#286: The S&P 500’s Most Undervalued Stock?

0:00so high margins are ridiculous still growth is steady it's bought back about 15 % of outstanding shares in the last 10 years and yet you can get a stock like that for 20 times earnings when the S &P 500 average earnings multiple is about 30 times so that's a serious discount to the market for what is on paper an incredibly high quality business

0:26and how we get on hey Mike how you doing I'm good I'm good do you know who's better than me though who elan musk tell me why oh the trillion the soon trillion trillion yeah when you read the terms of it i mean it's a it's a high bar to to get over really but but do you know what's stupid about it what i mean because i think the trillion dollar number was probably him to make the headlines and whatever else but what's stupid about it is he would be a trillionaire if tesla got to that valuation anyways yeah yeah that's right oh i see interesting so it would be just to have another trillion yeah if tesla goes up uh to eight and a half billion i think is the ultimate goal which would be the completion of the pay package but and then look there's more to it like he wants more control of the business he feels like he's losing it he feels like if he can have 25 of tesla he's able to do exactly what he wants which is optimus and self-driving and whatever else and fair enough but the just like the round number of it just feels so sensationalist and bombastic and a little silly like yeah well they had to find something that grabs the headlines 850 billion just doesn't do it no it's just it is what it is as a tested shareholder i'd say like is in the most important thing i think for and the board has been saying it a test shareholders have been saying and i think everything is that you just need to keep him there and engaged and motivated and and this seems to have done that and will do that hopefully so yeah he's a once in a generation a visionary you know he's up there with steve jobs and and all the others and i think that keeping him in that seat is absolutely critical i think the business can of course keep going and survive and stay profitable in his absence but it won't have that level of ambition and clarity of purpose and funny only last night i was chatting with my wife about the movie i robot or the book by is it isaac asimov and um it's a great i love that book it's a terrific book do you know the the laws of robotics and how yeah the original yes exactly and how there are as many robots as there are humans which basically is what musk was alluding to in his last in in that very bizarre um shareholders meeting where actually sorry i digress he said in the shareholders meeting which i thought was hilarious he said he goes now he goes we all remember r2d2 from star wars imagine me but the problem with r2d2 is he needed c3po to translate which was so nerdy for him to actually give that little nuance because you see He said R2D2 just was all squeaks, whereas C3PO would translate.

3:11Well, with Optimus, you don't need to translate. He just speaks English. I was like, what? That's what I was worried about. This is our local tree. Yeah. Anyway, good luck to him, as they say in Ireland. I do hope he succeeds because one of the milestones is to multiply the market cap by six. six-fold multiple on today's market cap which which would really put any tesla shareholders in a comfortable position yeah absolutely uh so where are we going with today's show we're not going to dwell on well i guess i'd like to start by asking our listeners to do something we've never asked which is subscribe to this podcast folks you know don't just listen but open up spotify our apple's podcast app and oh youtube oh yeah yeah yeah yeah like a follow for more I mean, click on the subscribe button.

4:01It helps us backstage in ways that, to be honest, I don't even understand. But we, Mike, you and I and the team, we all met and it occurred to us that we've never asked people to just subscribe to the podcast because it's very important. Please just subscribe to the podcast, folks. Needless to say, it's completely free to subscribe to. Nothing will change in your life whatsoever, for good or bad. Well, actually, for good, really. And I was reading, though, that if you do not subscribe, you'll be left with a feeling of malaise and general despair. So just subscribe today, folks, and save a baby panda.

4:38Right? That's my best effort, Mike. Mike, as you know, we retreated to the mountains of Spain last week where we decided, with 12 years of business experience and metrics under our belt, that my Wall Street is going to reposition. We're going to reposition ourselves and the output of the decisions made in the mountain in Spain will become apparent to our valuable listeners and subscribers over the months ahead. But one life hack that I've learned over the years is to try and look at myself as if I'm not me, right? And to advise me what to do, which stands far out. Actually, it's a great mind hack.

5:18When you're in the middle of your work and doing what it is you do in your life, imagine flying above yourself and looking down at your whole life and being a consultant to yourself. I've done this so many times and it's actually very powerful and I love it. But here's what I would tell me to do with the floating me knowing what happened in Spain. I would definitely sign up for Verizon and Profit right now. Profit is only 500 bucks, 499 bucks. Its returns are face melting. Just look at the returns. And Horizon is only a thousand bucks today. So email frank at mywallstreet.com and he might do you a deal, but believe me in repositioning, there will be no more deals.

6:00But deals are going, but they're going to be few and further between. Is that the expression, further and fewer between? So that's that. Few and further between. Few and further between. So if I was advising me now, I'd say, yeah, I'd buy that right now. So anyway, there you have it. And if you haven't two pennies trump together, subscribe to our podcast. Like a follow for more. Five stars. Leave five stars. There you go. Okay. We are discussing a company. You suggested this when you were talking to someone in the business. Yeah. So I'm interested. You can kick it off. Yeah. Well, I met a friend of mine, Paul.

6:36Hello, Paul. And Paul is a senior portfolio manager for a firm with a whole pile of money, a big ball of money. I won't say his name, but Paul, hello. And as usual, we were talking stonks and I said, hey, what stonks do you like? And I asked him for a name of stock that he loves right now. And very interestingly, top of the pile was a company I'm pretty sure everybody has heard of. I'm absolutely sure everyone has interacted with. and it is adobe which is a company that has grown revenue every single quarter for the last four years that's no small feat from around 3.4 billion dollars four years ago in 2020 late 2020 to nearly six billion dollars today so um that's this per quarter oh exactly sorry quarter exactly per quarter so um i thought what i would do is do what i do and give a teeny weeny weeny uh history lesson on the company that I think most people go yeah I kind of think I know them what do they do and we'll have a little chat about it how does that work for you Mike yeah yeah sounds good well it started in 82 when two engineers John Warnock and Charles Geschke left Xerox to start their own company and they named it after a creek that ran behind Warnock's house in Los Altos so Adobe is is a river known I'm sure to a couple of our listeners and their first big idea was a product called PostScript, which was a way for computers and printers to speak basically the same language.

8:11And anyone who went through the 90s and early 2000s will remember that when you plug the printer into a computer, like it was a complete IT project to get them to talk to each other. But anyway, Apple licensed Adobe's products and specifically for LaserWriter and it kick-started an entire desktop publishing revolution, you could say, or the average person in an average room and an average job could use their iMac and write a nice document that looked good and print it off. And suddenly anyone with a Mac could do like professional looking pages. And this was a big leap for small businesses. And it sounds very quaint at this stage, but when you think, like we all interact with computers in a million different ways, but in the early days of computing, to create your own document that looked pretty professional was a revelation really.

9:05And in the early nineties, Adobe wasn't just powering printers that launched and acquired a whole bunch of tools like Illustrator and Photoshop and Acrobat, which is the one that I think brought them into my line of sight. I remember Acrobat Reader, and it was the default for designers and publishers. And as you may know, Mike, the PDF format came from Adobe too. And that's why I said at the top of this piece that everybody who has computers interacted in some way with the output of Adobe. They invented the PDF and it's still the world standard for digital documents. So I think without being tech at all, you know what a PDF, you send it from this machine to that and from that machine to an iPhone and from an iPhone to an Android phone.

9:52When you open it, it will always look the same. It locks down all those elements as opposed to moving them about. And if you've used a computer, you most definitely have used something from Adobe. I was talking to an entrepreneur in America many years ago who once asked me, hey, have you ever been in a bathroom? And I was like, I have. I have been in a bathroom. He goes, then you're a customer of mine. And I was like, well, I have to say I'm starstruck. He invented some kind of widget that went into water closets in America, like into the cistern. But I kind of feel that that story sprung to mind when I started reading about Adobe.

10:31So anyway, through the 90s and 2000s, Adobe just kept expanding and kept expanding. And they picked up a company called, a product called After Effects for video editing. And then they bundled everything into a thing called a creative suite, which you could buy on discs. You'd go into a computer shop and buy Adobe's creative suite. and whenever i bought anything like that back in the day there was only one thing i wanted um i think strategically scott galloway would say it's rundled but there were like 20 software packages i only wanted one um but they they eventually trundled along got bigger and bigger and more known for what they do and then they decided to do a big pivot in and around 2012 and 2013 and i mentioned um like nostalgia and some something being quite quaint and what i'm going to describe is everyone's going to go that's hardly a pivot but you got to rewind 13 years and they did something that most software companies were quite scared to do and that was just a norm and they stopped selling that box software where you walk in and buy a bunch of discs and switched entirely to uh over the air or through the internet creative cloud and at that time people were complaining because the internet was way slower and it turned out to be a brilliant move because it gave adobe this steady recurring revenue it let people update products constantly which really is a bit of a headache when when they're doing it so often doing a disks and all the rest and downloading some content yeah it's kind of one of the pioneers i know salesforce is the pioneer of sas but adobe was right there with it behind it um in terms of that transition no you're absolutely on the money i mean uh they they they were the The first kind of benefit to them was, as I said, the recurring revenue and to the customer was the updated software without kind of too much drama.

12:25But then this kind of moving to the cloud was step one in being quite early. But it was the kind of we do AI of its time. You know, you update your software to the cloud and it's a bit like now in 2025, every company is trying to push their AI agenda. And speaking of which, Adobe are doing AI. And in recent years, it's leaned heavily into AI and its creativity tools, and specifically a product that they launched only a couple of years ago in 2023 called Firefly, which lets users generate images and effects, a bit like Mid Journey or Dali, if you've used AI to generate a picture. So we're kind of all becoming quite accustomed to these rather, I don't know, what's the right adjective, but they are displeasing images, I suppose, generated by AI.

13:21So it's kind of like, show me a picture of a baby riding a motorcycle or something like that, you know, things that are a little untypical. and they have their package that does that kind of thing. But it's trained and licensed data, so it's safe for commercial use, whereas a whole bunch of other tools are not safe for commercial use. And then it's built content credentials to tag AI-generated media for transparency. So what it really started out as, which was this kind of leader in publishing, it remains because what I'm describing here about keeping a control on AI is being a leader in publishing and whether it's printing or digital media or software or whatever it is a business that is very much still relevant despite it uh starting off by shipping CDs with our DVDs or whatever you call the data discs with with software packages yeah yeah absolutely we kind of divvy up responsibilities when we're looking at adobe and i kind of i i put it three headings on my notes for this because i think it's a really interesting business to talk about now um but what it looked like in five years is kind of the the inflection point i suppose of of this stock because for so long it's been seen as this ultimately high quality software business it's got the business model that everyone was chasing after from you know 2020 to 2012 which you said for 10 years it was just an exemplary sass business high margins scalable all the rest and since then there's been a lot of question marks and fair enough you know what i mean so i titled the three titles were um where are we now the bull case and the bear case so i'm gonna break down exactly kind of what's happened to the stock essentially and then if you are maybe seeing an opportunity what that would look like and if you were seeing kind of maybe a company circling the drain what that would look like as well then we can kind of discuss which side you're on i suppose interesting okay so where are we now uh shares of adobe are down 50 percent from all-time highs set at the end of 2021 since that time sales have gone from 16 billion 2021 to 23 billion in the last 12 months so the first three quarters 2025 and then the last quarter 2024 operating profit has gone from 5.8 billion to 8.4 billion it's maintained an operating margin of 36 percent its revenue growth has been about 20 10 since 2022 so on average like this and sales are still uh chugging along very nicely return on invested capital has improved from 23 to 27 gross margin has gone from 88 to 89 percent wow gross margin that's insane um so like as in nothing has really change performance wise in those five years when the stock has got down 50 percent actually nothing has gone negative a lot of things have gone positive like we're talking about a doubling of revenue with an 89 gross margin yeah well not so much doubling um about 50 but the business is taking a lot for sure it's just the valuation has fallen off a clip so at its peak in november 2021 which was an incredibly frothy time high valuations anything with software in front of it was trading a kind of ridiculous, ridiculous valuation.

16:38So it was trading at 60 times earnings and 20 times sales, which is, you know, and it was a 300 and something billion dollar business. It's just kind of unheard of. So today when we're looking at 20 times earnings and six times sales. And with the caveat that this is also a quite highly valued market. I think the average valuation of the S &P 500 is actually more expensive now than it was in 2021. It's just maybe focused in different areas. And software is certainly a business that has investor sentiment soured. Now, you don't have to be Einstein to figure out why investors five years ago were willing to pay, say, three times as much as what they're willing to do.

17:22And of all the software companies that have been sold off over AI fears, Adobe does feel right in the crosshairs for a few reasons. Obviously, we have seen the capabilities of generative AI when it comes to image creation and editing, whether it be like leader, like just, you know, the basics that you can do on your chat GPC or perplexity or cloud app or the specialists, like you mentioned, like mid journey or Dolly, where it really kind of put into context. wow, these capabilities are what it can do, you know, without any kind of skill or background in graphic design or whatever else. So as Adobe has essentially went from a cornered market with a few up-and-comers, it didn't have it all to itself, like Figma and Camel were making an impact to the business, to a completely different competitive landscape.

18:12And it's obviously taken its toll on the stock. Of course, like Adobe is, and you mentioned, investing heavily in AI, the Firefly product in particular. And it is seeing results in its Q3 earnings. CEO Shantanu Narayan claimed that Adobe is the leader in AI creative applications with AI influenced ARR, annual recurring revenue, surpassing 5 billion. And AI first, ARR, that's a lot of acronyms there, sorry. AI first, annual recurring revenue, exceeding 250 million. so but reading between the lines what that really means is that they integrate that into the existing products like photoshop illustrator and then firefly of course something like mid-journey isn't really going to be able to catch up that fast with the legacy software and the fact that you know it's got 40 million or something subscribers it's it's it's basically owned the graphic design industry for that long and it's integrating air into its product so yes it has that step up that advantage and and and i guess this will lead into the bull case of uh of what happens next you know what i mean because there is two there's a fork in the road it's a robert frost problem here for adobe um and going down the bull case there's a lot of reasons why people are talking about it we're talking about value investors now and that comes down a lot of that comes down to the numbers numbers and the top prices of wait a minute we're overestimating how big an impact ai is going to have on this industry because operationally at least for now anyways adobe is still a high quality business that wall street once valued so highly margins are ridiculous still growth is steady it's bought back about 15 of outstanding shares in the last 10 years and yet you can get a stock like that for 20 times earnings when the s p 500 average earnings multiple is about 30 times so that's a serious discount to the market for what is, you know, on paper an incredibly high quality business.

20:10It's incredibly profitable, some of the best margins we've ever seen. And it's been able to maintain these margins while still investing heavily in AI. You know what I mean? It's not like the company has, because it has the resources, but it's not like the company is, you know, wrecking its margin profile to go after this new technology. So none of it's, and this is where I think the arguments can be made, where none of its competitors have that same kind of financial heft or resource behind it. So it is dealing with the software legacy stack, and it's obviously going to be less nimble, but no competitor comes close when it comes to cash flows and a piggy bank.

20:49Adobe could and should be the top spender in this market. It should be able to acquire the top talent or close to it. I say close to it because in terms of AI, the hyperscalers are hoovering up everything else. Do you know what I mean? And so, yes, it's the most well-resourced in the kind of design market. But, you know, if Microsoft and Amazon and Facebook and Facebook are spending billions to get employees, they are going to take up, you know, the upper echelon. You know, AI image editing probably falls down the list of priorities when you're talking about, you know, general intelligence and all the rest.

21:23But it should be able to pay way more than something like mid-journey, something like DALI. Do you know what I mean? It's also going to be able to rely on the cash flows it already has. its ability to raise debt and the fact that it's a$130 billion company,$140 billion company, you know, who is going up against cash printing startups? If it can leverage this advantageous position to go out and build a best-in-class product suite of AI first or AI improved offerings, it can retain its client base, but charge them more and then also attract new ones. Because remember, it has so much training hours and some costs from the world's graphic designers locked in these people still exist it still is a profession you know if all that comes to pass and you can buy the stock for 15 times 2026 earnings that's a really attractive bull case um so yeah that is the kind of if you go right and everything goes well for adobe okay that would be one potential situation right and you can see why experienced investors hedge funds and all the rest our interest has been peaked with it because it is very much entered into value territory and if that does come to fruition huge bargain now the bear case would scare me as an investor because the bear case for adobe is that you know generative generative has brought with like a seismic shift in the industry that it used to dominate like so much so that in five years time there's a decent chance of it being pretty much unrecognizable graphic design as an art could essentially become obsolete.

22:56And the fact that any design is at the fingertips of the layman with a simple request into some kind of search bar, that's unheard of if we were here five years ago. Do you know what I mean? Yeah. So Adobe, in this instance, is this expensive legacy system that, yes, may offer high-end tools. You can't get anywhere else. But for, say, 90 % of jobs, that's not necessary. It goes from a mass market appeal to kind of a very specific niche. And like Adobe for so long has enjoyed this economic mode of like huge switching costs and ultimately unbelievable pricing power because subscribers were essentially locked in to this ecosystem that controls an entire industry.

23:36You know, if you wanted a job, you need to have skills for Photoshop or Illustrator, which is taught in colleges. You know, if you worked on other programs, you would essentially be a pariah. Why would you ever go for anything else than the industry standard? And now what's changed? Well, like potentially everything has changed. you know is is is graphic design as we know it a viable industry for for college students i think you have to be very brave you're 18 or 19 right now you'd have to be incredibly brave to be like yes that is my intended career path that's what i think that's i think that's terribly sad really so what we're saying is the share price is a proxy for a profession a profession where one gets to express the ultimate human expression which is art you know what differentiates us most from other sentient creatures art and now we're saying that adobe which was the toolbox for artists is its stock is taking a nosedive because the machines are taking over that profession i think that's in if i'm right in what i'm saying i think that's terribly sad incredibly so and and this isn't like you know i don't have the small violin out for 300 billion dollar adobe with$300 million back in the day.

24:49And it is an element of art to it, but a lot of it isn't as well. And I feel like there will be people in the graphic design industry now kind of banging their heads, listening to me talk, because I obviously don't have an extended knowledge of it. And there's so much more to design in general than just being able to use Photoshop or Illustrator. I'm probably offending a lot of people as I say this, but I do think in real terms and in particular how fast this industry is moving, it's hard to see that same economic mode for Adobe endure in the next few years. I think there will still be skilled designers out there for sure, and they have all this retained information and knowledge that will pertain so well to them moving forward.

25:34But there's a similarity in terms of software development now as well, where the people that already have these skills and now have the tools in terms of generative AI don't need the underlings as much as they did. So what happens to that next generation, the people coming out of college, the people maybe before even going into college now? It seems like the need for, I don't want to say underlings, but the need for entry-level skills that you then build up and become this person at 40 who would be able to use all these new tools available to them, that kind of is going away. And that's a problem much wider than graphic design.

26:18That's a problem in, say, all these industries now where we have tools that are able to cut out resources and kind of donkey work in a sense. But donkey work is how people become skilled. So this is a bigger issue than we're talking Adobe. And I'll bring it back to Adobe now. But in the sense of there's going to be a gap forming that AI tools fill, but then what happens to those workers? How does someone become skilled if that's just not a thing anymore? So yeah, sorry, that's the philosophical kind of argument to all of this. And it goes beyond Adobe and graphic design in general. But I think graphic design is one of those industries and skills and lines of work that is the most directly affected.

27:08And so that kind of seismic shift would really concern me for this business, for this industry, for this market. So yeah, so back to the kind of company and the nuts and bolts. Adobe does have the financial heft to invest big in AI. We'll probably see plenty of acquisitions. We'll probably see plenty of product launches, loads of R &D expenses in the future. Maybe those ridiculous margins will become slowly eroded. um i would imagine like say super users would stay retained but then the fringe cases start to disappear and it becomes a bit of an uphill battle in terms of its retention figures ultimately leading to discounts decline revenue reduce margins you know it's got a long way to fall market cap is around 440 billion it's got about 40 million subscribers but from a helicopter view it seems that maybe the cat's out of the bag here chat b chat gpt i mentioned inflection points at the start of kind of this tirade, but ChatGPT being released in 2022 probably is that inflection point for Adobe where people look at it before generative AI and after generative AI.

28:19But we're comparing, say, the bull case to the bear case there and the risk reward factors, I suppose. And you're looking at the bull case and be like, ah, yes, this is a bargain. If it continues, it's able to deliver 10 % revenue and it'll be a share cannibal and it'll invest well or whatever. And then the bear case is, oh, this could be like systemic, endemic failure, a terminal business that eventually just slowly and slowly and slowly circles the drain. So yeah, I know where I stand between the two. I feel like there's arguments made on both sides. And I think probably I'm leaning toward leaning a bit to the kind of sensationalist side of AI is going to ruin everything, blah, blah, blah, blah.

29:10But for especially this industry, for specialty design, for the capabilities we've seen in such a short space of time, for things like Mid Journey, for Dolly, for even like the basic editing software you get in like ChatGPT and stuff. the fact that that's moved so fast i just feel like that eats into adobe's target market so much and those 40 million subscribers become 30 million become 20 million become 10 million maybe become 5 million and this this business doesn't go away but it goes from mass market to niche and and at 130 140 billion dollar market cap that's a long way to fall so if you were handed 10 grand by your uncle and said i fancy adobe but do what you think would you put it into it no you make a very good bear argument there because uh certainly you shone light on the aspects that i hadn't really considered when you look at that quarterly revenue trundling up up up up up it's like a a pipe system in a in a in a church that's the way I want people to picture the revenue a whole bunch of pipes on the organ uh the revenue is just going up up up up up up up up and you kind of think well the trend is your friend and this is a business that's dominant and if you think about what ultimately is the end product of a designer it's a something that a human consumes a pair of eyeballs fall on it or it goes into your ears um will that demand ever go no so will the will adobe own the creation of that end product the imagery or the sounds or the both and the answer to me is probably now who's driving the bus might change from human to robot uh the analogy being ai but i do think they're going to hold their position as the creator suite for the end product that humans consume and i think it is as i said very sad that we are looking at the unquestionable diminishing of a of a very admirable profession which is design to me it's analogous to um an ai system knowing my top 10 favorite songs so it knows i love bohemian rhapsody and peg by stevie dan and master puppets by metall and all these kind of things and they load up 10 tunes that have always appealed to me and it produces on the spot a customized piece of music that through the algorithm of what I love it will know I like and it will get it right and to me that there's a sadness in that which is the artists who created something are not there it's a machine but then there's the resultant feeling that if it did produce a piece of music that evokes feelings that get me excited or interested or whatever their heart rate up it is a success from the production perspective and if you bring that yeah tell me well no i i see what you mean and like i i don't think you're wrong but i think a lot of adobe's functionality doesn't go into arch as as uh arch in its purest form yeah yeah yeah some of some of it obviously does like digital art is a real thing and it's it is it's out there but but it's a functional art a lot of the designs that would come from adobe and and in that sense this is what i talk about the super users versus like the fringe cases where good enough suffice for a lot of people in a lot of say we'll say functional design and i think that's where the even though there's so much switching costs involved and like people have poured you know years and decades into learning the company's uh programs and all the rest that that good enough unfortunately will suffice which is another sad you know sad like train of to go down that like you know this is just good enough and that'll do me but uh yeah yeah it's amazing to me that the company has increased revenue quarter and quarter since the the quarter that ended in december 2022 every single quarter is up by 10 percent up up up it's so predictable and that's compounding i'm torn because on one side i find it to be a dreadfully boring uh business to look at i just do it went through its ir investor relations web presentation yesterday which was beautiful to look at as you would hope but it was wow it was one hot mess there's an awful lot of bits to the story and i found it I don't want to say it was cohesive, of course.

33:54I mean, it's a business as old as the hills, but I just found it to be a bit of a boring company to look at. So I'm not saying that every company needs to be exciting. I don't care. But will the market ever recognize the fact that revenue is growing at circa 10 to 11 to 12 % every quarter in the face of the threat that you've described? I'm not so sure. So I would not be a buyer of Adobe, be but i'd be i say that in full recognition that it seems to be going into deep value but that threat is still there outside the window where they can tell us a story that ai is is their uh is their their their friend when in fact it might it might be their foe yeah absolutely and this is always the kind of conversations we have around these value traps or deep value or like you know catching a fallen knife the numbers always look really good but beyond the numbers where is the threat is it systemic and you kind of have to have a bit more of the you you talk about like the the art and the mechanics of investing i think this is more of a the art of wait a minute now stop and have a look and what's the long-term vision here and and yeah like a lot of it is you know trying to predict the future in a way yeah um but yeah you have to detach yourself just from the quantitative and just from the numbers okay good chat mike i'm gonna do something uh an unpaid segment but i i am gonna try and just kind of shine a little torch on businesses i've interacted with that i just like and i think they're doing something nice because i think entrepreneurs deserve a break uh i've been through the depths and pits and highs and lows of being an entrepreneur and I interacted with an Irish business recently as I said this is this is by no means a handshake this is just me I've bought a business sorry I haven't bought a business I bought I subscribed to a business called early table which allows me to book restaurants early because I like dining early and I got like 30 % off and I was like this is so good it was a restaurant I go to regularly with my wife I always go early I always pay the full whack and I got 30 % off the meal and um the restaurant is lobster in monkstown which is the most amazing place i have to say it's i mean there's two recommendations so lobster in monkstown is one of my favorite restaurants and early table got me 30 off the bill and it pretty much paid for its whole year subscription so i'm going to be using early table for lobster for the whole year ahead to be honest i'm gonna make a fortune i tells you so anyway they're two businesses i just thought i'd just tell people about because I think they deserve a little boost.

36:32So there you have it. Okay, sounds good. This is our first and last free ads in this podcast. Yeah, and it might be our last, we should do it because it's just nice. They're not ads. They're just telling people about stuff. I think it's quite nice. People who listen to this podcast love business and I love business and also everyone loves a deal. So Early Table was the one really, it's super slick. You just book through the website and they're going to launch an app I was reading and that's it. you're in and you're 30 off uh there you go right um oh yeah following profit everybody loves a deal there we go everybody loves a deal and what's the deal here well the deal is every week we're going to talk about one of the current profit stocks so even if you're not subscribed you get to peek behind the door at one of the 10 stocks that are currently live in profit which is our just tell me what to do service it always holds 10 stocks it rebalances every four weeks its returns are face melting just look at useprofit.com or go to mywallstreet.com and click on the profit bit it is unbelievable and i am so in i'm so well i won't a little bit i won't i won't go on down that alleyway but profit is the bomb trust me at 500 bucks now i'm plugging it at 500 bucks is i I think the best 500 bucks you'll ever spend, especially when we reprice it to five grand.

37:53But that's not for today. I need to caveat that we are talking about a company and a knowledge that profit may sell it in a couple of weeks. It only rebalanced their last Friday. Absolutely. Yeah. I talked about corn main a couple of weeks ago and it sold it for 5 % gain. It did. Actually, let me have a look here. So the four stocks it sold on Friday last, Corn Main, as you said, Gilead Sciences, it sold for 10.39 % gain. It sold Insulate Corporation for 16.17 % gain. And it sold Westco International for a 19.91%, in other words, 20 % gain. so it's sold for stocks and what you do is you take your cash from those four you divide it into four little equal piles and you buy the four that came in the door and i am going to talk about one of the ones that came in the door which is called ul solutions i never heard of it that's the thing about profit until it publishes live to the website i have no more insight than the next person.

39:00And I looked at ULS. It was bought, as I said, on Friday, November 7th at$84.99, say 85 bucks. And it's up about 1 % since, but I'm sure profit will keep an eye on it and make sure it keeps going. But this is an old business. It goes all the way back to 1894 when a young engineer named William Henry Merrill Jr. turned the chaos of early electrification into a discipline called Applied Safety Science. And I find it interesting how names, people's names from 100 or so years ago, always have a gravita. They're always like better names. Henry William Merrill Jr. Like, nobody's called that anymore.

39:45Hello, how you doing, Mike? My name is Henry McPheasant Carpendale III, founder of My Wall Street. Like, you just don't hear. It's all like Emmett Savage, Joe Brady. i have to upgrade my name but anyway so uh henry sorry william henry merrill jr founded a business um with an idea that new tech needs to be made safe which you gotta figure 100 plus years ago they're looking at electricity being stuck in to all these devices and they're like oh there's a that lad over there just dropped dead something going on so um this this is a brand that if you're a bit of a nerd which i am to be honest i love looking at the branding and the names of every company i look on underneath everything everything i look i want to see where everything was made and who made it but apparently in america you can see ul the letters ul stamped on all power strips and ev charger chargers um and send us a note if you are a nerd who spotted the ul because there you go you're looking at the brand that's well over 100 years old um so if ulta salon which are so ultra beauty which i discussed a couple of weeks ago is all things beauty ul is all things safety and the idea was and still is to this day to be the independent referee as new waves of products and standards crash into the market.

41:14It's a nice idea. One example is the fact that, like, sorry, this is to me an example of how investing makes you smarter. It points out industries and businesses that you never would have heard of. I probably said on the podcast before, but I remember years ago, reading about a company called P or Portfolio Recovery Associates, and their ticker at the time is PRA. maybe it still is maybe they're still around PRAA I think they changed their tickets but the point was that what Portfolio Recovery Associates did way back when was they rocked into credit card companies and they said hey who are your bad debtors and they said here's 10 million 10 billion worth of unpaid credit card debt and what Portfolio Recovery would do would pay say visa for example five cent for every dollar owed and they'd take it over and they'd recover it i don't know how i i like they would record they would get those bad debtors to pay up and they would make seven cent on the dollar so uh when i remember reading about it going that's a revelation i never even knew that was an industry it kind of makes sense once there's lots of ethics and good ethics but uh this this to me ul was and it brought me back to pra portfolio because it was like i didn't even know i never even thought about this being an entire company and industry anyway fast forward from uh our multi-barrel named friend uh century plus and one corporate reorg later and ul solutions is now the for-profit arm of the broader ul enterprise so it sits beside there's three bubbles and it sits beside two non-profits ul research institutes and ul standards and engagement so last year last april 2024 ul solutions listed on the new york stock exchange as uls at 28 books a share um and it was kind of interesting because the shares were sold as secondary from the non-profit owner so in other words the money from the flotation went straight back into the standards business to what i'm discussing and the stock opened above issue on the debut and valued the company in the kind of mid single digit billions and at the time commentators were calling it a rare public company with a public good backbone because all the other stuff was all about uh standards and behavior now the leadership uh its ceo and president is a woman called jennifer scannon and she's very much kept the message consistent since they all the way up to the ipo and since then pick attractive niches or niches as you say in america and um those niches are energy automation and consumer tech which is quite a broad playing field and let secular change do the pulling so it converts they convert their fields into better mixes and margins quarterly proof points which is steadily organic growth and rising EBITDA margins and disciplined capital allocation all line up with that brief now when you look at its um IR deck investor relations deck it's it's again it's a bit boring um but you know what boring can be good profit has looked at it i wasn't expecting the safety solutions for electricity it's not exciting yeah it's not like we're sending rabbits to venus so we can say there's life on venus like it's total literally is this this uh earth strip does it go deep enough into the ground and it's a competitive field like what they do there's a lot of competitors and possibly is seen as a um i suppose like utilitarian it is utilitarian it's just it's just expected to be there always where it could be done well and regulatory cycles can delay spending and portfolio pruning within their own portfolio can bring a lot of noise into their quarterly results, I've noticed.

45:21But we don't care. Profit just told us to do it and that's that. So that was kind of quite an interesting story, especially, look, you can't... What I find really interesting is that it's a 130-year-old business that decided to IPO last year. Do you know? It seems kind of... scannon walked into room and said gentlemen ladies the time is right and you're like what time is right for what well a bunch of like second generation shareholders that are all like 95 being like what's an idea yeah she said i found this letter in my desk from william henry merrill jr the first star founder saying would you mind floating this thing in the year 1952 and she because we've kind of missed it, but sure.

46:07Well, we'll do it now. Why not? Yeah, I mean, just their performance since that IPO is incredibly impressive. So it's clearly doing something right. It's interesting looking at the

46:21stock charts and the type of business, not even so the type of businesses, but the performance of the stock and trying to identify the. I know there are thousands of quantitative measures that go into profit selection. yeah but seeing if there's any patterns and stuff and like you know corn main bought last month after a poor earnings report and bounced back a little bit and then you're seeing something like u.s solutions where it's just up up up up up pure momentum and so yeah it is it's interesting to see and then it's interesting to learn about these new businesses as well even though they might be the most exciting in the world yeah you said it mike profit is still only 499 dollars a year for the handful of days to remain in 2025 and in 2026 it definitely is flipping to a grand that's the next milestone and once you buy at a price that my wall street you keep it forever because we don't like people complaining we're sick listening to them so it's like you can keep your price but i would say buy before you swap it over to a grand um it's the most amazing if you are and if you are interested you can write into frank at my wall street.com frank and that's my mywall street is stmywallst.com but we also own the domain mywallstreet fully spelled out.com but we do nothing but i think it redirects to thest.com okay so i'm interested in business this is a good chat emma thank you for joining me as always and thank you everyone for listening in and remember if you haven't already subscribe you youtube spotify apple podcasts wherever else you're getting them.

47:58If you subscribe, it really does help the show. Yeah, just subscribe. Come on. We don't ask you to do anything, folks. Also, if you're still listening at this stage, you might. We're doing something right. So you may as well. Yeah. Yeah. Thumbs up. You haven't turned us off yet. Yeah. Okay. Thank you. And we'll talk to you next week.