Fresh off an assassination attempt, Donald Trump’s political future looms large. Is his return to the Oval Office now inevitable, and what could this mean for the investment landscape?

While Krzysztof battles the tail end of COVID, he passes the analytical baton to Luke, who takes a deep dive into three high-stakes companies:

Palantir $PLTR
NuScale Power $SMR
Rocket Lab $RKLB

Tune in to find out which of these is Krzysztof’s favourite investment, and which he firmly parks in the uninvestible bucket!

We also unpack a controversial tweet by Cathie Wood of Ark Invest, shedding light on the often self-serving nature of professional money managers who prioritize their profits over their clients’ best interests.

Meanwhile, our two-year $EOSE vs $AXON bet still needs a prize. Perhaps a trip to the company HQ in Pittsburgh or Arizona? Tweet us to help us figure out the stakes, and get a shout-out on next week’s episode!

Segments:
[00:00:00] Introduction
[00:01:27] Has the Political Landscape Changed
[00:06:53] Stakes in the EOS vs AXON Bet!
[00:14:07] Ark Invest Said The Quiet Part Out Loud
[00:23:55] Palantir
[00:33:10] Rocket Lab
[00:40:42] NuScale Power
[00:50:31] Palantir vs Rocket Lab vs NuScale
[00:55:17] The Seductive Nature of Technical Trading

—

WSW E36

[00:00:00] Introduction

Woo, woo, woo, woo.

Luke: Hey, and welcome to the latest episode of Wall Street Wildlife. I’m your host, Luke Hallard. I’m fit and strong, and here’s my co host buddy, Kristof Pakarski. Are you still in the depths of COVID?

Krzysztof: I am emerging, uh, badger from the depths of COVID. before we hit the record button, I was bitching and moaning how the last full week of my life was Utterly wretched, more wretched than the first time. I was alone, uh, didn’t see a single soul, uh, and I felt more unmotivated.

Luke: supposed to do that when you have COVID. You’re supposed to isolate, right?

Krzysztof: yes, yes, but it’s one thing to, you know, like be, be, have a wife, but when there’s also no wife and there’s nobody anywhere, just nasty. Um,

Luke: I was thinking about your health and wellness from across the Atlantic. So yeah, you told me you’ve, uh, you slept for like nine hours just prior to the recording. And I will repeat the crack I made pre recording, which is you’re like the U S is current president. You need like a proper night’s sleep.

We’ll wheel you out. You get, we get one good hour out of you. Uh, so hopefully, hopefully we’re going to get a good hour review

Krzysztof: We got to capture a good hour out of me. That’s, uh, that’s ambitious. I think I definitely got at least 40 minutes. So let’s, let’s get going.

[00:01:27] Has the Political Landscape Changed?

Krzysztof: Did I sleep through anything? In the past couple of days.

Luke: nothing of note, nothing of note. Let’s not even go there. I know you want to talk about what happened, uh, in Pennsylvania in the last 24 hours. Um, well, have at it. I’m not in support of this topic on the podcast. I don’t think it’s very investing related. Go on, tell me.

Krzysztof: Well, it is investing related in two ways, uh, particularly dear to me. One is, I am, I legitimately am confused. And maybe you’ll have some insights for me. obviously, let’s, let’s step backwards. Politicians make policies. And policies affect businesses. And so there are certain policies that help businesses, other policies that hurt businesses, and the more granular you get, depending on the sector, you get some policies that are obviously, potentially very detrimental and others that will be a boon.

So I’m thinking immediately of. Renewable energies and electric cars. Now. Here’s the thing. Tell me what you understand Luke, but As far as I could tell Trump is very very on the record as being against electric vehicle

Luke: I think that’s true, but I do think he’s now buddy buddy with Musk.

Krzysztof: Well, that’s what I that’s what I don’t know. I don’t understand. So I don’t know. I was scratching my head. Like, how does must I mean, Trump is does not hold back in his derision for all things, I think, renewable. And then, and then all of a sudden, Musk is supporting him. unequivocally. So what am I missing?

Luke: well, nothing really. And I think like probably Tesla are in good shape, whoever, whether the Democrats or the Republicans win the next election, right? Um, the, the, the Biden administration has been a little bit dismissive of Tesla, but they are pro renewables. The Republican administration, you know, I suppose they’re anti renewables because a lot of their base is.

like people who work in the non renewable sector. So they’re kind of required to take those positions. Trump is like massively anti, foreign imports. So it’s going to be hard for like a company like BYD or other Chinese manufacturers to compete. It’s going to be good for Tesla. and he and Musk seem to be buddies on Twitter.

so I think Tess were probably immune from the wider environmental impacts of a Republic administration. And I will just say, you know, we are, we’re talking about the topic I didn’t really want to talk about, but it seems if nothing else as a consequence of these horrific actions in the last 24, 48 hours, it seems like this has very much played into, the Republican position and it seems almost inevitable now.

But that’s the way, uh, that’s the administration we should prepare for as investors come November.

Krzysztof: I’d be, I’d be cautious about, about something like inevitable because we never know, especially in, in, in knowing that polls are part of what have, uh, set up all kinds of expectations only to be half things turned out a different way. But Certainly the momentum is in Trump’s favor, but, the point you just mentioned, I think is really, really interesting. I can’t square, but I think your explanation is right. That Tesla is somehow big enough, maybe, or powerful enough that it won’t suffer the fates of the lower level, regulations, but that kind of inversion of Biden is pro green energy. And yet he was explicitly dismissive of Tesla. So that was like, huh?

How, like why American made company, right? Like, didn’t like, obviously there were political things behind the court, behind the scenes going on. And then the inverse seems to be true. Explicitly against energy, but pro Tesla. So that’s a weird one to, to watch out for the other thing that I’m thinking about and I’m getting questions from the EOS community or EOS crowd is, you know, okay, well, if Trump gets elected, what happens to a company like EOS and my, in the moment understanding or feeling not knowing what I don’t know is that the fundamentals will make or break the company.

When you’re sitting in the. crosshairs of these mega, mega trends. In other words, the need for more electricity and the energy to be stored, then you’re not going to deregulate all of, electric vehicles and data and AI and. Uh, energy grids upon which the security of the entire nation depends because you’re going to want to unwind some particular policy or tax credits.

I mean, that might happen, right? But you can’t undo all of it. I don’t think. And even specifically for a company like EOS, maybe it’s a gross margin will not be as great because maybe you won’t get as many tax credits, uh, but it’s not gonna, it’s It’s not going to break the company. So I don’t know. A lot of it is conjecture and sure.

Um, there’s a reason to follow the, the legislation as it comes out. But right now in this moment, uh, I don’t think, I think it’s too soon to, to place investing bets on the possibility of Trump’s election.

[00:06:53] Stakes in the EOS vs AXON Bet!

Luke: Okay. Fair enough. Uh, it’s interesting you raise EOS because we do have, you might remember from last week’s episode a bet, which is as yet, uh, undetermined, but we do have, Axon, my inventor of the tasers and public safety company versus EOS, your battery technology company. So it’s interesting that although you’re ahead in the bet.

you’re stepping back a little bit and saying, well, maybe, maybe my investments in trouble. I

Krzysztof: Is that what you heard? I,

Luke: had

Krzysztof: my investment is most certainly not in trouble. You know, that, that reminded me, we had, uh, one of our regular listeners, um, Kelly Jo from, from X, piped up and says, Oh, you guys really do have. Divergent investing strategies. And you, you said that we used to be on the side of good, but now that I’ve turned toward the darkness, We’ve, um,

Luke: an, uh, Emperor Palpatine slash spoilers for Return of the Jedi, Darth Sidious. Meme picture there. Yes, you definitely turned to the dark side going down your technical trading rabbit hole. You know what? I’ve got a whole, a whole arc of a discussion planned for today’s episode and we haven’t even talked about what we’re going to talk about.

And I do, let’s park this bit because I want to come back to this question of. The seductive nature of technical trading, the dark side can be seductive, Christophe. And I think in prepping for today’s episode, it really came home to me how seductive it could be. So let’s come back to that bit.

Krzysztof: okay. Okay. Uh, I’ll only say that I think I’m being unfairly maligned and characterized here. That’s it. And so I’ll let you lead.

Luke: just to close out that pre topic though, uh, we do have a bet and we haven’t yet determined the stake. And so we asked our listeners, uh, from last week’s episode, if you have some thoughts on what you think What the, uh, the wager should be, be it monetary or embarrassment or whatever it might be.

So we had a couple of good suggestions. one of our followers, alien investor, who, uh, we chat to from time to time suggested, I might have to wear a battery head hat. not really a hat guy. and maybe that doesn’t feel. Like hardcore enough. So we had, we had our own thoughts a little bit, didn’t we?

What sort of direction are we going in with this particular wager?

Krzysztof: Right. We need to step up the stakes because I don’t get. Enough opportunities to humiliate. And, and you know what you wearing a, uh, 1 percent battery hat logo is kind of like, you, it’s, it’s just not punishing enough. So I, I dunno, I was starting to think maybe it ought to be something like. The winner side we visit is paid is funded by a visit to the winners companies headquarters. And then we get a big tour and dinner funded by the loser. So in this case, we will be heading to Pittsburgh, Pennsylvania, to tour EOS’s manufacturing facilities while eating at Shoei’s pizza pie restaurant.

Luke: Very good. Uh, well, I had to just Google it to check. It turns out Axon is headquartered in Scottsdale, Arizona. So, um, so when I win the bet in two years time, we’ll be going to Arizona and we’ll juice up the bet a little bit. Maybe you need to think about, uh, the consequence if I lose, but if you lose and we can find a friendly police department in Arizona. Uh, you know, maybe you could test out one of their products for the podcast. They did invent the taser after all,

Krzysztof: they, they did. I wonder if, uh, Axon, you know, there’s a, uh, I, I know a good number of police, uh, folk through my jiu jitsu training here in Austin, and I wonder, I could do some on the ground research, how many of them here in Austin use or have heard of Axon, and then whether they’re willing to put me through the paces. Outside of the studio, though, that seems,

uh, get tased, don’t get tased on no account, but you know, only get tased if you’ve done something very bad in society or you lose this bet.

so yeah, we’re still looking for, for ideas. This is just, we don’t think we’ve, we’ve pushed the boundaries enough here. So if you have a good idea about what Luke ought to be susceptible to in two years time, let us know.

Luke: All right. Shall we talk about what we’re going to talk about on today’s episode? Cause we did get another tweet, on X and he said, uh, thanks for the content guys. Enjoying the podcast. Thank you, Hammy. We do appreciate the engagement. Um, I’m interested in getting your views on the following.

Palantir, Rocket Labs, NuScale Power, and Kratos, Cathie Wood’s largest waiting in her space years. ETF. So, uh, why don’t we dedicate today’s episode to talking about those three companies?

Krzysztof: Those three or those four?

Luke: Well, unless you know something about Kratos, I know Zilch, but I, let’s talk about, okay, let’s talk about, I’m not going to talk about Kratos, I know nothing about it, but maybe it’s an opportunity to talk about ARK Invest, uh, the wider ETF that Kratos is in. So maybe those three plus ARK, what do you reckon?

Krzysztof: Sure. I did take a quick look at Kratos. Um, uh, I closed the window after 20 minutes. I might be missing something, uh, very obvious, but, It’s a defense military company. And, uh, man, I have a personal bias that I can’t get past. I know you’ve done some work and you’ve turned some leaves with investing in these kinds of companies, but things involved in the military industrial complex.

I just. do it. So unfortunately, I, you know, it’s a, it’s a drones and, and bringing the most modern technology to all kinds of weaponry systems. And then I was reading the page and they did not do themselves any favors by explaining clearly what it is. They sell lots of jargon, lots of names, lots of like, I don’t know, I don’t know what these gadgets are for.

So, um, The fact that it’s the number one holding in are ARK’s space ETF. I’ve learned the very hard way over the last three years that just because ARK makes something a big position does not mean diddly squat. So I am not at all, uh, enthused to find out more about,

[00:14:07] Ark Invest Said The Quiet Part Out Loud

Luke: I’m with you on that, but should we go down the rabbit hole a little bit with ARK, because I do have thoughts about this, and I’ve hinted at it in previous conversations, um, how they’ve really built, I think, a very, really horrible bed for themselves that they now have to lie in. And actually, this is really timely, because did you see a tweet thread from Cathie Wood, uh, yesterday, I think, I think it’s now been deleted, but thankfully a bunch of folk on Twitter captured an image of it. Do you know what I’m referring to?

Krzysztof: no.

Luke: I’ll post, I’ll post a picture if you want to take a look, let me just quote two tweets from this thread from Cathie, yeah, yesterday at 10 PM, maybe she had too many glasses of wine before putting this one out.

Um, she said before selling in video in arc K. Had we known the market was going to reward it and the other mag six stocks to the exclusion of stocks that’ll be the prime beneficiaries of AI like Tesla, um, we would have held it like, yeah. Okay. Like if I knew a stock was going to moon and like 10 X I’d have held it too.

But like, what are you telling your subscribers? Because, uh, arc K, massively reduced their position in Nvidia. really at the absolute base of the market. I think it was probably November 2022. Don’t hold me to that date exactly. but that coincidentally, if it was that date was the date I was buying and adding.

And then she finishes this thread with, as a result, our trading related capital tax losses in ARK offset capital tax gains for years and underappreciated asset associated with our strategies. So there you go. If you, uh, if you follow Cathie, And by arc, uh, you’ll make some delicious capital losses, which you can offset against your capital gains.

And that’s a real benefit view.

Krzysztof: Can I ask, uh, can I ask you, uh, Oh, a whopper of a question. I I’m not, and I’m not really not trying to be facetious here. I don’t understand how their fund is in business. I don’t understand how, when you look at their holdings, and you look at the prices at which they bought holdings, and sold, and the companies they were invested in over the last three years, I mean, I could name a whole bunch, outside of their huge gains initially in Tesla, so many of them are huge, huge losses.

Almost like a contrarian Jim Cramer indicator. So I, I am sincerely asking how do they still continue to have money with which to play with?

Luke: that is exactly why I think this is a very divisive and interesting topic for stock pickers for individual investors like you and I, and hopefully many of our listeners like If I stood back from this particular tweet thread, which I think is egregious and like, Cathie should be derided for this one. I’m not surprised she’s deleted it.

like if you just look at ARK, to be fair, I think their research is actually good and they have good ideas and they identify good companies, but their financial models are just garbage. Like they’re just literally founded on hopium. and like, I didn’t do it public on the podcast, but I went, I remember going through like their zoom.

financial model, maybe a year and a half, two years ago, and this is after zoom had already started to like zoom down again. And they were predicting like a 30 or 40 X return, and it was like founded on absolutely nothing. It was, um, and I think coming back to the point you were just making, like how I think they, I think it’s because.

They’ve made this horrible situation for themselves where they have to now come up with these ludicrous predictions because they’re running a fund and, you know, funded and they’re still probably making a ton of cash. I’ve never looked at their own books to see how much money they’re making. They’re probably printing money, right?

But if consensus ever really turned hard on arc, which it does, it’s on the, has been on the verge of doing for years, really because of poor decision making around managing their portfolios. Well, they would suffer massive outflows, and that would be like the end of them. They’d be doomed. So they’re actually forced to make these crazy predictions because they need to keep bringing in new money and stemming the outflow of people who just get disillusioned with their actual performance.

And that’s probably, you know, I mean, maybe, maybe this hints into the seductive nature of technical trading I’m going to talk about the back of the episode, but you know, people just buy a story, right? And they, if someone’s, someone’s telling you this super optimistic thing that the stock holding you have is going to go to the moon, as I said, on Wall Street bets, well, like you, you’re inclined to want to believe that.

Krzysztof: Yeah. I mean, that’s part of part of what makes investing fun from this, from the standpoint of, maybe I’ll win the lottery, but it’s tied to a story and it’s interesting, but you’re right. There’s a whole, Not other half. There’s a whole nother 90 percent of it, which is financial reality. And it’s one thing, by the way, to say, I think a company is massively undervalued based on its market cap.

And from these levels, based on certain growth rates, I think it could appreciate a 10 times over, but it’s another thing, right? To, I don’t want to use zoom again. Uh, I mean, they continued doing it repeatedly to, take a, call it a 50 billion company and say, we really liked the product. And so it’s going to 10 X from there and go from 50 billion to, 500 billion.

The only company, honestly, that fits that bill. And they were right was, was, um, People that were saying that NVIDIA is going to be the next, call it, one in a, two decades company because the entire world is going to be riding on its coattails. And so even though it was already expensive, it’s going to get more expensive, and that turned out to be true.

But that’s like, Very, very rare. And that was backed up when I was listening to arguments in favor of NVIDIA, that was backed up by all kinds of fundamentals and research. So I think, I don’t know if there’s a lesson here for me, I know I learned this some years back is just because a money manager says it does not make it true.

Luke: Honestly, the whole industry is set up, but it’s a financial industry, right? They’re set up to make money for themselves. Like you have to look at the incentives in this space. If you are an individual investor, I am venom on this point, you have a massive advantage over the market because you can take a longterm time horizon.

You don’t need to persuade someone else about your thesis. You just have to do the work, identify the world’s best companies and just hold them long enough that you make a massively market beating return. If you’re running a fund or if you’re like an investment advisor and you put together a portfolio for a client, like the client’s going to be asking you every quarter, like, how’s our performance and if you’re not in.

Like the hot stock name at the time, or if you’re underperforming, well, you’ve got to do stuff. You’ve got to do stuff to try and deliver short term performance. Otherwise you’re going to lose that client. Either they’re going to, you know, your outflow from your fund or they’ll fire you and they’ll hire a different advisor.

So your incentives are back to front. And most of the actions you’d end up taking for the client are destructive to their long term wealth.

we kind of shat over passive index tracking and ETFs maybe a month or two ago. Um, but like if you don’t want to stock pick and you don’t want to manage your own portfolio, stick your money in a passive index tracker and just, you know, buy the market. Don’t, don’t have some individual making discretionary decisions, which in the main are going to screw you.

Krzysztof: and there’s a lot of, uh, really wise financial folks that do just that. There is, I think no harm, uh, in something like that. Although interestingly, I’ve never done it myself. mean, maybe that’s because I’ve always learned how to stock pick so I just feel comfortable, but risk is, is where I’ve burned myself.

And so I think as you enter later stages in life, middle age and later than something like having some portion of your portfolio in a, don’t think twice about it. index fun. That’s not a dumb strategy by any stretch.

Luke: Indeed. Well, shall we, uh, shall we turn our minds to three potentially good investments? And we’ll talk about these three, uh, that were requested by Hammy. And again, a reminder, Palantir, Rocket Lab, and NuScale. So why don’t we do it this way? Because I know we’re getting close almost to the 40 minutes of good.

Uh, good COVID energy from you. So why don’t I lead this? I’ll, I’ll give you a kind of a high level rundown on each of these three. And then maybe in the spirit of Phoenix and Dodo, which was like when we launched the podcast, like give us your view then on whether you think these companies are going to prosper, be doomed, or maybe you could rank them at the end as well. That’s that sound.

Krzysztof: Let’s do it, Badger.

Luke: Let’s do it. And, uh, and if you are enjoying this podcast, before I get into these three, just a quick reminder, we would love a like and subscribe. If you’re on YouTube, give us a comment, tell us which of these three companies you like. Maybe you think one or all of these are garbage. Let us know. You can find us on, uh, at wallstreetwildlife.

com. We can also download our 10 laws of the jungle. Um, and just tweet us. We’re on X I’m at seven Luke.

Krzysztof: And I am at seven flying platypus.

[00:23:55] Palantir

Luke: There we go. Right. Should we do Palantir first?

Krzysztof: Please.

Luke: Now, I’m not going to go super deep on these, but I am going to do that on my Twitter in the future. I’m planning to pick a couple of high conviction stocks from my own investment portfolio, and I’m going to do a video deep dive of each of them. So stay tuned.

Do give me a follow and, uh, and check out the detail, but here’s like my super high level view on Palantir. And actually for each of these, I’m going to pop up on screen my own trading history. So I will say Palantir. I only bought this one quite recently. I think it looks like about June that that green blob is my purchase.

And. Right now, I think it’s about a 0. 7 percent allocation in my portfolio. That’s kind of a starter position for me. And I’m currently up about 35%. , but you can’t judge anything by. Two months, three months in the market. That’s just random fluctuations. But so far that position is playing out quite well for me.

Now, why did I buy Palantir myself? And it took quite a lot of research just to understand what the hell the company even does. So let me try and explain this at a really high level. they help other companies who have masses of data and complex problems. They help other companies organize their data and make decisions.

And so they’ve got lots of products that do this, but I’m just to focus on one in particular. I think it’s quite interesting and timely. they have something called AIP, which is the AI platform from Palantir. So like if you, I’m going to liken this a little bit to, uh, the sort of Apple privacy approach around large language models.

And I know you’ve heard this analogy from me before, but I think it really holds water quite nicely. Like if I use Gemini today or chat GPT, like I have to share my data. You know, I, I paste in my attachments. I asked my question it’s in like that LLMs cloud. And then I get some results back. And that’s hugely useful for me as a user of this thing, but I don’t really know how my data is being used.

I even actually anecdotally saw a tweet, uh, no, actually a Reddit post a few hours ago that suggested that, um, Gemini, I think. was examining a user’s PDFs, because he had his permissions set up a little bit wrong and Gemini suddenly had a load of insight on his tax returns. Like it is just a reminder that when you’re using this stuff in the cloud, particularly from a, like a hyperscaler like Google, like they’ve got your data and you’re not entirely sure how they’re going to use it.

And if you’re a big company and you have a lot of data and you want to start using some of these public LLMs, large language models, it’s kind of dangerous to do that with commercially sensitive data, or even maybe like legally sensitive data. You might have like patient health records or That’s a legally privileged, perhaps so coming back to Palantir.

What do they let you do? Well, they let you deploy large language models internally within your organization. In a safe way. And they kind of offer three main, points of value for clients. So the first is you can deploy all of these LLMs locally on your private network, anchored to your private data.

So there’s nothing out in the cloud. You can define hard rules in this taxonomy that says the LLM can only access certain things. It can’t access other things because they can’t even see you know, maybe you’re really super secret data and also it keeps like a really good clean audit trail about how every decision was made.

And if you work in a big organization, like audit is really important. If something goes wrong, or even if things are going right, like occasionally you want to get audit in, you want to make sure that decisions are being made in the right way and the organization’s moving in the right direction. and so something like.

AIP from Palantir will help you evidence how every decision was made. Who are the humans involved, which bits of the LLM model were involved. So that’s just one example, about how. Organizations can use the latest AI technologies and how Palantir enables that, but they have a bunch of other stuff around their data fusion platforms and information analytics platforms, essentially just pulls together a morass of completely different data in different formats, coming in at different pace, different rates, sometimes super high frequency data, and lets organizations kind of manage that, organize it, and then make decisions around it.

That’s kind of their main. Does that make sense, sir, as a sort of headline on what Palantir do?

Krzysztof: I know I’m a broken record on this, but can you address quickly or relatively quickly your perception that Palantir are no longer the bad guys of, data used for nefarious purposes?

Luke: Yeah, look, I think they probably are, and I, I do remember now, we’ve almost had this conversation on a prior episode, haven’t we, and I stand by the comments I made then that, they might be the bad guys insofar as they’re building, like, the best weapon in the kind of information warfare, Battleground.

They’re building the best technology. And so I would rather those technologies were in the hands of, uh, the West, frankly, rather than, other countries that the West are in conflict with. so if as a consequence, some of these. Leading technologies, which is interesting to think have been developed in the private sector, not by like the NSA and the CIA.

If some of these world class technologies are being used for nefarious purposes as well. I don’t know, maybe I’m starting to think personally that that’s an acceptable bit of collateral damage.

Krzysztof: Hmm. I continue thinking that I don’t know. It’s the same thing I was saying with Kratos as an investment. Mind you, I, that was such a cursory look. But when I look at a webpage showing me all kinds of new military gadgets, I don’t have the inside understanding of what the hell any of these things actually do on the ground.

So you could, you could jargonize your way and give me all kinds of spiels, but I’m like, I don’t know, is this going to be used to kill innocents or not? Who am I to make that judgment? And in those instances, my default tends to be. Yeah. The two hard pile, ethically speaking. It’s not that I, I don’t consider myself like a purist, like the ethical moral compass is not what I use to make my decisions.

Mostly because I think the world is too complex and there is no such thing as purity, but. In a case like Palantir, hearing you describe it, I’m like, oh good, like, there’s a lot that seems like good could come of it, but also a lot that could be really bad, and I don’t want to find myself in a position of really buying in and causing, you know, collateral damage that I had no way of knowing about.

So probably I’ll continue stay on the sidelines, but I don’t know how, how one, unless you’re, you are on the inside, how you can make that kind of determination with a conscience that’s clean. It seems impossible.

Luke: Like, I suppose in this case, um, well, we have to think about Palantir in two ways, right? It’s uses in the military industrial complex and by government, and then separately it’s use by commercial organizations and like the government usage, probably the way to ensure these things are used ethically and safely.

Is with like your vote and like the way the country you live in is governed. giving these capabilities to commercial organizations doesn’t really fall under that. And so, you know, maybe, maybe if we liken it to Meta and what was that scandal at Cambridge Analytica, like misusing access to Facebook data to like derive insights and actually, uh, potentially influence elections.

Like maybe, maybe that’s the kind of ethical conundrum for a Palantir shareholder, because I suppose this tool is potentially giving commercial organizations that might have nefarious objectives, giving them the capability to do things like that. So I would buy that. It’s probably on the company. to try and regulate, not regulate, but try and ensure that its tools aren’t used in those ways.

But that’s obviously an incredibly hard problem. And as a shareholder, you know, in some ways, it’s part of the, um, the bull case for the company. Like the U S commercial revenue is growing far faster than any other segment up like 40 percent year over year in the most recent reporting. So increasingly Palantir may have started out essentially as like a set of military tools, it’s increasingly becoming tools that are used in the private sector to run organizations.

Krzysztof: Okay.

Luke: Okay, well, anyway, that was Palantir.

Krzysztof: Yep.

Luke: That was Palantir. Let’s, uh, let’s turn our minds to the next of the three. Sounds like you weren’t a fan, but that’s, uh, that’s all good.

[00:33:10] Rocket Lab

Luke: Rocket Lab. Now, actually, I know this is one you and I Probably are fans of, I’m going to pop up my own shareholding again. This is interesting one.

still a relatively small allocation for me, but I’ve bought this on four occasions. So originally back in July, 2022, and then most recently in April of this year, still less than a 2 percent allocation in my portfolio. my cost basis across those four buys is about 4. 30, so I’m up about 30%.

But, and this is a small, I think it was something like a 2. 7 billion company. like of all the, say, sub 5 billion companies in my portfolio, this is very clearly in my mind, the highest conviction holding amongst all of those. now I probably don’t want to say too much about this because really, this investment idea.

is very much, uh, belongs to one of our colleagues, Simon Erickson. So I am going to suggest if you’re really interested in Rocket Lab, and if you want to know why I’m so bullish on it, I would say actually go check out 7investing. com. , you can sign up, with a very good deal on the slash subscribe page and you’ll be able to see all of Seven Investing’s investment research.

Go check out Rocket Lab there. And um, several of us, but primarily Simon have written quite a lot about that company. what, what are your views though, without saying too much, that’s perhaps Seven Investing preparatory.

Krzysztof: I own it too. It’s one of the handful of stocks in my equity portfolio. I think the future of space exploration is quasi infinite, SpaceX is one option, but you need to be a private investor with a lot of insider access. So unless you have shares of SpaceX, there’s only really one alternative, which is Rocket Lab.

And from my own investing style, as of the last, call it year and change, I love the fact that it’s a smaller size company. And has not yet become a large behemoth. So I am, um, a fan in the potential of this company and that’s why I own it. So

Luke: I do, I do think there’s some interesting stuff that 7investing has to say about this company. Like, if you look at, actually he’s now Sir Peter Beck, or is it, is it Sir? I think so. He’s received an actual knighthood, I think from Peter Beck. King Charles. Uh, anyway, uh, Sir Peter Beck’s company, if you look at them on the Twitters, like you would be forgiven for believing that they’re all about rockets and putting stuff into orbit. But there’s actually a lot more to the company in the most recent year or two.

And they’re now very much, I’m going to quote Simon here, like an end to end space company. They’re doing a lot of very other exciting things that I think some, I think makes them, uh, like a very serious player in the space economy, perhaps second only to SpaceX.

Krzysztof: one question I have for you, the greatest danger with smaller caps is usually has to do with cash and running out of it. Do you have a view about their, Immediate cash needs and whether they are sturdy enough or future dilution still kind of keeping a lid on how high the stock can go.

Luke: Yeah. And I think that’s a really pertinent question because they are not yet generating like an operating profit and they, I need to recheck actually. I think they were on track to turn profitable by the end of this year if they hit their schedule on Electron launches. Um, but yes, cash burn is a, it’s a bit of a concern and they’re also gearing up for their Neutron program.

Which is essentially, like, bigger lift, um, space rockets, and that’s expensive, like, they’re gonna have, they’re probably gonna have to try and fail a bunch of times before they successfully start putting Neutron payloads into orbit and generating revenue from that, so they do need a bunch of cash to get them to, um, Like the next starting line.

and I do recall that in the most recent earnings, they pushed back, uh, the Neutron program by a quarter, a couple of quarters, maybe to the middle of next year. and I think reading between the lines, essentially, that’s to help them manage their cash burn. so that they increase the confidence of getting there without having to dilute further and raise more money.

Krzysztof: So this is the double edge, especially if you’re a beginning investor. This is why interest rates matter. Remember that a company like Rocket Lab. goes out, raises a whole bunch of cash. So imagine they have a really fat piggy bank sitting there and all is well and good, right? But each quarter that passes, as you’re not yet profitable, that piggy bank gets a little smaller and smaller.

Well, if you ever need to make more money because you’re not yet profitable and your goals have been pushed back, Then you need to raise more capital, but the cost at which you have to do that is higher. So the returns for investors becomes lower when rates go down, money is less expensive. That’s a weird thing to say.

Sometimes if you haven’t really thought about it, what does it mean for money to have a cost? But when money becomes less expensive, there’s more of a runway. So with interest rates on the table of allegedly starting to go down, starting with maybe the rate cuts in September or December, then, right, then a company like Rocket Lab, as long as they have survived and won’t push their profitability too far down, then they’re in pretty good shape.

But, you know, it’s a very different situation to be in than, let’s say, you know, your favorite Uh, CrowdStrike, which is just printing cash regardless of interest rates. So you have to kind of make an adjustment for the risk you’re willing to tolerate.

Luke: Yeah, I think in general as a, probably as an investor in non mature companies, like companies that are still in their growth phase in some way or another, even up to like enormous companies like Alphabet, like I wouldn’t class that as a, a post maturity company, like all of those kinds of investments, they, they do better in a lower rate environment.

Like the cost of doing business is lower. it’s easier to raise new money if you need to. and the growth multiple, like the money that investors are willing to pay for your company increases because, I mean, sort of cutting through the complexity of it, essentially, like if I can get a guaranteed, say, 5 percent I can get now by putting my money in the bank or locking it up in like a T bill or a gilt, well, If I can get 5% with basically zero risk, well, why would I potentially invest money in a risky asset to get a return?

But if I’m only getting, like back in the ZIRP days zero interest rate days, like if I was getting literally 0% 0.1% while I’m out there looking for ways to invest my money. So I’m more inclined to invest in riskier risk on assets, because that’s where I’m gonna get my return from. There’s, there’s actually a.

A much more complex answer to that, where you look at, uh, like discounted cash flows, and then you sort of factor in the risk free rate into that, but that probably goes beyond the scope of the stuff we talk about in this podcast.

Krzysztof: All right, so that’s Rocket Lab. Uh, I’m a fan. What’s the third contestant?

[00:40:42] NuScale Power

Luke: Uh, the third contestant is NuScale ticket, SMR. This really does fall into your piggy bank conversation, uh, because they are on a big ass cash burn and they don’t have a ton of money in the bank and shareholders are being and will continue to be diluted up the wazoo. for probably the next at least six or seven years, if not forever into oblivion, but I own this one still.

Um, so I bought this back in July, 2022. It’s a tiny little 0. 3 percent allocation, and I’ve taken a big ass draw down and I nearly Like threw in the towel on this one. And my position became so small that I basically wrote it off and said, Oh, forget it. You know, let’s just let it, it’s not even worth worrying about whether I should sell it.

And now suddenly I’m back in the green and it’s up 14%. So who are they and what do they do? Well, they are an industry leading provider of, small modular nuclear reactors. And so like, if you think about nuclear power, and this is going to perhaps play into the Republican administration conversation we had at the top of the episode, but you think about nuclear power.

typically you’re thinking about these giant reactors that are incredibly expensive, tens of billions of dollars to build, and they take like 10, 20 years to construct because it’s just so arduous with all of the safety and the planning that has to go into that. And so the whole, idea around small modular reactors, which by the way, are not a new technology.

They’ve existed since, well, the 1960s or 70s. And this is, they sit on nuclear submarines are powered by small modular reactors, like a mini reactor that generates energy that powers the sub. so, uh, the idea of a company like NuScale Power is they’ve got a, the world’s only Approved design from the U S nuclear regulatory commission to actually manufacture and deploy.

These SMRs, these modular reactors. now it’s a bit of a troubled investment and why did, uh, my stock holding almost go to zero over until very, very recently because they’ve never really had a very strong customer. backlog. They had really one confirmed customer, which was the Utah Associated Municipal Power Systems, UAMPS.

And unfortunately, deal got terminated last November just because the timelines are running out. And it wasn’t clear that NuScale could deliver power to Utah at the rate that they’d all agreed in the contract because of the sort of escalating expense and the complexity. so they don’t really have a confirmed customer and they have a whole bunch of potential clients and indications of interest with, um, Ohio, Pennsylvania, Romania, A bunch of other countries, including Ukraine, but nothing very firm.

and now this is a concern for investors, right? Because this company. Playing into your piggyback conversation is probably on a cash burn of about 50 million per quarter, and they only have 137 million in the bank. No debt, but they’ve only got 137 million. It’s gonna, that’s gonna last them like a couple of quarters.

If they tighten the purse strings a little bit, you know, maybe a year. they’re going to have to raise more money. And so, yeah, a low rate environment would help them do that. They can raise money essentially in one of two ways, either by selling debt. So basically, you know, taking out a loan either from investors or from like a bank, or they can raise money by issuing more share capital, which is really the approach they’ve taken to date.

and when new shares get issued, essentially, if you have an existing shareholding, a bit like. There’s Andrew Garfield in the, um, the Facebook movie, like you get diluted to hell and whatever percentage you had becomes worth less and less and less. And suddenly, you know, you’re left holding a bit of paper that’s not worth a whole ton.

and that is very much the risk with NuScale.

Krzysztof: Can you reiterate why the stock has gone up from about 2. 85 in, uh, earlier at the beginning of the year to about 15 and a half? I

Luke: I don’t really know if I’m honest. I’ll tell you one thing. Okay. One thing is

Krzysztof: mean, that’s a massive,

Luke: Yeah,

Krzysztof: there’s people buying it despite all of the dangers.

Luke: here’s one thing that could be the case. So, and it plays into our whole thesis around AI and data centers and links to your, uh, EOS recommendation, because if like, I think the, I saw a stat a few hours ago, data center and AI power consumption is set to reach a thousand terawatts by 2026, which is about.

Double from kind of broadly where we are today. and I think data centers are interesting because you have this huge power requirement in like one location, geographic location. So it makes absolute sense if you did have the ability to build a small modular nuclear reactor at sensible cost, like a couple of billion dollars, and you can literally build it.

Like next door or, you know, a couple of couple of miles down the road, and you’ve then got a self contained, incredibly climate change efficient source of renewable power, um, safely, like that’s the whole pitch around, like, if you think nuclear power is dangerous. Like you’re wrong, you’re misguided.

it’s one of probably what is, I think I’ve seen stats, it is the safest form of power. Even more safe than, um, solar and, uh, wind. Because sadly construction workers like fall off these things and they, uh, they die fitting them, right? So there’s, there are deaths involved in that industry as well. Not to mention like the mining of the raw materials.

Nuclear power is incredibly safe. and so if we’re able to deploy these things Quickly, like the timeline for an SMR reactor From having the idea and breaking ground, like once they get this thing fully set up and operationalized, essentially building these reactors on a production line in a factory, shipping them on a truck to the site, and then just installing them.

Like it’s a couple of years, not 10 to 20 years, and it’s a couple of billion dollars, not tens or even hundreds of billion dollars to build things like. Those point requirement needs for power, intense amounts of power for data centers and AI centers, like SMRs are a great answer for that. So that could be part of why they’re suddenly having a bit of a resurgence.

Krzysztof: Well, that’s a major change in fortunes. Oh,

Luke: Now, before you vote on this one, I want to share, like a really major, part of the thesis, but also something quite exciting that I think about when I think about this stock. it’s window. for commercialization, we were hoping would be like the end of the 2020s, 2028, 29, which was going to be the Utah project.

That’s now off the table. So they’re not really going to start making any revenue probably until the early 2030s. And even that timeline is unclear. And now I think something very interesting is this SMRs are still, uh, fission reactors and fission technology, you know, it’s like uranium and then. Complex things happen and then you generate heat, which you then boil steam and then you kind of create power.

and fusion is a, is like the opposite reaction to fission. and fusion reactors are being investigated right now. And there are breakthroughs like every couple of months we’re seeing stuff in the news. It seems inevitable to me. That fusion power is probably the future of nuclear power. but we’re decades away from fusion being a commercial reality.

and so I think even if you’re, pessimistic about Fusion starting to be deployed and rolled out. Like it’s probably towards the back end of the 2040s, which isn’t that long away. What’s that like 15, 15, 20 years away? so if you’re a NuScale, like you’ve got this unproven technology, if you’re lucky and you can sign some deals, you might be generating revenue by say the early 2030s.

You’re only really going to have. I don’t know, a 15 year window to make money before you’re basically like the horse and cart with electric cars on the road, because there’s just a better solution there. And not to mention all the other like science fiction solutions for generating energy that might exist.

but fusion is probably the direction of travel for nuclear power. So this worries me as an SMR investor. even if they kind of get rolled out. Like it’s very time limited. I know it might sound kind of dumb to say, Oh, you know, they can only make money until the 2040s, but, like it’s only going to take one massive breakthrough in fusion energy generation.

some research institutes suddenly being able to run like a fusion react sustained fusion reaction, generating net power for like minutes or hours at a time. And then suddenly. Like your SMR investment is going to look pretty dumb. And the way growth investments work is they are very much valued on the value of their future cash flows.

So like overnight, this stock could collapse if it suddenly looks like fusion is going to hit the ground at some point in the next 10 years. Let’s say,

[00:50:31] Palantir vs Rocket Lab vs NuScale

Krzysztof: Okay, thanks for those pitches. It’s my job now to rank them.

Luke: yeah, let’s do it.

Krzysztof: Is that what we’re doing here?

Luke: Why not?

Krzysztof: is, oh, this is actually, this is, uh, this is not as easy, as I thought it would be. You know what, Rocket Lab sits in that sweet spot for me in, in terms of, um, it’s big enough that it’s, it’s not gonna, ostensibly disappear at 2. 8 billion. market cap and it’s playing in this, uh, up and coming industry.

the dilution concerns are real, but I invest to make big returns. So Rocket Lab seems like it’s in that sweet spot of call it size and potential relative to its risk. I really like outside of this stuff, the ethical stuff regarding Palantir. I like that they are net income positive. They made 105 million and I don’t see AI slowing down any time, but it’s a 64. 5 billion company. So that’s already a large company. So if you just think about that, the two numbers I threw out, it’s valued at 65 billion. But it’s only making 105 million. So that’s a big, big gap between how much you’re bringing home versus how much you’re valued. So it’s pricing in a lot of growth for a long time.

So, um, I’ll rank that second and I don’t, Somebody knows something about, NuScale because the company is now valued at 3. 7 billion. And if what you said is true, that there are still what, seven years minimum from making money, then that’s an investor. You know, I’m thinking like that money is doing what exactly?

sitting there besides waiting to be devalued. Now, the time to invest in new skill, obviously in hindsight was, was when it was, struggling for, for its life’s sake, but even then, you know, this is, I won’t go too much off the technical training. Here’s, here, here’s the one thing I will say that I think.

I hope you won’t deride as hocus pocus. The one thing technical analysis can do is if you zoom out, and I’ve said this before, if you zoom out and see the whole, uh, history of price, you could tell very quickly whether it’s been going down, sideways, or is now going up. And the one cardinal rule that technical analysts say, and forget the nitty gritty, forget all of the, you know, hocus pocus, they will say, what is the trend? it’s down, then you are as an investor swimming against the current and in a sense thinking you’re smarter than the rest of the market. Because if the rest of the market is selling and you think you know something and you’re buying, you’re going against the trend and the odds are not in your favor.

If it’s going sideways, price wise, then the market is basically saying, we don’t know there’s not enough information. So if you’re buying in now, maybe you do need to have some sort of information advantage, but typically that’s a yellow light. But if the price of all is all of a sudden changing in momentum and going up, Then, that’s a signal that’s saying the market as a whole, collective intelligence, is seeing things that are in that company’s favor.

So, you have to wait, in a sense, until the momentum moves in your favor. And that’s what we saw with NuScale, at the beginning of the year, right? After it was plateaued, after it dropped a bunch, then traded sideways. And, and then went up. So now all of that is to say I think the stock is safer now than it was because the market sees something in it.

But maybe you also miss the boat because it’s gone up so many hundreds of percent since the lows. Regardless, I would not invest in, in NuScale at these prices. So that’s my third

Luke: Yeah, I’d totally buy that. Uh, and I think you’re good question about why have they really gone up? I kind of, I shot from the hip there with data centers. I need to do a bit of research on really why, like if nothing has materially changed and what I said is true, and this is like at least seven plus years to commercialization, well.

I’m going to take my money and say, thank you very much. My, my meager 14 percent profit, and I’m going to exit too. So maybe I’ll, uh, do that research over the next couple of days and I’ll post on Twitter what I decided.

Krzysztof: sounds. Sounds reasonable.

[00:55:17] The Seductive Nature of Technical Trading

Luke: Very good. You know, I said at the beginning of the episode that we were going to loop into the seductive nature of technical trading, and you’ve set that up beautifully with your comments on NuScale. Uh, so thank you for that because. Something I noticed. So I did a quick scan on X just because I’ve been prepped for the episode.

I knew I was going to talk about these three stocks, Palantir, Rocket Lab and NuScale. So I just searched for their ticker and like the timeline on social media, there are, there are just a ton of folk posting graphs and charts and technical trading. Positions and ideas around these three companies and pretty much every other ticker, if you’re honest. and I think this is an interesting build on our conversation last week where we talked about, you know, we were joking about bouncy chill ups is tweet and how.

Like you can’t wing it as an individual investor, you have to put in the hard yards, do the work to understand the company, understand the thesis. You can’t just take abdominal breaths and visualize success and then magically make money. and I do think actually looking at these three stocks today, it reminded me how seductive Technical trading can be.

Now this is totally different to the way you use technicals because I know you do the fundamental research as well. And then you use the technicals to inform maybe the timing or the sizing of your positions. And that makes a lot of sense to me actually, even though, you know, I like to what’s the term

you use? Squeeze your shoes on this. Yeah, that’s part of the banter, right? I squeeze your shoes in it, but it does make sense, even though I don’t really do that myself. but if you were just like a newer investor and you came and you Googled like dollar SMR and you saw all the charts and people saying, Oh, you know, this is going to the moon for these different technical reasons, you might stop your job there and go, well, I’ll just buy this thing.

And you’ve been seduced by the illusion of how easy it is to be an investor. Cause you think you’ve got like, you look at some pretty charts and you think you’ve got a handle on this company, but you don’t really understand anything about the company and its future and its financial situation. Like you got to do both.

so, uh, like I do think it’s quite dangerous how technicals have become such a predominant part of the narrative when in my mind, the reality is at best, they’re like an add on to actually doing the work.

Krzysztof: Yeah, you said that very nicely. The greatest, danger of all the stuff you see people doing technicals is a false sense of confidence that the pattern that they’re seeing is true in the sense, but we’re pattern making animals. And so if your timeframe is short enough, you’ll be able to legitimately call out a whole bunch of patterns and look there, there they are.

Right. But. I think unless it’s your job where you’re sort of playing the zero sum game and you could get quite good at it, you know, we’re poker players. So we know what it’s like to sort of try to find small edges. And if you repeat them over and over and over and over again, the means, you know, the, the averages begin to favor the player with the more statistical savvy approach.

Right. But that’s not what we do. And I don’t think you and I are in the game of sitting and. Looking at charts all day. All I’m saying is, yes, it’s, it’s a danger to be seduced by short term patterns and you will lose your shirt unless you’re professional at doing it that way, what you and I are advocating, what I think I’m advocating to, to repeat it is.

You said it. like a good poker player. I think knows their math and knows how to play the person and knows the value, intrinsic value of the cards. And unless you’re doing all of those, you’re an incomplete player. So for me, at this point, all of the technical stuff I’ve done reduces to is the momentum in my favor or not?

Yeah. And if it’s not in my favor, then I have to have a very, very good reason to be in the stock because I’m trying to be smarter than everybody else. And sometimes that’s the case. I mean, right now I’ll say my position in Coherus is predominantly based on fundamental understanding of the value of these drugs that the market is not yet recognizing.

But I am I have to admit I’m swimming upstream because the market is saying no there is no value in these things I’m saying I think I know better and that’s a kind of hard game to win unless you’re very confident in the fundamentals so if you’re listening to this as a beginner take Luke’s advice very seriously and Do not fall prey to stocks and charts and figures unless you understand the company fundamentally first

Luke: Yeah, very good. I think we have found like a point of agreement around this controversial topic. and this is something we’ll just keep hammering on about for hundreds of episodes to come. Like if you want to invest in individual companies, you’ve got to do the work.

Krzysztof: Yeah, or, or if you don’t, then you have to be completely honest with yourself and say you are taking disproportionate risk. That is not very different than sitting at a blackjack table.

Luke: Yeah. Or, uh, I went to Wimbledon yesterday. Uh, I sat on the mound, and I’ve proceeded to lose bet after bet. On Djokovic losing set after set. So, uh, yeah, you know, I was swimming upstream, play, play, play bedding with the underdog and it didn’t come good. if I won those bets, I might be calling myself a genius, but I was just gambling for entertainment’s sake.

Right.

Krzysztof: Yeah, I watched the, I watched that match. It was, uh, unfortunately not as good as a match as it could have been, but changing of the guard. Spain had quite a day yesterday. Didn’t, didn’t they?

Luke: Didn’t they? Yes, they’ve really did. Yeah.

Krzysztof: Anyhow. Um, okay. Wow. That was a long episode.

Luke: That was our longest episode yet. And I wonder if this might be a new theme going forwards. So do give us a tweet and let us know if you enjoyed today’s long and slightly rambling, perhaps conversation. And if you want us to talk about companies in more detail, like we did today, let us know, maybe drop us a couple of tickers.

And if their companies were familiar with, maybe we’ll add them to the roster for future discussions.

Krzysztof: Yeah, so we’re on YouTube and all the major podcast platforms subscribe now for a financial podcast that’s as fun and playful as it is in insightful. Are we, are we not entertaining

Luke: We do our best. Even when we’re half struck down with COVID, we do our best. you can tweet us, again, you can find us on the Twitters, that’s where we mostly hang out. I also post on Threads and LinkedIn, and we are on Instagram too, but to be honest, no one has a sensible thing to say over there, so go find us on X.

I’m at 7LukeHallad.

Krzysztof: I’m at seven Flying Platypus and. I represent Team Monkey, that’s Team Badger over there. Do let us know about the potential ideas for the Axon versus Eos bet. that’ll be unfolding over two long years. So we want to make it a good prize.

Luke: For real. Are you ready to become a beast of an investor? Your journey starts here.

Speaker: shouting A reminder that the people on this program may hold positions in the companies that are mentioned. Buying and selling stock carries financial risk which could include loss of capital. The views in this program should not be taken as personalized advice. Before acting on any of the information provided, listeners are encouraged to consult a financial or tax professional.