#268: Two Undervalued Stocks to Add to Your Portfolio

0:00My point is that it's almost priced like a winner takes all where if we're talking about this industry as a whole potentially tripling in the space of five years, you know, okay, maybe Novo Nordisk goes from 55 % to 45%, but it's going to be 45 % of a much, much bigger pie. And I just think in terms of valuation, in terms of being oversold, in terms of negative sentiment, it's just all stacking up to make a very interesting buying opportunity from these levels.

0:39Anne-Marie, how are we getting on? I am well. How are you doing? I'm good. I'm good. I haven't been on the pod in a while. Well, I've been in the background of a lot of pods recently, kind of managing and making sure Emma doesn't blow up a stream yard. But no, it's good. It's good to be on and to start talking nonsense again for a while. I've been in the sidelines for too long. I know we've been doing lots of like responsible, long term, investing content and had some really great guests on. But we're back just looking at the headlines. Back to talking SHIT. um before we get into it have you seen the this could be its own section but i just think it's really funny the open ai facebook stuff where mark's up is going in coaching people for 100 million quid bonuses and stuff how nuts is that if you are an ai researcher right now how are you getting any work done you're literally like waiting for an email saying you're going to be worth nine figures in two minutes like what is going on yeah it's very intense i actually listened to a podcast about it yesterday and the main thing most people that they interviewed that had left open AI to go to meta were like I did not get a hundred million dollars they were like I didn't get anywhere close that I mean they they got a million dollars but there seemed to be a consensus thought that meta has planted these seeds publicly so now anytime an open AI engineer goes into salary negotiations they can be like well I go to meta and get a million dollars and so that seems to be where the where it's going but he has poached a number of them successfully they released a big list like four of the top researchers uh from open ai last week or something and look we won't dwell on this for too long but he's never been afraid to spend big in something he seriously believes in like and that's gone a few different ways you know the metaverse was an interesting take but look where meta is now in fairness to him um and this clearly clearly seems to be his in his priority at the minute and he's going to throw as much cash as possible at it so it is it's really interesting i just it's like you know premier league football transfer fees like going and stuff i saw i saw a graphic it was literally like uh i can't remember that but one of the top ai researchers and it was like a transfer that you would see like from arsenal to man united kind of thing from open ai to facebook for 100 million it was mad yeah it makes you think like we should have been studying ai gotten phds back in the day like nobody told us that was where i was gonna go you know i'm something i'm sure if you studied high level mathematics you knew that's where it was gonna go but that didn't also we would also and maybe i'm only speaking for myself here i probably am but we also needed the brains to comprehend high level mathematics yeah that is true that that didn't come up as much in college so yeah but anyways um all right we're moving on we just want to touch on a quick little thing here um so we're halfway through the year and it has been the worst year for the u.s dollar since 1973 it's down about 10.11 percent 10 or 11 percent yeah from the start of the year which is the worst start in over 50 years and obviously we've talked about this probably the last time me and you were on the pod um but the fact this is gonna happen on your portfolio if you are holding u.s stocks in dollars now if you're holding it as you should be for 20 30 40 years there's going to be these kind of ups and downs and it'll probably level out in the entirety of your holding period but in the short term it does actually make a bit of a difference and even though say the S &P was recovered and U.S.

4:24stocks were recovered from say the February the dip that came after the India Liberation Day and the big Trump tariff drop-off we're still actually kind of in the we're still down considering the loss in dollar the loss in dollar value of those stocks if that makes sense so you're holding these U.S. stocks in US dollars and the currency devaluation comes into play. Yeah, somebody said basically year to date, even though SPY is up like 5%, the dollar is down, as you said, almost 11%. And it means your portfolio is actually down overall, particularly that's like if you were to liquidate right now and you need to move money back into euros or back into pound sterling or really any currency, the dollar has weakened so significantly, which does mean, you know, if like many of our listeners who are Irish, who get paid in euros and do all of their life expenses via euros, it's a great time to be buying things in America.

5:20If you need a new cell phone, get on a plane. Maybe don't get on a plane. Hard to say. But yeah, so there is a significant international exposure risk here. It is, as we have discussed in several earlier pods this year, there is this kind of floating idea of a sell America thesis. I think a lot of international traders and analysts and just regular everyday retail investors are starting to get this feeling of like, maybe I shouldn't be oh so concentrated in the United States. And we saw that with the market sell off. And then we're seeing this again where people are going, oh, yeah, I am actually, you tend to forget about the currency exposure because currency tends to be relatively stable.

6:02We see ups and downs in these gradual waves over several years. But this has been such a sharp sell off in such a short period of time. I think it's just a stark reminder. And so I think it is a good time to maybe just call out once again, Nexus, which is our internationally focused service. A lot of the stocks tend to sit in Europe. We have some nice Australian stocks in there this year. A couple of Japanese as well, yeah. Yeah, which are definitely worth the look. And I think it's just an opportunity, again, to remind people if you are 100 % US exposed and that makes you feel a little bit nervous, particularly with the current climate, that it's a pretty good time to have a look at Nexus and to unlock it.

6:40And so we're going to continue the sale offer that we did a couple of weeks ago, where if you email us at pod at mywallstreet.com, that's pod P-O-D and request an exclusive stock club discount code, I will email you one because I'm the one who has to run that email account. But I'll send you one over and you can unlock Nexus right now for just like an unbelievable sale price. We're really just trying to help people take advantage of this window of reminder of like, hey, maybe you got some international exposure here. But there are some really great stocks and there's some of them we've talked about specifically on episodes.

7:08It's worth going back, I think there's an episode we had maybe six or seven weeks ago with me and Emma, and it was entitled like our favorite European stocks. And both of those had come out of Nexus series one. So if you kind of want to see what the companies are like, or what our pitches are like, or the kind of detail, go back and listen to that episode for a little taste. I talk about a company there called Vision Group, which is French and it trades in Paris. And it's focused on those electronic shelf labels. And it has a massive expansion deal with Walmart. It's a very interesting business.

7:36And I really like it because it sits in a nice segment between hardware and software, and it's in a growing market, and it's somehow also the crossroads of e-commerce and in-person retail. I just think it's playing on a lot of nice trends at the minute, and I really, really like the company a lot. So that's the kind of stuff that you will get within Nexus. So if you're interested, if you want some international exposure, if you want some European exposure, it's a really great product to pick up. It's also worth saying, again, we have a predominantly Irish audience, it tends to be. If you are getting paid in euros, sometimes it is a bit more convenient to be buying and selling your stocks in euros.

8:13So if that's something you're interested in, email us at pod at mywallstreet.com and I will send you over a nice little discount code. And we're burying the lead here as well. I can't believe we're terrible salesmen on this pod. Nexus 2 has tripled the performance of the S &P 500 since it's launched in November. That should be the point number one. I can't believe we waited this long to say it. And that's not, no, it's my fault as well. I brought it up. And it's not even including the currency devaluation of the dollar as well. So that outperformance is even amplified by that factor too. So I think there's a lot of things.

8:47I'm just going to rehash what you said if I keep going on. But just the importance of international diversification has really shown up this year. And the other point of it as well is you're getting these hidden gems. the US stocks are covered to the nth degree. Well, Jesus Christ, we had a yogurt maker from Greece and it's up like 30, 40%. Do you know what I mean? Where are you going to find that kind of coverage? So we are covering stocks and no one else is, which is a very important thing as well. That's where you get values. That's where you get the hidden gems. So that's Nexus, email pod at mywallstreet.com and we'll send you a lovely offer.

9:20Yeah. Oh, it's also worth saying the write-up that we did also last month that just kind of breaks down the Sell America thesis. Also, if you're nervous about, oh, I own a lot of U.S. stocks, but maybe you don't want to go after so much European exposure. I did a massive write-up on that thesis, and I pulled a bunch of sources and read a bunch of reports from, like, J.P. Morgan about how worried should we be about U.S. outperformance over the last decade and are we finally in a great rotation. And I have a landing page for that where you can just put your email in and we'll email it over to you.

9:50So I will stick that in the description of the episode so you can click in there and put your email in if you'd like a copy of that report. it is very worthwhile. I spent several days on it. So there you go. Okay. Moving on then. I think it's a great time to talk about Novo Nordisk. So probably for a while anyway, it's one of the hottest stocks on the market there. If you don't know Novo Nordisk, you might be hiding under the rock, especially if you're listening to this podcast and you don't know Novo Nordisk, but just for a quick rehash. So it's a Danish pharmaceutical pharmaceutical company and it's the manufacturer of Ozempic.

10:25It was the pioneer of these, well, originally diabetes treatment drugs, which turned into weight loss treatment drugs, specific weight loss treatment drug. Wegovi is one of the most popular weight loss drugs out there on the market. It also has a rare disease division to focus on like chemophilia and blood disorders. But we're talking about this stock. We're talking about it's semiglutide and GLP-1 treatments which are there in place for people with diabetes and people with obesity and i it's hard to describe how much in terms of like scale and and applicability uh one treatment so i won't i don't want to say one drug because ozempic and migobi are slightly different but we'll say like the semi-glutides in general this one treatment has kind of just taken over the pharmaceutical world like there is an unfathomable percentage of the global population finds themselves as a potential candidate even either if they have one of the 550 million people living in the world living with diabetes or one of the 800 million people living with obesity that's about like a tenth of the world one ten one in ten people across the globe could potentially be a candidate for one of these treatments so it's crazy because we've talked about it for ages but it still is kind of very much in its early days of growth so i think the market value is estimated around 37 billion today and depending on who you listen to it can be anywhere from 95 to 142 billion by 2030 so that's looking at a double to a triple and a bit in the space of five years um so with all that said we're talking about novo nordisk and what we're talking about is the fact that the stock is down over 50 in the space of the year so what the hell happened and then look there's a lot of reasons we're going to list them out and break it down it kind of felt like since about june 2024 i think is when it hit its all-time high it was worth over 600 billion dollars the largest company in europe it was it was trading so much it was selling so much drugs in the us that it was affecting the danish krona yeah did you know about this yeah it's bringing in so much dollars that like one company was shifting how the danish krona historically traded um and it was just this behemoth and and the most important thing about it i mentioned that it was a pioneer it was the first to market with these semi-glutides and i think that's where that's where the crux of the drop for me like there's a lot of reasons why this stock dropped 50 in space per year but that's where the crux of the matter is because for so long they were the pure play they were the kind of market they're still the market leader but they were the only kind of show in town and then eli lily came in and that's where things got a bit hairy for no one order so the eli lily is i think it's it's approaching it's not a trillion dollar business yet but it's on the way um powered by these semi-glutides as well but basically it made a huge splash in the gfp mun market with its products zetbound and mundyaro which are the equivalent to ozempic and we govi so one for diabetes and one for uh obesity treatment but the most important thing is that they proved to be more um have better efficacy than novo nordus counterparts so you'll see it especially in the obesity treatment market zetbound took a clear lead over we govi in terms of prescription prescription volumes in the US over the last year.

14:03And it looks like, I think, Novo Nordisk at the minute has about a 70 % market share in obesity treatment. And Eli Lilly will slowly erode that because they just have produced a more popular and more effective drug. And so people are coming in and like, look, the US prescription platform business, you know people can come in and specifically ask but not only that doctors are going to prescribe the most effective drug and that's what's happening and you're seeing that in prescription volumes over the case so it does seem like novel nordics uh supremacy i guess would be the correct word is has come under threat and not only that for the current slate of drugs but for the next generation of drugs as well and this is where i think at the start of the year novel nordics saw its worst one day drop in history in its history and the company is 90 years old i think um so it's next generation weight loss product product cagri sema uh so say you know we go v 2.0 essentially the company had forecast uh weight reduction of 25 over 68 weeks on the pro on the for uh for customers using the drug but the results actually showed a weightly reduction of just 15.7 percent this when you compare it to eli lily's equivalent next generation product red tat sorry now reddit trutide um which is expected to deliver 24 weight reduction for the same time period and we're just seeing more and more evidence of novo norris competitive advantage basically being eroded, you know, which is a tough spot for a stock to be in because for so long, it was this absolute groundbreaking new product.

15:56Everyone wanted it. Growth was off the charts. Demand was out of this world. You bring in a new competitor, not only like does that threaten, you know, overall dominance, but also a new competitor, it's actually punching above your weight. And it just, it shook the investment thesis quite a bit. So that would be kind of the two major reasons and and and systemic issues i would suggest over um why the stock has fallen so much in the past year now we've talked about this we talked about this on the pod before and we talked about this at length even just between me and you at the compounding issue um which is essentially so essentially the fda put uh ozempic and we go be on a list of uh drug shortages because demand was so high and Novo Norris literally couldn't produce enough drugs to say demand so they put this on this drug shortage list which meant that despite their patent protections other pharmacies were able to produce compounded versions which is essentially a generic way less testing and like you looked into this as well like as it seems a bit a bit gray when we call it that is that a fair summation a bit gray area in terms of testing and production and like standards essentially and so hymns and hers was the big flashy thing that came about where hymns and hers was able to produce these compounded versions of the semi-glutides for i think at the time a monthly over-the-counter prescription of we govi was going for$1 ,300 and hims and hers was producing the compounded version for 70 bucks.

17:42Yeah. Something like that. Insane. It's insane. Yeah. And so obviously that absolutely rocked the stock. Now, this is always a temporary thing. It was only while these semiglutide products were on the drug shortage ban, which was ended last May, which is ended in May. So whatever, six weeks ago, we'll say. but what has happened since was Novo Norris dropped his prices of these products it also partnered with Hims and Hers which was kind of the main porn in its side and since then has ended that partnership which seems more shady again on Hims and Hers if you've looked at if anyone's followed Hims and Hers stock it is the most volatile thing I've ever seen in my life it's crazy but um yeah so nova nordis ended their partnership they said they didn't really they didn't really trust their production at all of the compounded drugs yeah which seems very hairy and it was kind of a call out which hims and hers fought to the tooth on the way back as well but like i it seems this is we don't really want to dive too far into hims and hers but this is a story about nova nordis but what happened there in the fallout of this compounding really does not paint hims and hers in a good uh in a good light and you you've discussed hims and hers in a few different guises over the years emory and it just seems to paint this kind of fuller picture of a company that maybe isn't operating fully above board all the time yeah i first covered hims and hers when they ipo'd and i hated them from the jump which you know maybe that's not the mature thing to do when you're looking at it as an investment but i remember even in the ipo documentation and even in the early marketing, this was several years ago at this point, I think they IPO'd in like 2021 or 22.

19:32I really hated how they positioned themselves as being the answer to the failing of the American healthcare system, where they would say, oh, you don't have access to a GP. That's fine. You can access a doctor via us, HIMSS, and we will provide you with the medication that you need. But they only have a limited offering. They do vitamins, mental health sexual health and now we go be or at least a knockoff of we go be and i really disliked that they were allowed to basically say that they were the saving grace of overall health in america when really all they were doing was figuring out what direct to consumer medications could most easily be sold and then figuring out how to get those in the hands of people who wanted them whether or not a doctor had really signed off.

20:20Yes, there is a procedure where you get to see an online doctor to get access to these prescriptions, but it's apparently very laxedase. It's not like it would be if you were going into a physical doctor's office and a doctor is asking you a lot of questions and maybe running tests and trying to get a more holistic viewpoint of you. And I'm sure that probably isn't happening in many in-person doctor's offices either, but I think that's the ideal that we're supposed to be striving to when it comes to healthcare. And that came out really in the write-up that Novo Nordisk said about HIMSS and HERS, where they basically said that they did not trust the doctors on the platform to prescribe the correct drug because they were caught between this position of this compounder, which is being produced by your employer, or this WeGovi that is being produced by a foreign pharmaceutical company.

21:09And yes, it's a more trustworthy drug. Yes, it has gone through far more FDA testing, but it's more expensive. and the margin on that drug is not as high. And so I just really hated to see this because it again shows if you tie a doctor to effectively a pharmaceutical company and they do not get compensated based on the number of prescriptions that they write, but there is again some funny stuff there where they have to see so many patients in such a short period of time. There is this sense of like, just sign the paperwork and move on, give the people what they want. And I, again, emerged here.

21:44And it's the same feeling I got when they released that absolutely ludicrous Super Bowl commercial earlier in the year, where again, they made this claim being like, we're going to cure America. I was like, you are trying to make money and nothing else. And so yes, I am very suspicious of him's and hers. And I would not be shocked to see some kind of FDA investigation come out against them and just tank that stock. So I give three thumbs down to hims and hers as an investment. I really dislike it. Yeah, fair enough. And then this is one of the issues as well is that Novo Nordisk realized that they needed this kind of coverage in order to sell.

22:27Because people are buying Wegovia and Ozempic over the counter. Sorry, not like unprescribed, not on insurance and not over the counter, out of their own pocket, essentially. And it was a market that they didn't really capitalize on at all because obviously their drug prices were so expensive. But there was millions and millions of people brought in by hims and hers and other telehealth services similar with the new price point. And so it's an interesting place now. So say the FDA stopped the legality of the compounding in May. It's still a bit a gray area, like as in him and hers intend to continue compounding on specific cases and stuff.

23:13But there is a huge market there for Novo Nordisk to capitalize on. It's just how they do that with pricing points and stuff like that. So compounding definitely wreaked havoc on the stock for a good year. I will say that it's much less of a systemic issue than the fact that they are underperforming Eli Lilly when it comes to efficacy. But it was definitely a contributing factor in the drop. And then lastly, this one is probably the most up in the air, but essentially Trump signed an executive order near the start of the year where he wants to bring in the most favored nation policy, which could see prices U .S.

23:55customers pay equal to the lowest prices paid in other developed countries. So essentially he's saying, and he's probably right too, US customers are completely overpaying for these drugs compared to say someone in the UK or someone in Ireland or someone in France or wherever else. And essentially subsidizing the R &D of these pharmaceutical companies. And definitely Novo Nordisk is one of the companies in the crosshairs there. I think he actually specifically mentioned GLP once in this executive order. now the execution of this is a bit murky no one really knows how or when or will it be um will it be fully executed management stated that even when they're comparing for like for like channels the prices for we go we now may not be too dissimilar so that one is not up in the air but again it is hovering over the stock as well so combine all that a bit of a perfect storm the stock is down 50 % in space of year.

24:56Now, why are we talking about today? Well, kind of going to make the argument or broach the subject of whether this is deep value territory or a value trap, essentially. So starting from today, whenever it was July, July the 2nd, Nova Nordisk is currently trading about a third of the valuation of Eli Lilly on a price to earnings basis, on an EV to EBITDA basis, trading well below the market multiple, the average market multiple, the S &P 500, all while it's still holding a 55 % and 70 % share in the diabetes and obesity markets, respectively. Two of the biggest potential markets the pharmaceutical industry has seen, I would say decades, maybe ever.

25:52And if we're talking about like the sheer scale and applicability of these drugs to the world population, it is one of the most exciting prospects still. I don't know what's been going on for years and years, but still remains one of the most exciting and most, the highest potential prospects of any kind of pharmaceutical product out there. And I just think that maybe I always say this and I repeat myself over and over and over again. It's kind of like a pendulum. it'll overreact in one direction and it's not going to come back to the middle straight away. It's going to overreact too far to the other side as well.

26:23If we're bringing in a new CEO, which it'll be interesting to see who they get, because that's going to be one of the biggest hires on Wall Street over the last couple of years. If they bring in a new CEO, if they can kind of land a bit of label expansion into things like heart disease, into things like sleep apnea, other kind of weight related issues. um the potential for this drug is huge and like there's green shoots as well so uh novo is seeing some positive signs from its new sorry now all these flipping pharma names are giving me grief yeah new treatment amicretin so which pairs a glp1 with an amylin receptor to improve potential weight loss so it reported a 22 weight reduction in people who received weekly amicretin injections for 36 weeks and on top of this there there was no plateau effect with patients losing weight at the same rate at the end of the trial at the start of the trial stuff like that there is a really successful trials coming out of higher dose week ovary treatments to improve total weight reduction so we were talking about that um that underperformance say from kagri sama kagri sama the i'm butchering all these names sorry kagri sama where it aimed for 25 and only actually to 16 weight reduction we're seeing outperformance by other treatments here so it's not like eli lily is just going to come in and own the market i guess my point is that it's almost priced like a winner takes all where if we're talking about this industry as a whole potentially tripling in the space of five years you know okay maybe novo nordis goes from 55 percent to 45 but it's going to be 45 of a much much bigger pie yeah and i just think in terms of valuation in terms of being oversold in terms of negative sentiment it's just all stacking up to make a very interesting buying opportunity from these levels now the other thing i could suggest and i think if you're just a firm believer in this treatment and technology as a whole is just buy Novo Nordisk and Eli Lilly and don't look at them for 20 years and I think you'd be a very happy person too but if I was to decide between the two right now based on valuation based on the kind of potential turnaround you bring in a new CEO you reinvigorate some stuff you yeah you kind of see some real positive things come out of those trials where Emicretin for higher dose of we go be it it makes a really interesting investing case um so yeah that's my two cents on novo nordisk i kind of rambled an awful lot there but hopefully it it makes uh coherent sense to you now because i think it could be a big opportunity and i'm not i'm not um i'm not screaming the buy table but i just think that the market has left it behind and the negative sentiment is really it's really stacking up and just as a contrarian play i think there's there's something there what uh what are your thoughts yeah yeah i'm definitely interested in something you didn't mention but i know is also going on in terms of research i wonder if there's a race to get one of these medications approved for things beyond like the direct obesity space because you remember there was a trial a couple months ago where it worked really well on people struggling with gambling addiction because it because the drug basically targets the centers of your brain that makes you feel satiated it helps people who struggle i think with any form of addiction yeah people have been uh people have been giving up cigarettes and stuff as well yeah and so that i think is really interesting as well like yes the obesity market is going to triple but think if they could get it approved for cigarette like smoking cigarettes or gambling addiction or alcoholism that's another massive market and so yeah that's what i said i mentioned uh i mentioned label expansion for things directly related to weight in terms of heart disease and in terms of sleep apnea but it's so true like as in we still don't know the full effects in terms of psychological i guess probably not psychological directly uh there's probably a better term for it but just literally like it has kind of shifted people's like neural pathways in a sense and how and how they and how they experience what you said satiation and satisfaction yeah so i think i'm like quite interested in from that and so i see i'm assuming there's a race there to be the first to get approval for that because it opens you up into a whole new market um just i suppose beyond that what percentage of their revenue is solely we go vienna zambic is is it massive like oh yeah it's it's basically the the rare disease the rare disease um i can probably get it off you know but it's going to take me more than a podcast more than dead time we can allow on a podcast but the rare disease part of the uh company isn't anyway in comparison to the obesity and diabetes treatment whereas if you're talking about eli lily eli lily is a massive pharmaceutical company aside from semiglucides as well yeah and that is kind of interesting to me as well because it's that thing of if you want to ride the wave of these diabetes and obesity drugs novo nordisk is far more the pure play whereas eli lily is going to get bloated out where you're going to say yes i'm buying eli lily because i like these drugs and i'm interested in this trend and i know this market is expanding but if eli lily's the majority of his revenue is coming from other stuff as well it's not going to be this you know the stock is not going to be this phenomenal growth driver and so i do like i like i like the pitch of novo nordis but i also to be fair i do like the pitch of just like buy both and put them under the pillow and come back like that that's the yeah to be honest that's completely the easy way of doing this that's that's the like don't talk to me about it way yeah that's the you buy the coke and you buy the pepsi and we'll see because it's a generational thing you know they were used to say what in the 60s it was like oh all kids drink is is pepsi and then coke went out in the end but you know you just don't know so um yeah i like the pitch i think it's interesting uh it's definitely a trend one to watch so yeah i'm just getting it here so diabetes and obesity care revenue is 284 billion and then total revenue is 303 billion so So yeah, very, very high percentage.

33:00So yeah, that's Novo Nordisk. I think, yeah, I think we could be looking at a big opportunity. I think if you're going to compare future returns between Novo and Eli Lilly in, say, the next three, four, five years, I think we could get a little surprise, even though Eli Lilly does seem to be one step ahead when it comes to kind of manufacturing prowess at the minute. But yeah. Yeah. Okay. You are also going to talk about a stock that might be making a comeback after a pretty, pretty poor year. Start of the year. I know, which is a bummer because we talked about it in January and I was like, guys, this is my stock of the year.

33:39As per usual, gosh. But yes, the stock I want to talk about is Nike. It was in the headlines on Friday because its stock jumped 15 % in its biggest one-day gain since 2021. Very exciting time to be somebody who said, you know, Nike might be planning a bit of a comeback here. Got excited about the new CEO. So let's walk through the numbers briefly. I'll remind you that new CEO, Elliot Hill, in February said that things were going to be pretty difficult. His exact quote was, I recognize that some of these actions will have a negative impact on our near-term results, but we're taking the long-term view here.

34:15And I think that seems to be what the market is taking here. So Nike recorded its worst sales drop in five years in the fourth quarter, falling 12 % to$11.10 billion. But it was estimated to fall 14.9%. So it was slight improvement over what we were estimating. Net income was 211 million or 14 cents per share, which fell from 1.5 billion or 99 cents per share in the year ago quarter. So that, if you were to just see that on its own, if you didn't have the context of what Nike was trying to do, you'd be like, oh my God, this company has fallen so out of favor. Where has its profit margins gone?

34:50But we know that this is part of a controlled strategy. And that I think is what the market saw, that little silver lining. Most of the pain and most of the reason for this loss of profitability is due to discounting, which we were expecting. As we've discussed in the past, since the pandemic, Nike has just been holding onto a glut of inventory and that has made it heavily reliant on discounting in order to shift this merchandise. It needs to shift this merchandise because it's in the middle of trying to reposition itself as a premium R &D backed brand. You know, it's trying to return itself maybe to where it was in the 90s or the early 2000s, where it was really seen as this place that produced awe-inspiring technology.

35:24You know, the coolest shoes, all the greatest athletes wear our products. So that means, yes, they're going to be expensive, but they're going to be phenomenal. It's somewhat lost that space, particularly in running to brands like Hoka. So it's interesting to see them trying to get that momentum back. The inventory clearing is well underway. And it seems that the discounting has put the company on track to exit this phase by the middle of 2026. And its CFO, Matthew Friend, said that it will now be in a healthy and clean position. So that's great to see. We know that this process needed to be done.

35:55And so it seems now that our pain is coming to an end and it wasn't as bad as we thought it would be. Again, heading back to Friend, he said that the fourth quarter reflected the largest financial impact of the company's turnaround efforts and that it expects a forecast for current quarter revenue that's q1 will be in a mid one of fiscal 2026 is that correct yes q1 2026 so that means that they will expect a mid single digit percentage fall in revenue but that is better than the double digits that they were expecting and it was the first time it will be heading back towards a single digit revenue fall from the double digits it's been going through the last couple of quarters.

36:32So it seems we've kind of hit the bottom and we're bouncing now. This was backed by CEO Hill, who said, moving forward, we expect our business to improve as a result of the progress that we are making. So we're feeling pretty good. Beyond discounting and beyond the numbers, we're seeing the structural changes that we had hoped for and predicted at the beginning of the year in January. If you go back to like our top stocks for 2025 and made this like huge pitch about here's the three things that Nike needs to fix. And the big one was getting back towards retailers as we can remember during the pandemic in 2020 nike went whole hog d2c and they're walking that back now because they realize that many people like to buy shoes in person and they want to go to a local store and be able to try stuff on and so this quarter they announced that their shoes rolled out into urban outfitters and aritzia and that it will be returning to amazon in the fall so you can now buy your shoes d2c from amazon which is probably going to be very helpful again just getting rid of like the cheaper products that they produce kind of down the bottom that aren't as high margin but just having a more efficient way to get rid of those is probably going to be great in terms of product innovation we're seeing a return to sports focused stuff and new releases are having success so this quarter they released the vomero 18 which is one of those like crazy road running marathon shoes that when people to be fair running is really in at the minute so i'm sure they were able to shift a fair few of these in just 90 days it had already sold $100 million worth of shoes.

37:56That's a lot of shoes. And so that helped Nike run and return to single digit revenue growth. So that was great to see. More importantly, and I think this is going to be a huge growth driver over the next decade in basketball, the women's division saw sales growth of more than 50%. And I will remind you that Nike has signed Caitlin Clark. I really do not think it is hyperbole to state that signing Caitlin Clark, in my view, is the equivalent of sign a Michael Jordan in the 1980s. I think she will be that transformative for not only basketball, but just women's sports in general. And I think their ability to produce like a Caitlin Clark shoe or really an entire line, like the equivalent of my, of the Jordan shoe, I think could have a massive impact on sales in the coming 20 years, to be completely honest.

38:39And so I'm very excited to see that kind of incrementally over this quarter, but I think that that could drive growth truthfully for the entirety of her career, if they're able to keep her. So that was very exciting to see making that one kind of transcendent athlete but it is where nike did um the the faith kip kip yogan four minute mile thing as well did they did yes and she didn't break it she didn't broke the record but it's kind of an unofficial record or whatever but yeah but it's interesting you talked about the kind of um the marketing efforts these these different kind of campaigns which always defined Nike for a very long time.

39:19And they kind of fell off that. And then they brought in the company guy who came in and you've seen this happen almost straight away under his tenure. It's interesting and it's maybe woman-focused as well. Would that be fair to say? Yeah, definitely. I think so. It's that aspirational kind of marketing that used to be so famous for Nike back in the day where if you have the great fortune of signing a phenomenal athlete, it's like, how do you make people aspire to them via the products almost? And it seems like we had moved away from that kind of marketing. And the main reason for that was often cited as the fact that the CEO before Elliot Hill had come from consulting, and he was very hard focused on the numbers guy.

39:58And he seems to have removed some of the artistry away from the marketing team, whereas that seems to have been restored. The first time we saw a significant bump, and that was during the Paris Olympics where again we saw Nike returning to form where it can kind of be like here's the greatest athletes in the world and they wear Nike shoes or clothing and as you were saying that marathon attempt that went on they effectively remanufactured their entire line for her they made her all new like brand new cutting edge sports bras and shoes that they had to that they had been designing for her for over a year and that kind of stuff is really important because Because yes, not everyone is out there trying to break a four-minute, a four-hour marathon, no, two-hour marathon.

40:41Four-hour is fine. Four-hour is fine. She's going for the two-minute marathon as well, but four-minute mile is what she was trying to do. Four-minute mile. Obviously, we're not all wandering out of the house doing the four-minute mile, but they can sell off of that aspiration, off of, hey, this is the sports bra she was wearing. These were the shoes that she was wearing. So yes, it does seem to be very female-focused. I mean, women's sports is very up and coming. It is definitely becoming far more popular. Look at those WNBA games. The second Caitlin Clark is on the court, she can sell that whole arena out.

41:13Like, there's definitely a movement there. And so I think being positioned for that is going to be very important in the coming decades. So, yeah, I'm excited. I think that they're making the changes that we need to see. Prior to earnings, Nike was trading at$53 a share, which is a number we have not seen since 2017. So it is very cheap. That being said, the stock dropped 30 % since January. Bummer. Because, of course, Nike is probably going to be one of the biggest victims of tariffs, which is an element that we have not yet discussed. And their CFO said that they expect to take a billion dollar hit from the current tariffs as they were on Thursday.

41:53So obviously, we don't know how long that's going to last. They could get walked back. They could get an exemption. They could get worse. They could get better. We don't know. But as of right now, as of Thursday, we're going to get a billion dollar hit. It has basically said now it's going to operate its business, assuming that these are going forward. And so it has created a four-part plan to help them mitigate it. Number one is to raise prices, which is unfortunate. The company is making, quote, surgical price increases in the United States with a phased implementation that's going to begin in the fall.