Expert: Luis Sanchez – $500,000 for internet in the sky | GoGo (NASDAQ: GOGO)

Bryce: [00:00:19] Welcome to another episode of Equity Markets. On tour in the US. We are pumped to be here and welcome to Equity Mates. If you're joining for the and welcome to equity markets, if you are joining us for the very first time, this is a podcast that follows our journey of investing and whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. Now, while we are licensed, we are not aware of your personal circumstances. So all information on this show is for entertainment and education purposes only. Any advice is general. With that said, my name is Brice and as always, I'm joined by my equity buddy Ren. How are you? 

Alec: [00:00:56] Very good, Bryce. Sitting here in a office in midtown Manhattan. And I can get used to this. 

Bryce: [00:01:03] Yeah, it's great, isn't it? Really? Enjoying the US tour? We've just touched down in New York for a week here of interviews with experts, meetings, a bit of party, you name it. 

Alec: [00:01:13] Stop three NYC. Stop. 

Bryce: [00:01:15] Stop Three, NYC.

Alec: [00:01:16] We start one night in L.A. over to Omaha and now to New York. We've got a number of interviews lined up and we've just finished our first New York interview with an investor over here, Luis Sanchez. A reminder of all the nations that you can run into in investing. We did about 25 minutes on private jets and how they get on the Internet.

Bryce: [00:01:41] Yeah, it's a bit of a theme. We had Warren and Charlie also speak at Omaha for about 15 minutes on their private jet business. NetJets. And pretty much spoke about how much money they spend on private jets. 

Alec: [00:01:56] Must be nice. 

Bryce: [00:01:57] It was a fascinating conversation. Louis is the founder and managing director of LV Advisory. He gives a bit of a spiel about how he started that at the beginning of this episode.

Alec: [00:02:09] But before we get into it, Price, we do have to say a massive thank you to Milford for sponsoring our U.S. tour and making this all happen. Milford is a leading New Zealand fund manager and they are now available for Australian investors and advisors.

Bryce: [00:02:23] That's it. They're flexible. Active management strategies and high performing globally. Experienced investment teams aim to deliver strong long term returns while managing downside risks. 

Alec: [00:02:32] Milford's team also invests in the same funds as their clients. So you know that they are highly motivated because they're on the same journey with you. 

Bryce: [00:02:40] So fund the Milford funds on your trading platforms or at milfordasset.com.au and remember before you invest, be sure to read the Fund's product disclosure statement and target market determination found at milfordasset.com.au.

Alec: [00:02:53] So a massive thank you to Milford for sponsoring this episode and sponsoring this tour and getting us to New York City. And just another reminder before we get into this interview with Luis, anything you hear is general advice only. We're not aware of your personal financial circumstances, your risk tolerance, your time horizon. Neither is the way. So it's not personal financial advice. Do your own research before making any investment decision.

Bryce: [00:03:19] So, Luis, welcome to Equity Markets. 

Luis: [00:03:21] Thank you guys for having me.

Bryce: [00:03:22] Now, as is tradition here at equity Markets, we always like to start with our business model equity markets, daily company guessing game and our tour of the USA continues. And so it is the game five Clues. It is a US listed company and the first clue is my annual mega conference is called Dreamforce. Barack Obama was a featured speaker there in 2019. 

Luis: [00:03:50] Salesforce.

Bryce: [00:03:53] game over. You won. 

Alec: [00:03:55] There you go. 

Bryce: [00:03:57] I think that's the first guest we've had.

Alec: [00:03:59] Who's got it the first time?

Bryce: [00:04:00] Who's got it for the first time. 

Alec: [00:04:01] Yeah, yeah, yeah. 

Luis: [00:04:03] Well I'm glad I didn't embarrassment. 

Alec: [00:04:07] It does get awkward when you get to like the fourth or the fifth and people aren't getting it.

Bryce: [00:04:11] It's like clean up my five. My stock ticker is the stock ticker is. 

Luis: [00:04:17] CRM. 

Bryce: [00:04:17] He's absolutely done it. He's done it. 

Alec: [00:04:19] Well, the ladies were sitting in midtown Manhattan and we're excited to be in New York is our first New York interview. We had a couple in Omaha, but this is the Big Apple, the city that never sleeps. So we're pumped. And for the equity mates audience who haven't heard of you before or LVS advisory, we'd love to start with your background. So can you tell us a little bit about your career and sort of how you how you got to founding LVS? 

Luis: [00:04:46] Yeah, absolutely. Welcome to New York, guys.

Bryce: [00:04:48] Thank you.

Luis: [00:04:50] So my name is Luis Sanchez. I am the founder and managing partner of LVS Advisory. I'm based in New York City, and LVS Advisory is a registered investment advisor that manages separately managed accounts for clients. My Journey, my professional journey started in investment banking, and I worked in a few different roles at a few different bank. And the last job I had was at Credit Suisse, which, you know, R.I.P.. 

Alec: [00:05:22] Yeah, yeah, yeah. 

Luis: [00:05:26] And I was working on in there and there hostile M&A and shareholder activism group and that was a very that was within M&A, M&A investment banking division. And that was a really interesting and very impactful experience. And my team was basically involved with helping companies take over other companies, sometimes working with activist investors, sometimes being on the other side of the table from very famous activist investors. And fair to say we worked on some of the hairiest merger and acquisition transactions. 

Bryce: [00:05:59] And can you give an example of one? 

Luis: [00:06:01] There were a few I mean, one that that stand out, one that's kind of interesting is we were advised by Samsung and I believe this was 2014 when they were trying to buy another Korean company called CNT industries, and there was an activist investment firm called Elliott, and Elliott tried to stop the transaction. And so part of that deal was we would go we went our team went over to Korea to make presentations to all of the relevant institutional shareholders to basically convince them to vote in favour of our deal. And that's just a random example. I mean, like another really random example is one an Asian casino company advised us because they wanted to acquire, they wanted to hostilely take over another an American based casino company and that transaction never came to fruition. But it was something that our team like analysed. And yeah, so it was a really interesting desk and fair to say that it only got to our desk if it was really Harry. So after my career in investment banking, I went and joined a quantitative fund and that was a really great experience. But after working in the hostile M&A and shareholder activism activism space, I was just really fascinated by the deal world. And I just started tracking transactions. And when I was on the buy side, no longer working on the deals, I actually started investing in some of the deals, right? And just in my personal account had nothing to do with my day job. But what I came to realise after a couple years of doing that was that investing in deals and merger arbitrage and other kinds of event driven situations can actually be a very fine strategy. And, and I, and I say that because I was able, I was finding that it's possible to generate double digit absolute returns with lower volatility in your portfolio, therefore translating to lower risk. And I thought that was very attractive. And when I moved on from that role, I set out to see if I could do something else with with that strategy. And that's what eventually became LVS advisory. So I founded LVS Advisory five years ago, and the first thing I launched with was a strategy that was investing in event driven situations, primarily merger arbitrage. But we we've done various other things here and there. A year later, I launched a second strategy, which is what I refer to as a global growth strategy. My thesis behind the platform is that I have an event driven strategy, which I referred to as obvious, defensive and obvious defensive. The job there, as the name implies, is to protect our capital and to still earn like an attractive high single digit, low double digit absolute return and do it consistently. So we've been fortunate, you know, what the environments in the last five years we've had COVID. We've had, you know, in 2022, bonds and stocks lost money. But we've been very fortunate in that our event driven strategy has actually made money every year. That's what that's about. It's about protecting capital. But on the other side of the ledger, it's about protecting capital without having a lot of volatility. But on the other side of the ledger, I basically designed a strategy that was the exact opposite of that, which is can I actually create a strategy that actually takes more risk so greater than market volatility with the idea that if we take more risk, perhaps we could earn more upside? And just having these two strategies that are very different from each other, I view that in different parts of the investment cycle, one strategy or the other might be more favourable to allocate to. And there's also different investors with different types of preferences. And I have a passion for both event driven and growth. Investing. And that's kind of how I developed this platform. 

Bryce: [00:10:19] So before we unpack each of the strategies in a bit of detail and look at what you're investing in, like what what's your overall investment philosophy that kind of drives both of those? 

Luis: [00:10:29] Yeah. So the two philosophies are very different, and I really believe that there's no one best philosophy that everyone's different and you should find something that resonates with yourself and your personality. So on the event driven side, the investment philosophy is rule number one, don't lose money. Rule number two, don't forget rule number one. And I say that half joking. But that's really what you know, that's the first slide of our deck. And the way that I think about the event driven strategy is every every idea that we put into the portfolio, my confidence interval needs to be at least 75% that we're not going to lose money, which is a really, really high. It's, you know, it's a really, really high hurdle. And then once we get past that, that high hurdle of not losing money, then within what's left, we just try to invest in the highest returning opportunities that are left. And it's as simple as that. But what we found what I found is that within the event driven universe, we very often can identify situations where there's a very low probability of risk and we can just kind of really hone in on a couple of like sub strategies where we can find interesting returns. 

Bryce: [00:11:42] Can you give an example of that? Like what's a and yeah, if you can provide. 

Luis: [00:11:46] Yeah. So our bread and butter is merger arbitrage, right? So I write about these periodically in our letters, although I tend to be a little bit more, I have less disclosure on the ideas in the event driven universe because they tend to be very time sensitive and less liquid. But my, our bread and butter idea is like an all cash acquisition where let's say Company A wants to buy company B for $10 a share and it trades and the stock's trading for $9 a share. And you know, with my background in M&A, I know how to go through, read the merger contract. I have a lot of experience kind of interpreting the shareholder dynamics through my sell side experience. And I can kind of, you know, through a very disciplined and repeatable process, determine the likelihood that a deal is going to be successful. I'd say like 85% of what we do. But then there are some random things that come up that just within this event driven universe that are maybe more one off where we have to be a little bit more creative. And I mean, a good example of that is in the last investor letter that I published our Q1 2023, I wrote about a contingent value right offering where we believe we could make as much as 34 times more money. 

Alec: [00:13:15] 34 times. Yeah. 

Luis: [00:13:17] So basically it's a Non-listed securities. So that's why I wrote about it, because it's no longer available to trade, but it's a CVR and that's dependent upon clinical trials, a very well-regarded biotech company. And, you know, we did our research. We felt that for various reasons, the market misunderstood the risk reward of that security. And we purchased a security for $1, which we think could be worth up to $35 per share. 

Alec: [00:13:45] Wow. Wow. So I guess if we're talking merger arbitrage, probably the biggest merger, at least the one that first comes to mind for me at the moment is the Microsoft and Activision Blizzard merger. And it's probably a classic case study in the potential for merger arbitrage. I think the deal was, what, $68 billion and Activision Blizzard I'm just looked it up is trading at 59 billion and the biggest question is regulatory one will they get antitrust and competition law approval around the world to do this deal. Putting your merger arbitrage hat on, when you look at a deal like this and you're trying to analyse it, is there opportunity? Is this a good investment? How would you think about something like that deal? 

Luis: [00:14:33] That's a good example and I think helpful framework here because we never got involved in that deal simply because the regulatory process on that deal was just too much of a wild card. Right? So I think when I looked at it, I probably just thought it was a coin flip, maybe maybe a 60% chance of going through. And I think at this point, you know, we're here in May 2023. It's easy for me to say that because I think the deal is pretty much dead at this point. But I think that's a good example, right, when we don't have a lot of clarity on the regulatory process. And there's a lot of clues that I've learned to pick up. I was trained on the South Side. That helped me think through that. But a lot of if I don't disclose our holdings in our merger, our portfolio, but I'd be willing to bet that 90% of them are just unfamiliar names because we tend to concentrate in like, you know, smaller and mid-cap deals where there really is no regulatory risk. And for one reason or another, either the market is just not aware of the opportunity or maybe misunderstand a certain condition in a deal or this, that and the other thing. And we just try to be really opportunistic when that happens. 

Bryce: [00:15:55] Did you get around the arbitrage opportunity with Musk on Twitter, wasn't there? 

Luis: [00:16:00] Yes. That was another. So there is what was interesting about merger because even within merger merger arbitrage itself sounds like a very specific strategy and even within merger arbitrage there's so many different ways to do it. There is, you know, some very reputable investors who just only do you know, the really kind of swing for the fences opportunities like Activision Blizzard or Twitter. I'd say our style is to focus more on singles and doubles because my view is our our strategy is more of a capital preservation vehicle. And we found that we can earn attractive returns without doing anything too risky. And if we want to take risk, we have another pool of capital that we take risk with. 

Alec: [00:16:51] Hmm. Well, let's turn to that other pool of capital. We've just unpacked what you're looking for in the defensive portfolio. When you think about the growth portfolio, what makes a good investment in that strategy? 

Luis: [00:17:04] Yeah, absolutely. So the simplest way for me to describe it is I call it the growth portfolio, and that may be a slight misnomer in the sense that growth can mean a lot of things to a lot of people. And you know, what often is traditionally thought of as growth investing is probably not exactly what we do, but what what we're really looking for, and I think very empirically can be deduced is if you look at the best performing stocks of all time, you can pretty much tie them to having the highest rate of growth in free cash flow per share over time. Right. And so at the end of the day, that's really what we're looking for. We're trying to find companies that over a 5 to 10 year plus time horizon, we believe will have the greatest compounding effect in free cash flow per share. I guess our philosophy, we try to keep things like really simple, but we have like a three pronged kind of very simplified framework and it basically is number one, like the free cash flow per share growth. So it's it's nuanced because it's not revenue growth. It's often times it is revenue growth, but it has to be revenue growth with really good unit economics and it has to be revenue growth with good unit economics and also a management team that can allocate capital in a way that can secure the free cash flow per share growth and not mis allocate capital. And you really need all three. If you don't have revenue growth, it's probably going to be unlikely that you're going to get like long term free cash flow growth. If you have a a management team that makes capital allocation mistakes, you might have a lot of dilution and you might have a lot of growth, but it might not accrue to the minority shareholders. So you really kind of need all three. The second prong is we look for companies with sustainable competitive advantages because at the end of the day, you know, we live in a very competitive world and if a company is generating very strong revenue and free cash flow growth, if they don't have very solid competitive advantages, it's going to get competed away. And then the last thing we look for is can we buy a security at an attractive price? Right. And that that's just simple value investing, although I think the way that we look at it is we look at it as a discount to maybe a 5 to 10 year free cash flow per share target. 

Bryce: [00:19:33] All right, Luis. So it's time to take a quick break. But on the other side, let's put those three steps into practice with an example of one of your most recent investments. GoGo. 

Alec: [00:19:42] We want to say massive thank you to Milford for sponsoring this US tour. If you want to give your portfolio an offensive and defensive strategy, check out Milford's award winning Milford Australian Absolute Growth Fund. 

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Bryce: [00:20:20] So for the Milford Australian Absolute Growth Fund, ticker symbol MFOA. You can find it on your trading platforms or at milfordasset.com.au And remember before you invest, be sure to read the fund's product disclosure statement and target market determination found at milfordasset.com.au. 

Bryce: [00:20:57] So here with Luis Sanchez, founder and managing partner of LVS Advisory. Now, Luis, before the break, we spoke about your investment process. Let's put it into practice with one of your current investments, GoGo. Firstly, for those that are unaware of GoGo, can you tell us what the company does? 

Luis: [00:21:14] Absolutely. And I recently shared a ride up on my website on GoGo, so that could also be good. Further reading, but I'll try to summarise it here. So GoGo is the leader in providing internet connectivity to private jets. And if you've heard of GoGo, it may be because they used to provide internet to commercial jets, but they divested that business about three years ago to focus on the private jet market. Because the private jet market is more profitable, it's more of a niche and there still is a lot of growth potential there as well. And the way this works is GoGo only operates in North America today and they have a network of cell phone towers. And unlike an AT&T Verizon cell tower that broadcasts down to the ground to your phone, these broadcasts straight up into the sky. So they're configured very differently from a normal cell tower. And GoGo, they sell equipment to private jet owners. And then and then the private jet owners, they buy the equipment and they pay monthly Internet subscription fees. So this is a razor razorblade business where they make money on both the razor and the razor blade. This isn't this isn't like a Comcast, you know, Internet subscription, though, right? This is like highly technical and very sophisticated telecom system which sells for, you know, it cost about $500,000 to install one of these all into a private jet. And these on average, these private jet owners are paying between 5000 to $10000 per month. 

Alec: [00:23:05] Yeah. So it's not quite yet AT&T.

Bryce: [00:23:07] Yeah, that'd be high speed.

Luis: [00:23:10] So it's a very unique business. Right. So maybe I'll go through the three pronged kind of framework. So starting with growth, right from a bigger picture perspective, only one third of private jets today are connected to the Internet. 

Alec: [00:23:30] Well, that surprises me. I think if you're shelling out for a private jet, you're. You're almost expecting 2030. 

Bryce: [00:23:36] Obviously. 

Luis: [00:23:36] You have to think about it. So you have to think about it this way. We've only had iPhones for about 15 years. And if you could imagine, the technology that goes into jets is even more niche. And there's a lot more regulatory red tape, which I'll get to in a minute. But Jets, well, let me come back to the switching costs. But only one third of private jets today have Internet connectivity. And this is a market that really just started about ten years ago. And the average age of a jet is about, you know, 30 years. So it takes time to cycle through. But connectivity is expected to hit 100% penetration within the next ten years or so, according to all of the industry surveys and according to the rate of change. So from a market growth perspective, this industry of providing connectivity to private jets is probably going to grow by a multiple of 4 to 5 X after you consider the fact that there's about 800 new private jets being sold every year. And, you know, the penetration of existing jets. 

Bryce: [00:24:47] This is just the US market.

Luis: [00:24:48] Just the US market. Yeah. And so I already walked through some of the numbers in terms of like GoGo selling equipment for, you know, hundreds of thousands of dollars and they're charging, you know, thousands of dollars per month. This is a very profitable business for GoGo. They earn a 40% cash flow margin. And they're ready at scale, but they're going to get more scale. And as they get more scale, you know, this could end up with a greater than 50% cash flow margin. So there's not only a lot of revenue growth as the industry is growing, but they are securing cash flow growth because this is a very attractive business model and the management team here owns about. A fourth of the company. They're very aligned with minority shareholders. They've been involved with the company for many years. They have a pretty nice track record, in my opinion. And they I guess the way that I would put it as it when it comes to capital allocation is they just get it right. I talked to some management teams and some management teams. They just don't get it. And, you know, this management team, they get it. They understand how to protect and they understand the value of the per the per share value of equity. And they protect that value and they enhance that value over time. 

Alec: [00:26:19] Well, even you saying earlier that they divested the commercial airline business to focus on the private jet business. You could say a lot of management teams saying the like the dollar, the revenue dollar signs in the commercial airline business just because of how big that market is. But the fact that they divested that because the private jet business is more profitable, I would assume like that, that feels like a sensible capital allocation decision.

Luis: [00:26:43] Absolutely. So that's exactly what I would point to when it comes to speaking to the management teams track record. So the second prong, competitive advantage, and I think this is relevant to the divestiture of that business is the commercial airline business is a bit more competitive. There's a couple of other players there. It's a bit of a larger market, so it's a bit more attractive, especially to satellite companies that want to compete there. Whereas in the private jet market, Google has 85% market share. They basically invented the market ten years ago. And so their decision to focus on this market was largely because they knew they kind of own this market and there was enough growth to be had just by focusing on this one smaller market. And actually the private jet market has some similarities with the commercial jet market, but has a lot of differences that are very important. When I think about the competitive advantages here, there's a lot and they come from the fact that GoGo already have a nationwide network. They have the only licensed spectrum to provide jet aviation connectivity. They have dozens of patents around all this stuff. But the most important thing really is that if you're a jet owner, the switching costs are incredible. Half a million dollars to install something, you're paying thousands of dollars a month. But it's not just about the dollars spent. If you want to actually install a piece of equipment on a private jet, a connectivity equipment, just given the way that the power works and the connectivity antennas work, you have to rewire the whole jet well. So it actually takes 3 to 5 weeks for a certified technician to rewire your jet. So you have a lot of downtime, you have a lot of cost. And very few people can do this. And there's actually like a wait list, too, to get into these facilities right now. There's a bit of a just given, you know, there's supply chain issues everywhere. But this is like another area where there's been a lot of backlog for this kind of thing. So typically because it is so involved, private jets have like a more thorough maintenance period about once every five years. So that's usually the time when these types of heavy installations happen. So once you install one of these, you know, you're probably going to keep it in there for at least ten years. Right. Unless there's something else in the market that's just so much faster or cheaper. And even if it is, it actually costs a lot of money to uninstall a system, too. So the switching costs here are just incredibly high. Maybe some of the high switching costs I've ever seen in a business.

Alec: [00:29:45] So you mentioned the satellite Internet providers in the commercial space, and that was actually something, you know, Bryce and I, when we're flying from Omaha to New York, we were talking about when are we going to get Elon's StarLink satellites just on our phones when we're in the sky. Is there a competitive threat from the satellite providers in this market? 

Luis: [00:30:07] Yes. Okay. So in addition to really high switching costs, they have an incredibly fragmented customer base. So GoGo has 7000 jets on their network, and that consists of over 5000 customers.

Alec: [00:30:21] Oh, wow. Okay. So I guess that makes sense. 

Bryce: [00:30:24] Just one multiple check.

Luis: [00:30:25] Exactly. Exactly. So who are the customers? Right. These are like corporations with, like, business jets. And they may have like one or two business jets for the management team. And so if you think about a competitor trying to come into this market, there's a bunch of regulatory things. They need to overcome it. There's a really high switching cost they need to overcome. And it's really hard to gain scale because you have to sell this to one jet owner at a time. Repeat that, you know, hundreds of times before you really even get a profitable business with scale. Okay. And then the final thing I would say about the valuation is that I believe Google is actually quite cheap. And the company themselves have come out and said that they've given some projections for where they think cash flow is going to be. My estimate of cash flow is within five years. We believe this could be doing more than $400 million of free cash flow. The stock today trades for 1.6 billion with an enterprise. There's a little bit of debt. So the enterprise values about 2 billion and these kinds of businesses with very high, you know, a subscription model of recurring revenue business with high margins and high switching cars. We believe these things trade anywhere from 15 to 20 times cash flow. So if we're right about our analysis and they get anywhere near that $400 million of free cash flow within five or six years, you know, back of the envelope, we think this could be like a four or five X, Right. Now, let me come back to the why now, Because there's a reason it's cheap, right? And there's a couple of interesting why now is like, why did we get involved now? So the first thing is that GoGo is launching a 5G service later this year and the 5G service is going to significantly improve their speeds and connectivity. It's also going to come with about a 25% upsell and revenue per subscription. So that's a nice little revenue catalyst. Next year they're going to launch a low earth satellite product and when they launch the low earth satellite product, that's going to open them up from being able to serve just North America to serving the entire world. Okay. North America happens to be most of the market. For whatever reason, Americans have 80% of the private jet flight hours. So maybe it's a little bit less dramatic than it sounds like going from North America to the rest of the world. But it still does expand the TAM over time. Now, as you mentioned, the stock has actually come down a lot because people are worried about a competitive threat from StarLink and Elon Musk, who owns StarLink. They've announced that they want to enter the business connectivity, that the aviation market for connectivity, and they have a product that is actually available on some regional commercial airlines, and they are testing it with private jets. Now, there's a lot of things I could say about this. We've done a lot of research into this, but what I would say is that we believe that given the inherent competitive advantages that GoGo has as an incumbent in this market, we believe it's going to be really, really hard for StarLink to come in and take a meaningful amount of market share. And we're not even sure if they're going to be able to take any market share because they don't have regulatory approval. They don't have a product that really fits on private jets yet. So the products that they have proposed really are tailored for commercial airlines. So we believe that the market is kind of misinterpreting the situation as StarLink is going to come in and kind of take everything when we think that their threat is really a little bit more targeted to commercials, where GoGo isn't really a player today.

Alec: [00:34:46] So I would love to take a step back from GoGo specifically, but use it as an example and just talk about, I guess, the start of your research process. So thousands of listed companies in the U.S., tens of thousands around the world, I think you said GoGo has a market cap of about one and a half billion at the moment, right? So it's by no means one of the bigger companies in the U.S. How do you go about finding opportunities and maybe if you use GoGo in particular, what did you come across this company? 

Luis: [00:35:17] Absolutely. So in our growth portfolio, ideas come from one of like three places I've been investing for over a decade. So the first place is maybe it's a company I've already looked at before and have some familiarity with. The second place is really the most common, which is. I spend a lot of time speaking with other smart people that I respect and others, whether it's smart investors or I spend a lot of time speaking with people who work in an industry that I think is interesting or the management team of our companies. And when I have these conversations, I try to always leave with like broader perspective. So if I'm talking to a company that does something, maybe we're invested in it, maybe we're not. But I'll always ask them about what they think of their competitors and which competitors they think are interesting or not interesting. Or I'll give another example and then I'll go back to go, go. We've spent a lot of time investing in the media industry, and part of what we've done to understand the media industry is we've spoken to film studios and we will ask the film studios what who they what distributors they use, what streaming services do they think are more organised, less organised, where they prefer to work? I prefer to work with what tools they use so that we can start to build really full pictures of an entire ecosystem. And, you know, we'll have similar conversations. Well then talk to someone else in that ecosystem. And if everyone in an ecosystem is telling us, Oh yeah, by the way, like these one or two things are like the best that we'll take note of that. Right. 

Alec: [00:37:06] Has there been a stand out streaming service? 

Luis: [00:37:09] Yes. And that would be Netflix. We've written about that. We actually started buying Netflix in mid 2022 and it's one of our larger holdings now and we quite like it. But on on the in the case of go, go, go, go actually came to us through another investor who we've actually co invested on other ideas in the past where and you know we they pitched it to us because we periodically speak to other folks who are who are kind of similarly looking for similar things and ask them what they're working on. And they told me about it in the summer of 2022. And you know, what I typically do is if someone if someone gives me a really interesting idea, I don't want to really act on that right away. And I usually probably have like five other things I'm working on. So I just added to a watch list of I with Google. I added it to my watch list. I reviewed a couple of quarters and when I went through the quarters, I tried to understand like, okay, what's going on here? Can I understand this business? Does the management team make sense? Like, are they coherent? Do the things that the person who pitched this to me seem to be somewhat accurate? And after about two quarters of watching off go goes earnings, I started to get the sense of okay yes. Like this company is performing in a way that aligns with what the person who pitched the idea said. And I really like the way the company talks about their business. I like the way they report their finances. I think I can understand this business. So then late 20, 20 to early 2023, spent about two months just focussing on this one idea. And then we just, you know, we spent two months, we went through all the financial statements, we scheduled calls with a bunch of people who work in this industry. We spoke to competitors, we spoke to customers. We tried to understand what the technology was, but actually, like the technology piece is important, but it's not the most important thing, right? The most important thing is are you aligned with the managers? Do they understand the most important things? What is their track record? Do you believe that? I don't know what the next innovation in satellite technology is going to be, but my trust is that the managers will be able to figure that out based on what I've seen them already do to navigate the business. Right? So that's really where I try to understand it to a degree that I think I need to understand it. But really what I'm doing is I'm underwriting the management team and I'm underwriting the attractiveness of the business, which in this case is really obvious that it's a very good business if they can keep it. 

Bryce: [00:40:11] For a retailing. But you mentioned some of the sort of tools and techniques you use that get information calling the company themselves, other investors, customers for retail investors and for our audience sort of sitting at home. Are there any other resources that we could turn to to use in our investment process? 

Luis: [00:40:32] I'm a big fan of keeping it as simple as possible, right? So I have access to some tools only. National investors have access to Bloomberg Terminal. Exactly. But you know what? Like the longer I do this, the less I use those resources, because at the end of the day, those resources are the same resources that all the big money investors are using. And sometimes what I found is keeping it simple, just reading the basic financial statement that's provided by the company, listening to the calls and then picking up the phone and just trying to talk to people that they like that have deeper insights, just kind of going one idea at a time. I think it only really takes having one or two good ideas a year and slowly building a diversified portfolio to really to really get there. And yeah, I think you can. I think all an investor really needs is a computer with access to the statements that are publicly available, maybe a spreadsheet and a phone.

Bryce: [00:41:43] That easy.

Alec: [00:41:44] It's not easy, but I think it's. I think it's important to just dwell on what you said. You only need one or two good ideas a year because I think it's so easy to get caught up in just the noise and the speed of the market and the amount of companies that are out there. But if you really just say it's that whole Warren Buffett punch card investing approach, like one or two ideas in a year is all I need. It just sort of can slow your mind down a little and yeah. 

Bryce: [00:42:10] Figuring out what that one is. That's the hard part. 

Alec: [00:42:12] And then and then doing two months of research like you did on Go go. Yeah. 

Luis: [00:42:17] Right. I mean, look, to be clear, I spend five, six days a week doing this, and I probably only have, like two good ideas a year. Yeah, and they're really hard. It's really hard to find a good idea. Hmm. 

Bryce: [00:42:34] Well, Luis, unfortunately, we have run out of time and come to the end of our interview. Thank you so much. Firstly, for taking the time to come and meet us in Midtown Manhattan. We're just around the corner from Times Square. Go check out the big shiny lots after this. But throughout the year, we run the Equity Mates Awards and one of the awards is Expert of the Year, and it's an opportunity for our community to vote on some of the best experts that have come on the show. And by nature of virtue of you being here today, you are automatically in the running for expert of the year. Now, to help our audience understand a little bit more about you for the voting process, if you were to win and receive the beautiful glass trophy that we send you, where would you put it? 

Luis: [00:43:18] Oh, boy. You know, I have a shelf behind my desk that's visible in my zoom calls. I would probably put it back there.

Bryce: [00:43:26] Nice, nice. 

Luis: [00:43:28] Bunch of books from, you know, a lot of really nice investment books over there. And some are pictures of my kid, and I'd probably put it up there also.

Bryce: [00:43:37] Love it. I love that. Well, as I said, thank you so much. We will include a link to the investor letters that you've been referring to, a link to the show and a link to the website in our show notes. For those that want to dig a little bit deeper and understand more about GoGo and the other investment opportunities at the advisory. But thank you so much. Absolute pleasure. We've really enjoyed it. 

Luis: [00:44:00] Great. This was fun. Thank you guys for having me. 

Alec: [00:44:03] Thanks Luis. And equity mates, before we go, we just want to say a final thank you to Milford for sponsoring and powering our trip over to the U.S.. Milford is a leading New Zealand fund manager, now available for Australian investors and advisors.

Bryce: [00:44:17] The talented and globally experienced investment team aimed to deliver strong long term returns while managing downside risks. They also invest in the same funds as their clients. 

Alec: [00:44:27] You can strive for a smoother investing journey with Milford's experienced active management and their award winning Milford, Australia and Absolute Growth Fund ticker symbol MFOA. 

Bryce: [00:44:38] So fund the Milford Australian Absolute Growth Fund and other Milford funds on your trading platforms or at milfordasset.com.au. And before you invest, be sure to read the Fund's product disclosure statement and target market determination found at milfordasset.com.au. Ren, let's pick it up next week. 

Alec: [00:44:55] Sounds good.