Risk, and the opportunity for gains. October 20, 2023

0:07Welcome to Motley Fool Money, the podcast that is not getting 6.4 billion dollars for our coal assets i'm scott phillips from the motley fool he is andrew page the man the myth the legend i know i say that all the time i just really like it how are you buddy yeah pretty good always always love the g up i feel a bit better after that as you as you well about myself as you well should i should say by the way uh for those who don't know because we haven't talked about for a while we are former colleagues uh you worked for the motley fool for a while you then left us uh in a half no not really to go and start burnt every bridge that was there that's right through grenades over the shoulders you walked your way bridge willer style you left us to start a business which is flourishing called strawman.com which is remarkable I have never actually thought to ask you what strawman.com does flourishing is a nice nice touch I like that thank you we're an online private investment club or a private online investment club some combination of those words you should talk to the founder and really nail that i think it's important you should get that yeah just at some point the first you know 10 or 15 years of the company's life you probably should just have a have a an answer to that question maybe you should ask me every week and then i'll get more practice that's not a bad idea i mean i'd probably be a bit boring for our listeners but yeah i'd help i can help you out if you want nah nah how's your week been oh it's been you know there's a lot happening in the world so it's sort of you know i you know i think it's one of those weeks where you feel as though it's best just not to look at Twitter or the news too much.

1:41But gosh, yeah. Other than that, yeah, not too bad. Mate, I'm going to start there, actually. And I haven't actually given you warning on this one. We did talk about it off air. But I do want to ask you about the Middle East, Israel, Palestine, Gaza, Hamas thing. Let me solve it for you. Yeah, if you wouldn't mind, that'd be lovely. Joe Biden's listening. I'm playing on the way over to Israel. Take some notes, Joe. I just wanted to, I wanted your thoughts. And again, we don't have to care about what the market does because our opportunity is to take advantage of the market when it's wrong rather than necessarily need to care or know or whatever about what it's doing when it's right.

2:19We don't have to justify or explain it necessarily. But there are circumstances where we see these geopolitical events just absolutely wreak havoc through markets. And then there are times when the market kind of seems to collectively shrug. We kind of talked about it a little bit last week, but it's continued on. And again, I will say about this goes to where anything could have happened, hopefully nothing bad. But asset prices could move all over the joint, insurance could move, whatever. But at least as we record this on Thursday morning, the 19th of October, we're now a week and a half into the conflict.

2:52The human toll is horrible. I said this last week, I will say it again, because it bears repeating. We're not taking it lightly. when we are a finance podcast, we'll talk about that. It's nowhere near as important as the human cost. But the oil price is down still. The markets are okay. I mean, Wednesday night, US was tough. So maybe our market will open up down tomorrow, today, so I should say. But broadly speaking, the market shrugged its shoulders. And in some other parallel universe, shares are down 10 % right now and oil prices over 100 bucks a barrel. Do you have a thought? Do you have an observation?

3:30Do you have a sense of what is going on in the markets and why this time is, I'll say this time is different, the four most dangerous words in investing. Why so far has it been different to some other occasions when these sort of things would have caused massive conniptions? No idea. No idea. I mean - It's weird though, right? It is weird. I mean, we touched on this last week as well it's it's always easier to rationalize after the fact so i'm sure i can come up with some narrative that goes yeah that makes sense but i mean before the fact i you know no idea and and then how it goes from here so it's it it is it is what it is and this is this is why i think it's such just a i get get to the punchline quickly here is why it's so silly to try and position around this kind of stuff.

4:20It's, you know, how do you end? Even if you've got a very good read on what's happening right now, I still don't know what's going to happen tomorrow in a very fluid, fast-moving situation. So it's the only thing, and again, as you say, it feels so crass to even talk about this given what's happening. But we've talked about this actually in a more general sense. as well, which is, I'm just going to do what I always do. I'm just going to try and find really good quality companies. And I've got a very high degree of conviction will be around 5, 10, 15, 20 years, and that will be earning more than they are today.

5:02And I want to try and acquire them at a good price. Now, I don't know when the market's going to offer me that price. And when it does offer me that price, I don't know if that means that's the exact point that's going to turn and go to the moon. But that's all I'm going to do. And I'm just going to keep doing it. And I'm pretty confident that as long as I continue to do so, over time, I'll be rewarded. I mean, the horrible humanitarian disasters that are unfolding in multiple places, in fact, around the world, I don't think that really says much about, use the great classic example of, you know, what Woolies and Coles are going to be doing, you know.

5:38Actually, we'll have some kind of impact because oil prices feed into production costs and there's general inflation and there's food price in the room, but you know, they're going to be around. So CSL, Cochlear, so it's a bunch of other big, you know, established companies. And so it's sort of, it's about focusing on what you, what you have a reasonable degree, what you can reasonably expect to be true. In other words, I don't know what next quarter's earnings are going to be at for any of these companies, but again, A, if they're around and B, they're in general prospering over the longterm and C, they're available at a decent price.

6:15That's all I care about. I think that's a really good way to put it, man. You're right. You're right. That's why we don't, you know, the ructions around the world are important for a whole lot of reasons. And we talk about it because despite the fact that human toll is far, far more important, assets still trade. And our listeners, you know, there are simply impacts on asset prices this time around. Not many, actually, as it turns out, at least not yet. But we do need to have that conversation let me let me take a tangent from that mate because i you you invest in smaller companies generally speaking than i do uh i tend to work in the mid to large you're definitely the small cap land given what you just said why do you this is not a direct it's a devil's advocate question not a direct a direct uh challenge or criticism why do you not take that to the extreme why don't you invest in the best companies that are out there the biggest the most proven the most, you know, the quality of the ones are going to be there in five or 10 years.

7:08It's easier to do that with a large cap business, a Woolworths or a CSL or something else, rather than a smaller business that maybe hasn't got the track record or the balance sheet strength or the brand recognition or the breadth of customer base. In your own investment thinking, as you kind of try and square that circle for yourself, if I'd have taken what you just said and said, well, most people would say that means I'm in ASX20 land, I'm in blue chip land. I know you tweeted about the ASX 20 during the week. So I'm giving you a bit of a throw with the dicks here. But why, you know, why not take that to its logical extreme and say, I'm just going to find the very best, highest quality businesses I can with massive balance sheets and great brands and invest in those where you get a second, third and fourth chance because nothing is fatal.

7:55Why go to the smaller end of the market and roll the dice there? Such a great question. So there's a US-based investor I've got a lot of respect for. He's not as, you know, we love to talk about Buffett and Lynch and Marx and sort of the big names, but his name's John Huber. He runs Sabre Capital. And he made, he had his investment newsletter out a little while ago and he was making the point that he's, he is generally that investor, very high quality, deep moated, large companies at good prices, very much from the Buffett sort of school of thought. And he made a comment to his investors, which is we're going small cap.

8:34And some of the, some of the, I'm paraphrasing here, but, but some of the, some of the, um, investors push back. It's like, Whoa, that's, that's not your style. And he said, no, no, no, no. My style is always to get good companies at good prices. It just so happens that when we look around at the landscape, the better value is in the small cap arena at this point in time. And I think that's true too. So while you're, You're right. My portfolio is very much small cap. I've sort of focused there. You know, if I could buy Cochlear at$100, I'd sell everything right now, you know, and back the track up.

9:10If I could get Telstra at$0.50, you know, even then. You know, it's like there is – it is not – my style is very much on what is the best opportunity risk-adjusted at current prices. I tend to find on average over time it happens to be more often in small cap because they are overlooked. They are under-researched. You often get the biggest disconnects with value because it's sort of me and a few idiots on hot copper who I'm competing against. So it's sort of like I'd rather that than the smartest, you know, PhD educated financial wizards, you know, with massive resources and supercomputers who I'm competing against at the big end of town.

9:56I just I think there's some really incredible companies at the big end of town. I just I don't I don't think the value is there. Maybe that's changing a little bit. Actually, I mentioned CSL and ResMed. Put that in there. That's that's interesting. What's happened with the Zempik and this miracle weight loss drug has really taken a knife to these businesses. So things could change. The other point I would make on it, just to reference the tweet that you mentioned, when you look at the ASX20, it is a story of mediocrity. Like, what did I, I'm going to forget my own tweet now, but it was something like 6.9 % a year, I think you said.

10:326.9 % with dividends invested, excluding tax. Don't forget, you pay, if you reinvest dividends, you've got to pay tax on the way through, but ignore all of that. So I just use the ASX20 index or total return and you look at it and it's just like, huh, 6.9%. You dig underneath the hood. We've spoken before at three of the four major banks have just all lost money as much as 20 % over 10 years on a capital basis. AMP, my favorite whipping boy, you know, like absolute dog's breakfast. Woodside. There's a whole bunch of stuff in there. It's kind of like, tell me again how these are high quality companies.

11:10And it's easy to sort of point to the share price, But the reason is, is that that share price, there's sort of short term fluctuations. But when you stand back and you look at the per share earnings growth of these businesses, because in fact, there's actually not much growth there at all. In fact, in many circumstances, an absolute decimation of earnings. So it's kind of like my, the point of my tweet was, I think too often we say big is better, big is safer. And it's like, well, it's patently not true. And I think too often when people go small cap, they go, they equate small cap with pre-revenue, highly speculative cash burning companies.

11:50Now, that's probably a majority of the case, but that just, there are small cap companies that are just gushing free cash flow with fortress balance sheets. you know that they're the exception to the rule but they're out there and and so which is why i wouldn't be and i'm not an investor in small cap etfs because i just get all the crap that that comes along with that so it's you gotta be careful with some of these labels i don't know that was a waffling answer but hopefully sort of threaded the needle a little bit now it's a good answer I think it's well worth talking about because it puts style or approach to the fore, which is exactly the point, rather than size in and of itself.

12:35And where the opportunities are is the place that it is worth going investing. I think that's a really, really, really thorough point. I just want to draw it out because I think people would have been listening to you saying quality, you know, here in five or 10 years, great businesses. And people are like, that doesn't sound like Andrew's small cap investing. But I think that is the point where you've made the point many, many times. Just applying a size filter arbitrarily is probably one of the least useful things you can do as a proxy for quality. There are some great companies in the ASX 20.

13:02There are some great companies outside it. Finding great companies is the point rather than arbitrarily saying big or small or medium or somewhere in between. You said it much better, mate. And not to lure us into a very deep rabbit hole. I think there's a lot of mischaracterization with property, right? It's like, Andrew hates property. I don't hate, who would hate property? Property is what a wonderful asset. I just, you know, I don't want to leave a five to one in something that's got a negative real yield. That's all, you know, give me a good property at a good price. I'll back up the trail, dump all of my stocks tomorrow, right?

13:34Like it's the same with the proverbial emu farm, you know, at a price and one that's generating good cash flows. It's these rules and heuristics that get applied and spoken about can be very counterproductive. And the reality is, is that when you're looking at something where there is broad agreement on the market of quality or something like that, well, they're just, the opportunity is not there. If everyone recognizes how fantastic a company is, there's no, at best, you might be able to buy it at fair value. You're certainly not going to get it at a bargain. And if you're buying it at fair value, well, by definition, I'm going to get the market average, which is like, well, I'm just going to buy the ETF and guarantee that.

14:17You know, so it's sort of like I need, if I'm going to be a stock picker, I need something that is below a reasonable appraisal of fair value. I mean, what else am I, what am I doing here if I'm not trying to do that, right? When there's a far, you know, perhaps far more worthwhile pursuits in life when I can buy an index fund, as I say, guarantee the average and not have to spend all this hard work and stress trying to beat the market average, right? absolutely it's one of the things i've said i've said before about tech i'll say it again because i think it's it bears repeating uh people buy tech stocks because their growth stocks and growth stocks they think are going to do better than the market and whatever else there's nothing inherently so we talk about size sector is the same if if amazon was appropriately priced from day one amazon doesn't beat the market no and that and yeah there is uncertainty there which is where the opportunity can come in some of these growth companies because you can sees something market misses and that that's okay the market wasn't convinced amazon would be the behemoth it is today um i own shares as everyone knows let's do that uh but uh you know there's nothing magical at any sector it's only a question of has the market appropriately priced the future that's literally it and to whatever extent technology has been that and maybe maybe will always be that for all i know right but there's just a reminder that if you if you focus on the wrong label big small tech uh i don't know industrials mining uh retail whatever there's nothing magical about any of those things and the only way any company beats the market is if it does better than the market itself investors a group think it's going to happen and that's been tech for a while because frankly people caught on late and that's been great if you're an early tech investor you've done really well right by finding these businesses you saw something in them you said great this is fantastic i'm going to make a lot of money here because the market hasn't seen it yet that's perfectly fine but a in a different universe it could have always been appropriately priced or b at some point whenever to your point mate when the crowd realizes this yeah that's when tech is down what a third over the last couple of years maybe not quite that anymore yeah probably about that yeah but part of part of that is for exactly that reason everyone went oh tech we love it we're going to bid it up why is it underperformed yes in some small cases because the companies themselves are disappointed but it's more the fact that investors got too excited about the price and And this is where, again, you've made that point beautifully, Matt, about you're buying a company for a price that is a discount to its future.

16:43That's all we're trying to do. When things get overvalued, you don't have the opportunity. And tech has been that for a while now. Will it come back? I assume so, yeah. But it's just worth – trends can continue forever. They can also end. And if the mispricing, way back to Buffett's mentor, Ben Graham, who bought businesses because they were trading for less than the value of their assets, right? Which sounds bananas to us right now. Why do people do that anymore? Because those companies don't exist because people have arbitraged that away. Companies don't sell at that price anymore because someone's going to grab them before they do.

17:15And so that idea for investing, Ben Graham doesn't become an idiot all of a sudden. The circumstances of the strategy you followed stopped. Buffett himself started buying Graham-type stocks. then went more phil fisher went more growth growth everybody who joined at the hip as munger said and we've repeated many many times but that that idea of buffett's own style change why partly because he thought he's found a better way partly because the fishing the pond dried up there was no more opportunity in that space for that particular label i.e discount to net tangible assets or book value and certainly with that amount of capital right exactly so those things you know it's it's the approach that matters let me give you a very quick example on that i have to point because it's only because they had some results out this week and it's a well i say little companies not that little actually it's what is it it's a 174 million dollar market cap so that's small cap right i always i always have to catch myself because imagine if i met you at the pub and you said oh i've got a hundred i've got a business valued at 174 million whoa that is that's small it's not a local fish and chip shop that is a big business it's just on the asx it's like no it's tiny you know it's like well okay is it anyway it's um it's called drop suite right and shares for full disclosure okay but here's a business right that has just knocked it out of the part year after year their recurring revenue has just uh it has increased their actual revenue has increased they've as they've been scaling they've tipped into profitability and cash flow positivity um and they're scaling extremely effectively well blah blah anyway i like i like the business right and they're not a recommendation to buy for god's sake please if you're buying stuff because some idiot on a podcast mentioned it it's all on you so i'm just mentioning that but i i i i mention it as an example here because if you which which is what most people will do they'll go okay they'll look at it and go wait a sec in july it was 37 cents and now it's 25 cents it's falling it's bad like is it right or was things a bit silly at 37 cents why did it get to 37 cents the afr wrote a big love letter to it you know big puff piece yeah and like oh this is great oh okay and then it was again under the under you have these companies are not scrutinizing there's not there's 2 000 stocks out there and everyone's talking about csl and woolies and cba you know it's like there are a lot of companies like this out there but this is what happens people will see it the race and they'll pile in because It was a glowing article on an AFR article, and they'd had some good results, by the way.

19:49And then it fell down at like 37 cents to 25 cents on a percentage basis as he delays. A third, give or take? Yeah, well, your mask is much better. Exactly a third. He's dropped a third in value in a few months. And it's just like, this is a good thing for anyone who is rational and farsighted. And this is the point here, is that there is the, thing that you are buying and then there is the price that you are buying it for and they are two very very different things and and yet here's a company that's very much clearly classed as as tech we know what tech has done but even despite that sort of recent movement if you go back to the start of 2019 it was three cents a share do you know what i mean like stand back look at the people are looking at the trees and they're not looking at the forest here yeah and and i think too often And this is why so many people get very mediocre returns because they're only focused on the wiggly thing on the chart.

20:49They've got no sense of perspective when it comes to timeframes here. Anyone who's run a business knows it takes, even the successful ones, they're the overnight success that are 10 years in the making. You don't see the team slaving away, you know, eating two-minute noodles, living in their mom's basement while they build the business. You just, oh, look at this guy. And now he's got a Ferrari. is like, no, none of this happens by accident. And I think if you, I don't know, I'm on a rant here, but I feel as though, again, I shouldn't complain and I'm not complaining because if you can sort of take some of this stuff to heart, there are nuggets of gold just lying around that are out there.

21:28They're rare. They're not obvious, but they're there. And they're there even in these troubled times, in these difficult times. And even in, as you say, the reason I bring it up is because in this landscape of tech and everyone hates tech and tech sold down, it's like, well no in the last few years this one's 10x in price and you know it's it's just it's just these again these labels can be very very unhelpful and each opportunity has its own merits or otherwise and that's that's why we often call ourselves bottom-up investors you know these these top-down labels all the economy's going into a recession or bond yields are spiking or all this macro stuff which is fascinating by the way um it it it distracts you from i think these individual opportunities and whether you want to call a company like drop street tech or small cap or whatever bucket you want to put it into is really just not going to give you is not going to help you in in any way as opposed to here is a business that has certain characteristics and is available at a certain price totally and by the way whatever label you give it not all companies with that labor will perform the same way so it's actually it's worse than useless because you say oh tech well drop sweet is 10x over that time there'll be other tech companies that have halved gone broke over that time so how has tech performed well it depends which tech you owned um the other thing about one last one on small caps very quickly is today's big companies were yesterday's small companies so people people tend to look at the success stories of i mean csl was a i think i want to say it was a two dollar stock now it's a 300 stock i mean maybe it wasn't quite the chip i don't really remember but the idea that as a government um right exactly operation yeah commonwealth serum laboratories back in the day um woolworths was a definitely a two dollar 15 i think a share when it was listed um now you know my point broadly is that you look at the big companies say see the big companies i'm really willing to buy more big companies and that can absolutely be the case bhp has been big for a very long time but there are some of the biggest companies today were small companies and it doesn't mean you buy every small company either I'm not making the case for either necessarily.

23:30I said, I tend to operate kind of the mid cap-ish kind of part of the world. Andrew is at the small end. I think I own maybe one company in the ASX 20 and we've talked about Telstra before. But just the broad idea of don't buy big because they're now big. That's, you know, it kind of misses the point. You know, you pay a lot of money for a very large, fully established tree. You can pay five bucks for a seedling and somewhere in between there is the right price, the right opportunity. Maybe the seedling dies, maybe it doesn't. And so, you know, there's reasons why you don't want to buy every cheap thing or every small thing.

24:00But don't look at the big company and say, look how successful Woolies is. I'm going to buy more of those. Add the one that won't even mature. That kind of misses that growth story. Can you indulge me for a couple more minutes? I've got to give you another. So I only, and I spoke about this recently also, but I have to write a bit of a love letter here. It's a company called, I think it might actually be one that you follow as well. It's called Jumbo Interactive. Yes, I own shares in Jumbo. Me too. um okay so totally biased uh and the fact that you and i both own it means it's it's going to zero so fair run run fairly worn but i mentioned it because we spoke to the ceo and the founder mike the verka during the week at straw man um mike started the company in 1995 as as an isp as internet service provider and software developer he's a he's a coder himself right it listed in 99 is jumbomail.com do you remember that i did not is that i didn't i should know the history i didn't know the history that's fast no well i looked it up in in in prep for the interview i was like huh i didn't know that jumbomail.com now you say that i have a yeah now you said i have a slight recollection but maybe i'm maybe i'm making it up because i want to sound smarter than i am but yeah go on well so uh for those that weren't around at the time um anything with dot com at the end of it just went to the moon and then and then crashed all the way back down walmart spun off walmart.com way back in the day that's how important this was walmart thought there was more value in spinning off their walmart.com business so it was for a very short period of time a separate listed business i actually went to the domain and it's for sale for 30 000 us dollars so if you want to own jumbo mail.com does jumbo and director still own it uh i assume so that's funny i don't actually i didn't look on the balance sheet somewhere go it'd probably be there somewhere um but what was what was fascinating about this is that here is a business that in the last 20 years they so you go i just because it's a round number go back 20 years well so what happened was we had the rise of the internet as we we now all know was a thing and we had some changes to the legislation which meant that internet lotteries became a thing now it's just sort of like yeah einstein of course it well it wasn't you know back in the old days youngins you had to go to a news agent and you had to buy it there and well now obviously you can you can buy it online so anyway another theme that i'm huge on structural shifts structural shifts are where value is really created and so for 20 years ago they went from less than 3 million in sales they most recently did almost 120 million you do the mass on that it's a compound annual growth rate of 20 % per year, right?

26:37Over that very long stretch of time. And even if you go over the last five years, even if you look on a per share basis, as you should, the sales per share has grown at 20 % per annum over that period as well, right? It's like, interesting. Okay. Not just that, it's profitable, right? It pays a dividend. It pays 80 % of its more, 80 % plus of its profits out to dividends. Doesn't need them. And it can still grow at that rate. And before you say, oh, yes, but it's all profits and profit is vanity, revenue is vanity, profit is sanity. The net margins, let me repeat this, the net after tax margins are 30%.

27:18That is remarkably good. Look on the app, do a scan. Tell me how many companies you find in Australia with a net margin of 30 % and a return on equity of over 30 % too, and consistently so anyway so uh it just tells you it's a very capital light business and it tells you it's a business with an incredible moat but unmoted companies don't trade it at 30 percent that's true but here's my point and just just i said it was going to be a love letter and you had to indulge me this is this is tech i said to mike you know what's what's what's the core ability and strength of business like well we're i'm a developer we're a development company most of the people who work at the company are coders and developers that's what we do and it's like Okay, well, how are you growing?

28:02Oh, we're taking our tech and we're launching it in other jurisdictions. Okay, what about sports betting? What about online casinos? Why would we do that? We've got no edge in that. That's stupid. It's like, oh my gosh, I just love it. Love it so much, right? And yet this ticks all of the boxes that you would tick in terms of those broader statements that we made. And that's why I remembered to talk about it, was it has just gone from strength to strength to strength to strength. And do you remember a few years ago, mate, so 80 % of the revenue comes from reselling lottery tickets from now called the Lottery Corporation.

28:36That's right. TLC was Tabcorp. It was my little Tabcorp, yeah. And then it's had a few restructuring. That's a whole business study right there, right? It really is. Like the structure and restructure of these gaming companies. um but do you remember a little while ago that this was these shares were incredibly good value because of this huge counterparty risk it's like oh tabcorp's just going to screw them over and then they signed a 10-year deal and even then people yeah but what happens after 10 years they're going to be they're going to be done because then then the counterparty is just going to demand a much better margin so when they re-signed that deal their their costs went up their margins went down on that business.

29:17Yet the business has continued to power ahead and has, I would argue, pretty good growth opportunities. And again, it's very easy to sort of look short term, very easy to sort of look at the characteristics that it sort of presents and bucket this with other sort of things here. And again, I guess I'm mentioning it because it ties together so many of the themes we're talking about. Quote unquote small cap, quote unquote tech, quote quote growth you know and and yet it's sort of it defies a lot of the generalizations that you can make about all of those buckets and i just wanted to give it a plug nice i will i want to add one thing mate uh which is just in the interest of fairness the counterparty risk you mentioned is still really big so if anyone's heard you talk about that and likes the business and i like it too i own it so you know we're absolutely both biased there is a there is a very real chance and no one knows how big it is that so you might remember remember vita group or vita group i do um so they sell up they right they were a retail company that basically had the contract for telstra shops a lot of i think it was all of them but most of them uh and then telstra just literally one day said yeah we're gonna do it ourselves thanks guys it's been fun yep and that was disappeared that was it right and so there was a there was a chance that not only does does the lottery corporation uh ask or demand of jumbo uh better returns for lottery corp in other words lower margins for jumbo it actually might at some point say yeah this online lottery thing it's actually really big now and we don't want to share it anymore we're gonna do it all ourselves and jumbo's business will go will disappear overnight for that part of their business yeah so so it's worth it's worth just making that point that uh and again i own the shares i i don't think it's a significantly large chance but it's a very real chance and the consequences would be i'll say catastrophic for the share price they're not catastrophic for the business not existential but you know this is it's a very very different looking jumbo at at a much lower valuation moving forward because that profit it's making now from from reselling the lottery corporations tickets would literally just go away tomorrow so i just wanted it's an excellent point i'm so glad you raised it i mean it is seven years away but that'll go by quicker than you than you think and also too the market will start to discount that or not discount the shares increase the risk of that until that deal is signed so that's the other thing is you can't wait for seven years and say, at that point, I'm going to sell if it doesn't get re-signed because the shares will crash that day.

31:39But even, you know, trying to predict market movements is really hard, right? But let's go out five years. The market starts to think, oh, okay, now if I'm pricing this thing, you know, it just kind of cash flows. The further out it is, the less value it creates or infers. If we're two and a half, 18 months out from the contract being re-signed, it had no news yet we don't know what's going to happen now and who knows what's going to happen the market will start to think okay that's now a you know it's it's a near-term risk and if the market is so convinced that shares may well fall and maybe stay low uh for a for a period of time before that expiry because it might expire and until or unless there's a new contract signed so uh you can't just wait seven years either it'll be some point before that people start to think but what if and that'll weigh on the share price that's that's gonna be life of earning jumbo right Now, by the way, you might say, well, then I won't buy them.

32:32The shares could double or triple between now and then, and they might fall 15 % or 20 % as a result, right? So we're not saying buy them. We're not saying don't buy them. I'm not saying because there's a possible downside at some point. We've all seen Amazon shares are off 2 % overnight, right? 2.3 % I think they were, which sucks if you bought them yesterday. If you bought them 10 years ago, you kind of never really notice it. So, and again, Jumbo's not Amazon either. But just be mindful of those moving parts if you are considering an investment, as Ram says, don't buy it just because we talked about it.

33:00But hopefully we want to kind of, we're not trying to be balanced because we both own the shares, so we like them. We're not trying to say it's an even bet here. It's a 50-50 outcome, but we do want to present the whole story. I just, oh gosh, we are so far off our agenda, but let me riff on this. I want to underscore a couple of points you made there. And I love it because, Munger talks a lot about this, which is that you've got to understand the bear cases, the bear case better than the bears, right? And I love that when we're talking about a company that we both own, that your first place you go to is to talk about what can go wrong.

33:34And I know you're doing that just for the sake of balance, but I also know as an investor, you do that. And it's something that I think is we are so, we want to believe, right, on a good story. And I think it's always a sign of a very capable investor when you tell us what stock you like. Oh, I really like this because of that. And you go, what can go wrong? If they go, I don't know, nothing. What do you mean? I just told you everything. This is perfect. That is like run a mile, right? Exactly. The true investor goes, well, actually, here's all the things that could go wrong. And why I might be comfortable with that.

34:13Obviously, you need to have that comfort. Otherwise, why would you invest? But you certainly need to be aware of it And you need to take it very seriously, which I think is super important. The other point I'll make, and I think I made this a few weeks ago, is the idea that without some of those uncertainties, you don't get the bargain. So you kind of need something that is there that is a little bit hairy, as I called it in a recent article. You know, you need some hairs on the business because the business that is just perfect is priced for perfection and by definition doesn't have it. So, it's this really weird thing where you kind of want this really great business, but you want a couple of things that aren't so great about it or at least are perceived by the market.

34:59Things that worry the market. So, great. Yeah. Because that is such a wonderful setup because it's sort of like, you know, it's like a Zempic and ResMed and CSL. You know, I was like, you know, for whatever reason, sleep apnea and kidney disease is cured, apparently, according to the share market. And like, huh? But, you know, shut up. Don't complain, right? Like, oh, yeah. Yeah, that's totally a thing. You should, everyone is holding shares. You should sell because that's totally a thing. And then I'll buy them off you because you're idiots. And that is, I guess, it's two ideas you've got to hold in your brain simultaneously that I like this and that this isn't, even though there's this aspect that isn't so great and might have some negative consequences because at least that way I get the bargain.

35:47And finally, finally, sorry. The final point is I would make is that that's not to say you should be careful with some of these flippant statements. I don't know. Maybe kidney disease is solved. Or if it's not solved through a Zempic and GLP-1 compounds, it's going to be solved next year through some AGI breakthrough or something. I don't know. But that is why that margin of safety concept is so important as well. So you're just sort of like, I think I would do that. In fact, I do with Jumbo and any of the stocks. I was like, well, I feel as though I've got a positive view on it for good reasons.