When the market turns red, your emotions become your worst enemy. Most investors think they’re disciplined until their portfolio drops 20% and the “SELL” button starts flashing. In this episode, we’re giving you the psychological toolkit to not just survive a market crash, but to thrive in it. We’ll show you how to master your fear, spot value when others are panicking, and understand the real game you’re playing.
Here’s what you’ll learn:
📉 Panic Selling & Market Psychology – We break down why emotional discipline is your most valuable asset when volatility strikes and how to stop fear from destroying your returns.
🧠 The Investor’s Identity Crisis – Are you a long-term investor or a short-term trader? Mixing these two games is a guaranteed way to lose. We’ll help you find out which one you really are.
💰 The “Sleep at Night” Test – How much is too much to have in one stock? We dive deep into position sizing so you can handle risk without losing sleep when things get rocky.
📊 Live Valuation Masterclass – Watch Luke use pro-level tools to analyze pharma giant Novo Nordisk, comparing it to competitors to uncover if it’s a hidden gem or a value trap.
📈 Read Charts Like a Pro – Krzysztof reveals the key momentum signals and chart patterns that scream “DON’T BUY,” even when it’s a company you love.
🧘 Meditation for Millionaires? – Why the most powerful investing tool might not be a spreadsheet, but a meditation cushion. Learn the secrets of courage under pressure from poker and jiu-jitsu.
Segments:
00:00 Cold Open – Multiple Games in the Market
00:41 Welcome to Wall Street Wildlife
01:42 The Bottomless Brunch Hangover Chronicles
03:20 Last Week’s Market Volatility Overview
04:26 Real WhatsApp Panic Selling Story
10:56 Mike Tyson’s Investing Wisdom
14:14 The Poker Table and Market Discipline
18:57 Meditation Practice for Investors
21:07 Understanding Position Sizing
25:42 Price vs. Value: The Fundamental Mistake
32:36 The IREN Energy Thesis $IREN
36:32 The 90/10 Portfolio Strategy
40:53 Trading Costs and Tax Implications
42:58 Long-Term vs. Short-Term Games
44:36 Preparing for the Inevitable Correction
49:31 Luke’s Valuation Metrics Cheat Sheet
52:37 Company Lifecycle Stages
58:41 Reading Financial Statements 101
01:07:02 Valuing Novo Nordisk $NVO
01:13:40 Comparing Big Pharma Valuations
01:15:15 Krzysztof’s Chart Analysis: Novo Nordisk
01:22:17 Playing a Different Game Than Institutions
01:26:41 Tesla’s Tron Ares Mode
WSW – EP103 – Video – No Ads –
[00:00:00] Krys: So you know what? I think the TLDR here is? I could see it so clearly I’m gonna reemphasize. There are multiple games played in the market. Both can be one when somebody buys a company and then sells it because price is dropping.
[00:00:15] Luke: I’m a professional investor, so I call myself these days and I’ve been an investor for over 20 years. I do not get the short, gets short term game, like to the point that I think it’s all just kind of nonsense and like mumbo jumbo.
[00:00:26] Krys: Start with a not one portfolio, but whether it’s one account or it, it doesn’t, there’s a way to divide your investment portfolio into, I would call different buckets or cans, like you said.
[00:00:41] Luke: how would I feel if this doubled in value overnight? How would I feel if this halved in value overnight? And if you are not at peace with, you know, both of those outcomes, then now is your chance to make those changes before the as falls out of the market.
[00:01:01] Luke: Welcome to the Deep Investing Jungle with your host, s Luke, the Badger Hallard and Christophe Monkey Piekarski this week dealing with panic selling, how to use options during market volatility selling rather than buying wisdom for traders applied to wisdom for long term investors. Maybe you can guess who’s who.
Plus I’m gonna have a crack at doing a live valuation for Novo nor Disk using our favorite tool. Ai.
[00:01:30] Krys: Badge. Usually we save our chitchat for last. But you sound a little groggy today. You sound a little, you’re deeper in the jungle than usual. You’re in like under some shadowy.
[00:01:42] Luke: deep in the deep in the jingle. Yeah. Went for a bottomless brunch with a couple of very close friends on Saturday. Um, uh, one of whom is like a regular podcast listener, so shout out. Hey, Mike. and, uh, yeah, like bottomless brunch turned into like a 12 hour drinking session of some very fancy venues in London.
It was very good, but like, this is the hangover that’s like reached across time and is still on Monday.
[00:02:09] Krys: Oh my God. We ain’t spring chickens anymore. Remember when, uh, we used to be like 20, 21, 20? You, you do the things and the next day you’re like, let me add ’em again. Let me add ’em again. And now we need what? Two whole days.
[00:02:23] Luke: Yeah. I’m pretty good. Like I, I lived in Hong Kong for six months and that just made me immune to alcohol. Uh, so I don’t, I do pretty well with hangovers, but, um, yeah, but this one hit me.
[00:02:35] Krys: Hey, do you subscribe to any of the magic hangover cures? Like, you know, vitamin stuff or orange juice or whatever other things? Do you do any of that?
[00:02:45] Luke: Now, you and I, we got a shipment of Magic Mind a couple of months. Well, a couple of years ago when we were working seven investing, like if there’s, if there’s anyone out there who wants to like, give us some freebie, like hangover shit, we’ll take it and we’ll promote it on the show if it’s good stuff. Uh, but no, I don’t take anything like that.
I just, you know, try and stay hydrated.
[00:03:02] Krys: It’s very weird for me. Hangovers last until approximately 8:00 PM the next day, so I know I just need to make it to 8:00 PM you know, the following day, and then the cloud’s clear. But, uh, I’m So, I’m sorry that you’re joining us two days. Two days afterwards, and you’re still, anyway. Uh, yeah.
[00:03:20] Luke: Self-inflicted. Self-inflicted. Yeah.
[00:03:22] Krys: Okay.
All right. Last week was a, uh, was a tough week in some ways because from one perspective, because the volatility was way up. I mean, the, the market’s way up. Then the next day changed its mind and then plummeted. And then there was a, another really big red day. And to us old seasoned grizzly veterans are like, yeah, yeah, yeah.
You know, you, uh, Mr. Mark forgot its meds. But for many people, most people, uh, it’s really, it could get really, really bad and some really poor life altering or financial wealth altering decisions are made in these kinds of times of panic.
[00:04:11] Luke: They are. And I’ve got a really good practical example of exactly this that played out on my WhatsApp a couple of days ago that I would love to share with Wall Street Wildlife listeners. ’cause I think this is quite instructive in a number of ways.
[00:04:26] Krys: batch. Before you go on with this example, I do wanna make another sort of, uh, pitch for what it is we think we do here at Wall Street Wildlife. I think right now you could find on the Innerwebs a lot of, for lack of a better term, finance bros sharing their spreadsheets. And that’s useful and that plays a part. But it’s strange to say that I think in so many ways the core, the most important thing that people either get right or go horribly wrong is with paying attention to themselves. Their, how their own minds work, the psychology, the behavior of all this. We talk about this endlessly, but they think to themselves probably, oh, that’s squishy.
Oh, that soft stuff. Oh, you’re gonna tell me about meditation, you’re gonna tell me about breathing, you’re gonna blah, blah, blah. And yet, that’s precisely the ditch people fall into because it’s so fundamental to the whole enterprise. If you can’t control yourself or if you are out of control, your emotions get the better of you, so on and so forth, you are gonna make egregiously bad mistakes that no spreadsheet analysis could fix for you.
So if you’re a beginner listening to our show, or even if you’re seasoned vet, but you still find yourself making behavioral type mistakes, listen hard because we, we hope to walk you through some, some things to watch out for in ways to get better.
[00:06:01] Luke: Yeah, good. A good intro to that, um, because you’re right, like we had, we, we are still in, like we are recording on the 20th of October. Today it’s nearly Halloween. Uh, we’re still in the midst of this like incredible growth run where stocks are very expensive, but seemingly like new all time highs almost every day and Okay.
Yeah, like occasionally we get like a bit of a down day, like we did what like. Last Friday, 10 days ago. Um, but then the market seemingly recovers like the next day. And if you listen to episode 1 0 2 last week, we focused on pe like the dangers of leverage and people who got blown out of the market because they had like too much risk on.
Um, but even if you’re like a simple investor and you’ve just picked what you feel are good quality companies and you have like a nice diversified portfolio can still be scary. You’re not gonna get blown outta the market ’cause you’re not leveraged. But if you see your portfolio go down by, you know, a significant percentage and you’re not ready for that, you’re not emotionally prepared for that, you might panic.
And I’ve got just a brilliant example of how this played out with a very close, uh, personal friend, uh, of, of my wife and I. Um, it’s not a real name. I’m gonna call her Sarah for the purpose of this because I said I’ll keep it anonymous. Um, so Sarah had this conversation with Sarah. She’s been, um.
Investing in her isa. So doing it in like a tax efficient way. She and I had a chat maybe a year and a half ago and she went from like investing in kind of meme stocks and garbage and she started listening to actually the podcast and getting into it and the discipline and understanding what it meant to be an investor.
And she’s built actually really nice diversified portfolio. They actually are quite, uh, a nice mix of badger and monkey stocks. Actually. She’s got a few of her own ideas in there as well, which is brilliant. But she’s got a lot of, I think, quality in her portfolio. And just this particular example was ire one of yours actually.
We both own it, but, um, but one of your initial ideas and Iran has gone absolutely bonkers. What’s it like a four or five x for you? I think something like that, like a 500% return that ballpark. So, um, Sarah had a chunk of cash in Iran, and this is hilarious to timing because we had a conversation on WhatsApp.
May just before like the big down day, a few days prior, like last Thursday, last Wednesday. And she was asking me like, how do I know if I have too much money in this stock? And then you and I went on to have a conversation and I posted some stuff on Twitter about it, about, you know, is your position size correct?
Have you got too much exposure? Not enough exposure. And the good test being the can you sleep at night test. Um, and so Sarah applied this thinking, said, I feel good. And she actually said, I don’t feel worried. So all good about her I Iran exposure. And then literally like 24 hours later, um, I get a message from her saying, um.
Just as you said, the stocks I have are volatile. They all went down. I sold my, I end shares in a panic yesterday. But happy to have made a good profit. I can buy back in again if they start going up. Um, I know in hindsight I should have trimmed it. I didn’t think I was worried, but when I saw it go down quickly in a day, I just wanted to put a stop on it.
Didn’t know how to do that, so I just panic sold everything. So she’s sort of self admitting to, you know, what’s gone wrong here? Now there are a whole bunch of problems in this thing, but let’s just focus on the call one to start with, and we can maybe explore this in a, in more detail in this conversation.
Like Sarah thought she had an exposure to IRE that she was comfortable with. And she asked, she said she’d asked herself the question, you know, what the, my framework, you know, just put yourself in that mindset. What happens if it doubles tomorrow? What happens if it halves tomorrow? If I feel like I’ve got the wrong allocation, I’ll fix it.
And she said, no, I’m good. I feel like, uh, I’m not concerned. I feel like it’s right. And then it did drop. So she hadn’t really done that exercise properly ’cause she said, I’m fine if it drops. And then it dropped and she wasn’t fine. She panicked and she sold in a panic. Um, so maybe let’s just like, let’s start there.
’cause that’s such an easy mistake to make that all investors make at some point or another. Um, and as you said in the intro, it’s only when you’ve seen this play out many times before that you don’t panic. Instead, maybe you go and reassess you try and figure out why did it go down. But you certainly don’t do anything quick to respond.
[00:10:56] Krys: Yes, I’m, I’m searching for, uh, for the quote that captures this, which is by Sir Sir Mike Tyson. Everybody has a plan until they get punched in the face. You know, in some ways, I mean, we laugh, but this is a real, you know, this is a real human thing. I’m gonna go off on a little tangent. Forgive me. This is what I do. Badge. This is why you pay me the big bucks. I was, uh, for my fire philosophy podcast, I was talking with, uh, with my co-host, professor of religious studies, Dale Wright, and we were writing about courage.
He wrote a five part series about courage. We were discussing, well, it’s all fine and good to know what courage is, to be able to discern different kinds of it, different levels and so forth. But how do you cultivate it? Like, how do you actually become a more courageous person? I think that’s a fundamentally, you know, central question, and most people remain or keep things in the abstract as we’re talking about here.
One of the things I said, this will not surprise you, at least on the level of courage that has to do with, let’s say. Bravery or, you know, running into the fire to save somebody, to put somebody else’s wellbeing ahead of your own, you need to actually practice it. So for me, I do that in the jiujitsu world because you can’t fake, you can’t, uh, pretend somebody’s trying to break your arm or break your leg, or, you know, choke you.
You have to feel, to some extent, somebody literally trying to break your arms and choke you. And then how are you gonna respond? And in the jiujitsu world, the white belts on the white belt level, what it means to be a white belt is when that kind of attack comes on you, you immediately panic because it’s scary. But the more advanced level practitioners know, you’re gonna panic. Know the kinds of stupid things you’re gonna do. And they’re right there waiting to take advantage. Oh, you’re going to, you know, pull this way. And then when you do that, you open yourself up and then they grab your arms, they turn you around, and now they’re ready to choke you and that kind of thing.
Point being is that I, what you are demonstrating now to me is so key in exposing, forgive that word. It’s not intended to be like harsh on your friend, but exposing the difference between thinking you’ve made a plan and you having lived through and executed and did you know what I mean? Like theory versus practice. So the bad news, I suppose, is. There’s no, I don’t know. I don’t know about you. There’s no other way. But like, you know, living through experience and this is what you and I have, you know, decades of,
[00:14:14] Luke: I think you’re right. I, as I think about this, as you, literally as you speak now, maybe you can practice, but I don’t recommend this practice to anybody. But you and I, you know, we’ve played a ton of poker in our lives. I learned a lot of these skills about mastering my emotions and not panicking. As long as I know I’m making good decisions, not worrying about the result.
I learned those skills at the poker table, but it took like decades and it took, you know, you’d go and you’d play your a game, you’d just be unlucky and like you get a beating, you know, you lose a couple of thousand bucks and you’re like, wow. But as long as you focus on. Analyze what you were doing, your decision making, if that was the right decision.
Everything else is just luck, you know, just focus on the stuff you can control. So that taught me a lot about building that mental resilience. As an investor, I don’t recommend that because it’s a totally different set of skills and you don’t wanna get into like the, the tens of thousands of hours I spent at the poker table, I’m sure could have been better spent in other areas of my life.
But that was one way. Um, I dunno how else you practice as an investor other than just being an investor and knowing that in your early years, like you’re gonna make mistakes, it’s gonna hurt. Um, but you are, you know, you’re learning lessons that are stealing you for the future. Because this isn’t a 1, 2, 5 year thing.
This is like a lifetime endeavor.
[00:15:40] Krys: I will admit to you this is, uh, that, because my poker playing career was now at least eight years ago, when I now sit down at a poker table for the pleasure of the game, I could tell that I’m out of poker shape because not forget the math and forget, you know, being rusty on some of the, you know, analytical stuff.
But I could feel my palms getting sweaty because I’m outta shape and there’s no other way, I mean, in that world than, you know, I I, it’s different, you know, at the start of the, the, the round versus how I feel later in the evening when I’ve just settled in and, you know, took some bad beats and, you know, whatever happened.
But, but right. So there is that exposure. And also, if I could add as a resident, uh, Zen, Zen teacher. Uh, mindfulness and meditation has a, i, I think, uh, a bad, it’s not a bad name, but it’s been co-opted and corrupted by commercial interests, but in the purest sense, which I feel qualified to speak to, and I would recommend as a practice, can you sit still on, uh, in the zen world on a cushion, looking at a wall for something like 10 to 15 minutes still and silent just looking at a wall.
And when I do this with my students in the classroom, I, I start each classroom doing this between five and 10 minutes. You know, I have the peripheral vision to see most students because they’re not practiced. They’re, they’re mo, they’re, they’re shuffling their feet. They’re moving their arms. Every itch that comes to mind, they scratch that, is the kind of call it habitual reactivity that most humans are prone to. A signal comes to mind and you do something, and the practice of zen meditation is to literally just be, just sit there. Just watch your anxiety, watch your boredom, watch your anger, watch your sense of ease or joy or whatever else might come up with. But if you do that for something like 10 minutes every day, you begin to teach your body what it means to witness panic, but not react from the place of panic. I can’t recommend, uh, meditative practices more highly, and I don’t even care, especially for beginners, if they are doing a kind of more commercialized version of it that is not what I would name as pure Zen or whatever. Just start, just do something like that and you’ll, you’ll, it’s not that you’ll see, but I, I think you’ll, people would be surprised at how it affects their whole life, not just, uh, an investing way.
[00:18:57] Luke: Yeah. Okay, good. Fair enough. So if you’ve got any takeaways so far, like don’t, you can learn a bunch of stuff playing poker, but I do not recommend that you can learn a bunch of stuff by sitting on cushions and staring at the wall, and Christophe does recommend that. But let’s make it, let’s make it investing practical because.
[00:19:16] Krys: Yeah. Yeah. And you know what? Because we have a Patreon community. I am totally volunteering myself because I teach this stuff. For anybody who has any questions around anything around these topics to please go into our jungle lounge and say, okay, we listen to your podcast, and no, you’re serious.
This is serious and it has serious repercussions. How do IX or what about y And we’ll be happy to talk you through or, you know, bring another one of your questions to the next pod. But we’re not, I’m, I’m speaking for myself. I’m not monkeying around when I say, this is a profound practice, or these are profound practices that will make a difference for you as an investor.
[00:20:00] Luke: and like, so there’s a direction we should take the conversation in there as well because it is, we’re building actually a nice community on YouTube. We get a lot of comments every day now on our videos, and it’s often. Like this stock is up 500%. Like, thanks, that was brilliant. Like what do I do now? Right.
So yeah, I mean, engage with us or, or find friends, find, you know, buddy, an investing buddy somewhere in your social circle. Um, and you’ve got someone to kind of lean on when you feel like those dangerous emotions and, you know, almost as dangerous, maybe even more dangerous than fear and panic is like greed and fomo the other side of it.
’cause that’s when you’re gonna, you know, like the guys who got blown out of the market ’cause they were overleveraged in crypto. Um, they got greedy. Like they were, you know, fundamentally they were owning potentially a good quality asset in some cases. Maybe not in every case, but just the way they approached it with such greed having like 10 x, 50 x leverage that screwed them.
That that’s how they, that was how they went wrong.
[00:21:07] Krys: Yeah, and I’ve fallen to the greed trap plenty of times in the course of 25, 28 years because we’re human. That’s the, that’s the point. Don’t pre, I don’t know. I, I don’t like the holier than now aspect, and that’s one of the things I think we try to name all the time. I mean, I think of myself as conscientious.
I think of myself as a, a person whose, whose role in the world is to do good and as a human animal. Right. I, I want more, sometimes I want more for myself and my family and my friends, and then everyone’s subject to that. So it’s not, it’s not like anyone’s born a saint. Some people are born saints, but most people have to work through this kind of thing. Uh, badge. I think this will be a perfect time for me to read a quote from a trader that I, um, am familiar with in the trading community because I thought it was quite insightful and useful for us as, uh, more long-term in investors. Uh, this person said, your inner belief state determines your reaction to uncertainty. Doubt amplifies noise, conviction collapses it. That’s why trading psychology isn’t a side discipline. It’s the core. You’re not trading assets, you’re trading your relationship to uncertainty. Now, for the 20th time, there’s multiple games that are played at different levels. This guy is talking about the short term gain, so forget the stuff about not trading assets, trading really, you know, forget the trading bit.
I think this applies as equally to what it means to be a long-term investor
[00:23:16] Luke: Yeah.
[00:23:17] Krys: when you have doubt, meaning I would translate that as when you have not done the due diligence necessary, you will not see that or feel that you’re an owner of a company. You are gonna see prices going up and down, and you’re probably not gonna think in terms of value. You’re gonna think, oh, I’m losing money. So your inner belief there is, I don’t know what I own and the price is falling, therefore, uh, I need to sell because every other people are selling.
[00:24:05] Luke: exactly right. And like bringing it back to, uh, this WhatsApp conversation with Sarah, like she’s, she’s saying the price is down. I’m panicking, I’m selling, I can buy it back later. Like the leaning into this, um, quote of yours, like if you, if she truly understood ire, say in this example and if she had conviction about it.
Well, maybe in reaction to the price movement, the right thing to do would be to go and do a bit more research and try and understand why is the price moved? Is it because something had actually just fundamentally gone wrong with IRE overnight? You know, asteroid hit their hq or the business model’s suddenly broken, huge competitor, like something which has damaged the investment.
Because then you might make a structured, like appropriate decision to sell it. Um, or is it just, which it was in this case, I believe, is it just the whole market’s down because like the US, the, the Republican administration have just tweeted something or they’ve posted a truth about trade wars with China and sent the whole market into turmoil.
All stocks are down today, and it just happens that I ran is, you know, down a bit more than most because it’s a really, it’s a small cap, highly volatile, highly speculative asset right now. And then there’s nothing wrong with the company, it’s just what’s happening in the wider world. And you might even then decide, well, I’m gonna buy a bit more, as opposed to panic and selling it.
But at least you’re making like a decision that’s grounded in conviction and research and understanding, not an emotional decision.
[00:25:42] Krys: I think I wanna name two Badge W. Diagnosed what I think is really a fundamental problem in 2025. You are looking at screens, right? People are looking at screens all day, whether on their phone or on a desktop chart, and what is it that they’re seeing? They’re, they’re literally seeing tickers and numbers, right? So that trains your mind to think, I’m an owner of an abstract symbol and a price. You’ve made your, you’ve had your, uh, lifelong success because you fundamentally bought a company and you think like, I am a part owner. In other words, I share in the profits of Intuitive Surgical, which. Builds robotic arms and helps, uh, surgeons. And it took them years and years and years and years of research and building out to actually make these things.
And they, you could see them in the, in the operating rooms and you, right? And so the moment, uh, the price drops, you would not in the million years think I’m getting rid of all those robotic arms. All those surgeons no longer, uh, know what they’re doing. Uh, you right? You think like an owner or a house owner, right?
You wouldn’t just sell your house in 10 minutes because, I don’t know, skunk pooped in your yard or, you know, like the right, you just wouldn’t because you could feel a house or you live in a house or you take care of a house. And, uh, I guess this rant is a little bit about, uh, for people who are prone to the panicking, uh, or haven’t worked through the panic stuff, is maybe read in 20, 25 more investor slide presentations where you see the physical things in the real world, right?
Or maybe you take a, like you did brilliant Amazon, you went and you took yourself to the factory that I remember that episode, whatever number it was. You came back to talk about your trip to the warehouse with a little shine in your cheeks. You were like, holy sh holy, uh, smokes, uh, uh, Amazon, like you couldn’t believe, right?
What it felt like to be inside that factory. And it changed you as a, as an owner of that particular company, did it not.
[00:28:34] Luke: Yeah. Right. Absolutely. Like it’s so valuable to be a customer of the companies that you own stock in and, and like stepping inside the business. If you, if you get the opportunity that not every company is gonna let you have a tour of the facilities. But Amazon do. But you can, you know, you can become a customer of most stuff that you might own in your portfolio.
Maybe not like an IRN to bit, unless you’re like, you know, buying data center capacity or something. Or you’re like an energy company. Maybe not like an intuitive surgical ’cause you probably don’t wanna wish this yourself onto the, uh, operating theater. But, um, there’s a ton of other companies you might own that you can, you know, viscerally own and go, oh, I’m visiting Disney World.
I’m a part owner of Disney. Like I’m, I just bought my ticket and I’m kind of paying myself.
[00:29:24] Krys: If I could bring this now back to your friend and I.
[00:29:29] Luke: Yep.
[00:29:30] Krys: Here’s the difference between me and her. No disrespect. I found Ira, what, back in early 24. So it’s been a year and whatever, a year and a half that I’ve been listening to earnings calls, reading the presentations, uh, following people on x uh, studying Bitcoin and the, the AI stuff, right?
So I don’t know if I were to tally up all those hours badge, like between, you know, that’s in the hundreds of hours now. And so iron is my, I think, third largest position. Both, both in the jungle portfolio in my urban portfolio. So Iron Falls last week. The only thing, like, what did I think? To, to sort of take it to the, the, the level of this conversation.
I was like, uh, the theory, the thesis is that every megawatt hour will be sold because there’s this obscene demand supply imbalance between how much electricity we need versus how much is available. Every megawatt hour will be sold, and ai, the thesis says, is just getting started. So this is gonna be a thing that runs for 5, 10, 15, 20.
I mean, maybe, you know, forever, like the internet is still a thing, right? And iron, from my understanding, is the company that is the gold standard of what they built, how they built it, and why they built it the way they did, and all of a sudden. The price drops, whatever, 10%, and I’m just gonna sell what took 10 years to build and has a future runway of 20 years.
Didn’t even occur, didn’t even cross my mind. It was just not one of my options. I’m like a monkeys, monkeys choices of, okay, how do I, how do I do this? Not even on my mind. Uh, segue, you know what, what, what I did do, actually this wasn’t with iron, but it’s a close cousin, another one of monkeys, king of the jungle, holding cipher. Uh, same scenario. Data mining center plummets hard, but unlike iron, I don’t have a, a lot of cipher. What I did. I sold puts badge. Do you know, uh, do, should I explain what that means and why I did that?
[00:32:36] Luke: I tell let’s, um, yes, but you’re then, you’re now taking us into more complex territory, so why don’t we do that after we close out this main bit? ’cause I’ve got a couple of things I wanna come back to. In the Sarah WhatsApp, but yes, you’re right. That’s a good strategy. But that’s like going beyond like beginner strategy.
And I think there’s some, there’s still some beginner lessons I wanna ring out of this little WhatsApp conversation. So let me just, lemme just do that to wrap it up then, because I think there’s two things remaining that are really interesting. So again, I’m just gonna read from the WhatsApp conversation.
Um, I sold ire shares in a panic yesterday, but happy to, I made a good profit. I can buy back in again if they start going up. So like, you know, you know where I want to go with this one, right? It’s the, I can buy back in again if they start going up.
[00:33:30] Krys: Mm-hmm.
[00:33:30] Luke: And it sounds simple, but it’s fatally flawed as a, as an approach because.
You’re not gonna do that if you’ve got outta a stock, like say iron and you made, you know, maybe you’ve four or five extra money turned, you know, a couple of thousand into like tens of thousands, who knows? And then you sold it. ’cause you’re like, oh, it’s going down. I’ve got lock in, you know, bank my gains.
And it starts going down. Well, you’re fooling yourself when you say I’m gonna buy back. Because if it keeps going down, like you’d always be looking for the bottom. You’d be trying to find the bottom and you won’t catch it. You won’t catch it. So if it keeps going down, you’ll be like, oh, I’ll just wait.
You know, one more day, one more week, one more month. It’ll keep going down. And then when it, when you miss the point, ’cause it starts going back up again. ’cause everything just operates in cycles. When it starts going back up again, you’ll be like, oh I’m, I missed the bottom. So I’ll just, you know, I’ll just wait for it to get back to where it was like two days ago when it was really down and I’ll buy it then.
But now it’s going up and you feel like you’ve missed the boat and you’re like, I can’t buy back in now. ’cause I could have bought in for, you know. $10 cheaper a few days ago or last month, and you just, you just, you never get back into this position because you’ve tried to market time. You failed unless you, unless you were incredibly lucky, you failed to time the bottom perfectly.
And then you’ve, you’ve anchored, like you’ve fixed your mind on this price that you could have bought the stock at, which you probably never see again. And if you do see that price again, well it’s going down. So you’d be like, oh, I better wait and let it really, really go down. Like, you, you just make life so hard for yourself.
And if you like, the simple answer is, I mean, just don’t do that if you, if you
Yeah, exactly right. Like there is a, there’s a slightly more advanced approach, which is. You might trim a bit. Like I, last week I talked about trimming axon ’cause it, I think it’s incredibly expensive at its current valuation, but I haven’t got outta it altogether.
So there’s no price in my mind where I’m anchored to and going, oh, you know, I, I sold axon at so many dollars, I’m gonna buy it back at so many dollars. It felt expensive. So I just took a little bit off. I reduced my exposure and that’s a way of navigating that. But if you wanna keep it really simple, just buy good quality companies and hold them for a long time.
Don’t mess with ’em. If you really wanna keep it simple, don’t even look at your portfolio like coffee can some of this stuff for decades and then come back and just kind of see what happens.
[00:35:57] Krys: two points. Badge, uh, strategy wise. One, also taxes. Most people, most people have to deal with taxes, so. Uh, I, I, another thing I found that the very hard way when you, when you kind of sell in and out, you are, you are costing yourself money. The moment, the moment you sell a position, if you have gains, you owe money.
So you’re literally triggering a, uh, outflow of capital versus doing nothing. Uh, the second point is on the back of what you just said, badge. I think this is, this is sound for investors of all levels of experience. Start with a not one portfolio, but whether it’s one account or it, it doesn’t, there’s a way to divide your investment portfolio into, I would call different buckets or cans, like you said.
And as a start, I would, I would do something like 90% is your long-term stuff and 10% is call it monkey business,
[00:37:20] Luke: Good.
[00:37:21] Krys: but the 90% one, and of course it’s personal to everybody and that would require different kinds of analysis. But for argument’s sake, in the 90% portfolio, once you buy something, you ain’t selling unless a thesis that breaks
in the 10% one because it’s only 10% in theory, it’s not you, you can give yourself a little bit more.
Call it the momentum stuff. And I don’t wanna take us to a, uh, to the field, but what I’m trying to emphasize is proportionally the 90%, if that continues to just sit there and do nothing, you are gonna be way more than fine. And then you could give the smaller one over to your impulses and you could feel like you’re doing something and then you learn whether it’s being effective or you’re playing a game and you’re losing at it and you make adjustments.
But even if you co completely screw that up, your 90% will still be fun.
[00:38:24] Luke: Yeah. And if you’re like totally as new as an investor, like your 90% might just be like some index trackers and you know, big funds and like market tracking stuff. And maybe your 10% is. Like, this is the money I’m gonna learn my lessons with, where I’m gonna make mistakes with, feel the emotions, and then, you know, build my skillset over time.
[00:38:45] Krys: Yeah.
[00:38:46] Luke: yeah. I wanna add onto your comment about tax because it’s a really good one. Like there is a real cost every, so if you do what Sarah did and you know, you buy a stock and it goes up and then you sell it and you plan to buy it back, even if you were successful in doing that, there’s a cost every time you trade.
And he, so Sarah’s account is an icer, so it’s like a tax efficient type of trading account in the uk, but like a Roth in the us. So she doesn’t have any capital gains, but there’s still a true cost to her because there’s a bid ask spread. And if you’re using like a really simplified trading platform like trading 2 1 2, which is what I use in the UK for my King of the Jungle portfolio, and it’s, it’s actually, it’s a good product.
For smaller accounts, um, like they don’t even show you the spread. They sort of simplify it. They’re just one price. But if you were to go onto there and you were to try and buy a stock and then sell it like a couple of seconds later, if the price hadn’t moved, you will lose a little bit of money. It’s like when you simplistically, so you go to the Foreign Exchange Bureau, you wanna change like your dollars into Euros ’cause you’re visiting Paris or something.
You know, there’s like the buy price and the sell price. Well, stocks have that as well. And the gap is known as the spread. And if you trade too often, you’re gonna pay the spread a lot of times. And that’s gonna, and eventually that could wipe you out. It is a, it’s a fee. Plus it’s slightly worse for ISIS in the uk.
I mean, they’re incredible accounts. We should all have one like world under Sarah for having one. But you have to settle into Sterling. So she does actually pay the US dollar to pound exchange rate every time she trades. So. Like simplistically, my advice around the WhatsApp was like, just assume you’re losing 1% every time you do a trade.
Um, and it might only seem that it’s only 1%, but you know, if you keep, if you sell everything and it’s like say 10,000 pounds and you buy it back, well that’s cost you like a hundred pounds twice in those 1%. Like they do add up.
[00:40:53] Krys: Yeah. So you know what? I think the TLDR here is? I could see it so clearly I’m gonna reemphasize. There are multiple games played in the market. Both can be one when somebody buys a company and then sells it because price is dropping. They are. By virtue of their actions admitting they’re playing the short-term game.
In this case, your friend thinks of herself not as a short-term player, however, she thinks of herself as a long-term investor. So she made a categorical error. She basically, uh, forgot the game she was playing and broke one of the cardinal rules of the long-term buy and hold game. Hopped over to the short-term game where she doesn’t have the skillset or the understanding to win that game, and she’s basically set herself up for losing.
So know the game you’re playing and then go from
[00:41:55] Luke: Yeah, and like I’ve, I’ve been, well, I’m a professional investor, so I call myself these days and I’ve been an investor for over 20 years. I do not get the short, gets short term game, like to the point that I think it’s all just kind of nonsense and like mumbo jumbo. And it, uh, you’ve kind of convinced me it’s not, there is something there, but I know that’s not my world.
I don’t, I don’t understand the kind of metrics that short term people look at, so I just don’t play that game.
[00:42:20] Krys: Yeah. And that could be as simple as that. And I think one of the values that you and I bring to this show, particularly as it’s unfolded over the last, what, three years of recording is that, uh, I’ve gotten more confident in the skillset required to do the short term stuff. But when you and I talk, we’re always labeling clearly what, which goggles do, do we have on?
And it’s not in the. At least I think I’m not, because I’m a long-term investor, I don’t need to disparage either game. I just need to know what it is I think I’m doing
[00:42:58] Luke: Alright. That was, that was a long conversation about a simple WhatsApp, but I think really instructive. And I think probably, you know, this is a, I think it’s a really useful time right now, October, 2025, to be thinking about this. And even if you haven’t made those kind of mistakes yourself, like really, truly ask yourself those questions about like the bigger stocks in your portfolio.
Take your biggest position in like an individual company and just really, truly try and like, sit on a cushion, face the wall for th 20 minutes and just feel, how would I feel if this doubled in value overnight? How would I feel if this halved in value overnight? And if you are not at peace with, you know, both of those outcomes, then now is your chance to make those changes before the as falls out of the market.
I’m not saying the as is gonna fall out the market anytime soon, but it will one day. One day in the next 10 years, my portfolio will over a relatively short period of time, say a year, probably halving value. And I’ve, it’s happened to me before and it’s gonna happen to me again. Like, I hope I’m in the game long enough that this happens to me another 10 times, right?
’cause that’s just part of the game, part of the cycle. And if you can internalize that, that days, those moments can become the most profitable, beneficial moments for you, not the most damaging and impactful, but if you sell, when stuff is down, that’s how you like, you realize those problems and that’s how you really do yourself damage.
[00:44:36] Krys: it’s unfortunate badge, but the stage that we’re in, we could see, because there’s a lot of Patreons joining our community, our YouTube channel numbers are going up. It’s always just so. I don’t know if tragic is the word quite, but it’s so unfortunate that we know ahead of time, for better or worse, that most people, they’re joining because things are good and everybody feels smart. We’re not complaining. We love having as many people listen to us as possible. Pop quiz. What’s gonna happen do you think? To our numbers and our rate of growth? When the market, uh, dives 15%, how many, how many subscription cancellations are we gonna get?
[00:45:28] Luke: we’re not just that, like we’re gonna get a ton, we’re also gonna get a ton of like flack and people chucking shit at us because they’re like, you guys suck. You’ve cost me a fortune. You told me to buy this stock. It’s gone down like, yeah, that it’s gonna happen. That’s just the nature of the game. And if you really feel like that and you’re listening and you’re like, you know, if, you know, if you are listening to this and it’s a year’s time, 2026, you happen to have picked up this episode, like, I’m sorry.
Like so be it. Right? That is just the way the whims of the market operates and no, we didn’t tell you to buy anything. We’re trying to give you the tools and the skillset so you can make your own decisions.
[00:46:10] Krys: You know, who’s gonna be exempt from that though? I think legitimately, uh, I think the, our Patreons that are paid Patreons, uh, I’m, I’m liter, I’m, I’m legitimately saying, I think they have the highest odds of not jumping ship when things get bad because they’ve already upfront said, we’re gonna pay you.
Because we take you seriously. And therefore, they’ve listened to these podcasts and we’re pounding the drums now about the inevitability of this correction. And at least, hopefully the majority of them have taken these, these warnings seriously. And when things crash, they, they won’t, uh, cancel the subscription because they’ll have, you know, thought through a bunch of this stuff.
Two, you know how I legitimately think of, uh, the difference between a beginner and a, uh, experienced investor? And this is a little bit from the options world and the, and the short term thing. Experienced people, experienced investors, traders take advantage of volatility for both mathematical reasons and for pragmatic reasons. They don’t fear it. So I don’t wanna get too, too into the weeds of complex option stuff. But one small note is that when things go up and down the IV in options, the the implied volatility number goes up, which means you can make more money if you know what you’re doing with that stuff. That’s for another show.
But there’s ways to succeed in the market no matter what’s happening is, is kind of,
[00:48:12] Luke: When do, because you said, oh, is, is it worth talking about selling puts? Maybe we should sidebar into that a little bit because that is an alternative response to selling the stock.
[00:48:23] Krys: Absolutely. So, uh, maybe let’s save that for, for next episode. And I will just preview that by saying, uh, when you open my Robinhood app, when I, uh, this weekend when I was processing a lot of what happened last week and I opened up my Robinhood app and I looked at the first whatever, 10, uh, option, the 10 lines of what I hold.
And the first thing that Robinhood shows you is options. The stock stuff is below. I think it was seven out of 10 things that I did were sold puts. So for those of you getting this episode, now, you may wish to ahead of time do a little bit of your own digging and research into what is Monkey talking about when he’s saying selling puts, what is that?
What, what is the put? And, and then we’ll, I’ll catch you up next
[00:49:16] Luke: Cool. Alright. Good stuff. Um, should we talk valuations? And I want to do a bit of a, a live. Uh, screen share of fin chat.ai, ai, but I’ve got something to share before I go there.
[00:49:31] Krys: Yeah. Are you, are you up for it?
[00:49:33] Luke: Yeah, I think, yeah. Yeah, the hangovers will be fading a bit. so here’s something I’m working on, but it’s sort of nearing completion and I’m calling this my valuation metrics cheat sheet.
And so I said I was trimming some companies last week, axon and Palantir and CrowdStrike. I’ve been trimming fairly actively. And then there are some companies like Novo Nordisk I’m adding to, well that isn’t arbitrary, it’s grounded in. Like a bit of thinking and planning, and I don’t wanna, like, this is, I’m not gonna try and give you evaluation masterclass in 10 minutes in one podcast episode, but I thought I would start to provide a tool that maybe gives you a starting point.
So what this little matrix on screen now is, is companies go through like levels of maturity from like the tiniest, like just like a PowerPoint? Like not, no, just like an idea pre-revenue. We’ve got some pre-revenue companies in our portfolios through to mature behemoths that are paying dividends and eventually, like they slip into terminal decline.
But typically, you know, the company life cycle, it starts small, then it starts generating revenue, then it really starts investing in itself and it scales up and it goes through like a growth phase. And I, I personally, I find that like the really exciting. Part, uh, of its lifecycle to catch a company in.
And that might last, you know, the, from being an idea to being a growth company, that might be like a couple of years and then maybe, you know, the, the, the best companies stay in that growth phase for decades sometimes. But eventually all companies mature, you know, they become old, they get their free bus pass and their gray hair and they start
Or die?
Well, yeah. And well, it’s like, you know, mature on the, on the road to death, or maybe you have, you have like an untimely death, right? You know, you step in front of a bus because you did something really dumb and you just blew up your business. Of course, there’s lots of ways to destroy shareholder value.
Um, but anyway, like the purpose of this matrix is as you go through these maturity phases, there are typically different kinds of. Valuation metric you can look at. And if we just try and keep this really simple, like if you’re a really young company and you are pre-revenue, like you don’t really have any numbers.
So the only way you can really value a pre-revenue company is based on its future potential. You can look at like, have they got any patents? You can say, oh, how well the quality of the management. They, maybe they’ve got like a, A CEO or a founder who’s had like success and they’ve exited companies in the past.
Um, maybe they’ve just got like a brilliant plan and they’re in like the right space at the right time with the right idea. So, but it’s all that kind of subjective stuff you use to value a company at the earlier stages. But once you start.
[00:52:37] Krys: Subjective and narrative subjective and na. So not just subjective, if I may, not just like I feel because I have warm and fuzzies, but closer to the way an artist interprets, uh, narratives and can make sense of complex dynamics and paint a really, um, convincing picture, if you will, right. Subjective in that way.
And by, by the way, I, I really, for better or worse, intuitively love this stage of
investing. It’s what I’m good at. It’s what interests me. It’s what, uh, I’ve developed, uh, an intuition for a STS being currently for like a great example of, of this category.
[00:53:28] Luke: Agree. And like, you know, with you, you’re taking very high risk when you invest at that stage of the life cycle, but you also have correspondingly very high returns if the business is successful. ’cause you know, not, not every business that’s pre-revenue is gonna become a success. Like most will fail.
That’s kind of the venture capital game. You know, you have to make like 10 plus bets and you, you’re doing well if like one or two of those actually deliver some sort of shareholder return at the end of a fairly long journey. Um, and I, I would say actually, I like your comment about it’s subjective and the art.
I do think actually the art of investing and valuing a company exists all the way along these maturity scales. Like there’s still a lot of art to valuing a mature dividend payer. A company that’s like. You know, it’s now not the end of its life, but now it’s in a mode where it’s focused on returning capital to shareholders with dividends and with buybacks.
Um, and, but there are different metrics. Probably the main purpose of this diagram, there are different metrics you can typically use at each stage. And so what I wanted to share here with my cheat sheet is some of the metrics that you could, you could theoretically use at each stage, depending on the type of the company.
Because a software technology company is really very different to like a financials or a banking company or like a consumer staples company that’s selling like commodity products. And so, and this isn’t precise, these are like, this is a guideline, but it’s intended to give you a starting point. And so I thought I would then now apply this to a particular company just to show.
Like one lens in. And also we can do a bit of fiscal AIing. ’cause you did quite a nice, um, screen share of PayPal last week. I thought I would do the same thing for Novo Nordisk Alright, let’s get back into it. So, uh, fiscal.ai is, christoph are my favorite investing, like metrics, tracking research, understanding the numbers tool. And when you go to fiscal ai, it’s as simple as literally just like typing in the ticker or the name. And on the very first page, you’ve got a bunch of really useful headline.
Numbers that tell you about the company. But one thing I’m gonna do today is I wanna do a bit of charting. So, because I want to look at not just this one company, I want to use my valuation cheat sheet. So actually let’s just, let’s, let’s just think about that quickly. So Novo Nordisk is like big pharma.
They make, they manufacture typically like di originally diabetes medication. And now like the business is leaning more into Ozempic and Wegovy, like the weight loss drugs, but it’s basically pharmaceuticals. Um, and they’re selling most of those into the us. Like the US is probably half more than half of their market, but they are a mature company that is paying a dividend, currently, a dividend yield.
Of 3.2%. So if we were to go back to my valuation metrics cheat sheet, this would probably be in like stage four or five mature growth or maybe even mature dividend player. And I would actually probably think about this one as being maybe like an industrials manufacturing kind of company. Um, and so typically the kind of metrics in my cheat sheet that I would try and look at would be PE price to earnings, and also I’d be looking at dividend yield and then maybe some other, there’s some other sort of finessing metrics like inventory turnover, um, and re uh, return on assets.
But let’s just focus on PE because I think that’s a good, if we know nothing, it’s a good place to start when we look at a company like this so we can see the PE. Price to earnings. The Novo Nordisk today is 16.1. Let’s just quickly explain, like you probably know what PE is, but let’s just quickly explain exactly what PE is.
So you’ve got, if I’m gonna, I’m gonna use sort of simple language here. You’ve got like the value of the entire company, um, which is based on all the, you know, everything it does and all the money it makes and it, you know, it sells stuff and it has to pay for those things. And if you look at the, well, we can actually do it in fiscal.ai.
If you go to the financials tab, if you can look at the three financial statements, the income statement, the balance sheet, and the cash flow statement. So every company will have these three financial statements and uh, and it’s like a story. If you learn to read these numbers, it’s a story and you can see.
Like in the last LTM, that’s the last 12 months. So like the rolling year up to today, um, their revenue. So it’s kind of like the sales, how much money they made, which in this case was give or take $312 billion. And then we can see the cost of goods sold. So that’s like
[00:58:41] Krys: Actually badger a quick, quick note. Um, I wanted to say this before, U uh, the units here are in, in the, uh, what’s it called? Danish cur
[00:58:52] Luke: Dan
Danish kroner, correct.
[00:58:54] Krys: So on the, on the same market cap, on the first page, it showed there’s one point something trillion in US dollars. It’s closer to one 85 billion. So maybe, uh, click on the USD tab.
Yeah,
[00:59:07] Luke: Yeah, exactly. No, that that’s a really good point because this is actually one of the things I like most about fiscal ai. It will do this translation from like. The currency that the company does its accounting in, which in this case is Danish kroner, but it will translate it to US dollars. ’cause if, ’cause we’re about to compare Novo Nordisk to a couple of its peers, which are US companies or British companies.
And if you look at them all on like a, like, for like basis, like dollars, there’s a fairly standard way to do that. So when we do that, yes, you’re right. You can see that their revenue was 48 billion US dollars. Um, and then the cost of goods sold was $7.6 billion. So that, like simplistically, if this was a really young company, it’s not, that would be an interesting way to measure it.
’cause you’d look at what’s called its gross margin. You’d be like, they, they sold $50 billion worth of stuff and the raw materials cost them $7 billion. So that’s actually a really healthy gross margin. Yeah. Like an 84% gross margin. It’s like, you know, it’s like the money, the excess money you generate.
From the, when you go from raw materials to the actual thing you sold and you work your way down the income statement.
[01:00:22] Krys: batch, you know? Yeah. Well, quick, quick point here. You know what, what I think one of the hardest things to do for every investor is to make the numbers mean something, uh, because they’re relative. Uh, but sometimes it is pretty simple. Meaning, uh, for somebody completely new to this and you tell them what’s a good gross margin? Well, I don’t know what is a good gross margin, right? If, if you think, for example, in the supermarket world, what is that like for every. Item you sell, you only keep what, 3% profit or something like that, because you can’t, you know, supermarkets are ultra competitive and you can’t upcharge customers and so forth.
But here, uh, Novo keeps about 85%, 85 cents per dollar sold. So even if you don’t know, relatively speaking, what’s good, what’s bad? You couldn’t say to yourself, 85 cents out of every dollar, that must, that sounds pretty good, right? Like, you know, something like
[01:01:25] Luke: yeah, no, you’re absolutely right. Yeah, and it’s a really important point, like you can then, as long as you don’t try and compare like a pharmaceutical giant with a supermarket. Because they’re apples and oranges, they’re not the same thing. But you could compare one pharmaceutical giant with another pharmaceutical giant.
’cause fundamentally they’re in the same business and maybe they’re even like direct competitors for certain product lines. And so you can usefully compare the gross margin of say, like an Amazon versus a Mercado Libre, and you can draw some quite useful conclusions about that. Um, now I don’t wanna that that was a, that was a good sidebar.
I don’t wanna boil to death. Like the income statement, maybe we do that in future episodes, but I did just wanna explain what PE actually means because you can see as you go down the income statement, okay, you’ve got your cost of goods sold, then you get to your gross profit and then you’ve got expenses around having a sales team and having like r and d.
’cause you have to develop new drugs and then you might have like administration, other kinds of expenses. Maybe you’ve got like CapEx, you have to go and buy like another warehouse or a manufacturing plant, basically, you know, think of all the things you need to do to run the business and you start getting towards the bottom of the income statement.
And then you might also have to pay like tax and maybe you earn some interest on some money you have saved, maybe you have some debt. There’s all these sort of financial things that you do when you run a business as well. When it’s kind of like you get to the very end, you get to your net income and that’s like truly.
Like your profit, that’s like true profit that the company has. It’s the, it’s the income net of everything else. And so the PE ratio is basically price. Earnings ratio is basically like the net income, how much real profit at the, the bottom line of the company generated versus its market cap, like the value of the whole company.
And if we go back to that first page, like our quick hint sheet right now, Novo Nordisk is 16.1 pe. So essentially if you
[01:03:34] Krys: Well actually, uh, sorry, that’s the next, uh,
12 months.
[01:03:38] Luke: yes, yes, yes, Good point. Yep, yep, yep.
[01:03:42] Krys: it’s 15.
[01:03:43] Luke: 15, correct. Yes, you’re right. That’s interesting that it’s actually, uh, I hadn’t support of that, that it’s lower on a trailing versus a next 12 months basis. I’ll go and think about that separately,
but um, yeah.
[01:03:52] Krys: yeah. Oh, and since I already interrupted you, uh, uh, little side note, when we talk in everyday conversation, we will say things like, what’s the bottom line? That’s, that’s from the income, uh, statement. And, and that phrase, top line means how revenue, the first, literally, what is the first thing you see is how much revenue’s coming in.
Bottom line is after you take out all the other stuff, what’s the base? What’s the essence here? What’s the bottom line? Okay.
[01:04:24] Luke: And let’s remind ourselves, right? We can only, the bottom line is only that, it’s only really useful as a metric for a mature company because it’s already built all of its factories and it’s done all its investing and it’s got, it’s like it’s. It’s efficient and it’s operating and it’s like this smooth, like well-oiled machine.
If it was a young company, that just wouldn’t be useful because it’s still gonna spend a ton of money on maybe r and d and break into new markets and do weird things and maybe a acquire other companies. When you’re like a big behemoth that’s like multi hundreds of billions of dollars, it’s unlikely or it’s rare that you’ll make an acquisition or you know, change the business fundamentally.
But you’re much more likely to do that when you’re a younger company ’cause you’re still kind of finding your feet. So that’s why like the PE ratio is really generally everything. Here is a generalization, generally most useful to mature big established companies. So let’s use.
[01:05:24] Krys: If I, if I may, another one of these sidebars, which I think for many beginners is not obvious. Uh, because, because who not everyone took accounting and not everybody looked at income sheets before, but when you are not making money. In other words, you’re still that as, as Badger said earlier, buildup phase, and you look at that bottom line, you will often see numbers in parentheses. And when the number is in parentheses, that means it’s a loss. So that means in that year, the company lost that amount of money. And that’s why this is maybe setting you up. Uh, when a company is losing money, I don’t actually know how the algos sometimes compute it, or sometimes they, they play games with this.
Sometimes you’ll see price per earnings not available, because literally if you’re losing money, you’re not earning something. So it’s like you can’t divide by zero. So they’ll show just NA or something, but sometimes it shows a negative number, like negative 340. And that’s a little confusing. But the point being is.
Don’t worry about that ratio, if in fact it’s negative or in parentheses,
[01:06:45] Luke: Alright, so while you were chatting there, I just built live just a very simple chart for Novo Nordisk. And so if you’re not on the YouTubes, like get on the YouTubes ’cause that’s where we’re like starting to show this stuff.
[01:06:59] Krys: get off your lazy.
[01:07:02] Luke: Um, but essentially I’ve just, I’ve pulled some industry comparators, so I did a bit of research on the side just to say like, who are the main competitors to Novo Nordisk? The really obvious one is Eli Lilly, ’cause they’re both competing for the same market around weight loss drugs. But also I just want some like big pharma comparables.
So I’ve also just somewhat arbitrarily pulled in Pfizer and AstraZeneca. So we’ve got like four big names that are broadly, like they’re doing the same kind of thing. I know they’re not exactly the same business, but they’re in the same segment. So we can compare them, we can draw some useful ideas. And I’ve kept this really simple.
All I’ve plotted is market cap PE and dividend yield. ’cause these will tell us something about the story. Now, this is not by any means, like the whole story to how you do. Evaluation for a company. There is so much art and there are so many, there are hundreds of numbers you have to dig into. You have to listen to the earnings calls and read the quarterly reports.
But this is like one of the many things you do where you can start to get some piece of the story that you can then like slot into your understanding. So I’m just doing this stuff live, right? So I’m just gonna, what do I wanna do? I wanna get to like a nice pretty picture where I can just see in outline like the story of what’s happening to these companies.
So here we got them. I’ve put this as biometric ’cause I’ve got three different metrics in fiscal ai. If I said it a single panel, like it’s unreadable, I’ve got like three metrics for four companies. There’s like 12 things here. You can’t compare them. So I typically like to do it by metric. ’cause then I can look at each part of the story at a time.
And we’ve got this in US dollars. So we’re gonna see like, like for like rather than local currency. My first part of the story is market cap. So Novo Nordisk is green in this picture. Might be a different color for you, but it’s green for me. And if I go here, I can see the market cap of Novo Nordisk today is 260 billion US dollars.
And I can see that actually that’s pretty much equivalent to AstraZeneca. They’re both about the same size company and Eli Lilly are massive. They’re like three times bigger and Pfizer are about half the size. I’m just getting a feel of where they are in the market, but let’s look at what’s happened.
Like actually the other three players have all been relatively stable on a market cap perspective over the last, what, say the last year to two years, but. Novo Nordisk has taken a pounding that’s like my green line, and the market cap has more than halved since its peak, which was looks like directionally sort of June, 2024.
It was a 650, $660 billion company. Today it’s like a $240 billion company. So it’s taken a massive hit. So the first thing we can unfer is like we have to ask ourselves why, you know, why has the valuation bonded? And that’s where you have to start looking at much more information, looking at the narrative.
And there were good reasons. They basically screwed up their execution. They had this magical opportunity with weak avi, and then bit a bit of a mess of it in terms of execution. But you know, once we know that, we can then ask ourselves, well, what’s coming up? And have the company address those issues? Or are they fundamentally thesis breaking issues?
And that green line is gonna keep going like south until the company’s worth like next to nothing, and it dissolves. Um, so the ne and now we said we’d look at evaluation metrics. So pe so this, the reason I wanted to screen share this is if you are, if you’re not on the YouTubes, like we’ve got our four companies here and a couple of them, my orange and my purple one.
So Pfizer and AstraZeneca actually had like massive PE spikes or troughs, so they, it makes it quite hard to see what the hell’s going on. So I’m just gonna be, I’m just gonna like lock down the timeframe and just report. I just need to go a bit tighter if you can see what I’m doing here. I’m just going back to like the last 12 months and I’ve literally just like zoomed to the most recent 12 months.
So I can get just a feel of like the trajectory of the PE as a simple valuation metric and how Novo Nordisk has stacked up against its three peers. And we can see here actually, like the whole sector has come down a little bit. Maybe AstraZeneca, PE has increased a little bit over the last 12 months, but the other three guys we can see here nice and clearly.
Like we used to be able to buy Novo Nordisk about a year ago for 28 times earnings, and now we can buy it for 14 times earnings. So not withstanding everything else, it’s like in some ways like half the value it used to be. And then because I’m, I’m looking at an investment like this in my own portfolio, from the perspective of it being an income investment, I wanna get a feel of the dividend yield and how that’s the trajectory of that over time.
So again, these are all actually mature dividend paying companies, and right now I’m getting a 3.2%. Yield if I own Novo Nordisk and I’m getting less than that on the other two, but Pfizer is paying like a massive 7% dividend yield. So you might look at that and go, oh, well clearly if you want income, just go buy Pfizer.
But you’d need to go and do a lot more work because you might be buying what’s known as a dividend trap, right? So there’s, there we are. I’ve just done a little bit of literally, literally like surface level analysis just to get a feel of what’s going on with Novo Nordisk. And the main thing I wanted to share here was not some big conclusion about the company, but just how you use a tool like fiscal, the AI to start to get some of these insights.
And we could bring in things like gross margin. Actually let’s do it because I’m intrigued. Gross profit margin, because we, we saw that was pretty healthy for Novo Nordisk. I’ve got no idea how it compares to the other guys. Oh, look at that gross profit margin of 84%, um, which is actually broadly comparable.
To its, its to Lilly and to, um, AstraZeneca for some reason. Pfizer maybe it’s a different kind of slightly different kind of business model, quite a bit lower profit margin, but that’s actually nice to know that Novo Nordisk’s profit margin is the highest and also seems to be like sustained highest, whereas the other guys have bounced around a little bit more.
So that’s actually, I would take that notwithstanding. Anything else, I would take that as a fairly good sign.
[01:13:40] Krys: Thanks for that badge. The main comment I have is that, I wanna say 85% of beginning investors when they say, I want to, uh, buy a company because it’s cheap. Unfortunately, they’re all they’re looking at is the price, which tells you nothing. It literally price. I, I don’t know how to emphasize this more than when you see the cost of a stock, it literally does not tell you anything about how cheap or expensive it is. You need the relative comparison between how much a share cost versus how much money they make, at least in this world of mature companies. So, um, uh. God, what was my, uh, what was my point? Oh yeah, the point, the point was that the very first step a beginner needs to take is exactly what you did. You, you not only call up the pe but then you compare it to other PEs. And only then can you begin very roughly saying, this is cheap, or this is fairly priced or expensive. On, on, uh, on a rough cursory overview level. At least in, if you’ve taken these steps, you’re not making a fundamental, categorical, egregious error of not knowing what you’re talking about. So thank you.
Yeah, thank you for that. May I now add the next
[01:15:14] Luke: Yes, please.
[01:15:15] Krys: the lines you see here are lines I drew when we last talked about Noval Nordisk, which was several weeks ago. Actually, I could count the weeks ago because I could see the lines 1, 2, 3, 4, 5, 6, 0 8, 12 weeks ago.
So three months ago, I suppose. Now, uh, when we, when this was a topic of conversation, here’s the point. What you’re looking at on the YouTubes is a weekly chart of Novo Nordisk. I think for long-term investors, weekly is the sweet spot when you’re deciding what timeframe to look at. Uh, that’s because it’s, it, it’s in between. Call it the, the monthly very, very high level overview and the daily, where you could see more of the gyrations and the weekly does give you pretty clear shape, right? You could see the shape of this company’s value. So I suppose three months ago when I drew that blue arrow down, that was right when we had that big purple drop in price.
And on that episode, I basically said, from the momentum perspective, from the trading perspective, you don’t wanna buy at this moment because the momentum, if you, if you, if you zoom out the 20 weeks from that peak, it is clearly going down. There’s the little jags, you know, there’s the little jaggedy jags, but.
If you’re buying Novo Nordisk, at that point, you are literally buying against the momentum of the market. So that’s, I would say a yellow slash red flag. Like you have to, I think the full statement I said is you have to have a very clear reason where you are saying you know more than the market and you very well might. So what is it that happened? Uh, after I said I wouldn’t buy this here. We saw that for the following, what, four weeks? I was wrong because then you see the green bars actually kind of going back up and at one point, see that orange box that I drew? Usually, usually when, when traders draw, draw, um, on their charts, it’s only a line.
It’s only a single line. And that line is meant to represent where is the bottom. Which is called support. And where’s the top, which is called resistance. And here it’s a visual thing. It’s actually not complicated. All I did was zoom out and I saw, uh, way back years ago, there was this area where the lines were kind of bouncing between badge.
You could see that
right from bottom to top, from bottom to top. And they were staying within that, that particular range until, uh, I can’t actually see the date on this ’cause I’m just using a snapshot. I took until there’s the moment where that green line broke out of that orange box and then kept going.
And you could see as soon as it broke out, it kept going to the very, very top until the the, the bottom again. So I drew that orange box because I could see, oh, we’re back in the orange box again, which to my mind says. Uh, odds are that we’re actually gonna be probably stuck in this box again until we either go severely below it or we get one of these green bars above it.
And what happened was, interestingly, there’s a little tricky thing is that you could see one of the weeks after I made this chart, that green bar actually closed above, right? That is a danger from the momentum trading spot. That’s actually a dangerous moment because you could be, in a sense, given false confidence to say, oh, we broke above that, that that limiting space.
And now it looks like Novo is actually going to regain its momentum and start trading up. But you’d be guilty of having itchy fingers because you would technically need to wait one more week to make sure that that’s. Confirmed and what ended up happening is the following weeks, it actually dropped right back into the box.
And now as of this, today’s, uh, day, it’s actually that breakout did not happen. And so the momentum still from my visual perspective continues to be down slash sideways. So were I to want to buy more of this because I believe my own thesis, I would still wait until we got a close on the weekly price above that orange box and B basically two closes, and then I would start putting money in.
[01:20:28] Luke: It’s good. And you, I think we can link this nicely back to where we started today’s conversation about know the game you’re playing. Because when you have a long-term mindset, you have certain tools and you have a short-term mindset, you have certain tools, and maybe you’re a bit of a hybrid like yourself and you use all the tools and then you can start to, um, not only.
Identify and buy great companies, but you can also buy them at a time, like a short term period. You find the right entry time using some of these indicators, um, so that you, you know, you hopefully catch a turnaround.
[01:21:06] Krys: I, I mean, honestly, if I were, if I knew more about Novo, uh, I, um, I would use this time, I guess I would use this moment in the company’s history to really get clear about my thesis statement. I would think to myself, I’m not in a rush. Right now to buy, because the chart is telling me the billions, hundreds of billions of funds trading this thing.
They themselves, with all the professional tools they have and all the analysis they have, and inside info they have, blah, blah, blah. Nobody is basically winning. There’s no argument that these professionals are saying, oh no, this is clearly worth more than whatever the price is saying. So if all those people are kind of stuck in a battle, I, as the little guy, I’m not, I’m not smarter than them.
I’m not gonna out hustle them. I would just dig deeper into why do I think this is a good place for my money and get, build that conviction. And then once the, yeah, once the big guys basically started moving, I’d say, okay, cl clearly, I, they soon seeing what I’m seeing and
[01:22:15] Luke: Yeah. Good stuff. Yeah.
[01:22:17] Krys: or, uh, sorry, I, I, or I would say I do know more. Than everybody, and that’s possible. But you know, I would just be
[01:22:27] Luke: And, and, and it may, maybe there’s finesse on that. ’cause as a long term investor, like I, even in companies I know really well, I’m not so arrogant as to think I know more than anybody else. But, um, I think maybe, I know I’m playing a different game. So
like I’m, I, I can truly play a long-term game ’cause I don’t manage other people’s money.
I only manage my own. I know my risk tolerance. I know I can suffer a drawdown as long as I feel like it’s a good quality investment. And I can, like, I’m investing in companies like I bought Novo Nordic again, uh, last week. I bought that with a view to holding it more than 10 years. And, and I kind of don’t mind.
I’ve, I accept that. My investment might go sideways or south for a chunk of time. I just wanna get that decision taken and move on. ’cause I’ve only got so much like brain power to, and I wanna be looking at my next opportunity to invest. If you’re an institutional player, you can’t play that game. Like you’ve got, um, other investors, money that you’re managing.
Maybe it’s like pension funds or maybe it’s, uh, you know, like other big firms, um, or clients of your firm. Um, and you have to, you’re playing a short, like, you might say you’re playing a long-term game, but you’re actually not, you’re playing a short-term game because you still have to give like quarterly reports to your investors.
And if you are not in like this year’s, like shit hot sector or shit, hot stock, you probably feel like you have to buy it because otherwise you are, if you are underperforming, which most professional investors do, if you’re underperforming the market, people will be like, well, why wouldn’t, why didn’t you own Nvidia?
You know, you idiots. Um, so you got, yeah. So you, you end up playing a short-term game even if you kind of delude yourself and tell a story that it’s a long-term game. The only people who can be truly long-term investors, I think are those who manage their own money and really understand the game.
[01:24:19] Krys: it occurs to me you’ve made an egregious error
in your own investing. I’m sorry to say this publicly to you, but you know, it’s what we do. But by allocating more funds to Novo, you did not buy more greasy sausage rolls made by the fine people over at Greg’s.
So let that weigh heavily on your conscience badge,
[01:24:41] Luke: As I said previously, these are my basket. I’ve got dike, I’ve got like my sausage rolls, making people unhealthy, and then my big pharma stocks making them healthy again. So.
[01:24:49] Krys: right? You’re like Baals above, you’re whispering, you’re whispering, diabolical things into people’s ears, and then profiting off of them.
[01:24:57] Luke: and, but these are, these are both well, outside of my normal like lane of competence, I know nothing about food retail. Um, I know very little about pharmaceuticals. I just, in Novo’s case, I actually really like the story and I think the numbers do make sense. I have, I have gone through the whole of all three of those like financial statements to understand them a bit more detail.
I think they, I think they are in a good place to potentially execute quite a nice turnaround and they’ve got a lot of, uh, strategic things on their side in terms of the timing of certain FDA approvals and where they are relative to competitors. But I’m not a farmer expert. And in the case of like Greg sausage rolls, I mean, both of these for me are in, are dividend paying stocks.
And so I, like, I find. With greater respect to our friends over at the Dividend Talk podcast, I find ’em all a bit boring. So like the stuff I really
[01:25:58] Krys: No disrespect. No disrespect, gentlemen. It’s, it’s, you know, we’re, we’re wild animals. They’re, they’re, uh, you know, seasoned, civilized, uh, human beings.
[01:26:11] Luke: exactly. Exactly. Yeah.
Like we, I, I get most fun of investing in companies like A STS and Tesla and Nvidia and companies that I feel are doing really interesting things in the world. Not companies that are making sausage rolls, but if that puts a bit of dividend money in my portfolio, well, I, I need some of that.
’cause like I’m a retiree.
[01:26:35] Krys: yeah, yeah. You need your acorns. Winter’s coming.
[01:26:39] Luke: Yeah.
[01:26:41] Krys: All right. Badge. Well, thank, uh, I think that was a solid episode. Thanks for not dying on me. Mid, mid air for suffering through your, your malaise.
[01:26:51] Luke: I’ve got a quick, quick pop quiz for you before, uh, before we close the episode. ’cause you know, we were talking about one battle after another and also Tron Aries. I mean, how dare I say those two movies in the same breath? ’cause that in your mind, that incomparable. Um, but have you checked out Tron Aries mode on your Tesla yet?
[01:27:13] Krys: can you say that again? What are you talking about? Obviously not what
[01:27:17] Luke: So, uh, if you’ve got your latest Tesla software, uh, then you have in the toy box, you’ve got Tron tron mode and it is freaking awesome. It’s really good.
[01:27:30] Krys: what? In the toy
[01:27:32] Luke: Yeah, yeah, yeah. It’s really good.
[01:27:34] Krys: Okay, cool. Uh oh man. That, that, I used to have so much, I was one of the first Tesla owners in Austin and you know, that was the thing that I sh I remember, like I was showing people look at all the fun toys in the toy box, right? And of course it gets old, but. I will look into that.
Cool.
[01:27:52] Luke: check it out. Leave it. Leave it turned on for a couple of days and you’ll see the most spectacular thing when you kinda walk away and the car locks. Like, it’s awesome.
[01:28:00] Krys: Okay. Awesome. Badge. Are you ready to become a beast of an investor?
[01:28:04] Luke: I am, and my hangover is gone. Your journey starts here.
