In their latest episode of the VALUE: After Hours Podcast, Tobias Carlisle, Jake Taylor, and Ardal Loh-Gronager discuss:
- The Power of Qualitative Analysis in Investing
- Long-Term Value Investing: Strategy, Moats & Portfolio Management
- Spectrography & Investing: Finding Hidden Patterns in Light and Business
- EM vs. Developed Markets: Navigating Valuations & Future Opportunities
- China’s Luxury Market & The Power of On-the-Ground Research
- Investment Lessons: Exiting Angelalign Technology
- China’s Economic Shift: Entrepreneurship, Regulation & Market Risks
- China, Taiwan & the Changing Landscape of Consumer Behavior
- China’s Youth Unemployment, Patriotism & Economic Challenges
- Global Investing: Surprising Business Environments in South Korea & India
- Investing in Africa & South America: Liquidity Challenges & Opportunities
- Alcohol Stocks: Generational Shifts, Ozempic & Investment Risks
- The Perceptive Investor: Ardal Loh-Gronager
You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:
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Transcript
Tobias: We are live. This is Value: After Hours. I’m Tobias Carlisle. I’m joined as always by Jake Taylor. He’s in firm, so his face is not on camera. But he’s here in mind, body, spirit, just not face. And special guest today is Ardal Loh-Gronager of Loh-Gronager Partners. He’s written a brand-new book. It’s called The Perceptive Investor. It’s got an absolutely superb cover. My blue screen is not going to let us see it, but there it is. How are you, Ardal? Welcome.
Ardal: I’m very well, Tobias. Thank you very much. Thank you also to Jake. Thank you for having me. I can help you with that, because my green screen, I think is a bit further away-
Tobias: There we go.
Ardal: -so I can hold it up like this. [laughs]
Tobias: That’s a great looking cover. You can’t see it, but if you zoom in. The line is numbers, and there’s a red eye and a green eye on the back. It’s very clever. Tell us a little bit about the reason that you wrote the book, and what the book’s about.
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The Perceptive Investor: Ardal Loh-Gronager
Ardal: Absolutely. So, the book was actually never meant to be a book. It was written for a market of one, which was for me, I thought that– So, I have a library of roughly 400 to 500 finance and business books. I thought when I was starting out with my fund, it would probably make sense to write down my investment thesis or philosophy.
So, I don’t know how you read books. But when I read a book, I’ve always got a pen with me or a highlighter. So, I write in the margins as I go and I highlight sections. So, I thought a good start might be going through all the books and putting those into chapters with headings and then putting my own thoughts alongside them, because I’m a big believer that we don’t need to reinvent the wheel. We can learn from the grades.
So, what started as various different chapters actually ended up being 120,000 words and seemed to fit quite well into a book. The purpose of the book, what I realized, was to better understand my own investment philosophy, is I think ultimately successful investing comes down to temperament. And so, essentially, the book at its core is a book about temperament. And that’s why it’s got the title, The Perceptive Investor. So, here, perception, I think, is the ability of to simplify– It is the ability to look at the same information as everybody else, but to be able to project forward a different outcome or a different conclusion.
And then, the subtitle to the book, The Art, Science & Temperament. So, I think you take them in reverse order of importance, for me, temperament is the most important part. But I think the art and science of investing, the quantitative and the qualitative–
I think we spend an enormous amount of time in our community talking about what are the quantitative aspects of this business that make it a great investment or the market at the moment, high PE, low PE. Whereas I don’t think we spend enough time talking about the qualitative. I think it’s the qualitative analysis of a business that is where you get the real insight. And that’s where you can have a differentiated opinion compared to your peer group or to the market. Those are the three core themes that I try to delve into in the book.
And then, I should say, the book was released last week. I think the first few copies that we had uploaded to Amazon. So, I’m very grateful. There seems to be an audience of greater than one for this book.
Tobias: [chuckles]
Jake: Nice of your mom to buy all those copies.
Ardal: [laughs] It’s funny that you say that, Jake, because I did send a copy to my uncle who lives in Australia. He said to me, he said, “Ardal, it feels good, it looks good and it’s a fabulous cure for insomnia.” [Jake chuckles]
Tobias: It’s a good doorstep. The Art, Science & Temperament, talk to us a little bit about what qualitative insights that you are looking for and how you feel that can give you a differentiated view on a stock versus everybody else.
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The Power of Qualitative Analysis in Investing
Ardal: So, taking the question slightly broader. So, on a quantitative analysis, I think we’re all looking at the same information or data set. So, that’s why I just don’t think you can have very much of a differentiated view, if you’re only doing a quantitative analysis of a business. Because one person’s analysis to another when using the same information is going to be relatively similar, depending what assumptions you make in your DCF or calculations of the like.
But I think from a quantitative– sorry, a qualitative perspective, so here, we’re trying to look at the business overall and the numbers behind it. So, here, we’re talking about industry analysis, competitor analysis, management analysis. They’re all the softer factors that are much harder to quantify. I think that’s where your insight and your own experience, as an investor, which is my journey, is what I chronicle in my book, that’s where it gives you the Insight into a business that other people might not be able to see. You’re able to perceive a destination that others cannot see with the same information.
I think that comes to qualitative judgments. That’s where every individual investor has a different internal scorecard, whether they recognize it or not. And that circles nicely back to cognitive and behavioral biases. We’re all a product of our own upbringing, whether it be nature or nurture. Those fundamental life experiences, I think, form our own investment philosophies. I think how we apply those and how we understand ourselves is what enables us to make successful determinations about whether a stock is going to be a good long-term investment or not.
That’s why I think the journey that I went on through the book, which was essentially it was a target market of one, it was just myself, because I think at its heart, you have to understand your own strengths and weaknesses, you have to understand your own past mistakes and your own successes, because you don’t want to repeat the mistakes, and obviously, you want to amplify the successes. So, to do that, you really have to understand your own nature. I think that that comes down to an understanding of your cognitive and behavioral biases, and that is what influences your answers when you do a qualitative analysis of a business to differentiate your view from others in the market.
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Tobias: Tell us a little bit about your background, and how you think that informs your investment strategy.
Ardal: Absolutely. So, I’m sure you’re aware of these figures already. From the age from when we’re born to the time that we turn one, our brain doubles in size. It’s actually the fastest growing organ in the human body. Then, from the age of two to five, it essentially grows up to 80% of the size of an adult. And by the time we’re 7 to 10 years old, we’re at 100%.
So, during that time, your nerve endings are growing billions and billions of more synapses. So, we’re going wide. Your brain is exploring its feeling. From the age of 10 onwards to the age of 21, it actually halves the number of nerve endings in your brain. So, that essentially means during that period of time you’re going deep, you’re specializing. So, I think that fundamentally your upbringing from the age of 0 to 10 is very important in formulating not only your personality, which is essentially fully formed, but also how you would go about investing from a temperament perspective. So, I’d say a very differentiated childhood compared to most people.
So, my parents were entrepreneurs. So, I think that helps, because you have business as a topic of conversation discussed at the dinner table, whether you understand it or not. My parents migrated to quite a few different countries. So, by the time that I graduated from high school at 17, I’d lived in six different countries and been to eight different schools. I’d actually lived in 11 different houses, because my par like to buy, what I call, knockdown houses, do them up while we live there, flip them, hopefully for a profit, and move on to the next one.
So, there was entrepreneurialism around me when I was growing up, whether it was the homes we lived in, or the businesses my father was starting or failing at along with my mother. I think that was core to my upbringing and who I am as an investor, because there were times where we seemed to have a lot and there were also times where we had very little. I think experiencing the ups and downs of an economic cycle at home from the ages of 0 to 10, you understand that business is messy.
I think that’s one of the things that a lot of people misunderstand. I think investing from the outside is so simple. We all buy an asset for the same reason. We think it’s going to be worth more in the future than it is today. It’s quite straightforward. But as Buffett says, “It’s simple, but it certainly isn’t easy, because it’s the application of all the information to make the buy decision and ultimately, the sell decision.” So, I think your upbringing is really, really important, in terms of going wide in that early experience.
I think that my experience helped me as an outsider. So, I think I have a more outside perspective than compared to most people that I meet, because I’m used to being an outsider, whether I went to a new school or whether it was to a new country. I’m quite comfortable, therefore, being contrarian. So, normally, when someone goes, “Oh, this is a great idea.” My first inkling is, well, why is it not a great idea? It’s that flipping things. Or, Munger, I guess, would call it inversion, although I didn’t know that’s what it was at the time. I think that those early experiences are fundamental to who you become as an investor.
Tobias: Let me just give a quick shoutout to the folks at home. Andhra Pradesh, India. First in the house. Highland Park, Illinois. What’s up? Danny Beltran, Santo Domingo, Dominican Republic. Bellevue. Mac in Valparaiso. What’s up? Just skipped ahead. Philly. Bethesda. Tallahassee. Dubai. Toronto. Seattle. New Hampshire. Surbiton, London suburbs.
Ardal: [crosstalk] Surbiton. [laughs]
Tobias: Savonlinna, Finland. Doylestown, Pennsylvania. Tampa, Florida. Lausanne, Switzerland. Brandon, Mississippi. Breckenridge. Boise. Dublin, Ireland. What’s up? Jupiter, Florida. Sam, you’ve already won, as I always say. Madeira Island, Portugal. Saskatoon. Barney Fountain misses Jake’s face. Me too. [Ardal laughs] Pforzheim, Germany, last one in the house.
Jake: No, you don’t.
[laughter]===
Long-Term Value Investing: Strategy, Moats & Portfolio Management
Tobias: Tell us a little bit about your investment strategy. What sort of businesses do you like to look at? What’s the geographic range, any industries, just give us a flavor for what you do Ardal?
Ardal: Sure. So, my fund, we’re a global fund. So, essentially, it means we’ve got either the blessing or the curse, you might call it, of the fact that we’ve got the whole investment universe, which is roughly 45,000 listed equities globally. So, the question then normally becomes, well, how do you narrow it down? Well, we have a few ways of simplifying the process. The first, is we divide our portfolio in half. So, on the one side we have our developed markets portfolio and on the other side, we have the emerging market part of our portfolio.
We are concentrated long-term value investors. So, by concentrated, I mean, that we concentrate 90% plus of our capital in 20 names. So, we have roughly 10 holdings within developed markets and 10 holdings within emerging markets. What we found, is that the academic research tends to show that over a five-year rolling period– or sorry, a year-to-year period, there’s very little correlation between developed markets returns and emerging markets returns.
But over a five-year rolling basis, there’s significantly higher statistical correlation. What we think therefore, is that there’s an opportunity to add alpha to the portfolio by rebalancing between emerging markets and developed markets over time. So, that’s the overall portfolio management.
And then, in terms of the businesses we’re looking for– So, I say we’re value investors and what do I mean by that. Well, we’re looking to buy essentially dollar bills for 50 cents. And in addition to that, I think there are a lot of people looking for that thing, but we’re looking for several things in addition to that. So, we’re looking for a business that has an identifiable and defensible moats around it, and that’s coupled with a long runway in terms of future growth potential.
So, businesses that fit this description, we tend to find can grow at roughly 10% per year. They do that through having very good long-term capital allocation policies. So, our portfolio tends to be founder or owner operated first or second-generation businesses, as we find they have a more long-term investing mentality. So, if the business can compound the capital at 10% per year and our dollar bill is valued at 50 cents when we buy it, then over a roughly five-year holding period, which is what we talk about as our ideal minimum investment time horizon of five years, that dollar bill would compound to $1.62, growing at 10% per annum.
We think that over that period of five years, if the business manages to consistently achieve decent financial performance, it’s more likely to be valued in the market at closer to the intrinsic value, which would at that time be $1.62. So, the return on our 50 cents purchase price then in five years would be roughly 26% per year. So, that means our capital doubles every 2.75 years or roughly 3 years. And so, that means that if you invested a dollar on day one, that would grow to $10 at the end of 10 years. So, that’s the journey that we’re on. That’s the target in mind when we’re going through the investment criteria and deciding what businesses would fit within our own portfolio.
We are country agnostic, sector agnostic, but we want to be geographically diversified and sectorally diversified across the portfolio. And then, in terms of the things that we’re looking for individual businesses, we have a roughly 250 question internal checklist when we find a business. The purpose of that is really just to throw up red flags that we’re going to do a bit more research on. And that’s quantitative and qualitative. But if I was to boil it down to the main things that we’re looking for–
So, the one is we’re looking for high returns on capital employed. So, it was Buffett that famously said in his shareholder letter to Berkshire Hathaway shareholders in 1979 that “ROCE or Return on Capital Employed is the primary test of managerial economic performance.” We definitely believe at my firm that that is true to this day. So, we want to make sure that our companies are returning and creating more value than the market in general.
And then, there’s three other points that we cover. So, the next stage is margins. So, we look for above-average gross margin. We think that’s a way of identifying a moat around the business. So, gross margin is the difference between revenue and cost of goods sold, and it essentially represents the difference between what it costs our company to make products or sell its service compared to what it’s able to produce them for. So, it’s the difference between the two.
And then, the third step is the operating margin, which is a cousin of the gross margin. So, here, we’re trying to evaluate the operational efficiency that our businesses operate at, i.e., by looking at how much the business earns after all direct and indirect costs have been deducted from their revenue. And then, the final one, which I actually think I probably should have done them in reverse order, because I’m sure you agree with me on this, is that most businesses don’t go bankrupt, because they’re not profitable. Most businesses go bankrupt, that is a permanent loss of capital for investors, because they run out of cash. So, cash is absolutely key.
So, the fourth thing we look for is– We look at through lots of different ways, the conservative financing nature of our businesses. But mainly, if we were to simplify it down, the current ratio, we want to know how many times over our companies can pay through their current short-term liquidity, the current upcoming costs of borrowing. I would say in our portfolio, typically, we prefer to have zero leverage in our portfolio, because again coming back to that point, I think most companies, even profitable and growing businesses can go bankrupt, and it’s often by running out of short-term cash.
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Investment Lessons: Exiting Angelalign Technology
Tobias: There’s a couple of interesting things that you raised there, but I just want to– Can you give us an example of, perhaps, a representative company or a representative business that you hold or that you have held in the past?
Ardal: Sure. So, it’s interesting. So, our fund’s been going through three years, and typically we don’t talk about our current holdings mainly for the reason of, as I alluded to before, cognitive and behavioral biases. Because I think that when you defend a position, it might be harder for you to change your mind about it. But luckily for you and for us to be– I don’t have to be boring on this, because it’s our third year, we actually had some voluntary portfolio turnover last year. So, the subject of my annual letter this year is, why did we sell?
So, I often have the view that I think if you sell a holding, then it definitely means you’ve been wrong about it. It doesn’t matter whether you’re selling for a profit or for a loss. Clearly, something’s wrong with your investment thesis for you to be selling if you believe that you’re a long-term value investor with your view as to own a business forever. So, what went wrong? So, I’m happy to walk you through one of those examples-
Tobias: Please.
Ardal: -which might be representative of our investment process. So, I don’t know whether you as a kid, but I had crooked teeth, so I had a dental aligner put in. I can’t see Jake, [chuckles] I’m sure he’s got a pearly white smile, but I’m just going to put you–
Tobias: I also got the same crooked teeth I had when I was a kid.
[laughter]Ardal: Sure. So, one of the largest dental aligner companies in the world is a company called Angelalign Technology. It’s based out of China. It essentially competes with Invisalign here in more developed markets. On every metric that you looked at Angelalign it seemed to have a great moat around its business, because what they did is they showcased the fact that they had patented technology that could essentially take market share away from Invisalign and grow margins over time, because they could 3D print cheaper than anybody else.
And that technology was patented and that essentially led to there being a moat around the business where they didn’t believe anyone could impede on that moat around their business. So, it was a very high return on capital employed business, very good operating margins. and then in terms of financing, very conservatively financed. And so, those are the more quantitative aspects.
So, on the qualitative side of the business, this is a business that was essentially very well managed and the management team had significant equity in the business. It was also founded or one of the key shareholders as a multi-time entrepreneur. So, it led us to believe that this would be where the management team were aligned with us and where everything on the surface of it presented very well.
As part of our investment process, in general, I don’t like to meet management teams, especially before we buy shares in the business. On this occasion, last year, I actually spent– was it six weeks traveling around China in February of last year. So, I spent roughly six months of my year on the road and that’s evaluating management teams of our current portfolio holdings or trying to find new businesses that we might look to invest in.
In this case, when I came to the meeting with Angelalign, I noticed something interesting which was, all the glossy managerial presentations, all the numbers, everything looks very good. But when you got on the ground and you went and visited the facilities, what was clear was that there was a a disconnect between what the management was telling you and truth was on the ground.
So, when I went and met with some of their competitors, I realized that actually there was a plethora of competitors that I could meet with. Obviously, that surprised me because I was like, “Well, I thought these guys had patented technology, it wouldn’t be able to be replicated. There’s a really good moat around this business.” But actually, it turns out, and this is a slightly more macro view, is that in China, it depends where you, on what sector you operate in. But in the healthcare space, patents aren’t always enforceable.
So actually, what it turned out here is this technology that Angelalign had was easily replicable by anybody else. I think there’s the famous quote there that the Americans innovate, “The Chinese [chuckles] imitate, and the third is that the Europeans regulate.” [Tobias laughs] But if you take that middle step there, it seemed to me that the competition was actually fierce on the ground. So, this led me to go and speak to the management team and essentially ask, “What’s going on here?” Actually, it was just a fundamental misconception of ours, that the moat behind this business was actually weakening. There was a race to the bottom based on price, because they couldn’t protect the patent around their technology.
So, although we got out of Angelalign, we held it for roughly three years and we got out at a small loss. It wouldn’t have mattered even if it was a small gain, because once I’d been there on the ground, met with all of these suppliers again and then the competitors, what we realized was actually there’s a misunderstanding here in terms of our perception of the business, so we were wrong. I hope that that gives you a little bit more of an overview, not only in terms of how we invest, but also where we invest and then also how we evaluate a business over time.
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China’s Luxury Market & The Power of On-the-Ground Research
Jake: Ardal, any other takeaways from your six weeks in China?
Ardal: Yeah, absolutely. So, Jake, actually, really interesting question. So, I don’t know about you, but I’ve always been interested in the luxury goods space. At the start of last year, luxury goods had a terrible year previously, but China printed a decent fourth quarter 2023 GDP number and people thought, “Oh, Okay. So, it looks like the Chinese consumer is coming back.”
So, at the start of 2024, consumer good stocks, the luxury good stocks, were performing very well up, 25% for your LVMHs, your Hermes, your Richemont’s. I thought this was interesting because I thought, well, there’s only one way to test what the Financial Times is telling me and what the Economist is reporting, and that’s to go there and have a look myself. So, I’d been overdue to go there anyway. So, I basically added a few extra city stops on my way.
So, I got there in April and I went to the six biggest cities and I went to the biggest shopping mall and the second biggest shopping mall in every city. There was not a queue outside any luxury goods store. And for context, Tiffany & Co has a city block wide store in Shanghai. I remember standing outside– It’s all glass, so you can look all the way up this store. I remember standing out there being like, “Wow, this is monument to capitalism.” And then, I looked a bit closer and you could just see desk after desk after desk of display cases with only one person behind each. And that’s obviously the sales assistant, but there were no customers.
So, I immediately sent my team an email and I said, “It’s really interesting.” I said, I think one person has written an article saying China’s going to roar back. Everyone has copied the same article. Actually, by going on the ground and doing a little bit of scuttlebutt, I can tell you absolutely categorically, basically, that Louis Vuitton’s resurgence on the Chinese consumer can’t be true. And then, lo and behold, we got the first quarter results, second quarter results and they were all pretty miserable. The Chinese consumer didn’t re-emerge last year.
I think that what that showed me was that it’s really important, especially in these more emerging markets investments to go on the ground and really do some research, really visit the different cities, see what the consumer’s doing, because management will always get you to lead a very good story. Because in general the management team are great storytellers. It’s a political position to become the CEO of a business. It doesn’t mean you’re the best individual. It usually means you’re the best salesperson for the stock or for the business.
So, that’s why alignment is so important for us. We know we need founder or owner operated businesses or whether management team have significant equity stakes in the business. So, they’re aligned with us as external shareholders, and trusting them with our capital, the same way that the investors in my fund trust me with their capital. One of the reasons why they do that is because all of my liquid net worth is invested in my fund. So, I really do eat my own cooking. I think that alignment is so important. Often lacking, not just in fund management, such as the industry that we’re in, but also within businesses themselves and the operators of those businesses.
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China’s Economic Shift: Entrepreneurship, Regulation & Market Risks
Tobias: Do you have a view on whether that weakness in China is cyclical or whether it’s a secular decline, as there’s a little bit of a demographic cliff coming up?
Ardal: I think that’s a really interesting question. I think there are lots of different angles you could look at it from. You could look at it from the geopolitical angle of China, essentially putting all their weight behind being as big economy as the US, as strong a military as the US and the posturing that goes with that. But we’re bottoms up stock pickers. So, I like to start at the bottom.
So, feet on the ground, meeting people. I felt that China had changed from the China of 5 years or 10 years previously. I think that was a notable feeling, especially in Hong Kong, which I visited afterwards. That entrepreneurial spirit is not what it was. I think the Chinese are phenomenal entrepreneurs. The moment those entrepreneurial spirits were released, the growth was enormous for China.
The Chinese are very good entrepreneurs. If you look at the richness in surrounding countries or in pretty much any country in the world, there’s always Chinese people on there, because during the period of Mao, the entrepreneurs that lived on the coast, the mercantilists that did all the trading, they left for the Vietnam, Thailand, Philippines, Cambodia. If you look at the richness of those countries, there’s a good portion, sometimes up to half that are Chinese of origin. So, they’re clearly, fundamentally excellent entrepreneurs. But that spirit I found on the ground had been diminished. There’s a real, what they call, a health risk to being an entrepreneur in China today. And I think the–
Tobias: Like, a political health risk.
Ardal: It’s exactly that. I think if you look at the Hurun rich list, and we look at that from one year to the next, and you look at– When you’re identified as a billionaire in China, there is a target on your back. I think this also comes down to, what, the investing that I do, which is obviously in public markets.
What I noticed was a lot of very successful entrepreneurs of publicly listed businesses were talking about the fact that they are doing their best to understate how well they’re doing. And their friends that own very, very good private businesses would definitely not think about going public, because the risk of going public and disclosing your net worth and how much money you’re making is a health hazard, in and of itself.
So, I wonder, therefore, whether we have a a zombie stock market in a way in China, where serial entrepreneurs, incredibly successful people, are doing their best to diminish their success. And that might mean either fudging the financials or making subpar acquisitions to make the business actually less good.
And then, you have the really good growth drivers of growth in China that are staying private for longer and they won’t publicly list until that health hazard warning has disappeared, because the CCP have made it very clear, which sectors they are happy for entrepreneurs to progress in. But even within those sectors, there’s a perceived health risk of IPOing and having that public spotlight.
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EM vs. Developed Markets: Navigating Valuations & Future Opportunities
Tobias: One of the points that you made earlier, was that there is this correlation between EM and developed markets on about a rolling five-year basis. I can see how that would be the case that– I believe in mean reversion when things fall behind, they become cheaper, that sets them up for future performance and vice versa. But it seems like in the same way that value has struggled against growth in the US and anything that’s non-US has struggled in comparison with the US. I think a lot of it is– US multiples have got very, very high. Have you found that that relationship between EM and developed continues to remain true, or is that broken down a little bit as with whatever we’re experiencing now?
Ardal: Yeah. So, I think you’ve touched on a really salient point and one that I discuss with our investors and other investors on a frequent basis, which is, if you look MSCI world, so developed markets, it’s returned roughly 12% per year for the last five years, you’ve also alluded to there, Tobias, that if you own the Magnificent 7, the majority of the return is in those names. So, a lot of the performance has been driven by those.
And then, if you take the MSCI, EM, so emerging markets, it’s only compounded at 2% per year for the last five years. So, clearly there, there’s a huge dislocation between the performance of developed markets and emerging markets on the face of it. But if you delve slightly deeper, which is what you alluded to with being driven by the Magnificent 7, if you strip those out, the performances are more relative to each other. They’re more in line with historical averages. So, what you could say is the performance of the Mag 7 is a little bit of a historical aberration. What that’s done is driven the performance of developed markets to far exceed the historical average of its correlation with emerging markets performance.
The only thing that this is a humbling experience for me, because when I look at the portfolio that we’ve assembled, it’s roughly 10 stocks developed markets and 10 stocks emerging markets. Since inception, 70% of our returns have come from our emerging markets holdings. So, what you can read into that is or what I like to say is I say so, clearly, we are capable of picking highly performing undervalued stocks in emerging markets, and that they do do well despite the fact that they’re overall for emerging markets, the performance is poor. Where we seem to be under delivering for ourselves and our investors, even though it’s only a three-year basis, is developed markets.
What I think there, the insight is also really interesting, because we think we own really great businesses at undervalued prices despite the market multiples, because all of it or a large majority of it is being driven, whether it’s performance or multiple basis, by those seven stocks. And that concentration leads me to believe that there is actually more potential for outperformance in the developed market portion of our portfolio, despite developed markets performing significantly better than emerging markets over that period of time.
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Spectrography & Investing: Finding Hidden Patterns in Light and Business
Tobias: That’s very interesting. JT, are you– We’re going to see if we can get JT to do his vegetables. He’s lying in his deathbed. He’s resurrected himself- [Ardal laughs]
Jake: Lazarus.
Tobias: -just to come on the show.
Jake: [chuckles]
Ardal: Welcome JT.
Jake: All right. Let’s see what we can do here. We are going to be talking about this concept of spectrography, which if you haven’t heard of it before is actually completely blows my mind. But it sounds intimidating, the word. But don’t worry, we’ll explain it how it works, maybe almost to a five-year-old, which is good, because that’s the level I need it at.
It’s this tool that lets scientists study light and break it down into its elements. From simply analyzing light, we can tell what something is made of, how hot it burns, how fast it’s moving. It’s a technique that’s unlocked the secrets of the universe from distant galaxies to crime scenes more locally.
So, the science of spectrography goes back to this guy, Joseph Ritter von Fraunhofer, I believe his name is. He’s an 1800s German optician who turned a failed glassmaking apprenticeship into one of the greatest scientific careers of all time.
So, his life was really wasn’t supposed to amount to much. He was orphaned at 11, and he was sent to work in a glass-making factory, which was a grueling, low-class job. But fate had other plans for him. One day, the factory collapsed on him and he was buried under the rubble. And a nobleman, Prince Maximilian, saw the rescue and took an interest in the boy. With the Prince’s support, Fraunhofer got an education, and then he just ran with it and he became obsessed with perfecting glass lenses. He spent his nights grinding and polishing and testing how light bent and split through these lenses.
His attention to detail allowed him to discover, that even in sunlight, which you would think is this very continuous spectrum of colors and light, there are these weird dark lines in the sunlight, these patterns. What was he seeing? Like, did he see this correctly? Wasn’t light completely continuous? No, actually, there were these dark lines that if you could measure close enough, you could see them. Sadly, he never lived to see how important this discovery would become. Probably, the exposure toxic chemicals at that job, he died when he was 39. But his name lives on in these Fraunhofer lines. These dark lines are called Fraunhofer lines now.
So, the way that this works is basically these– Think of like the light from the sun is not completely smooth. It has tiny gaps, like missing teeth in a comb. These Fraunhofer lines are really fingerprints of elements. So, when an atom absorbs energy, its electrons jump up to a higher level. And then, as the electrons fall back down to their original state, they release energy in the form of light at specific wavelengths. So, this is how scientists can analyze the light that’s emitted and absorbed by substances to decode the chemical makeup.
So, for light from our sun, the gaps are made up of elements like sodium, hydrogen and iron. They’re all imprinted on the spectrum that shows up here, the light that hits the earth. So, without ever touching a star, we can tell what it’s made of. Without stepping onto Mars, we know that there’s iron and it’s dust based on these lines that show up, all from reading patterns in light.
So, this idea of finding hidden patterns even when you can’t see inside makes spectrography, I think, a fun analogy for investing and hopefully, maybe ties in a lot with what Ardal’s saying and going and being boots on the ground. You don’t get to walk the factory floor of every business, interview every employee, sit in every C-suite meeting, but there’s often patterns there. Just like light tells a story about the stars, I think businesses emit signals as well. Some glow very bright, some are dim, some flicker before they fade to black.
And so, now, I’m getting like way over my skis, but I’m going to do six spectral lines of business here. So, the first one is high returns on invested capital. This is the elemental signature of quality, perhaps. If a business can reinvest profits at a high rate. It’s like a bright spectral line of hydrogen and a star. It tells you that there’s real fuel there. And weaker inconsistent returns, perhaps, it’s a dim star that’s burning out.
Number two, management incentives, the Doppler shift of integrity. Just like light shifts towards red or blue when objects are moving relative to each other, further moving away or towards, incentives reveal which way management is really heading. Are they aligned with shareholders or are they just juicing short-term numbers?
Number three, net promoter score, the absorption of spectrum of customers. So, a high NPS score might mean that customers aren’t just buying, but they’re coming back and they’re bringing their friends. Maybe a low NPS would be that’s an absorption of the spectrum where energy is getting drained away.
Number four, capital allocation, the emission spectrum of intelligent decision making. Some businesses generate a lot of cash and you reinvest it wisely. Others hoard it and waste it, burn it on maybe buybacks at the wrong time. The way capital moves through a company creates some of the clearest spectral patterns of all. Employee turnover– This is running a little long in the two, so I’m just going to keep going.
And then, last one, crisis response. So, this is like the supernova test. Some companies explode under the pressure, others absorb the shock and adapt and perhaps come out stronger. Watching how a business reacts in tough times tells you a lot about its internal makeup.
So, wrapping this all up, Fraunhofer, he turned light into knowledge. We don’t get to see inside every single company, but we really don’t have to, necessarily. The patterns are often there, whether it’s in starlight or financial statements. And so, as we learn to read them in the universe of businesses, everything starts to make a lot more sense.
Tobias: Amazing. Have you said spectrography?
Jake: Spectrography.
Tobias: Spectrography.
Jake: Yeah. I had to say it like a hundred times before–
[laughter]Jake: -over the last few days, because I was choking on the word so much.
Tobias: From the deathbed, you’re still alive. Good job, JT. The nation of Value: After Hours appreciates it.
[laughter]Jake: Ardal, inspire any thoughts about your process and things that you’re looking for?
Ardal: I think definitely, because I think I would sum all that up very similarly and I would say that that’s perception. It’s looking for patterns where other from something that’s obvious to everybody, which in this case is light. This is what we’re trying to do in investing. We’re all looking at the same sets of information and we’re trying to project forward different outcomes, different conclusions and what they’re made up of.
I think answering those questions, those black lines you alluded to, is really what the essence of successful investing. I liked the tangential there between something very quantitative, which is spectrography of light and how you parallel that then into the quantitative aspects of successful investing. So, thank you, JT.
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China, Taiwan & the Changing Landscape of Consumer Behavior
Tobias: Ardal, having just traveled to China, and Jake and I are planning in about a couple of months, we’re traveling through some of China as well. Not for as long as you did, but I’m interested to know. If you don’t have a huge focus on China, then feel free to move me along.
I’m fascinated in some sense, because I think that the spectrography of China, that’s really all that we have. There’s a language breakdown for me. And in any case, so I can’t read original source documents. I’m always relying on a secondary source. It’s culturally different and it’s politically different. There are very many broad differences. How do you reconcile all of that as you look at Chinese companies? And have you considered something like– Have you looked at Alibaba, which has been a popular topic of discussion over here for the last few years since Charlie Munger picked up a position?
Ardal: Yeah, absolutely. Well, first off, I think you’re doing a great service, which is going there and visiting. I’m just presuming you hadn’t been already, but–
Tobias: I haven’t been. No.
Ardal: Okay. Then, I think you’re doing exactly the right thing, because I think you can totally change your perceptions of a place by going and visiting and meeting the people. I think the only thing to be aware of is, your sample size is going to be small. It’s a population of 1.2 billion, and there’s only so many people you can meet and places you can go in a fixed period of time. But I think there are clever ways that you can gain insights. Going to the capital city and the second and third biggest cities, you can get a bit of a feel for from the general populace about how things are going.
I should say, for disclosure, we actually now only have one investment in China. So, although I spent a significant period of time there, I also spent six weeks last year in India where we actually have two investments. What people tell you and how– I often say, what people tell you is one thing, but how they act is another. So, seeing the consumption, seeing what people are doing in shopping malls, yes, it’s absolutely true that people can buy goods online. But in general, people don’t buy luxury goods on the internet.
And also, for example, Chanel, if you want to buy a Chanel bag, you must go into the store. They don’t sell online. So, I find it interesting when I see in London that there’s queues around the corner for Chanel bags, and then you go to China and there is no queue at all. So, clearly there the conspicuous consumption of five or so years ago has been extinguished to a great deal. There are options to consider in buying expensive bags. You can also try using an AAA replica designer bag with a variety of designs at an affordable rate. Another takeaway was– [crosstalk]
Tobias: Can I just ask before you move on?
Ardal: Sure.
Tobias: Is that political or– Is it financial, is it economic or is it sort of–
Ardal: I think it’s a health warning. That’s what I think it is.
Tobias: Yeah. Okay.
Ardal: I think that that’s conspicuous consumption. So, I was amazed when I was in Shanghai and Beijing. Looking around, you definitely don’t see Ferraris and Lamborghinis. You see a lot of, especially in Beijing, they’re mainly state cars, the state branded cars. And then, there is a huge emphasis. So, we know Jake [crosstalk] camera.
Jake: Wrong button.
[laughter]Ardal: But what I thought was interesting when I got there was the push to EVs to electrify their economy is on a completely different level from anywhere else I visited in the world. You understand then a little bit more about the incentives that are put in place. So, for example, I didn’t know but to buy a number plate in China is often more expensive than to buy a car. So, one of the ways that they can incentivize you to purchase an EV is not by a direct subsidy, but they basically say, “Oh, you get a free number plate if you purchase an EV.” But I wouldn’t have known that if I hadn’t gone there on the ground or knew someone there that could explain that to me.
The other thing, was which might just be of interest is the China-Taiwan situation. So, I did visit Taiwan as well when I spent a week there after my visit to China. What I found interesting there was the total different perceptions between generations of what’s going on. So, again, I wanted to visit Taiwan, because we have two investments there. But at the same time, I wanted to understand a little bit better how they felt about the Chinese and vice versa.
So, what I found in mainland China, was there’s a lot of incentives on social media for the locals to like posts that are posted by the Chinese Communist Party, that are pro-China and maybe slightly anti-Taiwan. You get social credits that you can actually spend on goods on social media. So, there’s a clear incentive there for liking those posts. I think that that’s to grow a– especially among the youth, a very pro-China view of the world. Obviously, for the elderly who use or the older generations who use less technology, they’re not really influenced by TikTok likes.
Then, you go to Taiwan, and it was interesting, the polar opposite. The youth in Taiwan that I spoke to were totally nonplussed with the situation with China. They were like, “But we’re ethnically Chinese, most of us, who came here after the Communist revolution. What’s the big deal? We basically speak the same language. We’re entrepreneurs. We just have a different system.” And then, it’s the elderly or the older generations in Taiwan that are much more patriotic or believe from the people that I met that Taiwan was rightfully theirs.
So, I think it’s really interesting. I hope to discuss this with you afterwards, Tobias, when I see you in Omaha after you’ve done your China trip maybe, is to see what you thought when you were on the ground, the perception that we have in the West versus the reality on the ground. I think that this ultimately comes down to the fact that the media is there to sell newspapers. It’s there to get eyeballs. So, a lot of the news stories are very sensationalist and the reality on the ground can often be very, very different.
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China’s Youth Unemployment, Patriotism & Economic Challenges
Tobias: But there’s also some possibility that the Chinese mainland youth are being encouraged to generate some patriotic fervor. On the other side of in Taiwan, they don’t care. They’re ambivalent. So, it’s possible that there is some push to join together at some point that won’t be resisted, because the resistance is in the older generation.
Ardal: I think you’re right. I think what you’re hinting at there is a more subtle point that I realized when I was in China that you might see as well, which is, youth unemployment is clearly quite high. What is the job of the Chinese Communist Party? It’s made a deal with the populace that it gets to be the incumbent in power provided that they provide a rising standard of living for the general populace. That’s what they are.
Taiwan, they would argue, is a democratically elected government. So, their job is also to get reelected. So, in that respect, the government’s initiatives are totally aligned. So, for the Chinese Communist Party, I think high youth unemployment is a real problem. Only it’s a misconception to say that, “Oh, well, the Chinese state companies can hire all these university graduates.”
The last statistics I saw, there’re roughly 10 million university graduates from Chinese universities every year. Well, of the Chinese economy, only 10% of it is state owned enterprises. So, it’s not possible that they can absorb all of that labor coming in. They’re in the unfortunate situation which is what coming back to what we were talking about previously in our conversation, which was, if you’re making entrepreneurs feel uneasy, if you’re making them not want to grow their businesses because they don’t want to target on their backs, if you looking at them– they don’t want to go into public markets because they’re worried about these sorts of things, and of course, growth is going to be slower. I think, therefore, how do you keep the youth well behaved, I guess is how I would put it.
Well, I think you make them patriotic Chinese and then maybe you do point the finger at the West or you point the finger at Taiwan, and they have somewhere to direct their anger at the fact that the economy is not able to absorb the current labor force. That’s what I think the main risk of for me with China is. I think high youth unemployment.
We had it in Europe after the European sovereign debt crisis, we had very high youth unemployment, especially in Spain and Portugal, in Greece. You did see some civil unrest, but it never grew into large-scale problem. I think China’s is less of a problem than that. It’s obviously a much more authoritarian system, for lack of a better word. So, there’s a lot of crackdowns on any perceived slight at the government or how the economy is managed.
And that I think is China’s difficulty, because no matter how much stimulus you do, unless you can get the entrepreneurs comfortable with hiring again and growing, I think you’re in a catch 22, because you can provide as much stimulus as you want. As we saw with quantitative easing, if no one wants to borrow, that’s your central problem. The problem is a demand problem, not a supply.
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Tobias: Did you follow there was a push to shut down TikTok in the US? And in response, there was a movement from some TikTokers onto other Chinese apps, one of which I think was called RedNote. And at one point, it was the most downloaded app in the Apple Store. I think that it was maybe one of the first times that Americans and Chinese citizens had a chance to really communicate directly with each other. What did you make of that?
Ardal: I think you often fear what you don’t understand. I should say I’m treading on thin ice here in terms of my knowledge of this subject. But I think–
Tobias: This is a podcast, sir. You’re allowed to speculate.
Ardal: [laughs] But I think as human beings, when I think about cognitive and behavioral biases, I think we fear things that we don’t understand. As adults with fully developed brains, I think we think that we know a lot more than we actually do. Where do we get our information from? In general, it’s the media. The media I’ve already said– I think it’s really there to sell newspapers and eyeballs. So, it’s usually quite sensationalist.
So, when we actually meet these people on the ground, I think we have a totally different view of them. That’s why I really commend Stephen Schwarzman from Blackstone. He started the Stephen Schwarzman center in China, a university that was dedicated for American and European and Western students to go to China and be educated there. Because there’s a takeaway that we can bring back to the West, which is actually, we’re not that different. We operate under different systems, for sure. But ultimately, what do we all want? We all want to take care of ourselves and our families. We all ultimately want an increased quality of life. The question, is just how do we make our own way up that mountain?
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Global Investing: Surprising Business Environments in South Korea & India
Tobias: You invest globally, so you’re looking at different economies and business regulatory environments in different countries. Have you found any that you were surprised at either how difficult it was to do business there or how easy it was to do business there, and perhaps, whether they were fertile grounds for investment and further study?
Ardal: Sure. So, I can give you an example of each. So, interestingly, I’m sure you know, but as a fund manager, we need to have a local broker and a local custodian to hold the shares that we buy in any country that we decide to make an investment. What was really interesting was the longest lead time for us to open an investment account was actually South Korea. Most people were slightly taken aback by that. India, believe it or not, was quite quick, which is often held up as the example of something that takes a long time. I found that actually the bureaucracy in South Korea was significantly more than I had seen anywhere else in Asia-Pacific, even compared to Japan. I found it less progressive than I was expecting. So, that I found of interest.
And then, on the flip side of it, India I went to and I had a lot of preconceptions about the country in terms of I thought it would take a very long time to get onboarded to be able to invest. It was actually a very smooth process. I thought maybe it’d be hard to invest money in to take it out. That’s proved not to be the case. I thought that on the ground, there might be a huge amount of obvious and visible corruption. I found that obviously, there are examples of poor behavior. But once I got there, I found that a lot of my preconceptions from the news and media were not necessarily correct.
There are a lot of incredible entrepreneurs in India that are running businesses in high tech sectors and low-tech sectors that have incredibly long runways ahead of them and great compounding engines. So, I guess I’d contrast a very high tech, high growth economy such as South Korea with what you might describe as an emerging economy with India, and say that, actually, I thought what you might think would be the better investment actually ended up being the opposite.
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Investing in Africa & South America: Liquidity Challenges & Opportunities
Tobias: Have you looked at Africa? Have you looked at any of the countries in Africa?
Ardal: Tangentially, yes. The issue for us when it comes to Africa and quite a similar story in South America normally comes down to liquidity and some of the smaller Southeast Asian countries, because we need to be able to make sure that we don’t have what I call style drift over time. So, for example, our portfolio today needs to be liquid for our investors with our current AUM. But also over time, as we grow our fund, it needs to also be liquid. So, we can’t invest in micro caps or highly illiquid companies even if they have a reasonable market capitalization.
What I found is, is that in a lot of these places we can find really attractive businesses. I’m thinking of one straight off the cuff that is actually in the Philippines, where I would have loved to have bought shares in that business. But it was too illiquid for us to be able to hold as our firm grew. I like the idea that when we meet investors, we provide a product that we don’t need to change our strategy or our investment style as we grow. We should be able to continue our investment with our businesses over time and grow with them. So, that’s one of the reasons why Africa is a harder place for us to do business.
Tobias: You find that it’s particularly illiquid at the public markets level and South America as well.
Ardal: And South America/ in general. There are obviously plenty of examples where that’s not the case, but then those businesses might not meet our own internal investment criteria. So, we’re very much looking for founder, owner operated businesses. I mentioned the quantitative metrics. Jake actually highlighted in his vegetables section, a lot of the qualitative metrics that we’re looking for.
But I would say, for us, we find a lot of opportunities when we find a business that’s going from first generation to second generation founder, owner operated. What we tend to find, and the reason behind that is actually quite straightforward. When these entrepreneurs, first generation have made a lot of money, they usually look to educate their kids abroad at the best schools, the best business schools. They quite often encourage their kids to get work experience in companies outside their home company or whatever the company is works in that company, but abroad.
So, what you get then between the first and second generation is you get very, very well-educated children with a much more global view coming back to the original country and basically saying to their dad at this point, who’s obviously very well respected at that point in the community, is a very wealthy and successful entrepreneur and they say, “Dad, why don’t we have an independent board of directors? Why are our aunts and uncles on the board? Why don’t we have a compensation strategy? Why don’t we actually have a good website where our investors can come to and find out more about our business? Why don’t we do presentations that investors can have a look at? Why don’t we respond to– My biggest frustration, is why does no one respond to the investor relations email address when you contact some of these companies?”
I went and met BYD in Shenzhen. I must have sent them 10 plus emails. I called them, and ultimately, I just turned up. I had to turn up more than once, but ultimately, I managed to gain entry into the belly of the beast. But again, we’re talking about $100 billion market cap business where, as an investor, you can’t get a meeting. There’s a positive and a negative way of looking at that. The positive is they don’t care about the external investors.
They’re purely focused on their business and growing their business, which is something I absolutely respect. But I don’t understand why you have an at IR email address if that’s the case. I think that also just shows you a little persistence is sometimes required. You have to go knock on the door and if they say no first time, you might have to come back the next day.
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Alcohol Stocks: Generational Shifts, Ozempic & Investment Risks
Tobias: This is a question that I pose to people occasionally. I don’t know if you have any holdings in alcohol, any brewers or distillers or vintners. But I think that they can be great quality brand, middle stand, that sort of– They tend to be family owned, they’re limited in the amount that they can scale, but they have very well-known brands and they make a limited run of whatever they make and they basically sell it out at whatever price they want.
I wonder whether some of these businesses that have been distillers that have casked whiskey for 25 years would be concerned about that pretty clear drop off in the consumption of alcohol, particularly, in generations that are younger than I am, in any case. Have you given it any thought? Do you have any holdings like that? Do you consider those types of businesses?
Ardal: It’s actually one that I’ve discussed with a few other people, because obviously, it’s a very topical discussion. A lot of value investors do own these various brewers and alcohol companies. Thomas Russo is an investor that I’ve always looked up to. I think he has had phenomenal performance over a very long period of time owning these exact companies. So, I’d be very interested at some point to be able to find a podcast or a recent interview of his where he talks about his views, because he has essentially 25 plus years of experience investing in this space.
I think at the core we’re bottoms up value investors, so we’re looking for value at the company level. But at the same time, as Howard Marks would say, “The pendulum swings with markets and you have to understand where you are in the cycle.” I think with that, it’s not just the cycle of the market, it’s also the cycle of the product that the company you’re buying sells. So, when it comes to alcoholic beverages, I think it must be a concern that alcohol consumption is decreasing or it appears to be decreasing between the generations. I think that that must be of a concern for those that own shares in these companies.
But what I would say, is these companies have often been around for over 100 years, because alcohol consumption, I think, is [chuckles] one of the first things whenever you meet anybody, you say, would you like to get a drink? I think that’s been the case since humans very early brewed beer, so to speak. And in my native Denmark, just a funny anecdote, the military there, back 300 years ago, used to be paid in kegs of beer. They weren’t paid in cash. So, I don’t know whether that was to keep them subdued, because at the end of every month, they drank their keg of beer and then they were relaxed. I’m not sure how that worked.
And then, I guess it’s very topical at the moment, because people are talking about Ozempic and talking about weight loss drugs, and therefore alcohol consumption. I think the jury’s out on that and I think it’ll take a long time for us to understand the real implications of that. And ultimately, markets are forward discounting mechanisms. So, if the market perceives that these are a real risk going forward to consumption, that’s going to be in the price today.
So, the contrarian maybe you take the opposite view and you would basically say, “Well, someone that goes on a Ozempic might actually go on it and drink more, because they know that there’s less risk, they’re not going to put on weight by doing it.” I think it’s always important to invert. It’s always important to, yes, the consensus view might very well be correct, but also taking the other side and just having a look through a different lens or a different angle and just being like, “That could be the case, but why might it be wrong?” Because human behavior often surprises us.
One of my favorite quotes from Charlie Munger is, “If you want to know how a management team is going to perform, just look at the incentives.” And with a Ozempic, I struggle to see, so what are the incentives of going to the gym or eating healthy or not drinking more, if I can just take a shot or a tablet and I lose weight? Surely, it might actually be the inverse, whereby I might not go to the gym. So, gym membership drops off. I might actually eat more junk food. You never know, I might drink more nice red wine, because the consequences of doing so are less. So, that’s how I would look at that. I’d be interested to hear your thoughts on, actually, Tobias.
Tobias: Yeah, I struggled with it a little bit, because they have been– It’s a truism, which means that it might not be true, but it has been true in the past that when we go through a recession or a depression. People certainly don’t drink less, they tend to drink more, so those businesses seem to be pretty-
Ardal: Countercyclical.
Tobias: -countercyclical. Thank you. That’s the word I’m looking for. Yes. I think that to some extent, perhaps, that’s going away. If there is this generational shift from– I have younger cousins who don’t drink anything like the amounts that I used to drink when I was younger. I would be worried if I own one of these businesses that has that very, very long lead time. It’s like owning a cork plantation in, perhaps, the late 1990s, not knowing that, wine in a can is coming [chuckles] and expecting that you’ll be able to cork these wines and that would be the indicator of quality where who knows now, if that continues to be the case. Ardal, we’re coming up on time.
Ardal: Sure.
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Tobias: It’s been a fabulous conversation. Please.
Ardal: One second on that though, which is, when you go to China, please have a look at what people drink. Because the majority of what I saw people drinking was Maotai. And Maotai for those that don’t know, it is the biggest liquor company in the whole world. It’s publicly listed in China, and essentially it is the official drink of the Chinese Communist Party. So, it’s one of the best performing stocks in the Chinese stock market long-term. I think that’s–
Tobias: What’s the drink?
Ardal: It’s essentially a spirit. How do I describe it? It smells like flowers and tastes like toilet cleaner.
[laughter]Jake: Yeah, it’s pretty rough.
Ardal: I think it’s something like 80 proof, which, if whiskey is 40 to 50, this is a lot, lot stronger. That’s a business where the product is actually put in barrels and there’s a fixed supply. And therefore, if the Chinese Communist Party says, “This is all you can drink,” and if the Chinese youth are more patriotic, this is what they’re going to choose to drink, then that might be a business that benefits from these trends. So, I’d just say, again, as a bottoms up stock picker, even if we look at the whole drinks industry globally, there might be some good value in var different spots.
Tobias: Maotai. We will report back in due course, if we survive it. Ardal, thank you so much. If folks want to follow along with what you’re doing or get in contact with you, what’s the best way of doing that?
Ardal: So, I’m relatively active on LinkedIn. So, folks can look me up there with my name. There is a website for my book called The Perceptive Investor. And then, finally, there is there’s my fund website, lohgronagerpartners.com. And people can reach out to the IR team there, and I can say we’re not like BYD and Shenzhen. We do reply to [unintelligible [01:00:47] emails and you can hold me to that.
Tobias: JT, any last words?
Jake: No. [Tobias laughs] Nothing to add.
Ardal: Nothing to add. [laughs]
Tobias: Ardal Loh-Gronager. Thank you so much for joining us today. Folks, we’ll be back next week same, bat time, same–
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