One Industry for Reliable Returns. One for a Moonshot. Here Are Our Picks. | Stock Club 320

0:28This episode is brought to you by Google Chrome. names to go chase the AI bubble, essentially, because they're going into something more exciting that's moving faster now, that won't be moving faster for long term.

0:43Welcome to Stock Club, the podcast where we find and discuss stocks that anyone can buy, many of which we believe will go on to grow your wealth. This week, Mike and I are going to answer the following three questions. The first is, if you could only buy one industry, the entire industry, to hold for the next 10 years for the most reliable returns, which one would you choose and why? The second question is, if you could only buy one industry to hold for the next 10 years for the biggest moonshot, which would you choose and why? And the third question of sorts is, name your top three favorite businesses in each of those two industries.

1:31So it's going to be a bit of a blur. I've no doubt about it. Before we jump in though, I want to remind our listeners that seats at Investicon are selling and they're selling fast. It's on 27th of August. That's just about a month from now. And our big media push is on the way with interviews with many of the guests uh under what's it called embargo or locked in from a lot of major channels at the theme for the event is called the top three investing ideas for 2027 and beyond from investing masters so everybody on that stage is going to tell you their three favorite stocks mostly that you can buy immediately for what we hope will be the creation of generational wealth and we i am We are delighted to welcome co-founder of The Motley Fool, David Gardner, as our VIP speaker.

2:27David has a crystal ball. He has called so many winners over the years and on stage. He's going to give us a glimpse into his rule-breaking style of investing, which has created untold wealth for countless people around the world since the late 90s. So that's it. Oh, if you want a ticket for Investicon, I recommend emailing Brian at MyWallStreet.com.

2:58Brian at MyWallStreet.com. He's the CEO of the event, and it is only he who can give out the last remaining discount codes. You don't want to miss this because we also have other speakers that we haven't announced for various reasons, but I think you'll have a great day. It's an all-day event. It's a Thursday in sunny Dublin, and it's conjoined with the Erlingas College Classic American football game, which is happening two days later. That's it. And if you have any queries, hit Brian up at mywallstreet.com. Mike, how are you, and how is the weather in Berritz? The weather's good. Can't complain.

3:34It's about 27, 28 degrees outside. Big day here in France. It's Bastille Day, 14th of July. Oh, Bastille Day today. 14th of July, of course. It's funny how these things, you just miss them when they're not your thing. Yeah, and then obviously World Cup semi-final season. So people will be listening to this knowing the result. So I could be set up very much for catastrophe by talking about this. So you're going to be shouting Alain Le Bleu? 100%, yeah. Complete bandwagoning. But I was thinking about it then. It's hilarious because like the Bastille Day, they always do the big fire accelerations and stuff.

4:10Oh, yeah. So wouldn't it be so horribly light? just desperately sad france get knocked out in like a penalty shootout or some like last minute goal or whatever and then just the fireworks start five minutes after the game it's just one of those little whizzers that's like you buy for 10 euro when you're a kid yeah uh and they decide to keep for a big one next year so um it's the battle of the giants tonight really it whoever wins well obviously whoever wins tonight has a is on the front foot for taking home the trophy but you know when you think Spain versus France from the outset you got to put those two as the favourite.

4:50Argentina and the UK watching Argentina's day to play to date hasn't been as inspiring as it was in previous years but tonight will be a great match. 100 % nervous now but be good either way. It's funny because I get to enjoy it but I'm not as invested in any way shape or form as it would be if Ireland were playing or any other of my teams are playing but it's still in the moment you're very much there and you're cheering them on and stuff so it is it's fun you'll pretend you're upset if they don't exactly and you do a good job of it's fun it's fun uh being in the bandwagon and not really caring too much but still getting to enjoy all the eyes of it so yeah yeah so that's it okay well let's see how that goes now mike we have a lot to talk about and i think we had a very quick pre-podcast meeting yesterday and i hit you with this idea which has a lot in it your favorite industry for conservative growth your favorite industry for what might be outsized growth and then some of your favorite stocks from those two categories so let's start with reliable returns so just to for the clarity of our listener imagine you had an index fund that was entirely representative of just one industry so you are actually buying the entire thing every company in that industry is now your portfolio it's obviously a thought experiment but what we want to do is start with which industry is most certain to deliver returns over a 10-year period.

6:14So we've chosen a very comfortable investment window for us, but nonetheless, nothing is certain. So Mike and I get a little uncomfortable by saying it's absolutely reliable. So with that caveat there, do you want to kick off, Mike, and tell me which industry have you chosen? And then sure, you may as well throw on the three businesses that tickle your fancy in that industry. Yeah. Yeah. So I was thinking about this and a lot of research went into this pod. I wasn't expecting it. We sat down for about five minutes and it came off and I was doing about three days of work on this because I came in and out of a bunch of industries.

6:51And I just, it's weird, like the speed of technology, the way it's moving right now, there's a specter over in the entire stock market around AI, whether you are on the on the bandwagon like me with friends or you're off and you're getting punished and i know we talk about it every episode but it is actually it's impossible not to mention it in some shape or form and what we're seeing right now is very concentrated market on one particular sector area it's probably more accurate it's much like it's a bunch of sectors involved kind of from different aspects but there's an awful because of this there's an awful lot of quality businesses being ignored and i mean it makes sense like if for a company like sk hynex to come and raise 27 billion quid in u.s listing that money has to come from somewhere else there's a finite amount of cash in the ecosystem so i thought it would be interesting if we're looking at 10 years out to look at some of the ever-present businesses and industries that are suffering from that outflow and maybe try to capitalize from from some favorable valuations and and a lower starting base because from this day to a decade on that does make a difference over time so this might be me just overthinking it and we should just say semiconductors and be done with this and you know make this a five minute podcast but uh but this is inspired by our conversation last week around boston scientific which was one of the big which is one of the biggest losers so far this year and i think it's a very interesting time to look at medical device companies in general so i listed are these are top 10 by market cap and their recent performance and i think it's very indicative of of that story of money leaving quality names to go chase the ai bubble essentially um so starting in number one avid labs is down 26 year-to-date and 33 from all-time highs set in late 2021 intuitive surgical down 27 year-to-date 32 from all-time highs late last year striker down 5 percent year to date and 18 percent from all-time highs set around this time last year medtronic down 13 percent year to date 38 percent from all-time highs set in late 2021 boston scientific we talked about this last week down 54 percent year to date and about 60 percent from all-time highs last september very swift drop there edwards life sciences first company that's up this year so out of the top 10 this is well i started to uh up eight percent so it's still trailing the overall market which is kind of nuts down about 25 from all-time highs set in january 2022 becton dixon is flat year to date down about 30 since july 2023 alcon is down 14 year today and down 35 since all-time highs in september 24 resmed is down 19 year today and 33 from all-time highs in 2021 caveat there is that it also kind of basically just short of its all-time high this time last year as well so that's that kind of it fell came back fell again and then dexcom is up second one that's up uh out of 10 um it's up 15 percent year to date but it's down more than 50 since its all-time highs in 2021 so there's there's a list there of 10 major companies that have achieved massive success in the stock market smallest of them is dexcom at about 30 billion dollar market cap only two were in the green you are only two are in the green so far this year and the closest any of them are to all them highs is striker but just shy of 20 that tells the story now i'm not saying that ai is the root cause of their problems at all there's been like a wider sector rotation and there's plenty of other like individual factors at play uh we talked about you know boston scientific boston scientific troubles last week at length a few companies in here at the wrong end of the gpl1 trend dexcom in particular is the diabetes treatments glp1s at the base is supposed to get rid of um diabetes obviously it's doing a lot more now but uh resmed as well so resmed makes um makes devices for sleep apnea and so they're saying if we're going to have a much uh if we're going to have a meaningful reduction of obesity sleep apnea would be one of the afflictions that would come down nothing bad about you know less diabetes and less sleep apnea going around.

11:04But just to point out those two individual companies, then like small stuff like Stryker suffered from a cyber attack in Q1. And then obviously the companies, a lot of the companies that hit their all-time highs around late 2021, they had a serious purple patch after COVID and haven't reached that same high since. So that's kind of the list. I think it's just really interesting to look at it and see the trends there because even though they have their individual problems, some worse than others some worse than others of course none of that seems very systemic to me apart from maybe the gp1 usage and the companies that are like you know going after diabetes or resmed in particular but apart from that i believe that there's a list of stocks there that will endure persevere and you can get them for a bit of a steal right now comparisons their historical valuations absolutely i believe i think because you have to put this within the context of ai in a sense i believe they will ultimately be beneficiaries of ai they're industries that are so complex and so regulated that it would be very difficult to be disrupted easily and then couldn't agree and then they have the resources to utilize the technology within their existing ecosystems that they built up over decades so that's my shout if i had to pick three i'm not that i would have to do a lot more research into the individual companies but like Just judging off a stock picker kind of instinct, I would go intuitive, striker, the two that seem very much in this short-term blip category.

12:40And to be honest, both needed haircuts to their valuation. They're still both expensive stocks. And then I think Boston Scientific, just because investors are acting like that is a company that's going completely out of business. And that's not the case. And I mentioned it last week. I think it was one of the big losers in the S &P 500. if i recall i it's one i picked if i had to pick one of the big losers yeah i think that's the one i said i buy yeah so it's a very like specific but hugely successful part of the stock market over the years and like we probably know more about it as to irish people as well it's such a huge industry in ireland um but from looking at it uh from the base it is at now 10 years time i don't think these companies are going away i think the sector rotation that'll be cyclical I think the elements of an industry that could be disrupted aren't there for AI.

13:33I don't think it would be easy for new companies to come up. These are very specialist manufacturers, the processing plants, the infrastructure in place. All of that is huge, heavy investments, heavy assets. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast.

14:07That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Yeah. Massive barriers to entry. if you just imagine FDA approval and equivalent around Europe was just granted with a magic wand, which it absolutely isn't. It is a ginormous barrier and moat. You then have to think about the physicality, the fact that products, things you can touch are implanted in patients. So when you consider those two elements, like they are nothing to do with AI. You could argue, yes, well, AI will improve the design of a striker hip or the implementation of intuitive surgical software.

14:51Yes, yes, it will, I'm sure. But the absolute business was never awaiting the arrival of AI. And you would have to think to a level has a will only benefit from it. It will not be pushed back because. Exactly. And they were the two kind of main motivations, I suppose, behind picking this industry because it's quite a niche, it's a little bit boring, but also the fact that money is leaving these stocks for one shape or another because they're going into something more exciting that's moving faster now, that won't be moving faster for long term. And then ultimately that it will become a beneficiary of AI because it'll be able to use the technology without being disrupted by it.

15:32Now, that's obviously not, that's not a definite at all, but I think it is a probable outcome. So for that, I picked the med devices, med tech in that space. I think there's some great businesses in there that will get rewarded long term. So, yeah. Yeah. Love it. I love that, Mike. I could easily take that in as my own argument or selection. but fortunately i didn't choose it um my one is far more ai vulnerable but the industry that i chose for the most reliable returns if i had to buy an entire industry uh isn't even an industry despite being the one who was allowed to make up the question like nobody forced you're not allowed to make up the answer it doesn't matter so serial acquirers are not a formal industry uh they're not like healthcare or med devices or utilities uh it's a business model that shows up across every type of sector most successfully in niche or niche as you might say in america software so i'm gonna go with that because we make the rules of this podcast mike like it's just you and me like that we don't even have someone in the back room going guys take that again we just do what we want so i'm picking that as my industry and the typical playbook um for a serial acquirer is that they buy small profitable and usually mission critical businesses as cheap as they can something sometimes like three to five times free cash flow they generally let the business run autonomously they go look the management team know what they're doing leave them to it and every dollar of cash flow that's generated from that industry sorry rather that company flows into the parent and they redeploy it into the next acquisition and they do that consistently for five ten fifteen twenty thirty years decade after decade and ultimately they compound usually very often at an extraordinary rate because uh you're not just growing the business that you own you're using the cash it's throwing off to keep on buying more and as a serial acquirer you learn how to deploy cash better and you learn how to run the businesses in your portfolio more efficiently and i guess it's an iterative process and it only gets better oh yeah that's why you see these companies that have such a strong track record it's almost important to have that track record before diving in it's tough to get these companies early yeah you're right like we only spoke was it last week about bending spoons or was it two weeks ago i think yeah yeah and they're best in class at buying gutting and building software businesses we spoke about the fact that they've acquired vimeo and aol and even the platform we're using to record this podcast which is called streamyard and loads and loads of software businesses that most of us have interacted with and they i think what differentiated bending spoons if you will from constellation software which i'll talk about in a moment is that they got them like they buy a business it's not decentralized it's hands-on beyond hands-on it's hands hands in that's uh hands in oh yeah and it's it's when they walk through the door you may as well start packing up the cardboard box you know with stuff in your best but the best known case study in the serial acquirer is constellation software which is a canadian company that pretty much pioneered this model at scale in vertical market software or vms which is software built for a specific narrow industry like veterinary clinics or public transit agencies where the product is mission critical but the market is too small to attract big competitors so like if you have a vet clinic there's probably only a handful of players who provide the complete vertical solution for running a veterinary clinic where and you can safely say that microsoft are not gonna launch pets for for b2b like it's too niche or too niche so um so since 2000 no as i was just gonna say it's the um it's within morning stars mode categories is the concept of efficient scale where you can offer veterinary clinics, vets.dos or whatever.

20:01It's perfect and it works and you can charge X. But for Microsoft to come in, Microsoft could come in, build a better product and undercharge you, but it wouldn't be worth it to them. Because then you start competing. The margins, the scale slash margins aren't there. So it's a huge, it's a huge aspect with these types of businesses, especially within the software space. so constellation ipo something around now 20 years ago i think it was the summer of 2006 and and uh at its highest point was like a 200 bagger every thousand books in that ipo was at its peak worth 200 000 books and drawdowns that's the stock falling from its highest point pretty much was limited to about 26 which is remarkably tame for that kind of return um so it's at this stage acquired over 500 businesses operates more than a thousand individual units globally and the model works because vms vertical market software businesses are resilient um they almost always produce recurring revenue they're almost always have a high switching cost if you're running a vet a vet's practice you're like i cannot be bothered changing the software l my dog and cat and other pet records are in here and all their treatments like it's messy business and um so that means just high switching costs uh there's low capital intensity so running these businesses doesn't require loads and loads of new cash to buy stuff and they represent a tiny fraction of their customers operating budgets despite being indispensable so if you have that vet clinic Like, yeah, you have to pay a few thousand bucks for the software, but in the scheme of things, it's keeping the place going and it's not an expendable cost.

21:46There's no way you're not going to pay your bills. And that's the profile that makes for cheap acquisitions with durable cash flows. But what makes this really reliable, because we're looking for reliable industry, if you like, is that it is not, there's no speculation here. it's it's a discipline driven quote-unquote industry i mean it is not an industry but they're all about uh being great serial acquirers obsessing over return on invested capital known as roic that's the number they obsess on in this particular industry and they enforce these hurdle rates on every deal so a good serial acquirer might see acme brick software walk in and they simply have a checklist and if you don't pass one of their toll gates or their hurdle rates uh they walk it's like sorry look we just can't acquire it it doesn't meet our thing and that um and that really means that they uh primarily these companies are primarily allocators of capital primarily and then secondarily they're operators but first is they they apply so that discipline i guess is also why the model has been proven exportable you know it's it's not very specific to a nation it's been successfully run in the uk and replicated uh who replicated constellation spinoff um so there is a risk though that's always worth kind of identifying and it's funny there's a cognitive bias i believe in a risk which is when you identify it and when you see a risk there is a cog bias i believe to think it is lessened because you've identified it but that's not the case risks are risks and when you see a risk you've actually you have to be aware that i might just come up and bite you on the back side but the risk in this particular industry is growth naturally decelerates as these companies get larger since it gets harder to find enough attractively priced acquisitions to keep moving the needle and keep showing the road and not only that but the new acquisition will make less and less of an impact on earnings and revenue as well entirely so yes you bet so if you're a serial acquiring you've 12 companies adding in your 13th is a big deal if you're a serial acquirer with 500 companies adding in another one is just another day at the office so you're right the the law of numbers or whatever you want to call it is a good example of that actually better example of roper technologies is a real cautionary example they guided like single digit growth after years and years and years of double digit gains and and now as a consequence it's selling it's something like it's spring 2019 share price so that's the industry i'm going to hit you with the three that if i had to put the old grabber in and pick out three here are three i'm not going to say that three because it would be untrue of me to say i looked at every single business in the in the serial acquired acquiring space though i've looked at a lot of them well you could go So I'm going to kick off.

24:50Across countries, across continents, across industries. It's a fairly vast. I mean, you and I have had a lot of chat about some of the magnificent businesses in Sweden, specifically in the industry. But I'm going to kick off with the one I've already said, because you can't say I'm going to buy soft drinks and not look at Coca-Cola. Well, the Coca-Cola of this industry is Constellation Software. It's the gold standard. It's been around for 20 years. It's compounded and created extraordinary wealth by buying these small vertical software businesses and they never overplay and all the stuff I already said about being decentralized.

25:25So the first I would choose without any doubt is Constellation. I'm not just adding it because it is the Coca-Cola. I'm adding it because they have built and refined the playbook that has made this industry so famous or so famous to us. The second I'll buy is its cousin. you know what I'm going to say because you know I love this company and it's Topicus and our topicus.com and it's effectively Constellation's European offspring and follows almost the exact same playbook as Constellation who owned 49 % of it and it all the reason they spun it off was that Mark Leonard the the founding CEO of Constellation who stood back from that role recently said that only businesses who have the autonomy to make their own decisions prosper so the whole european thing was spun off and it kept 49 um if it's it follows the same playbook as constellation mission critical software businesses in europe uh where the market remains fragmented and under penetrated um and because it's much smaller than constellation it arguably has a longer growth runway uh with thousands thousands and thousands of potential acquisition targets all across the let's say 26 main european countries and the many more that are kind of around the edges so um execution so far has been outstanding and if it maintains its capital allocation discipline topcus uh will i believe accelerate its share price just simply the value created for us um us everyday investors and then the third i'd pick mike before i'm speeding up because it's a long old chat this before we get to second categories judges scientific which is a is a favorite of my friend peter slagers i'm pretty sure it's right to say peter from who's attending vesticon this year would is a fan but it's a different type of serial acquirer but it's I really admire it buys niche scientific instrument manufacturers that often lead really small highly specialized markets with loyal customers and great pricing power and these businesses generate you know great margins and require again modest capital investment and I just excuse me I just think it sits right beside Constellation and Topicus very nicely even though it's way way smaller but its acquisition philosophy has been really exceptionally disciplined for decades and if that discipline continues judges judges scientific has pretty much every chance to remain one of the uk's best long-term competitors because it's been a brilliant one and i've loads of honorable mentions like lifco chapters group another chapters unofficial ad tech yeah yeah indutrade i think was one that you blessed for nexus maybe no indutrade didn't make it into nexus but it was close um but yeah those swedish swedish industrial uh serial acquires really have oh yeah unlocked an awful lot of loads of them yeah compass diversified there's loads of okay so that concludes our reliable growers industry segment folks and i think it's a lovely segue well it's the only segue into the next bit where mike and i are going to talk about the industry the entire industry we would back for a moonshot return for super normal returns of such a thing is real when you buy an entire industry so mike what industry would you buy if you're looking for the moonshot yeah again went across a lot here there's a fair few uh which you can dip your toe in that are on the public markets as well a lot of you know moonshot technology is kept in private markets but they come and they need to get funding and there is a lot of funding in public markets for them uh but you know they all kind of tell a similar story there's huge potential not any real commercial viability just yet quantum computing probably the highest potential out of the lot uh but maybe the hardest to execute crisper gene editing is an obvious one there we talked about it a lot this is quite close really like i mean it already is we're seeing quantum crisper editing computing we're seeing genuine genuine cures come to market like you know and and will in the future like never before i mean we've already seen with crisper therapeutics and sickle cell disease the only problem is cost two million quid for a treatment so yeah autonomous close your eyes exhale feel your body relax and let go of whatever you're carrying today well i'm letting go of the worry that i wouldn't get my new contacts in time for this class.

30:10I got them delivered free from 1-800-CONTACTS. Oh my gosh, they're so fast. And breathe. Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste. Visit 1-800-CONTACTS.com today to save on your first order. 1-800-CONTACTS. And it's no plain sailing either. Seemingly, it's a bit like, what's that treatment for cancer that's been around from the 70s? Chemotherapy. Seemingly, it requires immunosuppressing drugs and it's all very unpleasant. But yeah, the benefit obviously I have ways to downside. But anyway, what industry did you choose? So the one I settled on is nuclear and particularly these things called small modular reactors, which is kind of the next phase or the next generation of the nuclear industry.

31:01So nuclear itself is not that speculative. This new wave of companies that are trying to upend how the industry works is. so small modular reactors smrs yeah designed to be smaller obviously um yeah more flexible easier to build uh than traditional nuclear power plants and that's the difference really it's essentially trying to take away all the pain points that have hounded the industry and held back nuclear for so many years so faster and cheaper construction obviously also modular construction i'm just saying the letters now but that's a big plus because these companies can build on site and ship them out so they can build world-class manufacturing facilities instead of having to go out to wherever three mile island or sell a field or name another nuclear site and do it there and on top of that then that makes it much easier to bring in these new next gen safety systems and they don't need any active management at all which is a big plus probably the most important part and then the last kind of huge benefit i suppose to smrs is they have a much smaller physical footprint.

32:03So a traditional nuclear power plant requires huge swaths of land, enormous bodies of water for cooling. Probably the inverse for SMRs, they can be deployed in places where a massive plant just wouldn't be possible. So all of this means there's a lot of interested parties right now, like just in general, the demand for energy has never been higher and it's only going to grow with this AI infrastructure, the data centers, everything else. So Bank of America believes that nuclear will be a 10 trillion dollar industry and demand will triple by 2050 basically every hyperscaler is getting involved in some way for some way shape or form uh to help power their data centers obviously uh trump set out a formal goal of quadrupling u.s nuclear capacity so from 100 gigawatts as it is to 400 gigawatts by 2050 and yeah the excitement is real like it's very much everyone is kind of backing these because they are a more sustainable more efficient and more viable option for nuclear in general but they're not a magic wand yet at all this why they are moonshot like is there's only two smrs operating commercially in the world right now one is in russia and one is in china both are both ran over budget behind schedule and currently producing lower than expected output so it's not it's not a finished product whatsoever um but the excitement is there the momentum is there there's regulation coming in to help it there's huge funding like google amazon facebook in particular they're all getting very involved with the smr space in particular um so looking at the companies the real moonshots the pure plays are NuScale, which is aiming for a reactor on the market by 2030.

33:52Oclo, you mentioned this company recently on the pod. This is the Sam Altman-backed company. So it's focusing on smaller reactors. And I think the business strategy behind this is probably the most, the one that stands out the most, considering just the money being thrown at AI in general. So their plan is to sell directly to data center operators. And it's actually targeting its first unit by 2027. So as it stands in terms of targets, that's the closest we're coming to true commercial viability. And then the last one is nanonuclear energy, which is developing micro reactors, plus its own H-A-L-E-U.

34:30So H-A-L-U, it's high assay, low enriched uranium, which is the fuel that is essential to pretty much every next gen SMR. and that's kind of underpinning the entire industry um which is interesting because it opens up the concept the idea to picking shovels as well you don't have to pick whether oclo or new scale or nanonucle energy is going to win this race for the smr space you could back companies called centrist energy which is the only u.s licensed supplier of this hail you um uranium which is essentially underpinning the entire industry so those are the pure plays and then centrist energy which is right beside it as well but in nuclear in general these for nuclear in general there's plenty of other companies like there's blue chip stocks in nuclear as well constellation energy is an old favorite vistra is there as well the industry as a whole is set for gross that 10 trillion dollar figure from bank of america isn't just for the smrs it's for it's for nuclear as a whole and there's huge demand like as in we're seeing traditional power plants get a huge boost as well microsoft is backing um the opening of the reactor on three mile island that's going to come online for constellation quite soon hopefully um so yes smr is at the moonshot but in general the nuclear trend is here and it's going to be around for a very long time like it's interesting that both bank of america and trump put that 2050 figure in place that's 24 years you know so far it's so far you're kind of safe saying yeah we'll give till 2050 it's what okay thanks for that yeah i hear you though but it shows that the trends are secular they're here to stay and they're here to stay for a long time um oh yeah very encouraging So it is a long way away from being commercially viable, which makes it a moonshot.

36:22But there's a lot of people both, you know, in government and in business and the companies that we're talking about in business are all within the magnificent seven, the most profitable and best operated companies in the world. They're all wanting this to work out. So with that, it feeds me a bit more with confidence than, say, something else, which is just pure, you know, attempted magic. So, yeah. Oh, yeah, yeah. For that consideration, I picked small module reactors in the nuclear space. I like it. You know, sometimes I think Chernobyl did for nuclear what the movie Jaws did for Great White Sharks.

37:07like what i mean is like great white sharks are great lads all together they mind their own business they don't want to eat people they have accidentally bit people because people look like a seal so look down with that kind of stuff but like everyone hated great whites after jaws now bringing it across to nuclear we the world got we're all a bit kind of i wouldn't like a nuclear reactor in my backyard i know you're right but it is by far the cleanest most efficient way of producing um energy from something mother nature gave us so i i i get it like you know we all we all know cellafield and chenobel all that kind of stuff but it is deserving of a fresh consideration especially when you look at the power that can be be produced in such a clean environmentally mentally friendly way misunderstood and then of course sam altman like he invented ai right you got if he likes it then we gotta like it too i don't know i don't know if you want to be associated with sam altman right now did you see the no yeah oh yeah we could have gone there in this podcast but let's let some air fill that sales because that is quite that's going to be quite the uh courtroom battle you gotta imagine much so i don't think they're going to appeal this year because of it right we won't get uh right i'm gonna give my uh give my one quite fast because our listeners are like get on it savage just do your thing so you touched on it in your opener and one of the two you mentioned i've i've gone for very obvious but quantum computing is the purest small market today enormous disagreement about tomorrow industry like it is a it is a moonshot of moonshots and and um i have to put it out there that it is an extraordinarily moonshoty moonshot so just to remind our listeners because i know we attract intelligent people and i know we've a load of physicists who fully understand quantum but just in case you've had a drink and slightly forgotten i thought i'd remind people what is it because you will in your lifetime hear more about quantum computing so what it does is it uses the physics of subatomic particles instead of traditional on-off switches uh for powering computers so if you were to take go into like small mode and fly inside your computer in movie style and fly through the circuit boards like streets of la you would find that it is comprised of millions and billions of these teeny weeny little switches like the light switch on the wall they're either one or zero we stack them all up together they create information well a normal computer uses that it's known as a zero or one for obvious purposes when the light switch is off it's zero when it's on it's one but a quantum bit or a qubit for short can be a mix of both at once like a little bit of david copperfield magic and multiple qubits can be all linked together which is known as they are entangled for obvious reasons so the computer effectively explores as many answers in parallel rather than one distinct state at any one time so when you're flying inside that mini computer traditional computer all the switches are in a specific state at any one millisecond but in the quantum computer that is not the case and that makes quantum computers potentially far far far faster at specific problems like breaking down certain encryptions uh simulating molecules for drug discovery um or maybe optimizing huge logistic networks where massive compute power is required but what's what's kind of interesting as a sidebar is they're not a faster version of your laptop for everyday tasks uh they are very specialized uh tools if you like still very very early preposterously expensive and still very error prone in the earliest stages of development what they have that industry has as measured by many people who measure industries the most gargantuan opportunity uh market size estimates estimates for 2025 last year kind of say the market size was something between one and a half to three and a half billion dollars which are tiny i mean there's companies now that are considered small that are just that size but the compounded annual growth rates range from something like between 22 to 41 depending on what research firm you look at one estimate has the market growing from 2 by 1.9 billion this year to 8 billion by 2033 another has what i was reading a growing from three and a half billion to 20 billion by 2030 which would be 42 percent CAGR and a more aggressive long-range estimate that it could reach 50 billion by 2035 um so there's a wide dispersion across analysts um which i guess is characteristic of technologies before an inflection point rather than after one because nobody's really agreed yet no one can see the promised land there's too many it's opaque there's too many ambiguities it's like what does it do now and who's doing it um but when we start to see these mega machines breaking down uh cryptography and optimizing problems uh it will be a race of who can monetize the fastest but right now the honest answer is quantum computers still cannot reliably outperform classical computers on most commercially useful problems and i remember years ago by the away uh pre-facebook and and the likes hearing the chief strategy officer at vodafone being asked what the killer app for mobile broadband was um because at the time the giant mobile networks of the world like verizon and vodafone were investing absurd immense money to buy spectrum off the regulator the airwaves to literally push mobile broadband and at the time the mobile networks didn't really have the answer as to what why actually what is it we're building for but strategically they just knew uh build it and they will come the killer apps would come so and i remember uh chatting with him he didn't have an exact answer to that all he knew was that the right strategy was to build a network that went as fast as possible um because that was the right direction of travel and for me quantum computing is in the same vein i mean it has a massive moonshot profile has it's just an absurd enormous optionality it has minimal current revenue and a real chance that this thesis takes another decade to play off or even longer so may not fully arrive um in the form that i'm pitching in 10 years in the 10-year window and what makes it legitimate though as a decade a 10-year moonshot rather than just absolute speculative hype is that unlike most other emerging hype cycles quantum or quantum computing has sustained escalating investment from governments the u.s china and the eu are all treating it as a strategic priority be akin to semiconductors so it isn't make believe whatever the the yeti is it's not the yeti of industries this is the real deal and the biggest tech companies on earth google ibm microsoft amazon all have dedicated quantum divisions and are spending hundreds of millions and billions on making sure that they have a lead position and so i guess what i'm saying is that reduces the risk of the field simply running out of funding before it matures and i should also mention before i just pick my tree that the technology has really achieved real milestones like error correction thresholds and qubit counts and very specific narrow problem quantum advantage demonstrations that set it apart from things like vaporware and then finally before i shut up and get on with it is the timing risk so quantum's commercial payoff could land anywhere between 10 years from now in 2040 so the 10-year windows i already said kind of might capture the early inflection or it might capture nothing other than r &d spending so that's kind of if you were to apply the 10-year calendar it's bit binary lotto ticket like distribution of outcomes but i still think that we are looking at something that is going to be category defining world changing and ultimately deliver a payout uh as opposed to kind of the prolonged ai winter style disappointment that has hung around in various different industries or other sectors in in recent times so i'm going to name three companies then we're going to wrap it and go for a cup of tea yeah i might sounds good all right well the first one you probably can guess uh ionic i-o-n-q is how it's spelled and it's a pure play publicly traded quantum computing company what a tongue twister and it uses trapped ion technology which is one of the leading approaches um to achieving fault tolerant qubits so without getting too hyper nerdy the problem with qubits is that they don't uh they don't do false well and it's um so so basically ionic has the most direct way of investing in quantum computing before the technology matures but it is early stage as i said it's pre-profit it carries a massive risk profile moonshot squared so that's the first one second is rigetti computing another one i'm pretty sure i mentioned on the podcast i do a lot of talking about this stuff so i might have been talking to myself at the back we've had a we've had a quantum episode on before for sure was i on it you were you were was i any good it's up for the bit well then i probably already spoke about regetti which is my second one a super superconducting uh qubit quantum computer developer and another pure play option in the space and they're they're floating around with other technologies in the space but yeah they're the ones and then the third one everybody knows it figured in um the movie the godfather ibm mr corleone can you identify your source of wealth yeah i i made it in the stock market and it's like i'm specifically ibm and the likes so ibm has been around since well it's been around most of our lives it runs one of the most established quantum computing research programs in the world no questions it's backed by ibm's balance sheet uh decades of cubit and error correction research um plus the cloud accessible quantum platform that is already being used by uh boffins and researchers and enterprises and like and the likes and unlike the pure plays that i just mentioned um a quantum failure wouldn't sink ibm the other two are goosed of quantum quantum turns out to be too big of a thing so it's a lower risk way to get exposure to quantum it's a brand we all know and it's somewhat fallen out of the limelight over the last 10 years we we don't talk about ibm much as a hyper innovator but certainly when it comes to quantum computing um when the day in the sun arrives i think ibm is going to rise again experience a membership that backs your business journey with american express business platinum when you pay with membership rewards points for all or part of an eligible flight booked with a qualifying airline through amex travel you can get 35 of those points back up to 1 million points back per calendar year american express business platinum there's nothing like it terms apply learn more at americanexpress.com business-platinum yeah for me quantum seems too far out for these pure plays at the minute yeah no i get that i buy that look i i really you know me i if i'm going risky i'm going risky and if going conservative i'll do that um so look let's conclude by we both pitched for industries um you went with medtech i went with um uh serial acquirers emma do you're the one who said it you can't forget it so if you had to take 10k and split it between medtech and serial acquirers how would you split it like oh probably seven three serial acquirers oh you'd go 70 into my idea yeah actually i own a bunch of serial acquirers already you do my style of business yeah i think i do this time i'd probably i'll go about 80 20 into zero cores and then on our moon shots um we have quantum from me versus uh it's been a long week what did you say small modular reactors in nuclear reactors thank you i was listening but you know in fairness uh i have a lot to think about so 10 grand how just played it between your nuclear reactor at the back garden or your uncle's quantum bit lab at the back of his back garden it's a weird one because like the winners of quantum will probably be boring like google and ibm and you don't even notice it happened yeah so i think i think the more exciting people play is around the nuclear side so i'll go i'll go 80 20 i think it's um i think quantum is further away even in this 10 even in this 10 year timeline i think it's further away than we give a credit for even though the companies are here i should have gone with crisper totally regret it but we record another podcast might go we just leave it go

51:27all right so i'm going to give 80 to your idea nuclear reactors in your grandpappy's back garden and i'm going to throw 20 into quantum the industry because it was my idea i gotta get behind myself sometimes but yeah i think i think there was a better one okay we'll leave it there I've been talking for too long already. Yeah. Okay, folks, just come to Investicon. Stop your mess and go to investicon.ie and buy a blooming ticket right now or email Brian if you want something like 200 bucks off if he's still doing that. Okay, Mike, it's been a pleasure. Why don't we do it again next week? I think this, we're having the lulls and the laugh riots.

52:03Sounds good. Well, I'll see you same time next week. Thank you for joining me and thank you everyone for listening. We'll talk to you next week. When it comes to my policy, Farmers gives it to me straight so there's no surprises It's your coverage You should never be confused You hear that? An insurance provider with a conscience We're a choir but yes we have that too Straightforward coverage you can literally understand That's what you get when You have Farmers Bum bum bum bum bum bum Learn more at Farmers.com Underwritten by Farmers Truck or Fire Insurance Exchanges or Affiliate Products not available in every state