Expert: Tobias Carlisle – Finding deep value in today’s market conditions

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce, and as always, I'm joined by my equity buddy Ren. How are you going? 

Alec: [00:00:31] I'm very good. Bryce. I'm very excited for this interview. We've got a returning expert who I like to think is our one of our correspondents in two ways. First of all, are an American correspondent with an Australian who's making it over in the states. And then, second of all, our correspondent from the world of value investing. 

Bryce: [00:00:50] Yes, I know, and we're really excited. We're really excited about this interview. It's our absolute pleasure to welcome back to Equity Mates. Tobias Carlisle. Tobias, welcome. 

Tobias Carlisle: [00:01:01] Thanks, fellas. That was a really kind introduction. I love those interest. I remember I remember when I was in, I used to watch daytime TV, you know, like morning TV before I went to work in Australia that sometimes that flesh out of the day in Los Angeles. I've put the green screen up so you guys can stick in whatever kind of Los Angeles background you'll put. So shows from my mum's basement. So let's look it up from a look it up on the internet when you ask me what the weather's like. 

Bryce: [00:01:35] If you have just joined Equity Mates for the first time, welcome. Tobias has joined us many times before we would stress and encourage you to go and listen to our previous episodes with him. Tobias is the portfolio manager of Acquires Funds, including the New York Stock Exchange, listed listed ETF acquirers, deep value ticker Code De Ape and the author of multiple books including Date, Value and the Acquirer is multiple. Tobias is an Australian now based in the United States, as Ren said, and is our absolute go to on all things value investing. And given the recent sell off in the high growth part of the market, the largely unprofitable companies, we thought that it would be a really interesting time to check in with Tobias to hear his take on the market and how he sees things playing out. So let's crack in. 

Alec: [00:02:25] Yeah. So, Tobias, let's start our big picture. If we've been living under a rock for the past six months haven't turned on the news. Haven't checked the markets. Can you sort of summarise what's been happening, especially where you are in the states? What have we seen over the past six months? 

Tobias Carlisle: [00:02:41] It's a problem. So let's let's run back a little bit more than six months, let's say 12 months. So as sometimes happens in the markets, the markets get speculative and stuff that's sort of more more pie in the sky. It's sort of the vibe of it, you know, rather than actually making any money or doing anything like that, which ultimately is what you want your public companies to do. The stuff that the promised better returns sort of down the road ran up really, really long way. And that happens sort of regularly in the markets. But like I say, every 10 or 20 years or so, you get a speculative bubble and it's often concentrated in tech is very popular tech sort of. There was a tech bubble in 69. There was a tech bubble in 1999 and there's probably been another one, but we've just gone through and so that all Ren up. I don't know whether it was the Covid lockdowns or stimulus payments or easy money. It's sort of all exploded. 2019 2020 and it topped out February 12 last year. And I think the best representative of that is the ARK. Cathie Wood's ETF Ark A Ark, which topped out at $156 on February 12 last year. And since then, the companies in that complex have been down sort of variously 75 80 percent, some of them deservedly so. There's probably some in that up getting to too good value. I haven't sifted through. I haven't seen a lot of them because I tend to be. I'm a deep value investor. So if you think about Buffett as being buff, it's like a fake calls himself a franchise investor. He's looking for stuff that will compound and grow over time, unlike brands, well-known brands and things like that. Apple's a great example of Coca-Cola as its famous things that he's held See's Candy, which is very sort of popular over here. Those things grow and compound over time. So he says he'll pay a reasonable price for what he regards as a wonderful company. But I try to do is I will buy at a bigger discount for a less good company that can be cyclical businesses. And so I end up with a portfolio that can be a little bit heavier industry cyclicals. And that stuff tends to be that's when the market is ripping and all the really speculative stuff is going well. Nobody wants to be anywhere near the cyclical cyclicals to smithereens. They've had a little recovery over the last sort of 12 months, like basically when Kathie's portfolio topped out on February 12. That was the that's the worst relative performance I've had in my entire career, but certainly which showed up in the ETF. And then I've gone the other direction since then, so I've had a pretty good run over the last four months. I've got two ETFs, I've got the Acquirers Fund, which is ZG, which is mid-cap and large cap US equities and acquirers, deep value, which is small and micro and the ticker that is deep.

Alec: [00:05:32] Yeah, nice. I love the ticker codes that you get with ETFs deep and then zig, which I imagine is easy when other Zach. 

Tobias Carlisle: [00:05:40] That's the idea. Yeah. 

Bryce: [00:05:43] Can you talk us through? What are some of the metrics telling us since February of last year when we saw that the peak of ARK? How does this fall over? Since since then to now, how does that compare to some of the other falls that we've seen in our lifetime? You know, you mentioned that the 99 into 2000, of course, that was the 2008 GFC as well. Is this time any different? 

Tobias Carlisle: [00:06:05] That's an interesting question. So I didn't mention in that earlier the two examples that I gave earlier, though, like the 69 bubble and that was like if you just had tronic Sunni names like electronics was, that was the big thing, then that's pretty Bryce. They were the really popular things of the day, and they they all got smashed up and in the famous bear market was like the 73 74 bear market, which was actually worse than 1929 on a real basis because they printed so much money that nominally it wasn't as bad as a nominal is like what did the actual index do, but real? It's like adjusted for inflation and adjusted for inflation, 73 74 was was worse than twenty nine, which is kind of hard to hard to wrap your head around. But that does. That's statistically that's true. And so then the next one, there may have been another one in between. I I just don't think of it this way. And then 1999 2000 was a similar thing where it was the dot com boom. You know, the dot coms and the electronics there, kind of like the emblematic stocks of the bubble. They're the things that everyone thinks about. But it does tend to be a little bit more broader base than that. So that 69, 70, 73, 74 kind of boom and bust, that was the nifty 50 era. And the idea was that there were these 50 stocks that was so good that you just had to have them in your portfolio and you could pay any price for them. And it didn't matter because they grew so fast that over time, whatever price you paid for them, they just grew into them. So you played these enormous price to sales metrics, you know, very stretched and it would grow into it. And then that sort of thesis was found out subsequently when all of that stuff got smashed to smithereens, even though they did ultimately tend to perform quite well. But you just don't want to be paying over what something's worth when you're buying it. Something happened in 99. The stuff that everybody knows about is all the dot.com stuff that everybody was in, and the same thing would be this time around. It will be the of it'll be software as a service or what what that will ultimately decide will be the emblem of the whole thing. But thousand, like Wal-Mart, got really expensive Wal-Mart, even though underneath it was a very good business that was still compounding away, like the business was growing by 30 per cent a year still over that entire period. The stock just went nowhere for 15 years. Microsoft was the same G.E. same deal. Everything just got too expensive in 1999. What tends to happen? They have a little bit of volatility. They crash with everything else, but then they can't ever kind of rally back. And so you get 10 or 15 years of just going sideways. I suspect the same thing will happen this time. There are a lot of good businesses out there. FAANG might be 

Alec: [00:08:38] something like that. So Tobias, hearing you talk about the nifty 50 just makes me think about the index era that we're living in today where, you know, we talk about the FAANG stocks as sort of these brilliant companies that you can sort of buy at any price, but also just, you know, the ASX 200 index over here in Australia, S&P 500 over in the States. Do you think there's echoes of this nifty 50 thinking in today's sort of passive investing market? 

Tobias Carlisle: [00:09:06] 100 per cent. And it's as you point out, I think the nifty new word for Nifty 50 is Fang and or Fatman or whatever, whatever. It includes tips. 

Alec: [00:09:16] But I think I think Bryce and I are trying to coin and mama when you include Tesla and India now. 

Tobias Carlisle: [00:09:25] Yeah, I like that. But it's funny, you know, a few. There's a few. Those names have taken a hit us on Netflix. Netflix has taken a hit. Facebook has taken a hit. You know, if I had to pick one Tesla, I'd just shake my head all the time. Tesla, I don't understand how Tesla trades. It's silly, expensive, and it's not that great a business, but it is growing pretty quickly. So it might be that the growth just fools people for a while, but it doesn't actually. Not much of it falls down to the bottom line of that business. Yeah, Fang will. Probably that will be the nifty 50. And it's entirely conceivable to me that in 10 years time we could look at some combination of those bigger companies and they haven't really gone anywhere. Although having said that, I would take it on a case by case basis because I don't think I think Facebook is is undervalued here. The question is whether the business will be as good as it has been a future Michael. Soft like you can run a chart of Microsoft's multiple expansion, it's amazing that it has grown earnings very quickly, but that multiple expansions being even higher as the ski jump kind of look to it, it's hard to see it doing that again. The ski jump part of it, like the earnings, could keep on going, but maybe the valuation will not go up as fast. And then Alphabet doing a little buyback. So evidently they think that's cheap ish Amazon too. Like, I just I can see like these things maybe muddling through, but I don't. I don't think the next decade will look nearly as cheery as the last decade has looked interesting. 

Bryce: [00:10:48] So tell us, a lot of the focus has been obviously on the collapse of the high growth and the vibe companies that you mentioned at the top. I like that. We're going to coin that several companies, a lot of the Equity Mates community or 

Tobias Carlisle: [00:11:00] couldn't use it because only else will get the vibe. 

Bryce: [00:11:03] Yeah, and a lot of our community have obviously bought into those companies and have had a great run. Are you seeing similar sort of falls in the value part of the market, something that we don't necessarily discuss as much on the show, so it'd be good 

Tobias Carlisle: [00:11:17] to get your thoughts on that. Yeah, Very Valley sort of had its bear market, so I've got a friend, Mikael Siminoff, who's who's stitched together these three data sets that run back to like eighteen 25. The data gets progressively worse as you get further back, but they, like the gold standard of data in the states is the French data set. And that's Ken French, who's Fenner and French who did this like. Famous research that came out in 1992 called the cross-section of returns, and that's where he came up with he and farmer Eugene Farmer, who's got a Nobel prise for behavioural economics. They were the ones who identify the different factors, and one of the factors is value, which they defined as price to book, which I don't use and nobody uses. No practitioner uses price to book, but it's academics like it because it doesn't very much from quarter to quarter looks pretty steady. Yeah, assets don't change much for earnings, can be up and down, and cash flows up and down all over the place. So they advocated for these factors, saying that there's there's a market factor, you know, that's based anybody's on any sort of like entry level finance. It's beta and then there's additional risk in volatility and then you've got the small minus lodge, which is the the small factor and high on Oslo, which is the value factor. And they've now they've identified like another two hundred six. There's probably as many factors as there are stocks now, so none of them are really useful, but they have their data set that runs back to about 1926. And then there's another data set, but the cows commission and he had this question. It came out in nineteen. I think it twenty five to like 1875 or something crazy like that. And he had this question whether there was any skew in stock picking. And he got these people who wrote newsletters and he put them on punch cards, which was like the first time that anybody to use a computer to do any of this stuff. And Benjamin Graham saw it was where Benjamin Graham got the idea. Legend has it for for his sort of value strategy, where it said you could do about 15 percent a year if you just bought these cheap stocks through this period of time that the cows commission Alfred cows was his name, he decided that there was no skill in stock picking. It was it was a random walk, which is where we get a lot of it, a lot of the efficient market theory from. But then these guys more recently have gone and found every annual report from a public company that they could dig up from 1875. And I think it goes back to 1825 in the states because they didn't have to publish all of the financial statements that we get today. They might have given you a balance sheet, but they weren't as complete as they are and there was no standardisation, but they did. If they paid a dividend, you could use that as like a proxy for value that they've looked at the dividend yields of these companies and found that companies with higher dividend yields perform better. So what they have been able to do is look back to 1825 to 2020 say, and they've found that value has massively outperformed through that whole period. But it's also had its worst drawdown in the last 200 years, and that's the one that ended in September 2020, which is kind of amazing that it took that long. The drawdown sort of started. It's like a 10 or 15 year drawdown where value hasn't worked very well. So there aren't very many people you want to identify themselves value anymore because it's it's been so ugly for so long. But I think that it does seem to have turned the corner like depending on what kind of value you are. If you just if you like the leveraged shitty kind of companies you started ripping around September 2020. If you're like me and you're like a slightly higher quality kind of value where they've got reasonable balance sheets and cash flows and things like that, it took a little bit longer because I think there was a bit of short covering and the reflation trade, the reopening trade as it was called for a little while there. And then so basically mine took about six months longer and my stuff started working around February last year. And that's that's sort of been the change that people were talking about, like going by value stocks. What they're saying is just go and buy stuff that's actually good cash flows in assets. Yeah, right? Because that's traditionally been a way that, you know, that's investing. Everything else is sort of speculation. 

Alec: [00:15:09] Yeah. Well, Tobias, you you had a you had probably had a tough. I think your book Deep Value came out in the early 2010s or mid tik-tok, 

Tobias Carlisle: [00:15:21] 2014, absolutely top tik-tok 

Alec: [00:15:24] full credit for sticking with the value strategy through what was probably six quite long years. You must be longer than you must be revelling in in the resurgence of value at the moment. 

Tobias Carlisle: [00:15:36] It's been fun. You know, it's it's hard to trust it yet. And I get to say since the start of the year, you know, it's been a little bit softer again because it's weird the way that the market works like probably this, this Ukraine situation building or whatever it's been since the start of the year. So that means that the Fed probably won't raise rates, which means that the tech stocks will start running again. Like as if were the great rate traders are going and putting on their bets by getting leverage along all of the the the sassiest stocks in the market. For some reason, that hurts the stuff that I have. So I've had. I've had another little sell off since the start of the year, but I can have a sort of top down look at my portfolio and what I estimate the forward returns will be. And as you can imagine as this market, as the stocks go down, offered returns, particularly in value stocks get better. And I think they're like three times what the arc complex are likely to do on an annual basis for a long, long way. Because the stuff is still expensive, it's hard to believe because it's come up so much. But for a long time, they were saying if it gets back to a 10 times sales multiple, that's cheap. If you look back historically like it's very rare, that stuff gets expensive as 10 times and not by 10 times sales multiple for an OK stock. That's a deep value stock, and I think that's what he's been saying she's been talking about. 

Alec: [00:16:49] Well, I mean, you look at some of those names like Zoom is still up 30 percent from pre-pandemic. It just went on a round trip and it was up 500 percent at one stage. And, you know, Peloton probably flat from where it listed, but it was just, you know, down what's down 80 percent from its all time highs. We want to move on and talk about, I guess, the value universe and how you look for opportunity there. But I think we we do have to just get your thoughts on where to from here for these growth companies. So when you think about the, you know, the Teladoc's, the Rochas, the zones, the Peloton's, the Cathie Wood stocks, do you have a view on what the future holds? 

Tobias Carlisle: [00:17:26] Well, because tolling is Tesla. Tesla is still very, very expensive by any measure. It really is assuming an enormous amount of underlying growth. I like Elon Musk and I think he's I think he's a great entrepreneur, but it's just the business is what the business is. It's still growing very quickly. So I think it's grew 50 percent last year, which is kind of amazing. Like it's a pretty big business, but the stock price is just way, way ahead of where any, anywhere that it can get to reasonably in the next 10 years or so. So that's his biggest holdings. So that'll be that'll be a tough. It'll be a little bit of a weight in the portfolio. The other thing is like, so Zoom is interesting. So my co-host on my little podcast, he had a bet with somebody where he had curate, which is which is the home shopping network, I think home shopping network or one of those. Something like that over here. Like, that's not a great business, but there are people who watch that stuff as well that I'm devotees and they spend a lot of money on it. And it's controlled by John Malone and the Liberty guys who have very smart capital allocators. And so they've been doing some financial engineering in the back of it. And that's sort of got that stock moving and it's massively outperforming Zoom so that he had this little bit with somebody where he was long curate, which is the owner of that, and they were on Zoom. Zoom has been smashed to smithereens and sure, it's done quite well. But now he wants to reverse the bit, which I think is probably not a bad idea because Zoom Zoom isn't what I would regard as deep value, but it is free cash flow positive and it is growing pretty rapidly. The growth is slowing pretty substantially, but I don't think Zoom's going away. I mean, it is Zoom for a lot of stuff. Something will become a standard. It's just easy for everybody to get on the same thing and use it. Then it probably. And at the moment, it's looking like Zoom. It's shame for the guys who started Skype like it could have been didn't update the software. 

Alec: [00:19:10] Well, they they sold to Microsoft. So, you know, they're they're okay. 

Tobias Carlisle: [00:19:14] They did well. It's been sold a few times, right? It's yeah, now it's not so much the Microsoft. I think things used to go to die, but Microsoft. Yeah. 

Bryce: [00:19:24] So, Tobias, before we take a look at the opportunities in value, we're just going to take a very quick break and hear from our sponsors. So there's no doubt that you've got a fresh glow about you and the moment for value investors here. Your universe is a lot bigger than it was perhaps a year or two ago, and we're really interested to hear about how you're going through the process of filtering through the opportunity set. You've spoken about free cash flow and and and looking through some of the companies that have taken a big hit. So can you talk us through and talk the community through how you go about filtering and finding investment opportunity? 

Tobias Carlisle: [00:20:05] I have a little website that shows what I think are some good opportunities, and you can screen a few different ways. This is the update that I made to this website. So previously it's be any enquiries small, which is basically the way that private equity firms and activist investors think about stocks. You look at the operating income flowing into the business, which is adjusted for interest and taxes, so it's about operating income. And then you compare that to the enterprise value. So the market cap is what the stock is trading at, multiplied by the number of shares outstanding. And then it's like owning a house like the market cap is the equity in your house. So if you own if you have a mortgage on your house, you can have a $1 million house with a $900000 mortgage and $100000 in equity. The equity is the market cap, and it doesn't tell you what the house is worth, and it doesn't tell you how much debt you've got in your house, which are important things to know as an investor. And so what my metric does look set the enterprise value, which is the total price of the house, compares it to the income. So if you had if it was a rental and you were generating rent income, you would want to know how much money does this house relative to another house down the street. And ideally, you want to be generating as much income as you possibly can and paying as little as you possibly can. That's the price discussion. That's a very good metric and has worked very well for a long period of time. I do other things in there as well. That's sort of the first cut. But one of the other things that you want to look at is how much money does the company generate on what it has invested in it? So companies like Google and Facebook that don't have a whole lot of assets in them that they generate lots of returns and they've got some protection by virtue of the fact that they're networked and the more people that use them, the more valuable they become in Facebooks example. That's been why it's been so important for Facebook to, you know, that Instagram acquisition probably saved Facebook. And now they run this problem where Tik-tok has grown bigger than they are. I think with Facebook and Instagram were social. So you wanted to see what your friends were doing on their Tik-tok is different. Tik-tok is viral. It's what is the most interesting thing that every other person on the site is looking at, and it feeds you that so you want to go viral and it's slightly different sort of approach. But I think that Instagram has achieved a lot of that virality anyway, because there's different ways of engaging with Instagram, with the Reels, and they've tried to capture a lot of that stuff. But the idea is basically how much assets does it take to generate how much operating income? Because we could make it make it more comparable to the enterprise value discussion that we're having before I look for those things, ideally when something cheap and you want something, it can throw off plenty of cash based on what's invested in it and not try to fill a portfolio with things that are reinvesting at pretty high rates of return on an incremental basis that have some sort of protection there and that have a very long history of of actually doing that. It's very unlikely that I hold a lot of tech stuff. I just tend to hold stuff that's been around for a while. But funnily enough, that doesn't mean that I end up pulling. I've got some dot com 1.0 stuff in Oracle Cisco, because those still a net appliance net and they're funny, they're funny businesses because they're they're sort of internet plumbing now like almost utilities that make plenty of money. Wow. And because they're cheap, they buy back stock all the time. So that's great if you if you're a shareholder at 

Bryce: [00:23:23] the time of the matter, change Ren and I made a bet that I think it would eventually hit a trillion dollar market cap. Ren doesn't think it ever will. Whose side of the bed are you on, Tobias? 

Tobias Carlisle: [00:23:33] Well, so it's I think it's about five hundred and sixty seven billion today around about there. And I think it's about half price. So I think it's worth about a trillion bucks. 

Alec: [00:23:44] And that's a deep value investor.

Tobias Carlisle: [00:23:47] So here's the wrinkle to it. Here's the wrinkle. I don't own it, and I may end up owning. I may not end up owning it. I don't know. I haven't made that decision yet. I don't make that decision for another few weeks in relation to Facebook. But Facebook's price relative to its fundamentals is wrong. Right now, it's either half price or its fundamentals are going to deteriorate to the point that it's only worth where it's trading. And so the market, you know, we assume that the market is more right about these things than wrong, so that the thesis that I have to prove to myself in order to buy this thing is that it's not going to deteriorate as much as that. And I've got some headwinds. They've got some real issues. And that is that even though the data doesn't seem to show this, the data seems to show that there are plenty of people still using the website, even the blue website. Yes, there 

Alec: [00:24:31] are all bots out. people in our Facebook group is anything to go on, I reckon about half of Facebook's users a box. 

Tobias Carlisle: [00:24:43] So that's interesting. So I don't know anybody who uses the blue book, and I don't I haven't. I've got accounts. I haven't looked into the flow five idea. What's in there? Yeah. You know, but I use I still use Instagram. Like I started using Instagram because it's a matter of having kids and I wanted to see them with their kids. But now nobody posts on Instagram anymore, either. And I'm too old for Tik-tok. I'm going to go and figure out how to use Tik-tok. Kids are too young to use that stuff, so I'm sort of like business analysis is really, really hard. That's why I tend to be much more of a quantitative type investor. I look at the financials and try and figure out what the financials are doing, but I acknowledge that, you know, Facebook's got it's got an uphill battle and this matter. The first thing you know, I don't know if anybody wants to go back into its walled garden, which is what the metaverse sounds like to me. I don't know, but Zuck is very smart. They own a lot of money on the money that they've got invested in it. In terms of advertising, there's really only people that advertise on Google and they advertise on Facebook and they advertise more on Facebook because they can get that more granular. They know, you know what you like and who you are when you're on there. They like advertising to you that way. I think it's worth taking the bet. But I don't know that it's going to work out, 

Alec: [00:26:00] So, Tobias, we've mentioned a number of quantitative factors that, you know, the market cap and then the enterprise value we've looked at, you know, return on invested capital or return on equity, things like free cash flow. A lot of quantitative factors, I guess, do qualitative factors like quality of management come into play in your filtering process? 

Tobias Carlisle: [00:26:23] Yeah. So it's an interesting question. So they do, but I've figured out a way to turn them into quantitative factors. And the reason that I the reason I do that is that nobody becomes a CEO unless they're pretty charismatic people. You know that people who are good at sales, they tend to be pretty good looking, well-dressed, fragrant, all those kind of things. And yet some people aren't so sure. 

Alec: [00:26:51] So I'd love to see a study on CEOs and how fragrant they are. And maybe 

Tobias Carlisle: [00:26:59] But all of is the point is that all of those things you can find that they, you know, they're very persuasive and you've got all of these like these things that unconscious things working on you when you talk to them. And so you like to believe what they say. Does likeability them saying the right thing therefore translate into them executing in that way or achieving those things? Or can they even do that because they're always competitive pressures? There's stuff going on in the firms. There's just a million pieces moving. So what I like to do is I've found this sort of quantitative ways of doing it, and one of my favourites is just share buybacks. So that's a very powerful signal. I think there are there are funds that exist, and all they do is buy stuff that has the highest share buyback going on and sometimes they short stuff that's got the most shares issued. And so if you think about the reason why that is a company, anybody can do a buyback at any stage. The buybacks are almost all done at the wrong price at the top of the market, and there's no buybacks at the bottom the market. So you'd say that sounds like a terrible fact, but the way that you control it is, you say there has to be material buybacks, there has to be material relative to the size of the business relative to the size of the company. And what that achieves is it tells you that they're generating the free cash flow. They have the resources there to do the buyback. They're able to do it in a material size, which means that it's undervalued relative to what they can spend on it. And it also tells you that management is doing the right thing if they're if they are undervalued, often your stock is the best option for you. The tension, though, is, of course, when when you get undervalued in your industry, often there's a lot of other undervalued companies around an industry that's a good time to be going and doing acquisitions. If you've got the firepower on the balance sheet to do so, the record of CEOs doing acquisitions is pretty bad. So my preference would be like the least objectionable use of capital is typically to buy back stock. So that's one really simple way of measuring how good management is. Are they doing a buyback? And when you look right now at the big companies that are flowing cash and doing buybacks, you know, they are like Facebooks doing a buyback. And that's a good time, I think, for Facebook to be doing buybacks. So that's what the market is telling you when you get too cheap. The market is telling companies to liquidate, and so responsive managements should listen to that signal from the market and liquidate, which is what you're doing when you're buying back stock. 

Bryce: [00:29:11] So before we get to some specific companies that are on your screens and we always find the companies super interesting that you bring to the community outside of tech and growth, sell, sell off, are there any industries or sectors that are really sort of appearing frequently on your value screens at the moment? 

Tobias Carlisle: [00:29:30] Well, energy has been one. For a while, if you needed a signature, I sort of joked about this a little bit on the podcast, but the best signal for energy, it turns out the best contrarian signals when oil went negative whenever that was sort of 2020 or whenever that was like 2020. That was a pretty good signal to go on by a whole lot of oil companies because since then they've all had this, this great rip. And even before oil went negative, if you looked at the composition, you know, at one stage, Exxon was the biggest company in the stock market in the US, and it was for a long time occupied a very big chunk of the market. And that whole energy industry has now shrunk down to virtually nothing. Energy is still basically powers the entire economy. And if we have if you have a crash, it's not going to be because the Fed has raised interest rates because energy has got so expensive and sort of achieves the same thing. Energy filters into everything. It acts somewhat like an interest rate does. It just makes stuff more expensive to do. So I think energy as a sector has been interesting and the screens were certainly full of that stuff, and I still seem to be in there and everything from, you know, the Conoco-Phillips kind of producers to midstream to the pipelines. But it's the whole complex is cheap and the whole complex has been shit for a little while. So typically these things take a long time to play out. And like if the Ukraine and Russia thing blows up even more than it is, that's their big energy exporter. So that's going to get even even wilder, I think. Mm hmm. 

Alec: [00:31:01] So Tobias would love to move to a couple of individual stocks because we imagine that it's the stocks that are at the top of your screen are stocks that we probably haven't spoken a lot about on the podcast as being young people that are just obsessed with growth names. And so, yeah, and Vibe Company. So we'd love to maybe unpack a couple and just hear what the company does. What metrics are make it look attractive from a value perspective? And then, I guess, are there any risks when it comes to looking at these companies? Could they be a value trap? What's the watch out? How do you sort of navigate that? So would love to turn it over to you? What what are some of the companies that are appearing top of your screens at the moment? 

Tobias Carlisle: [00:31:47] The one that was in the screen for a while that has started to run a little bit was Lockheed Martin was kind of interesting. The reason that Lockheed Martin gets cheap is because there is some a new president comes in over here. The market seems to get nervous about the amount of money that will be spent on defence, and Lockheed Martin makes a lot of the fighter jets and that sort of stuff. And so Lockheed Martin tends to sell off. But Lockheed Martin has been very consistent for a very long period of time. And so I bought Lockheed Martin last year when it was reasonably undervalued, and it was probably a reasonably good stock, too. And Lockheed Martin stunt like when you get some sort of issue in the Ukraine. Lockheed Martin takes off like a scalded cat. You know, I don't want to be a war profiteer, but as my as my co-host points out, they only do well when when peace comes back. So maybe, maybe we're a peace profiteer in that instance, the things that are in the screen at the moment that really stand out to me, there are two. One is and these are these are sin type stocks. But Philip Morris and Altria, you know, they've both got incredible returns on assets over the last five years. They're like forty per cent return on on assets, which is extraordinarily high. 

Alec: [00:32:57] It's amazing. 

Tobias Carlisle: [00:32:58] It's not that expensive.

Alec: [00:32:59] It's amazing how these tobacco stocks just keep doing it. 

Tobias Carlisle: [00:33:03] Yeah, they seem to have fewer uses, but they just they're quite sticky for. Yeah, I don't know how good everybody feels about buying those things. They're certainly not. They're not really companies that I feel particularly comfortable holding, and I don't I don't stick them in the fund or anything like that. Facebook is another one, and I think there's a pretty good argument that, you know, lots of people think that Facebook is a sin type stock, too. So those are the ones that when when I open up my screen, they really stand out as being unusually good and unusually cheap. I've also held, you know, so that's one of the things that's happened here is that Columbia has had this great run. So anything that's sort of close to one bar looks pretty cheap. So there's this Western Forest Group is cheap. And then there's this company. Zim Zim is the ticker there, like a like a shipping company. They're very well managed. They make lots of money. Shippers have been crushing it for the last few years. And you know, that continue to be issues with shipping in the last estimate I had for when it was going to be sorted out, coming through the Los Angeles ports or something like late 2023, which I interpreted as like, that's as far as we can think. It goes beyond that.

Alec: [00:34:07] Yeah. That's cool. Wait, wait, listen. We listen to I'm going to get the pronunciation wrong. Musk the like the international shippers earning call. Earnings call. And they said the same thing like mid-2023 was when they're expected to start unravelling. J. 

Tobias Carlisle: [00:34:23] Yeah, that just sounds like that's the number. That's the thing you say when you don't know you just like we had to stumble by then, we can't figure out how it's going to be done before then.

Alec: [00:34:29] Yeah, yeah. True. That's unbelievable. We've spoken a little bit about Met or Facebook in this conversation, and, you know, it's relevant because it's top of your screens. I seem to remember the first time we spoke, you mentioned maybe not at that time, but previously Apple had been really high up in your screens. And I always just think back to that and think, God

Tobias Carlisle: [00:34:53] Well, Apple's funny, isn't it? Because Apple, I even wrote about Apple in the acquirers multiple because it's one of those stocks that, for whatever reason, nobody seems to believe in it like consistently, because I think it's this iPhone replacement cycle is about three years and people seem to forget every three years. Or there's this question about whether people will continue to buy the new iPhone and so it could chip in 2013. And I tweeted about it in 2013, and then it got cheap again in 2016, and then it got cheap again in 2009 10. And that's when Buffett loaded the boat in 2019. And here we are in 2022. It's looking pretty expensive to me at the moment, but it's not many of my screens, but I wouldn't surprise me if it maybe, maybe Buffett buying it has sort of put the seal of the Buffett seal of approval on it. Yeah, it's no, it's not going to trade cheaply anymore, but it's been an interesting one. I agree with you. I didn't buy it. I should have. 

Alec: [00:35:46] Yeah, or people seed of Buffett buys it and they're like, It can't be a tech stock if Buffett's buying. So maybe that's like a jinx on it. 

Tobias Carlisle: [00:35:54] Buffett is the best tech investor it sends out of the last 30 years. I don't think anybody would like that, but that's all I've been saying. That's the greatest trait ever because he put 40 billion or something to work, which is a lot of money. It was about a third of his book, so it was a lot of money relative to what he was slinging around or a third of his cash. And now he's had a lazy trip on it or more. Maybe it's a quadruple now. So in about two years, the article has still got it, and he's good at tech too. 

Alec: [00:36:20] I mean, it's a pretty good trade, but is it better than when Bill Ackman put that $20 million hedge on and then cried on TV and it turned turned it into $2 billion? 

Tobias Carlisle: [00:36:30] The biggest, no tears. The best, no tears. But yeah, the only thing is so I think the bigger you got to give more weight to the bigger trades because whenever I say that, somebody always comes and points out that the South African company that put the Tencent trade on and never sold it, Naspers Naspers had this big chunk of Tencent. And so Naspers, I think they put $20 million into it or something like that, which relative to what they had, was a pretty big bet, but it wasn't the biggest bet. But then they just held it. While it's run up a thousand times something like that, Naspers is like Naspers has had to split into two, and it's still like that. The two biggest companies on the South African Stock Exchange, so that everybody says that's the greatest trade ever. But Buffett did it. Nobody knew if if you say, OK, well, let's work backwards. If we look at every single stock on the entire stock market and find out who made any trade ever and didn't sell, and then, yeah, you're going to find this South African company bought this Chinese stock. But Buffett was, well, well known in the most popular name on the market or the biggest one of the biggest companies on the market and apple, and put an enormous amount of money to work. And it's worked out really well. I think, you know, kind of get all of those four things together again or for a very long period of time. So I think Buffett's got it. Yeah. 

Alec: [00:37:37] Yeah, crazy. Unbelievable. 

Bryce: [00:37:38] So, Tobias, before we wrap up, you know, we are seeing a lot of commentary around buying value get into value, you know, at the time of growth is sort of over. And for our community, it can be a bit of a confusing time to to try and navigate. Do you have a piece of advice? You know, someone is hearing that sort of news. Is it as easy as buying evaluate TAF or what would you sort of close this up and summarise for our bigger audience? 

Tobias Carlisle: [00:38:04] You know, this is this is my bread and butter. This is what I do. So there's lots of different ways that you can engage with me. So I have a book acquires multiple, which is like ten bucks. It's ten bucks us. I don't know what it is in Australia, but it's it's cheap and you can read it in a couple of hours through it into a fifth grade reading level. So it's pretty easy to get a grasp of 

Alec: [00:38:23] so Bryce Ren able to get 

Tobias Carlisle: [00:38:27] really hard to write it to a fifth grade reading, and it's not going to do that. Then that gives you an introduction to the website and how to use the website, and the website has some US names on it anyway. And then I have ETFs that buy names out of those two screens, for the most part. And so those are ways that you can engage with my style of value. But there are lots of different styles of value that are people who are more towards the buffet end and people who are even pricier than that. And that's there's still value investors. They're just doing a different sort of calculation of value to the one that I am doing. But basically, the idea is that you've got some fundamental justification for what you're doing when you're buying these stocks, and that's really all there is to it. You think that the business can grow very rapidly for a long period of time, and you can buy it at a price now that gives you a good enough risk adjusted return over that next five or 10 years or whatever. It, whatever you're sort of holding period is that's value investing. I think it's a little bit harder than the stuff that I do, but it's it's definitely what's his name, common stocks and uncommon profits. Phil Fisher still value investing, which is Buffett says that he's 85 per cent Graham 15 per cent. Sufficient so there are people around to, you know, 100 per cent Phil Fisher, and they've had a pretty good run over the last 10 years.

Bryce: [00:39:38] So a reminder for a few guys listening the ETFs that Tobias runs deep and zig. So check them out. If you're interested, Value After Hours is the podcast that Tobias runs and deep value and acquires multiple are the two books so plenty of content to keep track of and engage with. And Tobias is if you're if you want to ask him questions or whatever, I'm sure he would be happy to answer. We like it. We don't care about his direction now, but he's very 

Alec: [00:40:05] he's very active on Twitter. Although the the Twitter handle isn't Tobias Carlyle. 

Tobias Carlisle: [00:40:11] No, no, it's great. In fact, it's really how I did it because it was the name for the old blog that I had this guy. And basically it was like punks, you remember? makes no sense. But anyway, it's it's fun I'm stuck with because I've got the blue checkmark. I can't change it.

Bryce: [00:40:32] All Tobias. As always, it's been an absolute pleasure chatting to you. We love checking in with you what feels like on an annual basis now to get your view on markets. And now it feels like it's absolutely your time to shine. So we'll keep track of you over the next 12 months or so and all the best. And I know that our audience would have taken a lot of value from that conversation. So thank you very much. 

Tobias Carlisle: [00:40:53] That's very kind, the gents. Thanks very much for having me. I really appreciate it. Love chatting to you too, particularly, and I see that you guys have been crushing it to, I guess, a company, the AFR and a few little things. So congrats. I think I read it on LinkedIn. 

Bryce: [00:41:17] Oh, okay. Oh, thank you very much Tobias.