🏆 King of the Jungle Update – Monkey takes the crown! After being underwater for year one of the contest, Krzysztof has dramatically surged ahead in the last twelve months, and has grown his $200/month contributions into $8,000 with consistency and patience
📈 Palantir Valuation Reality Check – Luke dismantles a YouTube commenter’s dangerous logic that “Rule of 40 means you can ignore valuation.” Here why PLTR’s market leading 98% Rule of 40 score still doesn’t justify its unsustainable revenue multiple
🏠 Opendoor’s Risky Pivot – Krzysztof defends his speculative position in $OPEN as they transition from failed iBuying to asset-light platform. Luke bares his Badger’s claws at this “meme stock” approach to investing
⚡ IREN Energy’s Breakthrough Moment – From Bitcoin miner to AI infrastructure powerhouse – why IREN’s partnership with Nvidia and potential hyperscaler ambitions caught Luke’s attention enough to finally join Krzysztof as an investor
🎯 How to Get Started Investing – Responding to new Patreon Hugh’s video question about picking stocks for his pension. The badger and monkey break down their beginner-friendly approach: start small, pick companies you understand, do at least one hour of primary source research per stock”
💡 The Power of Primary Sources – Why reading company investor decks and listening to earnings calls beats following stock tip newsletters. Plus our favorite tools for fundamental research
📊 Portfolio Management Wisdom – Why diversification matters even for ‘generational’ companies, the psychology of winning and losing streaks, and lessons from IREN’s volatile trading history
🌴 Thank you for supporting Wall Street Wildlife on Patreon!
💵 Your support helps us continue bringing you valuable insights and unfiltered investment discussions
Segments:
00:00 Cold Open – Investment Psychology
00:48 King of the Jungle Contest Update
06:41 The Compounding Journey – From $1K to $8K
12:42 Opendoor Deep Dive and Debate
30:17 Palantir Valuation Controversy
44:11 IREN Energy’s AI Pivot
01:08:05 Hugh’s Question: How to Get Started Investing
01:23:43 Research Methods and Primary Sources
01:31:15 Closing Thoughts and Travel Stories
WSW – E96 – No Ads – PLTR IREN OPEN How to get started
[00:00:00] Kryz: a real player. They are willing to risk their whole stack when it becomes necessary because they know they’re not playing from anxiety.
[00:00:09] Luke: I want to point at one or two extra things that are really important. Like you can go and listen to other podcasts and read other analysts and look at like the Motley Fool and seven investing and services like this. But the most value you will get is from going to primary sources.
[00:00:25] Kryz: You’re already in. If that all blows up, you’ve lost basically nothing. But you’ve taken the most important first step.
[00:00:33] Luke: Buying properties is not like buying bananas. Like they’re not a commodity. Every property is unique and different
[00:00:44] Luke: Welcome to the Deep Investing Jungle with your hosts, Luke, the Badger, Hallard, and Christophe the monkey pki, where we separate the signal from the noise in the wild world of investing this week, the importance of valuation and why you probably shouldn’t have more than half your portfolio in Palantir, we also revisit an old favorite question that just came in from a new Patreon.
How to get started as an investor. I ran. Energy is taking off. Is this the next Rocket Lab Monkey? Talks about a paradigm shift hiding in plain sight. Plus, I’m gonna give him a proper badgering over his new investment in Opendoor. Looking forward to seeing him squirm as he tries to defend this misguided investment.
[00:01:34] Kryz: Yes, Badger, but to late breaking news. This is a contest that Badger and I started back in early November of 23. Badger. Can you describe what on this chart for those who are not watching us on YouTube and are not seeing our handsome, furry faces?
[00:01:55] Luke: You can see the trajectory of our holdings in the King of the Jungle Challenge since we started way back with a thousand dollars and now we are nearly at $8,000 each. the yellow banana monkey line has been lagging pretty heavily, and at the end of our first year, monkey was underwater where the badger had made decent returns, so they were diverging quite nicely.
That gray badger was stretching away and you nearly, caught me up in early 2025. Like our lines nearly inflected, but not quite. And then your portfolio fell into the, like the STAs pit again. But what’s happened like in the last three weeks? You are in the lead. You’ve taken the lead, you are the new king of the jungle.
[00:02:47] Kryz: Badger. You see this mug that I’m drinking my coffee today. This is the Team Badger mug, and you wanna know why I’m drinking coffee from my team Badger mug because everybody loves a good underdog.
Everybody loves to root for the underdog,
[00:03:05] Luke: are there really any underdogs in this contest? Like you have redeemed yourself and you are yet you’ve exceeded my returns. Good job. that’s gonna, you are gonna have an incredible return for this year. Clearly. ’cause you’ve made such a massive comeback. I didn’t think you could do it, if I’m quite honest.
I’m surprised. And later in this episode, you’re gonna tell us about one of the stocks that got you there. there’s a whole bunch of your investments that have come. Good. but there are no losers here. I, was saying that all the time when I was in the lead. Like we are both beating the market by a nice margin and that’s our objective.
[00:03:42] Kryz: Yeah. So man, I have a co couple of things to say. one, to flesh out the story. At the point, maybe late 24, I believe you were having a little bit of despair when looking at this contest. ’cause you’re like, oh my God, my co-host is going to embarrass us, and then I’m just gonna exponentially, widen my lead and it’s just gonna be, a sha walk of shame every episode.
And that can’t be good for the numbers. So I’m glad that for now, we reconverge that’s 1.2. I rarely say this and I hope this is the only time, I will have to say this, but I’m deeply disappointed in our Patreon crew. So over on patreon.com/wall Street Wildlife, we have three channels.
The Jungle Lounge, where we talk all kinds of investing stuff. We have our trade channel, which is where you and I, whenever we make a trade, we tell you what we did and our logic behind it. You could do your own research in whether you want to, follow us in that trade or not. And then recently we, opened up the watering hole where we could just shoot the shit about, non-inverting topics.
What got us, what we do. And it’s really sweet actually, for those of you who haven’t checked it out. It’s a really sweet channel and it serves a function building community trust. And we become better investors together. Here’s why I am disappointed in our crew. Two weeks. It was two weeks ago.
It was actually before IR took off, after the latest announcements. Monkey had taken the lead on the, in the King of the Jungle Challenge. but not being, not wanting to be a gorilla, pounding my chest, all that monkey did was posted a link to a Bob Dylan song called Changing of the Guard. Not one, of our jungle critters picked up on that Easter egg and, connected the dots between the, the newest king of the jungle in the changing of the garb.
But now it’s out in the open, so to the rest of you pay more attention.
[00:06:04] Luke: You, you have posted like a succession of strange videos and music videos. so I just, I thought you’re just losing your mind as usual. Okay. Didn’t realize it, Eric. Deep cut There.
[00:06:18] Kryz: Yeah. Yeah. not to be, not, to be overly insulting. It did lead to a great conversation about, all the Bob Dylan fans we have, and what a great song that is. But that was intended to point to the King of the Jungle, portfolio. One last thing, one last thing. we say this, we’ve said this a bunch. We started this at a thousand dollars. We’re now close to $8,000 each. We’re modeling consistency. All we’re doing is adding a hundred dollars per month, or $200 per month. This, this, these last nine months. And when you look at this line, you know that whole compounding thing happens. And before you know it, I mean it’s, from 1000 to 8,000, the numbers start
[00:07:07] Luke: Yep.
[00:07:07] Kryz: bigger and bigger.
That’s how you did it, right? That’s how you did what, you’re known for when it’s gets to the, what’s it called, five digits. some people might, start feeling intimidated, oh shit, I don’t have $10,000. This is why looking at this graph is important. You don’t need $10,000.
What you need is what you have right now, and you just gotta get started and do it consistently. end of my, gospel.
[00:07:35] Luke: No, that’s right. And the journey, we’ve been doing this for over 20 years and but I’ve really focused on it’s like my investment portfolio now literally supports my lifestyle. Like it pays me per month way more than my job ever did by an order of magnitude. and when the numbers, we’ve got, okay, we’ve got like four, like high four digit portfolios and you, as you say, like we’re gonna get to a five figure portfolio in the king of the jungle soon.
And that’s, our returns there. Like our investment returns are important, but the money we add is probably the bigger thing. Like we’re adding new money. Once you get to a mid five figure portfolio, our investment returns are be much more meaningful than like the 200 bucks we’re adding each month.
Maybe we’ll increase our, I don’t know, we’ll kinda make that decision as we go along. And once you get to a six figure portfolio, into a seven figure portfolio, like there’s almost no point in adding new money unless you’re super wealthy, because you can’t add meaningful new money.
It’s all about making good decisions and having compounding working on your side. But, if you’re getting the kind of returns, the, let’s say I’m getting, like I’m beating the market by a substantial margin in my real money portfolio, 22% cagr, so that means my portfolio like 10 x is in value every 10 or so years.
So like the journey from. A hundred thousand to a million is gonna take the same as the journey from a million to 10 million is gonna take the same as the journey from 10 million to a hundred million, right? The numbers become truly eye watering. You just need to keep doing the same thing. learn your lessons now when you are like a younger investor and the money’s small, and make your mistakes ’cause it’ll cost you a couple of thousand bucks, not like a couple of million bucks.
And you just get going and start learning the lessons. ’cause these lessons will repay you. And one day soon before you know it, you’ll be looking back and you’ll have a large amount of money.
[00:09:42] Kryz: Yeah. And you know what Badger, as you’re saying that, I, noticed one more, I think obvious lesson. When you look at my line, the yellow one, the monkey line, it has had severe drops. That’s how, in some points, you, your lead was quite sizable. I would venture to say that most inexperienced investors who have not done what we’ve done for so long, when that line drops so much, they get discouraged.
They say, fuck this, is not, this is this, I just can’t stomach losing that much money. there’s no way I could win, whatever. What did I do instead? Nothing but continue to add money each month and, work hard, study and figure where to allocate it. Have these conversations with you to justify my thinking and letting time play out the story.
So it’s important not to get discouraged. No matter what’s happening, and obviously when things are going well, you want to, you want to notice that, oh shit, now everyone thinks they’re a stock market genius. Things are probably gonna turn the other way. So let’s prepare for that. and then you study the ship.
[00:10:58] Luke: that’s, and that’s the bit I’m looking forward to in a masochistic way. because like we are in a growth cycle and depending on who you listen to, this is gonna carry on forever ’cause of AI and the all the things, or like everything is wildly overvalued and the market’s gonna turn and everyone’s gonna get caught with their pants down, Whether that comes tomorrow or it comes in 10 years time, at some point this growth run will stop. And the valuations of companies like Palantir, we’re gonna talk about that today, will be significantly down from where they are. The good companies and the bad companies. And like our graphics in the king of the jungle, they’re gonna turn south and we’re gonna get, like an ugly period.
And that’s when the value of having like podcast buddies and being part of a community of like-minded investors that are really thinking hard about the thesis on what they own. They’re not just looking at charts and stock prices. That’s when the value of this stuff comes in. Like hopefully you’ve enjoying the Wall Street Wildlife podcast now and everyone’s winning together, but it’s when things get bad that this podcast is gonna be really value add for you.
So if you’re not a subscriber, click that subscribe button in preparation for when the as falls out the market ’cause it’s gonna happen.
[00:12:18] Kryz: Yeah, for sure. and say hello on our Patreon channel because, that’s where you make, the lines is, and then you won’t feel so alone, and then you’ll hang in there and you’ll make yourself thousands or tens of thousands of dollars by that simple move. All right, Badger, you threatened, me on our Patreon channel, on our trades channel.
When I announced that I bought a small position in Open Door Technologies, ticker, OPEN, and Badger said his boy, his claws are coming out for that one. leather rip. Leather rip.
Why first of all, you tell us, first of all, you go first. This is your stock. Tell us who they are, what they do, and why you bought stock. And then I will claw your thesis for.
I thought it would work better to, you’re the one who I was just mine. I was just hanging off a branch minding my own business, allocating my bananas as I saw fit and then mean Badger comes along, says he’s gonna tear me a new one. So it feels Tell us what the company does, tell us, and then I’ll rip it apart and then you can tell us why I’m an idiot.
okay. the big overview is that it’s a real estate. It’s an online real estate platform that works with sellers, so it helps sellers sell their home, by, matching sellers with buyers. And, basically given the sellers like a guaranteed. Offer, and then, making it easy, it’s, yeah, making it easier for sellers to find buyers using, call it advanced, online technology.
I would say that’s the bread and butter thesis,
[00:14:06] Luke: Cool. Okay. Alright. Good. So I’ve got no problem with that business model. I think that’s okay. who was the guys who took a pummeling years ago? Was it Zoopla or is that the British version? It was like ZZ something. Zillow.
[00:14:21] Kryz: Zillow,
[00:14:22] Luke: yeah. Yeah. I used to be a Zillow shelter. I think I got out before things got really ugly.
I, as far as I know, okay, so that business model makes sense. Like facilitating, creating a marketplace, trying to disintermediate real estate agents and take a lot of the costs out of property. ’cause that, for most people, buying or selling a house is like the most expensive pro transaction you’ll probably do in your life.
You, and you might do it a few times. so the guys that like take the friction and the costs out of that, like that’s great, helps everybody. but when Zillow did their, we are gonna buy properties and hold them in our inventory and I. that’s when it got ugly. They did it really badly. And I’ve, my, I’m given to understand that with their Iyer program, Opendoor have also they’re leaning more into that market where they’re actually, they’re the purchaser and then they have the property on their inventory and they sell it.
am I right If that is what they do.
[00:15:25] Kryz: this is where I could educate you this. That’s, if you look at the stock chart of open, it’s ugly and it got into the sub dollar because, precisely because they were taking this kind of capital risk. The recent, hullabalu over this company was that the CEO exited. yeah, forced out, you could say, because there’s a lot of discussion about leaving that strategy behind and going into an asset light, let’s turn open door into mostly a sort of equivalent of an Airbnb platform where Airbnb does not own properties.
Airbnb is just the interface, that’s, that company extremely well. So that’s the sort of, transition point that the company’s going through right now. Exactly to your point, because there’s immense risk if you’re buying the properties yourselves. Now whether they execute on, this or not is a whole nother issue, but that’s, what got the catalyst going.
That’s what got my ears perked up. But there’s more, but go ahead.
[00:16:41] Luke: But they still have this eye buying model. yes, but, they’re shifting away from it. Or at least that’s the, plan.
Okay. Alright then. Look, I let, me explain why I, and maybe you totally buy this and understand it already, but why I think that model is faithfully flawed. But if they’re like exiting that model and they’re winding down, then all my concerns and my criticism go away. But the reason I’m critical of that is like.
Buying properties is not like buying bananas. Like they’re not a commodity. Every property is unique and different. And if I’ve got an incredible house and people come and real buyers come in the door and look at it and they see the incredibleness and they see that they get their survey down there, see there are no major problems and I’m gonna get a premium price.
And if I’ve got like a dog of a house that has a ton of issues, like a wise buyer will spot that and that’ll be reflected in the price. So like the properties that are gonna end up sold on open door, ’cause it’s chiefly as I understand, it’s chiefly like algorithmic. They look at like buying and selling prices in the neighborhood and the trajectory.
And then I think maybe at the end of the process I’ve just read because I was just trying to skim up on what they do. They send someone in to have a look at it and that’s the only bit that’s important in my mind. Like you cannot algorithmically. Value something like a house because there everyone is absolutely unique and there could be disastrous hidden issues in that property and it’s only the shit that will end up on your platform.
And even if they like, they try and reflect that and the price they’re willing to pay, like buyers who are happy to take that, like I know 20% haircut from market price, there’s a reason why they’re taking that haircut and open door’s gonna have crap on its books.
[00:18:36] Kryz: Okay. good, bear arguments. not why I took the position, actually, and this is, I thought you would go more in this direction. just for full context, I had, it was the end of the month and I had $12 left in, the account. We add, 200 beginning of the month. the bananas were burning a hole in my trousers and I’m like, eh, 12 bucks.
So one, it is important that this is, at this stage, it’s not like a major allocation, it’s 0.0 whatever my portfolio. So it, matters, right? Because this is funny money in a sense. and I openly acknowledged on our trades channel that this, you should think about this in the mean stockish way, this is not yet, should not yet be a serious investment unless you’re doing the trading game and the momentum thing, right?
So that’s a whole nother thing. But I thought it was valuable enough, or what I saw was good enough to add it to my portfolio in that context because, and this is where you might be surprised by this. I, one, I do believe big picture that the real estate market as one of the hugest, call it total addressable market, tams, whatever, is ripe for disruption and nobody has been able to really do it. And I followed the Redfin story quite closely for years. my ears are sensitive to this.
that’s. That’s the, background. It’s this investor activist guy, Eric Jackson on X that has a history of making big bets on future transformative companies. And he’s made bank on a lot of, so he’s been successful many, times over. And he chose Opendoor now to be his next sort of project. why does that matter to me? I really think this is where I want your ear badger. I think investing has become, there’s a new layer that’s been added, historically from where we were back in the nineties and the os and the tens. And now, for certain companies, communities are born online. That when they’re serious, when there’s a serious enterprise behind it, you get a bunch of really smart people working together and, processing information and gathering information at a rate way faster and way more thorough than say any individual analyst could ever do.
Or even like a siloed investment bank can do. ’cause we’re talking about like hundreds or thousands of people. And if you get something like, I don’t know, 10 or 20 really, serious thinkers and analysts, retail or not, I don’t even care. That’s, I’m getting rid of the elitist labels, like only an iBank could do this kind of thing.
So when I see this really successful activist playing the mean game, he’s literally. His playbook is literally to turn the stock into a meme. He’s, he’s showing up in front of Drake’s house in, Toronto saying, Drake buy a share of open door. he’s like a marketer. this is, from the serious investment standpoint, this is like Bush League tactics.
But here’s what I’m saying to you. I’m not dismissing those as pure casino and gambling and rah stuff. I am saying, he literally turned the world’s investment community onto this company and saying, look, if Opendoor could transition from an eye buying thing to basically an asset light AI thing, then it has immense, potential.
And in doing that, yes, he got a bunch of momentum traders. He got a bunch of people buying and schilling and selling, right? And that for me and you. Has a level of distaste about it, because that’s not what you and I do. But despite that, I’m saying that now I get to watch this company with, only 12 bucks invested, and I get to pay attention.
I get to follow the story. And when the fundamentals follow and they start making progress, and he’s created, a lot of eyeballs on it, it really does have immense potential. That last point in my argument here, the company brass, the new C level execs are replying to the community, OnX saying, here’s what we’re hearing you say, here are the pivots we could make.
And some of these guys actually cancel, canceled their, what’s it called? Their option plans. in lieu of saying no, we’re basically buying shares on the inside because we believe our mission and it’s all right there in the public. So to wrap this all up, I’m saying this is a fascinating. Moment in time where you could kinda watch a company do its business to some extent in public. and whether it fails or not, that obviously depends way more on the fundamentals to your critique points, right? To the execution of it. But I want in, on like front row seats with some skin in the game as this unfolds because there’s legitimate substance underneath the hoopla. That’s my, justification for taking a small starter, position.
[00:24:37] Luke: I find all of that deeply distasteful. I’m afraid like it all reeks of like stock manipulation, bullshit. Like the only thing as a long-term investor in my mind, the only thing that should be important is like the execution in the company and the strategic, the strategy and like how they operate and the business model, and then ultimately like the money.
are they gonna, eventually, are they gonna follow some journey and generate net income? you it might be investible all the way along that journey. Everything else is just like fluff and rah and if this guy’s making a big noise. Alright. Okay. One thing you said fair play.
They’re doing business in public. So maybe public, maybe they’re taking, like the execs are taking feedback and maybe they, the strategy will improve as a consequence. But if they’re good at what they do, they should have that stuff in hand already anyway. They shouldn’t need some Okay.
Active, okay. Activist, investor, whatever. Maybe often these guys will have an interesting idea. but yeah, I don’t know. I, they wouldn’t get 12 bucks of my money.
[00:25:43] Kryz: So this is an interesting, crossroads for our listeners. Badger for fundamental reasons. If I could translate, you’re saying it’s not time yet because the fundamentals, it’s, just, it’s too much of a hype story. You don’t have enough evidence for execution and fundamentals yet. Correct.
[00:26:06] Luke: let me refine that a bit. ’cause actually I’ve done no work on this. I’ve not looked at it, so I know nothing about the company. I came into this conversation thinking they were doing something deeply broken, but it sounds like they’re coming out of that. So actually I don’t really have any substantive concerns and it’s a $3 billion market cap today.
So like I know like meme stocks can get way higher than $3 billion in today’s market. but I wouldn’t wanna bet on like most of the stuff you’ve described sounds like short term stuff. The only stuff that’s important you described was like the change in the business model backing out of this Iyer program.
And yeah, I would wanna see some evidence of that over a couple of quarters. That is truly what they’re doing.
[00:26:49] Kryz: Yeah. And I am adding, onto this that, I posted one video that I think I watched that’s two hours long where I did about, I don’t know, three hours of research into the fundamentals when before I said, okay, here’s my 12 bucks. But I really think, I don’t know how to say this, most, most succinctly in a, maybe this is more portfolio allocation strategy stuff. I am convinced that when you find a strong community on X that has serious investors involved, that is alpha. That was not available in previous generations of investing. The trick here is, and this is to your point, that many such communities on X or anywhere else, the majority of them are momentum, circus, pump and dump stuff.
So I want nothing. I want no part in any of that. And I could name you 50 examples, especially in the crypto world, which is, there’s still bizarre, right? But when I do see legitimate, sophisticated investors.
Getting serious about this kind of company, and its kind of memes getting more and more eyeballs, and the C-suite is now responding and making alternate decisions because of it.
To me, this is classic turnaround in a way that might never have happened this way, like even three years ago. and I’m saying to our listeners, that’s worth, one of those tiny initial foot in the door. let’s, watch this unfold. and that’s what I did. 12 bucks whatever, four shares, whatever it was.
and I’m not, and I’m not, and I’m satisfied. I, I don’t feel guilty of the, the sins of degeneracy in this case.
[00:28:50] Luke: That’s cool. Just get like when you buy stuff like this, have a thesis, be clear about why you’re buying it and. Yeah, I’ve got no problem in buying like weird stuff. And then, you let it prove itself. Give it a little while, see if the me but know the metrics you wanna watch and I would urge you to monitor that.
the, I guess inventories, I don’t know how they account for the properties, but you’re looking for that to come down to like next to nothing. If, it is in inventories, ’cause a company is a tech company, it shouldn’t really have inventory.
[00:29:25] Kryz: Yeah, absolutely. And, you know who you are listening to this, whether you’re on the degenerate side and just buying this because you know everyone’s talking about it or whether, you I don’t know. I said I put three hours of research in it. That was enough for me because I really liked the substance of what I heard.
you’ve, if you only do 15 minutes or 30 minutes and you say, yeah, I now know what this company does, I still think that’s closer to gambling. And you should really go deeper before you put something like this in your portfolio. All right, Badger. That’s enough claw. That’s enough clawing at me.
I feel like maybe I escaped, with my limbs intact. Let’s talk about, legitimately serious company that also has the world’s attention. Palantir, PLTR, one of your core holdings in the Wall Street Wildlife portfolio. What’s going on with this?
[00:30:19] Luke: And I’m gonna get my claws out again, but not into you, into a particular YouTube commenter. So we, if you go back to episodes 90 and 91, and Christophe and I went through every stalk in the King of the Jungle, and we did a 10 minute like bull and bear debate about them all. it’s good stuff.
It’s, and it’s definitely, it’s working on like the socials. We got a whole bunch of videos out of that. They’re performing really well and people seem to love them and they’re getting good value out of them. I said as Ira was recording, the Palant is segment. I know this one is gonna get The dumbest comments and the most hate on, the YouTubes. ’cause I said I own this stock. I’m not saying it’s a shitty company, I own it, but the evaluation is just ridiculous. It makes no sense. And lo and behold, what comment that I get I got this classic comment from a fellow, who claims to have 11,000 Palantir shares.
So that’s a lot of money. That’s Several million dollars in stock allocation. He comments, the whole idea of rule of 40 is to disregard valuation, right? Yeah. Wow. What
the
[00:31:42] Kryz: Are we at a market top badge or what?
[00:31:45] Luke: yeah, for real. that is a, that is like, a market top comment, right? shall I just explain why this is just the peak of dumb asy,
[00:31:55] Kryz: Yes. Please start us off with, yeah, with what is rule of.
[00:31:59] Luke: here is, I can do better that I can show you the actual rule of 40 for Palantir, which today is, ooh, 98. that’s a fricking big number, right? What is Rule of 40? It’s like a shorthand. way of pulling together two different numbers, and actually it’s mostly, you apply it to software as a service companies, which Palantir is one, and it combines growth rate, with free or margin, some kind of margin.
So typically I’ve seen like profit margin operating margin. in this graphic they’re using free cash flow margin. I think that’s a reasonable number to use for Palantir. So you basically, you add together like the margin and the revenue growth rate and you get the rule of 40 and it’s called the rule of 40 because the backend, like the two 2020s and around then when SaaS was like really big, if, those two things added together were more than 40, it was considered a good investment
[00:33:02] Kryz: Yeah. and
Badger. Yeah. Yeah. Badger, one quick comment, just for the, those who are slightly more beginner. the reason this makes sense is because, just imagine one kind of business, like a supermarket. They make a lot of revenue. People are buying stuff, right? so you could have, I don’t know, I don’t know supermarkets, but millions, like a lot of revenue coming in. But the cost of all of that is eats up most of the profit. So supermarkets are not, in general, a good business model in, at least not compared to software as a service when you’re growing fast. So the revenue is growing very quickly, which in supermarkets, again, it doesn’t, it’s mostly steady state, right?
you have a good software product, but when you marry that with how much of that revenue you keep, because in software, you make it once in theory, and you don’t have to keep. Buying more bananas, you’ve already made the product, you keep more and more of the revenue. You could see basically number wise, how strong the software offering is that you’ve made.
The higher the number, the more sort of proof that you’re making a lot of money or growing quickly, and that it’s a product that has some kind of moat and is not being eaten up by competition. So it’s a powerful metric.
[00:34:29] Luke: it’s a good, it’s like a shorthand, but it is a decent shorthand. It’s a guideline as to. Like fast growing profitable companies that you might wanna take a look at and then do some actual due diligence on. So it’s a good guideline. And 98 is like a really, good number. So the rule of 40 for Palantir, like it passes that with flying colors, and this might be like the highest rule of 40 of any company.
It’s certainly up there. In fact, it’s not quite, I’ll show you one that’s better in a minute. but it’s, that’s very high.
[00:35:01] Kryz: Preposterously. Good. It is. It is. It is. It is. It’s, out of the ballpark. Good.
[00:35:08] Luke: But let’s come back to this, guys. This, I’m gonna say, let’s come back to this absolute morons comment. The whole idea of rule
[00:35:14] Kryz: Oh no, the clause.
[00:35:17] Luke: This millionaire moron,
[00:35:18] Kryz: What if you unsubscribe to our channel though? Wait, just for the record, I don’t know your name. you might not be a moron. I’m sure you’re a very decent person and a good human, but the comment has issues. So let just be diplomatic and translate badger into.
[00:35:35] Luke: Yeah. Okay. Yeah. But this guy’s got like 400, no, $4 million in Palantir stock, right? He claims to have 11,000 shares. oh, no, sorry, I got that wrong. I got that wrong. This, it’s a stock price of $156, okay. $1.8 million, something like that. So anyway, millionaire, more on a comment. the, let’s come back to the comment again.
The whole idea of all of 40 is to disregard a valuation. No, it is not. The whole idea of rule of 40 is to help you, shorthand, identify fast growing, profitable companies. If let’s just take it to an extreme. ’cause when you go to the extremes, like you see this, you see what’s stupid and what makes sense, right?
So today, Palantir is a $370 billion company and it has a rule of 40 of 98, right? great. Now what if Palantir was like a $200 trillion company, right? The rule of 40 is still 98 valuation is important, right? And I think we’re actually an extreme of valuation right now. Not with x hundred trillion dollars.
We’re in extreme valuation with like $300 billion because that’s a lot of, that’s many, years of growth already priced into the stock. And so they have to, maintain that profitability, which they will ’cause the, business model isn’t gonna get less profitable, but they have to continue to grow at an incredible rate.
For a decade plus for that valuation to make sense. And so valuation is important and if you’ve got, I’ve got 2% of my portfolio in Palantir, so if it, I mean it’s not gonna go to zero, but when growth stocks turn the, most egregiously valued stuff, they’re the ones that are gonna take a hit. So my 2% allocation might go down to a 1% allocation and then I’ll, I’ll boohoo a little bit ’cause I lost some money, but it certainly ain’t gonna wipe me out.
if you’ve got the large majority of your investment portfolio in a company like this, it is gonna fricking hurt. you do your own due diligence, manage your own portfolio, but at some point when the money gets big as it is for this guy, presumably you’ve gotta start applying some portfolio management diligence and a bit of margin of safety and.
Diversifying into other stocks. we’ll talk about that a bit more when we answer Patreon Hughes question at the back of today’s episode. But yeah, maybe, enough clawing actually know one, just one more
[00:38:14] Kryz: You one more. Scratch
get, get one more.
in your badge.
[00:38:17] Luke: Let’s just look at how it, how out of kilter. Palantir is so here’s a pretty picture. It’s pretty small, but if you can read this, I put like an arrow to Palantir. this is rule of 40 along the X axis and the Y axis is like valuation. Enterprise value is the next 12 months revenue. So Palantir is way outlier from everything else. There is a stock that has a higher rule of 40 app, a PP, I dunno much about them.
Is that app loving?
[00:38:49] Kryz: Yes, it is.
[00:38:51] Luke: It is, yeah. Okay. Another Mimi stock, but I’ve, I’m not prepared about that at all. I’ve known nothing about it, but has a higher rule of 40 and it’s valued a much more reasonable, like what, 27, 28 times revenue. But Palant is up there at like nearly 80 times revenue, with its 98 rule of 40.
there’s a reason why, why stocks might justify their valuation. And highly valued stuff like CloudFare. And Is that, who’s f is that Figma or they got acquired, right? Yeah, it’s Figma. Okay. Maybe the acquisition hasn’t completed or the data’s out date. there might be a reason why those companies enjoy their 30 times revenue.
It’s very hard to make an argument for nearly 80 times revenue of Palantir. So yeah, there we go.
[00:39:44] Kryz: All right, badge I got. I got a little bit of nuance here. I think what you said is, absolutely correct. This commentator is wrong because valuations always matter and it’s when, we get to the arrogance stage, stocks only go up. This is one of those data points, right? People just fool the fool themselves and it’s gonna be painful.
However, here’s the, trickier part I have learned. We, I’m sure together have learned the same lesson, that when you do find a generational company that’s truly excellent, it will always be expensive. So people make the mistake. Often. We’ve seen this millions of times, I’ve made it myself plenty.
Where you think to yourself, oh my God, it’s so expensive. I’m gonna wait till it gets cheaper. And it never does because lo and behold, it’s an excellent company. So the market knows this and it’s always going to pay more than, the laggards. That is not the same as ignoring valuation completely.
There has to, I don’t care if you discover a diamond mind in your backyard or a banana plantation that you know grows a new banana every single day, there’s a price at which it’s too much to pay for all those bananas and diamonds,
[00:41:13] Luke: But.
[00:41:14] Kryz: right? That we could all logistically agree that’s the case. If somebody says, your bananas, I’m, they’re worth $80 trillion today.
I don’t care how fast it’s growing, how delicious the bananas are, the correct thing is to sell because that’s an insane valuation. So this commentator is confusing. he’s confusing. Valuations don’t matter with good companies are always expensive and. it’s gonna go forever, and all of that. So thanks for bringing this to our attention.
[00:41:54] Luke: You got it. You got it. And I’m gonna do this guy a favor ’cause he helped with his comment. He prompted I can ask you a good discussion and I know we took the piss ly. I did. But, I think some learning here, if you open your ears. So I’m gonna post a link to this episode back to him and say next week when this goes out, and say, do yourself a favor and check it out.
And then let’s see if he comes back to us with any rebuttal. And if he wants to tell me I’m an idiot again. Cool, whatever. but let’s see what we get from this.
[00:42:26] Kryz: Yeah, although, you know what, one more, one more thing since we’re going to continue this. he said something like, in the comment, that he bought that at this price and this price, and lo and behold, it keeps going up, That is a kind of, I think, cognitive error in a sense because it’s the resulting thing we talk about in poker, right?
Just because you won the hand doesn’t mean your process was correct. Now, sure. When you’re in the market, it’s all about money and I could make the argument like with open that as long as I, I sell higher than when I bought. I don’t care that it was a meme stock or I don’t, there is that angle of it. but, by his logic, saying that it’s more likely to get to 250, then 1 75, he’s, it, the dis reality distortion field comes online after a certain point,
and I think he’s in it right now. And we hope if we’re doing our legitimate job of helping people, that he could at least hear. why there’s a problem with what he’s doing and potentially, if not outright cell Palantir trim. And that’s what you did, right? or maybe he has 20 yachts and it doesn’t, it really, he’s, eating Palantir’s stock shares for lunch. Maybe he doesn’t need to, but that’s a whole nother thing.
[00:43:56] Luke: Yeah, that’s fair. Alright, anyway, I’ve kept you anonymous, but you are named on the YouTubes. I’ll post back to you, let us know what you think. Let, okay, let’s talk about a company that is not controversial and will get no clause. ’cause I just bought some stock in it myself and it’s one you are a big fan of.
Tell us all about Iris Energy.
[00:44:17] Kryz: All right, I’m not gonna go too long into, Iran Energy. They used to be called Iris. They changed, their name. I check out our shorts on YouTube. I give a high level overview, two minutes. Yeah, go, research that in previous episode. I wanna start, yeah, let me, okay.
Let me start with, by one explaining a comment I made on our Patreon page, which I did tongue in cheek. And I was waiting for this episode to, give more substance behind it on Patreon. I linked the earnings call results. I said they were sensational, and I linked the clip to the famous, movie, I even forget what that movie is called, where Tom Hanks is the captain and the pirates, take the boat over and it’s that mish clip of the guy saying, look at me.
Look at me. I am the captain now. It’s a great, it’s a great clip, but I was, I, was actually, I had a serious point to make. here’s why. I think shares were bid up so massively after the earnings call up to now. One of the kind of most juicy catalysts that was lurking in the, sort of shadows was that iron had, because they had built out this massive power infrastructure land and electricity and permitting and building the data centers that we were waiting for one of these major AI players. Is it gonna be Google?
Is it gonna be meta? Is it gonna be open ai? Is it gonna be who? Whomever. We’re just waiting for one of these guys, these hyperscalers to say, okay, iron. We pick you, we’re gonna lock ourselves into this five, 10 year deal and we’re gonna pay you crazy amounts of money per mega wat hour that you could provide us.
And then based on that thesis, stock will Moon. That’s what I was operating on. Like most people were. Mostly, right. But on this earnings call, we if you could read the tea leaves, we heard something a little different. Iron basically came out and said, look, the supply relative to demand is so misaligned that we are at the forefront of this, of building this stuff because we thought of it years earlier.
So everybody else is one playing catch up and these hyperscalers are not waiting around. That’s one point like we are in the poll position ’cause we were first and we’re good and we’re doing this. That’s one. But two, they partnered with Nvidia. They’re now, when there’s some conference coming up, sponsors get their logos posted in terms of how tightly knit they are.
Iron is like second level down from whatever the first sponsor is. So Iron is Iron and Nvidia are now preferred partners. and basically NVIDIA’s is, saying publicly these go to these, you wanna work with us, you go to these guys. we’re a team. That’s Hint two, three, and this is going back to the slide. Aaron is now saying, Luke that, wait a second. We’ve been buying all these thousands and thousands of GPUs successfully. We financed all of this. And yes, we could co-locate and, basically play landlord to some hyperscaler. At a rate that obviously makes sense for them because why would they do business with us if it didn’t, or drum roll. We could become a hyperscaler ourselves because, hold on a second, we own all this stuff. they lease the GPA, but, we have, we already have grown the stack ourselves, so why can’t we become the next Google AWS or Azure or something? And this is not a done deal yet. I’m not saying this is there’s, it’s complicated.
It’s actually complicated ’cause there’s a bunch of moving parts. But the reason that this is a huge honking deal is because Iron, now going back to that, we’re in the, we’re the captains now. They’re ba, they have all the data and they could either do some part co-location, rent out some. Or they could go, it alone, add an appropriate time when the market dynamics shift, and I’m gonna use the Netflix an analogy just in a weird way.
I think, one of the reasons Netflix has become this, massively, huge company isn’t just that they invented streaming, but if they had the data, they had the data and they knew which shows to pay for and which shows not to pay for.
That’s what iron is saying publicly. Now we know which way the market’s gonna go.
We have Bitcoin basically helping us fund all of this. and some, so, some people in this moment badge are saying if this kind of plays out the way the tea leaves are pointing. The $26, whatever, $7 billion market cap we’re at now, or 5 billion, I forgot what it was after the big jump, maybe you could check.
right now where we’re at with the markets are closed, but whatever, four to 7 billion, that’s still teeny tiny potatoes. If in fact they leverage, this playbook. not without risk because there’s higher CapEx expenses, there’s depreciation of all the, semi chips and so forth. But we’re looking at a paradigm shift, in the face, the possibility of one, and these are through and through 10 x opportunities, depending on execution and how AI plays out.
But the one thing that delights me about this company, and I’ve listened to their earnings call now for two years, just about these guys know how to execute. And so that’s another huge plus mark. these guys are just, they’ve been doing this for a long time. They have the network connections.
They, just play the game at a higher level than anybody else, which kind of got me into the door way back in, late 23. I,
[00:51:08] Luke: Yeah, that’s cool. And I’ve come on board as a shareholder now. I hadn’t seen that comment. I think it’s a bit. It’s a bit early to say oh, we could, we are gonna be the next, hyperscaler, like that term has a particular meaning.
[00:51:25] Kryz: I wanna clarify. I do wanna clarify. They didn’t say we’re going to be, this is where, the nuance is. They’re saying, maybe let me be as accurate as I can between co-location and becoming a pure, hyper, cloud. There’s a bunch of, call it degrees in the middle. Like percentage points, if you will, and Iron is saying, stop thinking about us as a binary.
we’re Bitcoin. Certainly, we’re no longer just a Bitcoin miner and stop thinking of us as just waiting around for co-location deal. We ourselves have the capacity to do some of this stuff ourselves and the extent to which we’ll do it depends on a bunch of stuff, but it’s right there in plain sight, so don’t be surprised.
Market when,
[00:52:18] Luke: there’s one. There’s one. Okay. So there’s one thing I saw in my due diligence, which might. Not undermine, but make that trajectory a bit more difficult. but as you say, they have the data, and I’m sure they’re gonna navigate this successfully, but like the business model is founded on building data centers in locations where the cost of energy is really cheap.
that might be by like, a waterfall and a dam, or an area with like incredibly windy, various like nat ways of harnessing natural resources to generate cheap power. And then they use that cheap power to profitably mine crypto, which today is Bitcoin, but they can mine any crypto in the future.
They’re basically turning wind and sunlight into dollars and then, they’re turning those dollars into buying even more and more hardware and then they start selling that hardware to end customers. And I think they’re building data centers in other locations as well, but that like base part of the model is founded on the cost arbitrage between like buying or generating the power and using the power to create money with crypto. So they’re always
[00:53:39] Kryz: In crypto. They’re financed with other stuff too. But
[00:53:42] Luke: Sure. yeah. because all that means is typically their data centers on average will be in more remote locations rather than a data center in New York City where power costs a lot of money and at some point, like latency is important for certain kinds of
customer need.
Yeah, So I would imagine, again, I don’t know for sure, I would imagine that Ires business model is really effective if your customer doesn’t need super low latency, like instantaneous response. two, say 10 milliseconds.
[00:54:21] Kryz: Patrick May. Yes, may I. I’m glad you raised this, but you have a very common, misunderstanding here. So this is great that you
brought it up. logically what you said makes sense. However, this is the genius. This, I, don’t know if Genius is over, stating the case, but these guys picked Texas specifically years ago for this very reason.
There’s a pipeline, I don’t know, I’m not an engineer so I can’t explain it beyond, that there’s Dallas, or they call it the Dallas area in Texas is connected to this triangle, to the east of Dallas that’s connected by, I don’t know, call it a super fast, data pipeline so that the places that they invested in Texas, which you would think had high latency, meaning long delays, actually has really short latency.
So they have already preemptively solved this problem. And counterintuitively being in Bumble, fuck Texas, is much better than being in some other area. And that’s why they chose it. So they’re, yes, they, solved this problem already.
[00:55:41] Luke: I haven’t. Okay. I hear what you’re saying. You’re right. But again, my caveat applies like for certain kinds of customer. Okay, let’s look up like CloudFlare, like ticker net. they’re if, there’s like the who, the hyperscalers are really like Amazon, Google, and, Azure,
yeah, Microsoft, Azure, they’re like the hyperscalers and I guess they’re considered the hyperscalers.
’cause if you have a business and you’re tiny, you don’t have much money, but you wanna have like a web presence that’s really responsive everywhere in the world. Whether you’re in Bumble, fuck Texas, or you’re in like New York or London or Hong Kong or Singapore. Where you engage with Azure, GCP or, what’s Amazon’s one’s called,
[00:56:30] Kryz: aws.
[00:56:31] Luke: AWS.
You engage with those because they will deploy the, your staff in such a way that it’s like super low latency, very responsive everywhere. And CloudFlare were positioned as maybe like the fourth hyperscaler and they’re a much smaller company, like $70 billion market cap compared to like trillions of dollars.
But even CloudFlare have apparently over 330 cities where they have infrastructure like data centers. So they are like right there where the traffic is coming from. And so what you say is right, like they might be on like, one of the high capacity highways in Texas and they might be low latency for customers who are, I dunno, geographically in North America.
But if you are, if you expect to have customers in Hong Kong, let’s say, or London, you need a hyperscaler that has. Can deploy your staff in all of those locations, not just in certain ones. That’s it’s a nuance. It’s a nuance, and it won’t impact everybody. Like I’m sure with the data and the, like the intelligence.
They will court the customers that make sense for them, but they ain’t a hyperscaler.
[00:57:41] Kryz: Great. great distinction. I know, CloudFlare very well where I used to, it was my first recommendation back in the seven investing days. And what you said was actually one of the main ideas. They’re just set up all over the place geographically for latency issues. I think, I can, let me add this corrective regarding iron.
This is maybe where I misspoke, or maybe my understanding is not quite there yet. I believe Texas was named through the Stargate Initiative like that. the ai, build out or infrastructure is going directly to Texas that I think open AI is setting up shop there. So there’s some magic Bermuda Triangle area.
In Texas specifically, that’s going specifically to AI stuff. So it might not, So that might be the difference. Like that there’s the, call it global thing that CloudFlare is doing versus being fast enough for future ai, project and iron is saying we’re all in on the ai. And maybe that’s the misnomer.
Maybe that’s not technically a, hyperscaler. Maybe it’s some new variety of it. But the point, the overall point, is that latency matters. Iron deliberately chose Texas for a reason and they have the potential to be one of these big boys, doing something beyond renting out their space.
[00:59:15] Luke: Cool. That’s good. I like it. I do really like the company. You turned me onto it when you told me about it for like the 10th time. I should have listened to you the first time. and, I’m also now a shareholder. there’s one other thing you put in our show notes that I don’t understand and I’m keen to understand it is your, what lessons can we spot?
Can you break that one down for us?
[00:59:35] Kryz: Yeah. I actually intend this to be an open question because, one of the things we do over our Patreon, is every time we make a trade, I put in my spreadsheet and then I notify our, members. And so when I look back at all my trades, the iron, you could see, that.
My goodness, there, it’s been like, what, 2020 trades of iron and eyeballing it. I sold, I, my first buy is, for the King of the jungle purposes, February 20th. 2024, where I bought at $6 and 84 cents. And then you could see in the next column, I sold that June 7th for $11, getting a 60% return on those shares.
And basically, right now, the current status is yeah, looks half and half. I, sold the initial batches, but then I started rebuying again, December 2nd, 2004, all weight into April 4th is the magic one. where I bought five shares for at $5 27 cents. That’s at 400% return now. So I was looking at this and I was wondering how, what lessons, are there, here?
would it have been better to have bought them and never sold them? Or, was there something that was smart in here? or is there something that’s an obvious mistake now? My spreadsheet shows that had I kept those initial shares and never sold them, that I would have, for example, the 6 84, those, that batch of, those first shares, I would’ve had I missed out on $154 had I not sold them.
So the missed revenues quite significant, right? So that’s, a case for if you buy a company, just stick with it. But as some of our Patreons pointed out, a couple of people said, but obviously I did something with that money. So one, I netted profit, right? I made, I wasn’t selling at a loss. So anytime you make a profit in the market, you can’t be too hard on yourself.
But I real allocated those. Some went to eo some, and obviously that went up a bunch of percent a STS. So it’s hard to say I can’t, I don’t, I can’t remember exactly where I reallocated. But, another point that was important for me to mention, this is an example of a company that I’ve been now playing with.
You could say for close to two years, something happens. Badge. Tell me if I’m wrong. I know you don’t trade as, as often as I do, but when, you develop a relationship with a company over time because you follow the story and you have a track record, you, I call it, you get more sensitive to that company.
You, you learn it’s peaks and valleys a little more. You know what you’re listening for on earnings calls. You know when there’s like maybe a waiting period coming up and holistically, I look at this and I say, sure, I could have bought and never sold, and maybe I would have more money. net, but I also. This is evidence that I learned more and more about this company over time and was time to continue doubling down on it as the price share kept going down, I had more and more confidence to do that because of this ongoing relationship. That is hard. One, you can’t do that overnight. and some of it might, have cost me, but it’s, it was, easier for me to rebuild the position after selling it is maybe another point. now my decision really is do I add more? I think, at the highest price point it’s ever been, or do I have enough? and for new investors who don’t yet own this, your big question is, do you have a cognitive bias that says, oh, monkey bought at $5 27 and 6 26, but now it’s already $26.
Obviously the boat has sailed, so I missed it. Wow. Wow. I should have paid attention to him. I think that’s the wrong lesson. If it’s, if you do your research and you listen to the calls and you see what I see five years from now, when it’s whatever, hopefully five x, 10 x, you’ll say, yeah, 26 was a bargain.
So establishing this kind of track record that you could look at, you could post to people, you could get feedback on, you could ask an open question, this is priceless in my humble opinion.
[01:04:39] Luke: Yeah, that’s cool. And like I bought, $20, 20 cents. I bought up in my Real money portfolio and like direction to the same in the King of Jungle. no, I didn’t buy in King of Jungle ’cause I wanted to respect the fact that this is yours and I don’t wanna straighten your boots. yeah, it’s like another version of price anchoring, right?
That cognitive bias we, we get hooked on. We anchor to either the price we paid or the price that like it’s recently traded at, and then we start making judgements based on that. But prices irrelevant, doesn’t matter. Like it obviously matters in terms of valuation. The thing that matters is like, where is the company on its trajectory?
How is it executing? What do you think it’s gonna do in the future? And I thought when I looked at it like a couple of weeks ago at $20, I thought, yeah, Christoph’s, right? there’s a good thesis here. This company has a lot of potential. I’m not gonna trade in and out of it. I’m just gonna, I took a, I can’t remember, like a 1% position.
I’m just gonna sit on that now for six months. And if I like what they’re doing and they’re continuing to execute, then I might add some more money at, maybe 50 or $60. I don’t care, as long as it’s executing and I still believe in the thesis, I don’t care what you paid for it, I don’t care what, how it traded in the past, I, you should only care about like the valuation today on the date where you make your decision to buy it, sell it, or continue to hold it.
[01:06:11] Kryz: I do wanna openly say this is leaning a little towards the getting cute column because, I do use some crayons in my charts and, that’s, that has obvious pros and cons. But I do want to, in this case, I think I played the game and I won. And I just wanna point out one data point.
as an example. if you look and you see you, you’ll see that, for example, I bought, on March 15th, I bought five shares at $4 59 cents. And then I sold July 2nd at 1349. That was close to 200% profit, right?
[01:06:49] Luke: Yeah.
[01:06:50] Kryz: I sold it 1349, July 2nd. And then notice that I bought back the ones that are open now, December 2nd, 2024.
So that’s like what, five months later. At a price that was just a little bit lower than when I sold it. So luck and, the blueboard of happiness pooped in my eye, whatever. But in, in this particular example, I would color it this way because, and actually I, I remember now when I sold it, it’s because I think that around that earnings call, we were more in the, okay, we’re building this out and it’s gonna take a little bit of time.
And yes, we have people interested. And to me I remember thinking, okay, this is, like six months from now thing. So I was more confident in saying, okay, I, have better place for the money. And I got lucky with the timing enough to get back in when it was still cheap. But there’s the record.
[01:07:54] Luke: All right. Good stuff. I like it. Thanks for bringing this one to our attention.
okay. Shall we tackle a classic question? I know this has been a long conversation, but I really want to touch this topic this week because, we started a program on our Patreon a while ago where we said, Hey, if you guys have got any questions for us, type them in. That’s cool. And we do that all the time.
We answer questions from the Patreon, but if you are up to it, leave us like an audio message or leave us a video message. And we got our first video message, from our new Patreon, Hugh. And I would really like to get my teeth into Hugh’s question ’cause I think it’s a good one that we talk about in the past.
And I think we should just refresh our position on this one.
[01:08:39] Hugh: Hello, Badra Monkey. My name’s Hugh and I’d love some advice. just taking the plunge to invest my own pension. And honestly, I’m finding it quite daunting, just deciding, which 30 or so stocks to invest in and how much, of the portfolio to invest in each one. Any advice, on starting out as a long-term investor would be much appreciated.
Thank you.
[01:09:10] Luke: So let me summarize Q’s question. Basically he’s investing his own pension. He’s finding it a bit daunting to decide which of this 30 or so stocks he says he wants to invest in and how much to put in each one.
So basically like this is, how do I start out as a long-term investor? That’s his question.
[01:09:30] Kryz: Good question. It’s the perennial question we always go back to. first of all, thanks Hugh for joining us. It’s a jolly crew. the first thing that jumps out at me, and there’s so many things we need to cover, but the first fundamental point is it seems to me you wanna just open. You wanna sleep at night?
It’s the sleep well at night. quality, especially when you’re a beginner. ’cause it can get, and it will get scary. I would say psychologically, allocate some amount of money into a port investing portfolio that should, that go to zero. Theoretically, you wouldn’t like it, you wouldn’t be happy, but you’re not gonna be out on the street, Hugh. It’s a psychological, it’s, like the first steps where you wanna, you, the trades you make, like in poker, good poker players, the aggressive ones, the ones that you’re up against a real player. They are willing to risk their whole stack when it becomes necessary because they know they’re not, playing from anxiety.
They’re not, gonna be bullied. And I think that’s a kind of, important first step. Don’t bet at all. Go slow. How much are you willing to risk? And you’d be okay with losing and start there.
[01:11:08] Luke: Yeah, and you’re leaning there on two of our 10 laws of the jungle. know your investment comfort zone and protect your essentials. And you’re right, if you are. I think Hugh’s question is actually, it’s got an interesting nuance because if I read between the lines on Hugh’s question, he’s actually investing his pension.
like in the UK you might have say a workplace pension. I used to have one with my employer, HSBC, and they manage it on my behalf and I had some really limited choices as to what I could put that in. And then when I left the bank, when I quit, I was able to withdraw that, put it into what, in the uk, A sip, self invested personal pension.
And I just managed it like another brokerage accounts. It’s like one of many accounts I now manage and I have individual stocks in it. So I think probably Hugh is, I would guess doing something somewhat similar. And if you are a newer investor, like newer to picking stocks, you probably don’t wanna. dive in with, if it’s like your pension, that’s like a, that’s probably important money and it’s a lot of money.
and so you probably don’t wanna dive in and throw that into, like wild companies that you just, and you haven’t really learned your investing lessons yet. So with someone like Hugh in this situation, if he’s new to analyzing companies and he’s new to building, like the emotional resilience and the skillset he probably wants to keep, if he’s self-managing his pension now he probably still wants to keep the large majority of it in similar things that he used to own, big passive index trackers like, VU and so VOO and vw, rl, like some big track.
The s and p track, like the FSE track, the all world, have the majority of your money in those and maybe have an allocation, which is essentially if you’re really new at this, it’s like your kind of practice money. I’m gonna learn some real lessons. I’m gonna have some real skin in the game.
let’s say you’ve got, I dunno, a half million dollar portfolio here. It’s your pension. It might be like big numbers, maybe 400,000 of that is in like this. Not so much safe stuff, but there it’s in like market tracking easy, like stuff that, like the kind of things that the pension’s probably always been in.
And then, and maybe you got some bonds and some fixed income, follow up. We’re not financial advisors, do your D due diligence. Do like standard stuff, but maybe you take an allocation of that 50 grand, a hundred grand or whatever it is, like a percentage. And that’s your learning money where you’re then gonna pick a bunch of stocks.
I dunno about 30, we’ll come onto that in a sec. But pick like a number of companies and we’ll talk in a minute about how you pick those companies and put. say you had 15 companies and you had $150,000, we’ll put $10,000 in each of those 15 and then you’re gonna start learning some lessons like right away.
’cause some will go up and some will go down and you’ll feel some exuberance and you’ll feel some pain. And then you start improving your process over ’em a course of years and you become more confident. maybe you start to move some more of that like passive money into your actively managed personal money.
[01:14:27] Kryz: All right. Badge some more nuance there.
I wanna introduce the concept of, cash as a position. So I would add Hugh, Let, I’m gonna give a real number. It’s easier for me to talk about. Let’s imagine $10,000 is your, call it year one. I’m in year one. I’m learning how to do this and I’m going to use $10,000 with which to learn.
Very similar to what we did with King of the Jungle, right? Except we started with a thousand, right? But now you have $10,000, right? So as Badger said, you got your index funds. You are familiar with those. Not much thinking involved there, but let’s say you take 25% of the 10,000, so $2,500 and you put that in cash, right?
Now, you think of cash. Hopefully it’s also gaining some interest if you pick the right broker. so that cash is actually also making you some money, or at least keeping up with inflation. And now, before you go ahead and buy any companies. since you listen to our show, I would encourage you to look at Monkey’s portfolio, look at Badger’s portfolio. Maybe start with the top allocation, because obviously that’s where we’re, we have most conviction, right? And then before you buy anything, you do your homework and you spend I don’t know, I hope it’s not overwhelming, but you spend four years studying eos and you spend, I’m sorry, four hours studying eos.
I spent four years studying eos. You, don’t need to spend four, four years. Spend four, four hours studying eos. Spend four hours studying Rocket Lab. Learn how to do that, right? There’s lots of questions about how you do that, but go to their investment presentations and dig around, right? And then if you like the story, and you feel you could explain it to somebody, then out of the $2,500, I would recommend you make something like a quarter size purchase.
That’s your foot in the door. So I don’t know, that might be whatever, 10 shares of eos, 10 shares of Rocket Lab. And then you are in, right? You’re already in. If that all blows up, you’ve lost basically nothing. But you’ve taken the most important first step.
[01:16:59] Luke: And let me like, that was all good. I totally support all of that. I want to point at one or two extra things that are really important. Like you can go and listen to other podcasts and read other analysts and look at like the Motley Fool and seven investing and services like this. But the most value you will get is from going to primary sources.
It’s easy to do these days. Go to like just literally Google, say it’s Rocket Lab that you picked that one. Or eos just literally Google Rocket Lab ir like investor relations top of the fold. Like first couple of results you will see Rocket Lab’s own website, their own investor relations page. Virtually every company.
I’ve never found one that doesn’t have this stuff nice and easily laid out easily to access I, if you’re really getting into it, download like the actual financial reports. But if you wanna keep it real simple, they’ll probably have a 10, 20, 30 page like PowerPoint, like PDF deck. Just read the deck, be a bear in mind.
You’re reading like their own. It’s gotta be factual. ’cause there’s various laws around regulatory laws around what they can say. but you’re reading like their optimistic take. have that filter in your head but understand the company that way. You’ll see probably a bunch of pretty pictures or really you give you a good essence of who they are and what they do.
And then, when you want to get a bit more advanced, listen to the earnings call. If you go to an app quarter Q-U-A-R-T-R, it’s fantastic. It’s free. They’ve got like the audio of the earnings call i’d, recommend listen to it ’cause you get some human nuance from just hearing the voices.
Try and understand the analyst questions and why they ask that question. even if the company gives a flim flam answer, there’s often a reason why the analyst was asking that particular line of probing questions that might give you like a hook to do some of more of your own research on.
And then if you wanna get more advanced still. Start looking at really at the financials, by which I mean, not just like the Yahoo Finance page. Go and look at the income statement, the balance sheet, the cashflow statement. If you go to a tool like fiscal, no, sorry. Yeah, no. They are fiscal do ai.
They used be fin chat, go to fiscal, do ai. Like the free tier is very, good. And if you are looking at a small number of companies, you’ve got some great data there. Go check out fiscal, do AI sign up. Or if you sign up at fiscal AI slash wildlife, you’ll get like a handsome discount. But the free tier is good enough to do this, like initial research.
They’ve got all of the financial statements there, they’ve got a ton of other data there. And just start understanding what some of those numbers mean. And if you’ve got one you don’t understand, like ping us on the YouTubes or ping us on the Patreons and we’ll try and help you figure it out.
[01:19:49] Kryz: Yes. Badger hearing you explain that and trying to put myself in the position of a beginner, which is hard for us. But, I still, I, think there’s a one major I could see a ditch, a pitfall where to us it sounds like no problem. Okay. I look at the investor deck and I look at financials, and we’ve been doing this so long, it’s like nothing scary, but to a beginner.
It could begin to feel overwhelming, especially the financial statements because all companies, it looks different and they manipulate things. Gap non, there’s a bunch of stuff you, I could be like, okay, fuck this. this is, I’m way over my head. I think before you get there, Hugh and everybody else, and beginner path, start more Peter Lynchian style and start by doing what I said earlier.
look at our King of the jungle portfolios because we’ve curated what we think are the best companies, that we know of. And we do this a lot. I’m not saying that’s the only companies, but between badger and monkey, you have very different kinds of companies. AF and then do your, call it, let’s make it simple.
Do one hour of research per company, right? And now to not make you feel overwhelmed, do this for only 10. So let’s say to make it easy, pick five monkey companies and pick five badger companies. So now you have 10 companies, right? Here’s the important point. As you do this research and you begin to understand, start your own spreadsheet maybe, and just rank them in terms of what you think.
Just completely like, like holistically. Which company do you, did you really enjoy learning about? Have that rank, make it be clear. Let’s say it’s rocket lab, you’re like, man, I love rockets, cool EOS batteries, who gives a fuck about batteries? no, ah, But you’ll have a good sense of, pecking order.
That might be enough to then allocate appropriately, as long as it’s not a lot of money based on the initial understanding. Then as time goes on. And, earnings calls come out and more info, then you could start making adjustments. But that’s a fantastic place to start, I think. And one more, one more point badge, and I’ll let you take over on this. I do think because of information overload, it is very easy to pick too many companies
and too much information, and before you know it, you’ve just made another index for yourself.
This step is intended to really get you selecting, I call it 10 because that’s a nice round number and at the beginning that’s plenty to keep you busy.
[01:22:56] Luke: Yeah, I agree. Like 30 is probably too many, even in a mature portfolio. 10 is maybe a bit low end. some people have concentrated portfolios of four or five stocks. That’s outside my comfort zone. I think generally accepted wisdom is if you have say, 12 to 15 stocks, and if they’re broadly diversified, then you’ve, neutralized a lot of that, like exposure risk, like you have enough diversification and every additional stock probably doesn’t materially improve your diversification.
Obviously, if you own like 15 companies and they all do exactly the same thing, you’ve got no diversification at all. but I love that weigh in. Actually, maybe we’ve never said that so clearly. So kudos to you, Christophe, like literally an hour. Times 10 companies and pick like the handful, the three or the four that you just like the story of the most, like actually enjoying researching a company is really beneficial.
It might sound dumb, like who cares? is it, who cares if some, if I enjoy this or not? Is it a good business? But if you enjoy reading about the company, you’re gonna probably enjoy doing like more deeper research in the future. So you’re gonna learn more about that company. And if you become like a bit more of an investing geek, the algorithms, the YouTubes will start pushing more content to you.
’cause you just naturally reading about that stuff. And if you’re out, say it’s a, company operates in an area where you have either like expertise or a hobby or experience where it’s just like a thing you’re passionate about. I know fricking like sailing or something. And maybe you’ve found like some, brand that makes yachts or producers like.
Clothing or does like ocean mapping or something, right? It’s an industry. Then you’ll be reading about because of your hobby around sailing and you might see this company’s name pop up for good or for bad, just in the course of living your normal date. So you’re getting like free due diligence.
’cause it happened to be something you liked,
[01:25:03] Kryz: You know what, as you were saying that I could hear some called professional level investors being like, ah, these guys are just, just buy because you like the story. that’s some amateur shit. I think that’s a mistake.
I mean for, okay, if you’re a professional, obviously but you are working
[01:25:25] Luke: You are right. There’s a nuance here.
[01:25:26] Kryz: right?
Yeah. You are working for a bank. You, it’s your job to, to understand every tiny detail on every statement. But I have to reiterate that all the best investments in my career had I not sold them all, were born because I loved and cared about the company on the story level. I know this is, I’ve beat this horse to death.
But if we’re talking about Apple and Netflix and Tesla and Nvidia and it like these are Chipotle, oh, it’s weird, right? But all I had to do was like the story, continue to make sure it’s playing out the way I thought. And had I not sold because I got too smart for my own britches, then I would have way more money than I do now.
So it does not actually have to be more complicated if you are a long-term investor. That’s the weird thing about this. I’m not saying that’s the only way, but, that’s, that really is sometimes enough and then you add the nuances and a lot
[01:26:37] Luke: Yeah.
[01:26:38] Kryz: stuff.
[01:26:39] Luke: And the, you cherry picked your winners there, but let’s use an example of a loser, and I’ll give one of mine to explain like why this works. Like what we’re describing is just literally how you get started. If you’ve got, you don’t know how to value a company and you’re not looking at like primary sources.
You’re just buying what the latest stock recommendation service told you to buy. buy the stuff you like because then you will. You’ll enjoy studying those companies and let’s say eventually over the course of maybe you do 10 times, one hour today, and then next month you do like another 10 stocks, another 10 hours.
At some point you’ve got like 15 or 20 or maybe 30 stocks in your portfolio. You have to keep studying those companies and if the ones you enjoy are the ones you’re gonna, it won’t feel like work. It will feel like, interesting to study those companies and you’ll watch them over the course of a couple of quarters and some will perform well and some won’t.
But you will start asking the right questions that make you a better investor. You’d be like, oh, why? Why is this stock down and you’ve got like a rabbit hole to go down and that’s where you start. Then you’ve got like an entry point to doing like the real job as an investor actually studying companies.
But you’ve given yourself like an easy way to get going. If I, lean on one of my losers in the past, like going into the pandemic, I, was it pandemic, it rated Beyond Meat. Like I really liked Beyond Meat as a brand. I’m like, oh, I, it’s like these are tasty burgers. I bought stock in the company. and then because I enjoyed researching the company, ’cause I’m like, it’s helping the planet and it’s mitigating like animal slaughter and all these horrible things.
like I, I like this investment. And then because I was researching it, I started to notice, oh, like hell, like in the grocery store, like Beyond Meat is here, but they’ve got 50 competitors all selling the same product. Like this plant-based like aisle is getting bigger and bigger in my local grocery store.
So I started asking like the sensible question, is their product really differentiated? And then I eat burgers from other. Manufacturers. I’m like, these are really the same thing. If I, literally did like a blind tasting with three different kinds of burger. and I could pick out the Beyond Meat one ’cause I knew it, but I’m like, it’s, maybe it’s better, but this is like a matter of taste.
It’s not that much better. So I got out of my position and like now Beyond Meat, I think they’ve actually just become insolvent. Like they’re bankrupt. Like they’re, they’ve been in big trouble for a year, well over a year. you know that, hopefully, by giving an example of a loser, it’s the value is in doing the ongoing work.
[01:29:23] Kryz: Yeah, absolutely. Lululemon comes to mind actually in this kind of, topic because that in, to, to your point about cherry picking, I could see somebody loving Lululemon, but if you invest it at the top. You’re quite underwater now, but from an investing standpoint, forces you to ask the right questions.
So it’s not that it’s so easy and you’ll only have winners, but there’s lots of examples where I think this is the correct entry for most beginners. and over the long term, you’re likely to, make a lot of money, regardless of your financial statement, literacy or not, but,
[01:30:04] Luke: Yeah, but those skills will come in time. As you study companies, each time you look at it, you’ll learn a little bit more. You’ll figure out the stuff like, I don’t really understand what this, number means, or this company’s saying. And that’s like a hook to do more research and improve your, not just your understanding of that company, but your skillset as an investor, which will then benefit you when you look at every company.
[01:30:26] Kryz: Yeah. All right. Badge. So I think there’s a lot more to say about this. Maybe we’ll do a part two because, this is part of, this is what, this is our bread and butter, helping people just get started. So more things, a lot more things to say, Hugh, but I hope that’s a good start. However, badge, you do have a recommendation for a broker, correct.
[01:30:47] Luke: that was a big episode and I’ve, yeah, we’ll keep coming back to that Hugh question ’cause it is like the classic question and if there’s deeper questions or you think we, didn’t go deep enough on some aspect.
tell us on the YouTubes, tell us on the Xs and the Patreons and we’ll explore that. ’cause you’re right, like that’s our mission. That’s why we’re here. we have done a ton of labor over the last 90 minutes recording this episode. I do wanna say Happy Labor Day to you. I think that’s like the, is our holiday weekend in the States?
Is that right?
[01:31:16] Kryz: Yes it is though. I only teach, I don’t teach on Mondays, so to me, this labor Day is useless ’cause other professors have off on Monday, but, monkey’s always in his hammock on Monday anyway. but badge, so this is the first time I think in old, while that both you and I are back, in our home bases.
We’ve had, I’ve had quite the adventures in Sicily and Poland and Greece and, you recently, were also making like a pirate floating off the, waters of, your fine Great Britain Islands or whatever. You got up there and then you went to New York City, right?
[01:32:00] Luke: Yeah. Yeah. Boston and New York just got back yesterday. Yeah.
[01:32:04] Kryz: I don’t, monkey, was, New York was his first, That’s where I grew up, in New York City. what’s she like? Smelly, dirty, smellier Dirtier than ever. See anything you loved? What,
[01:32:21] Luke: Maybe a little grubbier. Maybe it’s, this is like my fourth office visit to New York, so I, don’t know the city well, but look, I’ve certainly been there a bunch of times before. busier, maybe busier,
we were staying actually like a really fancy hotel, but by Times Square, so the classic like tourist trap area.
I’ve got a good friend who lives in the city and she’s five minutes from there, so we wanted to be like near to her. Boston is beautiful. Like I’ve got, we’ve got a buddy there. We visited like Boston is still fabulous. It’s caught up with us, a really close old friend who lives in New Jersey these days, and then a couple of days in the city to go to like the US Open.
We caught a Broadway show and yeah, I did some admin. I bought a new laptop, Yeah, with a, FX rate as it is right now, I’ve made a bit of a saving on the laptop that mitigates some of my hotel costs.
[01:33:11] Kryz: Okay. Right on. yeah, I have a love hate relationship with New York because, it’s where I grew up. It’s where I learned English. I saw my, became an American in New York Classic Imma immigrant story. I also was there for nine 11. and, yeah. I, it’s just such a, it has a.
Obviously you can’t recreate the place where you were born and you saw the world change before your eyes, but it’s, it’s, a special place and I’m at the point where it’s, I actually love visiting, New York because I know it well and I know I don’t have to live there so I could get go, two weeks is, or one week actually.
And some is, enough.
[01:33:56] Luke: So you wouldn’t move back there. I know. Like you escape the Austin heat, like the worst of the weather and you like scamper off to Europe. You wouldn’t do that to, the East coast.
[01:34:08] Kryz: I hate the weather in New York. It’s one of those maddening things. There’s only two months of nice weather, like the fall and a couple of, maybe months in the spring. Otherwise, it’s either too bitterly cold or too hot and humid. It’s, and when it’s dirty and smelly, it’s just, ah, yeah, not, great.
but you know what, I, will say the three months I spent in Europe, this was the longest I’ve been outside the US since I immigrated. just absolutely lovely way of living, in between, Sicily and Poland. Greece was more of a, just a, I was floating around on the boat, but, I am.
I feel beyond lucky to have an EU passport, which I will pick up next time. I go there next year and I sense badge. I sense a lot of adventures between me and you that were, in the coming, months and years. We could coordinate more of like on the, on the spot. We’re next to each other and we go, do some fun stuff because living in Europe and it’s, it was a joy such sweet people in, Sicily and and in Poland and just can’t, yeah.
Can’t wait to go back.
[01:35:32] Luke: Yeah, that’s great. Like gimme like a tiny bit more advanced notice rather than am I gonna see you in Warsaw in two days time? And I’m definitely down to come visit. yeah. And now I know you’re in Warsaw, not just somewhere arbitrary in po. Yeah.
[01:35:46] Kryz: Right on.
[01:35:46] Luke: Alright, thank you to our Patreons and with your Patreon age.
we’re trying to build and improve the show, so hopefully you enjoying the trajectory we’re on one day. Maybe your patronage means that Christophe will be able to quit his professorial job. I dunno what the students of Austin will do then. And yeah.
[01:36:11] Kryz: T.
[01:36:14] Luke: you got a bunch of value out today’s show. It’s really, it’s good to be back. the last two episodes were both like interview episodes back to the, and by the way, we had like a whole bunch of topics we had to cut out at the last minute that we’re pushing to next week just ’cause there was too much to talk about.
But on next week’s episode we are gonna revisit Christoph’s 10 x portfolio from like November. So we’re about nine months in to his 10 X portfolio. We’re gonna check in and see how it’s doing and how his conviction has improved or waned on some of his 10 x stocks. And I think you’ve got a new 10 x stock you’ve added to your, predictions.
So keen to get to that next week.
[01:36:52] Kryz: Yep. We’re at patreon.com/wallstreet Wildlife, and we do have the Dolphin Channel where we talk about our trade. So that I hope, is proving valuable.
[01:37:02] Luke: Are you ready to become a beast of an investor?
[01:37:05] Kryz: Your journey starts here.
