(Ep.108) The Acquirers Podcast: Evan Tindell: Expected Value, Value Investing, Poker Pro And MIT Mechanical Engineer

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In this episode of The Acquirers Podcast Tobias chats with Evan Tindell, co-founder of Bireme Capital. During the interview Evan provided some great insights into:

  • Value Investing: Quality At A Reasonable Price
  • Finding The Next ‘LeBron’ Stock
  • From Poker Pro To Value Investor
  • Punishing The Mistakes Of Other Investors
  • What Caused The Value Spread
  • Capitalising On Representativeness Bias
  • Sum Of The Parts Investing
  • The Art Of Position Sizing
  • Time To Stop Working On An Idea And Move On
  • The Difficulty Of Investing During Covid

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Full Transcript

Tobias: Hi, I’m Tobias Carlisle. This is The Acquirer’s Podcast. My special guest today is Evan Tindell from Bireme Capital. We’re going to talk value investing, poker, MIT coming up right after this.

[intro]

Tobias: Bireme is an interesting name. Why is it called Bireme?

Evan: Bireme is an ancient Greek warship that is agile enough to do damage, but sturdy enough to last in troubled waters. We thought it was an apt name and all the Greek gods were taken. Then the other thing is that me and my business partner, two people and there’s two sets of oars, which distinguishes it from a Trireme, we thought it fit.

Tobias: It’s a wealth management firm, but you’ve run a hedge fund like strategies, and you’re responsible for the fundamental value strategy, which is what we’re talking about today.

Evan: Right. My title is Chief Investment Officer, which doesn’t mean much where there’s only two people. Someone had to be CIO, and someone had to be CEO. I decided to take CIO. But yeah, I spent all my time basically on the fundamental value strategy, which is like a bottom-up stock picking strategy.

Tobias: Well, let’s talk about that. What are you looking for when you’re hunting? How do you characterize the style?

Punishing The Mistakes Of Other Investors

Evan: Yeah. I basically think that mispricings in the market are caused by mistakes that people make. I used to be a professional poker player, which we can get into at some point. I see investing as essentially a game like poker. I know you play chess as well, and chess is the same way where the way to win at any of these games is, you have to see the mistake the other players make, and you have to punish it.

We think that the only way to outperform the market is by punishing the mistakes of other investors, and we try to look for those mistakes in the market, and we think they fall into common themes that are related to cognitive biases. If you’re familiar with like, Kahneman and Tversky, they categorize this long list of cognitive biases that are basically glitches in the way human beings think that are there because we evolved to not get eaten by tigers, rather than plan for the long term. We’re geared to see one tiger and then expect a tiger every day or see, the obvious thing that is it’s like looks most threatening, without really delving deeper to understand if you look under the hood is it’s such a problem. It just has to do with the risk rewards of the environment that we evolved in, but it caused these glitches to be buried deep in our psyche.

We think the way to repeatedly find undervalued stocks is just by finding situations where we can really articulate how the stock is mispriced and what the cognitive biases that’s driving it, and that’s the hunting ground that we like to prey on.

Capitalising On Representativeness Bias

Tobias: There’s two ideas there. There’s the cognitive bias that’s creating the opportunity, and then there’s the mispricing. Let’s talk about the mispricing first, how are you assessing a mispricing? Are you looking for deep value to liquidation? Are you looking for compound growth?

Evan: I do DCFs on everything. I’ll look at comparables, I’ll use multiples as initial screen. I love looking at as an example bombed out industries or industries that just have a low multiples in general and trying to find that that one company that’s not really like the other ones, that’s not– we call that representativeness bias where investors just see a group of companies that are the same, and trade them all at 8 or 10 times their when there’s one, that’s really different. The example of that that I like to use is Apple. It’s super popular now because now Apple trades at 30 times earnings, but back in the day everyone said, “Hey, Apple’s a hardware company,” because when you buy an Apple product, you buy a phone, but really, you’re buying the software. When my mom buys a iPhone, she’s buying it so that she can Facetime us, not because she cares about the bezel or whatever.

[chuckles]

Evan: If she could get that Facetime somewhere else, android might have a chance with her, but they don’t. We like to look for things like that where there’s an entire industry that’s bombed out and then we’ll try to wrap our mind around whether it truly is a cognitive bias. Because obviously things are cheap all the time for reasons that are correct, but we spend time trying to work through whether we think that this in the case of representativeness bias, whether we think the business is actually different than the other ones. Then, we’ll do a DCF, and just make sure that we think it’s cheap and has a double-digit IRR going forward and so we just try to build a portfolio of 10 to 15 stocks where we think it has a double-digit IRR and we have reason to believe that the market is mispricing it in that way because of these cognitive biases.

Sum Of The Parts Investing

Tobias: These tend to be undervalued businesses in the sense that you’re not looking at balance sheets that have got some unlocked value, you’re looking for businesses that are just being misunderstood?

Evan: Yeah. I would say we will look at balance sheets, we’ll look at sum of the parts stories, I will look at that, but for me personally I always want to see it pencil out to free cash flow at some point. A good example is, we were long Fox a few years back and that obviously ended up well because they ended up selling the company to Disney, but it had a really good sum of the parts story. The sum of the parts story was they owned a variety of assets that had some of them had pretty good current cash flows whether it was Fox News or some of their cable channels or the movie business, but they also had some other things that we thought were very valuable and not captured in the valuation of the company, but also, we’re going to generate revenues and profits down the line we thought. The good example is they owned the largest satellite tv company in India called Star India. They were growing pretty quickly, and the profitability was going up quickly, and so you could actually– not only wasn’t a sum of the parts if you added up the value of all the pieces of the business, but it also was going to pencil out to free cash flow over the five-year timeframe.

I think sum of the parts gets a bad rap but 90% of it is because people are just slapping multiples like 11 times EBITDA on things that aren’t making any money and it doesn’t make any sense to me. You can have a sum of the parts, but it needs to– if the part is worth $5 billion, at some point it has to generate cash flows. In the case of Fox, it was a little tricky because they owned a big– something that was really valuable was– I think it was 30% of Hulu and that was probably going to generate losses for a while, but basically all of their other businesses that were hidden assets were on the cusp of making money. We do sum of the parts and things like that, but we always want it to pencil out to free cash flow, that’s my bias in that way, that I like to see the actual IRR.

The Art Of Position Sizing

Tobias: When you’re constructing the portfolios, you said 10 or 15 holdings, so how do you think about sizing, how do you think about diversification?

Evan: I think the data shows that the benefit of diversification goes away pretty quickly beyond 10 or so names as long as you’re not buying 10 stocks in a single sector because as long as the stocks are relatively diverse in what they do and are moving– of course, they’re going to move with the market, but that’s any portfolio. If you have 500 stocks, they’re still going to move with the market to some extent. But if the 10 of them have different key factors that are driving the business, the benefits of diversification, I think, goes away pretty quickly, just statistically. We think that’s our sweet spot for being able to– especially as one person being able to research that many companies deeply or research any more than that deeply, it’s just nonexistent, obviously. We size things. We’re willing to size it and just come in– We’re willing to come in with a 10% position right away as long as we’re comfortable with the valuation. We’re obviously pretty picky about the stocks that we buy, if we’re comfortable with the story.

For me, I’m not a huge believer in taking a toehold position to monitor the stock, I don’t see why you can’t just monitor– I get that when it’s real money, it’s a little different. Just put it in a spreadsheet, man, it’s like, you can monitor it fine, I think. [laughs] Just have a watchlist. We’re willing to come in with 10% positions, it gets a little bit trickier. A couple of the stuff we bought in March of last year, tested our concentration limits, I should say, because of how much they ran up. That’s an art more than a science right of when to– It’s a great problem to have, obviously, to have something that goes from a 10% position to 30%, but then it’s like you have to make the really hard decisions about short term versus long-term gains. How much risk you’re willing to take in one stock, if it’s to not impose that tax cost on your clients, and so those are really difficult decisions. But yeah, we like bigger position sizes, for sure.

Tobias: Yeah. How do you think about trimming? It’s a tax and risk equation.

Evan: I think every situation is different in that regard. Having a hard invest rule there is a little bit silly, because it all depends on the price. We have stock go from $7 to $70 since March of last year, and so it’s nice to think that you always want to take long-term gains, but when the stock is up 10x, sometimes you have to just trim the position to make it not be an unreasonable part of your portfolio, and the valuation’s a lot different. This is something I hope we get into because I hear you talk about it with Bill Brewster all the time. The whole never sell thing, and I hear you, I always know that you’re going to push back a little bit against it. But honestly, it’s completely a product of the last 10 to 15 years. Everyone that has looked at price first– I actually got banned– not banned, some guy blocked me on Twitter, because he said, “Everyone post your lessons learned the past 5 to 10 years.” I retweeted it saying, “Look at this list, it’s a list of all the things that you hear at the top of the bull market.” I never look at price. I only look at business quality. I only buy growth stocks, stay away from banks, energy, and cyclicals. There’s a whole list of things, and the last 10 years has just been like a filter on the investment world, the portfolio manager world.

The only ones that move for the most part, the only ones that have come out on the other side with any assets or willingness to discuss things on Twitter without embarrassing themselves is people who are focused only on growth, and yeah, growth and how much the stock has gone up in the past year.

Tobias: And quality.

Evan: And quality. Yes.

Value Investing For Quality At A Reasonable Price

Tobias: Quality is one that I still struggle with a little bit because I see the– there is this– quality trades at nosebleed levels, but there’s quality doesn’t seem to be driven by valuation. I don’t know if that’s something that– to your point, that that’s something that’s like a more recent phenomenon or if that’s something that has been enduring, but there are a lot of guys out there who I think are very good investors who are purely focused on quality. We jokingly call it quality at a reasonable price. I don’t think there’s anything wrong with it. I just have a little bit of trouble doing it because it just goes against my nature to pay any price for quality.

Evan: Yeah, I would say that we vastly prefer– I have a strong bias for low prices, but I have historically been willing to pay up a tiny bit for some amount of quality. I try to pay up with my time searching for the next thing to find the quality. As an example, we own a hospital a company called HCA Healthcare. The thesis there is basically that for-profit hospital business is pretty tough unless you’re at a really big scale, and they’re at way better bigger scale than just about anyone else. They’re going to earn $11 this year, and the stock was trading for the longest time at $80 to $90 and then dropped to $60 during COVID in March. I think if you look at that business, it’s consistent for– The thing is it’s not going to knock your socks off in terms of the growth, it’s 4% to 5% revenue growth, but with a pretty long– the hospital business is insanely huge. It’s a really long runway for growth. Now you’re paying 15, 16 times. We’re willing to pay up a little bit for things like that, but almost never more than like a market multiple.

Tobias: Yeah. I think of it’s sometimes it’s the other way around, there’s stuff that deserves a discount, and you’ve got to work out whether that is sufficiently discounted from its deserving discount.

Evan: Right. Yeah, those historically, our value investing strategy has done a little a good bit better than statistical, than just naive value or whatever you want to call it, whatever the indexes are. Potentially, one reason for that is because we tend to not traffic in the absolute bottom of the barrel in terms of quality, and just say like, “Oh, is it extra discounted?” We’re probably somewhere in between quality for a reasonable price. [chuckles] It’s discounted significantly for reasonable quality, I’d say is–

Tobias: That’s a catchy acronym. I’m sure that’ll take off.

Evan: Yes. I’ll forward that right to our marketing department, which is also me, but–[laughs]

From Poker Pro To Investing

Tobias: Let’s get back to the start. You’re a poker player. Do you say you’re a poker pro?

Evan: The weird thing about poker is it’s a little tricky to talk to some people about poker because literally anyone can call themselves a poker pro. Sometimes, it just means like an unemployed 25-year-old who’s just living on their parent’s money. I was a pro in the sense that I was paying for all my own expenses and putting some money away and living– well, I look back on it, and I definitely should have been living somewhere cheap, but I decided to live in in New York City with my friends who were in finance. [chuckles]

Meanwhile I was playing online poker only, so I could travel around, it was completely foolish. The problem is when you’re when you’re a professional poker player, you have to have– you’re very conscious of risk and reward at the poker table, but you’re a little bit numb to small losses or small expenses. You have to be. It’s just like managing money. You can’t sweat every 1% move in the portfolio, or the only thing you’ll do is watch the portfolio all day. In poker, it’s the same thing where you can’t sweat losing $100 or you can’t play the game. Unfortunately, for a 22-year-old that meant that I never sweated spending $20 on cab rides or living in New York City, and I probably spent way more money than I should have for the mobility of my job, I guess. It was fun.

Tobias: What do you play, the [crosstalk] or anything interesting like that?

Evan: I was playing mostly five–

Tobias: Hold’em. Everybody’s playing hold’em, right?

Evan: The thing is so many more games. There’s so many more hold’em games, especially back then. Although in the real boom days of party poker, you could get a ton of PLO games going. I was always– the level of competition in the volatility of your results at hold’em are I think better. Although I’m not an expert in PLO, so I’m not sure. I always put 510 to 2550 blinds, no limit online. Like $1000 to $5,000 buy in depending on what games were going. Sometimes, you just wait around and there’ll be no good games and you play for two hours. It’s weird like that.

Tobias: If you’re a pro, you’ve got to be careful because you’re trying to make money, you don’t want to be– the nice thing about hold’em is it’s just the entry level game. There’s lots of people who don’t really know what they’re doing playing hold’em. Whereas once you get into PLO, it’s just a little bit more exotic and it’s maybe someone who’s–[crosstalk]

Evan: Yes. I think that’s– [crosstalk]

Tobias: -they know what they’re doing.

Evan: You can get the really insane gamblers, but they usually know what they’re doing a little bit. You do get the really insane gamers, but I do think they usually know what they’re doing– [crosstalk]

Tobias: PLO is a little bit more fun, I think, because it’s a little bit more action, and you’ve always got some big drawing hands [crosstalk] people’s hands for longer.

Evan: Yes. It–[crosstalk]

Tobias: [crosstalk] -hands at PLO hands, right?

Evan: Actually, it reinforces it I guess maybe it rewards someone, the natural bias towards– It’s action bias. We have a catalogue for these things, obviously. In poker, the biggest mistake people make is action bias. People just can’t sit there. I think it’s the same thing in investing. People just can’t sit there and do nothing. People just can’t sit there and own some boring regional bank and watch their money grow at 8% a year. They want to buy the hot thing. Just like PLO can reward that sometimes, I think the market has been rewarding that for the past 5 to 10 years that sort of the action bias.

Tobias: I mean, that’s the nice thing about PLO. You throw away the lows straight or you throw away the low end of the flush, because there’s a good chance that the top end of that is hanging out there somewhere still on the table.

Evan: Yeah, you can get punished heavily if you– it seems like it’s rewarding your action bias because you always have a “good hand.” What the bad players don’t realize is that–

Tobias: Everybody [unintelligible [00:22:26].

Evan: -the bar for a winning hand is a way higher, so you end up getting crushed with hands that would obviously, whenever you pull them hands.

Tobias: How do you transition from online poker to value investing or investing?

Evan: I made enough money playing poker that I started to not be able to use it all at the table. Obviously, in poker, it’s super important to manage your risk, it’s equally or more important than managing risk in an investment portfolio because at the end of the day, if you lose your bankroll, that’s the end of the game, that’s it. Or, if you even lose half of it, and then you have to drastically move down in stakes, and it’s all your money, too. There’s a huge incentive to really manage your risk well, but I had made enough money that I could set some aside as not my money at the table, not my poker bankroll, and other money that I just needed to do something with rather than sit in a bank account or nothing. I had taken some finance and economics courses in college, so I was familiar with that world a little bit. I had a friend in college whose– he was a finance major in college. At MIT, we call it by numbers. He was a course 15 major. [laughs]

Tobias: That’s great marketing, too. That’s very MIT.

Evan: Yes, it is. Yeah, I was course 2, which is mechanical engineering. He was a finance major, and so I just started talking with him about what am I going to do with this money. I think he sent me the Intelligent Investor or security analysis or something, and it immediately resonated with me because it’s so similar to what you do in poker. In poker, the world is full of charlatans, and people spouting nonsense and terrible strategy books, just like investing. I don’t understand how they all get published. I guess the people that are publishing them have no expertise in the field. It’s like they don’t know really know what’s– and they’re just trying to see if it’s something that sold last year or whatever. You just get all these terrible books. But there was one set of books that espoused a more rational, by the numbers–like a thinking man’s strategy for how to play that had some theoretical frameworks around, the mathematics of the game. Once I found this set of books, it was actually–

Tobias: Like, Doyle Brunson’s books or something like that.

Evan: I wasn’t a huge fan of Doyle Brunson. Doyle Brunson was better than most but not part of this publishing firm, the firm was called Two Plus Two Publishing. They had a website, the guy’s name is David Sklansky. He wrote the theory of poker, sort of like the security analysis of the poker world, I’d say. It just immediately spoke to me, because I was like, “Oh, I’ve seen this before.” Everyone else is doing dumb, crazy stuff, and here is someone that’s trying to actually make a rational strategy out of it. All the rest of this is just obvious nonsense about sell in May and go away, or whatever. [laughs]

Tobias: Swing trading.

Evan: Swing trading and candles. There’s just so much obvious nonsense out there, that it really spoke to me when there was this real method. So, I started getting into that, and looking at individual companies and trying to figure out what to invest in. Meanwhile, this was 2007-2008, so it’s a pretty strange time to try to figure out what companies are worth and make my first initial investments. I’m sure I made some horrible trades back then that I wish I could take back. The weird thing is that at the same time, the poker world was crumbling, at least the online poker world because it was becoming–

Tobias: Was that the crackdown? Was that when they started cracking down–?

Evan: Yeah, in 2006, Senator Bill Frist, I’ll never forget that guy’s name, or, he might be a house representative, it doesn’t matter. Bill Frist inserted this language into some other bill, I think it was just part of a larger bill that tried to ban online poker in the US, essentially. What it did is, I don’t think it didn’t make it technically illegal for individuals to play but made it illegal for any US entities to be involved. You now had this hurdle to go through where you had to send your money to some online shell company that was–[crosstalk]

Tobias: Cyprus. [chuckles]

Evan: In Cyprus or I think it was Costa Rica, or something. Unfortunately, the bad players just weren’t going to go through that. All the internet companies know, you put a little bit of friction in the process of putting your money onto a site, and over time, that just makes it smaller and smaller. It’s just like a grain of sand in the gear. What you had the worst players were just like, “Ah, screw it, I don’t want to go through the hoops.” Then, the next level players found themselves to be the worst players on the site. It was just a natural thing where there wasn’t any more money coming in, really. The players became better and better. It could still be done as a job by good players, but it was becoming a lot less lucrative. I started to think about, “Hey, maybe I’ll join the real world.”

At the end of the day, the investing world is just such a wider surface of interesting things to think about. I was comparing it to games like poker and chess. It’s just such a more multifaceted game. One day, you’re learning about a pharmaceutical company, the next day you’re learning about Indian stock exchange, or whatever. It’s just an infinite number of things to learn about. I just immediately thought it was more compelling than the game of poker just long term. I think it probably also, it definitely helped my relationship with my now wife as well, and we’ll have to see if she listens to this, this will be a test. But she tolerated the poker thing, but I think me being able to travel around, she couldn’t, she was in med school at the time. Her family loved me or whatever and luckily, they thought I was smart, it wasn’t like a total knock against me, but it was a little bit of a knock. It was a little bit of knock. I think her parents both have PhDs from MIT, her family all have very prestigious jobs and whatnot, so it was going to be a little bit of a headwind on the relationships. I think it was probably also good from that aspect.

Tobias: You became a value investor, and then now you have a decade, value is even worse.

Evan: Right. [laughs] Little did they know that value investors were about to become the black sheep of the– [crosstalk]

Tobias: I tell my mom I play a piano in a brothel here.

Evan: [laughs] That’s right. They weren’t attuned to that whole dynamic.

Stop Working On An Idea And Move On

Tobias: Let’s go back to building portfolios. The interesting thing, and I agree, the interesting thing about investing versus any of the games is that the games are sort of there’s only one mode of playing whereas with investing you’re doing lots of different things all the time, but we’ve also got this problem where you’ve got an overwhelming number of things that you can be doing at any one period in time. How do you source what you’re going to do, filter what are you going to do, validate, what’s that process look like?

Evan: Yeah. I’d say that is probably by far the hardest part of investing. I guess it’s probably just any job, but this is the main real job I’ve had in life. The hardest thing in investing, in being a portfolio manager is when do you stop working on this idea and move to the next one? When do you decide that you either know enough to pull the trigger? The price has moved against you so much that’s no longer worthwhile or you just decided you’re never going to be able to know enough about the name? I feel there’s not really a good answer I feel it’s more of an art. One thing that definitely helps is, having this cognitive bias framework tethers me to things where I feel that could be– I have at least an explanation for why that could be the what’s going on, so that points me into certain types of situations, but we have a few methodologies for finding those situations. I think I mentioned earlier, I like to look at beaten down sectors and just comb through those names and trying to figure out which ones might have the irrationality going on.

COVID was a huge curveball to probably everyone’s investing strategy. It was like all of a sudden, I went from wanting to spend months or longer researching a company before I pull the trigger to saying, “Hey listen–” and I think this is the hard part where you can’t be too dogmatic in what you’re doing in the investing world, but the prices were so insane that you had to change the rules. You had to change what you were doing. You couldn’t wait around and say, “Hey, I want to follow this company for six months,” because if you waited six months between June and November, you didn’t invest in any of the stocks and that’s probably what Buffett did. I know there’s some debate about whether you should be criticized for that. I think it was not easy to just say like, “Hey, we need to drop everything and start pulling the trigger on some things a little bit faster,” but that I think was a strategic decision that ended up working out well, but who knows? It might have not.

The other good thing for us was some of the stuff that was getting really beaten down with stuff that we owned. [chuckles] It was stuff that we were doubling down on that we already knew really well. An example was HCA, where we owned it and it was a pretty big position. But then, the stock went from $100 to $60, and we were like, okay, we’re pretty sure during this pandemic, hospitals are going to be made sure to be fine.

Tobias: This will be a good business.

Evan: People were thinking that because they were going to get overwhelmed by the COVID patients and then they people couldn’t pay their bills and if people were unemployed, then everything’s going through Medicaid, which is Medicaid which is lower reimbursements. It turned out basically none of that was true and they earned like $11 this year versus to where the stock was trading at $60. I think we got lucky that some of the stuff– I mean, lucky. At the time, it felt terrible because it it’s like, “Oh, we’re getting to double down on things that we already own,” but we were puking. It was not fun to be down 30% or whatever it was in March, or maybe it was 35%, I forget what the ultimate number was. I think at one point in March, I was looking at this the other day, in the fundamental value strategy, we had done pretty well– I’m going to pull up a chart here, but we had done pretty well for clients, and then at one point, clients had only gained 17% net from the inception of the strategy in 2016. It’s obviously been an insane ride since then, but it was completely terrifying to be doubling down on those stocks. Meanwhile– [crosstalk] Oh, go ahead.

Tobias: Just don’t look at your compound returns at the bottom, it’s just to–[crosstalk]

Investing During Covid

Evan: Yeah. I made this joke on someone else’s podcast that the thing this time was, your stocks were punching you in the face, your investment returns, and meanwhile you had little kids throwing things at you and running around, you’re trying to click the mouse to make a trade while pushing your six-year-old back, they’ll be like, “What are you doing, dad?” I’m like, “This stock, we’re putting in a buy order at $6.77 when it should be trading at $20. You’ve got to go upstairs with mom right now.” Meanwhile, my wife has patience, she’s a doctor, so she’s on virtual calls with people.

What Caused The Value Spread

Tobias: That was a rough time. One of the things we talked about just before we came on was the spread in value. Is that something you guys follow closely or what are your thoughts on that?

Evan: Yeah. We do follow that pretty closely. It’s something that we look at both to just set our mind straight in terms of how we’re thinking about the portfolio, even in the qualitative strategies, even in fundamental value. It’s definitely something my partner who focuses more on the other quantitative strategies, we’ll look at even more for the quantitative for the quantitative strategies. But if you look at the value spread, which is just the spread between the valuations of the most expensive stocks in the last six months of stocks, it’s at all-time highs. It’s basically right where it was in 1999, and we think that, and I’m sure you agree, that it’s probably the best time relative to “growth investors,” it’s probably the best time ever to be invested in these value stocks, at least as far as we see the go-forward returns.

Tobias: How are you assessing that? That’s not just price to book, you’re using a variety of measures.

Evan: Right. It’s a composition of price to earnings, EV to EBITDA, EV/EBIT, I think price to book is in there as well. Price to EV to sales might even be in there as well. I think all of those things look the same right now in terms of how off the charts they are compared to historically.

Tobias: What’s the reason do you think, how did we get to this point?

Finding The Next ‘LeBron’ Stock

Evan: I think it’s just the old adage of a good thing taken too far, like a kernel of truth taken to the extreme. In our letter, we grouped the growth stories in the market today in a few different buckets. One was the transcenders, which was these companies that really do have moats and really do have huge margins and huge cash flows and which have been obviously, some of the best performing stocks of all time. This is Apple and Google and Facebook.

It really was true that if you just closed your eyes and bought those companies when they were knocking the ball out of the park, in terms of growth 10 years ago, you did end up with companies with huge profit margins, huge revenues, and huge investment returns. I think people see that, and they see not only the potential for that to happen, but they see the increasingly successful method of buying things that look like they might be able to turn into that. It doesn’t matter whether the companies actually end up generating the profits five years down the road, at least it hasn’t mattered yet, really. The best strategy was to go back in 2010 and buy Google, it’s like, “Okay, we can’t do that.”

Tobias: Or Microsoft.

Evan: Or Microsoft, or whatever. In 2015, let’s buy things that are growing that fast in our software– and the valuations weren’t that insane back then, relative to their potential. But nowadays, I think people have just seen that the results of that strategy has gone so well, despite the fact that most of those companies aren’t generating the Google-like profits, that they’re just piling in– they’re just bidding up the things that look like they could become the thing. It’s almost like someone sees LeBron James– the analogy being LeBron James is Google today, and saying, “Okay, well, if we can just find a 15-year-old kid that’s a really good basketball player in Akron, Ohio, who’s 6’7”.” It’s like okay, but then they’re paying him $10 million a year. Then, that guy becomes a college athlete and he’s doing okay. The next person says, “Oh, you’ve done well with that, I’ll pay him $30 million year because LeBron’s worth 50.”

Then, you have the next group of GMs, or whichever the analogous investors, they’re like, “Okay, but that 15-year-old in Akron, he was once a 7-year-old. maybe we could look at some other cities that are not like Akron.” There’s a company, there’s a city in China that’s similar to Akron, if you look at the demographics. Let’s go pay a $500,000 or a million dollars a year to this slightly taller than average Chinese person in Guangzhou. That’s the level that we’re at with some of these electric vehicle companies, I think.

Tobias: Yeah. That’s a good analogy. I like that.

Tobias: We’re coming up on time here, Evan. If folks want to get in contact with you, or follow along with what you’re doing, what’s the best way to do that?

Evan: I think probably the easiest way is to join the now 3000 Twitter followers that I have [crosstalk] 10 times the size of the Spartan army in 300. Yeah, follow me on Twitter. It’s @evantindell. Or you could go to our website which is biremecapital.com/blog, or I occasionally post things under CIO Corner, which is where my business partner allows me to post things that are overseen by him for polish and consistency. [laughs] Or, you can follow our corporate Twitter, which has way less followers.

Tobias: What’s your corporate Twitter?

Evan: I think it’s @BiremeCapital. It should be, if it’s not, that’s a mistake on our part, but just search Bireme Capital on Twitter and you’ll find it, I’m sure.

Tobias: Evan Tindell, Bireme Capital, thank you very much.

Evan: Thanks so much, Tobias.

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