MI296: Epic Lessons From A Decade Of 10-Baggers w/ Dede Eyesan

26:48So I mean, I guess the summary is you look for businesses that have their competitive edge in big markets, but they have small market shares and have room to grow. That was the magic formula you would say with those 10x in two decades companies. So there are a few massive turnarounds in your study. You already mentioned Britannia Industries and then a couple of those ones were Trex and Adobe. So for investors who are interested in turnarounds, what were the primary characteristics to search for when looking for future turnarounds? And have you recently researched any developing turnarounds that interest you?

27:19Yeah, so I mean, the first part of the question on like lessons from turnarounds. So again, at the end of the book, I put together 10 lessons I thought I learned that were really important. Some of them are quite common, like everyone would know them, but like with turnarounds, the framework to use for turnarounds I thought was useful is called the distance analysis. And one of the famous investors, Nick Sleep, he's actually used that framework in terms of his thinking on investing. So the distance or the journey per se analogy is you want to think about these investments from a distance, time and speed angle.

27:50So with distance, you want investment that can go very far. So a very far investment will be a business that in their best scenario, they earn 10 % EBIT margins, but right now they're earning 1%. So if they get things right, they can go from 1 % EBIT margins to 10 % percent eBay manage really quickly. From a speed angle, you want things that can go really quickly. And what that happens is that reduces the journey that you need to do to get there. And then again, when you think about it from a turnaround angle, these are businesses where the problems are not product driven. They're either marketing or supply chain or cycles just turned a lot.

28:26So a good example here in the US was Trex. So Trex, they make alternative wood. I know that sounds very boring but when you actually look at the journey of how they became a 10 wagger it's so interesting so their founder the original founder of trex had developed this product where he combined sawdust and shredded plastic and they basically reinvented a whole product called alternative wood and i think mobile bought them and then they spun off and then they went public and they had about 20 eb margins just in the years leading to the financial crisis and then when the financial happened, they fell to like 0.8%.

29:01So when you're thinking about it from a turnaround, you're asking yourself, what is the journey it needs to do to get back to where it was before? So now if you look at the margins, it's fallen to 1 % and you're asking yourself, can you get back to 20 %? The first thing is to look at the competitors. If you had looked at the competitors in 2012, you'll have realized there were no new entrants to the market. Trex, even though they were failing or struggling, they still had that market leadership. That makes the journey of being a turnaround so much easier because you're not really thinking about, do I need to chain my product?

29:29You just need to like reorganize cost, cut down in certain areas, improve your marketing process. And that's exactly what new management did. And if you look at the journey, they went from, you know, having poor margins back to where they were in 2005. And it became, I think they went back to 18 % EB margin and then became a 10 bagger just from margin expansion and low. Some other examples are even easier. So again, I mentioned like AntoSports. So AntoSports, they do Aperol in China. And then what had happened in China was in 2008 after the Olympics, all the Chinese brands in April had expanded very aggressively to just get market share in the years building up to the Olympics.

30:04And then after the Olympics, people, tourists left China, you know, people were less excited about sports. The market basically crashed. So if you looked at Antisports, you'll have noticed in 2012, their share price fell by 75%. But where it got really interesting was that even though the share price fell by 75%. The EBIT margin only fell by 2%. So it still earned 18 % EBIT margins and it was PE ratio fell to like four times. If you compare that to their rivals, like Leaning and some other players, they went loss making. So the journey of getting back to where they were before was going to be so much easier.

30:40Why? Because they had cash on their balance sheet. They were still profitable. They had much better run stores. And the management realized that and they just worked on improving anti-sports back to where they were before. So the journey to being an outperformer was a lot less complicated than leaning, for example, who had to raise capital and get private equity money and invent new product, that sort of thing. So I think overall with turnarounds, if you utilize that distance journey and framework and keep it easier for yourself where it's less product-driven turnarounds, it's so much easier to really understand the journey to getting there.

31:15And I guess from my portfolio, I used to spend a lot of time on turnarounds. Right now, I've shifted. I mean, I've always looked at compounders, but our portfolio is more weighted towards compounders. But in South Africa, we had two turnarounds that we invested in. One was MTN Group, which is the largest telecom player in Africa. And when I go back to the distance journey analysis framework, MTN, they had fallen COVID and there's a lot of pessimism in terms of Nigeria because of oil prices crashing during COVID. So as a turnaround, these are more macro problems, not product problems. On the product level, people still use mobile money and it's still growing.

31:56And also data, internet is still growing as well. So when you look at telecoms, it's a declining industry in most regions, but in Africa, it's still growing because the telecoms have actually taken market share from banks from a financial services lens. And then also internet is still underpenetrated there. So there's still room to grow that data volume. So in terms of a turnaround, it was easier to achieve. And that was a turnaround that we invested in three years ago. And with ShopRite, it's the largest retail in Africa. They made some missteps in terms of their growth model, and they expanded into lots of regions outside South Africa.

32:31So what they did was that they scaled back that growth outside South Africa. So in countries like Nigeria, what they did was that they focused on South Africa and then just doubled down on their supply chain. So from a difficulty over turnaround, it was quite easy where they just had to just shut down operations, just focus on what they did best. And I mean, that was a successful turnaround as well. Excellent. Decreasing debt and increasing operating margins were two of the big growth drivers that can be screened for. What are some other screenable metrics that you think would help investors search for future outperformers outside of, say, just evaluation?

33:05So just before answering the question, I used to be very dependent on screens where I look at businesses reducing debt or increasing revenues, that sort of thing. But when I did this study, I realized screens is looking at past data. And the problem is that if you're screening companies on a debt level where they've fallen from 60 % to 20%, let's say debt to capital ratio, that's good in the past. But what you're thinking about is the future. And if that company ends up doing an acquisition next year where they need to like raise debt for and debt goes back up you know that screen hasn't really helped so i think one of the lessons that i learned from you know just doing the global performance book i think the best way to really screen for companies just look at things from an a to z lens and then just have like a two minute research process where you just quickly look at a business and you try to figure out where they sit and if they can i guess achieve good returns so i think that was one of my takeaways from a screening lens but that said If you have to screen because of time, I think profitability is a good way to filter out companies.

34:05So again, if you look at the outperformers, 82 % of the companies that ended up outperforming in the 10 years, they were already profitable. So you could basically say four in five outperformers will be profitable. So you can quickly remove companies that are just unsustainably unprofitable from that list. And then also, you also want to see some signs of future growth going forward. I think growth is really important. Now, the problem with growth is that you can't really screen future growth because you could be growing 30 % in the prior five years, but in the next five years, you might not even grow your earnings.

34:36So it's something that you just want to be really focused on and ask yourself, can this business raise volume? So can they grow volume? Can they raise prices? Or can they reduce loss-making or less profitable segments and expand their more profitable segments? And the answer is none of those three from your five-minute initial due diligence. I think just moving to the next case. You did a good job of separating industries in your research and showcase that certain industries just aren't great outperformers from your data set. Do you think poor performing industries will mean revert and produce more outperformers in the next decade after 2022?

35:11And if so, which industries or themes seem ripe for the future? So from an outperformance lens, there are some industries that are at a disadvantage. So when we talk about outperformance, we're really looking for profitable growth. Now, for some industries, it's hard to actually achieve profitable growth at a fast rate. One, it could be regulation. So when you think about utilities, they're just not built to grow. And because if they're growing by raising prices, like anything about the political climate and regulatory risk, they're going to be on their toes and they're going to have to cut prices to improve life of consumers.

35:45So when you look at utilities, that was the worst segment. Only five outperformers and all five are renewable businesses. and because renewable has a lot of support from a subsidy lens in terms of governments it was able to grow but that's not going to last forever so if you remove the renewable segment from utilities there was no outperformer and i don't say that mean reverting because i think it's going to be that the case so i'm not saying and that doesn't mean you shouldn't invest in utilities i think if you invest in utilities you want it to be more value driven where on average they trade 10 times earnings but there's been some pessimism and now they fall into like four or five times earnings So you could see them doubling or tripling in that sense.

36:21But expecting 10 baggers from, you know, gas or water producing companies, I don't think that's going to happen. And same thing goes for like financial segments where you look at banks and insurers. So insurance as an industry, most companies have to pick between good combined ratios or good profitability with growth. So if you're growing, there's a high chance that you're going into, you know, weaker profile customers to insure. And that has a long term problem. them. So insurance though, I think there was only one outperformer from insurance and that was a Saudi company. And Saudi, if you look at that 10 years, they had the fastest insurance market, life insurance market in the world.

36:58I think it was growing about 9 % per year. And Bupa Arabic, which was the outperformer from insurance, did really well in terms of being able to drive innovation. And it was really the innovation in the product that was able to drive sales and profits. But that's not the case across all insurance markets, either submarkets or geography. So it's going to be very difficult for you to see insurance produce outperformance going forward. But if you look at financials, it was mainly the non-banks. And there was only one bank. So banks, you know, it's also not a great place to look for outperformance.

37:29And I don't think that's going to mean revert in the future. But again, financials, I think you have to look for places where they're not under the same regulatory scrutiny as banks and insurers. So I think that will be a great place to invest in when you look going forward. So you think about financial exchanges, you think about research houses or loan platforms. I think that could be interesting. The other segments that did really well, I think those were information technology, healthcare materials. I think if you look at the 10 years, there was a lot of multiples expansion in information technology and sub-segments like semiconductors.

38:06If you look at 2002, 2012, there was only one outperformer from semiconductors. And then in the decade after, there was 49. So it's very clear things go up and down with semiconductors. So again, the mistake people make is that this has worked for the last 10 years. It's going to work for the future. Not really the case. It goes up and down. And you really want to understand why exactly it's going up and down. So I think things like semiconductors would have to go down at some point and then come back up later. And it's just being realistic with that assumption, I think you'll save yourself a lot of trouble.

38:35And then lastly, with materials, that was a surprise for me because materials, I really see them as commodities that go up and down. But then if you look at the performance, it did really well. I think about 15 % of our performance came from materials. And in this case, what we had was that you had materials that had either cost advantage, so they were the lowest cost producers in the industry, or they were diversifying into, I guess, more advanced materials where you had to put in a lot more technology or innovation and that was that allowed them to i guess build their moat in the industry and also drive volume growth so from that angle when you think about where technology is growing and where the world's growing i think things are becoming a lot more technical so industries like materials and industrials even in a world where we're moving more into technology i still think there'll be room for growth there so i'll still say look at those segments even though they did really well over the last 10 years Let's take a quick break and hear from today's sponsors.

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42:46That's theinvestorspodcast.com slash tip-finance. All right, back to the show. Excellent. 36 % of your old performers had negative returns in 2011 to 2013, meaning if you'd owned them before that period and sold due to declining price fluctuations, you would have missed out on a hell of a lot of upside. I'm interested in knowing if these businesses had easily visible and improving profits in that 2011 to 2013 time period. And a couple of names that you mentioned were NVIDIA, Netflix, Antisports, Salmar, and Abbott India. Yeah. I mean, there was a mixture. So the cyclical businesses, what happened during that period was that they were actually falling in profits.

43:27So in that bucket, some of the cyclical businesses were the salmon stock. So salmon, I believe, had fallen by 60 % in terms of earnings during that period. And same thing with the semiconductor companies. So NVIDIA, that's a giant now, was unprofitable in 2012, I believe. So at that period, that was when I think semiconductor sales fell by minus 2%. And then the fall was even more drastic with GPUs because gaming fell that year in terms of PC sales and PlayStation sales as well. So NVIDIA had done quite badly from a profit lens and also from a share price lens. Now, when you look at those cyclical companies, again, the frameworks are very different.

44:05When you look at those types of cyclical companies, you're looking for technical barriers to entry. So you're looking for, you want to be in those cyclical sectors where a new player can't just come in. So Apple cannot just start building their own GPUs. Or if you look at salmon, a chicken or a poultry farmer can't just say, I want to start producing salmon the next day. You actually have to have the right aquatic regions and not everywhere has that. Now, by being in those technical barriers to entries, you're in a much safer situation. Why? Because the existing players are more likely to still be there when the cycle turns, rather than new players coming in and flooding the market.

44:40The other example, I guess, where companies were like, you had another group of companies where it wasn't necessarily cycles, was more, I guess, product lens or micro factors. And you had lots of examples there. So like Netflix, you know, shifting more to streaming, The economics initially didn't work, then it started working. And as they grew volume, it was quite clear that the economics were going to work. And in that case, it's more qualitative than quantitative, because rather than looking at, you know, how this business has done from a DVD lens, you're really trying to understand exactly what happens with streaming.

45:13Why does streaming work? Why as a user, why am I going to spend$10,$15 per month on streaming? Why are they going to be able to keep content costs low? How reputable is this as a business? And I guess for those types of business, you're more focused on the qualitative factors. And I think for some of them, if you spend a lot more time there, you're able to get a better sense of a competitive advantage over the arrival. So like with Netflix, for example, they literally created that segment. And it was only up until 2019 where you had players like Apple, Disney. And as you can see how the share price performed after that, you struggled for a bit.

45:48That's really when it became much more of a problem. I like to move on to learning a little bit more about Jenga Investment Partners. Can you go over the evolution from an investment club to a hedge fund? And how did it start? And how does your investment strategy differ from other funds? I personally started investing at the age of 10. That's really where my journey started. And it was from my dad. He used his savings to buy stocks. And then he told me to buy stocks because it's a great way to make long-term investments. And I bought a few stocks in Nigeria. and then four years later, some of them had quadrupled in price.

46:20And I told myself, you know, this is so easy. Why don't I spend all my time doing this? And then I realized it's not that easy. But during that whole journey of understanding more stocks, I realized I actually fell in love with just understanding how businesses work. And in university, I started an investment club where I was investing for friends in university and family and later people I didn't know. And what happened or what caused that transition was really just a deep passion. When you have a passion for something, You want to take it more seriously, like a football kid who plays football at home.

46:51You're like, I'm good at this. I don't play for an actual club. So I mean, that was what happened. And after investing, I met people in the industry who were able to help out on the operational side of the business. And then we're able to take it into something that's regulated and more serious. From a strategy lens, we are global long-going equities. So we look at public stocks around the world. We have no industry or geography barriers. so we can look anywhere. But we want to look at businesses that have a market cap of about$50 million as a strategy. In terms of, I guess, what we do, what I would say is we try to do the little things slightly better.

47:27So how we understand commies, the questions we ask, the curiosity we show when we're looking at and trying to understand businesses, where we look for the facts, how we stress test the facts and the insights. So that's what we really try to do. I think one of the mistakes is a lot of younger investors that they try to reinvent the wheel. And what I've learned is that you don't really need to reinvent the wheel. What you really need is consistency, discipline. And that's really just what I try to focus on as an investor. What lessons from your study on global outperformers had the biggest impact on how you run the fund now?

47:59There were so many of them. But I think, so I think I'll start off from a geography lens. So I think one of the struggles as a investor is that you have, as much as you're thinking about return on your investment, you also need to be thinking about return on time. And you need to make sure, return on time. Bill Ackman says this thing, return on brain capacity. So the amount of energy you're spending trying to understand an investment, you want to make sure that you're in the highest return factors. And there are only two ways to really know if you're, I guess, in those right buckets. And that's either by studying what successful investors are currently doing.

48:33So looking at what Warren Buffett is doing and other key good investors are doing, or you're looking at what has worked in the past and asking yourself, why has this worked and if it will keep working. So by doing global outperformance, I was able to answer that second question by really trying to understand what exactly was working and why it was working. So, for example, it was really clear to me that I needed to spend a lot more time as a global investor understanding what's going on in Asia. And it's not just because Asia had 59 % of all outperformance. It's understanding why exactly it had those outperformance, where exactly they were based, of course, in the smaller companies.

49:05And within with Asia, if you look at their index returns, it's going to look very bad. So like China, for example, has returned 1.3 % for the last 30 years. Now, if I told you this market has really returned 1.3%, you're not going to want to spend that much time in terms of looking for outperformers. But again, again, China was among the top five performers from an outperformance lens. And it's about going into smaller cap companies, having good filters to remove crappy companies from the good ones and spending a lot more time on the good ones. So I think that was my key lesson, knowing where exactly to focus my time on from a geography lens and also from an industry lens.

49:38I spent maybe half of my time on consumer discretion and staples. And then when I did the research, I realized, you know, I actually have to spend a lot more time on other industries, especially the ones where I think I have some circle of competence within. So that was my lesson from, I guess, from a top higher level. And I guess from a more micro level or not really micro, from a strategy level was understanding that there was life beyond compounders. So I know 2021, 2020, you know, investors got really excited about the idea of compounders, businesses that grow year-on-year, every year. It's great.

50:10I mean, I think if you look at what's going to drive returns over the long term, I think the compounders would be the biggest drivers. But I don't think as investors, especially if you have a flexible mandate where you can look at both growth and value, I think you should also be open to cyclicals and turnarounds as well. And for me as a strategy, doing this research and seeing how many great investments even came from turnarounds, biscuit makers, all these weird, simple, low-growing industries, it made me a lot more excited about the future of cyclicals and turnarounds. And then finally, I guess the other big lesson was just basic frameworks to think about investments.

50:48So I mean, one of the investments frameworks that I learned, I doubled down on after doing the book was this idea of value chain investing. So what happens in civilization is that every age or every decade, you have this new technology and innovation that drives or changes how we do things. Either makes life cleaner, makes life more efficient. You know, you'll spend less doing the same thing. And in the last decade, one of the big top-down changes was solar, where it made how we use energies slightly less pollution driven. So with solar, when you look at it from a bottom up, it can be very daunting because solar is quite cyclical.

51:26You might not realize it was actually quite cyclical. And the industry is quite different from traditional oil and gas or traditional energy industries. So with solar, it's very low cost driven. So China produces like 80 % of all global PVs. And if you look at oil and gas, it's more distributed globally. So India would have their own refineries. Saudi Arabia would have their own refinery. US will have their own methods, whereas with solar, it's a very winner-take-all market. So for me, in terms of understanding these type of industries, this is where a value chain really helps, where you try to understand exactly how the whole ecosystem works from the polysilicon chips to the inverters and the additional supply chains in solar.

52:09And by doing this in solar, you have a much, much better understanding of where the outperformers lie. And I feel like if you had done that value chain analysis in 2012, you will have very quickly realized that the outperformers in solar were very likely going to come from China. One, they had a lot more subsidies from the government. Two, they had a lower cost of production. Three, they had the supply chain that could allow them export globally. So one of the outperformers was company called Solaria Energia. They're based in Spain and they initially used to make their own solar PVs, But they stopped that in 2010.

52:43If you had done that sub-value chain analysis and you saw Solaria that had stopped making solar PVs and rather moved into utilities, that would have given you a lot of information that it makes sense why they're no longer producing their own PVs. Why? Because they just can't compete with China. So what they did was that they moved into installation and utilities. And they were able to become an outperformer by just focusing on that. And that is a lot more higher barrier because that's where regulation comes into play. Government want local players in that market rather than international players.

53:16And it's much more of a struggle for a company in China to go into installing solar PVs in Spanish residential roof. So, I mean, understanding that value chain gives you a really good understanding of why certain things have to happen for a business to be an outperformer. And that was a big lesson for me. So now when I think about industries like semiconductors or wind energy or hydrogen, I'm really focused on the value chain. I'm really trying to look for areas where, you know, there are certain companies that can earn, you know, very strong competitive advantages over long periods of time. I really enjoyed your part on the value chain.

53:51And I'd like to actually jump into that just a little bit. What value chains are you looking at now that, you know, might be interesting for the next decade? Are there any types of themes or anything like that that you're seeing develop now? I mean, from a value chain, I'm still looking at solar. So what had happened with solar was that after the pandemic, well, 2019 to 2022, there was a high run-up in prices. And now there's been a fall. So I think if you look at the yen per kilo per kg prices, it's fallen by like half in the last one year. And a lot of the stocks have fallen. And I think it's still going to fall a bit before it bounces back just because that's how the cycles work.

54:28So I'm still looking at the solar chain just to have that understanding. So even though I've written this book, I seem to do a lot more research and understanding how the value chain works. So I'm still spending some time looking at, you know, solar and lithium cycle. Semiconductor, I think, is really important when you think about the impact it is going to have for the future. Sadly, some segments of the value chain have already taken off where it's very hard to see, you know, potential margin of safety going forward. But they're all the segments that I think would be indirect beneficiaries of any technological advancements in AI.

55:02So that's something I'm spending quite a bit of time trying to understand. Who are the people producing stuff or giving services to the huge foundries in Taiwan and South Korea? Where's the area for improved costs in the value chain? So that's an area that I'm spending quite a bit of time in. So you mentioned that you've kind of moved away from quantitative measuring and more to the qualitative end of things. How do you integrate the qualitative analysis into your investment process at the fund level in terms of capital allocation, management, looking at total available market? So I think at the big picture level, whether you're looking qualitative or quantitative, the portfolio management is a function of two things.

55:45You're trying to reduce risk, and you're trying to increase returns. Another thing is a distraction. That's really what you're trying to do. Now, at a personal level, you have constraints. So you have sectors that you understand, or you can actually value the risk level or the potential return level. So that's one constraint. Another might just be regions that you're just not comfortable with. So for example, some people might just not be comfortable investing in China. So you have those constraints and you have to walk around those constraints as an investor. So for me as an investor, how I'm incorporating that qualitative factor is being able to widen my circle of competence.

56:19So I'm spending a lot more time just trying to understand how different countries work you know why our business is great 20 percent each year in india and you know why there's so many great indian chemical companies and just trying to find my spend some time just understanding you know how these businesses work so i think that any investor can do that you don't need you know you don't need to be an institution you can be a retail investor and still commit a lot of your time to just expanding that circle of competence over time so i think that for me is really the big way as an investor with being able to incorporate that qualitative factors in your investment process.

56:53The second big thing is when you're trying to size up investment. So, I mean, it's one of the things I've had to learn when I was running the investment club. I learned really quickly that, you know, picking stocks is very different from managing a portfolio. And then later I learned it's actually very different from also running the business as well. But from a portfolio lens, being able to size up investments, I mean, the qualitative factor, because it can really impact the risk in the business. By understanding or having or putting the qualitative factors into your investment process, you're able to really size up investment.

57:22So when you're trying to make decisions on, shall I make this stock a 10 % position or a 5 % position? When do I sell? Or which might be more strict in terms of a target price, for example. I think the qualitative factors are a lot more important there. So I'll give you an example here. So with cyclicals, My view is that for compounders, you can be a lot more, you can be less rigid with target prices because the potential is quite wide. There are a lot of things a business can do if they keep compounding, going to new markets and driving volume. Whereas with price, there's a limit to how price can go.

58:00So if you go back to the solar panel and solar cycle, for example, there's a limit really to where the solar PV prices should be. So for me, as a quality factor, I've put those understanding how the cycle works from a qualitative angle to really size up the pricing power potential. So if a business cycle goes above a certain price, a lot more strict as an investor that even though this is going very well and I've made money on this stock, I'm just going to sell because when it turns, it turns really aggressively. And it's very easy to lose 50 % of your money when that cycle turns. So for me, I mean, that's one of my takeaways when I was trying to understand, you know, qualitative analysis and understanding cycles that I learned from global outperformers.

58:45As your research highlights, many more companies underperform than outperform. Knowing that what you've learned from the study, let's invert and look at some of the underperformers. What are some of the less obvious characteristics of underperformers that you're actively trying to avoid at all costs? So first, inverting is like is very important. So one of the most important things from the book is I actually need to invert my ideas and just stress test them. So I was actually going to write a second book called Global Underperformance, but I realized half of the book is going to be bashing companies and I didn't want to get any legal situations where I'm insulting companies and telling them, yeah, this is bad.

59:20You've done badly for 10 years. So we pulled that off and just did Global Outperformance. So one of the key things I learned when I was thinking about Global Underperformance is that a lot more companies underperform. So when I say underperform, I mean either communists that are flat for 10 years that end up growing, you know, being 10 baggers. So I think among the 27 ,000 communists that were around 10 years ago, I think about 9 ,000 of them were flat. So either flat or they fell in that 10-year period. So about a third of them, you just didn't grow share price-wise. Now, when I think about, when you look more at the numbers from a factor lens, there are certain contributions that matter most.

1:00:00So for example, growth was very important. So I think the number, I might be wrong here, but I think the number here was that 7 % of the businesses that underperform, so when I mean underperform less than 0%, only 7 % of them actually grew 10 % earnings over that 10-year period. So basically the number is that 9 in 10 of the underperformers will be businesses that just don't grow their earnings. So for me, that really emphasizes how important earnings growth is in any investment case. So I think as an investor, I know we like to pick between value and growth. I think it's just very important that with every investment you're trying to make, except it's trading at like one times earnings or like two times earnings.

1:00:39But like if it's not trading at like some huge discount, I think it's very important to make sure that investment is going to be able to exercise some form of earnings growth. So I'll give you some of the companies that underperformed like in the 10-year period. So there was IBM, there was AT &T, there was Vodafone, it was General Electric. If you look at all those companies, none of them grew earnings during that 10-year period. And that's why they underperformed. It was just quite clear. So for me, you know, when you're inverting earnings growth, I think that was a very important factor. Profits was also important, but I mean, for profits and profit is, I think a lot more companies were profitable or still underperformed.

1:01:14So I wouldn't say profit being just profitable is enough. I think you need that profitability, but also earnings growth and of course, low multiples. And I guess just to conclude there are some mistakes when you're looking at outperformance people make so i know a large percentage of you know outperformers were founder-led businesses a lot of investors say i want investments with that founder-led and have high insider you know share purchases but the i don't know i don't have the numbers with me but a lot of the companies that underperformed and the ones that went to zero and went bankrupt they're also founder-led businesses so you know You don't want to just focus on just that one, that founder-led factor that, oh yeah, this company became an outperformer because it was founder-led.

1:01:55Hence, every founder-led business would outperform. It doesn't really work that way. You have to go back to what really matters. What matters is that you're able to grow earnings by at least 15 % year-on-year for 10 years. You're at low multiples and you're improving your businesses. Of course, being founder-led, having an owner-oriented mentality would be a key factor there. But it's not about the founder-led. It's about the fact that you have good business and you made your business better and you grew over time. So it's very important to focus on what matters. That's why we didn't do like a big research on founder-led businesses, because again, you know, it could be, you could have very wide outcomes with founder-led businesses.

1:02:33Dayday, thank you so much for joining me today. Before we close out the episode, where can the audience connect with you and learn more about Jenga IP and your research? so our research are all on our website which is jenga ip j-e-n-g-a-i-p.com i tweet often on twitter so you could also see some of my thoughts when i'm reading earnings calls on twitter if you're interested in that and my handle is my first name underscore my last name that's d-e-d-e underscore e-y-e-s-a-n okay folks that's it for today's episode i hope you enjoyed the show and i'll see you back here very soon. Thank you for listening to TIP.

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