Pimp my Portfolio, two investor letters & what do UGG and Hoka have in common?

Bryce: [00:00:15] Welcome to Equity Mates Investing, a podcast where we explore what's possible in the world of investing. If you've just joined us for the first time, a huge welcome. My name is Bryce and today we're kicking off with a stock on my watch list. We've got another community member to Pimp My Portfolio, and we review two, invest two letters to get through it to chat through it. As always, I'm joined by my equity buddy, Ren. How are you going? 

Alec: [00:00:37] I'm very good, Bryce. Very excited for this episode. We've been loving the response to pimp my portfolio, so please keep it coming. But I'm also very excited to hear about this stock on your watchlist. Now, before we get into it, especially when we're going to hear about a stock from Bryce, we need to remind everyone. 

Bryce: [00:00:57] Especially from me. Yes. That's right. And the information on this show is for education and entertainment purposes. Any advice is general, particularly when it comes to stock pitches, stock watch lists, stock ideas. Anything stock related?

Alec: [00:01:15] All right. Bryce, well, there's no dilly dallying. I want to hear what you've got to say. Let's get into it. 

Bryce: [00:01:29] All right, Ren, can you fade it out, please? That's it. Ren, today I am bringing a stock to the table that is on my watch list. That came up, in my research while I was doing stock of the year research. Oh, look, good work on the buttons there.

Alec: [00:01:46] Thank you.

Bryce: [00:01:48] Nice fade out. Yeah. So this came up, I did a bottom up approach for my stock of the year. Put in a few figures in the old ticker. To try and filter out some stocks. I want a good return on equity. I want strong revenue growth and strong profit growth. I wanted no debt. 

Alec: [00:02:08] So you use the screener on ticker? Yeah. 

Bryce: [00:02:10] Yeah. Use the screen on the ticker. I wanted, like, a significant, more decent market cap. Didn't want a small cap and came up with a list, which is where I got it. 

Alec: [00:02:20] You know what you stuck with this year is.

Bryce: [00:02:22] No, I was booking holdings. 

Alec: [00:02:24] I thought you I thought you got that because you were such a big fan of it. 

Bryce: [00:02:28] I'm a massive fan of. I was pleased to see it in the list. Yeah, yeah, yeah. So I was like, right now I am going to do this one anyway. The stock that I've got today is called Deckers Outdoor Corp New York Stock Exchange. The tick is D E C K. No, I'm not doing a decking company. 

Alec: [00:02:51] For context everyone I came into the office this morning and I was like, oh yeah, you're going to be chatting about a decking company. And it just irrationally annoyed you. Like, no, no. But it's called. Deckers Outdoor Corp. Yeah. And its ticker is D E C K. Like, give me a break. 

Bryce: [00:03:11] Well look online it's called deckers or Deck is brands. And it's essentially a, it's a, it's a parallel. It's a footwear designer and sell it. They sell shoes. Have you heard of UGG?

Alec: [00:03:25] Yeah. Yeah. So they were Australian. 

Bryce: [00:03:28] So did I. They may be. And UGG bought them. That is definitely sorry. And deckers bought them. Yeah. But August is their main, one of their main brands. 

Alec: [00:03:37] Okay. Wait. How is it deckers outdoor clothing? UGG is a very indoor shoe. 

Bryce: [00:03:46] Well, they also have Hoka. 

Alec: [00:03:49] Oh, yeah? Yeah.

Bryce: [00:03:49] They're leading. Yeah. Like running shoes. Other brands include Coolibar, which is a sub brand of UGG, Teva. So NOC, they're all the running brands and then they have a few other smaller brands that I hadn't necessarily heard of. But I'm also not a big brand guy. So, they've got a pretty strong stable of brands. But look what I like about this and why I'm bringing it to the table is just financial performance essentially. At the end of the day. 

Alec: [00:04:17] Hit me. Give me the numbers. 

Bryce: [00:04:18] The last five years, the stock price has grown 500%. The last 12 months it's up 117% year to date up 27%. So it's continuing to perform well. From a price point of view, stock price is 861 with a market cap of 22 billion at the time of recording. But this is a company that just Ren, has a strong portfolio of brands that allows it to just continue growing revenue and to continue growing its profit. Its two biggest brands, as I said, UGG and Hoka and both these brands are expanding and growing very quickly across Europe and Asia. They have a strong presence in the US at the moment, but are very focussed on European and Asian growth. And their profit is growing 173% over the past five years and they have zero debt. So a very strong balanced position. They have free cash flow. Strong free cash flow. So this is for me. As I said, it was a bottom up approach and their financial performance, it's not, you know, blowing the lights out, but it's just consistent and very solid. If you look at some of the metrics in terms of its return on equity, it's profit growth, not necessarily market cap, but where it sits relative to other players in the industry. Nike's obviously the number one when it comes to footwear. There's another one called I think vape Brands or VF brands. I can't quite remember what it was, but the financials of Deck are incredibly impressive compared to its peers. The bare case on this, though, is a pure valuation play. It's incredibly odd, and if you look at where it sits from a PE point of view, I think it has a pay of about 30. If you compare that to Nike or Nike, the pay is very similar, I think about 30 as well, but they're both sitting a little bit higher than, than other peers. So look, there's nothing too complicated about this business. It's just that they have two premium brands in UGG and Hoka. And they are able to, I guess, generate pretty significant margins on that. And this is just a story of how they can grow in markets, particularly UGG across Europe and Asia. But it's a company that just popped up on the screener. And I think, you know, if you're looking at if you listen to all the experts that come on and think about how they look at companies from a, I guess, an upgrading cycle, strong revenue growth constantly out, wasn't what's the word not outperforming but exceeding expectations. The stock price is, speaking for itself. 

Alec: [00:06:54] Nice. Fascinating. 

Bryce: [00:06:57] Yeah. It's not a decking company. 

Alec: [00:06:59] No no it's not. Yeah. Yeah. Right. Yeah. Incredible growth. Like I'm just looking at tickers. So 2018 revenue grew 6% year after that, 6% year after that 5.5%. And then coming out of Covid, it just had a big hockey stick up for 19%, 24%, 15%. So

Bryce: [00:07:20] And yeah, revenue and profit growth at the same time and also debt free. So they're able to I think pretty high return on equity as well. So pretty efficient capital allocators. 

Alec: [00:07:30] Yeah. More than $1 billion cash on their balance sheet. No debt. 

Bryce: [00:07:35] Yeah. No debt.

Alec: [00:07:36] Respect. Yeah. 

Alec: [00:07:39] All right. 

Bryce: [00:07:39] So what is honestly a company I'd never heard of? I know the brands.

Alec: [00:07:43] Here's my question. Yeah. The shoe business is in a state of flux. Nike, you know, they were distributors. They, you know, sold through Foot Locker and Rebel Sport and everyone. Then they have their own flagship stores. But they also sell more online. And you have named yourself the retail whisperer for many years now. And you loved retail brands, particularly brands that were going from bricks and mortar to e-commerce. They were changing their sales mix and, selling more and more online, better margins online. So is that part of the thesis here? Have you applied your retail whisperer cap to the old Deckers Outdoor Decking Corporation? 

Bryce: [00:08:30] That's the question I can't answer. Yeah, I don't know. I don't know what their mixes are, or online. I mean, you can buy a lot of these brands through many distributors, online distributors here in Australia. What other big distributors are there? I don't know if you can buy them on Amazon, to be honest, but a lot of those are major. Yeah, e-commerce sort of distributors, you can buy these. 

Alec: [00:08:51] It's probably not the same though. Like if you're selling your shoes through the iconic, your margin profile probably isn't a lot better. It's really when you're selling directly to customers that your margins are better. 

Bryce: [00:09:02] Let me see. 

Alec: [00:09:03] But anyway, it doesn't really matter. Solving for if people want to run with this idea, that's something to research themselves. 

Bryce: [00:09:09] Yes. 

Alec: [00:09:13] As we said, not financial advice. 

Bryce: [00:09:15] Yeah. Look, it's on my watch list. I haven't bought it. I'm unlikely to buy it. 

Alec: [00:09:19] Well, great. Well, we just wasted ten minutes, so let's move on. 

Bryce: [00:09:22] Well, that's on the watch list. I think if you look at the share price, it's run pretty hard in the last even year. Today it's up 27%. So it might be one of those ones where if you say that it comes off a bit, there might be an opportunity, but I think I need to do a bit more dd, to feel confident that this is something that's kind of going to the satellite portfolio, but nonetheless, it's on the watch list. 

Alec: [00:09:43] Nice. Interesting company. I'm glad you brought it towards us. I look forward to the next one. 

Bryce: [00:09:47] I love it. All right. Ren. It is that time of the show. Let's go.

Alec: [00:10:00] Well, you're bringing back Pimp my portfolio for the second time. We had so much fun doing it the first time. This is going to become a mainstay, I think, where we get an expert in the studio and someone from the Equity Mates community gives their portfolio just at a high level to the expert. And then the expert has a look and gives some general feedback. And the expert that is joining us again, in the studio, Luke Laretive from Seneca Financial. Luke. Good to have you back. 

Luke: [00:10:31] Ren, Bryce. Hi.

Bryce: [00:10:33] Luke, how are you? And welcome to Equity Mates Investing. Maddy. Maddy, welcome to the show. 

Maddy: [00:10:38] Hi, everyone.

Bryce: [00:10:39] Thank you for submitting to Pimp my portfolio. We put the call out without anyone knowing what this segment was. And you, you put forward your portfolio. So we're really excited and also appreciative of you doing it. Now, as always, Ren, let's just give a very high level on how we see Maddy's portfolio for everyone listening.

Alec: [00:10:58] Yeah. So Maddy's portfolio is split into ETFs and some individual stocks. About 80% of her portfolio is in broad based market ETFs, the S&P 500, the Aussie ASX 200 and some other ETFs. And then, about 20% is in some stocks, Apple, PayPal, Qantas, Soul parts and zero. So Luke, where do you want to start? 

Bryce: [00:11:27] What's the name?

Luke: [00:11:29] The name is kiss, which is like, you know, keep it simple. I won't say stupid. 

Bryce: [00:11:34] You can say stupid. 

Luke: [00:11:38] And I think, yeah, that's kind of the overall thinking of the I think I feel like looking at this sort of like I started off doing one thing and then I've kind of added to it thinking that adding complexity is going to add performance or is going to is going to be better. Because I heard about this, so I want to do that. Or someone told me that dividend yields are good or whatever. And then it's probably detracting from returns and more importantly like detracting from life, you know, like stuff that you actually like doing. Okay. So yeah, that's really my overall. 

Alec: [00:12:08] I think, I think you might need to explain some of that. 

Bryce: [00:12:13] Hang on. Should we get a reaction here. We've got kiss is the name of the portfolio. Keep it simple, stupid. Maddy, how do you what do you think of that? 

Maddy: [00:12:20] It's pretty accurate, to be honest. I wanted to keep it simple, easy and, low maintenance. So I think that's a pretty accurate way of describing the portfolio. I actually think I went the other way where I had it complicated and started off individual and went into the ETFs. 

Bryce: [00:12:45] So you so You're keeping it simple.

Alec: [00:12:47] You're making you're making. 

Maddy: [00:12:49] Yes. I am deliberately making it simple. 

Alec: [00:12:52] Yeah. Well I mean.

Alec: [00:12:53] I, I that resonates with me because I was the same. I started in individual stocks and then realised that there were those ETFs and realised the power of them. So I think your journey has been very similar to mine. Maddy. 

Maddy: [00:13:06] Yeah. 

Alec: [00:13:08] But Luke, I want to hear you said it was detracting from Maddy's life. 

Luke: [00:13:15] I just know how my life is. 

Alec: [00:13:18] You know? It's what I do.

Luke: [00:13:19] Oh, that's. I know I'm joking. But look, I do think that, you know, this whole investing thing is really simple. You know, now we've got multi-asset ETFs available, and, you know, their high growth or your growth or your balanced conservative type ETFs. And you don't need to own anything. You can just buy one security. You can just reinvest in that security. All the asset allocation is done for you to that particular risk profile. All you have to do is figure out which box you kind of want to live in and if it's to generate the highest possible returns and you don't care about volatility, then it's high growth. And if it's something else, then something else. And that would even be a simpler version of this portfolio. And so Maddy like, you know, you could just find the appropriate multi-asset risk profile kind of based ETF for you and you could literally own nothing else. You could just do that and then you wouldn't have to worry about, you know, how much money should I put in high yield? How much money should I have in the US versus Australia? How much money should I have in, you know, emerging markets or, you know, small caps or whatever, like, which are sort of the parts of the market that are in your portfolio at the moment. And you also don't have to worry about what xero's earnings are going to be next quarter or like, you know, whether the Apple Vision Pro thing is going to be a hit or not. You know what I mean? You don't have to, you know, have to deal with all that stuff, right? Then you can forget about it, you know, lose in a newspaper or write anything. It's all done for you. So, and you know, it costs you. I don't know what's what, what are those, what are those ETFs cost. 

Alec: [00:14:49] Vanguard diversified high growth would be probably less than 50%. 

Luke: [00:14:53] Yeah. What can I say? They like 30 to 50 bips. So, yeah, that's what I'll be doing. 

Maddy: [00:14:58] I have a question for you, Luke. Sorry. 

Luke: [00:15:00] This is my favourite bit.

Maddy: [00:15:03] So some of those individual stocks have been performed very well. Would you actually sell right now at a loss and just lump it into an ETF? So would you. Wait a bit longer. 

Luke: [00:15:16] Well, like, you need to kind of go into each individual company, but, at the end of the day, I'm beyond particularly for someone who's like, trying to get to a more simple, lower maintenance, want to get on with the hobbies and things that I like that aren't managing my portfolio and just want to use this as a savings vehicle, like get to your ideal portfolio as quickly as possible, within reason. You know, I think that just because, your, you know, you might have lost money on one of these holdings and you've made money on another one, doesn't mean, you know, that the one to sell is the one that's done badly. Maybe it's the one that's done well, is now too expensive, and you just don't realise it yet. So I think people get caught in this kind of sunk cost fallacy that, oh, I haven't lost money. I'll sell that when I get back to making money. When reality eases, it doesn't matter what you make money in next as long as the next one you don't lose money again, you know? So I think that getting to your ideal situation is going to take all those decisions off you. You're probably gonna feel a lot better about it when you don't have to look at those holdings in your portfolio anymore. You know, you want a diversified product. You can just get down to sort of trusting the process over a longer period of time, knowing that there's nothing for nothing that you can do beyond what you're already doing. And you're kind of finished, for lack of a better word. So I know it's hard and it feels like, oh, that's, you know, X dollars or whatever. Like that's investing. We all the best investors in the world have, you know, a 50% or under 50% win rate. so that means I make two bets and one goes wrong every single time. So and that's the very best hedge fund manager on the planet. It's all about how much money you make and lose when you win and lose. So don't stress too much about it. Just move on. Get to your ideal portfolio as quickly as you can, and then you kind of, you kind of finished.

Maddy: [00:16:59] Cool. Thanks. 

Alec: [00:16:59] Now, look, I want to take this another way because, you know, you're saying simplify, simplify, simplify. And I you know, as I said, I had a similar investing journey to Maddy , starting with individual stocks, then getting into ETFs. But what if, you know, I'm speaking personally, but perhaps Maddy feels the same. Maybe she doesn't want to simplify it to the nth degree, and she wants to have some exposure to individual stocks. How would you approach constructing a portfolio that has all the elements that you're talking about, you know, broad based market exposure, some of those funds, but also gives Maddy some money to invest if she wants to have some exposure to some companies she thinks is interesting. 

Luke: [00:17:37] Yeah, I think investing is really like in individual companies is a really good way to learn about. I like how the world works, how businesses work. How you kind of react to different challenges and stresses and stuff like that. So I think they are really valuable. I reckon I've learnt most of the things that I know from investing in individual companies. So not saying don't do it at all. If the goal is to simplify, obviously there is a really simple way to do that. If it's not audited, some sort of blended version. The best thing about shares is you can say, okay, well I'm going to take 70 or 50 or 20 or 80% of my money and that's going to be in one of these, you know, multi-asset risk profile kind of ETFs. And then I'm going to take whatever the balance is. And I'm going to make reasonable sized bets in five companies at five 4%. I'm just going to pull a number at them, you know. So then you're going to have, you know, you're going to have to spend your time looking at those companies, understand the earnings, understand the business drivers, understand the valuation. And having a really, I suppose, deep knowledge of something. And that is a way where you can actually, as an investor at home, working two hours a day on it, start to develop an edge over the market over time. So, you know, if you know, these companies Xero, Apple, Qantas and Paypal, pet companies for you, and you love those businesses and you love what they're doing and blah, blah, blah, cool. I wouldn't necessarily choose those myself. I think some of them are pretty boring. 

Bryce: [00:19:04] How do you respond to that, Maddy. 

Luke: [00:19:10] Right on your bank account.

Alec: [00:19:11] It's pretty boring. But boring companies can be great investments. 

Luke: [00:19:15] They can be. 

Alec: [00:19:19] what do you reckon, Maddy, to recommend board? 

Maddy: [00:19:23] No, I don't think they are boring. I think there's a bit of tech, a bit of travel. I think it's, but pretty well-known brands. To be honest, 

Alec: [00:19:34] Yeah, yeah. 

Alec: [00:19:35] It's always been one of the best stories on the ASX. 

Luke: [00:19:39] I don't love. 

Alec: [00:19:40] It, I love it, I love it. Thanks to the authors, to be honest. 

Alec: [00:19:43] Fair enough, fair enough. Well, hey, you know what? Good minds can disagree. So I guess, Maddy, do you have any others? Do you have any other questions for Luke? 

Maddy: [00:19:55] Would you add anything rather than subtract? Like, would you be there anything that you think you would add to this? 

Luke: [00:20:02] Look, I would choose, you know, if I was going to buy, like, what Ren's talking about with, say, like, you know, 70, 80% of your money, a core strategy and then some stuff in the. Satellite. I would choose companies that are a bit smaller. That's my preference. I think, you know, companies go through a maturation cycle and there's a bit of a phase in the growth curve where those businesses can grow quite quickly, and they often rewrite in evaluation centres as well, because they're improving quality, whether that's paying down debt or just generating, you know, more consistent, reliable earnings. So, you know, you want to be investing in if you're going to take, you know, precious money and, and put it into businesses, a few select businesses that you understand really well, try and find those kind of companies that generally on the ASX, like in that sort of a 200 to 2 billion kind of market cap zone, where they might be like making revenues about like on the way to profitability or just ticked over into profitability or had two years of solid profit growth. And they've got good operating leverage. So you know Apple yeah they're great businesses. Zero success story. It's great telling people that you own those shares but they can't mature companies. And the irony of investing in mature companies when they're on a growth multiple is you normally invest in a business that has to do something riskier than what they've done to generate incrementally lower returns and what they've done in the past. 

Maddy: [00:21:23] Yeah. 

Bryce: [00:21:24] And then I guess from an ETF point of view just looking at that. Yeah. Without going the other way and stripping it all back and just going, your one multi-asset is there. 

Luke: [00:21:33] I don't know why You wouldn't do that though. 

Bryce: [00:21:34] Is there anything outstanding.

Luke: [00:21:36] But yeah obviously emerging market small cap stock. There's heaps. But the point is why would you not like just, you know, do the thing like you can just hand it to someone else and it's sorted and you can spend all your time trying to find three or 4 or 5 little companies that you're kind of, you know, excited about. 

Alec: [00:21:52] Nice one. 

Bryce: [00:21:52] There you go. Well, Maddy, some decisions are there to think through. Either strip it all back and just go one multi-asset ETF low cost. That kind of gives you exposure to everything you've got there, plus a few of the things that were missing in terms of small caps, emerging markets. And I think the other point that Luke made was don't, don't get too emotional about, I guess it's more like an opportunity cost with the companies, the individual companies that are there, even with those that are in profit. Like if you think there's a better opportunity. 

Luke: [00:22:23] Take it. 

Bryce: [00:22:23] Take it. Yeah. And I think that's what helps me when I look at companies in my portfolio that are down, I think, Henry Jennings said there's just always another opportunity. And if you're just sitting there for the purpose of sitting there like there's something else that it can go into, that's definitely going to be a better result. So, I hope that helps you think through. 

Maddy: [00:22:42] Thanks so much, guys. 

Alec: [00:22:46] Appreciate you coming on. And, we don't think your stocks are boring. No.

Maddy: [00:22:54] Thanks so much. 

Bryce: [00:22:55] Know a massive thank you to Maddy. If you would like to book a time with Luke to review your portfolio, discuss the markets, or help you with your financial goals, head to equitymates.com/advice. Choose Luke's name and you'll get sent straight through to the booking form to find a time with Luke in the team. Luke thank you again learning a lot. 

Luke: [00:23:17] Very enjoyable. Thanks, Maddy. Superstar. 

Alec: [00:23:20] All right. Well that is the second instalment of pimp my portfolio. I think this is going to become a mainstay in the Equity Mates Investing podcast feed. So make sure you keep listening. And if you want to submit your portfolio for Luke or another expert to take a look at equitymates.com/contact is the place to go. We're going to take a quick break. And on the other side we're going to have a look at two investor letters and what we've learned from them. Welcome back to Equity Mates. Bryce, we're going to turn our attention to two investor letters. Now, for people who are new to the show or unfamiliar with investor letters. A lot of the big, fund managers and hedge funds, especially in the U.S., actually a lot of the big and a lot of small fund managers, every quarter will write an investor letter and those letters will be made public. And there's a really great subreddit security analysis that aggregates all the investor letters or heap of investor letters that you can go on and read. And we find investor letters, a really great source of, ideas for new stocks, but also just, I guess, assessments of where, where the market is, where it's going, how investors are feeling. There's always some good lessons around just how to be better investors. They're just they're just a really valuable source of information. 

Bryce: [00:24:46] Always have a little stock idea of some stocks that sometimes we've never heard of. Yeah.

Alec: [00:24:53] And so for this segment we wanted to choose two from the opposite ends of the spectrum in terms of performance, because you can certainly learn from those that have done very well and also those that perhaps haven't. So for this episode, the two funds we've chosen, Rowan Straight Capital, which returned 103% in 2023. So they doubled their investors money and then Ace River capital, which was down 29%. Ouch. So lost almost a third of their investors money. Now we'll include both of these links in the show notes will also include a link to security analysis, their post where they've aggregated the most recent quarters letters. So, if you want to read these letters and read plenty more letters, head to the show notes. But Bryce, let's start with the positive news. Let's start with Rohan straight capital. Overall takeaways. What do you think? What did you learn? 

Bryce: [00:25:51] Well, I mean, the big takeaway you've already said is that they doubled investors money in 2023. Gotta love that. And not a bad result. Outperforming the market I think the S&P last year, return about 24%. So five times their market return. So they gave a bit of a breakdown in what the biggest contributors to that result were. And there's some big names in here. Firstly, meta was the best performing stock at 194%. Spotify. That was up 138% in the portfolio trade desk, I'd forgotten about this stock, but one, I reckon 3 or 4 years ago we had expert after expert in the small cap space come on and talk about it. It was up 60%. And Shopify up 124%. So no wonder the fund overall returned over 100%. When you've got at least three companies, they're all contributing upwards of 120% return for the year.

Alec: [00:26:48] But I think there's a really important caveat here. So those four stocks were four of the top five largest holdings. And as you said, they all did incredibly well in 2023. But here's how they went in 2022. Meta down 64%. Spotify down 66%. The Trade Desk down 51%. Shopify down 75%. So it's, real, you know, swings and roundabouts story like they got smashed in 2022 but they recovered and then some in 2023. 

Bryce: [00:27:26] Yeah. Well not only yeah. And I think this is the one of the big takeaways that I got from this. It was a it was a lot about their emotional state of investing. And their point here was that they stayed invested in these companies through those massive drawdowns and subsequently were able to reap the rewards the following year if they avoided trading based on the macro, I guess not trends, but the fears that were going on at the time and, and certainly, yeah, stayed invested in those companies. They go on to talk a lot about the, the importance very Buffett like their importance of patience, being selective.

Alec: [00:28:06] Very Buffett like in their, temperament, not in their stocks. 

Bryce: [00:28:12] You know, not swinging the bat at everything essentially, and just being very selective with what you invest in. But then once you're invested staying in.

Alec: [00:28:19] Yeah. Yeah, it's a really good lesson. Now, they speak about a particular stock in here. They added one position to their portfolio in 2023. I think there's also a lesson, in just how often the best investors add positions to their portfolio. And I reflect on how often I add positions to my portfolio, and it's certainly more than one a year. But like that, having that level of confidence and, knowledge about a company and then putting in your portfolio. Is impressive. The company, they added, was Adyen and the ticker is ADYEY . It's. I've tried it over in Europe. It's a payments company. 

Bryce: [00:29:01] Payments Processing. I think it's in the Netherlands or something. It's Dutch. So it's a payments processing company. They bought it a €22 billion valuation after the stock had dropped 75%. I love that you love that. And they expect this stock to grow at a compound rate of over 20% in both its payment volume and revenue over the next five years. 

Alec: [00:29:27] Yeah. Fascinating company. It's worth writing a write up. The temperament of the founders of this company is also impressive. You know, they didn't get caught up in the hype of 2020 and 2021. And while, everyone was having redundancies in sort of 22 and 23, they actually added 53% to their headcount. They were just like opportunistically just go picked up all the best people. Yeah. So really interesting company. One that I'll certainly add to the watch list Bryce, I think. Let's turn to the negative. Let's turn to Ace River capital, which was down 29% in 2023. 

Bryce: [00:30:05] Not good, not good. It's a portfolio that is massively concentrated. 

Alec: [00:30:10] Yeah. Crazily so. 

Bryce: [00:30:12] Massively concentrated.

Alec: [00:30:13] So in his letter, he wrote that, he has five small or micro caps long and then one short, normally a large cap. And I think that's incredibly risky portfolio construction. Both how concentrated it is. But also the short seems to add a lot of risk. I would like to see some portfolio construction experts talking about that? Maybe luke, does a Pimp my portfolio on this construction on the short. Because it just feels like. Yeah. Anyway, Yeah, just it feels like that lot one shorting, one large cap, especially in today's market. But just generally, I feel like. You're getting enough sort of alpha from the five small caps like you. If you nail those, you're gonna get differentiated returns. Yeah. Anyway, 

Bryce: [00:31:05] Anyway, so, in terms of his largest position, it's. Rick Hospitality. Sorry. The ticker is Rick. The company RCI Hospitality. We have had someone on the show pitch this before. It's an adult entertainment operator or one of the largest adult entertainment in the Us. 

Alec: [00:31:25] Yeah, I think they are the largest in the US. Yeah, we had Yaron Naymark. Pitch it back in June 2020. Yeah. So, a little while ago, we'll include the link to that episode in the show notes for this episode if you want to go back and listen to it. But, yeah, it's the largest adult entertainment operator in the US. They own a lot of strip clubs, basically. And, as this letter writes, because local governments aren't granting licenses for new strip clubs, these clubs are essentially local monopolies. They also have a sort of, like, Hooters esque, restaurant franchise called bombshells that they're, trying to roll out across America. It seems this company is a real favourite of, like, the small fund, small cap investors over in the US. 

Bryce: [00:32:12] Big time, big time. It's run pretty hard since it was pitched back in 2010. But anyway, he also discusses a new stock Vox Royalties, which is essentially a company that plays in mining royalties. 

Alec: [00:32:28] Yeah. So they pay upfront cash like a lump sum cash, and then they get a royalty from miners based on, you know, the amount of profit they make or the amount of, or they dig up. And so they're essentially trading upfront capital for a long term revenue stream. Yeah. There's a company in Australia that does something very similar to Deterra Royalties. The ASX ticker is DRR. If you want to have a look at that company, I think we've heard that pitched a few times, maybe not on this podcast, but yeah, it's a it's a really interesting business model where it's I guess it's it's about finding the right project. So that's, that's probably where the rubber hits the road. But if you do find the right projects, you can have these like long term annuity like income streams that just pay year after year. And hopefully as these mines become more profitable, grow year after year. 

Bryce: [00:33:20] So that's to invest two letters, one from Rowan Street and the other from Ace River will include both in the show notes. If you want a little bit more detail on both of the stocks that, we've discussed the Adyen and Vox Royalties. But Ren, that brings us to the end of our, episode today. If you'd like to join the conversation, hit us up in our, Facebook. Come and join us in the Facebook community. Otherwise, if you want to submit a book for book club, if you want to submit your portfolio for Pimp My Portfolio. If you have any money related question, or if you'd like to ask us to connect you with an advisor, then please, we have a form equitymates.com/Contact all the information will be there. 

Alec: [00:34:00] It's going to be a long form.

Bryce: [00:34:02] You can choose what parts you want to fill out. 

Alec: [00:34:05] All right. Well, they will be back in your feed tomorrow with an Ask an Advisor episode. We're going to be speaking to Phil Thomson all about insurance, the insurances you need, the ones you don't need and whether you buy it in super out of super. Pros and cons. So a big insurance bonanza. And then we'll be back on Thursday as well. To keep covering off what's going on in market. 

Bryce: [00:34:27] Love it. We'll speak to you tomorrow.