34][4.9]

Bryce Leske: [00:25:34] Put it in. Why do you think funny one. [00:25:36][1.9]

Alec Renehan: [00:25:36] Well it feels like its phone business isn't actually doing that. Well, you know, it's not growing. Yeah, it's not. Its services business is growing, but it's coming off a small base. It hasn't really innovated except for the bloody air pods that another one of my housemates can't get enough of. Yes, but it's a massive company with a fortress balance sheet. So much cash. [00:25:58][21.8]

Bryce Leske: [00:25:59] It's the largest company in the world. [00:26:00][0.8]

Alec Renehan: [00:26:00] Yeah, yeah. I don't know. It's a funny one. It feels like there's more downside than upside there. [00:26:04][3.6]

Bryce Leske: [00:26:04] Yeah, I mean, I mean, they've just got so much opportunity though, with so much money on their balance sheet. I can't remember what it is, about 200 billion or something like that. Something ridiculous. [00:26:14][9.5]

Alec Renehan: [00:26:14] Yeah. chuck it in. [00:26:15][0.6]

Bryce Leske: [00:26:18] So you and Amazon, [00:26:19][0.7]

Alec Renehan: [00:26:21] lots of investment comedy ever, [00:26:24][3.0]

Bryce Leske: [00:26:24] Microsoft, [00:26:24][0.0]

Alec Renehan: [00:26:25] Microsoft yes. Love Microsoft [00:26:26][1.2]

Bryce Leske: [00:26:27] given. Now, let's also think about the I'm not too keen on Netflix to be honest Netflix [00:26:33][5.9]

Alec Renehan: [00:26:34] Netflix or Facebook are a no for me. [00:26:35][1.1]

Bryce Leske: [00:26:35] Yeah, Facebook. No. [00:26:36][1.2]

Alec Renehan: [00:26:37] Yeah I think so. I mean just like anecdotally. How much do you use Facebook now. [00:26:42][4.8]

Bryce Leske: [00:26:42] Yeah, I mean this has always been an argument for many years for us, but I think given that they are on Instagram, I agree. [00:26:49][6.8]

Alec Renehan: [00:26:49] But I think well you know, I'm a tik-tok fan. At some point, social media companies get disrupted. And I feel like in terms of like the growth, the disruption potential and balancing those two things. [00:27:02][12.9]

Bryce Leske: [00:27:03] Yeah, I don't think we're anywhere near that for those companies. [00:27:05][2.0]

Alec Renehan: [00:27:05] I'm a bad example because outside of the Equity Mates Sociales, which I love, I hate social media. Yeah. [00:27:11][6.0]

Bryce Leske: [00:27:12] Yeah. And I mean, yeah, I just they still say so many of our friends and whatnot using both of them religiously, [00:27:18][6.6]

Alec Renehan: [00:27:20] it's well as someone who has five posts on his Instagram. Yeah. [00:27:24][4.6]

Bryce Leske: [00:27:24] I can't really speak from experience but. [00:27:27][2.5]

Alec Renehan: [00:27:27] But then the WhatsApp one is interesting. So what's up. Not really monetized at this point, although they are starting to do some interesting things around payments, I'm pretty sure they just enabled payments through WhatsApp in India. And so, like that could be an interesting business opportunity. But I just feel Facebook like the chance of them being heavily regulated and the fact that the Facebook I feel is getting out of favor. [00:27:50][23.0]

Bryce Leske: [00:27:51] OK, we can put Facebook on ice. That's fine. So Facebook and Netflix on ICE. What about Spotify? I think that's a good one. We need to put Spotify on. I imagine some pretty big things coming with video. Yeah. Oh, yeah. I reckon. Interesting. They say, wow, I heard it here first. Yeah, I did. [00:28:09][17.3]

Alec Renehan: [00:28:09] I would have thought that they want to be the audio. I like just own audio. [00:28:13][3.9]

Bryce Leske: [00:28:14] You'd hope so. I am keen to throw on Walmart. Sure. And I'm also keen to throw on. I know you will be is Home Depot. [00:28:23][9.0]

Alec Renehan: [00:28:23] Should we just move to America. Is that where Home Depot. What about Wesfarmers Bunnings. I did do very well. [00:28:30][6.6]

Bryce Leske: [00:28:30] Yeah. Yeah, they did do very well. Now that they don't have the chain, which was Coles I'm happy to put was. No, actually I don't want to put Wesfarmers. [00:28:39][8.8]

Alec Renehan: [00:28:40] You only want to put American stuff. [00:28:41][1.0]

Bryce Leske: [00:28:41] No. If we want to do Australia and we want to be a bit strategic about it, do we want to try and back in some shorter term recovery stocks [00:28:49][7.5]

Alec Renehan: [00:28:50] like Qantas or Sydney Airport or something? [00:28:52][1.6]

Bryce Leske: [00:28:52] Yeah, I would probably rather go Sydney Airport over Qantas. It's just a bit more of a hedge. [00:28:57][4.8]

Alec Renehan: [00:28:57] on? [00:28:57][0.0]

Bryce Leske: [00:28:59] On broader recovery rather than just on one company. Sure. As well as probably some rates, but I don't have a specific rate in mind. So are we going to go with Sydney Airport? [00:29:09][10.3]

Alec Renehan: [00:29:10] I mean, the thing is. [00:29:10][0.7]

Bryce Leske: [00:29:10] I'm just not sold on this recovery yet. [00:29:12][1.9]

Alec Renehan: [00:29:13] Yeah, the other option is like, do we say, alright, well, where are the companies poised to benefit from the recovery? But. Also have, you know, good tech tailwinds, and is it like a Webjet or something? [00:29:23][9.9]

Bryce Leske: [00:29:23] That's the it's a Disney like open up all of their theme parks and they've got good tech. Now, I'm not keen on Disney. [00:29:34][11.4]

Alec Renehan: [00:29:35] You own Disney. I dare you. We both are indeed. Yeah. [00:29:37][2.7]

Bryce Leske: [00:29:38] Another one that I'm I am keen on and I mentioned this to before the show, and you went so is Palantir Technologies. So for those who are unaware, this is one of the big data analytics companies backed by 82 or owned by Petito, started cofound, co-founded recently iPod. And they do a whole we've spoken about on the show before. They do a whole bunch of stuff with government and CIA and all sorts of things. And I think we spoke about it from an ethical point of view at some stage. Look, I think the industry that it's in, you talk about finding the sort of the growth industries the industry is in, ticks the box for me and I guess who they deal with in terms of contracts and the ability to to sell their products, I think is appealing. And what's your reasoning for not being so keen on it? [00:30:25][46.5]

Alec Renehan: [00:30:25] I've read a lot about how their technology may they may not actually just have a lot of good technology. And it's like they're really a data analytics play, like that's what Palantir are. They're like, wait, we'll take complicated data sets and, you know, help the CIA or help US Special Forces or, you know, police departments better visualize that data and then better be able to form actionable insights out of data. There's no disputing that they have helped or that one of the most famous case studies is they actually embedded Palantir engineers with U.S. Special Forces in Iraq or Afghanistan and did a whole bunch of visualization around like IED, like roadside bombs, and helped them massively reduce the number of casualties. U.S. soldiers dying from these explosions. The question, though, is these technologies scalable? Is it something where they've got a technology and they can go what they've built in, you know, these major contracts? Can they go to like every company and every government agency and say, look, we've built this, this will help you? Or is it that every time they get a new contract, they need to build a bespoke program and software asset? Or do they need to change their software over time to deal with the intricacies of that organization's data? Because if that's the case, then it's not really scalable and the unit economics aren't as nice. So for me, Palantir is an interesting one because I've obviously got a reputation, but I've read some things that make you question what they're going to be able to do longer term. Are they like a software business or are they like a consultant? I guess is really the question. [00:31:58][92.5]

Bryce Leske: [00:31:58] Yeah, right. OK, all right. Well, let's park, you know, let's pocket and do some more research. Maybe I'll come back with a tape here. I'll do that. OK, so I'm interested. Tencent Yeah. Cool. And also, do we want to go down the gaming route, Activision Blizzard, for example. [00:32:15][17.5]

Alec Renehan: [00:32:16] I don't mind to [00:32:17][0.5]

Bryce Leske: [00:32:17] get involved in that space. And then do you have anything that will cover it? I know we've got cloud in terms of Aiwass, but do we want to cover anything in this sort of cyber security space, maybe in an Adobe or Palo? What's it what is it? Palo Alto [00:32:32][15.0]

Alec Renehan: [00:32:32] Networks? I don't think I know enough about cyber security to name a particular company either. So I'm going to [00:32:38][5.8]

Bryce Leske: [00:32:39] let's hawk that idea and put some more thought into it so that we're not just spraying and praying everything. I think the key here is that only the companies that we've spoken about, both you and I have been following for a number of years, done a lot of reading on and are pretty confident that they are going to be here to stay. I wouldn't suggest this be the strategy if you just started out right. [00:32:39][0.0]

Alec Renehan: [00:33:03] Yeah, yeah, yeah. [00:33:04][0.5]

Bryce Leske: [00:33:04] We throw out stuff and [00:33:06][1.8]

Alec Renehan: [00:33:07] we introduce this whole segment. We want to try and apply what we've learned and, you know, get better at analyzing companies and get really practical. And then we just bloody name companies that we know. So we've got big tech, we've got some big bucks right now. What we don't have is really any specs or anything like that. So I'm going to say next month [00:33:27][19.6]

Bryce Leske: [00:33:27] I've got a specky to you. Yeah. Yeah, next month. [00:33:30][2.7]

Alec Renehan: [00:33:30] Yeah, I'm going to say next month we we each have to come with a specky. [00:33:34][4.0]

Bryce Leske: [00:33:35] I mean I don't want to go to Specky like I'm not talking like a fifty million market cap. [00:33:39][4.5]

Alec Renehan: [00:33:40] Okay. What about under a bill. [00:33:41][1.0]

Bryce Leske: [00:33:41] Under a bill. But over at least one hundred you [00:33:44][2.8]

Alec Renehan: [00:33:44] want to be on. Yeah. [00:33:45][0.5]

Bryce Leske: [00:33:46] So yeah. OK, we're talking. All right. Sure, sure. [00:33:49][2.5]

Alec Renehan: [00:33:49] Well I mean yeah we need to really nail down what our philosophy as well. [00:33:54][4.7]

Bryce Leske: [00:33:54] As we said at the start, there is no philosophy [00:33:55][1.3]

Alec Renehan: [00:33:57] unconstrained, [00:33:57][0.0]

Bryce Leske: [00:33:57] unconstrained. [00:33:57][0.0]

Alec Renehan: [00:33:59] I think putting some of these big tech players and stuff makes sounds like you and I, both in our personal portfolios, have a lot of those names I imagine most listeners have and a Q or a Fang ETF or something. And there's a reason for that. These companies are aiding the world. So, yeah, I think it was a timely. The decision to put something like that in, [00:34:20][21.3]

Bryce Leske: [00:34:20] so I Ren let me just recap on what we have put in [00:34:23][2.4]

Alec Renehan: [00:34:24] a little bit, how you will like you can only pick one stock, but somehow you've PED's like that. We do. Are you going to do a write up for all I shit? [00:34:33][9.3]

Bryce Leske: [00:34:36] I'm just looking now. We've actually got 17 grand on hand, so we've got Amazon, Apple, Alphabet, Microsoft Bank, Spotify, Wal-Mart, Home Depot, Sydney Airport, Tencent and Activision. So that's 10 stocks, 10 grand if we want. [00:34:52][16.6]

Alec Renehan: [00:34:53] Sure. I love it how everyone in the media is saying, like, now is the time to rotate out of tech and go into the cyclicals, invest in the recovery, you know, like the mining stocks, the travel stocks, the industrials, they're the stocks to buy. And we're just bucking the trend. Yeah, I think from my perspective, we're not trying to invest for a quarter. No. All of those names that you mentioned have long term defendable modes. And, you know, if we ask the question, will these companies be around in 20 years? Will their competitive advantage endure for 20 years? Do they have opportunity set or an addressable market that gives them the opportunity to be bigger than they are now in 20 years? I think the answer for all of those companies for all three is yes. Sydney Airport is maybe the only one that, you know, depending on what a second airport does and stuff like that. But, you know, they're not going anywhere. [00:35:43][50.8]

Bryce Leske: [00:35:44] I was thinking about recovery. And then that brings me to thinking about oil. And I was interested to know how the big hedge funds in the states are playing this. And you can look on Yahoo! As 30 most bought stocks by hedge funds in the last quarter. Yeah, and there is an oil company in there called Petrobras, which is it's actually the fourth most bought stock. It's the largest oil. It is a state owned Brazilian multinational corporation in the petrol industry. I mean, it just churns out barrels and barrels of oil, two point seven million or two million barrels a day. It does seventy six billion dollars in revenue a year. I'm not suggesting put it in, but I'm just kind of saying that if you do want to think about recovery, Andrew Brown spoken about oil. I'm interested that the hedge funds do have that play in this. [00:36:34][49.8]

Alec Renehan: [00:36:34] So I don't want to put a Brazilian state owned oil company that has brought down at least one Brazilian leader through a corruption scandal and left them [00:36:45][10.4]

Bryce Leske: [00:36:45] with an awful lot of the [00:36:46][0.8]

Alec Renehan: [00:36:46] Brazilian political situation is probably not something that you want to be jumping headlong into at the moment. That's going to be a no for me. That's for 119000. I'm going to throw out there in terms of this Bryce Leskie, Fosterville is just throw names out there. Vast mineral resources. I am. I am. [00:37:02][15.9]

Bryce Leske: [00:37:02] OK, that's been buzzing around for a while. [00:37:04][1.7]

Alec Renehan: [00:37:04] Yeah, yeah, yeah. What's the thesis? [00:37:06][1.3]

Alec Renehan: [00:37:06] The management of this company apparently is just unbelievable. It's been an incredible growth story. The TEDMED guys, when they pitched actually this is going to this is going to intersect a few different themes from Equity Mates. So the stadium growth partners at the Hearts and Minds conference last year, they pitched Spotify, but they made mention of mineral resources. When we spoke to the guys from London, they spoke about mineral resources as an unbelievable company. If we're talking about investing in management, not all that, but also the pivot away from tech towards, you know, mining cyclical, you know, the recovery stocks. Maybe this is a way to play that thing. [00:37:45][38.8]

Bryce Leske: [00:37:46] Yeah, okay. [00:37:46][0.6]

Alec Renehan: [00:37:47] Well, James, we're being fast and loose. Yeah, yeah. Let's go. Let's call it. I feel like in one episode we've undone four years of hard work about your own race. [00:37:55][8.5]

Bryce Leske: [00:37:56] No, but I think we made the point that we know these companies. It's not like we're throwing in, but we will come in the new year well before we close out this year with actually. [00:38:04][8.0]

Alec Renehan: [00:38:04] You know what? You know what? Because because we don't we're not as familiar as we should be with mineral resources. Put it on the White House. [00:38:11][6.8]

Bryce Leske: [00:38:12] Yeah, yeah, yeah. I haven't put it in. So Ren there is another asset that I would love to put in that deserves also a thesis. And I'm so this will be going on the watch list, but I just want to make note of it now. Given that we're probably not going to talk until another month or so, I would love to discuss putting Bitcoin in this mix. I know it's controversial, but there are some interesting points of discussion to be had. [00:38:36][24.6]

Alec Renehan: [00:38:36] So, yeah, the fact that it is running like nothing else at the moment. [00:38:39][3.0]

Bryce Leske: [00:38:41] Yeah. [00:38:41][0.0]

Bryce Leske: [00:38:42] let's just mark that down. [00:38:43][0.8]

Alec Renehan: [00:38:44] I'm happy to put it in [00:38:45][0.8]

Bryce Leske: [00:38:45] As of now. [00:38:45][0.1]

Alec Renehan: [00:38:46] As of now. As someone who doesn't believe in it but owns it all. I own it. I own it because it's. What if I'm wrong. Yeah, yeah, yeah. There's so much conviction from people who are a lot smarter than me that I've got a smallholding in it just because. [00:39:03][16.6]

Bryce Leske: [00:39:04] Well, if I'm wrong, yeah, I will certainly come next episode with some more concrete reasons as to why I think it's worth keeping in the portfolio if we are writing it now. [00:39:13][9.2]

Alec Renehan: [00:39:14] Well, up to you. You're more of a Bitcoin believer than I am. So you're. Watch list or portfolio. [00:39:18][4.8]

Bryce Leske: [00:39:19] It's going in a small position. All right, Ren Well, we will update all of that and put it up on our Sociales. It is not available on the website at the moment. A few technical difficulties, but it will come available soon. So we'll make sure everyone the [00:39:33][14.3]

Alec Renehan: [00:39:33] website is an iterative process, just like The New York Times took 10 years to turn that around. That's the timeline where we're disrupting and [00:39:42][8.6]

Bryce Leske: [00:39:43] disrupting ourselves and going large on the website in the New Year. So stay tuned for that. But for now, we will endeavor to put all of this online. If you would like to make a stock pitch and add it to the portfolio plays, we would love to hear from you. Hit us up on our Sociales or through e-mail, and we'd love to get you on the show. We've had three awesome pictures already and they're performing very well in the portfolio. In fact, they're driving most of the returns. Well, three of the four stocks have been community pictures anyway. But looking forward to closing this out before the Christmas break, Ren. And hopefully, Santa is what I call it, the Santa Claus [00:40:18][34.9]

Alec Renehan: [00:40:21] So it may go away, the Santa rally, all of these things that are alike in the very short term, just before we sign off, should we see how Salesforce is going? Because you pitched it. We didn't put it in the portfolio. [00:40:33][12.4]

Bryce Leske: [00:40:34] True. But can we remember when I pitched it? I think it's pretty flat, to be honest. Let's have a look. [00:40:38][4.5]

Alec Renehan: [00:40:39] You pitched it on the 14th of September. From there it is. It's yeah, it's flat. It's up one percent. OK, not bad. [00:40:46][7.0]

Bryce Leske: [00:40:46] Not bad. But I do recall it. Yeah, it did have a massive jump and that's why I was a bit reluctant. But anyway, it didn't make it Ren and that's the beauty of democracy. Didn't get the votes. Look and if you do have an issue with any of the stocks that we have put in the portfolio, given that it is the Equity Mates community portfolio, again, we'd love to hear from you. Unlikely that we'll make any changes, though, because we're backing in those companies. Not so. All right, Ren. Well, we'll close this out in December before our Christmas break, as I said. But otherwise, watch out next week. [00:41:17][31.1]

Alec Renehan: [00:41:18] Sounds good. [00:41:18][0.0]


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