TIP751: Mastermind Q3, 2025: Uber, Merck, and Bath & Body Works

25:35And they have conquered city by city and established their near monopoly in most cities. So that's their strength. But with AI, that model itself might come to a question. I don't know if you have taken a ride in Waymo. Have you guys tried Waymo?

25:56Hari Ramachandra:Yeah, I tried to catch it twice, but there's only four seats and I've got a family of five. So I couldn't catch it in San Francisco. And then I'm outside the boundary in Los Angeles. So I haven't actually managed it, but I would like to. I haven't.

26:12Tobias Carlisle:How is it, Hari? I mean, it is a really, really seamless experience. I really liked it. I've tried it in San Francisco. It even provides step-by-step direction of where you are, where the car is parked. Once you're in, it recognizes you. It even turns on a music that's your favorite if you have a past history. so it's it feels like you're in the future and for the first time when i tried that i thought okay san francisco is coming back because it feels like the city of the future and the ride is really seamless they're expanding now to other cities and that is where the risk lies for uber if tesla also tries this i think they're piloting in austin and if they if they're successful the latest FSD in Tesla is really good.

27:09I tried it. It can even park itself. So that was amazing. When these companies are coming in, they have the resources to build that brand presence as well. That becomes a challenge for Uber. Because now Uber is reliant on multiple small vendors or suppliers, like according to Porter forces, like, you know, if you have distributed suppliers, you have the strength, you have the advantage over them. And when I talk to Uber drivers, I always strike a conversation with Uber drivers to see how they're feeling. Many of them are hurting. Actually, it's a sad thing to see because one of them was asking me, how much are you paying for this ride when I was going to San Francisco for my home.

27:59And I was shocked to know he was barely getting any much money to his account. And Uber was charging quite a bit of all the charge and everything it was keeping for itself. So that power Uber has now because there are so many small suppliers to Uber and these are these drivers. But imagine a company like Tesla or Google who have a fleet of robotaxis who can operate at much lower cost than having a driver. Even if they work with Uber, they have more leverage over Uber than the small drivers. That's the other risk. The third one is switching costs, like how I did. I just downloaded a Waymo app and I just took Waymo.

28:47It's not a big switching cost for me personally. Uber has a big presence in enterprise, but even there I think it's not easy for somebody like it's not difficult sorry for somebody like Google who has this ambition of getting into enterprise market with their Google Cloud whatnot offering this another service along with their Google enterprise services for companies so those things and then finally with Robotaxi of course safety is of a less concern you don't have a drivers. You don't have to worry about rating the driver. So I see these patterns where a lot of businesses, they build a lot of these technologies that are really their competitive advantages, like reviews of drivers and all that stuff.

29:33And it's all gone in the era of robotaxis. There is no reviews required anymore. So it might catch Uber management off guard because why would Google or Tesla be subservient to Uber? Waymo has already launched. They have their own app. Tesla has such a big brand presence. They can easily command a big market. And more importantly, I think Uber is not like Facebook where the network effect transcends geographical locations. They have to win city by city. The network effects is only within the city, the demand and supply, that entire ecosystem. And that's well documented in many books and analysis of Uber.

30:24They had to go and win city by city. And even now in many cities, like in India, for example, Ola is very popular in many cities. Uber couldn't win those cities because Ola is an Indian brand, very similar to Uber. But there are a lot of head start over Uber. and for various reasons they could understand certain cities better than uber of course uber is also there in many cities but it's not like once you win in one area that also helps in other area because most of the time when we are taking uber it's for local commute not intercity so it doesn't matter to me i will just go with lyft or uber or anything else and if waymo is there if Tesla is there.

31:06So that is the other risk that I see. And how Uber will navigate this, I'm not saying they'll not be able to, but I'm saying there are headwinds. Let's take a quick break and hear from today's sponsors.

31:24Hari Ramachandra:Curious about online trading, but haven't taken the first step yet? You're not alone. And Plus 500 Futures is a great place to start. The futures markets are moving fast. And with Plus 500, you can explore popular assets like oil, gold, S &P 500, Bitcoin, and more. From crypto to commodities, there's always something happening. The platform is super easy to use, so you can trade on the go right from your phone. You can get started with just $100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account.

32:00Hari Ramachandra:No risk, no pressure. With 20 years of experience, Plus 500 makes trading more accessible than ever. Check it out at plus500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. They say every day your business is late to AI. You fall two days behind in the competition, they're only moving faster. Fortunately, there's NetSuite Next. You probably already know NetSuite, the AI-powered business suite that securely connects all your data, financials, inventory, commerce, HR, and CRM all in one source of truth, trusted by over 43 ,000 customers.

32:43Hari Ramachandra:NetSuite Next is the next huge leap because now AI is built into everything you do. It surfaces custom insights throughout your day. AI agents work alongside you on the routine stuff. And anytime you've got a question about anything, you just ask, like you're talking to a colleague. And I use it. And really, I think you should too. For the first time ever, you can try NetSuite Next for free. If your revenue is at least in the seven figures, go to netsuite.ai slash tip. Built for every industry, ready for every boardroom, netsuite.ai slash tip. As investors, we spend all day studying great businesses, but some of the best returns come from building one yourself.

33:25Hari Ramachandra:If you've been sitting on a business idea, Shopify makes it easy to actually make it happen. Everything you need to start selling is included and ready from day one. Take the moment your first customer is ready to pay. Shopify checkout helps more of them finish the purchase. And when they come back, their details are already saved. One tap and they're done. And because Shopify handles the setup and the checkout, you get more time to focus on what actually grows the business, plus the tools to do it. If I were starting a business, I would absolutely use Shopify myself. It powers millions of businesses worldwide, from names like Mattel and Gymshark to founders just getting started at shopify.com slash tip.

34:12Hari Ramachandra:With Shopify, nothing stands between your idea and a real business. So go make it one. Start your free trial at shopify.com slash TIP. Start your free trial at shopify.com slash TIP.

34:29Tobias Carlisle:All right, back to the show. Yeah, I think you bring up some really great points, Hari, and that is certainly our risks. And so how would I respond to that? I mean, And whenever I try to do the math, and obviously all of these are crazy assumptions because we don't know what the cost is going to be. Right now, it's not financially feasible for Tesla or Waymo to do that. It's just too expensive. But there's a question of time before the technology would be so cheap that they are going to considering eating Uber's lunch. And so what I'm thinking about is, can they do it as cheaply as Uber? Are margins just going to be driven down?

35:15Tobias Carlisle:Is it going to be a prize war? And if yes, who is going to win that? It's a tricky question. I'm inclined to say Uber, and the reason why I am is that they can tap into the human workforce. Whereas if Waymo has to make sure that you can get a car any time of the day, think about how many cars they need to deliver everywhere. whereas it's a lot more flexible for Uber. But another thing I've been thinking about is would people like to get their own AV? And if the answer is yes, what does that do to the supply side for a company like Uber? I think that there are some studies done in the US where it's like a car is idle, like if it's private, like 95 % of the time, something like that.

36:05Tobias Carlisle:I can see a lot of people don't want to be an Uber driver, but what if it's an AV? Would they be okay? As long as you can probably tap into Uber's system, they will be going to be there at four or six or whatever you need it. So they're going to have people and providers bid for the lowest possible price. One of the interesting things is that after Uber lost the game, let's say, in the Middle East to Kareem or to Grab in Southeast Asia, they got XG in those companies. And they're selling that, or recycling as they're calling it, selling that equity right now to make, let's call it vertical integration with some brands.

36:46Tobias Carlisle:So smaller brands like Lucid and a few others, I think they sold their original AV, which is sunk around 3 billion into, was Aurora, which is primarily now in AV trucks. But they're trying to see if they can vertically integrate with some of the smaller players, not taking controlling stakes. But for some of the smaller players that are not Tesla or Waymo, it might be a win because they do get access to that matching technology. I am worried about Alphabet. And I'm worried partly because they probably have the best tech, but also because there is a huge advertising opportunity. And if anyone understands advertising, it's alphabet.

37:26Tobias Carlisle:I'm shocked by how well the advertising business is doing for Uber. And I'm going to give you some random numbers here, but the click-through rate is 3%, and the CPM is$45. And for anyone who is in advertising, and we are funded mainly by advertising, those rates are just amazing. So why is that? Well, they're sort of like, if you're going to this, I don't know, this restaurant, they can sort of target you to go to the comedy club afterwards next door. Typically, you're skewing a bit younger, wealthier, people who are very open to new brands. It's a very interesting demographic to have. But certainly, all your concerns are well noted.

38:06Tobias Carlisle:And it might very well be so that they can't compete with Alphabet and the Teslas of the world. There's this joke that fusion energy is 30 years out and it always will be. I kind of feel like if you're listening to some people in the AV space, they're always like, next year, the world is going to be on it. It's probably not going to happen next year. One of the interesting things about Uber is that, and they talked about this in the latest earnings call that came out here last week, was they see themselves as a platform for the gig economy. So whenever we think about Uber, we might be thinking, oh, it's like a taxi, just nicer.

38:50Tobias Carlisle:How they think about themselves is that, no, that's not the case. We are catering to a new generation. I remember I'm at an age where whenever a Sunday night, eight o 'clock, we hollered in front of the TV because that was whenever whatever kind of thing was on. Otherwise, you had to catch the reruns at Tuesday at 10 a.m. or whatever. That was how it was. Right now, you have a new generation, and they're used to everything on demand, whether it's food or rides or whatever it might be. And so that matching technology isn't just the case for mobility or delivery. Think about delivery for anything you need locally within 30 minutes.

39:33Tobias Carlisle:And so that's interesting itself. And actually, what they talked about in the last earnings call was that some of the drivers, because they're very much thinking about how much money is their driver making per hour, which is why, as opposed to Lyft, they both have mobility and they also have delivery. But they're also now in certain areas offering drivers to do AI labeling for big tech companies. So if you're sitting waiting for your next assignment, you can actually sit on your phone, do AI work. It's not that well paid, but it's very much, I think you're seeing a macro trend of gig economy being more prevalent in lots of parts of the world that didn't used to have that.

40:17Tobias Carlisle:They also talk about how 70 % of the drivers came to the platform because of inflation. There is a certain demographic that would go into that line of work, and it's very supply-driven. Another trend, and we go back to ride hailing, there's also a new generation where a lot of people don't have driver's license. I do have driver's license. I never own a car. And it's kind of interesting because whenever I speak with someone who's 50, they would always tell me, I have a car, it gives me a lot of freedom. I felt the way that the landscape is here where I live, I have so much freedom because I don't have a car.

40:52Tobias Carlisle:It's terrible to park and parking spots are like, it's incredible. you know, expense. And so there's so much freedom in not having a car, at least where I'm based. And I can always get an Uber within three minutes and they can drive me, whatever. So it's like, and that's a trend that you see more and more. And so I don't know, that's a macro tailwind too, perhaps.

41:11Hari Ramachandra:Preston Pysh I do understand that point of view, because I've lived in San Francisco where a car is just a hassle because it's so hard to park. And there's the density of public transport and things like, it was pre-Uber, but you know, of taxis and zip cars and things like that the only time you really need one is when you live in the suburbs or you've got kids in car seats and it's such a pain to get the car seat into a taxi that it's just easier to get particularly if you've got a number of kids in car seats but that's a pretty limited use case so i can easily see a world where everybody or everybody has maybe one small car and then you have an av for everything else one of the interesting things when i was in china and we were meeting with some of the vcs and the things that vcs are focused on AI, robotics, and autonomous driving.

41:58Hari Ramachandra:And their view was that Tesla was the furthest ahead in autonomous driving, or most likely to be successful because they spend so much less on their cars because the nature of the sensing system doesn't require all the extra cameras that the Waymo cars have, even though the Waymo cars have a little bit of a head start now. so the final state of this is some sort of network attached to probably a car that's operating a system like tesla because it's cheaper it's like 20 or 30 000 cheaper without all of the the things on it so you make more money out of it so you have people who will provide the cars like i think that's tesla's vision right that individuals will put up the capital for the car then put it on the network and then they'll share the revenue out of the network so you have someone who's just basically a passive capital provider and someone who operates the network.

42:52Hari Ramachandra:And that seems like a pretty good, that seems like probably the likely outcome to me. The question is whether Uber can get enough Tesla-type cars on its network before Tesla can get an Uber-type network built out. And I think that's the challenge. Uber's at least 50 % of this fight, right? It's halfway there. They've just got to figure out the other, whether they partner with an autonomous vehicle provider and they're probably there are enough around that they can find one and then maybe Tesla buys Lyft or something like that. I don't know. But I would be I think it's I like the bet. I'm interested to hear how you feel about the valuation though, Stig.

43:32Actually, I have one more point. Yeah, I have one more point to make. I think great point, Toby, you brought up about Tesla versus Waymo. I think there was a fundamental technical decision that was made by Waymo and Tesla that are completely different. So Waymo went for the LiDAR technology that is Google, way more expensive and not scalable. But their hypothesis was that's the only way we can go to level five AV, which means no drivers at all. Whereas Tesla took this approach of saying, hey, why go that route? Because we can't really make it scalable. Every car should be autonomous. That was their vision.

44:17So they went with cameras with the point of view that Elon had that if I am seeing through my eyes, camera should be suffice. I think they have eight or nine cameras now and that should help. And I think your assessment, Toby, based on the conversations you had with the VCs is absolutely right. I think the latest version of FSD and Tesla is leaps and bounds better. actually it's very close to level five it's not completely there yet but way more is already at level from what i see because they are able to operate without a driver they have that license now to operate without a driver whereas tesla doesn't really have it yet so because the driver has to be in the seat but it's eventually if tesla is able to figure out how to get to level five and get those regulations figured out and that's the risk that others have stick that can work in favor of uber is if there is a huge backlash in terms of employment and public sentiment governments might limit the avs if that happens that is in favor of uber because uber is an incumbent incumbent but if that doesn't and if AV as a technology takes hold and I agree to your point that it's almost like nuclear fusion for past 15 years they have been talking about AV coming in but this time it feels real because I have ridden in Waymo in San Francisco I have sat in Tesla's with the latest FSDs, it's there.

46:00It's no longer a lab project. It's just productizing it and Waymo is already ahead with that. They already have productized it, but now they have to scale. So I think it's a regulation that can, if regulation is against AV, it's in favor of Uber. That's a very bad spot to be in, in my opinion, because now you're hoping somebody will stop you from getting disrupted. And if you remember when Travis was there, Uber actually had an active division working on autonomous car. They met with a, there was an accident during the test drives. Travis left, the company got spooked, and they completely shut down that operation.

46:44So now they don't have that part, the autonomous part. And as Toby was saying, Uber has figured out the distribution, that's the 50%, but hasn't figured out the autonomous that the other 50%. Tesla has the other 50%. Waymo has the other 50%. Now they need to figure out the distribution. And Waymo is at it, actually. They're going city by city. But, Stig, your point is also valid. Like, how will Waymo scale? If there is a surge in traffic, they can't just suddenly add more cars. whereas in case of tesla tesla's model will be as toby was saying every car owner of tesla will be like live will be a passive capital provider when the car is parked it just goes and i can just turn on in my tesla app saying i'm i'm available now so it goes and i can even set a schedule saying between 10 a.m to 2 p.m do whatever you want but come back to this parking lot but then then will Elon give it to Uber or have Tesla app for all Tesla drivers and make it like a Tesla clone?

47:51And these are all unanswered questions. So it's very hard to say this is how it will play out actually. So that's why it's very hard to make a case against your pitch as well.

48:03Hari Ramachandra:One other argument for Uber is, not Uber, sorry, for Waymo is if you go to somewhere like San francisco or to santa monica here last time i went to santa monica the first four cars that i saw were waymos like there are lots and lots of waymos on the car there are lots and lots of waymos around san francisco but they really are rolling out the fleet and that fleet just gets as far as i'm concerned like they've they've proven the concept they've launched the business they're just now they're just growing the business and in the next few years it becomes a problem for for uber that's not to say that Uber can't compete because I think the network is a hard part of that problem to solve.

48:41Hari Ramachandra:But Tesla and Google are certainly two companies that can compete. But I still like Uber as a, I think Uber's part of it. Uber's got to be part of somebody's plan or they'll be able to have access to their own AVs. And to your point, we don't know how far out that is. But people do seem to have a preference for the AVs. I've read some of the people who travel and I'm like the fact that there's no driver.

49:06Tobias Carlisle:Yeah, it makes complete sense. And I think people right now, there was this study in Austin, like they're willing to pay more money for not to have a driver.

49:17Hari Ramachandra:Do you think that that's novelty? Like I would pay a little bit more money to have my first ride on it, but after a while, I'm going to be just going with the cheapest one.

49:25Tobias Carlisle:I think price probably matters a lot to most people. I do think there is a certain segment who would be willing to pay more for there not to be a driver. And it speaks really well about Uber also, like how much of consumer surplus they capture. They have all of these different offerings. If you're willing to share a ride, if you want a nicer car, if your company is paying, then you also charge something else. And so they're very good at targeting people with the right offer at the right time. And we see that with companies like Spotify and so many others who have a lot of data about how you are as a user.

50:07Tobias Carlisle:So we mainly talked about Waymo and we talked about Tesla. And I do agree, those are the two main competitors. I can't help but think that it's going to be all driven down to the cost of capital. Even whenever you would say they would need$10 billion, random number, generic year or two, to secure that fleet, I think it's going to come in in the form of a read. It's not too difficult to think about a business model. It's either a fixed payment per ride or revenue share or something. You can model that relatively easy and figure out what kind of dividend coupon can you get. And so whenever I'm thinking about how many players you have in the AV space, thinking about subsidized Chinese companies, are way more and Tesla really going to be cheapest?

50:55Tobias Carlisle:Are drivers of Tesla more likely to allow other people into the cars versus others? It seems to me that Uber has a pretty good case for getting to the lowest cost of capital and being able to capture those who would be willing to pay more if there is a driver or even less if there's a driver. So who knows? As you can tell, I'm pretty bullish on Uber, even though you certainly gave me pause, both of you, Jens. And I need to think more about this threat from Waymo and Tesla.

51:30Hari Ramachandra:Preston Pysh, Do you have some thoughts on the valuation, Stig? Can you walk us through where you see the?

51:35Tobias Carlisle:Jens Lutzer, Yeah. If I can skip to the end, I'm looking at something like 15 % in the internal rate of return over the next five years. But again, it comes with so many Fs whenever you would do that. So what are the key metrics to look at? You're probably looking at the gross bookings, and I would expect there would be 15 % to 20 % here for the foreseeable future. You've also seen take rates go up across the board. It's a little bit different what kind of take rate you have whenever it comes to mobility or whenever it comes to delivery. They're typically a little lower in delivery, around 5 % to 7 % of points.

52:15Tobias Carlisle:Globally, and I would also say it really depends on the maturity of the market you're looking at. So globally, take rates for mobility, which is basically ride hailing, is around 30%. They used to be significantly lower. The way Uber does is that they subsidize new cities, and then both for whenever it comes to drivers, so they guarantee different kind of pay, but also for passengers. So then they reach critical mass, and then they start increasing the tick rates. Especially whenever they're surged, they take higher tick rates. So it's sort of like a dynamic thing, but it's roughly 30%, again, depending on maturity of the market.

52:53Tobias Carlisle:And so one of the things that frustrates me a bit is stock-based compensation. And I know this is sort of like, this is a thing you have to think about for all big tech companies. And if we don't do it, we can't attract the right talents and so on and so forth. And it seems to be the name of the game, but you are seeing a dilution of 3 % to 4 % over the past few years. And then they have started to ramp up share buybacks to offset that. And that drives me a little nuts because the way that they talk about it is that, oh, we issue these shares, but because we buy them back, it's not really a concern for shareholders.

53:34Tobias Carlisle:And you're like, they just authorized a$20 billion package, which was on top of the$3 billion that was already authorized. So it's like, but those$23 billion doesn't come out of thin air. Those are real dollars. And you also talk about how many growth opportunities that you have. And those$23 billion are not invested into growth opportunities. You're still diluting shareholders, whatever you like. So that drives me a little bit crazy. I'm also not a big fan of the adjusted EBITDA number. Now, every time a company is talking to you about adjusted EBITDA, you sort of have to go on a treasure hunt to figure out how they came up with that number.

54:12Tobias Carlisle:During their investor day, they talked about how the next three years, it would be adjusted EBITDA, 90 % of that would be free cash flows. I'm really curious to see if that is actually going to materialize. If that is going to be the case, it's a little bit easier to look at some of those numbers. But not saying that share-based compensation is not an expense just drives me a little nuts. Anyways, I'm really happy that a few years ago, they changed the incentive structure for management. So now it's not just restricted stock units, which is basically slang for saying, as long as you have a pulse, you just get free CS.

54:45Tobias Carlisle:Now they actually need to perform. But what really upsets me about that is, so you can go in the proxy and you can be like, oh, for example, what I'm looking at here is the bonus structure here for 2024. and they talk about adjusted EBITDA 20%, and then they have another 20 % of, which is adjusted EBITDA less stock-based compensation, and then 20 % on gross bookings, and then have some other things that are non-financial. But then they don't define for you how to reach those targets. They're just saying, oh, it's about the growth. Yes, but how much growth? Is it 1 %? Is it 20 %? Anyways, I like transparency whenever it comes to sector compensation, especially also because you have what I would call a weak board.

55:30Tobias Carlisle:Whenever I look, and that is the case with a lot of non-funded companies, if they're in the S &P 500, a major company, they hire an outsider to be the CEO. I'm not saying that he's not a competent CEO. He typically doesn't have a large ownership stake, perhaps per his net worth. It's a lot of money to him, but you have your usual socks bags on the board, your BlackRock, Vanguard, State Street, so on and so forth. And you sort of get this vanilla type compensation package, which is just a bit annoying. You don't have that wonderful alignment you want to see as an investor. And you generally don't want to be, like for a company that's probably going to grow like 15, 20 % over the next few years, every single year, you do start three or 4 % in the hole every year.

56:16Tobias Carlisle:And yes, again, that has been offset by share buybacks, but that money could also be used to grow the company. And I would argue that with a company as mature as Uber, you wouldn't need to structure that way. I can see why it makes sense for a VC backed whatever, but the IPO was a long time ago, and they're already at a stage where you can probably turn some of that down. But then you look at all the big tech companies and it's even worse, and then you're like, what is the Charlie Munger said, if you mix raisins and turds, they're still turds. So I don't know if it's useful for me that other companies are doing it even worse.

56:57Tobias Carlisle:But anyways, if you put me on the spot, I'm looking at something like a 15 % return here over the next five years. That's what I modeled out. Sorry that I went so long here on Uber. Any concluding remarks before you throw it to either Hari or you, Toby? No, I think this is a great pickstake because this is the sign of time. It's a poster child for a lot of tech businesses who are navigating disruption. So there are some disruptors, but many within the tech industry who are trying to manage this disruption or trying to take advantage of this disruption. And Uber is one of those. So it's a great pick to kind of, you know, summarize the time we are in right now.

57:44So interesting. And it will be great to follow through and see an year or two where Uber will be. Yeah, I agree.

57:50Hari Ramachandra:Good pick. Good pick. I've been looking at it for a long time. I think it's very interesting. It's just because there's so much going on in that space with big, well-funded competitors, but who don't have the network. And we're going to see, I guess, which is the more important part. I'm guessing that Lyft gets taken out. I'm surprised that Lyft hasn't been taken out yet by somebody else because it's, they get part of the problem solved, but maybe it's cheaper just to build fresh. I don't know. It's going to be interesting.

58:16Tobias Carlisle:Let's take a quick break and hear from today's sponsors.

58:19Hari Ramachandra:One part of being an investor that I don't think gets enough attention is how hard it can be to continue to improve as an investment researcher. And for myself, I'll often find that when I finish a great conversation with some industry expert or fund manager, my head is full of ideas. But by the time I sit down to write it all up, half of them are already gone. That's why I've been using Plod Note Pro. It's a small device that sticks to the back of my phone and captures the conversation and hands me back a clean, searchable recap. And so the key points, the follow-ups, the things I usually want to act on, it has all of that.

58:54Hari Ramachandra:And that allows me to stay present in the room instead of scribbling notes that I won't be able to read back later. And I notoriously have very bad handwriting. And so it's changed how I prep and how I follow up with investors. It's also built for people who take conversations seriously. Enterprise-grade security. So if you're recording calls with clients or industry contacts, that's covered too. So if you live in meetings, calls, and interviews, well, give it a look. Go to plod.ai slash WSB and use code WSB for 10 % off. That's plod.ai slash WSB code WSB. And always get consent before you record a conversation.

59:34Hari Ramachandra:They say every day your business is late to AI, you fall two days behind in the competition. They're only moving faster. Fortunately, there's NetSuite next. You probably already know NetSuite, the AI powered business suite that securely connects all your data, financials, inventory, commerce, HR, and CRM, all in one source of truth, trusted by over 43 ,000 customers. NetSuite Next is the next huge leap because now AI is built into everything you do. It surfaces custom insights throughout your day. AI agents work alongside you on the routine stuff. And anytime you've got a question about anything, you just ask, like you're talking to a colleague.

1:00:14Hari Ramachandra:And I use it. And really, I think you should too. For the first time ever, you can try NetSuite next for free. If your revenue is at least in the seven figures, go to netsuite.ai slash tip. Built for every industry, ready for every boardroom, netsuite.ai slash tip. Curious about online trading, but haven't taken the first step yet? You're not alone. And plus 500 futures is a great place to start. The futures markets are moving fast. And with plus 500, you can explore popular assets like oil, gold, S &P 500, Bitcoin, and more. From crypto to commodities, there's always something happening. The platform is super easy to use, so you can trade on the go right from your phone.

1:00:58Hari Ramachandra:You can get started with just$100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account. No risk, no pressure. With 20 years of experience, Plus 500 makes trading more accessible than ever. Check it out at plus500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify.

1:01:25Tobias Carlisle:Plus 500, it's trading with a plus. All right, back to the show. All right. Thank you so much, Jens, for your feedback. Hari, you're up. Okay, so my pick today is Merck. And there are a couple of reasons why I picked Merck. And that is because the, obviously the tariffs and trade tension caught my attention because Forma is also in the crosswinds of that. And on top of that, Merck also has some kind of short-term headwinds that are coming towards it because of some patent cliffs on some of its key drugs. So before I get there, that's the reason I started looking into Merck, pharma industry in general.

1:02:15And in that, I picked Merck because it's one of the cheapest now among all the big pharmas. To give you a background on Merck, Merck is one of the top five pharma companies with$60 plus billion in revenue. They are by far the most dominant leader in the oncology segment within pharma. In fact, one of their top drugs, Keytruda, is the most dominant platform in oncology with bringing in around$29.5 billion in revenue in the latest year. And the oncology in general, and it's a sad thing to say, but it's projected to be a TAM of around$500 billion or more by 2032, which is a CAGR of 11.3%. This is one growth rate that you don't want to see, but it's sad.

1:03:18But I think that plays into this story. and Merck also kind of you know has a history of bringing in these kind of really blockbuster drugs and has that ability to innovate in internally and then develop in fact if you look at Keytruda it started with zero revenue then it accomplished one billion and then it kept going And if you see last 10 years, and you can see that from zero to 1 billion to 29.5 billion, how they have grown this business. And without Keytruda, if you look at their revenue, it will be stagnant at around 34, 35 billion dollars today without Keytruda. So Keytruda is a very important aspect.

1:04:06And therein lies the current headwind. So why are they cheap? because Keytruda's patent is scheduled to expire in 2028. And that means other biosimilar drugs can come in with much cheaper alternatives. So that's one of the headwinds they are facing. The other headwind they are facing, which is again recently, the current administration made an executive decision on NMF pricing, that is, or MNF pricing, most favored nations pricing. What it means is the price of a drug in a similar developed market will be used as a reference for pricing it in US. And that might impact Merck and other pharma. It's just not for other pharma in terms of their pricing power.

1:05:06For example, Keytruda per dose can cost you anywhere between$10 ,000 to$12 ,000. And for a patient undergoing treatment, it might result in an annual expense of anywhere between$150 ,000 to$180 ,000. and that's a big concern for many of the voters within us obviously and citizens so it's a big concern the pushback Merck has is that out of that 10 ,000 to 12 ,000 dollars half of it goes to middlemen and that's a inherent inefficiency in our medical system in us it's not like Merck is making all the money 50 cents is going to the middlemen but however it does pose a risk for Merck if the prices are brought down for similar medications.

1:06:01So these are the two headwinds that are staring at Merck. And that's the reason the stock is now at a PE of 12 and a forward PE of 11, I believe, compared to all other peers. If you look at Johnson & Johnson or Pfizer, they're all trading in the range of 18 and above. So their value is much lower in terms of investors' sentiments. However, the reason I'm pitching is that this is pretty much a feature in pharma industry, not a bug, in the sense that all these pharma companies go through these cycles of patent cliffs, revenue decline then they develop their new drugs in fact i'll talk soon about the late stage drugs that they have in the pipeline and then basically they again increase their revenue it's never smooth like pfizer experienced it with lipitor in 2011 that's when the stock hit say with abby so many other companies have faced it in the past mark however is already taking steps to mitigate this.

1:07:18Number one is they're coming up with their subcutaneous version of the Keytruda. Today, if I'm a cancer patient, it takes 60 to 90 minutes or 30 to 90 minutes for me to get the drug through IV. So it's a very painful process. You have to go to a clinic, wait in the line, then again spend another hour for the IV, then come back. It's a painful process. So this new version, new way of delivering the medicine is like a shot. You don't even have to go to clinic. Can be delivered anywhere or in your doctor's office. It takes only a few minutes. That extends the patent life because the delivery mechanism has changed.

1:08:02It does have some challenges from some other companies, but I think Merck is already working towards it. The second thing is they also acquired Verona. through that they got a copd based medicine it was a 10 billion dollar acquisition their vin rivier which is a pulmonary hypertension drug has a huge potential according to them in the future it's few hundred million dollars now but that's how ketruda started too so and then they're curating other drugs that are in the later stage of the pipeline so by 2032 they might have compensated for most of the loss from Keytruda. And the other thing is, unlike the molecular drugs, in case of this biosimilar drugs, it's more like a hill, not a cliff.

1:08:57In the sense, we will not see Keytruda kind of revenue go down to zero come 2028. It'll be like a 3 % to 5 % decline every year in Ketruda's revenue. And then gradually others are picking it up. But there will definitely be pockets where the decline rate versus the revenue growth rate, it's very hard to predict. As Munger says, right? Like business is never predictable, but stock investors always expect predictability. And the key difference between a risk of the business versus risk of volatility are two different things. So that's how I see the business. Revenue might be slightly volatile, but the lead they have, the expertise they have in oncology and the growing time of oncology sector positions them really well for the future.

1:09:56And it's a long term investment. And while we are waiting for all this headwinds to subside, we get a 4 % plus dividend paid to us. And especially in this market, which I feel, Toby and Stig, you might agree, market is richly priced today already. There are very few stocks that we can find where it's a good business, has a good mode, well-known company. it's not going to go away tomorrow, but selling at a reasonable P. And I will, I think you guys are more experts in the valuation, but that's my, at least my analysis. And I feel like, you know, holding this stock for the next five years will help us kind of, you know, earn the dividends of 4%.

1:10:44It's kind of better than what I would get anywhere else. And then there is an upside too with limited downside. But of course, the risk is they're not able to come up with any drug, nothing pans out, their acquisitions don't work out. Those are some of the tail risks, which I believe are minimal. So that's the reason I am bringing this up. I'm open to your feedback.

1:11:08Hari Ramachandra:I think healthcare, I've seen a few statistics that say that healthcare is as cheap as it's been against the market in 25 years or something like that. It's a similar scenario to the late 1990s where healthcare got really cheap relative to the market for whatever reason. And then healthcare is a high margin, high earning, very consistent business, and they tend to do well over the long term. And the fact that these guys are buying, they've bought back stock pretty aggressively over the last few years indicates that they think that they're cheap as well. So I think it's very interesting and good dividend yield, as you say.

1:11:41Hari Ramachandra:So you're carried for the period of time that you're waiting. And I think it's a good time. there's a lot of negativity around healthcare from the administration. And I think people have got some COVID hangovers as well. They're a little bit avoidant of healthcare. So I think this is one of those good contrarian, good undervalued contrarian picks that probably works out over a three to five year period. Probably in three to five years, we'll be talking about how it's all time highs and looking expensive. Actually, that's a very good point, to be you brought up one is it is selling at 40 discount to its all-time high so it's down 40 percent from its all-time high that's number one number two their operating margin today is 31 percent 31.5 percent which is the highest in the pharma industry the rest are all in the 17 to 18 operating margin except Abbeam, which is around 30 plus percent as well.

1:12:39But Abbeam is selling at a really premium valuation. So I think that's a good point you brought up. High margin business and also the stock is significantly down from its all time.

1:12:53Tobias Carlisle:You know, Hari, if you allow me to come out, I just said, oh, it's in the too hot pile. I'm I'm probably going to say that, but I'm going to make a lot longer and then say it's in the too hard pile. So pharmaceuticals are just, it's just really challenging. It reminds me of the time that Toby pitched Gilead here on the show. And I was like, oh, the numbers look great. I just don't know what I'm investing in. So, and I think it also has a bit to do with how you invest. Like whenever I, for example, would say, oh, I invest like 1 % in Uber. I don't invest in any stocks unless I want to take it to a 10 % position.

1:13:34Tobias Carlisle:It's typically because I don't understand it well enough or the price is right that it's not a full position, but my intention is always to take a full position. So whenever I'm looking at a stock like Merck, I'm thinking, I don't think I would ever get the conviction to take it to a 10 % position. But then, and I know, for example, Toby's strategy is different. He's a lot more quantitative than I am, and you hold more in a basket approach. I don't think there's anything wrong with saying, let me allocate, I don't know, 8 % of my portfolio into pharmaceuticals, and then I have 15 companies or whatever into that.

1:14:10Tobias Carlisle:I can definitely see why it would make sense. It is incredibly difficult for me to look at a company like Merck. And not that it would be easier for me to do in the 90s for a bunch of different reasons, but there was almost like an affliction point around where you have your own R &D. There was internal networks that you develop and you can sort of like say, this is what we do and we have a certain culture about how we do things here. And of course, then you run the risk of some of your best scientists being posed by other companies. But you have a lot of that inside. And now you go out and you acquire a different R &D.

1:14:49Tobias Carlisle:And so you can, of course, say, well, isn't that the same? You have to have people who can also get posed and you have to figure out if they have the right culture, the right process to go out and find the right projects. Keytrude had just been one of the examples. They didn't develop that themselves. There was something that they acquired and then just became a lot more successful than they originally thought. And so I don't know. It's very tricky. I don't like the lack of insider ownership. I don't like the big unknown when it comes to regulation. And then some listeners are tuning in and like, but Steg, you just pitched Uber.

1:15:26Tobias Carlisle:Talk about poor inside ownership and regulation going against you. Yes, you're absolutely right. Let's just pretend that didn't happen. But there are some things there about Merck I'm concerned about. And then you can, of course, say, well, it's all priced in. And I think you're absolutely right. It is all priced in. In terms of Toby's point about share buybacks, I would look very carefully at the proxy. I'm not questioning what Toby is saying is the right thing. I've seen a lot of management buyback stock at the wrong time, or because they really very much had an incentive to do that. So that's definitely something I would look into.

1:16:07Tobias Carlisle:Share buyback really only works if the company is getting better. At least that's a framework you can put into it. Otherwise, you might want to get it as dividend, even if you have to pay taxes of it. Whether or not Merck is getting better is very tricky for me to determine. Well, awesome. Thank you, Stig. I think it's definitely one that can fall in a too hard pile, but I just couldn't resist the PE. So I had to pitch it. All right, Hari. Thank you very much for your Merck pick. Toby, you're in the hot seat.

1:16:40Hari Ramachandra:Thanks, Stig. I have a pick. It's called Bath and Body Works. The ticket is BBWI. It's not Bed Bath and Beyond, which went bankrupt a few years ago. This is a spin out from L Brands. It's a different value proposition to Bed Bath and Beyond, but it's the same kind. You know, it might occupy the same kind of space if you're not familiar particularly with these things, which I was not. I did do a channel check at the Doama Mall over the weekend with my son. and there were people in this store and the rest of the mall was pretty quiet. So I was a little bit surprised by that because it's not something that I pay attention to as I walk around necessarily or not that I go to malls very much either.

1:17:22Hari Ramachandra:What they sell is fragrance. That's a very broad kind of idea to be selling, but that's how they sell it. That's how they market it. And so what that means is that they have personal fragrances and house fragrances. and if you read some of the research on it the people who work in the store believe that they sell candles that burn longer and smell better than everybody else they have other stuff in there but they're very proud of the the candle so that's a value proposition they have customers really like bath and body works they're they're quite loyal to this brand and it it kind of amazes me but it has continued to grow through this sort of period of retail weakness particularly because they're mostly store-based they've until very recently they're almost exclusively store-based they've had this digital strategy only more recently the the company spun out of as i said the company spun out of l brands and went public in about 2021 2020 near the end of 2020 out of they listed a 20 bucks out of the gate they were very popular and they ran up to 80 dollars in that sort of meme stock craziness um through 21 at 22 and i and they're probably over earning as as you know when people were home and i was spending a lot of money on stuff for the house and so they've had to work off that stock price over valuation and you know that looks like they've had earnings haven't been great for a period of that time because some of that over earning has had to come off but um i think from a valuation perspective it's a very sort of compelling opportunity so the stock price is 28 ish today market capitalization that level is about 5.9 billion dollars enterprise value is 10.4 which means that they're carrying about 5 billion four and a half billion dollars of debt which i don't usually love but i think they can carry it they've got free cash flow of 750 million dollars this year which on the market cap is a 10 to 12 percent more like a 12 percent yield free cash flow yield which is gigantic um they cover their debt many times over the p at this level is seven and a half ev ebit is 7.7 price to cash flow 6.3 so very very cheap on those kind of metrics they've been buying back stock pretty consistently since the top so they they just after they listed they had 200 and nearly 280 million shares out they've currently got 212 million shares out so they bought back quite aggressively over the last few years which which i like seeing because the stock's been been down i think the The analysts who sort of follow this stock have got this, they like the stock around$41 to$45.

1:20:25Hari Ramachandra:So$28, it's a very big discount to that. It's way off its all-time high. And I think it looks pretty cheap here. They've continued to beat, which I think is impressive given the retail backdrop, which has been pretty weak for most of the things that I follow. They've changed CEOs. I don't know how much impact these people have, and I don't pretend to know these people particularly well, but they've got a guy who's a Nike executive. He's going to help them with their international expansion and their digital strategy, which are the two areas where they've been a little bit weaker. But he comes from a background where they've done very well.

1:21:03Hari Ramachandra:So they're very hopeful that he can do well in this position. I think the risk-reward scenario, I think, is pretty good here. I think your downside is limited because it's really trading at trough valuations. It's as cheap as it's been. It's very cash flow generative. They're buying back stock at this level. So that says to me that there's a four around here somewhere. And then I think 12 % free cash flow yield is probably silly. You could easily see that being their long run average. So it's only five years worth. They've been more like eight times price to cash flow. So it's 6.3 times. They've got a fair, just to get back to average, there's 20 or 30 % embedded in the stock.

1:21:45Hari Ramachandra:and then I think with the buyback and a little bit of like continued growth I think there's there's quite a lot of upside in this stock I think it's like a 50 to 60 percent upside but the risks are that it's a it's a retailer it's got a very sort of niche approach and I'll I'm not the target demographic and so I don't fully understand the the the desire for it but in my portfolio, which is, this is my mid large cap value portfolio. It's one of 30 names, has all the things that I like, lots of free cashflow, buying back stock, trough valuation. And I think it's a, it's a reasonable bet. If your timeline is like two to three to five years, that's my pick BBWI is the ticker.

1:22:30Great pick, Toby. The reason it's very interesting to me is I have had similar observation and I never thought about it from an investing perspective. So that is the difference between you and me. It's like I always saw this store always had more people than the rest of the stores in the mall. So that's number one. Number two, the staff was always very friendly, offering samples and inviting people into the store. it had a different vibe than the rest of the mall especially in the last few years I'm seeing the malls are becoming less and less inviting it almost feels like a rundown town because a lot of things have moved online this store usually has a different vibe they are into candles they're also into body spray especially for women and a lot of them really really are loyal to that and in fact when the one that was closed near our home like you know i know we had to search for another one somewhere else so definitely i think they they have some kind of a customer loyalty that they have figured out it's not something that you can can get somewhere else they kind of they make their own they sell so that's their unique mode the other thing is the stores are all very small, so their cap OPEX might be much smaller than say a big retailer, so that's the other advantage they have.

1:24:03And the other thing I feel is this is one business where it's kind of AI proof, you can say. Can't be disrupted by AI. But we'll have to see whether recession impacts them. Are they cyclical? That was my question to you, Toby. Because if there is recession, this is one of the things, candles. and other things that people will kind of, you know, try avoid or easy to avoid at that point of time. It's nice to have. So I think those are some of the risks I see for them. But otherwise, as you said, like for a three to five year term, it's probably you're getting it's one of the lowest price points compared to the past.

1:24:45Hari Ramachandra:Yeah, I think that's, I think it's an interesting point. I think that we, I think that there has been some recession for a lot of the market since 22. I think that most people are feeling a drop-off in their wages and an increase in the amount that they spend. And I think that's reflected in lots of different data series. One of them is that people aren't making payments on their student loans, people aren't making payments on their car loans, people aren't making payments on their credit cards. There's a lot of delinquency out there. And so I think that that is already reflected in the numbers for many of these businesses.

1:25:27Hari Ramachandra:So I think that they have been suffering through a little recession. And even through that period, they've managed to continue to grow despite this sort of revenue headwinds. They're exceeding guidance, maintaining profitability. There was a little revenue decline, I say, due to calendar shift effects. Too many, not enough Saturdays in the month or something like that. they're still forecasting growth for the next year one to three percent like that might be under inflation that might be all cost pressure and not reflected in unit but i still think that any sort of growth through this period is a positive so i think if they're still growing that indicates that possibly they are going to struggle through avoid the recession and so i think it's i still think this is a good time to be putting this position on i'd certainly rather position like this at this point in the cycle than when it was roaring in 2021.

1:26:20Tobias Carlisle:Trey Lockerbie So, Toby, it was interesting that you would mention this is not Beth Bath & Beyond. I actually pitched it once. I don't know if you remember. I say it proudly since now I've gone bankrupt. Trey Lockerbie It's coming back. Trey Lockerbie It's all screaming back. I actually, my wife walked by here the other day, whenever you sent the email that you're going to pitch Bath & Body Works. And she was like, what? What are you looking at? Why are you looking at Bath & Body Works? And I was like, no, no, Toby sent me an email. He wants to talk about it. And so I need to figure out what it is.

1:26:57Tobias Carlisle:And she looked at me and she was like, you don't know what it is? They're everywhere. We've been to one together. You don't remember? I have no recollection at all about going there. Like you, I guess I'm just not the target group, but I like the numbers. I'll be the first to say that. I tried comparing it to Bed Bath Beyond because I had this, not just because of the similarities with the name, but there were just some of the numbers that were just like, I need to double check, is this a value trap in the making? And of course, we don't know that, but there are a lot of things that are much, much better with Bath & Body Works.

1:27:36Tobias Carlisle:So gross margins, different, certainly higher level of loyalty. 80 % of their sales are from members. I feel like they're probably slightly over-levered, even though it's probably manageable. Whereas for Bath & Beyond, it was just getting kind of ridiculous at the end, and they were just boring and then buying back shares. But anyways, I find the multiples very compelling. I'll be first to say that. And so I was trying to go through the most recent presentation, and I looked at the debt maturities. And the first thing I thought was, oh, it doesn't look too bad whenever it's being refinanced and the interest rate that they're paying.

1:28:15Tobias Carlisle:And then I thought to myself, well, you're looking at debt maturities. Isn't that a bad thing in the first place? And so it sort of depends on what kind of glasses that you have on. It also depends on how big you're going to swing.

1:28:30Hari Ramachandra:I agree. Just before you move on from that, I agree. I had a look at their debt. Five and a half billion dollars on a five and a half billion, or four and a half billion dollars on a five point on like a six billion dollar market cap always gives me pause too. And I don't like seeing that. And I looked at their debt maturities too, and it looked to me like it was turned out pretty well. I think they were doing like$500 million chunks on a yearly basis was my recollection. Is that right? Yeah, that sounds about right. which i thought was like that was that was pretty reasonable i think like they're going to be working all the time to do that but it's not doing a 5.5 it's not doing four and a half billion dollars in one go it's it's 500 million at a time which i think is achievable but they're probably

1:29:12Tobias Carlisle:paying higher rates as they roll almost certainly yeah and you know whenever you think about how much money they return to the shareholders through buyback and dividends. I mean, there's just a part of me who would probably prefer they just pay out some of that debt, even though they would be the first to say that. I think the first maturity they would hear is like$284 million in 2027, like 6.7%, and then have 444 maturing in 2028, 5.3%. So it's like, you can probably in an Excel sheets say that they shouldn't work off that debt. It's probably just more from a principle of being a bit more conservative.

1:29:51Tobias Carlisle:I like the stock. I don't by any means consider myself an expert in what they do. I do think it was kind of interesting. So correct me if I'm wrong, you being an expert in fragrances, or hopefully more than me, Toby. Is there a case to be made where bath and body works dominate, let's call it more emotional categories, like fragrance, body care, whereas the Beth Bath Beyond are just a bit more commoditized, your towels and sheets. I don't know. I might be overthinking this. Is there something to be said about that 80 % coming from members? I should probably just do a very quick peer comparison here.

1:30:34Tobias Carlisle:So Ulta Beauty, which is one of the picks we talked about before. Toby, again, speaking right to our core competence when we talk about cosmetics, but they had 95 % from members, but that's also top of the class. You have something like Sephora in North America, it's also 80%. Starbucks is like 53%. I know that's a very different type of product, but how should I look at that 80 % loyalty from members?

1:31:01Hari Ramachandra:I think that's a very, very positive thing. And I think when you look at, they ask people to rank the, I'm just struggling to find it at the moment, but they ask them to rank the brands that they like. And it ranks, there's a handful of brands above it, and I forget what they are, but it's like Starbucks and very well-known brands. And then Bath & Body Works is right up there. It's higher than Target. It's a very well-known brand in this group. And they have, people seem to be very loyal. They get the good feelings when they go into the stores. I think that stuff's a little bit voodoo, that sort of psychology.

1:31:38Hari Ramachandra:What happens if you lose that? I'm mistrustful of that stuff. I tend to be more of a quantitative. I look at the numbers more. And I think that their performance is borne out in their numbers and borne out in that 80 % figure that you quote that most of their sales come from members. People seem to be very loyal once they go to the store. They like going back to the store. They like visiting regularly. I was surprised, like I said, when I was walking around the mall, the mall was very empty and this store was kind of a little bit out of the way and I was walking towards it following three people and all of them went into the store.

1:32:11Hari Ramachandra:So I just stuck my head in at the entrance and it was like there were a dozen people in there and not a huge store, whereas there were a dozen people in the entire mall. So I thought that I was surprised that they were doing as well as they were. Not that I would ever, that's not part of my investment process. I just wanted to see why is the stock down so much? And it's not lack of foot traffic. It's not a lack of traffic. It may just be that they're working off their 2021 hangover and there is a little consumer recession going on. And the debt looks scary against a market cap of$6 billion. But there's an argument to be made with$750 million of free cash flow, it's probably about half price.

1:32:55Hari Ramachandra:and so with a market cap closer to 12 billion the debt looks less frightening at that at that kind of level of ev of like 17 or something like that you could probably support this sort of free cash flow plus with the buybacks and probably the continued growth those numbers will be higher and more impressive next year i think it's i think it's a it's a the kind of stock that i like i think it's quite asymmetric i think it's got limited downside and pretty good upside for the risk that you're taking. And it's just a little undiscovered stock, not necessarily an undiscovered brand, just undiscovered stock.

1:33:30Tobias Carlisle:Yeah, certainly whenever you look at the numbers and you think about that it's retail, it looks very good. 80 % of the products are manufactured in the US. So you can look at it as they're very dependent on North America. You can also say that there are some tariffs and shock minimization there. Now 57 % is off malls, and they want to have 75%. They have this declared goal. They don't want to be as much in malls anymore. We all know what's happening with malls across the country. There's also an element that is a little bit easier for buy online, pick up in store, which very much speaks to this experience that they want to create.

1:34:11Tobias Carlisle:Preston Pysh it a little bit easier to visit the store. I found it's always interesting because if I said, you know, oh, it's like 30 % buy online, pick up in store, is that high or low? You mentioned Target before, they're 35 to 40. I also know that it depends on how much, like where they're located. David Steinem, it's just not as simple as that. Gap Old Navy, for example, is like 15 to 20. So it's kind of interesting to see. And again, very, very different businesses. Preston Pysh, But it is something, and we also saw that with Alter Beauty, the way that they have more and more data about you, the way they're upselling the app.

1:34:42Tobias Carlisle:Is the company big enough to have that critical mass of data to hit you with the right advertising probably?

1:34:51Hari Ramachandra:Well, one thing that they do is they have very short lead times for new products. So in COVID, they were able to get out a hand sanitizer by March 2020. They have this five or six-week turnaround. So if something's working, they lean into it. If something's not working, they cut it off really quickly. So that's been, they're good retailers from that perspective, like they're good data-driven retailers. So I think that they're pretty well optimized for what they're seeking to achieve. I think they're doing a good job there.

1:35:22Tobias Carlisle:All right, Toby, thank you so much. Where can the audience learn more about you?

1:35:27Hari Ramachandra:I'm on Twitter at Greenbacked, G-R-E-E-N-B-A-C-K-D. I have acquirersmultiple.com, where I have a whole lot of low value, good value picks. And I run two ETFs, Zig, which is a mid-cap, deep-valued, domestic US, lots of small companies very similar to Bath & Body Works where they're generating good cash flow, buying back stock, very undervalued. And Deep, which is a smaller micro fund. Deep and Zig will sort of track factors like value, quality, and small size. And those factors have been very beaten down for an extended period of time, really starting since 2011. There was a little reprieve from 2021 to 2022, but at the widest valuation discount to the growth year end of the market, going back to 1999, last time we saw these sort of discounts, the following five or 10 years were very good.

1:36:28Hari Ramachandra:So I'm very optimistic for small value right now, even though the historical record doesn't look great. This is the kind of investor that I am, the contrarian that I am. You want to put these positions on when it looks ugly like this. And so I think this is a very good time to be a small value investor. Thanks for having me, Stig. It's always good seeing you.

1:36:51Tobias Carlisle:That was absolutely wonderful. Hari, welcome to the audience. a little more about you. Hey, it's been fun as ever talking to you both. Everyone can find me on Twitter or X now. HariRama is my handle. And looking forward to all the conversations, feedback about today's speech as well. It's always good seeing you. Toby, Hari, thank you as always for your time. And we'll see each other again next quarter. And for the listeners, next week.

1:37:24study billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor's Podcast Network. Written permission must be granted before syndication or rebroadcasting.