One of our stocks is up 1,200%… so why are we thinking of selling? In Part 2 of our King of the Jungle portfolio review, the gains are bigger, the valuations are scarier, and the debate gets heated. We break down the massive winners, the surprising losers, and the tough decisions that come with managing a high-growth portfolio. These are our highest conviction plays and biggest winners of the last 18 months!
Here’s what we cover:
🚀 12-Bagger Alert – Luke reveals his massive winner that’s delivered a 1,200% return since the portfolio started. Is this performance sustainable, or is it time to trim at these valuations?
💰 The Great Conviction Debate – Why Krzysztof’s worst performer (Chainlink) gets one of his highest conviction ratings, and why Luke’s best performers are getting conviction downgrades due to “egregious valuations” $LINK
🌍 FinTech Global Domination – Deep dives into Wise (preparing for US dual listing), Nubank (conquering Latin America), and MercadoLibre (Luke’s 9-badger conviction play that’s becoming the Amazon of South America) $WISE $WIZEY $NU $MELI
⚡ The AI Infrastructure Play – Krzysztof breaks down Arista Networks’ explosive growth in AI data center connectivity, plus his controversial thesis on IREN Energy’s Bitcoin-to-AI pivot strategy $ANET $IREN
🛡️ Cybersecurity Reality Check – Luke’s honest assessment of CrowdStrike and Palantir at today’s astronomical valuations. Great companies, but are they investable at 28x and 100x sales respectively? $CRWD $PLTR
🚀 Space Race Showdown – The ultimate growth story showdown between AST SpaceMobile (building cellular networks in space) and Rocket Lab (Luke’s 12-bagger that’s literally going to the moon) $ASTS $RKLB
🔋 The Battery Bet Results – Krzysztof’s obsession with EOS Energy pays off with a 344% return in their head-to-head bet, crushing Luke’s 155% Axon gains. Is this the future of American energy independence? $EOSE $AXON
⚖️ Valuation vs. Conviction – How to manage exposure when your best companies become your most expensive stocks. Luke’s trimming strategy for managing winners vs. Krzysztof’s “never sell” philosophy
📊 The Scorecard Revealed – After starting $500 behind, Krzysztof has delivered 112% returns in just 7 months to nearly catch up with Luke’s steady 65% year-to-date gain. The competition is heating up!
Segments:
00:00 Cold Open & Portfolio Philosophy
12:40 Wise
21:12 Nubank
25:35 Tesla
34:40 BYD
41:20 Astera Labs
48:06 Zscaler
55:33 IREN Energy
01:05:20 MercadoLibre
01:13:04 Nebius Group
01:16:50 CrowdStrike
01:24:59 AXON Enterprise
01:29:37 AST SpaceMobile
01:36:39 Palantir
01:44:10 EOS Energy
01:51:53 Rocket Lab
02:00:02 The AXON vs EOSE Bet & Final Scorecard
E90 – No Ads – King of the Jungle review part 2
Luke: [00:00:00] It’s a great way to navigate companies like this. if you really, truly believe in the long term, which I do
‘Cause you were trying to time your way back in at the bottom. And if you miss the bottom well, or if the stock just continues to go up as this one did, like you kind of never get back in. Exposure level that’s appropriate to your conviction.
Krys: I bought, a small amount of shares
that stopped the world. but then I sold it again. I took a quick little profit.
I had other places to reinvest
Luke: And have much longer whole conversation to tell the story, but a high level
Never trust anything, always verify everything. That’s like the essence of zero trust.
Krys: So why invest in such a difficult, business without all of the massive upside
Luke: If you do this well, you can beat the market and I’ve got the numbers that prove you can beat the market over the long term.
Hello and welcome to the latest Wall Street Wildlife with Christophe and Luke Hot on the heels of last week’s episode. This week [00:01:00] we’re going through the back half of our King of the Jungle portfolios, reviewing our final 15 stocks between us and these are our best performers in the King of the Jungle portfolio.
We’re gonna give you up to date due diligence on each one of these, and the key investing thesis for each one, plus our current conviction level for every company. This is an episode once again that is absolutely packed with insights that will make you money.
Krys: lots of bananas and badgers all over the place. ’cause we ranked them, we ified them, we badgered them. We, we thought about whether our convictions changed, gotten, I mean, in what way? They changed whether they got better, worse, or stayed the same. And, uh, I confessed to you that last night I had a really hard time sleeping because after doing this for so many hours, I kind of couldn’t stop thinking about all the, you know, the, the massive.
Data download. So I thought I’d share with you [00:02:00] a couple of things about what you said about your holdings that, uh, that I both like and don’t like, so to speak.
Luke: Before we go there, if you’re wavering as to whether you’re gonna listen to this episode, these are the best of our stocks we are gonna cover in the next two hours. If it’s anything like yesterday’s mammoth recording, eight of our stocks that are up a hundred percent since we started 18 months ago, and we’re gonna cover the one stock we have between us, actually it’s mine ha, which is a 12 bagger over the same period.
That is an incredible return. Is it sustainable? Hang around to the end of the episode to find out.
Krys: just because the first half were our least lowliest performers, there’s only a couple really that, losers and only by a few percent, and that actually makes some of them probably the better values today as opposed to the ones that I have already run up a lot. So [00:03:00] I would not divide the two and two halves into bad and good.
what’s good. Might be what’s bad today, might be good tomorrow and vice versa. so Badger, uh, I have two thoughts for you.
made me think twice about how quickly I want to add to Google and Amazon. I took those, those pitches quite seriously and I’m, I’m, uh, the only thing holding me back is that they’re, you know, trillion dollar market caps and so on. But, um, maybe I’m gonna try to get queued in market time a little bit and wait for market pullback to add them, but they, they certainly rose to my, you know, pay attention to, to those two again.
Luke: Great. That’s, that’s good stuff. Actually. I’m glad I had a bit of an impact and I’m glad I kind of brought you round on Alphabet in particular. ’cause you were quite bearish on that about six months ago. And I think I’m right on this one. And [00:04:00] if you didn’t catch last week’s episode, check it out. But Alphabet and Amazon are my two highest conviction holdings.
I’ve given them 10 badgers. I don’t have 10 badgers. It’s the same as 10 bananas. But like, you don’t get any more badgers than 10 in my
Krys: Uh, yeah, I, I think 10 bananas equals 10 badges a banana per badger. and I’m sorry this, this will not be a surprise to you, but. I’m speaking ignorantly, but I don’t think Greg’s is a good pick
for your portfolio. I know what you’re looking to accomplish with it, but the fact that you don’t like the company either, the fact that it’s, it’s kind of blah and it’s kind of mostly, you know, a, a kind of financially distressed, good value pick.
I just think there’s so many better ways to accomplish what you’re going for with that kind of pick than that one. But again, I don’t have, you know, I’m not in the uk. I don’t know it, I’m ignorant about all the things that you see. And as I said to you yesterday, even though the [00:05:00] dividend is not as high, I think, because Nintendo’s growth is probably gonna be much higher than Greg’s, that’s what I would officially recommend you consider swapping.
The one for the other. I doubt you’ll do it, but, off the top of my mind, that’s, that would make your portfolio more, more shiny.
Luke: yeah, that’s fair. Okay. no pushback on that. I think that’s very reasonable. And then from your 15, I hadn’t really looked properly at a MD. And you’ve picked my ears up to that. Like I’ve owned some semi stocks. I own A SML, which I’m not massively enthusiastic about right now. I own Nvidia.
It’s not in my King of the Jungle portfolio, but I own in my real money portfolio. I’m very bullish on that. I think that’s pretty reasonable valuation. but a MD has played second fiddle to Nvidia and you made a strong case around how it could be a leader in its own segment, focus more on AI inference rather than AI training.
And I know Nvidia do both, but you know, maybe there’s like a decent [00:06:00] market here or opportunity for a MD to carve out. So, I’m gonna take a closer look at that one. I was, I was kind of saying pre episode, like a number of your px, particularly like your biotech ones. I know in your mind these are very distinct different companies, but I just hear like pre-revenue, you know, stuff, it’s kind of beaten down.
It’s trading for less than the cash it has on its books. Like I, in some ways, I kind of categorize a bunch of your holdings in the same way as just like Christophe nonsense. So I find it hard for the stuff to go in. I suppose I’m most rueful about Coherence Biosciences, and you’ve told me yesterday like they’re executing this turnaround or they’ve rebranded, they’ve renamed, we didn’t even really say that explicitly.
They work Coherence Biosciences, they’re now coherence oncology. You know, I hope that’s more than just like changing the name of, obviously they sold off a bunch of drugs, so I guess it is more than that, but they’re now very different company focused on [00:07:00] oncology specifically. I’m, I’m just rueful about it.
’cause I’ve got, like, I’m out like a couple of thousand bucks of entertainment money, cause I bought options on your, endorsement like a year ago, and they’re now deeply underwater. I’m not willing to add to that, but I’m not gonna sell them. I’m gonna, I’m hoping your thesis plays out on that one.
Krys: I hope that doesn’t end for you. Like my racket lab options ended for me because, you know, they expire in January and it’s kind of, at this point, it’ll be probably a few months after that where the next good batch of data might kick in. So you might be shit outta luck. but you know, that’s the problem with, with those kinds of things.
You know, one month you’re, you know, you have mud on your face. Next month the stock, you know, for reasons beyond understanding might just decide to take off. So,
Luke: I thought it was also interesting yesterday, like of the stocks we went through, up to that point, you highest conviction [00:08:00] play was eight bananas that you awarded to Chainlink. But Chainlink is also like your worst performer and my newer or certain, my lower performer. Investments, like I wanna see success before I really get conviction in something.
So like typically my worst performers are a lower conviction.
Krys: Yeah. Uh, I think in this way we have a slightly, not slightly a, a decent sized difference in our po investing strategy for all the reasons we talk about endlessly. and since I have quite a few pre-revenue companies, to me, when the company itself and its mission continues to accelerate and deepen, but the stock actually goes backwards the other way, that just increases the value, the margin of safety, I would say, which increases my banana rating.
and the only exception, just to point it out though, the, the exception to that is my downgrading of [00:09:00] Relay therapeutics, which is also I think my second worst performer. But, uh, I only gave it three bananas because of the timing issues that I called out.
Luke: Yeah, and we, we had a bit of a conversation along these lines on the Patreon, wall Street, uh, patreon.com/wall Street Wildlife, if you wanna check it out, just with like a number of our Patreons over the last few days. And I did my, sort of mid month portfolio update and we were chatting about like Rocket Lab, which has been like an incredible run up for me and I was getting some questions around.
Like, how do I think about some of these companies and how do I manage my exposure level? Like it’s not a science in my view. Like I, I know like technical trading and algo trading, there’s a lot of math and there’s a lot of science involved. But as a long term investor, I definitely feel like this is much more of an art than a science.
And so, you know, it might seem somewhat [00:10:00] arbitrary how we’re assigning our conviction level, but those badges and bananas, like, you know, this little old cartoon emojis, but actually they’re quite high signal, I think if you’re paying attention to the stuff we’re talking about. Because there’s a whole bunch of very nuanced factors that are going into like how we feel about these companies and it’s still different factors for each one.
It’s very contextual. So yeah, you, you know, if you ask me to say, okay, how do, what things do I add up to arrive at like 10 badges for alphabet? Probably couldn’t tell you. It’s just like the sea of information that’s washed over me over the last 15 years as a shareholder and projecting ahead in my mind about where I think this stuff is going.
Like that’s how I kind of come to this.
Krys: know what’s fascinating? Uh, I read, somewhere that each human being is, its own, LLM and that once a human being dies, that particular [00:11:00] learning language model is never going to be seen again. Now that’s kind of, you know, it’s, it’s kind of sci-fi and, and perverse in a certain way. But what it, what it means to say is we each have our own life’s experience that we’ve been collecting and downloading for a very long time.
And what comes out from us is the. Effect of having all those inputs. And so when the output is, you know, in this case, however many badgers and bananas per stock, that’s being filtered throughout our life’s experience as investors. Which is not, you can’t duplicate it. Exactly. And you can’t even say precisely why the things, you know, the model spit out whatever it spit out.
But, uh, it does seem like we could recognize our own patterns, our own proclivities, and you know, what we’re drawn to, what we’re not drawn to. and when I was looking at [00:12:00] the cumulative sum of our ratings, they, make sense to me why they’re the numbers they are.
Luke: Yeah. Very good. Well, we’re gonna go into our, uh, highest performers. Now we do have your highest conviction rating. One of your stocks is nine bananas. I think we had to come to that at the back of the episode, but I’m afraid we’ve had my highest conviction ratings already. Some of my best performers, like the valuations are getting a little bit out of hand, and so correspondingly my convictions coming down.
But anyway, we’ll get to that as we’ll. Get to it.
Krys: All right. So why don’t you start us off with, the, with whys a company that both of us are really into.
Luke: Yeah. Yeah. We, uh, we even visited their offices. We met their, uh, CTO and we had, a member of the wise policy team on the podcast. What, like a year ago. Exciting company. Let me tell you about Wise ticker. WISE on the London Stock Exchange and soon to be on what? Either the NICE E or the Nasdaq, ’cause they’re [00:13:00] about to dual list and list in the USA.
They were born of around FX and money transfers, but they’re now essentially building money without borders and they’re disrupting the vast $32 trillion cross-border payments market. Unlike the legacy banks that rely on the slow and expensive correspondent banking system wise, has built its own proprietary payments network wise platform, which connects to local payment systems in the many, many countries they operate in the market consistently.
Misunderstands wise its business model, which is to reduce fees on FX down to eventually zero zero cost money transfers for customers and at the same time taking massive scale. And it has got 15 million personal and business customers. But the part of the company I’ve always MO been most excited about is Wise [00:14:00] Platform, which is where they’ve essentially white labeled their network and their capabilities and they allow partner banks to plug into it at a fee.
And that allows. Smaller, typically regional banks to give the same high speed, high reliability, low cost transfers to their own customers. So it’s incredible value proposition and as I said, wise is relisting right now, probably by August, 2025, there’ll be primarily listed in the US and that’s probably gonna be, it shouldn’t change anything, but it’s probably gonna be a catalyst for the stock.
It’s gonna increase liquidity, attract US institutional investors and raise brand awareness and like stuff FinTech and tech in the us. Typically trades are higher multiple than US Tech, even though it might be the same company under the covers. I really like Wise, I’m a personal and business customer.
I’m giving this eight badges out of 10 as a conviction rating. It’s a profitable, mission-driven disruptor with a [00:15:00] significant long-term growth runway. It’s got superior infrastructure, a deflationary pricing model, and an expanding product ecosystem that gives it a powerful competitive advantage.
Krys: Okay, Badger. I, I like it. I like the company very much. I use it, but this, this investment also like Adyen feels to me, maybe it’s similar to when I talk about, biotechs. When I actually try to understand like why what makes it a good investment rather than a good company, and how it actually makes its money versus another competitor doing something similar.
Why this one and not that one, you know, PayPal versus Adyen. Yesterday and Wise, I don’t know what Wises, uh, nearest competitor would be. I’m sort of at a loss.
Luke: It, its competitors are the legacy banks. I mean, if I, if I can, I have a bank account with HSBC, uh, ’cause I used to work [00:16:00] for ’em for 25 years and they’re a great bank, global bank. Uh, and I have also accounts with wise and then just to, to bring it to life as a, from a customer perspective, it’s almost ridiculous.
It’s embarrassing for HSBC when you put the, the customer proposition side by side. I travel to the states. I’m coming out for three months every year. I’m coming out this January for ski season and. I’ll be spending like, you know, low five figures dollars when I’m there on food and booze and lift ski lift passes and accommodation.
So I usually ship over like a bunch of cash from my HSBC UK account to my HSBC US account to spend. And if I were to transfer that money from HSBC to HSBC, which is what every normal person would do, it’s gonna cost me about a hundred to 150 basis points. More like a per, like, more than a 1% in fees. They might say it’s fee free, [00:17:00] but I’m getting a such an inferior FX rate.
So what I instead do is so daft is I take my Sterling and I move it to my wise account. I do my incredibly low cost FX transaction on WISE, and then I ship the money from my WISE account to my H-S-B-C-U-S account and it takes like an extra two minutes of like clicking buttons on the phone and the money arrives same day and I’ve saved myself like a couple hundred bucks and I’m doing that every time.
and that’s a significant advantage for people who, and we’re just talking about the end customer benefit here, people who actually keep an eye on the pennies and you know, this stuff adds up and they don’t want to get ripped off by their financial providers. But not only does WISE give me that, now they’ve got the WISE account.
You know, you and I talked about this last year. You realized you had like a bunch of cash sat in your SAT on wise, and once you turn on the interest product or the investment product, you start getting actually a really healthy [00:18:00] return. Like I can’t get 4% interest from HSBC. I can get that from Wise and I can get even more if I’m willing to use the investment product.
Albeit it comes with investment
Krys: So could the slogan of wise be as simple as like, it’s the better, more modern bank.
Luke: Yeah. So they’re not, they haven’t got a banking license ’cause they don’t do everything. They don’t aspire to do everything a bank does. Like they can’t give loans for example, and they can’t you credit cards, but essentially like, you know, if you didn’t understand that nuance Yeah. Like you’ve got an account, you earn interest and you pay for stuff with your debit card.
You know, that’s how most people view the bank.
Krys: Yeah. Yeah, exactly. That’s why, I mean, it’s, in some ways it’s so simple, uh, from, from the consumer perspective. and banks are some of the largest market caps in the world, like in the hundreds of billions. So if, why at, its, what’s its market cap like? is it like 10 billion?
Luke: it’s had a little bit of a runup of late, let me give you the [00:19:00] exact number. You know, where are we wise? It is 14 billion. Dollars. I think that’s been like transferred to dollars, like about 11 billion Sterling, something
Krys: Yeah. And I’d mentioned that just relative the size, you know, 250 billion for whatever JP Morgan versus 14 billion for better experience. not apple’s and orange. I mean, not apples to apples, but, but the scale is so, meaning there’s room to grow, obviously.
Luke: yeah, and I think that’s, you know, coming back to what I said about wise platform, like the growth, to me the most exciting part is like they’re not partnering with JP Morgan, but they are partnering with companies like Newbank and like major regional banks in the US and other like sort of FinTech like technology forward banks around the world.
Because it’s so much easier for those banks just to say, okay, we’re gonna plug in wise, behind the scenes. You probably, if you know, if your [00:20:00] bank’s using wise, you wouldn’t even see that. You wouldn’t know that. You’d just think, oh, this is incredible. My own bank is giving me like super low cost, high speed transfers and really cost efficient fx.
But behind the scenes it’s actually wise powering that, you know, the fact that this FinTech has kind of come out of nowhere in the last 10 years, give or take, and now they’ve literally reinvented the way. Like the correspondent banking system, the way money actually moves around the world. and the magic is, without going too much detail, the magic is the money doesn’t move.
It’s literally just like adjusting ledgers. In retrospect, it’s so obvious, but like no one figured this out until wise. This co-founders came along and came up with a solution literally at a dinner party.
Krys: All right, so I’m looking forward to this popping up on the, on the nasdaq. Uh, do you want to, uh, move on and confuse me a little more with yet another financial product that’s, that’s.
Luke: Yeah, yeah. We’ll, we’ll take it in, we’ll take it in terms after this, but let me do [00:21:00] another one. ’cause it’s really similar to Wise I all the, it’s in like the same segment. So let me tell you about Nubank n ticker NU on the 90 Stock Exchange. So Nubank is one of the world’s largest digital financial services platforms, but essentially it’s a disruptive tech first approach to banking in Latin America.
And this is a region that has a large underbanked population and up until Newbank coming along and becoming. Like much larger in that region, like it was bricks and mortars, banks, really poor customer service branches that weren’t open. Huge long lines, just impossible to do anything. So most people didn’t have bank accounts and newbank have really turned that on its head by having a digital first proposition.
And we used to that in the developed world. But this is new in Latin America. It’s growing really quickly. It’s now up to 119 million customers, which is more than half, [00:22:00] nearly 60% of their whole adult population of Brazil. So that’s like, you know, more than half of adults use Nubank now as their bank. and then that growth has driven revenue really nicely.
It’s up to net income. So like truly positive, truly profitable of $557 million in the latest quarter, which is up 74% year over year on our currency mutual basis. So incredible growth and it’s like dominant in Brazil, but it’s aggressively investing its profits in growing in Mexico and Colo, Mexico and Columbia, where it’s got a massive opportunity to replicate that like successful flywheel in Mexico.
Revenues of doubled in the latest quarter and they’ve recently. Started pursuing a full banking license, which is gonna be a key catalyst as they roll out additional products in that region. I really like the company. I, I, I can’t use it, I don’t live in Latin America, but the thesis makes absolute [00:23:00] sense to me.
It’s got really high endorsement from its customers. It’s a newer holding for me. I’ve only owned this for about a year myself, but I’m giving this six badges out of 10 as a conviction rating.
Krys: So this, uh, fits nicely next to your beloved Mercado Libre. Like just a play on, I don’t know, to my ears it sounds like, okay, here’s a really, quickly developing region of the world, and here are the businesses that are doing the best job. Down there, taking customers with, you know, just by execution and providing obvious value way beyond what the other guys are doing.
And if you’re looking for bank play in that region, new bank is, is your bet is, I mean, is that fair? Could, could it be that simple?
Luke: Yeah. that’s it. And if you are, they like, they have like their high net worth customer proposition. If you’re one of those like ultra via letter or something, then you get wise as part of your proposition behind the scenes ways, doing all your international effects. ’cause those guys and [00:24:00] girls tend to travel and spend money.
So good example of like convergence of a number of different fintechs.
Krys: any sense of why new bank gets six badgers and Wise gets eight? What’s that gap?
Luke: you know, my large language model and like the sea of information are quite hard to articulate. Mainly I feel like I understand wise better and I’ve owned it longer and I see like wise platform driving growth for a long time. Like it’s, it’s every quarter it’s announcing new partnerships, some which are quite significant.
new holdings is like a regional play and that is a massive region, but it’s already like more than half of the population of Brazil. So like, you know, how much growth will there be in Brazil? Still a lot, like you’ve got the other half to capture and you’re capturing more wallet share as customers stick around and are remain as Nubank customers for longer.
They, you know, [00:25:00] the bank generates more income from them ’cause they take on like additional products. So there’s plenty of growth there, but it is a regional play whereas wise I see us being more of a global play.
Krys: Okay, cool. no further questions from me, your Honor.
Luke: All right. I’m looking forward to hearing your next one.
Krys: Okay. Uh. I wish I was as smooth as, as you are with these, uh, with these summaries. But, uh, I’ll do my best. My next one is Tesla. And, I only have in my account like 0.13 shares, but I wanted to put it on the scorecard because it’s a expensive stock. So fractional shares go a long way. the core thesis is that Tesla is a multifaceted technology company.
Really an AI company that is accelerating the world’s transition to sustainable energy by designing, manufacturing and selling high performance electric vehicles, scalable energy [00:26:00] generation and storage systems, and developing autonomous driving and artificial intelligence robots. That’s kind of it. I’m not gonna go on and on about this company that probably most people know quite well.
But suffice to say that I think of it when I put it in the bucket as an AI company, like maybe one of the world’s, maybe the world’s leading producer of taking data and using it to make actual objects that run on ai like. the full self-driving now, experiment live in Austin and the soon to be mass produced optimist robot that in theory, is going to revolutionize how all manufacturing takes place.
That’s my both thesis for why invest in Tesla. It’s those bits of it. I actually downgraded the stock badger, down, in my mind’s conviction, I gave it five bananas, which is sort of neutral [00:27:00] ish. The downgrade is because I think in the short term, and this might be, might end up biting me in the ass.
I think in the short term, the political fallout from both the left and the right will actually dent the revenue coming in from the car portion of the business enough such that the financials will look a little bit dicey. how can you give a premium, multiple to a company that is actually losing revenue or going, you know, in the reverse, which is I think what we’re gonna see maybe this quarter, maybe even next quarter.
but then to kind of counter argue against myself as I was going through the slides and doing the research for this. I came across, Tesla’s new charging station that has this new fancy alien ship looking diner. It reminded me that this is a company that is kind [00:28:00] of as imaginative as Apple used to be, and really pushing the edges of what’s possible with, you know, great engineering, uh, a kind of go for broke design teams.
You know, what can we make, how can we play with all this massive engineering talent we have? And I thought to myself, man, you know, like as one instance, you know, if you want to, uh, switch over to electric charging, you might be afraid of, you know, the lock electric charging experience. But what if that turned into more of a, uh, kind of Disney attraction where you’re looking forward to going to one of these diners that feels out of the world, out of this world.
And I think Tesla is this company that kind of does so many things that are not just interesting, but they push the edges on what’s possible and what people think of as their experience. Like what it means to drive that long term. I am, I am, uh, sure I’m going to be [00:29:00] a big Tesla owner. Again, I’m just not yet willing to, to, to make a substantial investment.
Now, uh, after what Elon. And his political shenanigans have put us through, uh, over the last, call it six months.
Luke: Yeah, that’s fair. You’ve, you’ve, you talked me down on my conviction rating for this one. I’ve actually got a pretty big allocation to this in my real money portfolio. and I consider it a core holding, and it would’ve been up until the last month or so, probably would’ve been like eight or nine badges from me.
But like Elon’s comments in the last couple of weeks that he’s gonna start his own political party, like, holy Christ, just like, get out of this arena, dude. Like, just focus on the businesses, get out of the political space. You’re not helping anybody doing this. so yeah, I’m down to like seven badges and even that might be like an optimistic seven badges.
Krys: And as we talk through this, I’m already noticing a [00:30:00] bit of discomfort because I know I’m market timing and that’s in the past. I mean, what I mean by that is I’m basically saying I think the stock’s gonna be lower in the future, but that, that framework has often not worked out well for me because the excellent companies just continue to execute despite whatever, you know, pitfalls they might have to traverse.
So I worry that I’m gonna be, you know, buying the shares even higher than they are today. And yet, I just can’t pull the trigger to, to buy at today’s prices. I, you know, the, the next, yeah, because the next earnings call, my prediction is the numbers are gonna be, call it bad and then, but we’re gonna get a bunch of, you know, uh, rah rah narratives about how great the future will be.
And I think, I’ll believe all that. But, but how the market will react, worsening numbers and more [00:31:00] rah rah is to be determined. I’m saying it’s not
Luke: Is it, I’ve never sort of said this before. Maybe I’ve just thought of it. I dunno if it’s true, but like, you, you, one thing you are really good at, you like spotting. Like inflection points and catalysts and you know, you build that into your investing strategy. Whereas I tend to take more of a, like just where is it gonna be in 10 years time and invest based on that.
Albeit I do like balance based on valuation. Well, you know, often the earnings call for a company as a big catalyst and you know, you have, you were saying about one of your companies yesterday, like, you know, you’ve got an option and you’ve got three earnings calls in that option period. Like three opportunities with Tesla.
I wonder like, you’re right, typically the earnings calls are gonna be like bad events, but it’s one of these companies where Musk is so such a public figure and like their progress is so sort of visible in one, in one way because you’re seeing like [00:32:00] influencers on the streets of Austin driving the cars or you know, a car kills someone, it’s gonna happen at some point and they won’t be able to bury it.
You know, it’s not, this is not a company where, you know, like quarterly earnings is gonna be the most impactful thing. The most impactful thing is gonna be like some social media, either madness or incredible success where, you know, suddenly Optimus are out there. Well, just yesterday I saw like the LA restaurant that you just talked about, the Tesla diner and like a video of an optimist in the restaurant, like serving popcorn like.
You know, we’re gonna start seeing these things in the real world, albeit in controlled environments. And these are the kind of things, ’cause it’s all story with Ed, with Tesla. These are the kind of things that are gonna be like the major catalyst. So I do wonder if you’re putting yourself in a tricky position by staying out.
You know, may because, because this will just like creep up on you. Suddenly the stock will go [00:33:00] bananas yet again and you won’t have seen it coming.
Krys: Although, a few nuances here, it’s interesting because in the King of the Jungle, I’m not touching that and maybe because I’ve convinced myself it’s not that much, but it’s, you know, it’s up 75% for me. And I had a moment where I thought about selling and I thought, no, this is my public portfolio. I don’t wish to sell the company.
It’s just I sold out of it in my real world, you know, portfolio. Which for our purposes is the less important one because it’s not what I’m doing publicly. So I’m basically a shareholder. I remain a shareholder in Tesla two. I do wanna add, uh, a nuanced point, which is that there’s a recent big to-do about tariffs on batteries.
And it seems like because Tesla is, a major growth sector for them, but they make lithium ion batteries, they could be negatively impacted by all those tariffs. And that’s one of the reasons that I like [00:34:00] my other babies so much is, Tesla’s kind of proven just how badly or how, you know, it, it is the moment for energy storage solutions, but this could be another headwind for them because those tariffs are actually close to an outright ban on anything having to do with Chinese, materials.
So not sure how Tesla’s going to solve that one.
Luke: Should I tell you about a very similar company to Tesla and one that you and I have, uh, waged on in the past?
Krys: Yes, sir.
Luke: So we had a, we had a bet way back about. Growth of vehicle sales from Tesla versus BYD. And I believe I won that bet by a whisker ’cause BYD were outselling Tesla at the end of last year.
So let me tell you about BYD, build your dreams. The Chinese manufacturer of new energy vehicles, EVs, basically, they actually started as a rechargeable battery manufacturer [00:35:00] in the mid 1990s, and they’re still a major player in that field supplying batteries for their own vehicles, but also for like consumer electronics.
But in recent years, it’s transitioned to primarily being an electric vehicle, an EV company similar to Tesla, BYD is really vertically integrated. They design and manufacture most of their core components in-house, including the batteries, the electric motors, semiconductors, and then they manufacture themselves.
And so that strategy has allowed them to offer a really wide range of very affordable EVs. And today they’ve got an estimated 35% of the Chinese passenger EV market selling over 4 million units last year. It is pretty reasonably valued if you look at it alongside Tesla. So currently, BYD is about 23 times earnings.
Tesla is 172 times earnings. Albeit, to be fair, like earnings is probably not the [00:36:00] best way to look at a company like Tesla, because they spend a ton of free cash flow on developing, like building gigafactories and like building in other areas. But, you know, BYD itself is a reasonable valuation, I think, and I like the investment, but this is getting a pal tree, three badges from me, which is actually up a little bit, uh, like a slightly higher conviction rating from like less than three badges.
No badges. like the geopolitical risks in China are significant and the trade tensions between China and the West could, like, things could get worse. We have tariffs. Tariffs could get worse and the tariffs that the US are applying, like the European Union and the UK might get forced to apply the same kind of tariffs and essentially almost like sanctions on Chinese EV manufacturers.
So that could hurt by D’S growth. But as you can see from my pretty picture, like the majority of their revenue [00:37:00] is from China, people’s PRC, people’s Republic of China. So it’s gonna, it’ll hurt them, but it won’t hurt them too much ’cause they’ve still got a ton of growth domestically.
Krys: I read somewhere that these cars are actually quite good, but nobody in the west or in the US has ever seen one.
Luke: Yeah, they’re not in the US but they are in the uk. Like there’s BYD showrooms not far from me and all over London. And they’re in Europe as
Krys: Yeah, so that’s the interesting thing. You know, basically the US I really forget the source was, but I think the argument was that these cars are actually so good and they’re being made for a really good price because of Chinese manufacturing excellence that were they to be introduced into the US market.
They would put a lot of US car companies. out of business or some, something like that. so it’s quite a pickle to be, you know, to not have the world’s largest economy, [00:38:00] available to you. and also side note, I don’t, you know, longstanding principle of mine is never to invest in Chinese companies.
for some of the reasons I think you mentioned.
Luke: I built a China. Portfolio, like a hedging portfolio, and it just performed disastrously, like the only winner in there really was BYD. And even that’s been a pretty long torturous journey to like a hundred percent gain over many years. They are really innovative. I saw, I haven’t seen the vehicle, I, but I saw a video online, like they’ve got a car now that can like fly inverted commerce, like the sus the, the suspension is so powerful and so computer controlled when it’s in like EV mode and driving, like ev evidently, according to this video, it’ll see potholes coming up and it’ll literally like jump the car over the pothole.
So like it can, has like a clearance of like six or seven like horizontal meters. It will leap forwards and [00:39:00] like, you know, smooth out the ride by literally jumping over obstacles like Tesla. Talk about their flying, what’s that thing like the new Roadster with like the SpaceX engines and stuff, but they haven’t brought that stuff to market yet.
Krys: one more pushback. Badger, if I may. My understanding is that the automobile industry in general is a hard industry, you know, uh, massive CapEx, lower margins, so on and so forth. I understand investing in Tesla because it’s ai, robot on wheels among all the other things. But this is, this is a straightforward auto manufacturing company, correct.
So why invest in the, in, in such a difficult, you know, business without all of the massive upside that a company like Tesla has? Why not just, for example, invest in Tesla? why have both?
Luke: valuation is a big part of the answer to that, right? Like as we’ve said previously with Tesla, [00:40:00] you can’t look at the financials and judge the company, which is why the price to earnings just kind of makes no sense because you either believe in the thesis of Tesla and like Optimus and energy and all the other stuff they’re doing, or you don’t.
And if you believe in it, it’s arguably undervalued. And if you don’t believe in it, it’s vastly overvalued. BYD, you kind of get what you see a little bit. It’s reasonably valued, and you, there’s not, like, you’re not waiting for some like magical thing to hopefully happen for them to solve autonomy, albeit they are making progress with autonomy as well.
you know, you’re, you’re buying something at a more reasonable price in the same segment, and as you said, like very competitive actual vehicle, that the customer proposition is pretty strong.
Krys: All right. So three badgers, but no, you’re not your ac. Your conviction has actually gone up rather than moving toward a cell.
Luke: Yeah, like I was always a bit bearish on China. at least now with seeing like maybe [00:41:00] some stability to where the tariffs thing gonna end up. I was very negative on China, but I wanted to hang on to BYD because it was like the one thing in that sub-portfolio that was performing. So right now I’m in for the long jo Long journey, I think with this one.
Krys: Okay. Right on. Excellent. my next company, which is up about 75% from the time I bought it, is Ster Labs. Ster Labs, designs and sells semiconductor based connectivity solutions, purpose built to remove performance bottlenecks in cloud and AI infrastructure. Badger, while it doesn’t sell the headline, AI chips like a MD or Nvidia Sterile Labs provides the essential plumbing that lets those chips scale, making it a pure play lever on the sectors explosive buildout.
And so the way I think of this company is, what’s happening in the world today with AI requires massive buildings. [00:42:00] Right. You know that massive buildings called data centers. It’s about connecting a bunch of computers or a bunch of computing power to one another to create from call, I think of it as mini brains to one giant, enormous brain.
And it turns out that ki connectivity is incredibly complicated. Like it’s a serious technical feat to control all kinds of lines and memories and cables and power regulation. And it’s way beyond my pay grade. In fact, this is one of the things about Sterile Labs that can be quite confusing. It is so jargon filled with technical equipment names that the only other thing I’d like to share is a kind of translation for the kinds of things they sell to give people an idea of what this company actually does.
And they have this, product, code where they, they name their products in terms of astrological signs. So, uh, for [00:43:00] example, their Aries line, aims to, fix or upgrade inside the server. Signal integrity. Their Taurus line is for rack to rack networking.
Leo adds flexible, shareable memory. Critical for large language model inference. Scorpio is the product line that ties everything together at twice the output And Cosmos is their software brain that watches over all those links. So this is a direct play on the explosive growth that is AI in cloud computing. When I put this on my King of the Jungle scorecard, it was precisely after the last earnings, which were really great, but the market that day decided to sell off for something like 20%. And I think that was a little bit of like gain theory gains [00:44:00] manship. But when I looked at those numbers and I just, which were absolutely fantastic, I think 144%, growth year over year, and that’s declining.
So, you know, it’s triple digit growth. Anyway, you, you slice it. this is, this is, you know, in some ways it’s all the proof you need when a company is growing that quickly by, uh, their revenue with really great margins and there’s a sell off because somehow it’s not good enough. While we’re at the beginning of this massive build out, to me that’s, you know, the flashing sign like this is a buying opportunity.
And so I bought it not that long ago. It’s close. Yesterday actually went up 20% because they announced, a new, they’re expanding their corporate headquarters in San Jose, which implies lots more hiring and lots more growth basically ahead. So it popped 20% yesterday, so it’s [00:45:00] close to being one of my, a hundred percent gainers at this point.
And at first I bought it primarily for the value I was getting on that day. But there’s nothing about this company that says to me it’s time to take profit because this is one of these decades long runways. This is internal mandatory plumbing that is needed for all hyperscalers and its valuation where it’s rather market cap is still, relatively speaking, quite small.
I think around 16 billion last time I checked. So, it’s not like a sexy company, but when I look in my portfolio of, you know, pure a, what are the purest AI plays I could get my hands on that are, still reasonably valued, ex Nvidia. And yesterday I named a MD and this is like a excellent counterpart, 2:00 AM d, under the radar for most people.
And yet it’s gangbusters in terms of its [00:46:00] performance.
Luke: Very good, good return in a short period of time. I think it is now a $20 billion company, but that’s literally in like the last two or three days. are its customers behind the scalers and like, like who is that SMCI? Who are those guys who were slightly dubious,
but
Krys: yeah.
Luke: thing was like building data
Krys: Yeah. Super micro something or other. Yeah. I don’t know that company well at all, so I can’t speak to what’s different. I think they sell, I, I kind of think of them as everything’s specialized in, in ai and these guys obviously have this market on, the connectivity stuff, where I asked GPT to translate their products into plain English translation into what these products actually do with an analogy and metaphor, I think it’s quite useful because it is so abstract if you’re not a expert engineer, you know, in the, in the workings of data center plumbing to, to get your head around of what these guys do.
But like, as one example, you know, [00:47:00] there’s Scorpio Smart fabric switch, the PCIE six, it’s called, uh, is double, uh, according to the expert definition, doubles link bandwidth and provides real time telemetry. So GPUs stay fully fed. The translation of that is it’s, uh, think of it as a high speed traffic circle that directs data between dozens of AI chips without pile ups.
And apparently companies need a whole bunch of these, and I see that being the case for a very, very long time to come. So I feel very content having this in my AI basket. And so I have given it, uh, five Bananas because it’s a new company. It’s performing well, kind of, but keep going though. It’s le though, it’s less of a attractive value than obviously when I bought it.
Luke: All right, very good. Let’s stay in the same [00:48:00] ballpark and I’ll stick with tech. Let me tell you about another cybersecurity play I’ve owned for a little while. So let me tell you about Zscaler ticker Zs. It’s a cloud security company that enables organizations to have seamless, secure, and reliable access to applications and data based on a zero trust architecture.
So like Z ZScaler’s layer provides a secure gateway, so enables when users wanna log in wherever they are, whatever they’re trying to do, their traffic gets inspected for threats before it reaches its destination. And instead of connecting directly to a website or application, user traffic first goes through ZScaler’s Global Network data centers enabling zero trust access.
And the sort of essence of this is no user or devices trusted by default. It’s not like the old days of like firewalls. And once [00:49:00] you log in, you have like all the access you might, you know, you might be able to get your hands on. This is like. Never trust anything, always verify everything. That’s like the essence of zero trust. I’ve got a basket of cybersecurity stocks and Zscaler is a smaller part of that I’ve owned for a couple of years. I prefer. My other investments like CrowdStrike and my new ad CyberArk and Palo Alto Networks, they’re just more established. But Zscaler works in tandem in partnership with many of those.
It’s not like in competition with CrowdStrike directly. it, it’s getting three badges out of 10 from me as a conviction rating. It’s still smaller scale and maybe my conviction is dented slightly by the fact that growth seems to be slowing maybe a little bit early. Like a good number that allows you to look at this, if you check out this pretty picture is dollar based net retention.
So I love my SaaS companies to have net retention of over [00:50:00] 120%. It’s now slowing. For Zscaler, it’s down to 114%. What that means is for every customer who spent like a dollar last year, on average, customers are spending $1 14 cents. So they’re still growing, but they’re growing slower. And you can see remaining performance obligations.
also growing but growing slower, albeit it’s inflected back up in the most recent couple of quarters. So I’m just keeping an eye on this one. As an investment, it’s starting to perform a little better. It kind of did nothing in my portfolio for almost two years. Suddenly it’s come to life a little bit time for me to get a bit of a better handle on exactly their positioning, but not a super high conviction holding from me.
Krys: Yeah. Okay. this is a company I know. Well, I used to own it. I was surprised to hear you call. it not as well established. I always thought these were one of the, you know, OGs of the cybersecurity world. it’s sort of, you know, pushing the, the edge. But you know [00:51:00] what my problem with, with a company like Zscaler is from the investor standpoint is, this likes, you know, like the, like a sterile labs.
Unless you’re an expert in the field and you read about the products. it’s the acronyms and the jargon are so hard to understand because the industry is evolving so quickly, and it is, you know, it speaks to the professionals in the field, but you, you really have to put in massive amount of hours to understand on the ground level of what they’re doing and how they’re evolving.
If you don’t do that, then you’re left relying on just the financials, right? Is are billings going up or are they going down? You know, almost like, and I, I personally don’t like being in that kind of position as an investor because I really can’t tell, you know, and I have to rely on, you know, either the major [00:52:00] trends or just cross my fingers that things continue to be, be good.
how do you, and this is by the way, one of the reasons I sold, as I talked about in the last episode, episode I, I sold Cal Map because I was like, I just no longer wanna deal with this anymore. That kind of, you know, tax code, deciphering shit. where are you with, that angle and why not just slice, cut Zscaler and reinvest the cybersecurity money into the companies you understand are easier to understand potentially.
Luke: Yeah, that’s a really good shout. And I am challenging myself with that a little bit, but, and I say it’s like it’s less established. You’re right. They’re like, they’ve been around a long time and in their niche, like they’re a very strong player. but like partner companies like CrowdStrike are starting to infringe on their turf.
And if it was like a toe to toe battle with say a customer and they had to choose one or the other, well they’re gonna choose CrowdStrike. ’cause it just does so much more. [00:53:00] Like today, customers choose both. and that, that could be why growth is slowing for Zscaler. I do think I totally buy what you said about, as an investor, like some of these companies are really hard to understand.
I think I do understand cybersecurity reasonably well. Like I just rebuilt a friend’s PC just yesterday, like I’m, I do get my hands dirty with this stuff. but I think a really high signal is of metric, like dollar based net retention. ’cause that’s like, even if I don’t understand it well, the people who are actually spending money.
On average, customers are spending more year after year. So like that’s a pretty strong endorsement that customers are getting value ’cause they’re giving them more and more of their money. but yeah. You know, and I think you can be a successful tech investor or biotech investor, or maybe not biotech, but tech investor, certainly around SaaS by looking at a couple of key like SaaS metrics.
but it is nicer. You, you have a warmer [00:54:00] feeling when you feel like you really understand the, the solution. And you’re right, this is a bit more on the fringes of what I understand. ’cause I don’t use these technologies myself or I haven’t used them in the past. I don’t wanna, I want to increase my exposure to cybersecurity, not decrease it.
It’s why I added CyberArk just a few weeks ago. If I had, if you told me I was forced to sell a company in this sector, it would be Zscaler, but probably just not for any other reason than I feel I understand it, the least of the four companies I own in that
Krys: Right. jogging my own memory too. I remember when I was an the owner, their financials are also not the easiest to understand because for some reason. You know, billings is like the main thing with Zscaler and remaining performance obligation. You know, most, some SaaS companies, you kind of, you, you, you know, net retention rate, that, that’s fairly easy to understand.
Number going up good. But, Zscaler tormented me for, for, for long, you know, like, why this company, you know, why are we [00:55:00] looking at billings as the thing for them and not the other guys? And it’s kind of, I think, having to do with, you know, it’s because corporations are buying it. And the way you calculate seats and fu I mean, it’s just, it, it’s another, it just, my eyes are starting to roll.
just rethinking about that angle too.
Luke: Anyway, three badges. Maybe it’s no longer in the portfolio. If we do this review next time, next year.
Krys: All right. Well, but we do need our cybersecurity, Iron Energy is a company that is pivoting from being only a Bitcoin miner to AI cloud services, leveraging its renewable energy powered data centers. It’s acquired a whole bunch of Nvidia chips, the H 100, H 200 Blackwell, GPUs, uh, around 4,300 of them.
So a lot, and they are generating very high margin revenue in that tech stack. [00:56:00] So I think this is, this is close now to a a hundred percent gainer from me, and I think this is one of the most misunderstood companies out there on the market. on the surface. It’s up to now been known as a Bitcoin miner that invested hard into using renewable energy sources to power the Bitcoin mining operations.
But more than any other company on the planet, they’ve managed to lower their costs at the same to the inefficiencies, how much their electricity costs, while Bitcoin obviously has gotten up in price. So their margins per Bitcoin now are really, really good. That alone at this point, Badger, I think, would make this an excellent business.
It’s just, it’s just digging cash out of the ground really. And they’re doing it better than anyone else. Of course, that’s dependent on the price of Bitcoin, but you know, the price of Bitcoin has gone nothing but up [00:57:00] over the last 14 years. So, but that’s a whole nother thing. however. From what it looks to me is like the Bitcoin is a sort of, um, it’s not really a distraction per se, but it’s the way they’ve chosen to fund what their unquote real businesses, which is essentially creating massive conglomerates of power to sell for to all the hyperscalers that need this power in the age of ai.
And what people don’t understand is that when you’re talking about these gigawatt hours worth of energy that’s needed, that’s the bottleneck, by the way, of AI growth. It’s not the chips, it’s not the engineering, it’s not, it’s like the actual electrons. And you need a large amount in order to get these kinds of clustered power, uh, units.
Think about all you need to buy the land, you need to go through the permitting, you need to construct the things we’re [00:58:00] talking about. These are like football sized, like massive, massive operations. It kind of looks like alien, you know, like building foreign town, you know, towns and iron has this portfolio, leading world’s portfolio, most power that’s scheduled, that’s already online or about to come online in 26 and 27 of about three gigawatt hours, which is still less than what’s needed, but it’s basically ready to come on online and it’s all being funded with great margins using Bitcoin. It’s at $4 billion thereabouts in market cap, and I think it has a long, long way to go. These guys, are exceptionally good at lowering costs and executing on basically what is a massive engineering feat. So, you got basically two plays working very well together. I could not be more excited to hold [00:59:00] this company as a third part in my AI basket to go very well with a MD and with Aster Labs.
Luke: And, uh, this is quite a big allocation for you. So you’ve got, in your King of the Jungle portfolio, you’ve got 14% of your funds in iron, and this has just given you, in the last few days, a hundred percent return.
Krys: Yeah, it’s kind of staggering. I was deeply underwater because, for a good while because the market did not really, could not see or did, chose not to believe that these guys are as good as they are, what they’re producing and they thought, yeah, it’s just a Bitcoin mining thing, which the market does not trust at the moment.
But, I think I’m in this moment badge with my investing that I kind of think the companies that are the best at actually building stuff. Here in the United States back, you know, with the whole manufacturing thing, making things that other people can’t make will be rewarded massively because they, they’ll have [01:00:00] that ability to price what, you know, make the price whatever they want because there’s no other options.
So I sort of am kind of thinking like, Nvidia, Nvidia is able to build a chip, nobody else could. They have a monopoly on that thing, and they’re a four, whatever, what is it? A $4 trillion company?
Luke: $4 billion.
Krys: 4 trillion, right?
Luke: Oh, so, oh, sorry. Nvidia. Oh, oh, sorry.
’cause yeah,
I ran, I ran
Krys: for, yeah.
Luke: company. Yeah. So, yeah.
Krys: big
picture, we know, you know, just with the massive, uh, announcements for AI build out, think of all the companies are ready to build their massive, you know, AI units. Where are they gonna go? Right now, nobody has the power that’s needed except these guys. And so they’re in, you know, discussion for whatever contract they’re gonna sign.
But I bet you the terms are gonna be very, very favorable for them. And the fact that they kind of camped out in Texas where there’s massive amounts of land and it’s actually, perfectly [01:01:00] situated next to other data centers that have to do with lowering latency because latency matters a lot in the inference.
Stage of ai. So they’re perfectly located for, I think this could be a multi, multi-decade growth story that just keeps funding itself and propelling the world toward, you know, ac given the world access to low cost electrons where they’re in high demand and low supply.
Luke: It’s really interesting. You’ve talked, this one’s sort of washed over me when you’ve talked about it in the past. I haven’t paid too much of attention, but I did pay a lot of attention there. that’s on my radar now. Thank you. How would, how would you contrast this to like, they’re totally different companies, but you know, micro Strategy has been making headlines for the last year or two.
Sailor with like this crazy like, leveraged leverage on leverage Bet on Bitcoin. is this like. Does it have aspects of that? They’re doing it totally different [01:02:00] way, hasn’t got like the crazy leverage. They’re mining the Bitcoin as opposed to like leverage themselves up the wazoo and doing financial engineering under the covers.
It’s kind of still a Bitcoin play.
Krys: Great question. They’re the exact opposite.
And this is why I think this is a genius. This is like, I don’t know, sheep, wolf and sheep’s clothing or something like that. As soon as they mine a Bitcoin, they sell it. They hold none, no bitcoin. And for a while the market was actually punishing them for that.
They’re saying, wait a second, but you’re a Bitcoin company and you’re selling the things. What? You don’t believe in Bitcoin? No, these guys were just saying, our objective here has more to do with creating the best, cheapest form of energy possible. And we’re trans, we’re use Bitcoin is a means to a much bigger end, and we’re gonna do that better than anybody else.
So basically, we’re gonna fund ourselves better than any other way of funding. And Bitcoin is our, you know, instead of taking [01:03:00] out massive debt, we’re just gonna dig electric change electrons from, from solar, you know, and put those into a computer. The computer’s gonna spit out this imaginary coin and we’re gonna sell that imaginary coin, you know, and give it to people that want that imaginary coin.
And with that, we’re gonna actually buy Nvidia chips and build out these massive data centers. It’s actually brilliant. And side note, Badger, I really, really like enjoying listening to these guys earning calls. They’re Australian. The CEO co-CEO is a Australian fellow, like really smooth, kind of reminds me of you a little bit.
Like really kind of collected with that sexy voice, you know, just like they’re, they’re really enjoyable calls. So, put that on your to-do list, for iron and it’s exciting stuff.
Luke: I literally, for the first time in the three hours we’ve recorded, I picked up my pencil and I just wrote down a ticker and my list of things to look at. There you go.
Krys: Yes. Screw that. Biotech stuff. Uh, promises. Promises, but yeah.[01:04:00]
Luke: All right. Very good. Hey, uh, on our Patreon, I noticed yesterday our Patreon Slow and s Slothy referred to us both as having sultry
Krys: Oh, excellent. I think that might be a first for me. The, the old polish accent doesn’t polish. Brooklyn. Accent doesn’t usually go over too well, but thank you. Sloppy.
Luke: well, your YouTube shorts are still doing way better than mine, and we’re gonna have like 30 YouTube shorts coming out of these two episodes. So, yeah. Let’s see who’s, who does better?
Krys: Right. We definitely have to feature this one, like, and, and, and make a poll out of it.
Luke: Okay. let me tell you about a very high conviction from me. MercadoLibre, ticker, MELI.
They are the world, well the leading e-commerce and tech platform in Latin America providing a marketplace payments, logistics, credit and advertising. It’s kind of like, like the Latin America version of [01:05:00] Amazon. There’s bits of like PayPal, there’s bits of eBay. There’s all these different things wrapped into this one incredible self-reinforcing ecosystem in, in its main markets of like Brazil, Argentina, Mexico, Uruguay.
So it is rooted in e-commerce, but it’s got a FinTech arm, Mecado, pargo. And that’s become like the real engine of growth and profitability in the last couple of years. It’s also using that profitability to a bit like Amazon invest in its logistics network and Mecado envious, which is what they call the logistics.
It is now like a really serious competitive advantage in its home markets about, it’s not like Amazon where you get something like five hours after you ordered it, but given the maturity of like what logistics used to look like in these markets, it’s pretty incredible the journey that they’ve been on.
So now 82% of all GMV, like merchandise volume was delivered [01:06:00] within 48 hours. And that’s like a really significant moat against other folk trying to come in. But they do compete with Sea Limited and they do compete with Amazon in some of the markets. But Mely have kind of got this stuff sewn up. They’re doing the best job there.
This is a really high conviction rating from me. Nine out of 10 Badgers only subordinate to the 10 out of 10 I gave to Alphabet and Amazon. And, it’s now pivoted to generating net income and that’s growing steadily. So it’s like the financials are maturing really nicely and management, unlike C Limited, which really bit investors a couple of years ago, management of many have really got the balance of aggressive expansion, particularly in the credit portfolio with disciplined risk management.
They’re growing fast, but in a really well-planned way. They’re not over expanding in the way that’s seeded. And if they can maintain that operational excellence [01:07:00] in logistics and leverage their data advantage in FinTech, I really think this one’s gonna compound value for a long time for shareholders.
Krys: Boy, I love this company. It, to me, it’s like the best, company that most US investors have never heard of, and yet it’s kind of like the second coming of Amazon, just in their own South American, Latin American playground, right? in fact. Let me pose this question to you, badge yesterday, because your, your rating for Amazon was a 10 out of 10.
I put it on my to-do list, you know, acquire Amazon shares, but, you know, my, my, my reluctance is the law of large numbers and it kind of this feeling, well, okay, it’s already whatever, 2 trillion, why wouldn’t, wouldn’t I be as an investor better off buying shares of Mercado Libre, which obviously is at a younger [01:08:00] stage, has still more room to grow there, you know, there world class and yet you have them at nine Badgers rather than 10.
So why should I, or should I buy Amazon before buying Mercado Libre?
Luke: maybe you shouldn’t, right? It’s all personal preference. I know you are averse to like these, even the word mega cap shouldn’t apply to these companies. It’s like, you know, they’re like, I dunno, like ultra mega, super mega caps. Right. and I tried to make an argument yesterday for how there’s still like a ton of growth left in the Amazon story.
Well, you know, the Amazon story is a global story. The Mercado Libre story is a Latin American story. So, but there’s still like e-commerce penetration in most of these markets is still relatively low. Like a lot of commerce is like bricks and mortar style commerce. So they’ve got like decades of growth ahead of them.
I’m not saying like their growth is limited, but ultimate, the ultimate [01:09:00] opportunity. I feel like Amazon, like they’ve got AWS right. And Amazon earn most of their profits from AWS Mercado Libre don’t really have a competitive product with that. Like, if they had anything that wasn’t the e-commerce side, it would be.
The FinTech side. And there are risks around the FinTech side, like they’ve built out, aggressively built out their credit portfolio and that’s working pretty well. And they’re trying to come like up market a little bit with the loans that they’re giving their retailers and also their end customers.
But you have got like credit risk like if the economics in some of these countries fell apart or hyperinflation we’ve had in Argentina for quite a long time, they’re actually getting a really good grip on that now. if, if the cost of living gets worse for people in this region, like the credit portfolio could fall apart, it could get away from Mercado Libre.
Like there’s a big risk there and that’s just not a risk that Amazon run. So in my mind, like they’re totally, they’re [01:10:00] similar but they’re different, very different companies. There’s not much in it between like nine badgers and 10 badges.
Krys: uh, follow up question. What’s going on with Mexico? who’s doing the best e-commerce stuff in Mexico? Is that Mercado Libre’s territory, or is that Amazon’s, or is the, is it neither?
Luke: I don’t know. I’d need to go and do a bit of research. Amazon are in Mexico. Mecado Libre I think are dominant. C Limited are mostly a Brazil story.
Krys: Yeah. See what, even that even, you know, when I think of Sea Limited trying to encroach in Latin America, that just seems so foolish to me given how it, it does seem like a kind of, winner takes all. business model because manufacturing scale leads to better customer value, leads to more loyalty, and so on and so forth.
So it’s surprising to me that I don’t know the answer to what’s going on in Mexico. Given that both they [01:11:00] could, they could.
Luke: I did a quick Google fu, so I think I was pretty on the money with my hand wavy thing just now. So me, Amazon are dominant in Mexico, but Mercado Libre are making some big investments. And I do remember seeing some news over a year ago that Mercado Libre had built distribution centers in, I think in like, I dunno my US geography, but like, is it Texas or New Mexico?
Like the bits of the states that kind of border with actual Mexico. So they’re, you know, they’re building distribution centers there. ’cause the idea is it’s like getting us goods and having then linking it up with Nelly Air, they’ve got their own airlines and things and they’d be able to get like US North American goods into Latin America in a lower cost, more efficient manner.
So that again plays into like. The logistics advantage they’re building, but Amazon are a serious player in that market. Possibly bigger.
Krys: That’s an interesting story to keep an eye on. I’m curious to how it will [01:12:00] unfold and also to say that this story is still in many ways, day one, as they like to say, over at Amazon, right.
Lots, lots of parts of the world that still, don’t have access to high quality e-commerce provided by mely. Cool. So Nine Badgers?
Yeah. Okay. So a lot of Badgers. My next pick, does not have as many. It’s a six banana rating as of now. Neas neas Group is a Netherlands based technology company that focuses on artificial intelligence and owns businesses, including neas, ai ide, and several large scale data centers. It focuses on becoming the default software, platform that helps decrease the time to value for customers for AI workloads.
You gotta think when you’re thinking of neas hardware, software, and developer engineering all under one roof for all your AI [01:13:00] needs. This is a company Badger that I have the least I think, fundamental understanding about in my entire portfolio. And yet I wanted it in my portfolio because it fits that, uh, you know, the whole ai, the AI trend.
And this is the company that feels to me most like the conglomerate of actual, of the, what my other companies do in piecemeal. So I think, like, to make that clear, these guys are also building data centers in Europe and in the United States. And I think they have one, if I’m not mistaken, Iceland, although I might have just made that up, so ignore that. and they’re working with, they’ve co-partner with Nvidia or rather Nvidia chose to co-partner with them. And their mission is to basically say to a customer, okay, you wanna do ai, we’ve got all your needs covered from hardware, you know, across the stacks. So why would you go anywhere [01:14:00] else? the numbers have been gangbusters.
It’s up close to a hundred percent for me in my portfolio. Here’s the knock on neas. It’s still very early in their rebranding from being an ex Russian company. They, uh, Yandex, they basically closed shop due to the political geopolitical uncertainty and they rebranded, they took their engineers and made this.
So it’s only been public, since the results have been public for about a year, which to my liking is nowhere near enough to have any kind of confidence. you could see that they’re growing quite nicely. But the massive influx, is still.
Luke: Okay.
Krys: In the future, IE the June 25th quarter, which has not yet been announced.
So it’s still a, we’re still in a wait and see mode with this company. But, uh, I took, uh, I took a, a go at it because [01:15:00] in a sense, why not? You know, like it’s kind of a, I kind of wanna say it’s the Zscaler for AI in that what they do has, you know, their fingers are in all the AI pies, which makes it kind of complicated to understand on the nitty gritty level.
But the numbers are backing up that what the customers are paying for and liking, plus the Nvidia, you know, backing as a partner, I kind of said, okay, I’ll buy this first and then learn more about it later. So, I, I just don’t, I gave it five bananas because I still have a lot more work to do in terms of gaining confidence in the numbers and whether they will in fact show up as real or whether it’s been kind of hyped up.
Luke: All right. Fair enough. Not heard of that one has done well for you, but you’ve got a small allocation appropriate to your like, experience [01:16:00] with the company. Alright, if you are, cool, should we plow on to, uh, our final six and I’m gonna pick us up with a couple in a row. Now. First of all, I’m gonna tell you about a longstanding cybersecurity holding CrowdStrike, ticker CRWD. It’s a global cybersecurity leader that provides a cloud native platform and they’re a leader in like modern ai, native cybersecurity, the platform’s built in the cloud and they deploy a single lightweight agent to each device and that makes it really easy for customers to deploy their solution.
You don’t even have to like power cycle, like turn it off and on again. You just install the agent and you’re away and you’re being protected by CrowdStrike and all of this data, trillions and trillions of events of monitoring gets streamed in real time to CrowdStrike central threat graph where they use AI and also humans in their security operations [01:17:00] centers to.
Analyze and stop threats detecting malicious behaviors while they’re happening without impacting device performance. And the beauty of this kind of cloud-based solution is if they detect a breach and then they close that for one customer in real time, like within minutes they can be rolling out or making the same fix available to all their customers because you’ve got this incredibly powerful network effect.
Every customer is like another risk point, but if they get breached, everybody else gets the benefit of the solution to that. They did some really clever kind of financial engineering, or at least like sales engineering a year or two ago and they launched something called Falcon Flex. So Falcon Flex is essentially, customers can now buy a certain level of spend over a multi-year term and then they just kind of draw down it o on it for the modules they want.
’cause CrowdStrike now has over 30 different [01:18:00] components to their solution. So rather than customers and the procurement teams having to work out, okay, we’re gonna buy like these different Lego blocks for our solution, they just say, okay, we’re gonna spend, you know, X million dollars and then we’ll use the bits that we need.
And it’s really easy for cus for the buyers to like buy the thing and then the engineers to use it. And a good example of that. In practice is they recently disclosed that one of their Fortune 100 clients scaled their spend from 12 million to over a hundred million dollars within a couple of months of coming on board with Falcon Flex.
So customers really like the flexibility. Now, this is only four badges out of 10 for me, even though I consider it a core stock. Unlike, uh, you know, in really if you put the valuation aside, a very high conviction investment in a very high conviction segment. But the valuation is frankly egregious. It’s now 28 times sales, which is gonna sound like nothing when I [01:19:00] tell you about Palantir in a minute.
But, um, like both of these companies, I’ve just been trimming pretty aggressively in the last year. I really like the company, but I don’t really like the stock at this price.
Krys: Yeah, so interesting that, uh, a company that is beloved to us both gets four badgers, due to valuation. I mean, I, I am getting, uh, 21 vibes late, 21 vibes in this, you know, sector. You know, I wonder, I mean, it seems to me, based on your own investing history, whether you’re taking the lessons from 21 and trying to.
Actively apply them in. In this sense, you’re trimming because as to quote you, the valuation is egregious, but it’s not eg. But you dare not sell out of it completely like yours truly did.
Luke: I think, lemme jump in there. ’cause I think that is a really good, it’s a great way to navigate companies like this. Like if you really, truly [01:20:00] believe in the long term, which I do like, remain an owner, but just manage your exposure to it. Like I’ve I bought, if I just look back at my own history with this thing, right?
I bought CrowdStrike five times between 2021 and 2023. and those are all like multi bag of returns. The later returns are like four x returns on like a reasonably sized investment for me. But when the valuation started to get away, I’ve trimmed it. The last four transactions are all trims. Most recently, actually just last month.
because, you know, in each one of those trims has been a mistake in the rear view mirror. Like my first trim, the stock has doubled since then. But I just wanna manage my exposure and I think it takes away. Like the problem you put yourself in the quandary you gave yourself when you sold a bunch of really high quality companies.
’cause you were trying to time your way back in at the bottom. And if you miss the bottom well, or if the stock just continues to go up as this one did, [01:21:00] like you kind of never get back in. And if you trim like you’ve got, still got skin in the game, it’s you, it just sort of mitigates that, like price anchoring because you’re like, okay, I’ve, I’ve got some and if the company starts is continues to perform as it does and if the valuation gets more reasonable or like, I’ve got some, I can add a bit more and I can do, you know, just add a bit, trim a bit and just kind of nudge it towards an exposure level that’s appropriate to your conviction.
I think that’s a much a really mature way of managing a portfolio.
Krys: You know, I don’t think I ever confessed this to you, but I bought, I think, uh, a small amount of shares after the, uh, what’s it called? The, the major airport bug. that
that stopped the world. but then I sold it again. Taking a quick, quick, I took a quick little profit. I had other places to reinvest it in that have, that have since doubled.
So it was so, it was fine. It was good. But, uh, but that reminds me, ha [01:22:00] has the impact from that major catastrophe already been completely processed and like we’re to, things are totally fine, you know, weather under the bridge, nothing to see here, kind of thing.
Luke: we’d have to go like much deeper into the numbers and have much longer whole conversation to tell the story, but a high level, that like the valuation has just like continued to charge on. So it’s like investors have kind of ignored it in terms of like billings and revenue. It has slowed and there was definitely like a bump in revenue growth as a consequence of that outage.
But we’re now more than a year past that I think, or coming up to a year. So like, you know, it’s always like, comparables can be quite difficult with tech companies, particularly highly valued ones where you’re basically looking at, you know, what was some number a year ago versus today and if you had like a really good year last year, what, like, the comparables are quite hard.
It’s tough, particularly if you’ve had [01:23:00] like a major incident like that. So that’s why the valuation has kind of diverged from reality a little bit because the market cap has continued to go up at a steady pace, but revenues have kind of, the revenue growth has trailed off a little bit. but long term, like I said, like this, this currently, it was like a six or 7% allocation for me in my real money portfolio.
It’s now a two and a half percent allocation. That’s like, just feels like a comfortable level to me. And I don’t, it’s not like a big deal. It’s not like I’ve gone like turned the light bulb on and off. I’ve just got like a dimmer switch. So that’s that sort of thing. And if, if the valuation gets better, like it’s easy for me just to add a little bit more to my two and a half percent allocation, like turn the brightness up a little bit as opposed to going from owning nothing and then trying to pick that point, like, boom, if I timed it to suddenly become an owner again, I just find it easier to navigate that emotionally if nothing else
Krys: Yeah, good point. I know exactly what you’re talking about. [01:24:00] All right. So tell us another, uh, about your next company, which, uh, is special because we have, uh, it’s part of, uh, another one of our side bets.
Luke: Oh, it is, yes it is. Uh, we’ll come to that back. Let me tell you about Axon Enterprise Ticker, A XON. They sell, they’re like ostensibly, they’re a hardware company. If you look at them, they sell tasers, cameras in-car cameras, body cameras, drones, anti drone defenses. It’s a hardware company, but it’s not really, it’s actually really a software company because.
All of that telemetry, that data, and that monitoring goes into evidence.com, which is axons platform for its customers who are actually like the police and military and like law enforcement all around the world, but mostly in North America. evidence.com is like the main repository [01:25:00] used by the legal system in the states with all this massive data coming in from Axon devices to allow well police officers and law enforcement officers to do their job well.
And they are dominant, like the huge majority of all law enforcement. And there are tens of thousands of individual departments across the states. Huge majority of those are Axon customers. this transition from being like predominantly a hardware company to a software company is really great for the financials.
’cause the software revenues are much higher margin. And it’s like this monopoly of these two things. This flywheel working hand in hand. The software sells the hardware, which sells the software. And so now annual recurring revenue is over a billion dollars, up 34% year over year. So just like this company’s firing on all cylinders.
the other thing I really like about being an Axon investor, it’s so embedded with its customers. You can project [01:26:00] revenues with a high degree of confidence out. Like 10 years, pretty much. They’ve got currently future contracted bookings of $9.9 billion. And it’s so sticky. It’s so hard for a police department to use something other than Axon.
They’re like, they’re stuck with it. There isn’t a federal competitor that has anything like evidence.com ’cause it’s so embedded in the way they’re operating and they’re introducing like, incredible new technologies, like their anti drone stuff that they recently announced in the last year or so. Like customers are really happy with it.
This is a high conviction holding for me, but again, a bit dinged by valuation. So it’s gonna get five out of 10 badges from me. like recent growth has pushed the valuation to an all time high of 26 times sales, same kind of territory as CrowdStrike. ’cause the market’s basically woken up to its potential.
So right now I don’t think I’ve [01:27:00] started trimming this one a, a little bit, but I, I might start trimming it more heavily. I mean, kind of wait and see with this, I wouldn’t start a position today, but I do think this is a company that’s gonna be still a leader in its field in 10, 20 years time.
Krys: This is one of my life’s biggest regrets, Badger, when we went on that run and, uh, in the green belt. And, uh, and you talk my ear off about Axon the whole way. and did I buy any shares? No. Why? Because, you know, a badger talking in, in your ear for that, you know, get, get away. Shut up, get all this happen.
But, I need to pay, I need to listen to you more often, like note to self. some of our listeners might also know that we made a bet about a year ago on June 26th, in which we pitted two companies against one another, in which of these two companies will [01:28:00] be the better performer in two years time, which we thought is a decent, it’s long enough ish to, you know, come to some conclusion.
And, I’m flabbergasted to say that your pick since that date was Axon and it’s up a whopping 155%. That’s, that’s just, uh, staggering, staggering gains, going from a $22 billion market cap to close to $60 billion. So had I known back then that you were gonna try trot out 155% gains in less than a year, I might not have taken that bet.
Luke: Well let review the actual result of the be at the back of the episode ’cause I’m pumping the air with my incredible gains, but. Maybe I’m not winning the bet. We’ll see.
Krys: So that was Axon. Okay. Our next company is, we’re going to do a little bit [01:29:00] quicker because we’re planning on doing a special episode on a ST space mobile for all kinds of reasons. But in short, a ST space mobile is building the first and only global cellular broadband network in space designed to operate directly with standard unmodified mobile devices.
You already have no extra equipment needed. This is a telecom giant in the making that will not only connect the unconnected, but will integrate. Its always on signal into government defense strategy and the internet of all things. I am as excited about this company. I think as any company I’ve ever been as an investor.
I’m kind of thinking of this as the, what are the, I can name them, uh, off the top of my hands. Apple in its early days, Tesla, when it was doing, you know, when it was trying [01:30:00] to break through at some point I was really, really excited about Netflix. I just love that story, you know. and then the passion I have developed over the last six months for this company is through the roof.
It’s not every day. I think that a company gets to say it has the opportunity. To completely redesign how human beings communicate with one another. and so when I say in the, in the pitch that this is a telecom giant in the making, I mean that, but we’re going from, telecom as, you know, towers on on earth that sometimes work, sometimes don’t, don’t reach everywhere to the signal that beams in from outer space.
That is basically always on wherever you go. And what that will do for the way human beings, communicate what they’re able to do, to me is a, is a paradigm shift of [01:31:00] sorts, because I think people get stuck a little bit in thinking, oh, it’s just slightly better cell phone coverage. But if you think of the, that next level of what governments will do with an always on signal in terms of defense, operations.
And then this goes a little bit to my a MD thesis. What happens when every gadget imaginable from refrigerators to thermostats, to whatever roaming things we have delivering our food? When all of those things. Need a signal to connect to the internet. And if you’re in New York City and you’re between skyscrapers and you know, that’s poor signal these days, but won’t be when the a ST comes online.
Basically, it’s going to empower a whole new, I think world really. And so the last thing I’ll say as a pitch is that, this did not get 10 bananas from me. It got, eight bananas [01:32:00] because it’s still undeniable that it’s pre-revenue. So it’s still has to cross the chasm of actually launching the satellites.
The next one actually scheduled for next month in August with an Indian rocket company. But once that sort of technological, chasm is not quite the word, once that technological hurdle is overcome, which I have much faith it will be, then we’re off in the, to the races in terms of the revenue.
Luke: Yeah, we are gonna go deep on this one. We’re gonna do a full deep dive episode on it so we won’t drain it right now. I might just say it’s a three badger conviction rating for me ’cause I own this one as well. Like thank you very much Christophe and thank you very much Patreon, Steven. ’cause you guys got me on board and it’s more than a hundred percent return even for me and I got in much later in the story.
so very happy with [01:33:00] that. The reason I, it’s lower conviction for me is that, I mean, I, they, to me they do have very significant, multiple, very significant engineering challenges to overcome and I just kind of wanna see them get one of their giant like football pitch sized satellites in orbit unfolded and providing services to tens of thousands of customers.
And then I’ll really kind of believe the story until then. It’s a little bit science fictionally.
Krys: Okay. I correct you and say millions of customers ’cause that’s gonna happen real fast. But yeah. I think that’s a fair way to look at it. You’re in the, I’ll believe it when I see it mode and I’ve read enough to kind of think they’ve already accomplished the hardest technological challenges, which are the, basically inventing the stuff and making sure it works part and now it’s more of a industrial challenge.
Which, because the rockets are now going up quite regularly without [01:34:00] exploding. I think it’s just a matter of time. And so whether, even worst case scenario, let’s say the, A rocket blows up and they, you know, they lose a satellite, it’s not the end of the company. They have a great, a lot of cash on the balance sheet.
It’s just a question of is it gonna happen on schedule or is there gonna be some delay? It’s not like a question of will this or won’t it work? From my perspective, that’s why eight bananas, but, not a full 10 because, yeah.
Luke: I feel like I wanna just stand by my challenge again though, ’cause you sort of misrepresented it there a bit. I have no doubt that SpaceX or this Indian outfit will be able to put it successfully into orbit. My question mark is once it gets deployed. Like, can they, can a STS ’cause they’re then, you know, it’s their design.
Can they keep the biggest thing that we’ve ever put into space? This thing is bigger than the International Space Station. Can they keep it in order? That’s like their challenge. And if it’s when it’s there, can they act? And [01:35:00] by keeping it in order, you know, for eight to nine to 10 years ’cause of the cost of this thing And does it actually work?
Can it actually, like there’s gonna be 60 or something of these in the constellation. Can them, can they individually supply like the bandwidth required to the number of customers required? And particularly in like, like urban areas. I just wanna see like this engineering challenges nobody’s done today. I just wanna see them to face into that.
Krys: And I think that’s one of the, things we’re, I’m looking forward to doing a deep dive on this company because we’re gonna go in the weeds with all of the technological accomplishments that they already have under the belt. And it’s kind of, it’s just a fascinating, case study in engineering and problem solving and, what humans are capable of.
So
Luke: Great. Gus off, let me tell you about my lowest conviction investment. I hinted at this one earlier, so this is a, [01:36:00] let me just check the scoreboard. This is a six x return for me in my King of the Jungle portfolio. And it’s a 5% allocation. It’s one of the only things I’ve trimmed in the King of the Jungle.
I very rarely sell. I have trimmed this one there. I’ve trimmed it much more aggressively in my Real Money portfolio. But let me tell you about Palantir Technologies, ticker, PLTR. It’s actually a, it’s a hard to get your head around company, but I’m just gonna try and explain it really simply. They do data integration and data analytics.
So you’ve got all these other companies might be hospitals, might be like Operation Warp Speed, where they’re trying to roll out Coronavirus vaccines all across the us. They’re trying to, and battlefields like military environments, complex logistics. Any company that’s got like a massive data, which is just messy and you wanna get insights outta that data to make it better, like Palantir is, is like the cream of the [01:37:00] tools to do that.
And as the world transitions to ai, if you build your AI through a IP Palantir’s AI platform, you are deploying like industry standard models like Open ais and Anthropics and Gemini. You’re deploying those in a much more controlled manner where you have it hosted and it’s protected. It’s your private data and it’s auditable, and you have much more control over the decisions that are taken as a consequence of that data.
And you can go back and you can look at why certain decisions were taken and what decisions were taken by the AI and what were taken by the human in oversight. And you can audit that. So if you’re serious about deploying AI in your organization and you’re sitting on like a mess of disparate data, like use a IP and it’s gonna make that much easier to deploy, to operate and to govern.
’cause AI is [01:38:00] kind of a scary thing for a lot of companies to implement. So that’s kind of what they do. It’s as simple as that. They used to be initially like a, more like a military segment, but now commercial revenue, like businesses in North America are the biggest growing segment, which grew 71% year over year and it’s now a billion dollar annual run rate.
But government revenue, just mostly military stuff is also growing well and is over a $800 million on a run rate. The big risk to Palantir though, and the reason why I only gets a pal tree, two badgers out of 10 from me, is the frankly insane valuation. The stock trades at a massive premium to peers. Uh, you forget the pe, it’s not, there’s no point even looking at it, it makes no sense.
But on a price to sales value or like an enterprise value to sales, it’s above a hundred times sales. Like you could operate this company and you could keep every single dollar that it [01:39:00] generates for the next a hundred years. And you don’t need just recover the market cap. Like where is the return for investors?
I have no idea. Right. It’s obviously the company’s gonna continue to grow, like it’s valued, like it’s gonna continue to grow and in crazy, crazy pace. There is an argument here, and this is why I’ve not sold it completely, but, and I’ll probably always keep an allocation to this, but I’m keeping it very constrained in my real money portfolio just because of that valuation.
Krys: Has there ever been a company with this kind of insane valuation for which it ended well for the investor? And I think the answer is no.
Luke: Yeah,
Krys: think it’s ever happened because like you’re saying, it just defies the law of gravity. So from that angle, I would say this is an immediate sell. The only thing that I could counter argue on your behalf is to say, well, but we’ve never [01:40:00] seen something like AI before, which is the kind of, you know, exponential thing happening.
So maybe this is the only time in history where a company could potentially end up justifying this kind of insane valuation if everything goes right. And if the exponential thing happens, then you get to a merely expensive company instead of one that inevitably will crash. So, still I would recommend a complete sell because,
Luke: like I, I could say one thing I guarantee, right? So we’re gonna make, I’m gonna make like a one minute social media short out of each of these 30 companies, which is why we’ve been like the, the way we’ve done it, the way we have over the last four hours of recording. I guarantee when I put this short out and I close it by saying like, the egregious valuation, it is gonna get so much hate
because companies like this dumb money, you won’t hear this, you dumb money people who are so committed and are so [01:41:00] overexposed.
’cause you’re only gonna listen to the 62nd short and say, oh, these guys are idiots. If you listen to the full episode, you are crazy having a big allocation to a company like this for exactly the reasons Christoph just said, but. Like I’m riding on your coattails of the dumb money. ’cause they’re gonna keep pumping this stuff to 200 times sales.
And it, I mean, it isn’t objectively is growing like commercial revenue up 70% plus year over year. It’s growing great, but the numbers still don’t make sense.
Krys: This is where I would beg anyone listening to us that has not yet, you know, thrown rotten bananas at us. There is a key distinction between finding a truly world-class excellent company, which this appears to be one, and the stock as an investor. I mean, it’s that simple. And there’s the old adage, don’t marry a stock.
And I think some people, when they find a truly excellent company like this, and especially get in the early, and there’s this immense [01:42:00] amount of pride and like success and money made, and the future is very bright. It’s so hard to say, okay, it’s time to cut ties because it just won’t end well, So anyway, maybe we’ll return, yeah, we’ll return to this in a year’s time and be wrong, but I highly doubt that.
Luke: that’s a really good distinction you’ve made there. ’cause it is really good as an investor to love a company and really believe in the mission and what it’s doing. It’s really bad as an investor to love a stock. Right. If the underlying, even if the underlying company is decent, if you fall in love with the stock, you’re just asking to have your heart broken.
Krys: I see a lot of heartbreak not for, for, uh, these investors, but
Luke: But hey, like, you know, I’ve, I’ve ridden this to a six x return in my real money portfolio and my King of the jungle portfolio. I’ve got enough of an allocation, I’m probably gonna trim it again soon. I’ve got enough allocation that I’m still gonna make bank out of [01:43:00] this. I don’t believe in the term, in the, like the idea of house money, but if you did believe in that, like, I’m playing with like a, a lot of house equity here.
I’ve taken my money out multiple times over.
Krys: Yeah. I don’t like that concept actually, but that’s a for another day. but good job so far on, on buying when you did. I think it’s a mistake if you don’t actually outright sell it all. That’s monkey’s take,
Luke: Oh, before you go ahead. Like exciting, right? This is our last two stocks of 30. These are our individually our best investments, and yours you’re about to tell us about is also your highest conviction stock. So listen up. If you weren’t listening, stop running, turn up the volume and pay attention to Christophe
Krys: Okay, here we go. This has been my number one for the last, I think two and a half, three years. I’ve just been absolutely obsessed with this company. My pitch is that EOS energy is on a mission to accelerate American energy [01:44:00] independence with non flammable zinc bromide batteries that cover the three to 12 hour storage gap.
Lithium ion batteries leave behind. I came up with that, but EOS has a wonderful, now has a wonderful community online on x, and over the many years there have been many, many really savvy engineers and industry experts and just all around call it, you know, weirdos that do nothing but investigate a company like this.
And I wanna shout out, to Bur Gilfoyle at Burt Gilfoyle, who I think has done better work on this company than anybody in the community. I mean, just utterly magnificent, ability to look at. Prime documents and go to meetings and like, you know, like read through legal stuff. I mean just chef’s kiss.
And I thought recently when I was looking, at his comments, he made a very [01:45:00] quick, I think, off the cuff sales pitch or thesis statement of what Yos does. I’m gonna read it word for word ’cause I think it really gets it. It’s a pretty simple thesis. If you believe Project A Maze will play out in just a reasonably approximating way, then there will be a $20 stock in 2027.
The valuation is really simple. The Department of Energy and Seus vetted them for literally years, both technically and financially. Their technical performance, their pipeline, incredible ability to pay it back. EOS doesn’t need to start paying back the DOE loan till 2028. The DOE loan chief retweeted me on this thesis and the DOE has supported EOS from both administrations.
Both Secretary Granholm and Secretary Wright Congress has written legislation in the recent budget reconciliation package supporting EOS and rejecting every other Chinese lithium ion best [01:46:00] integrator. It’s almost too good to be true. No guarantees. The company follows through and executes. Though I’m not convinced all of their employees are good at math and truly believe they have the opportunity they have before them, but they have every tailwind in the world to become a unicorn by 2030.
That sarcasm on Burt’s part, by the way, if you want to invest in a subsidized monopoly, a safe non flammable, non-no lithium ion alternative, using abundant American supply chains that gets better and more profitable with time as renewable penetration into the grid continues a best otherwise known as Americans.
America’s battery supported by both political parties and multiple administrations, and for an energy storage solution with a technology readiness far ahead of the rest of the pack. Here’s your time to get on board
Luke: All right. You got me fired up. You forced me to buy options in our tennis bet like a [01:47:00] couple of weeks ago. and I’m now a battery head reluctantly,
Krys: how’s your first week, uh, been being, uh, a battery head?
Luke: I think my stock’s up. I suppose
I I I glanced at it day. Yeah,
Yeah, yeah. You so you forced me, you got me to buy a thousand dollars in call options for January, 2027. So, go on, gimme a prediction. Where, where’s, where are we gonna be at Market cap wise by January
Krys: Well, here’s where we’re at now. It’s still a one point something billion dollar market cap. So it’s a baby, right? What Burt’s going on about is that every imaginable tailwind at this company’s back, the US needs more electrons than ever. By far, the grid needs all the help it could get by far Trump just basically outlawed Chinese batteries.
Lithium is a difficult material because it unfortunately, hard to source and also catches on fire. And [01:48:00] meanwhile you have the US government helping subsidize a alternate chemistry that’s been proven, and they have all the financial backing now in hand, and they’re on record of saying, we will not make lines, additional lines until we have the orders.
And they just announced they’re in the process of ordering line two. So now this is at a $1 billion market cap that’s set to basically run the US grid. I mean the, the, the, so the basic assumption is that they will do a good job, if not necessarily a perfect job scaling and actually building it, because now it’s round two.
They’ve already, they have line one already operating. It’s just like cut and paste. How quickly can they do that? How quickly will the market then pull forward the obvious earnings that are come about to come off each line? So there’s an estimate. It [01:49:00] varies that how much is each line worth to the company.
An estimate is between seven and 13 a share. So one line is worth $7 a share. So it depends on how excited the market’s gonna get. But if line two is now running by end of the year, we could call that about a $20 stock. And then once line three isn’t, you know, been, been placed, then you just do basic math and the numbers get pretty crazy pretty quick.
So it’s an execution story, sort of like a STS, but they’re just further along, you know, now it’s their hands on the ground. They’re not that floating out in space. Uh, it’s a, it’s the, it’s what a 35% conviction in my, uh, king of the Jungle portfolio. And it’s a massive conviction in my real world portfolio.
And I made a New Year’s resolution way back at the beginning of the year that I’m not gonna sell a single share. I have not, and I [01:50:00] will not because 10 years from now.
Luke: do not do as Christophe says, follow him when he talks about like the laws of the jungle and the sensible staff and managing your portfolio. He is doing this ’cause he’s trying to, well, he encourage your convictions, courage, your convictions and this, it’s working out. Seems to be working out pretty well for you, like your biggest allocation and your biggest performer.
So good luck to you my friend.
Krys: Thank you and welcome to the club, buddy. You’re, I’m gonna, I’m gonna put a smile on that badger of frown. You’re just, you wait. It’s gonna be great.
Luke: I set my conviction levels up based on that last five minute explanation. Like this was no badgers as an investment because I now own some. It’s now one badger. I’ll
Krys: Oh, oh, great. After hearing you talk about this for two years nonstop, I had to call in another guy to get, to go from zero to one badge. Okay. This is your payback against, uh, [01:51:00] me not buying Exxon.
Luke: Yeah. Make me rich. Christophe and Bert make me rich.
Krys: All right. Take us home. Take us home with, uh, with the fireworks.
Luke: I’m not taking you home. I’m taking you to the stars with my final recommendation, which is a 17% allocation in my King of the Jungle, but it’s like a 14, 15% allocation in my real money portfolio. And trust me, that is a fucked ton of money, right? This is very material to, uh, my life. It’s a big allocation because I’m watching this one very carefully.
And it’s got so big ’cause it’s delivered like a 12 x return in the last couple of days, like it’s gone bananas. Anyway, let’s come to the social media short. Let me tell you about Rocket Lab, ticker RKLB. We think of them as a space company. They’re actually an end to end space company. So sure they launch stuff, but they also [01:52:00] manufacture satellites and then they operate satellites when they’re in orbit.
And there’s even hints that they might be deploying their own constellation to compete with companies like starlink. They’re a leader in small satellite launch. So they’re so reliable at putting payloads of about up to 300 kilos into orbit, would you believe? So they’ve done 68 launches since they started their Electron program, which is their small launch program.
64 of those 68 have been successful, like the first one failed and then there’ve been three other failures over the years. But 64 out of 68 successful launches like space is supposed to be hard, but Rocket Lab frankly make it look easy. Um, they’re now building on this incredible track record to launch a medium lift reusable rocket, which they call nron.
And you’ve seen SpaceX, their Falcon Nine, like the, the thing they’re using [01:53:00] today to put all of their starlink satellites into orbit and also deploy payloads for military and commercial customers all over the world. Well, when Rocket Lab bring neutron to the pad, second half of this year, they’re planning a first test launch that’s gonna be competitive with Rocket, with SpaceX in terms of like the payload that they can ship into orbit.
But there’s so much momentum built into this stock right now. It’s really like they make the most of their money from the space system segment, which is like manufacturing satellites and building them for their customers. But it’s the momentum and the excitement that retail investors have around this as a launch company.
And sure, launch is really critical to their overall business model, but it’s not really where they make their money. So if you try to look at the financials for this today, it’s kind of ugly. It’s overvalued. And so a prudent investor will keep [01:54:00] a pretty tight control over their allocation to this one.
And it’s probably one I’m gonna have to start trimming reluctantly soon. I’ve got my finger poised on that button. So for that reason only valuation, and I’ve said this so many times in this episode, this is a reduced conviction rating of five badges out of 10. But that’s only because of the price.
Neutron is gonna be super volatile. It’s gonna be a tough for shareholders because it’s probably not gonna be successful on first flight if they’re not successful on second flight. We’re looking at like quite a serious drawdown. ’cause the company’s the company. The valuation of the stock is really detached from the actual fundamentals of the company, which are really good.
Rock solid, good balance sheet. They’re well set up, but this is gonna be like a tough holding, but I’m not trimming it just yet. ’cause if they’re successful with neutron, this one is literally like going to the moon and beyond.
Krys: oh God. Where do [01:55:00] I start first? I’m sorry. I have to start, I have to, you have to be my therapist again for this. The reason I don’t have shares is because I got cute and I bought the, the calls at $7, the $7 calls that expired in 45 days, and it expired worthless while you ended up making all the bank.
And I’m bitter. I’m so bitter. I’m so, so, so bitter, and so I can’t will myself to, to buy back out of sheer, lack of character for, but, but tell me, this is a five because a five Badger rating at this point seems to suggest that, eh, you know, like it’s a, it’s as good a time as any. So would you actually, would you say that me not being a Rocket Lab [01:56:00] shareholder in the King of the Jungle portfolio, that I should get serious and and buy a share?
Luke: If I didn’t own this today at all, I would buy some, but a small allocation, yes. So yes, you should, but don’t over allocate to
it. like it’s gonna, like they’re well capitalized. The next I, so actually I published like a sort of quite a personal article on our Patreon, which is free to anybody. So if you listen to the podcast, you haven’t checked out the Patreon, just go, yes, let’s go sign up.
Give us your email address, I’m afraid. Go sign up at patreon.com/wall Street Wildlife and you can read this article for free. Don’t have to give us any Patreon, although we’d love it. and in that article I lay out. Not so much like the thesis and like what the company’s all about, just how I plan to manage this exposure myself.
’cause this is really material. Like I’m not gonna talk real numbers. It’s quite material to my real life. And so, I’ve got a close eye on Neutron. I’ve like the [01:57:00] TLDR is, I’m gonna have to trim it. If it gets to more than a 20% allocation, it’s currently about a 14% allocation. If the price goes down, I’m fine with that.
It means I don’t have to worry so much about it. and I’m probably gonna trim it just because it’s like in real dollar terms, it’s a big number. So I’m gonna have to trim it. I feel just to take some risk off the table prior to Neutron first launch, like first test. But if that first test is successful, which it may well be ’cause they’ve had such an incredible track record with Electron, if they’re successful, even with like half of the mission parameters, then like the stock is gonna go bananas.
It’s gonna double or triple
so
Krys: gonna go, what?
Luke: bananas. It’s
gonna go
Krys: see, now you speak my language.
Luke: badges. Yeah.
Krys: And now see, you know, how to convince a, a.
Luke: Yeah. And it’s like a 22, even with the run up, it’s a $22 billion market cap today. So like, I mean that’s, that’s ahead of it’s unreasonable valuation if you just [01:58:00] look at the numbers. But if you look at the story. Like if who is launching stuff successfully today, you’ve got SpaceX far and above anybody else, then you’ve got like the US and the China government, like the state, and then you’ve got Rocket Lab, right?
They’re a tiny, they Well I you, when I used to give this pitch a year ago, there were like a two or $3 billion company and it was such a no brainer. Now they’re a $22 billion company, so it’s no longer a no brainer. But you know, if you believe that like the fourth biggest launch provider of our species, like in the known universe, can’t grow from a $22 billion valuation, well, you know, you’re being
Krys: I buy a badger. Um, it’s interesting because, uh, on the interwebs there’s a lot of, uh, back and forth between a STS shareholders and Rocket Lab shareholders, and sometimes they’re all, you know, uh, they’re allies, but sometimes they’re yelling at each other, [01:59:00] like, what do you do? You know? it’s a fascinating, segment for sure.
I’m very tempted, to, to get over my bitterness.
Luke: Well, let us know in a couple of weeks if you do, but if you do take a small allocation, just get like a foot in the door. Don’t overexpose to this one. ’cause it is quite expensive right now. All let’s really bring it home and come back to that Axon conversation. ’cause you are just lauding my genius in picking Axon in our two year bet.
And yep, I’ve had 155% return with that wager. Which is, that’s a good return. That’s a good return, but it’s in second place ’cause what have you bet on and what’s happened?
Krys: Well badger in that particular bet. On the 26th of June of 24, I made my horse eos, and at that time the market cap was 0.27 billion. and today it is at 1.5 billion, which [02:00:00] is a gain of 344%. So despite you gaining 155 per 5%, I’m more than doubling it’s a hell of a contest, let me say that.
I wouldn’t, I wouldn’t, you know, like to lose, you know, to be at 155% and losing is a good place for us both. And so I hope our listeners, Paid attention to that silly, what might have looked like a silly contest, but we were essentially putting two of our best ideas against one another and to, to date, it’s really worked out well.
So I’m excited to see how, where this contest is still, uh, 11 months from, from today. ’cause it ain’t done yet.
Luke: incredible performance by eos. I know. I bitch and moan about it. Just ’cause you go on about it so much. I’m just trying to be a counterpoint. And our Patreons, by the way, did vote and say that like the badger should keep his claws out. He shouldn’t be nice to the monkey. So,
and it continues to
Krys: traitors, all of them [02:01:00] except Barry. You know what, Barry? Barry, I feel like Barry’s got monkeys back, but the rest of y’all,
Luke: You don’t have to have an allegiance. Join the community and we have a lot of fun. And we also talk like good quality investing, due diligence. And you can be a fan of both or neither of the badger and the monkey. It don’t matter. We’re not precious.
Krys: and speaking of both of us, we made a, a somewhat slick graphic that sums up all of our companies and our current conviction ratings expressed in bananas and badgers. And whether it it’s gone up, stayed the same or dropped, and we’ll put it on the Patreons for our members.
Luke: Yes. We shall, I mean, let, let’s just take a stand back from it and have a look at this now. ’cause we’ve gone through 30 companies between us. I think I had. Like maybe you had 14 and I had 17 or something, you know, however, something like that.
Slightly unequal. I’ve got a few more than you. We didn’t talk about [02:02:00] cash, although you did yesterday, like cash as a position, but in the round. So EOS and then a STS and chain link. Like there you top three, my top three Alphabet, Amazon and Mercado Libre. But maybe those individually, like they do kind of represent our philosophies as investors.
Like my three are behemoths. Two of my three are like among the biggest companies in the world and they’re all like established, strong, stable companies and pretty much all three of yours are like super young, unproven, tiny
market cap, you know, all of the world ahead of them. you don’t have to be a, an ex one of these two extremes that Christophe and I seem to occupy as investors.
I’ve got a bunch of tiny little companies, I’ve got some A STS, thank you Steven. I’ve got a bunch of other small companies. Christophe has a bunch of giants like Nintendo and a bit of Tesla and some other like big established market cap companies in there. You don’t have to be one or the other, [02:03:00] but you find like a blend that works for you, for your risk tolerance and your situation in life.
And you know how many people are dependent on you and have you still got an income coming in? you know, you build your own conviction rating about these companies. Don’t just rely on the badger and the monkey count.
Krys: And this might sound like a silly thing to say, but have fun doing this because part of what, you know, makes tolerating recording for five consecutive hours and spending all weekend doing deep dives like this, is that we enjoy doing it. And that’s because on my, I’ll speak for myself. I, for one, don’t have to research a company that makes sausages.
You know, I get to, I get to learn all about Nintendo and I get to learn all about space and all, all of that. So, there’s no right way and wrong way to do it, but I think you’ll be a better investor if you, if you kind of like it or you teach yourself to like it, or you naturally gravitate toward a certain kind [02:04:00] of in the world.
Luke: Yeah, I’ve always said like investing is just an incredible lens to look at the world through, to try and understand the future. like I’m a sciencey guy, I’m a science fictiony guy, and I, I love looking at the trajectory. Okay, maybe not the sausage roll company, but like most of the other stuff in my portfolio is doing really interesting things in the world.
And I’m just, even if I wasn’t an investor in these things, I’d still be interested in what they’re doing. ’cause I do feel like they’re making the world a better place.
Krys: So, yeah, it’s been quite a journey badge. we hope we get feedback from our members about whether this was a successful venture or not. I hope the shorts do well for us. we’ll see, we’ll compare the algorithm. We’ll see how happy we, we made the algorithm and which one, which one of them is the best performing or worst performing.
Actually, that could be an interesting context. now that I think about it. Like guessing once all 30 are out there, which is going to be viewed the most and which is going to be the ugly duckling.
Luke: [02:05:00] well I mean based on history, like anything with you in it is gonna do twice as well with anything with me in it ’cause you’re clearly much handsomer. and unfortunately, like to my mind it’s all the meme shit, stock stuff are the ones that seem to do well. ’cause like the dumb money, they just watch like the 62nd stuff, they don’t listen to the two hour
stuff.
So Yeah.
I’m expecting a number of yours to do very well in terms of the social medias. But maybe those guys, you know, you’re not all dumb money. If you’re listening to the long thing, maybe you’re coming around to the idea that actually like, there’s a two sides to every argument. You have to understand the bull and the bear case and do your own, like fundamental research.
Don’t just rely on podcasts and other people’s research. like one final thing just before we close out, ’cause you deserve some acclaim here as well, right? If you do this well, you can beat the market and I’ve got the numbers that prove you can beat the market over the long term.
Like [02:06:00] I’ve got a compound annual growth now of 22% year after year. Some years much more, some years less, some years I’ve lost money, but it averages out to 22% growth over what’s about to be 22 years. It’s my 22 year anniversary as an investor next month. So you can beat the market if you take this seriously and if you follow our contest.
So here’s where, here’s like the overall scores on the board. Remember we started with a thousand bucks each. ’cause it’s a nice accessible amount of money because for anybody, and we added a hundred dollars per month in the first year, and then Christophe twisted my arm and we jacked that up to $200 per month in the second year.
And about halfway through the second year, at the end of that first year, Christophe had turned his, what, 16? He’d, he’d started with a thousand, he’d added 1100 and he finished with 1600 bucks. So in the first year he lost $500. Not, not a
good performance.
Krys: Not [02:07:00] great.
Luke: Not great. Not great. And in that same first year, I gained 31%.
So I was like, yes, I’m well ahead here. And we
celebrated that on our,
Krys: off our show.
Luke: yeah, I want Albert back. But look how you’ve turned it around. I thought I had an untouchable lead. But you have delivered just in the seven months into year two from November to now, you’ve delivered 112% return. and I’ve only delivered, Only.
delivered 65% return.
I’m happy with either of these numbers, but like what an incredible catch up. And now there’s like a couple of hundred bucks in it in the overall contest.
Krys: Yeah. And, uh, I would say the main lesson here is, is you have to take the longer per perspective, and you have to really do the work and do the diligence to know what you’re holding. Because a lesser experienced investor would’ve looked at that loss that I had in the first year and said, oh, this investing thing doesn’t work.
Screw this, you know, it was a lie [02:08:00] or what, whatever. But I knew what I owned. I, you know, and then it was just a matter of the market catching up, and it doesn’t always work out that neatly. But, with a community like ours and then an extended timeframe, you two can really be a beast of an investor.
Luke: Well, I just wanna say a quick thank you to fiscal ai. ’cause we’ve used that tool throughout the last two very, very long episodes. If you go sign up with fiscal.ai/wildlife, you’ll get a handsome discount and you can see like the extent to which Christophe and I use this thing. I’m on it like for multiple hours every day now.
So I do all of my financial analysis. It’s just an incredible tool for understanding, like the balance sheet, the income statement, the segments, the story in really rigorous detail and there adding a whole bunch of new
capabilities of the next
Krys: getting better and
Luke: few months. Yeah. Alright. You nearly closed this out. I will.
Are you ready to become a beast of an
Krys: Your journey [02:09:00] starts
Luke: here?
Krys: here.
