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2:26

All right folks, welcome to Investing for Beginners

2:28

podcast. Today Andrew and I are going

2:30

to talk about this great question I

2:32

found on Reddit. This is an interesting

2:34

question and we thought we would have

2:36

some fun answering it. There's many parts

2:39

to it so bear with us. Here's

2:41

the first part. So I'm reading Warren

2:43

Buffett's biography The Snowball and it has

2:45

me thinking about how value investing works.

2:47

Early in the late 50s, the story

2:49

goes that Warren would find undervalue companies

2:51

and simply invest in them. And he

2:53

beat the average market return for a

2:55

given year by doing so. My question

2:57

is, how does that work? So let's

2:59

maybe tackle that part first. So what

3:01

are your thoughts on that? I would

3:04

say it does still work. It's just

3:06

a game I've decided not to play.

3:08

There's a saying by Jim Kramer who's

3:10

a very loved guy, depending on

3:12

what corner of the internet you're

3:14

in. He says there's always a...

3:16

bare mark. No, I think he

3:18

says there's always a bull market

3:21

somewhere. And so just like there's

3:23

always a bull market somewhere, there's

3:25

always a bare market somewhere. And

3:27

what can happen with the emotions

3:29

of the market is people overreact.

3:31

In my opinion, a lot of

3:34

times when you're seeing these value

3:36

opportunities is because people are overreacting

3:39

on the negative side and

3:41

pricing something to be way worse or

3:43

way bleaker of a situation than it

3:45

actually is. I think that's a feature

3:47

of the market that you see today

3:49

that you saw a couple years ago

3:52

that you've seen five years ago and

3:54

that you saw in the 50s. It's a

3:56

hard way to invest because you have

3:58

to be constantly evaluating.

4:01

It's definitely a feature that

4:03

makes the market very, very

4:05

interesting. Very, very interesting.

4:07

And you can just look at

4:09

the news over the last few

4:11

weeks to really see some of

4:13

that narrative impact on

4:16

investments or companies. All

4:18

you have to do is look

4:20

to Deep Seek and everything that

4:23

kind of happened in a week

4:25

with that and how much that

4:27

impacted companies like invidia and TSMC

4:30

and all the hyperscalers, Google, Microsoft,

4:32

so on, then you can segue

4:35

into the tariff situation and what

4:37

kind of played out with that

4:39

and all the reactions

4:41

to the potential news of what

4:44

could happen, what didn't happen but

4:46

what could happen and all those

4:48

things really impact how and what

4:51

people think about companies you look

4:53

back a few years ago at

4:55

meta everybody was very down on

4:57

meta and it's since come roaring

4:59

back and Google was supposedly dead

5:01

because of open AI and search

5:03

and how that was going to

5:05

die and that's what a 25%

5:07

return since that or something that

5:09

knows ranges so there is definitely

5:12

a narrative driven market especially

5:14

with the faster we get news and

5:16

the more we get news, the faster

5:18

these kinds of things can come and

5:20

go. And it's not unusual. And as

5:23

Andrew said, you can play that game

5:25

if you want, but it's also, you

5:27

got to be on top of your

5:29

game, and it's a lot of harder

5:31

game to play for sure to try

5:34

to take advantages of those drops or

5:36

overreactions by the market. I think, I don't

5:38

know this for a fact, but it feels

5:40

like there's more 20% swings now than there

5:42

ever used to be. And I don't know

5:45

if that's a function of the different new

5:47

cycles or the shortening of new cycles. And

5:49

you can see it negatively and you can

5:51

see it positively. To me, it's a much

5:53

harder game to play. And I don't want

5:56

to play that game and I choose not

5:58

to play that game just because my same...

6:00

wouldn't let me do that. That's

6:02

too much craziness for me. Yeah, but

6:04

I mean, if you're buying a dip

6:06

or buying a stock that has

6:08

been dead money for two, three

6:10

years, you could argue you are

6:12

playing that game. Right. And it

6:14

is possible to play our game

6:17

and double or triple your money

6:19

in a decently short period of

6:21

time. I'm telling you that because

6:23

that's what I've done. So it

6:25

is a benefit to being a

6:27

value investor. But to be able

6:29

to say, oh, I'm going to

6:31

predict those situations where I know

6:33

that this is an overreaction, good

6:35

luck. Yeah, good luck. I don't

6:37

know how you can do that

6:39

consistently. And that's also why

6:41

a lot of successful, especially

6:43

deep, the deeper value you

6:45

go. A lot of those

6:48

guys are very diversified because

6:50

they don't necessarily know exactly

6:52

which companies are severely distressed

6:54

for a short period. and so they

6:57

might spread their bets a little bit

6:59

more. Yeah, that's entirely right. And the

7:01

game I choose not to play is

7:04

the one where I'm just reacting to

7:06

market news as opposed to understanding the

7:08

business. And if the Mr. Market says,

7:10

you know, here's an opportunity on a

7:13

platter taking advantage of it like you

7:15

have, when I think about. reacting

7:17

to, okay, good earnings news came

7:20

out and the company is down

7:22

6% kind of thing. If I

7:24

don't know the company, it's like,

7:26

okay, I'm not gonna invest in

7:29

that particular business because I don't

7:31

know it. To me, that's the

7:33

harder, much harder game to

7:35

play. All right, so let's let's pick

7:37

apart the rest of the question. So

7:40

a majority of investors don't want or

7:42

don't know of a particular stock and

7:44

its price trades below book value. That's

7:47

the easy part to understand. What I

7:49

don't understand is that if the stock

7:51

is generally unpopular, how does its price

7:54

ever reflect an outsized return? Having trouble

7:56

figuring out how a stock goes from

7:58

unloved and relatively unloved. unwanted to suddenly

8:00

beating the market. I'm missing the part

8:02

where people find the stock and suddenly think

8:04

it's worth buying at a higher price.

8:07

How does that work? Yeah.

8:09

I mean, definitely

8:11

a good thing to ask. I

8:13

kind of go back to

8:15

this idea that the fortunes of

8:17

businesses can change. We make

8:19

it sound like it's these unprecedented

8:21

things, but I think cyclical

8:23

forces place such a more powerful

8:25

effect on businesses than we

8:27

like to admit as investors. We

8:29

like to all think that

8:31

we can just buy Coca -Cola

8:33

and Apple and nothing can ever

8:35

happen to those businesses to

8:37

ever affect their earnings or their

8:39

profitability. But when you're looking

8:41

at the majority of the market

8:43

and the majority of businesses,

8:45

yeah, there are very real things

8:47

that affect their profitability and

8:49

also just the

8:51

natural swings of cyclicality

8:54

in industries. As an example,

8:56

supply and demand, that obviously

8:58

applies to companies

9:00

that are exposed to the

9:02

cycles of the economy,

9:04

but also in the sense

9:07

that you get supply and demand

9:09

of the number of businesses that are competing

9:11

for something. High

9:13

growth is great until it attracts

9:15

a bunch of competitors who are trying

9:17

to copy you, and then on the

9:19

flip side, if you're the only person

9:22

grinding it through in the business that

9:24

everybody else has given up on, what

9:26

do you think is going to happen? Of

9:28

course, you're the only one grinding there.

9:30

Of course, you're going to be a business

9:33

that emerges from that with better prospects.

9:35

Not to say that that's

9:37

the case for every cyclical

9:39

downturn or for every stock that's

9:41

in the gutter, but it

9:43

happens more than I think we

9:45

realize because there's a lot of

9:47

things that cycle and can

9:49

rebound essentially, things that can

9:51

snap back and rebound. I think

9:53

that can be very powerful.

9:55

We get stuck in these time

9:57

horizons of, oh man, whatever. happened

10:00

in the last five years is

10:02

what this business is going to attain

10:04

for the rest of its life.

10:06

And that's totally not the case at

10:08

all. A

10:10

lot of times, you find

10:12

success buying, beating up

10:14

stocks because you don't know

10:16

what future development will

10:18

help the stock grow, but

10:20

it will happen and

10:22

you will see that growth

10:24

because you bought cheap. Yes,

10:28

you will. And what are

10:30

your thoughts on how does

10:32

an unloved company go from

10:34

unloved to popular? What are

10:36

your thoughts on that? Well,

10:40

I guess the home building is

10:42

a good example because that's one, for

10:44

me personally, that I lived through

10:46

that was very obviously unloved and then

10:48

became very loved. And in that

10:50

case, I don't

10:52

know how would you

10:54

describe what happened there?

10:59

Well, I think a lot

11:01

of it probably stemmed from

11:03

prior to the pandemic, there

11:05

was a lot of negativity

11:07

around the home builders and

11:10

that maybe there was a

11:12

glut of homes at the

11:14

time. And

11:17

I know a big reason, the

11:19

rates dropped to all -time lows

11:22

and so people were going crazy

11:24

refinancing homes or selling homes and

11:26

trying to get new ones and

11:28

it created this kind of over -hyped

11:30

demand, I guess is the best

11:32

way of putting it, because I

11:34

think people wanted to take advantage

11:36

of those historically low rates. And

11:38

then since then, it feels like

11:40

it's more of a a lack

11:42

of demand or not a lack

11:44

of demand, a lack of supply.

11:46

And that's been pushing up the

11:48

prices of homes because there's a

11:50

lot of people that want to

11:52

buy homes that can't because the

11:55

rates are decent, but there's not

11:57

enough homes. And so that's pushing

11:59

up the prices. home. So it's

12:01

kind of a weird place to

12:03

be, but it shows that even

12:05

though a company like Pulti is still

12:07

doing their thing, the

12:09

not necessarily economics of

12:12

the business, but the narrative around

12:14

the business or what people feel

12:16

like as far as like buying

12:18

homes, selling homes, it's that

12:20

changes and that can impact

12:22

what happens with the business.

12:24

Not so much that Pulti

12:26

or DH Horton completely changed

12:28

what they're doing. They just,

12:30

they kept doing what

12:33

they're doing, but the uncontrollable

12:35

forces around what was happening with

12:37

them really impacted their business and

12:39

the stock is a better way

12:41

of putting it and impacted the

12:43

stock performance, not the actual business

12:46

performance. Yeah. I

12:48

mean, their EPS has been insane.

12:50

So that's been awesome.

12:52

If you've been

12:54

a shareholder looking just

12:56

again to companies that I'm

12:58

familiar with that I can speak

13:01

to something like TSMC, we bought

13:03

that in late 2022.

13:05

And that was before semiconductors.

13:07

I mean, semiconductors have

13:09

kind of always been very

13:11

popular, but it hasn't

13:13

reached this whole

13:15

AI mania until

13:17

recently. And then

13:20

TSMC went from $80

13:22

a share to $200

13:24

a share. It's interesting that

13:26

for TSMC's case,

13:28

definitely they've just continued to do

13:30

what they always do. So

13:33

before with TSMC, what you see

13:35

with a lot of foreign

13:37

stocks, their price earnings are lower

13:39

because you have that geopolitical

13:41

risk or just this whole foreign

13:43

thing like US investors don't

13:46

want to touch it, the whole

13:48

China thing, all of that

13:50

can make stocks in the Asian

13:52

countries cheaper. And

13:54

I think for a valid reason, there

13:56

is in general a lot more geopolitical

13:58

risk if you're buying in certain areas

14:00

in the world. But now that

14:03

you have invidia that went to

14:05

the moon and then invidious evaluation

14:07

went to the moon, is it

14:09

now that the riskiness of TSMC

14:12

has become less because compared to

14:14

invidia, well, this is safer. And

14:16

that's another example of narrative, potentially

14:18

driving up price and creating this

14:20

huge outperformance. I'll throw another example

14:23

on here. Dix Sporting Goods is

14:25

something I bought in 22, and

14:27

then that's doubled since. And if

14:29

you think about the way, I

14:31

guess, fashion, for lack of a

14:34

better word, changed from before pandemic

14:36

to after, at Leisure Wear has

14:38

become a lot more acceptable to

14:40

be worn in public, and a

14:42

company like Dix Sporting Goods has

14:45

benefited from that. Is that the

14:47

only reason why the stock is

14:49

up? You know, from 117 to

14:51

240? I don't know. Was it?

14:53

Was it just the priced earnings

14:56

was low? Was it a combination

14:58

of, okay, now they have more

15:00

better earning power because F Leisure

15:02

is born more than it was

15:04

or is trendy now? It wasn't

15:07

simply them executing because they were

15:09

the number one market leader and

15:11

they're just widening the gap between

15:13

them and their competitors. I don't

15:15

know. I can't say for sure

15:18

why, but I think it's an

15:20

example of how the fortunes, the

15:22

perceived fortunes of a stock or

15:24

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15:26

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I agree. And I'll throw another

18:13

log on a fire, kind

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of the opposite direction. That's

18:17

Texas Instruments. Like they have struggled

18:19

a little bit for the last

18:21

two or three years because their...

18:24

cycle compared to TSMC and other

18:26

parts of the semiconductor space have

18:28

been on an upswing, they have

18:30

actually been on a downswing. And

18:32

so they're also spending a lot

18:34

of money to build out capacity

18:36

in the hopes that when they

18:38

catch the wave back up and

18:40

it will go back up, that

18:43

they can take advantage of that

18:45

by having more capacity to build

18:47

to fill the bigger demand that

18:49

they're expecting. And when you listen

18:51

to their analyst calls, and listen

18:53

to their capital day, you can

18:55

hear the enthusiasm in the

18:58

management, but the analysts

19:00

that are questioning them are a

19:02

little more skeptical. And so

19:04

there's just a little more

19:06

skepticism around that company than

19:08

there is against TMC, you

19:10

know, TSMC or even, well,

19:12

and tell a whole different

19:14

story, but Broadcom, Qualcomm, some

19:16

of those other ones, AMD,

19:18

and so on. Those have

19:20

a much better. prognosis

19:22

according to the market than a company

19:25

like Texas Instruments. And so that's, it's

19:27

just kind of interesting how you can

19:29

see different, even in the same industry,

19:31

among certain companies, you can see different

19:33

narratives. Texas Instruments still doing the same

19:36

thing they did two years ago, but

19:38

the cycle that they're in is on

19:40

the downswing. Is it the bottom yet?

19:42

Don't know. Will it come out of

19:44

it? Yes. When? Don't know. And so

19:47

that's just part of the game. And

19:49

sometimes you have to wait longer to

19:51

get the return that you want. But

19:53

if you believe that the company is executing

19:55

and doing their thing and nothing has really

19:57

changed that way, then it's just a matter.

19:59

of writing out the storm, so

20:02

to speak, and taking advantage

20:04

of it while you can,

20:06

and then when it gets

20:08

to an upswing, then you'll

20:10

be asking yourself, why don't

20:12

I buy more? Yeah. Oh, yeah.

20:14

That's always the fun part. Yeah.

20:16

I look at a company

20:19

like Danner. Definitely something where

20:21

it hasn't seen the growth that

20:23

it saw, let's say, in the

20:25

last five years or so. But you

20:28

ask, you know, has anything

20:30

fundamentally changed and nothing is

20:32

super obvious? Dana Herf, for

20:35

people don't know, basically sell

20:37

their picks and shovels to

20:39

laboratories and things like that. So

20:42

is it just one of those cases?

20:44

And I'm completely oversimplifying,

20:47

but just to have a teaching

20:49

moment. Maybe all the labs bought

20:51

all this stuff they need and

20:53

they're good for a while and

20:55

then... Your stuff will start

20:57

to run out and then you'll need

20:59

to buy more right so you can

21:02

those those type of things that sounds

21:04

so simple But you do see it

21:06

we saw it with the the semiconductors

21:09

and and the way that the whole

21:11

automotive shortage during COVID really had an

21:13

affected thing so Yeah, it's weird something

21:16

that like a company that you

21:18

wouldn't think would be like that

21:20

is a company like Apple If you

21:22

look at their revenues, they're like flat,

21:24

flat, flat, flat, boom to the

21:26

moon and then flat, flat, flat, flat,

21:29

boom to the moon. I can't really

21:31

explain that either, but it's just

21:33

for whatever reason, supply demand doesn't

21:35

work in the exact straight line like

21:37

we all like to think. You know,

21:39

we think of 10% growth or 11%

21:42

growth and just think it's going to

21:44

be this smooth. Okay, so I mean

21:46

if you're visa then sure or Google

21:48

share like for the rest of businesses

21:50

this stuff happens in ways and and

21:52

you can't really predict it and that's

21:54

why you have to be holding these

21:56

stocks for the long term because if

21:59

it comes all out. ones like it

22:01

can, then either you have the

22:03

stock and you get to

22:05

participate in that or you

22:08

don't. If you're constantly

22:10

chasing these big up

22:12

swings, then you're constantly

22:15

already missing it.

22:17

Like you're already missing

22:20

the big, the big, whatever

22:22

it is, the big, whatever

22:24

that is, you're just missing

22:26

it. And so. Don't try

22:29

to chase that, but instead if

22:31

you stay disciplined with valuation, you

22:33

can still have that. I just,

22:35

I can't tell you how to.

22:37

It's just buying what the margin

22:39

of safety allows you to have that.

22:41

And I don't know, I just, it's

22:44

something I observed and maybe

22:46

it's just because we're living in

22:48

2025, or if the market's always

22:51

been like that, I'm not sure,

22:53

but yeah, it's just weird how

22:55

things happen in waves. Sunamis, not

22:58

even waves, Sunamis. Yeah. Sunamis, yeah.

23:00

And I think a lot of

23:02

that comes back to the mentality

23:05

of people in the market.

23:07

And if you're trying to,

23:09

air quote, time the market,

23:11

you're already going to be

23:13

behind. Because of, you know,

23:16

to your point, if you're trying

23:18

to catch the wave, if you're

23:20

trying to catch the wave, and

23:22

you don't time it correctly, you're

23:25

gonna miss. And you may get some

23:27

of it, but you won't get all of

23:29

it. And if you're constantly

23:31

trying to do that, that's a

23:34

really, really hard place to be.

23:36

And studies have shown that if you

23:38

invest, if you own great

23:40

companies for long periods of time

23:42

and you buy them at a

23:44

good price, you're gonna do well. And

23:47

doesn't mean that it's always

23:49

gonna go up. to the right.

23:51

You're going to have periods where

23:53

companies or industry sectors

23:55

are going to struggle and

23:58

Buffett and Munger have both talked

24:00

about, I think, at least two

24:02

or three 50 % drawdowns in

24:04

Berkshire and the time that they've

24:06

been with the company. And so

24:08

that's 50, 60 years. So having

24:10

the fortitude to handle, I mean,

24:12

that's their investment. That's their business.

24:14

That's their livelihood. That's a little

24:16

different than us, but not a lot.

24:18

Being able to withstand those takes a

24:20

lot of fortitude and a lot

24:22

of understanding what it is that you

24:25

own. Sometimes a company like Visa

24:27

will drop, and it's not

24:29

necessarily because they're not performing.

24:31

It's because other factors in

24:33

the economy, the sector, maybe

24:35

market sentiment, a pandemic, there's

24:37

lots of things that can cause

24:39

companies to drop for for unwanted reasons.

24:41

But the trick is to really

24:43

understand what it is that you own.

24:46

Again, it comes back to understanding

24:48

what you're doing. If you do understand

24:50

that you're buying and selling companies

24:52

as an owner of a business, that's

24:54

a different than trying to understand

24:57

and own a ticker or a symbol

24:59

on your phone. That's a different

25:01

mentality. And when you think about it

25:03

the way that we try to

25:06

think about it and try to teach

25:08

and the people that we enjoy and

25:10

have learned from do

25:12

the same, that's a different mindset.

25:14

And it's a different mentality. And

25:16

that's how you can find companies

25:18

that are unloved. And that's part of

25:21

the value investing creed is to

25:23

try to find things that are unloved,

25:26

understand them, buy them at a good price,

25:28

and then wait. And that's

25:30

the hard part, right? We all want

25:32

to do stuff. We want to

25:34

do things. We feel like if we're

25:36

not doing something that we're not

25:38

being active, and we're not participating in

25:40

the growth of particular company, and

25:42

it's hard to let Satya Nadella

25:44

do all the heavy lifting

25:46

for Microsoft, and for us not

25:48

to do anything. But ideally,

25:50

that's what you want to do is buy it and

25:53

let him do all the heavy lifting. And you just

25:55

sit back and enjoy the fruits of his labor. This

25:57

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28:03

come from? Yeah, and you know,

28:06

I'm just gonna say it. I

28:08

think that's a bit of myopic

28:10

thinking. We all, because I've

28:12

done it too. We all

28:14

think that everybody thinks like

28:16

we do. We all

28:18

think that everybody's trying

28:21

to. fine buffet type

28:23

stocks or high growth

28:25

stocks or big compounder

28:27

stocks. And that's not

28:29

the case. The market

28:31

has so many different

28:33

investing timelines, so many

28:35

different temperaments, risk appetites, career

28:37

goals even, all of these

28:39

things. Even you go down

28:41

the path of like pension

28:43

funds and hedge funds and

28:45

needing to smooth out their

28:48

returns because they have investors

28:50

Withdrawing and all of these

28:52

things and so you will

28:54

see stocks like I mentioned

28:56

Dix sporting goods or Taiwan

28:58

semi who will have either

29:01

narrative or real-life business Changes,

29:03

but you also just have

29:05

little small things too that can

29:07

change certain subsets of traders

29:10

or investors that affect the

29:12

stock price. So a unloved

29:14

stock that a Warren Buffett

29:16

or a Chuck Ackery would

29:18

never touch can still go

29:21

up in price, shocker. You

29:23

know, like just because we

29:25

have these particular rules for

29:28

ourselves or ways that we do

29:30

things, it's very easy to get

29:32

in this myopic circle that we

29:34

think. so many other people invest

29:37

and look at a stock the

29:39

exact same way that we do.

29:41

And that's just not the case

29:44

whatsoever. And so I think this is

29:46

a little bit of black and

29:48

white thinking like a stock is

29:50

unloved and then it's loved or

29:52

you know and as if there's

29:54

just that switch and there's nothing

29:56

in between when in fact a

29:59

company can go. from let's say

30:01

everybody thought it was going to grow

30:03

at 3% a year and now everybody

30:05

thinks it's going to grow 5% a

30:07

year and I could double triple the

30:09

stock but maybe that's still not

30:11

the type of stock you want to

30:13

own because you don't want to compound

30:16

that 5% a year. So just to

30:18

use as an example that you can

30:20

see that and I think it plays

30:22

out a lot in the stock market

30:24

and if you kind of have

30:26

more of an open mind

30:28

and open viewpoint to the

30:30

different types of businesses and

30:32

just the wide range of

30:34

outcomes that there are, both

30:37

in valuation and in just

30:39

the businesses themselves, I think

30:41

that helps understand why you

30:43

see these huge swings and

30:45

why there's these last puffs,

30:47

as the person put it. Yeah,

30:49

I totally agree with that. I

30:51

think a lot of times that

30:53

we are a we can be

30:56

an amalgamation of the people that

30:58

we surround ourselves with. And in

31:00

today's age, if you think about

31:02

the echo chambers that we can

31:04

all experience in a social media

31:06

environment, for example, and I spend

31:08

a fair amount of time on

31:10

Fentuit, and there are different narratives

31:12

that go on in that world, depending

31:15

on who is showing up in my

31:17

timeline. And I'll give you a couple

31:19

of examples a few years ago, or

31:22

maybe even a year ago. a company

31:24

called Celsius was All the Rage. Everybody

31:27

was talking about it. I wasn't because

31:29

I don't know the company and never

31:31

learned about it and not my thing,

31:34

but there are a lot of people

31:36

talking about the company all the time.

31:38

And the company has seen a downturn

31:41

in fortunes. I don't know exactly why

31:43

again, I don't follow the company, but

31:45

Now you can't go on ventuit and

31:47

find it. You have to search to

31:50

find somebody talking about it, whereas maybe

31:52

six months to a year ago, every

31:54

third post was about the

31:56

company. Now everybody's talking about

31:58

Palantir or hymns. And that's what

32:00

everybody's talking about. And so if

32:02

you're in that echo chamber, you

32:04

think that that's all that really

32:06

exists is those companies and what's

32:08

going on with those businesses. But

32:10

there's a wide, wide, wide range

32:13

of companies out there that nobody

32:15

knows about, nobody hears about, that

32:17

have fabulous returns. Andrew

32:19

talked a while ago

32:21

about WD -40 and

32:24

what a great company it was and

32:26

what a great returns it had. And

32:28

I don't think any of us in the investing

32:30

world, I had never heard anything about it

32:32

until Andrew brought it to my attention. I

32:34

was like, what? So

32:36

I think it just showcases that the

32:38

popularity can come and go and it

32:41

really can depend on the echo chamber

32:43

that you're in, especially now in this

32:45

day and age of social media. And

32:47

one of the ways to combat that

32:49

is try to make sure that you

32:51

widen your echo chamber as much as

32:53

you can and try to listen to

32:55

as many opposite voices that you may

32:58

not normally listen to to help

33:00

give you a more balanced opinion

33:02

or thought on things. Because if

33:04

you surround yourself with 10 like

33:06

-minded people that are all talking

33:08

about a particular company, let's say

33:10

it's American Express. Great business, great

33:13

investment, love the company. But let's

33:15

just say everybody's talking about American

33:17

Express. You may not even think

33:19

about Visa and MasterCard because it

33:21

just doesn't even enter your circle

33:23

of knowledge because everybody's talking about

33:25

this one particular company. And that

33:28

doesn't mean that those other companies

33:30

couldn't provide you with a good

33:32

return. But you just have to be

33:34

aware of where the echo chamber

33:36

is and how much that can impact

33:38

the short -term results of different companies

33:40

and whatnot. And that's one the

33:42

things that I admire about Buffett. Because

33:44

he wasn't in New York, he removed

33:47

himself from that echo chamber.

33:49

And so his echo chamber was

33:51

he and Charlie or any

33:53

friends that he had. And he

33:55

read a lot and he

33:58

would ignore companies. He would pick. different

34:00

companies and whatnot. His investing style has

34:02

changed certainly over the years, but the

34:04

foundation of what he does has not

34:06

really adjusted much. And so I think

34:08

when you're trying to find investments or

34:10

looking for investments, kind of be aware

34:12

of what kind of investor you wanna

34:14

be, where you are in your. evolution,

34:16

if you will, and try to make

34:18

sure that you're not listening to the

34:20

echo chamber. One of the things about

34:23

value investing is the best way to

34:25

find good investments is to go the

34:27

other direction. So if everybody's talking about

34:29

Palantir, for example, you can go another

34:31

direction. And always remember, you don't have

34:33

to invest in what everybody else is

34:35

investing to get a good return. I

34:37

have come across plenty of companies. We

34:39

talked about W.D.40. I think I mentioned

34:41

Chenier Energy a while back for the

34:43

last five years, a 30% return. I

34:45

had no idea. Never heard of it.

34:47

Nobody talks about it. Just shocked the

34:49

heck out of me. So there's lots

34:51

of great opportunities out there. You just

34:54

have to keep an open mind and

34:56

make sure you keep your eyes open

34:58

and look as much as much as

35:00

much as much as you can. Yeah,

35:03

and I think investors, just as

35:05

a general overview broad brush paint

35:07

things, saying that the past is

35:09

going to be, whatever happened in

35:11

the past is what's going to

35:13

happen in the future. And how

35:16

I feel about a stock is

35:18

what has happened in the past.

35:20

And that's a big lie too.

35:22

It's so much easier to look

35:24

at the numbers of a stock

35:27

and get excited and then start

35:29

drawing up narratives. then it is

35:31

to actually like try to find

35:33

narratives that are unbiased. Like you'll

35:35

always find the greatest stories with

35:37

the stocks that have done the

35:40

best. And then once they become

35:42

dead money, then all of a

35:44

sudden the happy stories go away.

35:46

Well, shocker. So you just you

35:48

have to be very careful because

35:50

and that can be it could

35:53

be a great business too. It

35:55

could be a business that has

35:57

like an invidia type business that

35:59

ten X. they're operating income or

36:01

something. The stories will be there,

36:03

whether the stock price follows it

36:06

or not, but notice how the

36:08

stories change if the numbers start

36:10

going in the other direction. All

36:12

of those stories are always there.

36:15

A company has lots of stories,

36:17

positive and negative. You'll just see

36:20

the negative ones reach the surface

36:22

in the echo chamber. when the

36:24

stock or the business is stumbling.

36:27

You'll see all the pauses rise

36:29

in the echo chamber when the

36:31

stock's killing it and and the

36:34

company is growing like a weed.

36:36

So just be careful with that

36:38

too. I think I think the

36:41

rear view mirror syndrome is very

36:43

strong when it comes to how

36:45

people feel about businesses. Is there

36:48

a name for that bias? Is it

36:50

hindsight? I mean, yeah,

36:52

probably. Yeah, hindsight bias

36:54

is like, oh, you know, I yeah,

36:56

I look at hindsight bias

36:58

a little bit differently, but

37:00

that could be that could

37:02

be the actual definition. I

37:04

don't know. Yeah, yeah, I agree. That's

37:06

a good. That's a I think

37:08

that's a really good

37:10

explanation. Yeah. Well, that will

37:13

wrap up our show. We

37:15

hope you found it helpful.

37:17

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37:19

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37:21

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37:25

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