In this week’s episode:
📗 Lessons from 100-Baggers by Christopher Mayer
💭 Monkey dreams of 10x returns, exploring market inefficiencies and why they matter $TSLA $EOSE
🧪 The dramatic fall of Cassava Sciences, the dangers of fraud in biotech, and the importance of robust due diligence $SAVA
🚀 How Rocket Lab became one of Badger’s top holdings and why he’s not trimming profits just yet $RKLB
🎩 Why penny stocks are high-risk gambles, and how to know a penny stock from a company that’s just down on its luck $CHRS
🥃 Badger wins the NVIDIA earnings bet $NVDA
⏱️ Segments:
00:00 Introduction
03:20 NVIDIA earnings bet $NVDA
07:15 Market Efficiency & 10x Stocks
20:58 Lessons from 100-Baggers by Christopher Mayer
30:39 Rocket Lab to the Moon $RKLB
36:54 The Danger of Feeling Like An Investing Genius
43:30 Cancer Sniffing Cyborg-Dogs
47:15 The Dangers of Penny Stocks
59:05 Cassava Sciences: A Biotech Cautionary Tale $SAVA
01:05:38 Upcoming Episodes and Final Thoughts
E56 – 10x Stocks RKLB SAVA
[00:00:00] Luke: Penny stocks are dangerous. There’s a reason this is on the docket because, one of my friends I play tennis with mentioned that she lost some money in penny stocks recently, I think. And then she was, actually, and she was distraught because, like, she got wiped out. I don’t know the details.
[00:00:13] and then, like the penny stock went on to like double or triple and she’s like, oh, I’ve missed out on these gains. like this is just not an area. You want to be investing in, right. Full stop. This is very hard to argue, right. And that’s an incredibly special situation.
[00:00:29] Welcome to the Wall Street Wildlife podcast with Luke and Krzysztof. On today’s episode, Krzysztof is going to tell us about his favorite stocks with 10x potential. Hang out for that one. We are going to chat about the dangers of penny stocks. Maybe one of Krzysztof’s 10Xs is a penny stock. Let’s find out. I am going to review my Rocket Lab position, which is literally going to the moon, and I’m going to sweat the gains. And Krzysztof is going to hopefully reassure me [00:01:00] to stick with the plan. And Krzysztof has a very special Phoenix or Dodo situation for us with a stock that’s doing the opposite of Rocket Lab and potentially going to zero.
[00:01:12] You
[00:01:15] Krzysztof: Most importantly, from the bottom of our hearts, thank you to all our current Patreons. Your generosity in joining our Wall Street Wildlife Jungle Tribe is really helping us make the show better. We’re hiring editors and we’re starting to like get really fancy on y’all. The show’s just going to keep getting better.
[00:01:33] So thank you so much for your support. To, uh, join one of the animal tiers, go to patreon. com. Slash wall street wildlife all one word and then find your inner animal beastie this week We gained oh my goodness. We have a lance p in the tribe. We have a reuben w A hatem, forgive me if I butchered that hatem y [00:02:00] Colby and Lorenz M.
[00:02:01] Gentlemen. Thank you so much. Uh, special. I’m wearing a special, uh, slothy Wolverine short in your shirt in your honor and it really does. Let me just say this that the sloth tier is only three bucks It’s the It’s the tip jar, but you know, that chunk of chain adds up. So if you’re still on the, you know, free tier and you’re like, eh, three bucks ain’t worth it for these goofballs, uh, I’m saying it is to us.
[00:02:28] So, uh, Slothy pride to all you new sloths.
[00:02:33] Luke: know, I’m opening like a short conversation in the DMs on the Patreon when anyone, someone joins and like the thing that is most meaningful to me personally is, Like there’s someone out there listening to our shit. week we record, I used to spend a day doing the editing, like, thankfully we have now outsourced that. And, uh, but there’s really someone there listening to our shtick. So awesome.
[00:02:59] Krzysztof: Yeah, [00:03:00] that’s the whole point of why we’re doing this. So it’s just, it feels good and then, you know, it’s a virtual circle because the more people that learn about us and about each other, the community builds and it just gets better. So, uh, thank you all, uh, Patreon animals. Oh,
[00:03:18] Luke: a glass. Actually, today’s Monday is always my, um, fasting day, so I have like zero calories on a Monday, but I shall be opening a glass of this tomorrow. If you’re not on the YouTubes, I have a beautiful bottle of Kochi which a kind monkey sent me by post this week because I won a bet. What did I win?
[00:03:38] Krzysztof: yeah, it was not out of kindness. You, you very flawed you, you, who takes advantage of, of, uh, vulnerable, gentle creatures. I lost, uh, I lost a bet to badger his closing price post NVIDIA earnings. of [00:04:00] uh, it was 145, right? was very close. I think NVIDIA closed at 144, 67. If, uh, if the memory bin serves or somewhere around there, I thought it was going to do another one of those 10 percent exceeding expectations, but, uh, that did not happen.
[00:04:17] So, In regard to the earnings themselves, I think the most important thing I heard was not only did they meet and beat expectations because that’s given in the market already assumes that would be the case, but it’s like, you know, what does the future look like? And NVIDIA is coming out with the, uh, I think of it as the even fancier toys and they’re seeing that.
[00:04:40] Uh, demand is not going to be an issue whatsoever, that it’s all supply constrained and when you have that situation, that means the revenue and the margins are going to get what either stay the same or get even better and that the whole AI train is like full steam ahead and NVIDIA is [00:05:00] the backbone of it.
[00:05:01] So the market. Had every reason to keep the shares as lofty as they were. And, um, yeah, no reason to sell.
[00:05:11] Luke: It’s interesting, isn’t it? Because, it’s a great reminder that valuation is such an important part of an investing framework, if you want to be effective in the long run, because. Like by all accounts, Nvidia have put in yet another incredible set of results, blue market expectations out of the water, like there’s so much demand for their product, but actually the stock price like stalled, it didn’t really go anywhere. And it’s because there is so much growth and anticipation built into today’s valuation. Like it’s a, is it a value trap? Is that, am I using that term in the right way? Or there’s some other term for it where something is just, that’s the wrong term. What’s the right term?
[00:05:51] Krzysztof: Well, no, let’s, that’s good. Value trap is the opposite.
[00:05:55] Luke: Right.
[00:05:56] Krzysztof: it’s, uh, in this case, something like Coherus [00:06:00] could have been a value trap because people are like, Oh, it’s so cheap. So you pile into a bad company, but it only gets cheaper, not the situation with coherence, but that would be the more appropriate, uh,
[00:06:11] Luke: Okay.
[00:06:12] Krzysztof: Label
[00:06:12] Luke: All right. There we go. Thank you for educating us, but nonetheless, is an expensive stock and even when it kills it, like you, the, the company might do brilliantly, which it is, the stock today’s valuation might stall, might trade sideways, might heavily dump off. So this, this is the, the risks and perils of investing in highly valued companies.
[00:06:35] Krzysztof: right. Nvidia though is such a special case because it’s the company
[00:06:40] Luke: care.
[00:06:40] Krzysztof: that’s kind of reinventing the world at the moment.
[00:06:43] Luke: like it is, it is until it isn’t right. Yeah.
[00:06:47] Krzysztof: you and I sold out because of valuation reasons and we were wrong to do so, but, uh, that’s because we have a lot of experience when everything is rocket ship to the moon until it ain’t like you said. [00:07:00] Uh, but, but again, I’ll just say every so often you get a Google or you get an Amazon or you get an NVIDIA upon which the entire world, depends.
[00:07:10] So,
[00:07:10] Luke: on. All right. Well, maybe you’re going to tell us about a company in this next segment that we’ll be having that same conversation about in five or 10 years time, because you’ve got a bunch of 10 X investments for our listeners.
[00:07:23] Krzysztof: well, so I want to, I want to cue this up, uh, with, uh, maybe a longer winded setup,
[00:07:32] Luke: All right.
[00:07:33] Krzysztof: you whooped my ass, something silly in year one, because you invested in companies already performing well. And then they just kept performing or exceeding expectations. And then the market got very excited about the shift in interest rates.
[00:07:50] And now with the new administration coming in, the market’s continuing to be very frothy. So you, you whooped me sort of fair and square in terms [00:08:00] of the strategy we both know and love. Just executing. I did not, I’ll say long time listeners forgive the repetition, but, I, this needs to be said, I think again.
[00:08:11] I did not intend to have the portfolio that I have because it’s so far different from what I’ve usually done. However, over the past year, it’s kind of amazing to me what I’ve ended up with. And, and it, and it was just this weekend where, you know, I was looking at our results and, you know, thinking things through that a light bulb went off off my head.
[00:08:37] And it’s that, without exception with only one asterisk, all of my holdings are, I think legitimate 10 X potential companies. And that means that. The gap between what I see in terms of the fundamentals and the potential worth is so wide that in the [00:09:00] market hasn’t yet caught on to this or not an end or not enough time has yet passed that they’re all sort of like coiled springs.
[00:09:10] And the amount of time it might take to get to the 10x on my, if you’re a Patreon, I made a very fancy spreadsheet with a whole column, lots of pretty colors that said my estimated time, best case scenario in which we might see the 10x. And some of these are as little as two years. So I think what I’m trying to say here is it was a surprise to me that I could legitimately carry categorize all of these as, as potential 10 Xers.
[00:09:40] I also included the column with my completely out of the ass probabilities, you know, like, what do I, Really think like what the odds are. I bet you’re going to squeeze my, my, my shoes and pause about, about this column. But I was like, I was really trying to be honest, you know, like, how’s this? how’s [00:10:00] this look like?
[00:10:00] Am I really, you know, just indulging in a whole bunch of hopium.
[00:10:04] Luke: Yeah.
[00:10:04] Krzysztof: so we could talk about those. We could talk about those. You hold on, you’ll have your turn. And one more point I want to say, two more points. It’s not that I don’t think your stocks, Luke, can’t also 10X. So that’s also a sort of weird gray area because if your companies keep executing, like Rocket Lab, for example, which we’ll talk about, right, which could have easily been one of mine, though I screwed up with options and won’t get into that again.
[00:10:33] But this does lead me to a big principled idea, which is, is the market efficient or not? And all investors always squabble over this, right? The only way my, this current king of the jungle portfolio makes sense for me to say, these are potentially 10 X in as little as two years is if the market is inefficient.
[00:10:59] And I [00:11:00] truly fundamentally believe that. And I believe that because I’ve invested for 25 years. So all the cases that have come up over and over and over and over again, where there are some situations. Where despite all the information, despite all the price data, despite all the quants and blah blah blah, there’s still a fundamental mispricing in the equities if you have done your due diligence and you kind of understand what the ground is relative to what the more arbitrary prices.
[00:11:33] Okay. So I saw on our Patreon that , after I posted my portfolio, we got the big old Badger does not approve of monkey shenanigans report. So have at it buddy.
[00:11:46] Luke: All right. And let’s put a, we’ll put something on screen here and we’ll just list out your companies. Are you happy for us to share like your, all of your columns? Because a couple of them are interesting, right? You’ve got the stock name got is a 10 X possible, and then you’ve [00:12:00] got your odds of 10 X and the minimum time to making a 10 X. Can we, can we stick those on the podcast or is that for our Patreon members?
[00:12:07] Krzysztof: you know what, at, at this point it’s, okay, let’s, let’s share with everybody, you know, Patreons. You guys will bless you with other all kinds of good stuff in the future
[00:12:19] Luke: All right. So here it is. Here’s the list. Coherus EOS, Relay Therapeutics, Iris, Tesla, ASTS, SpaceMobile, and Chainlink. There’s your six. I haven’t actually got any major problem with any of these six, particularly Tesla, which I own. and I think they’re interesting opportunities and I like to, I’ve got like a venture sub portfolio in my portfolio and I call my options like my gambling side.
[00:12:46] That’s really kind of like my venture investments. It’s the stuff that I think like nine out of 10 of my venture investments are going to fail. They’re going to trade sideways. They might even go to zero. That is not going to help my overall returns, but like that one [00:13:00] in 10 might deliver such returns. A bit like your 10 X’s here. Like I’m looking with that sub portfolio, looking for like a hundred times returns, right. and you find that one, you know, one in a blue moon and that covers the losses of all the rest and it really pays you off big time. and so this is a legitimate strategy. But the bit, and you know, you know, I was going to lay into you because in our Monday dashboard, you will see my comment, your odds of 10 X column hints at mental illness, but what are you smoking that you think? Let’s, I mean, let’s just take one that we talk about over and over, coherence biosciences, right? And I’m, I’m supportive of that. I now have like coherence options. I want them to win. There is no way on earth that 75 percent of the time in the next two years, they’re going to 10 X 70.
[00:13:55] I get that. They could, that ain’t like a three quarters of the time.
[00:13:59] Krzysztof: [00:14:00] Okay, I think you’re misunderstanding or maybe let’s nuance what my 75 percent means
[00:14:05] Luke: Okay.
[00:14:06] Krzysztof: Because, or maybe we are saying the same thing, but we’ll just, uh, arrive at a different conclusions. I know the fundamentals of Coherus inside and out. And it’s not me saying that this is, say, a random biotech that is, say, pre FDA.
[00:14:25] And that the odds are just 75 percent in their favor because that would be the kind of, like, at best I should probably say like 50 50, you know, or whatever that, I don’t even know what the stats are between FDA approved drugs or not, I could look that up. So you would, you would be right if that were the case, if this was say, any, biotech.
[00:14:49] But remember with Coherus. This is pure commercial execution, which is their great strength. And now we have two quarters of data already in [00:15:00] hand that tell us the execution of commercialization is going along better than expected. So why did the stock drop so badly? Because another black cat crossed their pads and they had this manufacturing labeling, stupid issue, which they recently said is Now resolved, and it’s now back to the ramping process.
[00:15:22] Most people, right, on Wall Street, all the analysts, don’t know anything about that. The algorithms saw like a massive decline in price, and the share price got as low as 70 cents just a month ago, as I was loading up, right? As I was loading up on these shares, down to 70 cents. Today, interestingly, it’s up another 21 percent.
[00:15:42] So right now it’s at 1. 32, so I’m almost at 100 percent gain in just a month because the fundamentals are, you know, what they walk, what they are, and eventually this, what looks like a gambling position really is not. [00:16:00] so I put 75 percent because it kind of really felt to me like the same in poker. I’m holding aces.
[00:16:07] Knowing what I know, I could still lose, but it’s like, the reason I would lose would be mostly bad luck, which, again, could happen, right? But I wasn’t gonna lose because of, say, the unknown of, FDA approval. That’s already in the past. And, more to your point, Badger, Coherus could go from, this is the other point, the valuation, right?
[00:16:34] At what point are we starting? So Coherus got down to, I think it was 80 million valuation, 80 million based on just based on the basic math of how much of their drug is needed and how much they’re making. That valuation could easily be 800 million. That’s the 10 X.
[00:16:53] Luke: don’t doubt it.
[00:16:54] Krzysztof: Right on that price just on those drugs Forget any of their [00:17:00] pipeline drugs that are really promising I’m, i’m not even adding any of that because if I added that this could be a 20 x 30 x Because then you know, then the numbers get really silly but forget all that.
[00:17:10] This is basic like can they execute? And so, you know, with the poker thing, maybe not ACEs, maybe we could throw in the debt convertible notes hanging over their head in 2026, but we’ll know in 2025, if they execute, that’s going to be fixed with cash and, you know, refinancing, whatever that’s going to Wall Street’s going to forgive that overhang because the fundamental business will appear so strong.
[00:17:36] So I was thinking like, like I used to do, like, what kind of hard cards are these? Maybe not aces, maybe these are Kings or Queens. And so, you know, that’s still starting the hand with what? 70 percent odds? I don’t know. What is, what is, uh, the odds of, uh, depending on how many people are at the table, right?
[00:17:55] I mean, all that, but,
[00:17:57] Luke: Okay, you’re getting a bit more grounded now. I think you’re [00:18:00] coming around to the idea that, like, 75 percent is not the right number there. No argument with what you said, and I’m not going to try and dispute the thesis with you. you know, when you put this together, like my comment on mental illness was like a little bit jokey, but also like a, maybe a bit on the nose and that’s why you’re kind of, you’re bouncing around a bit and you’re, uh, listeners with Krzysztofe has to keep the towel on the desk because he’s like, When I was doing the editing, he’s like banging the desk with a comment just like this.
[00:18:29] And it’s a fricking pain in the ass to fix in the edit because I got all these like noises from the jungle and he’s in Austin. So yeah, he’s banging his towel right now, but you’re probably sweating into that towel as well. Right. Because, like if you were realistic, like, okay, we just had a short conversation about it.
[00:18:45] I haven’t pushed you on the thesis at all. I’ve just asked you to justify your odds of 10 X. Well, what should that really be?
[00:18:51] Krzysztof: can we, well, you know what? I’m going to stand my ground on Coherus.
[00:18:55] Luke: All right. Okay.
[00:18:56] Krzysztof: I am. And I’m going, and it’s not because, uh, tell me, [00:19:00] tell me if this is. It’s not that if you repeat this experiment, it’s not, I think you said something earlier about your like three out of four times. This will come good for some reason that feels off to me because it’s not like about, there’s something about it that feels like these kinds of situations, three out of four times success is too high, which I would agree with.
[00:19:24] It’s that when you add all the things that I just mentioned together in this particular situation, not all situations, it’s not a repeatable scenario. Given this data, it seems like the odds of success are way higher than 50 50. And so I picked 75 as a kind of random number signifying again, what ACEs feel like.
[00:19:48] Luke: Okay. All right. Fair enough. Fair enough. Yeah. And it’s, it’s a, it’s a made up number, so it doesn’t matter. It doesn’t matter
[00:19:53] Krzysztof: Yeah,
[00:19:53] Luke: there, but it does sort of hint at the way you think about the company like, I suppose if nothing else, right. [00:20:00] I’m just being, like an opposing voice because I don’t want people listening to this podcast, looking at this and going, Oh, you know, all in on Coherus.
[00:20:08] Cause those kinds of actions you might do really well, but they’re much more likely to F you up.
[00:20:14] Krzysztof: yeah, and actually the, the, as poker players, we know the pain of losing with aces and the problem with a great hand at the start is you could still and will lose your stack 20 percent of the time or whatever it is, right? So going all in, no matter how good your hand is. needs to be very carefully calibrated in terms of your larger risk profile and where you are in life and so on and so forth.
[00:20:43] So, these Kind of probabilities should really be taken with as badgers suggesting a lot of other Contextual pieces of data that only you know,
[00:20:56] Luke: Yeah. Yeah. Yeah. I think there is a good, if you want to [00:21:00] read more about this topic, and if you want to go out and look for Like 10 baggers or a baggers of your own, right? There’s an, there’s an excellent book that’s well worth a read by a guy called Chris Mayer, called a hundred baggers, subtitle stocks that return a hundred to one and how to find them. And I haven’t read this for a couple of years and I put it on the desk because I should probably reread it. Um, but I, I remember a couple of years ago I did a podcast episode with my buddy Albert, where we talked about this book and we both read it and we pulled out some notes on. Chris’s, the author’s attributes of a hundred bagger that he found.
[00:21:37] I thought it might be worth just like recapping them. I haven’t actually read my own notes for a couple of years. I’m just going to kind of read, read some stuff I pulled out here. you’re unlikely to find a hundred bagger in like a mega cap, like Apple, Microsoft, Amazon, right? That’s just a given. on your list, even Tesla is a bit of an outlier because it’s a trillion dollar market cap. Like it’s going to be hard to get to 10 trillion. [00:22:00] Chris also observed that, now we’re going to get a bit detail. Maybe I’ll start with an easier one, like high margins. You’ll typically find like your massive returns, your hundred baggers, your 10 baggers in typically in companies that have a high gross margin.
[00:22:17] That’s kind of like, you know, you make, know, bottles of vermouth. And then it costs you, you have to buy the raw materials and you have to buy like the stuff to make one unit of a bottle of vermouth. So the gross margin is like the amount of money, say it costs me, like you bought this for me, I think it was like 30 pounds.
[00:22:35] Very kind, very, it’s a it’s a good bottle of vermouth. Thank you. Um, and maybe
[00:22:38] Krzysztof: it was more than that. It was more than that You’re not a cheap bet.
[00:22:43] Luke: maybe it costs the manufacturer, like booze is probably cheap, but there’s like tax and other stuff. Actually, no, it’s not tax. It’s like the cost of manufacturing the thing. So. Uh, like the gross margin on a bottle of vermouth. I got no idea. It might be like 50%. Maybe it costs them 15 to manufacture one unit.
[00:22:59] They sell it for [00:23:00] 30. That’s the gross margin is 50 percent gross margin. Like companies that have a high gross margin, they hang on to more of the money that generate from selling products or services. That’s typically like good hunting ground for like mega return opportunities.
[00:23:18] Krzysztof: In fact badger. May I interject just for one second? Uh the company that I know the least at this moment just because it’s so new to me AST SpaceMobile, one of my new king of the jungle companies that I Highlight on this new fancy spreadsheet. The reason the real reason that I’m This is a case study in that in my initial research It seems like their gross margins might be somewhere around 90 percent because it because really the thesis is that once the satellites are up the kind of Call it majority of the capex is done.
[00:23:56] Then it’s a flip of the switch and then instant, [00:24:00] uh, revenue generation from the Revenue splitting between the you know, cell phone providers and AST Space mobile. So that’s exactly why, though. I only gave the odds of the 10 X to ASTS at 35%, only 35%, because I still don’t really know enough though. There’s a bunch of, there’s a bun.
[00:24:25] It’s another one of these culture stocks that there’s a lot of talk about this company and there’s some wild, wild price projections on the interweb. So, um, who knows?
[00:24:36] Luke: And let’s pick up a couple of other Chris’s criteria. So typically hunting grounds are companies that reinvest in themselves. So they take like free cashflow. It’s like the money left over. When you’ve your bottles of vermouth and sold them and you’ve, you know, you’ve done, you’ve done everything to operate it.
[00:24:55] You’ve like built your factories and you’ve paid all your research guys who are [00:25:00] like tasting new different varieties or all the stuff you need to run the business. You’ve got money left over. board can decide what to do with it. Typically reinvest it in themselves, maybe by doing like shared buybacks, things like that, then that typically gets the compounding engine, like the flywheel spinning even faster. And those, that tends to be something that companies that deliver like a hundred times return tend to do to make accelerant growth.
[00:25:27] Krzysztof: Apple right now is a good example, right? Just off the cuff.
[00:25:29] Luke: yeah,
[00:25:30] Krzysztof: Uh, so much cash, just buying back massive amounts of shares. This was one of our former seven investing colleagues, kind of, uh, one of his, Matt Cochran’s, uh, bread and butter, like, uh, share buybacks
[00:25:43] Luke: yeah.
[00:25:43] Krzysztof: and capital allocation, as a strength.
[00:25:46] Luke: Yeah, and actually you, you, you gave Matt a shout out there, like good one. Um, we are hoping to chat to Matt on a future episode of, of the podcast. So if you’re a fan, like hang around, we’ll have him on hopefully, uh, on the run up to Christmas. [00:26:00] what other criteria does Chris pick on? Like valuation, maybe coming back to our conversation at the start around NVIDIA. Like you, you really want a company with like a lower valuation multiple, like the growth isn’t priced in yet. Yeah. and so, uh, yeah, you know, that is certainly the case with some of your beaten down companies like EOS and Coherus, like there’s not a lot of, expectations built into their share price.
[00:26:25] and so that’s the kind of thing you should be looking forward to. then the last item that Chris pulls out is a return on equity, which is, I don’t want to go too deep on this. It’s a little bit more of a complex concept. Essentially, it’s like a ratio of, net income, which is like the money the company has left over after doing bit like free cashflow, slightly different, divided by shareholder equity.
[00:26:48] And there’s, there’s too many complex stuff to really explain that one, but essentially it’s kind of like a measure of business efficiency. You can’t use it for every kind of industry, every kind of company, but return on equity can [00:27:00] tell you a little bit about, the way the company is operated. yeah, so anyway, some of
[00:27:05] Krzysztof: Yeah, you know, a lemonade stand example might, might work, you know, like if you, if you go around trying to start up a lemonade stand and you go to each neighbor’s door and everyone gives you only 1, right? Then let’s say you have 10 in your pocket, you could buy only some amount of lemons, right? And so you’re sort of, we know lemons aren’t a great business, right?
[00:27:31] You’re not, no one’s going to pay 1, 000. For your cup of, lemonade. but if somehow, I don’t know, in this example, everyone happened to give you, well, same amount of money, but all of a sudden drinking lemonade cured cancer. Then with the same amount of lemons, you would, your business could potentially be worth a lot more because that initial equity could stretch a lot further.
[00:27:58] so, but, you know, most. [00:28:00] Things remain rational. So you can’t do that much with ten dollars of lemons. So that is really gonna put a limit.
[00:28:07] Luke: you, and you can’t use that like robotically for every kind of company. Like some kind of companies need a ton of stuff to just to operate like massive factories and things like that. Uh, or they need, you know, like not just lemons. They need like. different bits of highly specialized equipment to produce like one glass lemonade. And so your return on equity could look really ugly ’cause you’ve got all this CapEx sitting around. but it doesn’t necessarily mean it’s a bad company. It’s just a sector where that measure, have to think about it in a different way, generally in relation to other similar companies. You can’t just kind of use something like. Voic or ROE and look across like lots of different industries and then say, Oh, these are better and these are worse. Anyway, it’s probably beyond the scope of the kind of conversation we’re trying to have. But essentially, like, well, essentially, I suppose I’m going to promote the book, 100 Baggers. Like if you, if this [00:29:00] topic interests you you want to know more, like go buy Chris’s book and check it out.
[00:29:05] It’s a good read.
[00:29:06] Krzysztof: Yeah. And I think this is a great moment to, to reflect on our journey so far that it’s, it’s what I said at the beginning. It’s amazing to me that a year into our show. You and I have followed very opposite, not, I’m sorry, not opposite. It’s just that our investing paths have taken this interesting, almost like divergence, but there’s a lot of merit to both.
[00:29:32] they feel very different. And so, uh, and there’s a time and place for each and you could do different combinations of both. And so I think that badger suggestion that our listeners check out that book is very good. And I really highly would love it, or I encourage everyone if Uh, our Patreons were to check out this little portfolio, [00:30:00] uh, that I made about my 10Xs and the commentary I made and post some questions or comments or feedback or blind spots or anything like that.
[00:30:10] Because it’s amazing. If I’m right about any of these, there is serious, serious money to be made. And it’s kind of shocking to me in this moment that I think I’m right about most of them. So time will tell, but, yeah, I’m not out, uh, you know, uh, I’m not yet in the market for any yachts. Quite yet, but you know, that wouldn’t be a bad fate for us to float around, record some wall street wildlife from, you know, a yacht in the Mediterranean, one of these days.
[00:30:39] Luke: Well, maybe, uh, maybe I will be able to fund that if my rocket lab investment continues to go orbital the way it has been for like the last year or so. Uh, I was happy to say I was, I wasn’t in this company early. I think I’ve been buying nice and steadily when it’s been in the [00:31:00] pits at, with a peak pessimism and suddenly this one has caught fire. I’m going to pop something up on screen because I kind of want your, uh, I don’t know. I either want a hug or I want like a kick in the ass. I don’t know which I’m looking for here. Um, but, so here’s a chart. Which shows, uh, when I’ve, where and when I’ve bought Rocket Lab and you can see, uh, I’ve bought it five times down in the kind of four bucks or so. And well, like if just before we started recording today, it was like nearly 26 and it’s given some of that back from the free market. I just want to pick on a couple of my comments because I do think this is, this is interesting. Like you. I, I always, well, we both, we both always advocate having a process and then having a way of improving your process. And so like a key thing in that is like you need the data. So whenever I buy or sell anything in my main stock portfolio, I just write [00:32:00] like at least a one liner, sometimes more just to say, what was I thinking? then back in February this year. I bought some stock, like I added to my position said, the company has just issued convertible deck debt.
[00:32:15] The stock has crumbled, happy to add this high conviction, long term holding. And then I added again in May at 3, 88 decent results. Stock is down 5 percent as revenue is a slight miss and neutron delayed, happy to keep nibbling into strength. Well, I just bought this one slow and steady, even actually adding just like two months ago. Uh, part of moving some money around the portfolio. this has come out of nowhere for me and it’s now materially my second biggest position and it’s in danger of becoming my biggest position and like my biggest position has always been intuitive surgical pretty much from day one. And it’s taken me like over 20 years to build up [00:33:00] like the real dollar number that that has turned into.
[00:33:02] And it’s, know, it’s a chunk of change. and now Rocket Lab is like chasing its heels and might be my biggest stock position. out of nowhere. so like I feel like I’m going to have to trim this at some point, but at the same time, I don’t want to interrupt compounding because like Netflix delivered life changing return to me.
[00:33:24] Then Shopify took over and then ran with like the baton in the relay race. And now Shopify has handed off the baton to rocket lab in my portfolio, at least. And, you know, I don’t want to, I don’t want to be. waylaying that stock on the way to the finish line because this is how we get to like recording episodes on yachts, right?
[00:33:44] Krzysztof: Oh, I can’t wait for that. I think I have good. So are you, are you inviting me to give you like personalized non advice?
[00:33:52] Luke: yeah, yeah, yeah. I won’t see you tell me anything.
[00:33:54] Krzysztof: Yeah. So this is one of those cases where I know you and I [00:34:00] know your life situation and I have more data to work with. So a couple of things to remind. you and us both. For example, uh, I, I could just do this from memory.
[00:34:13] I don’t need to pull up the chart, but it wasn’t too long ago when Netflix plummeted severely, uh, for whatever reason it was, uh, who knows, doesn’t matter. Likewise, Shopify, right?
[00:34:28] so no matter what any company, especially if it’s still, you know, It’s not in that capital allocation stage where they have more money than they know what to do with Safety stage that anything could happen confession I sold My rocket lab shares in my real world portfolio Again, right at the stupid, like right before the hockey stick trajectory, [00:35:00] because I needed to find more cash to add to Coherence.
[00:35:04] So net net, I’m still doing fine because Coherence is now, you know, making up the difference. You don’t need all your stocks to win, etc. That’s besides the point. But of course, I have an egg on my face for selling Rocket Lab. Again, besides the point. Given, I think, Badger, where you are in your investing journey, in terms of like, what you need your gains to be, don’t forget that Rocket Lab is still a baby.
[00:35:33] Rocketry is explosive. What will can go wrong at some point, probably, you know, what can go wrong will probably go wrong. And I would feel really bad for you. If we’re this close to a yacht. But the reason we’re not on a yacht is because this position got to something like 12 percent or, you know, something really, really big because of the [00:36:00] hype phase, what, why not knowing you already have enough, right?
[00:36:07] Knowing that it’s now more about risk management as a, as a heavier thing to think about, why not kind of call this like already a kind of victory and reallocated. Real, take some of that risk off to more of the defensive positions, the sleep well quotient at night. Because if I were to argue your position for keeping it at number one, it would be, it would be start getting close to my greatest investing mistake, which is I wanted more, I call greed.
[00:36:40] The greed. Like, oh man, I’m really good at this and I’m winning so hard. Why not, you know, get to whatever, you know, in greed. usually it doesn’t work out.
[00:36:50] Luke: that is, that’s actually a, a really interesting comment. I didn’t know if I was, I didn’t put this on the docket. Cause I don’t want to be like braggy with it, but I think there’s like something here that is [00:37:00] also in the back of my mind, like, frankly, right now I feel like an absolute investing genius, but probably everybody does because stocks are like wildly high right now. compact, my Kaga, like my compound annual growth rate from years, it was, it was like 26%, which is kind of ridiculously high. For like 20 years, almost, well, 18 years. And then post COVID pan pandemic. I took a battering and my, I, I wiped out like 40 plus 2 percent of my portfolio just after I retired.
[00:37:36] I’ve told the story before in 2022 took a long time to get back. I’m now back above that point. Like I’m now a new all time high and like every day I’m at a new all time high. and my CAGA went down to like 19 percent because I took such a hammering, like 19 percent is still like, like world class results, but relative to my performance up to then, like I suddenly got smashed. And I remember back then thinking [00:38:00] like, I’m a genius and now I’m kind of feeling like that again. So I’m This is hubris, right? And I’m, I’m, it hasn’t tipped into doom yet. So I’ve got a chance to like, as you say, take some money off the table, give myself a slap and say, you’re not a genius. You know, you’re You’re just, this is just investing, right?
[00:38:20] Long term investing. You’re going to have periods in the cycle when you literally can’t make a wrong decision. Everything is just going well. Every, every stock you have is going through the roof and then they’re going to be periods in the cycle when like the ass fall out of everything, your fantastic companies are still performing, but the stocks are in the bottom of the barrel and you feel like, you know, like everything is going wrong and you can’t, how do I turn this around? Like, here I am now. Saying I probably need to get ahead of the ass falling out.
[00:38:51] Krzysztof: In fact, uh, another confession for maybe some of our new listeners. If you don’t know this, I’m a, I’m but a [00:39:00] humble educator. You know, I work as a university professor. I was a high school teacher out of college grads, graduate student for most of my, uh, thirties, twenties, thirties. Right. So I’ve never had a.
[00:39:12] Fancy corporate job where I was making bank, but I still view my investing skills could have retired Had I taken money off the table in 2021 But it’s exactly this point when things are going up Monkey’s head got way too big, and I was like, Oh, obviously this is gonna keep going up, because it is, and I’m such a genius.
[00:39:37] This is, this is exactly the moment, right? We now know, both of us know, that we’re not, and it’s probably, The one of the best times to just lower the risk profile. And if I could not advise you one more time, you know what I would do? I would take whatever cut that rocket lab position by whatever. [00:40:00] You’ll decide the right amount, but whatever that is and invest, spread it equally in all of monkeys, 10 X positions.
[00:40:08] That way we’d have, we’d have a fleet of yachts. We take over the whole mess.
[00:40:17] Luke: Okay. Yeah, yeah, yeah. You’re right. You’re right. I will do that. I’m not going to do it just yet. So what I’ve like, I’m trying to bring also like an element of not being too market time Marie and like, it’s not my biggest position yet. Intuitive is still my biggest position by a good margin. So like, it’s like 16 percent allocation versus 10%. So I think if this gets to like a 12 percent allocation, I’ll probably trim it. And because it’s not, cause I don’t believe in it just because it’s, it’s a tiny little company and like stuff can go wrong, things go boom. And they they’re, into their neutron program in 2025. We don’t have a date for the first launch yet, but I’m definitely gonna take [00:41:00] some money off the table just before that, because like much as I hope Neutron’s going to be seamless, like it’s a big complex inflection company that’s going to cost them a ton of money, especially if things go wrong, they’ve got a ton of money to pay for it.
[00:41:13] Like I think they’re in good place, but you just got to manage risk. I will say as a caveat as well, so I’ve got, I’m not going to name any of, name and not name and shame, name and like celebrate, I’ve got an investing WhatsApp group with a bunch of very close friends. And, uh, we, I, I sort of persuaded them all to buy rocket lab stock like a week ago, two weeks ago.
[00:41:34] And we’ve now amended is now used to be the WhatsApp group was investing family. It’s now investing family rocket ship emoji. And now they all own the, even the ones that don’t really buy it. They’ve all bought like, uh, an entertainment stake in rocket lab. So we all own the rocket lab now. And I said to them a couple of weeks ago, Like even though I’m, I’m sitting on like a five times return now from like the lows, like this stock still [00:42:00] has a ton of value built into it. And awesome. Like two weeks, the guys are all up like 20, 30 percent almost. So it’s going well. Rocket ship emoji is going well. I am going to take some money off the table, but that’s not because I don’t believe in the company. It’s portfolio management and you’ll see that because I’m going to post that on Twitter, uh, cause I’m transparent every month or every six to eight weeks. And I post like what I’ve done and why, like, I’m going to have to start trimming this one, but that’s personal reasons. And that’s exactly why you can’t just copy another investor. You’ve got to understand and you’ve got to take the actions that are right for you.
[00:42:33] Krzysztof: Yeah, brilliant. Uh, I hope to ask you the same exact question in maybe a year’s time. And this is a preview for an interview that we already talked about, but we’re hoping to have a special guest to talk to us about Chainlink, which is my number one position in the investing world. Uh, I’m begging all of you listening to this to do go and Chainlink labs.
[00:42:58] Go to their official [00:43:00] site and just start poking around and I hope That call it in a year’s time badger. I’ll come to you with the same exact question saying oh my god I’m up, you know a thousand percent And do I sell now? Or, you know, and you’ll be able to provide me with the same kind of, uh, you know, I feel like a genius.
[00:43:21] What do I do?
[00:43:22] Luke: Awesome. Look forward to it and look forward to that interview. Uh, you’re the guy you’ve teed up to chat to us. It looks like an interesting fella.
[00:43:28] Krzysztof: Indeed.
[00:43:30] Luke: All right. But you, you know, you think these stocks are great. Shall I tell you about the greatest investment opportunity that the whole of the Twittersphere can offer you right now?
[00:43:40] Krzysztof: Yes. What is it?
[00:43:42] Luke: Have you heard of a startup called Dognosis?
[00:43:47] Krzysztof: Uh, no, but I like dogs.
[00:43:49] Luke: Do you like dogs? You are not going to like this company.
[00:43:52] Krzysztof: Oh, no.
[00:43:54] Luke: You say, you know, like a furry friend. I like, kind of like the idea, but it’s just such a dumb idea. Come on, let’s face [00:44:00] it. And you see a ton of this. When you look at private investments, you just see stuff that you’re like, no, sorry guys, that ain’t going to work out. and like the story here is they, you know, what dogs are. And you know, like there are stories and there’s evidence that like our furry friends do have such incredible olfactory, like sniffing systems that they can detect diseases in humans, like cancer, for example, like dogs can sniff out cancer and, you know, impending doom. and I think that’s legit. I think I haven’t done, I haven’t looked at the science. I think that is legit. and then you might also have heard of brain computer interfaces and there’s like some great. Um, like steps being taken by one of Musk’s companies, Neuralink, like Neuralink is actually putting like actual, electrodes into the brain, tens of thousands of them. And then there are individuals today who can control their computer pretty effectively move the mouse, click buttons, literally just think by thinking. So that’s like incredible real progress. Brain computer interfaces are real. There [00:45:00] are much lower resolution versions of brain computer interfaces, which are literally like a skull cap. You stick on the outside of your head and then using AI, they try and read something about your train of thought. I, you know, I, there’s not enough resolution there for me to ever believe that’s going to deliver. At least with current technology, next 10 years, anything like being able to control a computer and move a mouse and click a button. Or anyway, these doggnosis guys have put these two things together and they’re now outfitting their pet dogs with brain computer interfaces, like a hat on the head. And then they’re, uh, using the feedback from the dogs, sniffing cancer patients, I think, to sniff out disease. And then they’re going to, uh, build a bunch of models around this and have like cyborg dogs, Sniffing out cancer.
[00:45:45] What do you reckon?
[00:45:46] Krzysztof: Wow. I’m just, as you were talking, I’m, I went to the website and I’m looking at some of these pictures and I reckon. You assume that I wasn’t going to like it because, you know, it’s putting funny hats on, you know, [00:46:00] these beautiful, uh, creatures, but on the other hand, I then, as you were explaining it more deeply, Badger, when I go on my morning runs in the neighborhood, there’s a blind man who is always led by his dog and it just melts my heart each and every time, like that true symbiotic, uh, love that, that happens between man and, and, companion.
[00:46:27] And I kind of, I don’t know, I’m not as opposed to this as I, as maybe you thought I would be because there’s something like, you know, dogs are such pure love. That maybe, maybe after they get past the funny hat, you know, like if they could save the lives of their masters and humanity, that they will be all for it.
[00:46:47] And it’s kind of like, they get to be even more altruistic than, than before.
[00:46:52] Luke: All right.
[00:46:52] Oh, there’s a, there’s a, it’s not going in my portfolio. I can tell you, but there’s, if you want to get your venture investing journey started, you got the, [00:47:00] uh, you got the website now.
[00:47:01] Krzysztof: so you said this is, uh, another one of these private companies.
[00:47:04] Luke: It is. Yes. Yeah. I just, I literally, this one I just saw on Twitter. Cause I’m,
[00:47:08] Krzysztof: Okay.
[00:47:09] Luke: regularly for, uh, companies raising in the private sphere. Yeah.
[00:47:13] Krzysztof: Okay. All right. You wanted to talk about penny stocks.
[00:47:18] Luke: Oh yeah, I did. I did. okay.
[00:47:21] Krzysztof: This is right up my alley too.
[00:47:23] Luke: good. All right, good. Right. Penny stocks are dangerous. There’s a reason this is on the docket because, uh, one of my friends I play tennis with mentioned that she lost some money in penny stocks recently, I think. And then she was, actually, and she was distraught because, like, she got wiped out. I don’t know the details.
[00:47:40] and then, uh, like the penny stock went on to like double or triple and she’s like, oh, I’ve missed out on these gains. like this is just not an area. You want to be investing in, right. Full stop. This is very hard to argue, right. And that’s an incredibly special situation. This is just right. Typically.
[00:47:59] Well, okay. [00:48:00] First of all, what do we mean by a penny stock? Right. Start there. So like,
[00:48:05] Krzysztof: Can I, can I take a swing at this?
[00:48:07] Uh, actually because I’m going to argue, I’m going to offer the counter argument to this, but it’s sophisticated. Let’s start with the basics. I think technically Badger, the definition of a penny stock is any stock on the market. that is trading for less than a dollar.
[00:48:22] Luke: Yeah. Like in that range, like a couple up to maybe a couple of bucks, like it’s a bit of
[00:48:26] Krzysztof: No, no, no, no, no. Because actually, curiously, because I’ve, I’ve gone through this, uh, personally, there’s a ticking clock on the market that says, if your stock trades below a dollar, for I think it’s 30 days or some whatever period of time. Then it’s at risk for delisting and a bunch of regulatory clocks start ticking.
[00:48:50] So then it needs to end a day’s close above a dollar to reset the clock. So a dollar is for sure the [00:49:00] cutoff.
[00:49:00] Luke: Okay. Fair enough. Yeah. And it’s literally as simple as that. Right. It’s the stock price. And it’s something instructive. Well, maybe like, this is a alluring, like, why is it alluring to invest in penny stocks? And like, if you want to know about what penny stocks, just go and watch like the Wolf of Wall Street.
[00:49:15] Right. Cause the whole, the whole shit was like this guy making bank by selling like literal shit codes. This isn’t like diversified dog shit we were talking about last week. This is literally. Like, garbage that’s worth nothing, and this, I forget the name of the character, but, uh, you know, the Wolf of Wall Street basically made his money selling shit to schmucks, and making like a massive like the broker was making more money on the trade than actually was being invested.
[00:49:46] But, uh,
[00:49:46] Krzysztof: The only regret you’ll have is that you didn’t buy more badger.
[00:49:50] Luke: Um, and it is alluring, right? Like, and the sort of logic kind of adds up in a dumb [00:50:00] way because, you know, you could say, I could say to you, I’m trying to like shill this like absolute garbage stock. And I’m like, it’s, you know, it’s trading for like 50 cents and it’s, it’s alluring because I could say it only has to go up by 50 cents. And you’ve doubled your money and you’re like, Oh yeah, that’s right. That’s like, it’s the same as saying, you know, a company like Nvidia is at 3 trillion. It only needs to go up by 3 trillion more and you’ve doubled your money. So, I mean, there’s things, but it’s kind of the same thing, right? company, this is not a useful direction to go in, but the, um, maybe a more useful place to go is. Like they’re alluring, but why are they dangerous? That’s probably the meat of the conversation we should be having. And maybe to start us off on that, we should think about how a company became penny stock. I think that might be an interesting way in because the share price, frankly, is just irrelevant.
[00:50:57] It’s not a meaningful number. The only, if you want to relate to [00:51:00] something that’s meaningful, it’s like the market cap, the market cap is the share price times the number of shares in issue. And it’s essentially, it’s like, there’s a different, There’s like enterprise value, and there’s other ways of talking about it, but essentially, simplistically, the market cap is like the value of the company. Tesla is worth, in theory, a trillion dollars, because that’s what people are willing to pay for it. the share price could be anything, like if companies do like stock splits, um, and for company, like if a, if Tesla did a 10 to 1 stock split, which they have done in the past, I don’t know what the share price is today.
[00:51:35] Like say 250 or whatever it is. Um, if they did a 10 for one stock split, nothing really changed. They, it’s just like they took this pie and they chopped it up into like they chopped every slice into 10 extra slices. So the share price would go down from 250 bucks to 25 bucks, but there’d be 25. Well, there’d be 10 times more shares. Nothing has really changed. It’s like an accounting thing. for [00:52:00] some like weird reason. So, um, shares tend to go up when they do a stock split because, and the old story was, well, it makes it more accessible to an investor, but you don’t, that’s not important anymore. Like it’s hard to buy a Mercado Libre 2, 000. For one share. I, I struggled to build a position like way, way, way ago. you can do fractional trading. You can buy a 10th of a share, a hundredth of a share. So it is completely meaningless. And so when companies list typically like no company is really realistically, if it’s plans to go public, it’s not going to list publicly. With like a sub 1 share price, because that sends a very, very bad signal to the market. So companies typically have sub 1 share prices because they’ve fallen apart. Like they’ve fallen off a cliff. They might’ve had a 10 bucks, 20 bucks, a thousand dollar share price once, but they’ve underperformed so [00:53:00] badly.
[00:53:00] Their share price is now worth less than 1. So this is, you know, I mock the. Technical trading stuff. But like what you say is true. The fundamental truth is like you want, you’re looking for stuff that’s increasing in value, like the lines going up, not going down while all of these companies that have a dollar share price or below, like they’re somewhere along that long journey down into the dumps
[00:53:24] Krzysztof: So badger, if I may, I think they’re two interestingly, separate arguments here. so let’s slow down a little bit. Let me add to the penny stock. What are we calling penny stock definition first? In my investing life, I’ve always thought of it from the direction of there’s a bunch of junk out there.
[00:53:50] And that junk is usually closer to like 2 cents, 3 cents, like almost literal junk junk. You could, it looks like [00:54:00] junk. It smells like junk. It’s priced like junk. It has some weird name, like, you know, and people still fall for that. AKA, IE Wolf of Wall Street. That’s what I would call to me. penny stocks. My own experience with both Coherence and EOS are actually a little bit of a rebuttal to what you said, even though most of what you said is still right.
[00:54:26] It’s not good if your stock ends up in penny land, because that means that it’s somehow underperformed. But in our, in my king of the jungle portfolio, I bought EOS at under a dollar a bunch of times. And I was trying to add to Coherence as much as I could under a dollar. The recent buys were at 77 cents because I did my fundamental research and these companies [00:55:00] want, uh, Coherus was once a multi billion dollar company.
[00:55:03] And I could explain to you rationally, logistically, what went wrong and why I think it’s going to reverse. So the fact that it was technically a penny stock. Was is way different than me going out there finding a penny stock crossing my fingers and gambling
[00:55:20] Luke: that, that totally agree, right. Context is vital. And I think. And so you, you’ve, you’ve ended up in penny land because you think you found like this deep value, essentially, um, something that shouldn’t be worth sub a dollar, but it currently is. So like it’s on massive sale, in your opinion, the thing is though, like this is no implication about my friend from tennis.
[00:55:42] I’ve got no idea. How much, maybe she does a ton of research, but I think your typical investor looking at penny stock land is like buying stuff because they’re penny stocks, not for any other reason. They’re just like, Oh, you know, it’s just gamble on those, these like things worth 10 and 15 cents. And like that way it just [00:56:00] leads to doom.
[00:56:00] You, you would be much better off going to the casino and sticking your money on like a couple of numbers on the roulette wheel. Cause you’re going to get much better odds of roulette than you are in this world.
[00:56:11] Krzysztof: Yeah, same thing with people, uh buying lottery tickets. It always makes me so sad because you are not going to win actually Anyone listening to this like really really? Uh, get your q tips open up your ears because this is a habit like even my mama. Hi mom. I know you listen It breaks my heart Every time I see someone buying a lottery ticket for two reasons, they’re not going to win, actually three reasons, they’re not going to win.
[00:56:42] Philosophically, if they do win, They’re not going to be any happier. That’s a whole different philosophical conversation, but odds are they will become more miserable rather than happy. But the third most pressing reason, Badger, is because That any amount of money you [00:57:00] spent on lottery tickets could have been used instead to buy shares of Rocket Lab or Coherus or Chainlink.
[00:57:10] And not only did you not burn the money and turn it into zero, you could have actually started developing your habit of investing. In the principled way, which will actually get you rich.
[00:57:22] Luke: Yeah,
[00:57:23] Krzysztof: That isn’t magic hocus pocus. So it’s like heartbreaking in all, all these ways. So, uh, maybe some of you could comment on our Patreon page, your own, about your own, uh, experience with lotteries and whether what I’m saying, what we’re saying, maybe changed your mind or not.
[00:57:41] Luke: yeah, yeah. I’ve, uh, like in, in like Luke’s version of hell, like the very deepest, like Dante’s seventh level of Luke’s hell are like the, uh, the money lenders and like, you know, the companies that exploit. You know, the financially unaware, like in the [00:58:00] UK, there used to be a company called, uh, Wonga that used to just, you know, like have 50, 000 percent APRs on like payday loans, I’m sure there’s plenty of American companies that do the same thing, like screw those guys, but somewhere in those levels of hell, I think are like lottery organizers, including. Like nationally managed ones, you know, I sat on the board of a charity with a beneficiary of like a bunch of lottery funds, but maybe, you know, there’s sort of two, there’s many sides to some of this stuff, but
[00:58:31] Krzysztof: Yeah. Well, yeah, I mean, what we’re both saying is like. Uh, human desire to get rich quick, to which we’re all susceptible, our institutions take advantage of that, and in the stock market, that is called penny stocks in the classical tradition. Don’t do it. Don’t do it.
[00:58:51] Luke: Recognize your cat. If you do it, recognize your gambling and recognize that you, you could easily find much better gambles than like living in this world, right? [00:59:00] you want entertainment, like find it somewhere better. Yeah. Yeah.
[00:59:04] Krzysztof: of, I think that’s a brilliant segue, Badger. To our next segment, which, and if you’re watching this on YouTube, I’m about to take off my monkey hat and put on my dodo hat. Look at that. Look at that. Uh,
[00:59:18] Luke: have a phoenix hat? We’re doing a phoenix or dodo session. Do you have a phoenix hat as well or is it just the do?
[00:59:23] Krzysztof: I do.
[00:59:24] Luke: I? Okay. All
[00:59:25] Krzysztof: Have you seen it? It’s sparkly in red. Yes.
[00:59:29] Luke: Well, there you go. It’s definitely the dodo today.
[00:59:31] Krzysztof: Yeah. The dodo is unfortunately a fine, fine bird that went extinct. Just like, a stock that has, as we’re recording this on November, Monday, November the 25th. Looks to be heading in the same directions, and that is Cassava Sciences, ticker symbol S A V A.
[00:59:53] And this is actually really sad, because, they were promising a cure for Alzheimer’s. [01:00:00] And, you know, that, that disease is maybe one of the most awful diseases that humans have not yet really figured out. And the intrigue here was that the data looked really promising until it became clear that the, I don’t know if it was the head scientist or one of the head scientists, uh, was basically fudging the data or there was some potential fraud in the data.
[01:00:29] And so this is a stock that was talked about a lot at our former place of employment, seven investing, where there was a lot of, you know, arguments back and forth because I think people were so, we want to hope, you know, when we’re in the face of such awfulness, we, we really want to hope that, uh, there’s going to be a cure out there.
[01:00:49] And so people were willing to, I think. overlook the accusations of fraud. But to me, this is very [01:01:00] similar to any whiff of accounting fraud. If it’s even like plausible that one of the chief scientists did something unethical, you cannot put any money, any real money on that. And also not think you’re legitimately gambling.
[01:01:22] And today, basically the company reported that their data Ain’t gonna cut it. I mean, that’s the long and short of it. And as far as last time I checked, the stock was down 90 percent and given their cash position, it’s game over. It’s going to zero. I was actually thinking of still buying puts because it’s still like at 4, it’s still worth whatever.
[01:01:45] So that’s, you know, I might do that after we finished recording the show. I want to, um, Shout out to, uh, 7investing, uh, user Findle, who is a, somebody that I’ve gotten to know on the [01:02:00] chat boards, both at 7investing and over at, um, SaltDB. Uh, he’s, he’s just a really thoughtful investor and works in healthcare.
[01:02:11] And he made a list of seven lessons from this particular situation, and I’m just going to read them as he posted them this morning. One, as long as it’s safe, the FDA will not block phase three trials. So if the FDA is blocking your drugs, uh, your, uh, company’s drugs, it’s probably because they’re issues.
[01:02:37] Two, hiring people is not a sign of a drug’s upcoming success. That was one of the bull theses for, uh, why, well, why would they be hiring, right? If the data is fraudulent, so it’s false causation, uh, fallacy, false causality. Three, data based on fraud is not real data. [01:03:00] That was my main point. All I needed was this number three.
[01:03:03] Uh, if there’s even a whiff of fraud, don’t go near it. Four, data based on anecdotal evidence from people desperate for hope is not data. Five, if the scientific community is challenging the fundamental mechanism of action for a drug, Avoid it. So this is where people with a deeper scientific understanding.
[01:03:24] We’re saying We hope this is true, but it’s not so it’s not how things work with Alzheimer’s Six be skeptical of an investment thesis based on total addressable market You and I have talked a lot about this. You have to really know for real Right, what, what an investment might be worth in the best case scenario, but that’s what Propagandists for stock will start with.
[01:03:49] Oh, it could be 200 billion dollars if blah blah blah blah I’m guilty of this sometimes myself because it is exciting to think, right? I think this is maybe the [01:04:00] least problematic of these red flags, but still. 7. Do not try to interpret research practices 7. like Western blot analysis without personal domain experience.
[01:04:11] And this goes back to the fundamental point. If you invest in something like biotech, You really have to hitch your horse to people in the community that know that stuff inside and out. Otherwise, you’re gambling and it’s really sad this morning. I bet a lot of people lost a tremendous amount of money and the fact that we’re no closer to a cure for Alzheimer’s via this vehicle is triply sad and the writing was all on the wall and it’s gonna happen again, and it’s just, man, I’m bummed, that this is the outcome, but professionals looking at this saw it from a mile away.
[01:04:49] Luke: That’s a shame. Yep. Agreed. Good. Good lessons there. Well, uh, I’ll check that Findle’s cool and we’ll, um, we’ll stick the, uh, we’ll stick a screen grab of his quote on the [01:05:00] podcast today.
[01:05:01] Krzysztof: good job. Thanks for that summary. Um, Findle,
[01:05:04] Luke: well, so, uh, yeah, that’s a really sad story about, um, that stock server, so, uh, hopefully too many listeners of the show were over invested in that one and it does shows, right?
[01:05:15] Like biotech is, uh, highly volatile, like stuff can literally. Deliver 10x returns and it can literally go to zero as you’ve implied this one might be doing. And if you were yesterday, you’re down nearly 90 percent today. So not pretty at all. But that is the way of investing. Yeah. Which is why you should be diversified.
[01:05:35] Probably all these lessons in this one episode, we could bring them all together somehow. I do want to promote a conversation we are going to have in the next couple of weeks. We’re coming up to Christmas. I actually did all my Christmas shopping this morning. All done. Mr. bloody on,
[01:05:48] Krzysztof: Wow.
[01:05:48] Luke: of it
[01:05:49] Krzysztof: Would you get me?
[01:05:50] Luke: Yeah. You gotta, you gotta win. If you want to get a gift out of me, you’re never going to win. but come up to Christmas and
[01:05:56] Krzysztof: know what, because there is, there is a very specific yacht I [01:06:00] had my eye on. So I just don’t want you to surprise, you know, like go through all your trouble and just get, you know, one that’s like, that was close to, you know, like, so just,
[01:06:09] Luke: I’ll bear that in mind to be clear. I am a long, long way from ever. Well, I’m never going to buy a yacht cause it’s just ridiculous, but I’m long, long way for you to afford to rent a yacht. don’t worry about that, uh, by the way, like your kids, if you have kids or if your friends have kids, right, they’re going to get like some money for Christmas, presumably like a little bit of pocket money.
[01:06:30] And we want to help you as parents think about, how you could help your kids grow that money. So we’re going to do an episode focused on investing for your kids sometime in December. We’re just kicking the, uh, the details of it around. So anyway, if you, uh, have. Friends who have kids or if you have kids like subscribe to the show and get ready because sometime in December We’re gonna drop that one and help you with your new year resolutions.
[01:06:58] Krzysztof: This is huge. [01:07:00] This is huge. Anyone listening to this, please take us seriously. This is, uh, and, and, and tune in. These are life changing habits. Uh, and results that we’re begging you to take into consideration. So I can’t wait to record this episode, because we know it will change lives. I mean, it’s one of your best ideas ever.
[01:07:20] So,
[01:07:20] Luke: Thanks. good All right. Let’s uh, let’s wrap it up for another week Krzysztof. Um, if you do want to chat to us Go find us at the Patreon. Krzysztof keeps saying like the whole patreon. com slash WallStreetWildlife. Actually like our own website, wallstreetwildlife. com points right there at the Patreon.
[01:07:38] It’s now our homepage. That’s like where we do all of our deep thinking and chatting and community nonsense. So go find us there. But if you want to chat to us a bit more publicly, uh, without joining the Sloth Tip Jar, you can find us on the Twitters, the Xs. I am at 7LukeHallard.
[01:07:55] Krzysztof: I’m at 7 Flying Platypus. And we also, uh, [01:08:00] have a YouTube channel, obviously, where we like engaging with folks. I think I’m personally going to start spending a lot more of my effort on Patreon so because it’s just intimate and it’s protected and it’s like people who say we’re in your tribe and it’s you know, as opposed to public riffraff and so Yeah, check out check out our patreon page
[01:08:29] Luke: Great stuff. Are you ready to become a beast of an investor?
[01:08:32] Krzysztof: your journey starts right here
[01:08:37] [01:09:00]
