My High Conviction Stock: Nathan Bell – Floor & Decor (NYSE: FND) + Mastercard (NYSE: MA)

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. If you are joining us for the very first time, welcome and thank you for becoming an equity mate. If you're still getting up to speed with the basics, you can check out our Get Started Investing podcast. But let's crack on for today. My name is Bryce. And as always, I'm joined by my equity buddy, Ren. How are you going? 

Alec: [00:00:42] I'm very good, Bryce. I'm excited for this interview. We have a returning guest or returning favourite Nathan Bell from InvestSmart, and we're going to be diving into two companies. Last time I believe we only spoke about Australian companies. This time we're going global.

Bryce: [00:00:57] Yes. So Nathan Bell of Intelligent Investor. Nathan, welcome. 

Nathan: [00:01:01] Thanks. I'm glad you said Warren Buffett status and not age. 

Bryce: [00:01:06] We are actually going to go and see him over in Bourke Shire in Omaha for the Bourke Shire conference this year. Given both of their ages, we felt time might be running out. So have you ever been, Nathan? 

Nathan: [00:01:19] I have been a couple of times. What we used to do in my old company was whoever was basically the last analyst in who was typically the youngest analyst, had to get up at four in the morning and go and line up and save seats for everyone else. And it is the single worst job you'll get as an investor in your life, trying to hold seven seats in an auditorium that's going to fill up twice over for like three or 4 hours while everyone's trying to pitch those seats is a nightmare. 

Bryce: [00:01:48] JAY So we haven't even thought about that when you just thought you get a ticket on a seat, on your ticket, in your role in. But if we're going to have to be sending our juniors saying.

Alec: [00:01:58] He's going to join us.

Bryce: [00:01:59] Nice. 

Alec: [00:02:01] Then let's get into the interview today and we're excited to have you on because intelligent investor are launching a new fund. The Intelligent Investors Select a Value fund, ASX ticker IISV, which is an actively managed ETF of about 20 or so global industry champions and market leaders. And so today we're here to talk about two of those global industry champions and market leaders. 

Bryce: [00:02:29] Yeah, so let's kick off. We've got a couple of companies to dive into and then pending. Time you did you did mention that you've got so many stocks in your head. 

Alec: [00:02:40] I think. 

Bryce: [00:02:40] You need to get them out. 

Alec: [00:02:41] I think you promised one international bank that makes the Australian banks look very expensive. So even if we don't have time to delve into it, we'll get you to give us the name at the end of the interview. 

Bryce: [00:02:53] So the companies are the fund is made up of about 70% international stocks and we'll touch on the purpose of the fund in a moment. But let's start with the first one, Nathan, which is MasterCard. Now, if you have been living under a rock, let's just start with what MasterCard is and a bit of a history and then we'll get into the bull case and a bit of the nuts and bolts. 

Nathan: [00:03:13] Yes. So MasterCard shares a duopoly basically on the financial transaction rails of the financial system with Visa. And the history goes back to the late 1950s. So these companies have been around for a while. And it started with the launch of the bank Mary Card, which would eventually become Visa, and a bunch of financial institutions got together and say, Well, we're going to launch our own card. And that's eventually what became MasterCard. Now, unbelievably, MasterCard listed in 2006, and I clearly wasn't paying attention because the stock is up about 100 times since it listed, which is just phenomenal. And this is what I really want to see is why I picked MasterCard. I mean, there's a whole bunch of incredible companies you just can't find on the ASX that we could talk about. But I just thought this one in particular, it's easy to understand because people are probably customers of it. You know, basically everybody has a Visa or MasterCard and the business is actually quite simple, but it's also your classic Warren Buffett stock. And again, it shows that when you buy that quality, it's just got these impregnable competitive advantages that competitors just can't compete with. And you happen to be in the right spot at the right time, you know, with this switch to digital payments. And yeah, the returns can be absolutely phenomenal for low risk. And that's what I really try to tell people what this fund is about, because I think so many Australians have thought about investing overseas or can see the writing on the wall for stocks like Woolworths or their banks who share prices haven't gone anywhere for over a decade now. Yeah, you can see that there's no growth left in those businesses and go, okay, well there must be these, you know, I know these great businesses exist overseas, but it's too time consuming. I'm too afraid to go over there. It's too much work or yeah, it's too complex. And I see all these strange Asian companies and CEOs going missing and all this sort of stuff. And so that's what this genesis for the fund was. And so MasterCard is typical of that. It's just a very simple business. We understand where they take a small charge on our everyday purchases and those pennies essentially add up to at the moment about ten or $11 billion in net profit. This is an absolute financial beast, this company says, and the previous CEO who was there from 2010 to 2021 is a guy called AJ Banker, and you're quite a lively personality. So he was quite well known and he was 80 or 2021. And I think in that decade revenue increased fivefold and net profit increased fourfold. So this is a $380 billion US dollar business and nearly half a trillion or over half 1,000,000,000,000 AUD. So it's a really big company and yet the net profit is still growing in the mid-teens. So, you know, you just don't find that in Australia, you just don't find these type of businesses particularly growing that fast. But the net profit is a ridiculous 45% of revenue. So like almost half of revenue falls to the bottom, bottom proper bottom line. And if you look at in Australia, for example, where CSL or ARIA group would probably be hung out there is to have by far and wide two of our best businesses and extraordinary margins, particularly in those property classifieds businesses, even their margins 20 or 25% and they're the absolute pinnacle of what you can find in Australia. So this is an absolute monster that's still growing quickly at $350 billion market value. 

Alec: [00:06:45] So Nathan, let's just stop there because I think a lot of people across what MasterCard is, they've seen it on their credit cards or their debit cards, and most people are familiar with the duopoly that exists in payment rails between Visa and MasterCard. And both have been incredible investments and incredible businesses. And, you know, as more and more of the world gives up cash and most of digital payments, it feels like they've got a long growth runway ahead. And you've just told us that they have 45. Well, MasterCard has a 45% profit margin. It did $9.9 billion in profit of $22 billion in revenue, which is astounding. The best some of the best profit margins in the world. The obvious question out of all of that becomes why aren't there other companies entering this space trying to bust up the duopoly and accepting a 30% profit margin or a 20% profit margin and trying to undercut those two giants? 

Nathan: [00:07:43] So the two big risks, so there is the competition. So we can talk about that in a second. And the other one is regulation. So if the government came in and put a cap on the prices or the fees that MasterCard and Visa took a charge, that's the other big risk. And they've actually tried in the US to make that happen. And it's happened for some particular client groups. And MasterCard and Visa have just offset that with putting up their fees elsewhere. So but that is the big risk to me. The reason the competition hasn't been able to take them on because American Express is essentially the other the third player and they essentially have their own network. And it's a different business as well because they've actually got a bank within Amex. So it looks like they take the credit risk. So all Visa, MasterCard do is all they do is just charge the transaction. That's it. Whereas Amex actually lends money. So that creates a very different business, you know, very capital intensive when you have to start lending huge amounts of money and that's why you don't get as big a profit margins. And then you also have to worry about a recession if all of a sudden people can't pay back their debts. So that's really been the third main competitor. And if you have a look at, you know, Afterpay well, these sort of bnpl companies I'm sure everyone's familiar with, they've been very popular with young people who have been steering away from credit cards because mainly because I think there's a and I think there's just a bad feeling about them generally that they're taking on debt. And they probably see a lot of adults who have got too many cards or borrowed too much money. And Bnpl just seems to be a much more modern approach, smaller amounts. But I think what you're going to see on this particular competitor over time, and I may be wrong, but the Bnpl sector's not even profitable anyway, so I don't even know whether it's going to really last as a service. But the one thing it does do well is it actually provides the retailers with good information about what's selling. And and and this shows that the average person who has a PayPal spends more money with that buy now pay later account than if they didn't have it. So so that's a positive. But again, you've got some credit risk if people are paying back there and the money that because they are actually borrowing money technically, even though the PayPal sector says otherwise. But actually what happens as you get older is that there's a massive network where a absolute global network of merchants signed up to Visa, MasterCard, and that takes a lot of time to put together. So, yes, you've got to own the rails, but you've got to sign up all the customers. So it involves a lot of. Marketing as well, and just a lot of, you know, walking the pavement to sign everyone up so that it's expensive. And so you've got to do all the marketing as well. And then I think about myself. I'm 47 years old. I pay off my credit card every month just with a direct debit. Like I don't even have to look at it. But when I do get value out of is the the points system and I'll get a whole heap of free flights each year and it's worth it. So it's worth paying the 350 bucks, I think, annual fee. So you've got this whole ecosystem that comes off the cards that no one else can compete with in addition to not actually having to build a network. Because if you actually going to go and build a network like that's going to cost an absolute fortune and an enormous amount of money that no one's going to bother spending because then you've actually got to go on at market and compete and create the whole international ecosystem and industry from scratch. And it's just like it's just a monumental task. And that's why you've got companies like Apple Pay who are saying they just ride the rails and they just rather get a little clip of the ticket rather than spend, you know, a zillion dollars trying to compete. It's just too expensive. 

Bryce: [00:11:23] What do you think about MasterCard? It's as you said at the top, it's one of the just those big stable sort of earners that is just improving its profit year on year. Where do you or what do you factor in over the next five years or so from a growth driver point of view? Is this just a story of trying to get more and more market share from its competitors? How do you say like revenue growth over the next sort of five years?

Nathan: [00:11:46] And there's a couple of things here. So and can actually bring portfolio management into it up, which is a really important part of looking at these stocks because they look like the perfect stocks, right? You say, look, this stock is so good and it's priced reasonably. It's like it's in the mid to low thirties as a milk price to earnings ratio at the moment in a couple of years, assuming the growth that everybody expects comes through, it'll be in the low twenties And you know, so your line is absolutely world's best business in the low twenties if you're patient for a couple of years and like that's a really nice outcome for a business that should be able to grow in the teens for yeah, indefinitely basically. And but you've got these big risks and you know around regulation which you can't get rid of them. But the question is, you know, would you run with 50% of your portfolio in a company like this? And or maybe if you've owned it since 2006, you know, you might and just hang onto it, let your profits run, but from it, from a professional funds management perspective, and there are a lot of funds that actually have a lot, you know, 10% plus of their portfolio in Visa and MasterCard because they've just been so good and they just keep trimming them as they go along. But the reason they trim them is because you just never know. And one of these big risks could come up and if you've got 50% your portfolio and all sudden worth half and you know, that's a hard thing to explain to your investors. So I think what you can do with each business, no matter how good a business is, you've got to have some sort of limits on your portfolio management and, you know, maybe where you end up going with, you know, 5% MasterCard and 5% in Visa because you just can't get rid of those risks.

Alec: [00:13:23] So, Nathan, we've spoken a little bit about MasterCard. You've touched on management, you've touched on growth and the competitive threats. I guess the question is to sort of wrap it all up and, you know, to really understand why, you know, MasterCard has been a great investment since 2006. It's made a lot of people a lot of money. But that's all that's all old news for investors, you know, for yourself looking at MasterCard today and thinking about putting it in your portfolio. So what does the company look like in five or ten years if management can execute? Is it radically different to what it looks like today or what vision underpins the thesis? 

Nathan: [00:14:05] So come back to your previous question as well. The difference between Visa and MasterCard is that roughly these numbers, but roughly two thirds of Visa's business is in the US and the other three from around the world and MasterCard is the opposite. So MasterCard typically trades at a bit of a business premium to Visa, but it's because the market thinks that there'll be more growth overseas and they will be in the US. And you can argue about that. You know, I'd say that that should be true. So, so the thing about this company is we don't actually want it to change. And you know, if there was some sort of massive technological hiccup coming our way that maybe required a massive investment or was going to threaten those gigantic profit margins in MasterCard, you know, then that's something really to worry about. And again, you might just factor that into your portfolio management or just make a smaller position, you know, rather than carrying five or six, maybe it's a three or 4% position if you thought those risks were higher than what we do. But it's really just more of the same. You know, this is we're not trying to reinvent the wheel here in any way. This is when I talk about MasterCard, I feel like I'm like all those fund managers talking to you about CSL. You know, like, you know, I'm sick of it. You know, everyone says it's like the old days where if you bought IBM, you know, you never lost a job. 

Alec: [00:15:22] Well, well, for people listening who are who think that Nathan's just talking about a stock that we've all heard of before, I can assure you the next one that we're about to speak about, most people won't have heard about to the point where Bryce and I were figuring out the correct pronunciation before we started recording. 

Bryce: [00:15:39] That's because we were given to us with the spelling mistakes.

Alec: [00:15:41] So that kind of ruins the mystery. 

Bryce: [00:15:44] That's a good laid up. As we said at the top, the fund is made up of international and local equities that Nathan and an intelligent investor team believe are trading at undervalued prices. The fund is still at an expression of interest stage, so it's important that you register your interest so that you can get priority access when the initial offer opens. The link for that is in the show notes. Now, we're going to just take a quick break. And on the other side, we're going to dig into a second stock that is part of this portfolio. So we'll be right back after this short break. Now, today, Wren and I are joined by Nathan Bell of Intelligent Investor, digging into the idea and concept behind the Intelligent Investor Select Value Fund ticker IISV, an actively managed ETF of about 20 or so global industry champions and market leaders. Now, Nathan, before we jump into the second stock, can you just touch on the international coverage of the fund and why you've launched it like we see fund after fund come to market and really like to understand how it's different to some of the other international funds that are out there. 

Nathan: [00:16:48] So there's a whole bunch of reasons. But one of the things that really frustrates me is I see all these fund managers and it's becoming increasingly so where they've got a stable of funds and the best fund by far in terms of our performance and maybe it's usually often it's actually the only outperforming fund is the fund that can actually invest overseas and own some Australian stocks as well. But I think it's becoming more and more common as well, because I think people are starting to open up a bit more to overseas stocks generally. So there's a combination of trends there. So with the performance on now, existing trio funds on average I think is about three and a half per cent per year. There's some pretty heavy restrictions on those funds. Main one's an income fund for a start and I think that's but I can't find an income fund that gets anywhere near to the performance of our funds. Over the same time, I get streaks ahead and it's not based on a B. S benchmark like including franking credits in your returns and not putting the franking credits in the index. All that sort of nonsense you see everywhere and in ones and ethical funds. Again, huge restrictions on the sort of stocks. It's benign and yet we've had that great outperformance. So so the reason I really wanted to create this fund is because by April, being able to buy these wonderful businesses overseas, plus combine them with some of our best small cap ideas in Australia, and that just creates the best possible opportunity to outperform out of all our funds. And as I keep repeating, but I just think people are finally starting to appreciate because I use Google every day and because they see Apple and they just seen how good these businesses are because I use them every day, I think it's just become a lot, just a lot more open to it, along with the frustration probably of the poor returns of some of the long held Australian stocks. But one of the thing has been holding as well they think it's been holding me back is it's one thing for me to run the fund, but we have a subscription service, which I'm sure a lot of your listeners have heard of or tried before at some point, and to introduce 20 new international stocks and cover them on an ongoing basis. Every day is a huge task and I just don't have time for that. So I've just been restrained in that way. And so we hired an analyst, Nick Cummins, who was 100% responsible for this. Next up we're going to talk about. So if you don't like it, blame him. And he's able to write up all these stocks and keep people abreast of them. So if you're the sort of person that has no interest in the fund, you want to do it yourself. But you've just been waiting for someone to hold your hand and cover these great businesses, and then Nick's going to do that for you. And I think April seven will kick off the subscription service. 

Alec: [00:19:23] And we should just clarify. Nick Cummins Not the Honey Badger. He's not. He's already redhead. Yeah. So let's get into this, this second stock, because as we were saying, Bryce was pronouncing it flaw and deco and I was pronouncing it for and Dick for a company that we hadn't heard about before, also listed in the US New York Stock Exchange ticker and day. So, Nathan, to kick us off, can you tell us a little bit about foreign decor? 

Nathan: [00:19:55] I can so get the names right here. So the company was founded in 2000 by a guy called George West, and George actually had a family business. And I don't know if it was just one single building supply store, but his parents had it. And the story goes that he was very frustrated when he was doing his own bathroom renovation. And he said, there's just got to be better options than what there is. And so he got into speciality flooring. And today we've got 170 stores across 36 states. So it hasn't been around very long. Like this isn't the MasterCard story where you go back 60 or 70 years, it's a fairly new business and it does specialise in flooring and building supplies. So the building supplies Heritage is obviously there from his parent shop, but it's really about about the flooring and the difference in this business compared to what exists out there is it's a speciality store and typically the industry has had companies like Home Depot's and Lowe's, which are the Bunnings equivalent in the US, you know, tremendous stores in their own right to tremendous shareholder value creators and they don't specialise in flooring and the other shops that tend to specialise have just been much smaller. And you know, floor decor stores are 20 times larger generally than any and competing offer. So when you've got about 2600 to 2300 hard flooring stock options in they stores like to say it's comprehensive probably doesn't do it justice. But know here we are you think you're in America which is an enormous country and you've only got 170 stores rolled out. So just shows you how early stage this business still is. And the CEO now who's a guy called Tom Taylor, who actually has a history as a very senior executive at Home Depot, he started out as a 16 year old and worked his way up there. And you can get quite to the top very, very senior roles for a very long time. And looks like he spent six years there. I think it's like a venture capital type business and obviously got sick of listening to pitches or maybe had something to do with the GFC and maybe there wasn't many pitches to review anymore and he wanted to get back into a managerial position. So he took the CEO role, the floor in decor, and his current aim is to get that hundred and 70 store network up to 500 stores by 2030. So big aims for the company. But this isn't a mature company like MasterCard as a similar price earnings ratio, but obviously a very different business and a very different set of financials. 

Bryce: [00:22:33] Yeah, I wanted to touch on that. So for a company like floor and decor that is a lot earlier less established, I guess, than MasterCard, as you just pointed out. How do you look at the financials differently? You spoke it about MasterCard, you just looking at that revenue growth and also profit growth. Now, just how much they can put to the bottom line is that is important for a company like Florent Decor or what specifically are you looking at to, I guess, keep proving that your thesis is right here? 

Nathan: [00:23:00] The secret to looking at the financials is to understand that, yeah, only 30% of the stores so far are more than five years old. All right. So. So the networks actually even sort of younger or more in its infancy than it looks. And the reason that five year target is important is because that's what they consider a mature store. And a mature store is twice as profitable as a new store as you'd expect because it just takes time for a new store to ramp up. So yeah, you can sit there and you can just build a simple spreadsheet. You can have some sort of estimate of what you think a mature, profitable store earns, and then you can just quite simply do the roll out. You know, let's say they hit their 500 stores over the next seven years and, you know, work out what the maturity of each story's over those years and you'll come up with a discounted cash flow, big giant spreadsheet. And they'll probably say that the share prices can be worth three or four times what it is today. That's exactly why we're in this. But I just don't think you need to be that specific at this point. And I'm always, you know, I'm not a big fan of spreadsheets because I think just all they really do is create more mistakes, more bit more potential mistakes. And in my experience, what they've done is actually made you sell the great businesses far too early because the great businesses, they just surprise you, you know, And just as an example, I ah, they was a four wheel drive accessory company that you know. Yeah. Before Covid, the share was stuck at $0.70 and all sudden they saw a couple of, you know, and those EPS have really gone nowhere for ages. Then all sudden it comes out, announces a couple of new contracts and all sudden, and if the shares doubled, I haven't seen, I can't put that sort of stuff in a spreadsheet. So, so I sit there and look at floor decor and say, okay, well this thing's trading at low 30 times. And if those stores, the existing store network matures and then you're going to own a store under 20 times earnings just from the existing network pretty soon. So basically, you know, if you're happy owning that, if you think these are sustainable stores continue to be profitable for a long time to come. And you're starting on an an earnings yield of, say, 5%, which is the equivalent of a price to earnings ratio of 20. So it's just the earnings year is just the flipside of the PE ratio. And you know, you've got a nice growing business there that should at least grow by three or 4% a year for a long time. South Asia, I don't 9% return based on your existing network and essentially any bonus you get from the other 350 stores that are coming is all gravy. 

Alec: [00:25:29] So, Nathan, when I look at a company like this, you know, how how big is the market for hard surface flooring is instantly where my mind goes and how sexy can a business like this? Bay And the analogy that comes to mind, if I'm thinking of an Australian company, it would be something like Nick Scali, you know, how big can the market for furniture be? There's other competitors for furniture, but you look at Nick Scali and it's a story of founder led execution in a pretty unsexy category. And I guess the foreign to core story, if it plays out, will be something similar that, you know, this becomes a giant in hard surface flooring. But I guess you do have to just wonder, like what's the natural limit for a market like this? You know, they're targeting 500 stores. They've seen great revenue growth so far. How big is the market? And, you know, even with the best execution, can this market support 500 large format stores in the US? 

Nathan: [00:26:27] Yeah. So, I mean, the 338 million people in America. And at the moment this company has got less and is only in, you know, 36 states and there's 170 stores. So really at the moment that's only not that this is where the stores are, but that's only three stores per state. And so the bottom line is they can handle a lot more. You know, I don't know where the 600 700 is limit, but, you know, maybe they don't get to 500 as quick as what they are because it actually requires a lot of investment. And that's a far more rapid rollout than what they've had in the past. So that's probably where my interest is more at the moment is on how much money it's going to cost. Yeah, Are we going into a global recession? So does that slow down the rollout? They can have to focus on profits just to make sure they've got the capital to be able to roll out those stores over the longer term. So I'm less worried about maxing out the market at the moment because we're only paying low 30 times. I know that sounds high for most businesses, but what are you talking about? Tripling the stores. You know, low 30 times is nothing. And that's why, you know, the market's prepared to pay a big multiple for Lovisa, for example, at the moment, you know, people can say it's growing or some of the new CEO's come out and say, we're going to open up stores everywhere. Yeah. And you know, the market's buying it. Everyone's excited. So it's the same thing. But there's one other aspect to this investment case that I think is really important and probably not well understood by most Australian investors for obvious reasons. And that is that America actually has the current population of sort of 25 to 40 year olds with essentially the millennial population. They've now told millennials don't like being called that, but whatever you want to call that population cohort is the largest population cohort in American history. They are UK home buying and building years, family starting years. And so you've got that huge demographic tailwind for this business. The average age of a home in America is 39 years old, so there's plenty of renovation to be done. And this is a really important point, is that the mortgage market works very differently in America to what it does in Australia. So basically when you take out a loan, it's fixed for life, but only for that property. So at the moment everyone's interest rates are going up, but not mortgages. In America, everyone's still on the 3% and that's why I like the transmission of these higher interest rates in America is so slow that they don't have variable rates like they do in Australia. So you've got all these people who for the next ten or 15 years are going to be stuck in their house whether they want to move or not. They're only having to pay a 3% mortgage rate in. If they move, they have to pay six plus, you know it's going up. So maybe it'll be seven, six, nine, four, seven very shortly. So obviously they're going to stay in their home and I'd much rather spend the money and renovate their home. So Florence is becoming an increasingly fashionable thing. I think in the past it was just more of a, you know, just do whatever we need. You know, I had white tiles if my parents place or, you know, easy to claim, you know, whatever it is. But these days the flooring is actually becoming the absolute highlight of the house. Yeah, you see all the Chevron flooring and all that, which is much higher margin revenue for this business. So so that's what I like about it. It's not just a store role that I just really like the tailwinds blind behind the industry generally. 

Alec: [00:29:43] Now, Nathan, one final question around I guess the most that foreign to call has and the competitive threats, because I've just Googled Home Depot flooring and there they do have a flooring section and it says the Home Depot really is your one stop shop for all your flooring needs. Now, for people who are unfamiliar, Home Depot is or Home Depot is the Bunnings of the US. It's a giant in this sort of, you know, home renovation, outdoor space. How do you think about the threat from Home Depot and how does foreign décor continue to, I guess, differentiate and beat. 

Nathan: [00:30:25] Them? So, so these guys have always been there, at least like Lowe's and Home Depot go back a long way. And the thing is, there wouldn't be any floor and decor if these guys were already providing the full range. The fact is when you go to Bunnings, they're not specialists in flooring, you know, it's a broad, you know, it's going to be one stop shop for everything. But that also limits, you know, what, you can provide your excuse, as they say, the variety of products you can buy. And so, you know, I don't know whether they have 2300 products, but that's essentially where floor decor is. You know, they are the specialist. And if you read the some books on business theory that basically say over time, industries tend to fragment into specialists. And so this is a good example of that. So if you're, you know, you don't really care about your flooring, if you just want half a dozen choices and you just want to pick the economical one, or maybe there's one flash, one one expensive one, then you go to Home Depot. But if you want to choose from 500 different ones and you really want to make flooring the main thing of your home, then you're going to go to flooring decor just because it's the specialist. And that's the opportunity. And the other thing I'd say too, is Tom Taylor is Home Depot. He wasn't the CEO, but he was basically the next best thing. And he was there for I think it's 25 years or something. So he knows who he's competing against. And so when he took the job floor decor and he knew exactly what he was up against and he knows everything they do and he clearly figured that he could take them on. So he's been doing a good job so far. And then we're back and he made nice. 

Bryce: [00:31:56] So now I think to close out when thinking about flooring, decor, what are some of the risks or perhaps, you know, what is going to blow the thesis apart? Is it just simply a matter of that? They're not rolling out as they said they would or their other key sort. Elements to. 

Nathan: [00:32:11] It. Yeah. I mean, the first one I always ask myself is this competition? You know, is someone else going to come in and start up and start building the same specialised, huge stores? And, you know, that's the number one thing you're looking for. The second thing is there's a problem with the rollout. You know, if you start to say that the stores weren't as profitable as the store network matures, you know, that would be a big red flag because that's telling you that America doesn't need 500 floor decor stores. 170 probably enough. So, you know, and the thing is, if those stores are maturing and those profits from those stores are growing, then that's less money. You've got to reinvest in that store rollout. So all of a sudden, you know, if you've got your built yet, you know, you do a spreadsheet and you've got 500 stores in by 2030, all of a sudden, even if it's just delayed by three years, for example, and then, you know, you're just kind of cash flows, time is going to be very sensitive to that change. In the short term. I'd say it probably is more around a recession. And, you know, people may not want to go and spend $30,000 on that, you know, very floor into their house if people start losing their jobs. But to me, that would only be know. That's just a temporary cyclical factor and that's, you know, any opportunity to buy the stock on the cheap from that opportunity would be fantastic. You know I'd be cheering for that. It's always about competitive advantages. Is anyone going to come and steal, you know, the profits and reduce the profit margins, especially when you're paying three times earnings your business like know, I don't say that lightly. You know, it's very rare that we pay that sort of multiple for a business. But these are just two I think, pretty spectacular opportunities where it's worth it now. 

Bryce: [00:33:48] Nathan That does bring us to the end. But we have one more question for you. And every year Equity Mates hold the Equity Mates Awards where we celebrate products, platforms and people that are making financial markets more accessible to us. As the retail investor and as an expert. One of the first for the year though, we did have Andrew Brown But you are now in the running for the highly coveted trophy of Expert of the Year just by appearing on this show and it's voted by the community. But we want to know if you are lucky enough to win, where will you be putting the beautiful glass trophy that we send out at the end of the year? 

Nathan: [00:34:26] Since all my downfalls imminent have had a put it in the background. Therefore you say at least you can see it. 

Bryce: [00:34:32] Nice. Oh, thank you for that answer. I do appreciate you coming on. Just a reminder that the fund ISV is a compilation of international and local equities of quality businesses at undervalued prices at the time of release of this episode. Intelligent Investor are in the expressions of interest stage for the fund. So if you are interested, click the link in the show notes to make sure that you're on their mailing list and they'll give you priority access when the initial offer opens. Nathan It's been an absolute pleasure. Great to chat with you again in 2023 and to get us thinking about two international stocks, one that we couldn't really pronounce, and now they're in Canada now that we can. Thank you very much. 

Nathan: [00:35:12] My pleasure guys. Thanks again.

Alec: [00:00:00] Thanks, Nathan.