#31. Anders Björkstål: Mastering Small Cap Investing

0:00Anders Björkstål:If you ask any great founder or investor how they got here, the answer is usually not a straight line. It's a series of decisions, risks, setbacks, and turning points that shake the path along the way. This is Inflection Moments Conversations, a companion series of one-on-one conversations with founders and investors focused on the defining moments in their career so far. These are the moments that tested them, that changed their thinking, and influenced what happened next. In each episode, we unpack those moments and the lessons behind them for the people building and backing the next batch of great businesses.

0:35Anders Björkstål:So without further ado, let's dive in. Welcome, Anders. Thank you for joining. Thank you for having me. I understand I'm the first guest of this podcast, so I'm very honored. Yeah, first, but hopefully not the last. See, I've heard you have a good pipeline, so it should be okay going forward. I appreciate that, man. Okay. Well, look, it's worth introducing you because I think you've got a background that our listeners are going to find really interesting. So for the last, I don't know, roughly 15 years, Anders has been an investor with a focus on small and mid-cap public equities. With most of that experience working on the sell side and institutional hedge funds.

1:13Anders Björkstål:and having grown up in Gothenburg in Sweden, Anders spent his formative years in investment banking, starting out with internships at Goldman, Pareto, Carnegie, Danske, like a who's who of investment banks out there. And he spent several years as an analyst managing money for his university student society. And then he moved to London as an analyst at Berenberg Investment Bank, which is how Anders and I originally met. And we'll talk about a funny story in a few moments about how actually we did meet at Berenberg. And after that, he spent six years working on the buy side, institutional hedge funds, including managing money for some of the most prestigious university endowments and family offices in the world.

1:51Anders Björkstål:But most impressively, and my thing you know, is Anders developed his craft from scratch to be a phenomenal public markets investor and did so by learning a quite unconventional approach and one that has proven to outperform many of the largest institutions looking at the same opportunity set. so welcome and as i hope that that did justice for your background i mean i'm living my own life and when you summarize it like that it's uh it sounds better than it actually is but maybe it's the power of looking from the outside yeah well i can always be your sort of like part-time cheerleader if nothing else uh ends up working out so i think it's worth sharing a little bit about the actual moment that you and I met at Berenberg because whilst you can't tell from a camera, Anders and I are maybe above average sized humans.

2:42Anders Björkstål:Anders is a little bit more so than me. Anders is what? 6 '7", 6 '8"? You like average in Sweden, aren't you? I'm 6 '5", but Anders is the normal spiking blood man, which makes him a super giant. And so when we met, it was actually during the interview process and when we were when the HR head of HR came in she kind of shared that we would be waiting for a little bit and then as she left I think everyone started speaking in German right yeah I mean it was a German investment bank and even if we were in London it was the influence was quite clear that there were a ton of Germans I mean I'm Swedish I don't speak German you're British I mean none of you guys speak any other language so that's how I got started right and so like i think the assumption was that everyone was going to end up working in the london office but sorry to hear everyone speaking german around you like makes you wonder if like they're actually schlepping us out to munich by accident anyway i think uh we ended up seeing each other as being on the slightly uh outsider's perspective but neither of us spoke german and we actually became good friends in the interview process and regardless of whether i think either of us got the job we exchanged numbers and kept in touch and it was a cool outcome that actually I think we're probably probably only two if not maybe one or two others that got the job in that assessment center right yeah I think it was maybe one or two more that's right I mean it just is investment banking kind of assessment center days I mean it's a kind of a sweatshop for university students right you throw them in a room and it's kind of like the hunger games and you do various tests throughout the day and in the end you have no clue, you just go home and you wait for a couple of days and then you get a cool phone call.

4:29It's quite stressful, to be fair. I did a couple of those, but yeah, this was the one I met you, so.

4:38Anders Björkstål:And that was what, 2015? That was 10 years ago, or 2014 maybe. I moved here in 2016 to London, so this must have been 2015 because it was a year before then. And yeah, then we had to wait for I think 7-8 months before we actually started the role. Yeah. Well, anyway, there'll be plenty of kind of overlap, I'm sure, in the course of this conversation about when we talk about my and the shared experiences working together. But I think, you know, just to start out this conversation, it's important that I feel how people think about founders and investing is really impacted by your formative experiences as a child, because that's ultimately what makes people quite different, you know, in their philosophy and their experiences.

5:21Anders Björkstål:So it'd be interesting to hear a little bit more about your upbringing and how you think that affected you as an investor. Yeah, so I mean, I grew up outside of Gothenburg, a tiny, small village. I mean, in a good day, it might be 150, 200 houses there, call it 500 people. There might be like three, four kids in each age group, you know, and you have to take the bus to the other town or, I don't know, village, whatever you want to call it. and they kind of collect all the children that lives around on different kind of farms, basically. It's quite rural. And, I mean, there's no affluence there.

6:02There are some people commuting to Gothenburg and working maybe a little bit kind of, yeah, regular industry type of jobs. But I wouldn't say there is like, it's a very different lifestyle to growing up in London. I mean there is no such thing as private schools like everyone goes to the same schools everyone playing the same football team and yeah I think that like if you go on holiday once a year like I mean you're well off against your pierce there so it's a super like I don't know it's very safe I couldn't have a wish for a better upbringing but like there was never like money flowing around Like you never had these options.

6:47Like there were maybe a couple that went traveling like after a while. But like I used to remember like in my ninth grade class. So we were probably like 75. And I think seven or eight of them went to university. And I was one of them. So that's like a very, like it's a very small proportion. If you compare it to like living in London or any big city in the US. I mean it's like everyone's goal is to bring their children to university right I mean that's that's what people work for that's why they save up I mean you have such a like college funds like I mean that shit doesn't exist in Sweden I mean university is free so even though it's free to go to university actually in fact you get paid like 250 300 a month to go to university as long as you like manage it finish your courses and still people don't do it in that great extent and that kind of yeah that was upbringing i had and i always felt like a little bit like an outsider so my mom for example she grew up in gothenburg and yeah my grandfather was like a ceo of an insurance company so they always had like this more like education is important and then we moved out here because my mom didn't want to live in the city anymore so she moved out there and met a man and so on and that kind of always felt like she still brought this with me like she always told me like oh it's important to like do the right thing I mean I'm I'm always gonna love you whatever you want to do but but if you go to university it's not a bad thing you know and And yeah, so I mean, I went to university and studied business economics and I did like my bachelor's in financial economics.

8:35I kind of didn't like university. I mean, I don't like to study in general, but I mean, you can get through it. So I choose economics. It's mostly math. So you don't have to go to class so much, which was the best thing. So that's why I chose it. You could choose that own business administration kind of accounting and that stuff. But I didn't want to go to school. So yeah, it's better to do math.

8:55Anders Björkstål:and share a little bit about how you first got into investing because i think that's an interesting story right because before you started working at hcm managing money for the university student society you kind of i guess being a young kid growing up in a small town like where there's not too much in the way of like the local job market it's it could be interesting to hear about how you first kind of dip your toes in yeah so my grandfather he he died when i was four years old so he was never with me but he was he was like a he invested a lot and obviously my grandmother benefited from that so basically he bought quite a lot of shares in ericsson and this was like 1990 you know and then the it bubble came and those shares just like i don't know 100 200x or something she i mean i think that was like a four or five thousand dollar maybe investment from start and it is like skyrocketed and she sold it like on the peak and she managed to build a house for them like she just decided to build a house and she sold the shares and then like two years later she booked back the same amount of shares and it cost like four thousand dollars again so it was so that was like I heard that story being told sometimes and my mom always told me like oh you would have enjoyed to be with your grandfather so much because you had a very similar mind however there was no one investing in my family like I've heard about it that knew kind of what it was and then I had an older stepbrother he also went to university to study but he became an engineer though but he was like dabbling in like some shares on the side when he was in uni I mean, he did like high risk kind of lottery ticket type of things.

10:46But so he kind of showed me a little bit. He was like, oh, I use this platform to do my trades, whatever. And I was like, okay, well, let me do one as well then. But then I was like 14 or 15. So then I needed my mom to sign off on it for opening it because you cannot open it until you're 18 in Sweden. So yeah, I got that one started and then I just bought like three or four stocks. And that was kind of my first introduction. um i didn't look so much at it i think this was like in 2009 so when i looked back a couple of years later i mean they were all like three four hundred percent up because and i was like oh this is pretty sweet um should do more of this uh i mean there was no money back then but uh yeah that that's really how it started i thought it was a good idea to see what's uh what stock market's about so i started investing more and more reading books like i mean it's the regular stuff you know like Warren Buffett, Peter Lynch, and Joel Greenblatt.

11:42Those were probably my favorites back then. I mean, for disclosure, I don't really read investment books anymore. I think there's very little benefit once you read the best 20. After that, the marginal return on that time is quite limited, and I don't enjoy it so much. It's a bit dry. So I'm not doing so much anymore. But yeah, back then it was good to lay the foundation. and yeah I started investing a bit more and more and that's when I kind of realized in high school I was like okay maybe this is what I want to do because I had a few jobs on the side you know and nothing really interested me so this was like the first thing because I wasn't quite lazy so I was like okay here I can actually make money but I don't actually have to do so much I could just like look at the companies they did the work for me that that's a pretty good deal and so yeah I I thought, okay, after university, I'm going to try to go into investing.

12:39So that's when I went to study business and economics. And yeah, that's how I got into HCM, what you mentioned before, which was basically a selection of 15 students from all different age groups. So it's from first year up to the fifth year. So it could be both from bachelor and also the master's. So the masters, these guys were typically, I'm saying guys here because we tried to get female in, but I mean, this is like nerds, you know, like everyone's like loving investing. I mean, we had like maybe one application a year from a female out of 100. So it was hard to get a female in. We managed in the end, but it was a struggle together.

13:28But yeah, in the end, like I became a part there. We had like three, four hundred thousand dollars maybe at the time. I think it's like 4 million now maybe. So they put like pretty strict restrictions like how you could invest. So some had to be in money market funds, some had to be in bonds, some had to be in mutual funds. But then there was like 30 % of the portfolio that could be invested in stocks. And 50 % of those, so those 15%, they were invested in small caps. So that's where like everyone spent like 100 % of the time. So that 15 % of the portfolio, it was like, that was the only thing people cared about.

14:08So we were like, okay, so every week we had like meetings, usually had like four or five presentations a week, maybe. So every time a company reported, for example, we had an analyst that was in charge of like doing the updates, telling what they've thought about stock, and you took a buy or sell decision afterwards. And also you would do new company kind of pitches. you probably did like three or four of those per person per semester so yeah every four or five weeks or something like that you had to do a pitch and so yeah we had meetings every week and it was like three hours maybe everyone's just sitting around talking stocks and yeah that was a bit more formal though the really good thing was that we had an office so we managed to in some way into like the principal because he loved us so he would give us an office at school so basically take like an old classroom that was like kind of too small to use but nor it could have been used but he was like yeah but what you guys do is like really important so i'm gonna give you this office like here are your keys and then we basically got sponsorship from a swedish broker as well a brokerage platform called nordnet and um they gave us like six computers with like double screens some subscriptions to some various news sources and like databases and stuff and i mean that's where i spent my university like i didn't go to class i went to this office and it was like we were like three or four of us there was the most hardcore involved in this thing we were there all the time you know it's like even on weekends we would go down and just like chill talks talks yeah you see what's going on and yeah that's what we did it's interesting right

15:47Anders Björkstål:because most people when you think of investing money for your university student fund you think of people that are doing this like an hour or two a week like super part-time they're probably mostly investing in large caps so there's only so only so much tracking error that you can get from investing in you know other big stocks in the index but what you guys are doing it's almost like you're investing as if you were doing this professionally right like you you are working 30 40 hour weeks even running money for your student like student university fund and you're doing it in a niche that very few institutional investors are looking at and are finding alpha in those kind of small pockets is that kind of feel like was that kind of how it felt like back in the day so so i would say there were um so we were 15 of us and i would say that there were probably three or four of us that did like there were you spending a lot of time there but we also invested we also invested ourselves so we would spend like a disproportionate amount of time and because so i have diabetes which meant that when i was like 12 when i got it i i got a bit of an insurance payout so i had a little bit of starting capital i mean we're not talking millions here we're talking like 35 000 so but i did have a starting capital which at the time was i mean it was quite useful it was putting like mutual funds in the meantime until i was 18 when i got access to it so it wasn't like it was i couldn't do anything with it but um so so we were a few that might from various sources had a little bit of capital and some of them especially the ones that spend the most time they were a little bit older um so actually i was like 22 but the ones i was hanging out mostly with they were like 30 and they haven't they was like one of the guys his name is uh yeah he's on he's on twitter i'm not gonna give out his real name because he doesn't want it but his name is christian or nemcap at twitter so he was basically he started investing when he was like 18 i think he took a loan so he had like 15 000 dollars from the start and since that until today he's compounded that money by 50 per year like a kegger of 50 and just to make sure people had that that's five zero not one five five zero exactly so i mean he's taken it from so he had he started with like 170 000 swedish kroner which like 15 or 17 000 and today that's about 50 million dollars and he has taken out money alongside the way as well so he's never had a job so he went to do school because he became a full-time investor not working when he had like 200 grand like dollars so he was like okay if i don't make like 40 per year i'm gonna need to find a job so he went to university because then you actually get paid for going to school and you can also take out like basically an interest-free loan um so you can support yourself so you can have like thousand dollars of coming into your accounts every month and you don't have to do so much like as long as you pass your courses you get that money obviously of course the loan part of it you need to pay back but he was like okay if i give myself three years here studying i can use defer that payment and i can be cash flow neutral when i'm studying and i can compile my money in the meanwhile so i think at that time he had probably like 400 grand or something and but then he was like oh maybe i should start working as an accountant but then because i need it's kind of good to know like accountant stuff you know and then well then he just found a 15 bagger and the portfolio went to like five million he was like no I'm not gonna do that I'm actually not gonna finish so he never finished uh he like failed the last statistics course like three times in a row and he was like oh I don't want to do this anymore it's like it's too boring it's too expensive for me to sit and try to win do this like if I find one more investment case it's pointless for me to find it like it's like the opportunity cost is too big I can't I cannot waste my time on statistics yeah so maybe share a little bit more about what christian taught you right and like what you were able to absorb from someone that can compound it 40 50 60 percent a year yeah i mean he didn't never did any models or anything it was kind of um isn't that big to basics he was like it mainly like if companies grew the valuation was cheap and you could get the double engine or triple engine even that you have revenue growth and you also have expanding profit margins in combination with a cheap valuation from start and remember this was back in 2011 2012 like there were a lot of small caps in sweden that traded on like four or five times ebit and was that like maybe seven eight times price to earnings ratio and they were growing like 50 because the economy was recovering from the financial crisis and if you could find i mean they were they were very fertile hunting ground back then and if you were on top of companies you could really find a good stuff today everyone knows about sweden everyone knows about the serial acquires and you see all these like american investors they're just looking at small swedish companies and it was just very different back then like nobody wants to touch dogs it was he's like all right good good times it was like cheap valuations great companies like good corporate governance in the nordics economy was growing everyone's happy like yeah it was uh it was good it was a good time um so that was different but back then i mean it's always been very like sensible and heavy does it and in some way he manages to like never lose money on any stocks he purchased is like even the times when he's wrong he very rarely loses money so he's very patient and usually he buys stocks when the market's dipping a little bit and in small caps you can get kind of kind of a bigger movements usually so he oftentimes manages to buy quite well i think that's getting harder with time because he's now much bigger so for some of his investment in sweden he needs to own like eight to ten percent i think in one of the companies he owns here it's like the second biggest shareholder so it's getting tougher when you have more capital but back then that wasn't really a problem um but in general it's used to find like kind of honest people running companies decent growth margin expansion and yeah he's trying to think about it and just not overpaying for things and usually staying relatively patient around how he purchases and when he realizes he's wrong he just like chucks it like he's just getting rid of it like there's no questions like you just need to get get out he doesn't care like he's yeah so i think from from what i've seen like i mean i realized like we bought the same stocks and he was like oh i made 60 percent of this i was like oh but i made 45 how did you do that like he was like yeah but i purchased on this day on this hour when it was down like six seven percent on the day okay okay so he he's like always He's managed to suck out every little...

23:24He's like, I don't know, some kind of third sense that he always times really well. I'm not so good at that. So that's why my Kager is much lower than his. I think those are really the big things. He never really has any losses and he just manages to purchase really well and sell really well. I don't know. I think that's a skill that is very hard to learn. But yeah, because it's so much about the motions,

23:51Anders Björkstål:right when it comes to that yeah how about like from a founder's perspective right so you know you talk a lot about corporate governance and i think one thing that's quite interesting to for listeners to hear a little bit about who aren't familiar with the nordic market is what makes the corporate governance and the founder sort of culture so investable you know and what you were able to learn both from christian and just like observationally about the kind of founders he was backing i think in sweden is like or at least among the swedes that grew up like 20 or like they are baby born like the 60s 70s and 80s like i mean people to people take pride in like doing a good job and it's like it's very rare that you try to come up with frauds are not so common i mean it's been a little bit more of that lately but But I think in general, like people are quite honest.

24:47You can really trust, I mean, Swedish people. I mean, I think people are too honest sometimes because when they do business with other geographies, they might get screwed over because they trust people so much. And even if you're coming, like in Sweden, like everyone pays invoices on time. You go to Denmark, like they don't pay you. Like you need to go to the door to get the invoice paid. you know it's like it's like a culture shift happens already in in Denmark and like look at the stock exchanges like there's a massive difference like look in Sweden like the stock

25:23Anders Björkstål:markets are very developed and I think there is a strong entrepreneurial spirit and there has been a little bit of tech companies I mean you have Spotify for example which maybe is the biggest one, but also with engineering, like kind of, so one thing about Sweden is that it was a very poor country, but we stayed neutral in the Second World War. I mean, think of that what you will, but we didn't take anyone's side, which means we were never bombed. When the whole of Europe was building up again, like Sweden sits on like massive resources in like forest, mining, and yeah kind of like industry and engineering knowledge so when they were rebuilding europe like in sweden was like there was it was roaring like people went from farmlands to becoming like kind of middle class wealthier and you had this massive kind of social social infrastructure being built out you had a security system i mean sweden was always a social democrat or i don't know liberals probably call it um and uh it's always been quite high taxes but people always trusted each other and no one would screw you over and there wouldn't be any really corruption to speak of of course it always corruption but it's not so much i mean corruption index in sweden is probably one of the lowest in the world i mean maybe iceland is higher but like you you basically you had a trusted society and people weren't like people would do a good job and people wouldn't stay home just because they could stay home on benefits and just do nothing and like everyone kind of contributed and it was like a sense of um sense of everyone contributing together so i think it was fine to pay a little bit high tax because you knew what you got the government had you like they would provide school for you they would provide health care for you probably among one of the best in the world and you wouldn't pay anything for it.

27:27I mean, you already paid it in the tax bill. And then there was so little corruption alongside the way. So actually, the kind of system did kind of work. And most companies are quite efficient as well because it's so expensive to hire people in Sweden. Like the tax bill for hiring people is like really high. So you need to be efficient. So you cannot not be efficient because you can never compete on international scale. But then when you bring that abroad and you go to another country like the UK, where the tax bill is lower all of a sudden, like, yeah, you can compete pretty well because you have the systems in place from Sweden and you're probably like 15, 20 % more efficient than your competitors.

28:06Like you, I mean, you print money. And that's what happens. Like you have so many companies, industrial businesses, that's gone and been really strong in the US as well.

28:17Anders Björkstål:Right. Yeah, I mean, from a sort of capital efficiency standpoint, you get very hard with how to invest in capital businesses. is out of Sweden for that reason. I think it'll be interesting maybe to explore a little bit on the corporate governance side, right? Like about how you deploy capital and the sort of very long-term thinking. I think it's also worth explaining like what makes the Swedish sort of like founder culture a little bit different because you can talk a little bit about like the dual share class structure that's super common that basically gives a lot of voting power to the people that control a lot of the business.

28:45Anders Björkstål:You know, at least where I'm from in the UK, typically the corporate governance structure is a little bit more short-term thinking, a little bit more dividend centric, which means that you're not reinvesting enough cash in the business, like truly grow a moat. So I think it's interesting to explore what makes the sort of corporate governance and how you deploy capital different in Sweden, because I think that affects how founders make decisions that ultimately build great companies. I think that the Wallenberg family probably has had a very big impact on Swedish entrepreneurship in general. I mean, there hasn't really been so much class A and B shares.

29:29You've seen a little bit of that in the US lately, especially with tech founders that wanted to protect themselves. But that's like from venture capital taking over, so they cannot take long-term decisions. And then when they go to the stock exchange, they just keep the A and B shares and they remain in voting power. But in Sweden, you had this family called Wallenberg. I mean, it's a super wealthy family. It's more like a dynasty, if anything. and they own several big companies in Sweden and they might own like 20-30 % of them in terms of like the share capital, but they have like one to 10 voting shares.

30:07So they would own the A shares, which is 10 times stronger than the B shares. So let's say you have more than 10 % of a company's outstanding shares and you own the A shares, you will basically have a majority to or like a super majority to vote on the AGM and decide. Which is fine as long as the people who are in charge are sensible people. Which they are. I mean, they've created like very strong. I mean, if you look at Omex 30 today, which is the biggest 30 companies listed in Sweden. I mean, I don't know how many they are apart of, but they probably have voting shares like six of them or something.

30:49So it's, yeah, it's a big sphere and the family has a very long history and they've been groomed to be business leaders. They keep a very low tone though. They're never out speaking in media really. They stay away from media as much as they can and they do their thing and they stay in majority of these important Swedish large companies. And, yeah, I mean, they've done more. So they own Investor, which is their holding company, basically. So that's through Investor that they own several other industrials, banks, EQT, I guess, which is a big private equity firm. So they have investments throughout.

31:37Anders Björkstål:Yeah, and it feels like there are a lot of other holding vehicles that have kind of adopted that same philosophy, right? Like you've got the tour and other big, like, like big pools of capital that when they're allocating to local Swedish companies, it's with the idea that like we're going to be permanent source of capital for you to be able to reinvest long term, which I think further reinforces this idea that these Swedish companies are quite different and why they can be a phenomenal niche for investors, right? Yeah, I mean, A-Shares is great as long as you have someone who does the right thing.

32:09if you don't I mean then you're screwed like then I mean you cannot do anything you sit there and you're I mean as a minority shareholder it might not matter so much because you can always sell your shares but if you own 5-10 % of a company that is listed and the people in charge have all the A shares I mean there's no liquidity in the A shares I mean some of these big even if it's like a 20 billion dollar company with market cap like there's no one trading the A shares like they are listed on the stock exchange you can buy and sell them but i mean the spread will rip you out your eyes out so you have to buy the b shares basically and um so investor for example their a shares is trader and their b shares are traded so not to say that you cannot get the control yourself but you can never get you can never go past uh developer family anyway so yeah and you don't have very strong liquidity in a share so yeah that's why you probably buy the be shares anyway but if you trust a good person is in charge then it's fine but yeah it you have to have a long history of understanding how what kind of decisions they've taken in the past um but yeah for myself i mean if i was investing i mean i wouldn't care if i was buying investor for like a pension portfolio i mean i would be totally happy with wallenberg being in charge there like i mean why not like they've done the right thing for like like 150 years like uh probably their son's or daughter is going to continue doing the same so let's change gears a little bit um and

33:37Anders Björkstål:talk a little bit more about like the key moments you know that as an investor you're able to kind of learn from in your decision making style you know on the journey so i guess like as a first sort of question for you you know we're talking a lot we've spoken a lot about what you've learned like in the formative years of your career so like what would you say was the biggest investing mistake that you made like earlier on in your journey that allowed you to kind of realize because I think people remember their mistakes much more than their successes and a lot of the mistakes not all the mistakes but a lot of them happen at the earlier part of your journey as an investor so it'd be interesting to hear maybe a mistake that you made whether it was like on a founder level you know how you approach investing in a company and what it taught you basically Okay, so just the takeaway, there was a business that was run by Jitze Kroon, who is his Dutch.

34:34I'm probably butchered his second last name here, but he was a founder. He started the business back when he was in university to basically get food delivery. And it was a marketplace business. It was super profitable. It was more like a booking type of business model where the restaurant delivers the food. You as a customer, you order it and they take a little cut of 10 % and you make 60 % margin basically. Then the company grew and they become very, very strong in Holland. And they went to basically war in Germany with Delivery Hero and they managed to win. They did a really good job winning Germany.

35:16They did a few small acquisitions of like number three and four. they became number two and then they just managed to take over Deliver Hero. I think this is where it went a little bit wrong because I think Gigi became, he thought he could take it over the world. And over this time, also, I'm not sure if you remember, but during COVID, Uber and DoorDash grew immensely and they were subsidizing vouchers for everyone to order. and Just Eat, that was like a profitable company with 45 % margins in Germany and Holland. They felt that, okay, if we're going to have a business left, we're going to need to also join in on this.

36:04So what they did first was they acquired Just Eat in the UK, which was a very struggling asset. I think they've done a decent job here, but UK was a much more of a battleground than Germany and Holland. So Uber came here. You also had Deliveroo here. And both those models, they lived on venture capital. So they could do a lot of discounts and just started to lose market share, which meant that they needed to change their operating model to become logistics, which is basically you're not only aggregating the demand, you're actually providing the rider as well but they didn't have any density so they probably lost like five pounds in order right which is really hard and yeah he allocated capital to the uk and then also it was he bought grubhub in the us and for our us listeners you probably know that grubhub is not the hottest stuff on the street anymore i mean it's doordash all over the place right and uber in some uh some geographies but nobody really just grab up anymore so that was a declining asset and he diluted the shares he came down to like 10 ownership which was fine it was probably a 10 billion company by then but i mean he paid i'm trying to remember the numbers but probably like i cannot remember actually but probably six billion he paid he paid a large chunk of the market cap for acquiring grubhub and i believe this was somewhere around five six billion and i mean at the bottom probably just its market cap was one and a half so you could see how the market was judging his capital allocation skills but he diluted shares and he bought assets that were struggling he thought they could turn them around and it was just too much to chew.

38:08I mean, there was like a war here. Like during COVID, you remember, like everyone was at home, like everyone throwing vouchers. You had Get Deer, you had GoPuff, you had all this like super, like there was the supermarkets, there was everything. Everyone's like, okay, home delivery is like, it was like AI is today. That's what delivery to home was for, I don't know, iPhone cables and snacks and whatever. Like it was like, it was all over the place. Like there was just, and for me, I thought, okay, But just it has a very strong marketplace business in Germany and Holland. It will be fine. They've proven it will work if it also works in the UK.

38:42But the capital, I don't know, there's a book called Capital Allocation of Capital Cycles by the Marathon guys that runs the big investment firm. And if I would have thought about when I read that book, this was the sign to leave. because the share price were propped up because they were growing like 60, 70%. The only problem was the Doordash was growing like 200%. So they were losing market share and Uber was also growing faster in the UK. So they were losing market share. They had to invest a lot of the money they made and all the money that went from the good business they had to throw on the bad business just to keep market share.

39:24And we did a lot of research on this, but I mean, just following where the money is going, I think this was the time we should have said, okay, this is just getting too complicated. There's just too many players getting involved here and everyone is fighting for it. And what will happen when stuff reopens? Like not everyone's going to order as much. All the demand was just pushed forward so much. And if there's something that the market doesn't like, it's when earnings shrink. So that's an important lesson. Stay away from companies where earnings shrink, like you think is priced in. I promise you it's not it's never it's never priced in like everyone everyone loves the short shrinking earnings like it doesn't matter like it will it will just continue going down and there's no end to it.

40:14Anders Björkstål:Changing gears and inverting what we were just talking about like how about your biggest investing win like what can you share about the story of how that happened and what you learned from that as an investor? So it's not going to be my biggest win in terms of money because those tend to be later on if you do it well. But it was actually investments like back in 2012. So this was during the Handles Capital Management days when we were sitting in that office. And yeah, so Alex came dragging with this like gambling company. It was like$20 million US market cap equivalent. They basically, this is a company that spun out Betson, for example, and also Net Entertainment.

41:01I'm not sure if you guys know what it is, but those are two fairly large gambling companies as well. And Net Entertainment was bought by Evolution Gaming later. So this was like the mother of the Swedish gambling companies. And what was left was it was a small business where you have like blackjack tables in pubs. So not the most sexy stuff. And then you also had a few online brands and you had this little studio called Yggdrasil, which was a slots producer. They made the slots games that the online casinos would then implement into their product. So this was really interesting because it was valued to, I don't know, probably like four or five times EBIT, which is quite low.