In this episode, we deliver a critical reality check for new investors and reveal a hidden tax trap that could decimate your portfolio. Plus, watch a live breakdown of Intuitive Surgical’s earnings and a high-stakes options trade dilemma.
* 🚨 Market Reality Check: Think stocks only go up? We’re sharing Peter Lynch’s timeless advice on how to survive (and thrive in) the inevitable market correction.
* 📊 Mastering Earnings Reports: Watch a live breakdown of Intuitive Surgical’s stellar quarter. We’ll show you exactly how to analyze financials and validate your investment thesis with real data. $ISRG
* 💰 High-Stakes PayPal Trade: Listen in on a real-time options dilemma. Are March 2026 calls the right play for a turnaround, or is this a costly mistake waiting to happen? $PYPL
* 💀 The Investor’s 40% Tax Nightmare: A critical warning for non-US investors. Learn about the hidden US estate tax that could decimate your portfolio, and the legal strategies you can use to protect your legacy.
* 🎯 You vs. Us Challenge: We’re launching the Wall Street Wildlife Community Portfolio! Submit your best stock pick and let’s see if the wisdom of the jungle can beat the hosts.
Segments:
00:00 Welcome & New Investor Warning
06:32 Market Cycles and the Coming Downturn
13:44 Peter Lynch’s Timeless Investing Wisdom
35:04 How to Review Quarterly Earnings (Intuitive Surgical)
46:46 Monkey’s Robotic Surgery Discovery
53:38 Live PayPal Options Dilemma
01:11:18 The 40% Estate Tax Trap for International Investors
01:24:25 Community Portfolio Challenge Announcement
Special Guest Teaser: Episode 105 features one of the world’s highest-volume robotic surgeons and UK training authority on the Da Vinci system – an unmissable deep dive for ISRG investors!
WSW – EP104 – Video – No Ads
Like if it got, if that’s how you got started, like no shame in that, right? Getting started is the most important thing.
Funny because I joked that this is like a hundred percent of my portfolio because at the moment I’ve made money in both of these.
But here’s the thing, I think you’re right. The people investing in beyond me at this moment are gamblers
we’ve been on this journey and like, come on this journey with us because we’re all gonna feel the pain together. and hopefully we’re gonna emerge unscathed the other side, like.
Yes, because rumor has it. Badger had some cash registered dinging ching and ding, ding, ding, ding, ching, ching ching.
​
Welcome to the Deep Investing Jungle with your hosts, Luke the Badger, Hallard, and Christophe the monkey Ky this week. How Peter Lynch can help you avoid panic selling monkey’s. Got a PayPal dilemma for me. We’re gonna discuss it live the day before earnings. He’s broken my reverse discounted cashflow model somehow.
I am gonna dive into intuitive surgicals latest, stellar quarter, and I’m gonna be screen sharing again if you’re on the YouTubes and show you how I review quarterly earnings plus a devastating estate tax that I just learned about that could wipe out 40% of your investment portfolio. Stay tuned for the back of the episode to understand what that’s all about.
Oh no. 40% badge. That’s a lot. That’s a lot to wipe out.
Seriously, dude. Seriously, I
the hell?
tax and you’re dead. But anyway, we’ll come to that at the back.
Okay. We’ll, we’ll, we’ll get, we’ll get to that. Um, uh, so let’s start with the panic stuff, because this is the timely conversation, right? this is when everyone thinks they’re genius and, uh, monkey and his uncle. And everybody wants to join, get on the investing train now. Right. But we have a slightly more, uh, gloomy ish message to deliver.
What do we have to tell people this time around?
Yeah. I really want to reflect again on stuff we talked about last week in episode 1 0 3. ’cause I think this is really, really important right now. Um, and this was actually brought home to me by like, I’m. I’m constantly on like WhatsApp chatting to friends and family about investing and like a few close friends of mine, including my brother Matt, are spreading the good word about the power of investing the podcast.
You know, they like the mission, the podcast, and, but they’re telling their friends. Like how investing can change the trajectory of their lives. And like literally to quote from a conversation with my brother this morning, there is a wonderful thing happening here. You are changing the lives of people you don’t even know.
That’s like you and me, Christophe.
We’re doing it. We’re doing it.
This is. Like you’re right to be excited. This is superb news and this is why I’m like so passionate about investing and this topic in particular. And like we were chatting to edgy from Dividend Talk just a couple of days ago, and like I said, the same thing to him there, like the stuff you and I are doing with our King of the Jungle portfolio.
Shows how small amounts of money, but like adding money regularly every month, every quarter, and then taking a long time, that can add up to a lot over time, but at the same time. Like this is why I’m nervous because if you are a newer investor, and I’m gonna give you a case in point, I don’t know this guy personally, but one of my buddy Matt’s good friends, rich.
Rich, like nice to meet you through the medium of the podcast. Now I gather Rich is making bank right now ’cause he’s got. Like a, a lot of his investments, he’s a newer investor. He is got a lot of investments in A STS and iron, which are, they have just done it incredibly this year. Like two classic monkey stocks that I happen to own both of as well.
But these are from your side of the scorecard really. Um, and I’m sure Rich ain’t alone. There’s like a bunch of folk. If you’re a newer investor. Well, IRE in particular, like if I looked at all our social media shorts, that’s like the most viewed video of all of our shorts and like the ire short had 60 comments alone.
It’s just like. People constantly like Should I buy it? Should I sell it? Like panic, panic? What’s going on? Um, like if you’ve just found our podcast by word of mouth or maybe organically on social media, if you started investing in the last two years, then you would be absolutely forgiven for thinking stocks only go up.
’cause that’s been your experience of the market for the last couple of years. This is not normal. Like what? Between us, we have 50 years of investing experience. I’m like 22, 23 years. And you are more than that. Like have you ever seen a market like this one
I have actually twice.
When
What? Uh, I was a junior in college, I think. So this must have been around 2000, 2001. Uh, where I looked at, you know, my portfolio and things were going up by the tens, 20, 30% clip, the internet, boom, period. So that was one, that’s the first one. And then also kind of post, right post COVID when the entire market decided that anything online and digital is gonna be worth 40 times as much when the whole world is never gonna go outside again.
Ever. So that was two. Maybe then three. ’cause I had also in mind as soon as, no, let’s, that’s plenty. Those two times are plenty. Where? Where every day you, the portfolio was just jumping.
But for such a protracted like multi-year period, I’m with you. I probably wasn’t big in the market in the early two thousands. My first growth stock was like 2006, but I was there during COVID, you know, maybe that was like 18 months of like the good times. And you’re right, like everything was going bananas, but.
Probably I didn’t have multiple multibagger over the course of months, which is what I’m seeing in my portfolio right now. Like my two fastest growers are those two stocks, A STS, and I, like they’re both three, four baggers for me and like as many months pretty much. Um, it’s unusual, uh, okay. Even if it’s, even if it’s, I mean, it’s certainly not normal, even if it’s, it’s not unprecedented.
It’s unusual. Right. And the thing that worries me is. If you’re a new investor, you think this is just what it’s like all the time, and this is not what it’s like all the time. It’s like the market goes in these cycles and these swings and like the, the concerning thing is maybe in particular with like a STS and I ran and a bunch of other young companies, we don’t actually know if they’re gonna become like big behemoths.
We might be. Really confident in their mission and where they are and the maturity and all of the thesis might be really strong, but they’re still young, tiny companies, they can still fail and they’re more likely to fail than something like a Amazon or an Alphabet, which is like established, like very, very established.
Um, and the trouble is you’ve got say, let’s say quantum computing, right? You’ve got dog shit stocks. I’m sorry if you like quantum computing. If you do, I disagree with you. That’s fine. Um, you’ve got great companies and you’ve got terrible companies and they’re all going up, and when you’re in the middle of it, it’s quite hard to tell the difference.
And even, I don’t know the difference, like a STS and I, one of them might succeed and one might fail. And if you told me that was the outcome, I couldn’t tell you which was which. Right. I don’t know. Today, I’ve gotta see how it plays out, so I feel a bit safer owning those two. Because they’re like two stocks among 30 stocks that I own, and I’m pretty well diversified and my bigger allocations are in my more established positions.
And I’ve got smaller amounts in the more prospective stuff. I know you do things differently and like, you know, tell us about your strategy and why you are more comfortable having like larger allocations in these smaller companies. But even then, you are pretty diversified, right?
Okay. Boy, there’s a lot there. Let me actually take it one step back. Uh, it may be in order I think of importance. Forget iron for a second and forget a ST. I think there’s a bigger point
Yep.
and you, you name dropped the, this ticker appropriately. I think Amazon.
Hmm.
Here’s what, here’s I think what new people will not know because they don’t have the experience when you invest, invested in Amazon early, and that could be actually any number of years. You, if you had a time machine to go into the future, would have been like, oh my God. I was a genius to have invested in, in, in Amazon, because yes, you would be a multi, multi whatever, right? Millionaire, billionaire. What what beginners miss is that Amazon dropped something like, what was it, 80%? 80, 90, whatever.
It doesn’t even matter. The point is it dropped way more than you think is even possible. So all beginning investors should mentally assume the following. You’ve done your research, you picked Amazon, or today’s version of Amazon, let’s, let’s call it, uh, whatever. But Banana Incorporated. You’re right because your research was right, but then you forget that you don’t go in the straight line from whatever, $5 a share to 2000 a share.
In between, you will have something like a potential 80% correction. So now if you’re a beginner and you wake up tomorrow or a month from now and you see that banana incorporated, which you are so confident about. Now dropped 80%. What are you gonna do and how are you gonna feel?
It’s ripe. You’re ripe for panic, right? When you’re, when you’re in that situation, particularly if it’s the first time you’ve seen that happen, you haven’t got like the battle scars of experiencing it over 10, 20 years.
Right? And one of the things you’re gonna do is you’re gonna say, I was wrong. And the way you’re gonna say that is actually maybe not to yourself by by, but by pressing the sell button, which is the classic buy high, sell low trap. So maybe what we’re trying to say as per last episode is do the mental work to prepare yourself for the quasi inevitable correction. Then double check that you’re not going to be selling out of panic, but rather understanding that this is just how things be.
Yep.
And really at that point, the only I think, serious decision would be, is this a good time to add more? In which case I would then bring in my technical, um, uh, tool set and kinda wait and pick my moments.
To dollar cost average rather than just do it because I feel like I should have more shares now. But that’s a side, that’s a side issue that it would be anything but selling if nothing has fundamentally broken.
And Yeah, and doing it like certainly doing nothing. Just like that because the price moved up or down. It’s like, go back to your plan. What was your thesis? Maybe if you use, um, technical trading indicators, you go and review those. Maybe if you use fundamentals, you go back and reread like the last quarter results.
Maybe stick the next quarter in your diary and put aside like two or three hours to review that quarter when it comes around. But just reacting because the price moved. That’s almost always gonna be a mistake.
Right, and actually to bring it back to a STS at the moment, it’s a pre-revenue company. For one. So my whole investment thesis badge is not based on something like, you know, discount cash flow models or multiples. It’s primarily, almost entirely thesis based in terms of narrative. So I have that story completely locked down.
If the price were to drop 50%, that’s, that’s. That that is irrelevant from the thesis statement. It brings you, it allows a better valuation and all of that. But why? It’s almost inverse. Why would I sell at a better valuation if it had nothing to do with the story? So point being people confuse price with value and company and so forth.
So I would actually, in some ways welcome a huge correction to A STS because I could buy more shares before the actual thing starts playing
Right, exactly. Now don’t just take our word for this because you may have heard of Peter Lynch, like Legendary investor. Um, now he doesn’t make live appearances. Often you don’t see him on interviews. He was a big guy. He ran something called the Magellan Fund. Did like. Incredible market beating returns for decades.
But he retired from that in the 1990, I think sometime around then, and he’s kept a pretty low profile since then. But he just did an interview this month with a incredible podcast called The Compound and Friends. So we’re gonna drop a link to the Compound of Friends episode 2, 211 in today’s show Notes.
Don’t take our words for it. Go listen to this interview. And take Peter’s word for it. And so like, let’s just pull a few lessons outta that compound and friends, because I think Peter Lynch’s approach is really aligned. To the way we think about stocks. And it’s probably, it’s probably not coincidental because I’ve not read his classic book, was it One Up on Wall Street?
But, um, certainly the lessons from that have infused me. ’cause I’ve got them from other, you know, I’ve probably read your own writings on that over the years when used to write for them what before. Right. I’ve soaked this stuff up and it’s certainly core to how, well, how we talk about being a long-term investor like Peter is.
So focused on know what you own. Like if you don’t understand the companies you’re invested in, you’re much more likely to panic sell when the stock price goes down. he’s a real advocate for researching
Actually, actually badge can. Yeah. Can we, can we unpack that a a little bit? it seems simple. Know what you own. But I found that the way this happens for me is over stages. Like, it’s not like a, all of a sudden I go from not knowing a company to all of a sudden I know everything. Uh, it’s more like once a company shows up on my radar. Then I just systematically keep learning about it, and I keep, maybe if it’s a product, I then eventually get the product or I ask people about it. But it’s, it’s a, it, it takes mu often, like it takes months. There are some exceptions where I, myself was fanatical about the company. Actually only two really come to mind, which would be Apple and Tesla, where I just.
You know, I knew those things because I was fascinated by the company, by the culture. And so I knew I had hundreds of hours or thousands of hours of, you know, reading about it. But more usually it’s like, ah, okay, Lululemon, okay, uh, do I want this? Do I not want this? Oh, I’ll go into a store. Right. Uh, you know, but that takes time.
Yeah, it you, you’re right, and, and there’s like an easy structure to build that knowledge over time, but it takes time and it just takes. You know, refreshing your due diligence. I’m in today’s episode, I’m gonna show you how to look through a set of quarterly results. It’s about doing that. Every couple of quarters, you know, at least once a year, but ideally a bit more frequently.
And just like build your knowledge of the thesis, look at the competitive landscape. Go into the Lululemon store and look at what’s on the shelves and look at how busy the store is. And then, you know, check out like the next, like this summer’s line of clothing. And does that fit your idea of what people are gonna wanna be wearing?
It’s that kind of stuff.
I mean, it’s not just that simple, but it is the most obvious and, and, uh, non-complicated place to start. If you don’t, if you then walk into the store and you don’t like what Lululemon is selling, then why would you invest in it?
Yeah.
I mean, really, like all of a sudden then you’re swimming, you know, upstream, which is just not, not wise.
Uh, badge. Could I talk about the second, the second point on, uh, on the docket here, uh, Lynch says, avoid playing the market. Investing isn’t a game, it’s about buying good companies. You understand? So that’s a little bit of a tail. Um, segues with the first point. I, I would reword this differently, as you know, uh, I, I would simply say, uh, know the game that you’re playing and if you call yourself an investor, then.
Do all this stuff about understanding the company and the fundamentals and knowing the product. If you are interested in something, uh, outside of investing, which I would call, uh, either swing trading or momentum trading, then you first have to say, this is what I’m doing. And then I would still go and understand the company, especially in the swing trade stuff.
’cause that takes months sometimes to unfold months or even a, a year or so. But, um, I’m not so prohibitive about, uh, avoid playing the market. It’s just a different, it’s just a different thing.
Yeah, and actually one other point, like later in the interview that Peter brings up is, which I’m terrible at, I think you are potentially quite good at, he says. Like, be open to investing in less glamorous companies. Um, like sometimes looking for companies that are improving from a like crappy to semi crappy, to better, to terrific is like a good journey.
And if you can catch them at the crappy stage, but you can see that trajectory, like, I’m terrible at that. I’m always like, poo-pooing. It’s like some of your like, you know, I call them like, you know, like your bottom of the barrel ideas, but. Um, but you know, if they’re on the right trajectory, then it can still be a legitimately incredible investment.
Right to multiple ways. This is great news. Multiple ways to win in. Let’s cough. Broad strokes in investing. One is to do what you do primarily, which is, and this, I’m gonna simplify a little bit, but it’s, you’re not trying to be smarter than the market in a sense. You’re just, you’re, you’re buying excellence.
You’re acknowledging that excellence tends to remain excellent. You watch the valuations so that they don’t become too excessive, but you’re betting with the market. Because that’s just easier. You’re swimming with the flow, right? I mean, it’s just don’t, don’t overcomplicate things, right? Excellent. Is excellent for a reason.
And if you’re patient enough, that will unfold to your benefit.
in the main, like our caveat and say there’s exceptions like Novo Nordisk I’m adding to as recently as last week, and like it’s in trouble as a company. They have to prove themselves. But yeah, that I, I agree.
Right. But, but in general, the flip side, right? And this is, this is where I’ve turned much more toward, especially over the last, uh, two, three years as we began podcasting because I became. Not enamored, but uh, maybe convinced is also too strong, but, but certainly deeply curious about this idea that, being a contrarian, if you’re right, of course, pays way, way, way more than going with where the trade is crowded.
Already. And the reason I began looking here is because, you know, I was really scared at what was going on in the market. All these high valuations and ev, you know, and then things were looking really bad. So I thought I gotta get more, call it exposure to things that are being overlooked and not everything that is overlooked is bad.
It’s kind of the sentiment thing. If things are out of favor, people make very poor assumptions. About this out of favor stock simply because it’s the momentum thing, right? It works both ways. So, um, the trick of course is discerning between genuinely bad or value traps bad for good reasons, versus it’s.
It’s just been overlooked or people don’t understand it, or there’s a catalyst coming up or all these other ways, and that to me is actually in, in a sense, more fun because there’s a lot more stuff to study and, and, and as questions about and poke holes out, that kind of stuff.
there’s an interesting, like in that interview, Lynch made like an interesting observation that I didn’t agree with, but when I think about it more, actually, it’s, it’s quite astute and it was that. Like this, we had this sort of meme stock phase with like stocks like GameStop and it’s happening right now with like Beyond Meat and like a bunch of other companies.
Um, and like his observation was, this was reckless, but the meme stock trend encouraged a lot of younger people to open their first brokerage account. So, you know, maybe those investors are now kind of graduating into being. A couple of years in the market, they’re starting to learn lessons and then maybe that means they go on to eventually, you know, running a mature portfolio and having some good discipline.
Like if it got, if that’s how you got started, like no shame in that, right? Getting started is the most important thing.
this’ll take us to a little bit of a tangent, but I think, I think there’s. Something to be said. ’cause I saw your ex, uh, reply to someone that was the Beyond Me versus Opendoor. Uh, comparison. Funny because I joked that this is like a hundred percent of my portfolio because at the moment I’ve made money in both of these.
But here’s the thing, I think you’re right. The people investing in beyond me at this moment are gamblers. Or call it pure momentum. I did it out of pure momentum trading stuff, and I was, I said to myself, I’m gonna just be quicker than these other people to exit when it’s time to exit. Right. But I, I, I, at no point was confused about what it is I’m doing.
Sometimes it’s fun to go into a casino, right, and put some chips down and spin the wheel, right. The young investors that we’re talking about. Uh, that just opened up their Robinhood accounts and see this thing going up. Hundreds of percent, they’re in bad shape because they will learn the exactly wrong lesson.
Right. They’re gonna think it’s easy or this is what stocks do. It’s the whole GameStop phenomenal, right? What’s interesting to me is that, as you pointed out with door, it is, FF uh ha. What, um, what I wanna say is, call it, it starts as a meme stock, but then you dig more and you see that there are actual fundamental, real reasons to own this, but it’s more of this gray area and it’s, it’s, it’s, it’s more complicated, especially for the average.
Investor. Um, so it’s not like all the stuff is bad, but you really have to study and understand and put the time in. but a side point I think that I want to make badge. There’s something happening right now in investing. don’t know how to phrase this exactly. It’s something like the information that’s available to everyone. How quickly it’s available and how quickly people now act on it. It’s like a paradigm has shifted. It’s like we’re in a different world than we were even, I don’t know, three years ago, two years ago. And I think it’s more like a neutral thing. It’s a, it’s not that it’s bad or good, it’s kind of technology in general. It’s how you use it. So there will be some people that take all this, this mish stuff and they take, um, and then they, they, they, they pair it with time and time to investigate and then they will figure out which things are actionable and which are not.
I mean, I’m calling saying the professionals will do this. And then they’ll be able to potentially play both games and win. But the, for the beginners, I think it, they might confuse themselves, right? Or learn the long, wrong lessons or just so it’s like major warnings here and opportunities, but.
Yeah, like, you know, just being introspective and focusing on good quality decision making is always gonna be like superior to looking at your results. ’cause what you’re describing there is like the beginner poker player who goes into the casino, or maybe they sit down at roulette or blackjack, whatever it might be, and they’re gambling.
And they come away and they win the first time they play. You know, like beginners always win, like their first session of poker. and they come away thinking, oh, actually I’m a, yeah, I’m a poker genius. I just discovered this. I should have started playing years ago. but it’s just, that’s just like, you know, that’s like probability messing with your head.
’cause in the long run, if you’re an inferior player at the poker table, you’re gonna lose to the better players. It just takes time for like all the probabilities to like play out.
Isn’t that a fascinating law of the law, of the investing jungle too? Uh, the po that well, right, that poker player, beginners always win. And the, the analog in investing is any beginner that starts options. They always, they always do stupidly good with the first or two options they buy. The universe ensures that happens and then they lose, you know,
That was, that was me. That was me. Dude. Like I, one of the, one of, one of the first options I bought was like a joke just to like piss you off. ’cause you, I think you, you were in Upstart for a long time when we both worked for Seven Investing. Then you sold Upstart. I’m like, I’m gonna get him here. And I bought some like.
Out of the money upstart calls. And they, like at one point, like I bought, I dunno, $2,000 worth like an entertainment stake. They were like 25, 30 grand at one point. I was like, what the hell? And I ended up selling at like 12 grand. So I still locked in like a nice profit, but yeah, and I’m like, oh, I’m obviously not options genius.
And I’ve, you know, lost like a ton of money on my other entertainment options since then.
Yeah, you’re not an options genius yet. Wait till monkey gets through school in you then, then you’ll be a, A options genius. But yes. All right.
right. Anyway, there’s like a bunch of other stuff in this Lynch interview, so do go check it out if you, and don’t take our word for it, like there is a way to navigate, like the mental mindset is the important thing here. ’cause if you get that in your head, I can’t lose. At some point you will lose.
Like just to reinforce something I said last week, because this is I, this is absolutely true and you don’t like, if you don’t believe me, we will live through this at some point and then I’ll reaffirm how I feel like I know sometime in the next, let’s say five years, I don’t know when, could be next week could be five years time.
I know I’m gonna tune into my investment portfolio and I will start hitting like a protracted. Downturn in like the real amount of money that I have available to me, and it could get as ugly as like 50% drawdown, right? I could get wiped out over like a sustained period. It’s not gonna drop 50% overnight, but it’s gonna be like 5%.
Then the next day it’s gonna be like another 5%, and it might go up a bit. It’ll go down a bit. We’re gonna have a chunk of time. Which could last for years in itself. I not make any predictions and I’m gonna be sitting on big drawdowns. And so like you could say, okay, Luke, you’re an idiot. Why would you do that?
Why don’t you just sell your stocks? But like, I don’t know when that’s gonna happen. So the only way I know how to navigate this is to be like mostly long stocks. Like mostly be an owner of companies and then prepare myself mentally for when that downturn comes. I don’t think I can time. Like the downturn and go to cash.
I’m just making small nudges and I accept that I will be sitting on massive drawdowns, feel like a schmuck, but I’ve seen it before and I know I can just continue like working through that and it might take a couple of years, but we’ll come out the other side and then we’re in like another cycle and we’re gonna finish that cycle and I’ll be worth like two or three times what I’m worth today.
That’s just a, the nature of the cycles, you just gotta. Do the journey. You gotta feel the pain and do it anyway.
Right. So see this is where, uh, well, well, one, um, advanced level, uh, there is advanced level stuff you, you can’t do with options to kind of help when the market turns, but that’s another episode or another bunch of episodes. fundamentally one, another one of Lynch’s points was do not get scared out of good investments.
That kind of ties what we’re talking about together. I guarantee you pretty much guarantee you that even during mid middle, uh, huge drawdowns, you will not see me selling eos. You will not see me selling my A-A-S-T-S. You will not see me selling iron unless there’s something fundamental wrong with the company. Right. So I’m only gonna be thinking how to add here, not sell, but the other point to reiterate something we’ve been saying for a long time, hopefully, well, our regular listeners are really hearing when we say this. Right now, we’re getting a lot more Patreons. Our YouTube channel is growing, but I’m betting that the, well, I don’t know.
I’m not betting, I’m hoping that the majority of the people listening to this right now. forget about the stock tickers themselves. Forget about what’s gone up, or what’s gone down that our listeners are taken to heart. The fact that this community together will help. You sort of persevere through those inevitable downturns because you won’t feel so alone and you will see us posting all our losses and we will kind of work through our anxiety and panic and all of the bad stuff together so that we’re not just like bears of doom and gloom, right?
Like, but we’re, we are truth tellers. And so that’s what you’re, you’ve joined us for. I think that’s the, that’s the real thing that differentiates us from say a stock picking service.
I think so. Yeah, I think so. I think so. Like we’re, we’re trying to give it to you straight. We’ve, we’ve been on this journey and like, come on this journey with us because we’re all gonna feel the pain together. Um, and hopefully we’re gonna emerge unscathed the other side, like.
Yeah, and the, and the, I’ve said, I think I said this last episode, the people I feel bad for legitimately. Are the ones that will inevitably cancel our subscription, you know, when they experience those losses because they won’t either have heard this or they won’t have taken it to heart that it’s part of the journey and they will make the wrong conclusion saying, oh, their stock picks were wrong.
And that’s just, that’s the whole poker resulting fallacy. So.
right.
But then they’ll resubscribe when the market’s at next, all time high, three years later, you know, four years later. Oh, anyway.
that’s how the world works and it’s unfortunately, it’s why most. Individual investors lose money in the stock market for exactly that
Yeah.
anyway. Shall we move the docket forward and shall we talk about like how to be an investor and how to review like company financials when you get a quarterly results?
Yes, because rumor has it. Badger had some cash registered dinging ching and ding, ding, ding, ding, ching, ching ching.
Yes, cash registers were ching for me last week because Intuitive Surgical dropped their latest quarterly results, Q3 results. Um, and I thought, so we got really good feedback on episode 1 0 3. Uh, AM 1 0 2 where you took us through, I think some of the PayPal numbers with fiscal ai. And then last week I looked at Novo Nordisk, so I thought, I’ll come back again.
We’ve just had a company report, a quarterly result. It’s a company I’m pretty close to. It’s, it’s like the second biggest company in my investment portfolio. And I thought I’d show you how I use these kind of tools to actually review a company. And I can do this in like an hour or two now. Might take you longer, um, when you come to it for the first couple of quarters, but each time, like you’re learning more, gonna give you like a whirlwind tour through the most important aspects. alright, so we’re gonna start.
With fiscal ai and we’re looking at intuitive surgical, like the main homepage. We saw this last week and as usual, we’ve got like some nice headline numbers, market cap PE ratios, and I’m gonna say like this is a great home base to start your research, but what we’re gonna look at, ’cause they just reported quarterly earnings, we’re gonna go and look at.
The actual quarterly earnings, which you can get if you go to intuitive surgical ir, investor relations. But you can get ’em in fiscal.ai too. And every quarter typically you’ll get a couple of things. You’ll get a. Report, which is like the 10 Q and it’s literally like A-A-P-D-F document that you download and you read through.
And then you get like, usually not all the time, you get a bunch of slides that you can look at. And again, you can usually download that. It’s like a PDF you can download. And if you hang around like an extra day or so, you get the earnings report, which I highly recommend you listen to with your ears, not read the transcript.
’cause you get a lot of human nuance out of. Hearing like the founder, the CEO, like the leadership, the CFO, talking about the company, and fielding sometimes quite tough questions from analysts.
Badge. A side note there, a quick side note. Uh, it’s fascinating. There have been very, very good and serious investors. Who legitimately put a lot of stake in the literal tone, meaning it’s kind of, it’s kind of gets maybe not into woo woo stuff, but certainly like, oh, they were downbeat, or, oh my God, they couldn’t be more excited.
They were jumping out of their pants. That is, we can assure you a legitimate data point. It’s not the only data point, but it’s a legitimate
yeah. Yeah. Like as, as poker players, right? You can hear something in the inflection and the confidence and you can hear when their wing it a little bit. Um, because these are live, like these calls are live and they’re there on the call with analysts and we get to hear it all. So, um, it’s, it’s useful.
Now I’m gonna jump out a fiscal.ai just ’cause I’ve. Like, I’ve taken the report, the slides and the transcript, and I’ve just dropped ’em into PDFs and um, I wanna show you guys those, but before I do, I’m gonna say, this is my starting point actually, and it’s something I did a year ago. Like Intuitive Surgical is a company I know well, and so like, you don’t have to do this, but for companies, I, but.
Well we were, and really I was doing it ’cause we were scaling the YouTube channel. I built like a nice fancy deck where I explained the thesis and what I thought the competitive position was and I pulled out some financials, like you can find this on our YouTube or link to this video from like a year ago.
But the reason I’m reflecting on it now is. I had an investment thesis, so my investment thesis for Intuitive Surgical has pretty much always been pretty close to this, which is if you’re on, sorry if you’re not on the YouTubes, like this is very visual, get on the YouTubes. Um, but my key thesis is like they are a market leader with a massive competitive edge that I feel is almost insurmountable.
They’ve got. I’ve, I’m, I’m tongue in cheek calling it a robots and blades business model. It’s the razor and blades business model, like they make most of their money from. The instruments, which they get used for a couple of procedures and they’re thrown away the actual robot, you know, they buy the hospitals, buy or lease the robot, but most of the money they make is ’cause they buy, you know, these accessories that are consumables that un the company is unlocking new opportunities with Da Vinci five.
It’s, its latest version of the robot, essentially launched a couple of years ago. They’ve got a rock solid balance sheet. And really interesting right now is they’re collecting really interesting procedure data, which I likened in my thesis a year ago, to Tesla driving while that with Da Vinci five, which is 10,000 times the C, that the processing capacity of previous iterations, they’re capturing video data.
They’re capturing like the surgeons movements and they’ve got all this data in a big repository. And now they can start a bit like FSD. With Teslas, they can start to use that massive data from millions of procedures to start to do some quite interesting things. And we’re now starting to see that. So let me take you into this quarter.
So I’m literally, I’ve just downloaded from fiscal.ai, the 10 Q, which starts off with like a nice, actually pretty. Pretty story that’s come from the board that tells you what are the highlights of the latest quarter, what’s their outlook, what’s coming up, and I’ll take you into a few bits of that. Um, I’ve also downloaded the investor presentation, which is some nice, handy, easy to read slides.
And I downloaded the transcripts. I’ve got one thing I wanna point to in the transcript, so lemme just take you on a quick tour of the highlights of the Q3. I haven’t highlighted all these financial numbers, but if you read through them, essentially good growth ahead of what they expected, so they’ve grown.
Both the number of robots they’ve deployed into hospitals, they’ve pro the number of procedures they’ve performed, they’ve pro revenues, really solid. I want to call out something that’s a little bit unusual. They repurchased 4 million shares in stock. That’s great. That’s kind of about, directionally about one 1.2% of the share capital.
So that’s like real 1% increase in value in your pocket when the company does that, essentially. Um. Now if you read through the story, the company have placed 427 Da Vinci surgical systems in the most recent quarter, of which 240 were Da Vinci five. So that’s like more than half of the new systems are Da Vinci five compared to.
Third quarter last year or a year ago where 110 out of 379 were Da Vinci Fives. Makes sense. It’s a new system. It’s scaling up. But this is helping me validate my thesis that Da Vinci five is rolling out, becoming a bigger part of the platform. Um, and we can see it in the numbers. I’ve got some yellow flags in here as well though, like it’s not, everything is always glowy share-based compensation of $206 million, so that’s kind of high, but relative to revenue of two and a half billion dollars, it’s reasonable.
It’s certainly not like an axon. We talked about that in a recent episode where. I think more than like a quarter of revenues, were going to insiders. This is a much more sensible, like less than 10% of revenue. Still a big number, but it’s not egregious. They’ve also, I, I was focusing on their fortress balance sheet.
They did have. Eight and a half billion dollars in cash that’s gone down. Another yellow flag gone down by over a billion dollars because of they rebought common stock. That’s like the buyback plus capital expenditures. Like they’re actually building more facilities and they’re increasing their ability to manufacture instruments.
So again, when you read into the story, it makes sense they’re not spending the money on stupid stuff. Um, so that’s probably enough for that. But if you were to go through this whole document, like you’ve got. The financials, you know, we talked about how to walk through the income statement. In last week’s episode, you can start to draw out some insights from this.
Like, here we are in the financials, inventory is up 1.5, uh, billion dollars to one point, nearly $8 billion. So there’s a question for me to answer there. I haven’t answered that yet. Why is inventory up? Could just be because the company’s scaling. If you’re scaling. You need more stuff because you’ve got more people buying your stuff.
That would be a good reason for inventory to be scaling. A bad reason for inventory to be scaling would be like people are buying less of your stuff, so it’s sitting on the shelves. Um, so we can get a lot outta the numbers, but if that’s like feels dense and not very pretty, then let’s just flick to the investor presentation.
Now, not every company makes one of these, but a lot of companies do. And it’s a really pretty easy picture way of seeing what’s happening in the company. And just like two slides I’ll pick out of this, ’cause I think they tell the story really nicely. Here we are on slide six, worldwide procedure growth up 17%.
Um, for the whole year, 2024 to the whole year 2023. So we’re looking back a little bit and you can see general surgery, um, is up significantly. That now makes up more than half of all the surgeries that are performed. So like growth of general surgery. This is intuitive coming out of it’s like little narrow space where it used to be just about like urology, prostatism and those kind of operations.
And now going into. Like appendectomies and a whole bunch of other operations, general operations, which massively expands the tam, like the ability for the company to do more procedures and more areas, which is gonna increase growth. And then the other slide I want to look at, because it’s my robots and blades business model, got a of, there’s a stop here quickly.
Look at that pretty thing. Da Vinci five like this. Uh. Yeah, it looks like it doesn’t look like Wally. Yeah. Yeah. Um, it’s a, it’s a beautiful piece of equipment. Uh, but let’s take a look at slide 21 in the deck, which is how the revenue breaks out. And revenue. We just saw up 17% year over year. 84% of revenue is now recurring revenue.
So that’s like. It is almost like a software company, not a hardware company because it’s making, every year it sells the robots, and that’s like non-recurring revenue, but it also services the robots. And it provides these instruments. Um, and this is where, you know, every year if the comp hospitals own these robots, they’re doing the procedures, they gotta keep buying the instruments.
’cause otherwise they can’t do procedures and they’re sitting on this like robot, that’s no use to them. That money’s coming next year and the year after that and the year after that. So you can be really confident about the trajectory of the financials with a company that has high levels. Of recurring revenue.
That’s one of the main reasons I love intuitive surgical.
Badge. Uh, great job, first of all, uh, in encouraging, you know, walking us through the process and, and on making this your second largest position and on the results. Uh, monkey though wants to screech and holler about something adjacent to this that, uh, uh, is very timely. And I’ll talk more about this next episode probably, but you know what I did Okay. You know what I did? I’m like, damn, that badger is, is one smart badger. Uh, and then I employed, next step. I employed a fallacy. I was like, I gotta get me some of that intuitive surgical two. But damn, it’s already $194 billion company. And the best, you know, like, you know, I’m not gonna match his whatever, 10000% gains or whatever obscene number you have.
So I’m too late. So, note that I’m aware that this is a fallacy, but I, I nonetheless did it. So I’m like, I gotta outsmart him. I gotta outsmart him. How am I gonna outsmart him? And so I had been doing research on another. Young, up and coming, uh, ro uh, health robotics company. But it was this, but, but that was in my research phase, right?
I wasn’t yet ready to pull any triggers, but the, the, the superior results kind of just got me more motivated to, to start really digging harder. And, you know, what I discovered, I discovered, uh, in part, uh, that the co-founder. Of Intuitive Surgical, whose good name is Mr. Frederick Mo. Ma Mo Ma. Uh, who’s he?
He, he basically invented this thing out of thin air. He wrote the, he wrote the business plan. He, he funded it. He did all the things. He is a American physician, so he’s, he, he’s a doctor ba from Berkeley, uh, MD from, uh, just all the fancy degrees, really. I mean, he’s, he’s just one smart fellow, obviously, right. He bought a massive amount of shares and a little, uh, up and coming, uh, health biotech called precepts, bio robotics. And then, um, he, uh, and so my thinking really not to overcomplicate this is who knows more about this field than this guy PR probably. Few, very, very, very few people on the planet. And so I accelerated my research on the back of sort of, I call it reverse engineering.
When somebody like Mo buys companies of my $2 billion robotics company, I’m like, I’m gonna pay attention to this harder than any other data point out there. And so I ended up really loving what I discovered in my own research, and I bought a couple of shares for the King of the Jungle portfolio. Now side note, uh, our good man, uh, Ben, uh, Ben gal tiger on Patreon.
He’s, uh, I believe works in the healthcare field and he did some underground, I think he said he, uh, talked to urologist, friends of his, because Cept, um, bio Robotics is a prostate surgery company, right? So he talked to his physician friend, and I believe the intel came back that this physician friend was less than enthused.
Right? And I think Ngal said that this is, uh, anecdotal and so forth, but it’s an interesting investing moment because if you think about it, you get, you get faced with this kind of con uh, mixed signals all the time. And sometimes investors overthink things and confuse themselves. I’m, I’m, I don’t think I’m guilty of this when I see Intuitive Surgical becoming a company that’s now worth $194 billion on the back of your research, and I saw how you participated in it, basically made your career in some ways, right? And I see a person who knows this industry because he invented the damn thing buying massive amounts of shares. For higher than this, than what they’re selling for right now. In the same sector At that moment, technically, technically, I’m like, how much more research do I need to do? Not much. Right. At the very least, like, you know, take a little nibble and then, you know, follow up.
You know, and like, I don’t need to be smarter than, than that. I will be, ’cause I’m gonna do the due diligence and all that. But that’s enough. And I’m not gonna get psyched out by, by one anecdotal, one anecdotal physician’s viewpoint probably because when paradigms shift, people know what they know and they’re gonna say, oh yeah, this new fangled thing, that’s not gonna work because my way is better because that’s what I do for a living.
So, you know, um, yeah, you will get crosscurrents, but, um. I’m gonna outsmart you and I’m gonna, and I’m gonna make, make all the bananas with my law. Intuitive surgical Junior, just you A and
luck. Good luck to you. I haven’t looked at that one. I, I will take a look once you finish your dd if you’re still happy with it.
Yeah. I’ll do a Safari stock segment on it, probably in the coming, coming month. But the trade was posted in our dolphin trading channel for all you Patreons. But that’s all it was. It was like, you know, here’s a ticker. I researched, here’s what I bought. Here’s a couple things I like. The rest is on
Bengal tiger. Like that guy’s got good taste. He was just a, a crowded house concert the weekend, I think. So, uh, adding incredible value to our Patreon. So thanks so much for that Benal.
Yeah, rah.
righty. So I did a whirlwind tour through quarterly results for Intuitive, and I did wanna quickly, before we hand over to you to give us a tour of PayPal. I wanted to quickly headline a incredible guest that we are hoping to have on the podcast next week. I’m not joking, one of the world’s highest volume robotic surgeons.
He wrote the UK’s NICE guidelines for Robotic Surgery. That’s like the National Institute guidelines, and he’s a world leader in training other consultants in how to master the Da Vinci surgical system. So this guy knows his onions when it comes to Intuitive Surgical. I know the company he’s hands on and teaching.
Other consultants how to use it, like we could not get a better, more expert guest to take you inside the operating theater and really understand this technology from the practitioner’s point of view. So, interview episode coming up hopefully in episode 1 0 5. Um, if you’re a fan of Intuitive Surgical or if it’s on your watch list, definitely must watch.
Excellent. I wonder, I wonder if he has a view on, uh, on Mylo new, new discovery. Can’t wait for that conversation. Cool badge. Um, I have a legit live, uh, investment question that I thought we could work out together on the show. So you’re not prepared for this ’cause I didn’t give you any, any notes, but, um, I have a decision I need to make before today’s trading day, and I wanted to walk you through it and go back to, uh, my, my process.
This revolves around PayPal. Uh, I think our listeners know that I’ve been, I added a couple of shares outright in King of the Jungle because I liked what I saw in my initial research. And then I did something a little foolhardy, which might be foolhardy. This is what I need to decide on. I bought PayPal calls, uh, dated for March 20th of 26.
We’ll return to that for a second. That’s the, the, my question is I don’t know whether I should keep them or sell them before the call because I’m starting to have. Some doubts, we’ll talk through that. But in order to deepen my research and understanding of PayPal even further, I, I used the fantastic, uh, reverse discount cashflow.
Spreadsheet that you made. And a funny thing happened on the way to heaven. I think it’s funny. I think I, I understand. But when I put in, and by the way, it’s very simple. Badger made it incredibly foolproof where you could just follow his steps and it’s, it’s great because PayPal is a mature company that produces cash flow.
It’s. Right, for exactly this tool. I don’t usually need to, at least the way my portfolio is constructed, I don’t usually need to use it. But for PayPal I do. And when I put in the numbers. For PayPal’s cash flow relative to its market cap, it broke the spreadsheet because the column that calculates it basically said free cash flow too high.
Like this can’t be true, like this can’t be true. And lo and behold, it is true. Uh, management is in fact predicting or yeah. Uh, predicting six and a half billion dollars of free cash flow for. 25. And when I put in the rest of the numbers, when when that box showed up I believe that error comes because then that. It tells us that the implied value is that for that those numbers to make sense, PayPal would actually have to stop growing and start declining. So we get an error. That’s my interpretation. So in order for me to prove that that was true, I increased the discounted, uh, the discount rate up to from 10%, which I think is, it’s actually quite aggressive for PayPal.
I think PayPal could even. You could argue for something closer to 9%, but I increased it from 10% to 11%. Again, uh, side note, the higher that rate is, the riskier the company, the, the, the heavier, the, the, the more like you have to, uh, basically justify a grade of return because the risk is higher, right? So when that number goes up, the risk gets higher.
So anyway. I had to move the PayPal discount rate to 11%, and then when I did that, Finally we got, uh, an assumed growth rate of, I believe it was something like 1%. So either, so basically in order to even get today’s valuation to, to, uh, make sense, I had to over exaggerate.
The risk. I think that is that, that we see at PayPal. So I did that, that’s a side note, and that confirmed that PayPal is either absolutely bottom, fairly valued, or, and the only way it doesn’t make sense is if, if it actually starts declining it’s revenue start declining, which of course could happen. Uh, here’s my question to you.
As I started getting excited about PayPal, uh, I ended up buying a call for March 20th, 26th. That will profit the way options do if the stock price goes up basically between now and March. But the more I was thinking about and researching PayPal badge, oh, sorry, one, one other thing. The reason I picked March was because I was getting two earnings calls in there before expiration.
I’m gonna get the one tomorrow, meaning tomorrow as if the recording date you listen to this in the future will already know how PayPal did but me right now, we don’t know how PayPal did. But anyway, I get that call, earnings call, and then I get another one three months later. And initially my thesis was I already can sniff the turnaround happen.
The last earnings call, they already, you could see the numbers are now trending in the right direction, but the market reaction was actually muted. And my tingly sense says, no. This is gonna be the earnings call where we’re really gonna start to get traction in the market. Maybe if not overnight, in the coming weeks, we’ll start reevaluating it.
If not this one, then they’ll March one. But the more I studied this badge, the more I think, Sometimes things take longer, like the rerate, the fundamentals might be sound, but it’s still gonna take longer for the market to properly recalibrate, especially a company that’s around 60 whatever, 5 billion, 67 billion. Market cap. So I’m sitting here looking my King of the jungle portfolio badge, and I, I have three options right now open.
Two of them I’m confident in, but the PayPal one, uh, right now is worth $239. I bought it for $340, so I’m down a hundred bucks. That’s a loss of 29% on this trade. And if I based it on that, it’d be anchoring. It’d be like, well, I paid more, you know, I paid more, so I don’t wanna sell it, but I’m, I’m better than that.
So I’m debating selling this before earnings call pocketing the bananas. And if PayPal actually does, you know, deliver superior results like I think is possible. Then, well, I’ll have cost myself hundreds of dollars of profit because you know, if, if the stock jumps up five, 10%, the options would’ve made it even more.
So that’s one thing I’m like, damn, it might cost myself a lot of money, but then if it doesn’t do well, right, I could of course rebuy the options for later dates cheaper. And I’m not, I’m legitimately not sure what to do with this. And I’m curious with, given what I just told you, and since you are kind of the FinTech resin expert, you have PayPal’s competitor in your portfolio in the Adyen and you know, you study this stuff and I think you have a better natural sense for.
What PayPal might say, and you know, or how, how the market might react. I’m curious whether you would advise Monkey to just sit on his hands and I made my decision and I get two earnings call shots, or maybe I was too aggressive in my timeline and it’s a little too short dated to profit.
I don’t like, I know nothing about PayPal, but maybe the question is, I can help you try and answer for yourself is like, what’s gonna happen in the world between now and March?
Maybe like, who knows? Things might stay the same and then I know you have to work out what that means for PayPal,
I have, I do have a strong thesis I haven’t gotten into yet. ’cause you know, I haven’t done a deep dive with you. I do have a strong thesis that says PayPal is turning around. There’s, there’s things I’m gonna point to. Uh, but that’s a, I think adjacent to, is that going to be quick enough, so to speak. Will that happen quick enough?
To per proliferate through, call it the, the FinTech ecosystem. That’s the thing I can’t quite answer. And that’s the bitch, pardon my language, of having a shorter ish call option for March because I could be right, but it’s gonna take them, say till June rather than March to really
Yeah. And that is like, that’s the, that’s the downside of using options as opposed to just buying stock. Like if we reflect on. You know, you, you sort of, you, you dry your tears when you remember that you bought Rocket Lab calls, you didn’t buy Rocket Lab stock, then the calls expired, worthless, or you know, it didn’t play out because there was like an end, like a time date on that and they expired or you had to sell them.
Um, but if you don’t, the stock, you know, you just own it in perpetuity. Come hell or high water. And in this case it was like high water. So if you’re really, if your thesis, your long-term thesis around PayPal. Is positive, you might as well buy the stock, but obviously you get a discount when you buy it through options.
So at least you get more leverage over your capital that you can con control more stock with less dollars if you do it with options than if you just go buy the stock. So I can’t, I can’t really, I can’t tell you. I’ve got no idea. Like I’m a bear on PayPal, but only because I personally don’t like. The platform.
I don’t like the business model. Um, I think companies like wise, to the extent that they overlap, they don’t really overlap at all. I think something like Wise is a better, better proposition for u for bi, for users. But like, you know, PayPal have a huge volume and so there’s a bunch of people using it, irrespective of Oh, like the, the anti-competitive.
Nature of the FX that it operates. That certainly that’s why I don’t like him. But, um, but that’s, that’s, I don’t know your thesis. It doesn’t talk to your thesis. Um, but what’s gonna happen between now and March? You’re gonna get two earnings calls. Maybe the world is gonna stay the same. Maybe we will tip into recession, like, I hate to use that word again, but.
Like it’s possible and like I, I’ve certainly got it front of mind with when I’m adding money to companies right now, and like Intuitive surgical is like in my mind, recession proof because, you know, they do, most, most pe most individuals will spend on surgery through their insurer. And you’re probably gonna continue to have insurance in the US whether, you know, irrespective of your.
Uh, wealth level, like if you Yeah, you, you know, in real terms you have less expendable income, you’re probably, most people are probably gonna still keep their insurance. So like a PayPal, like, I guess their money is made from commerce, from like effect, like helping transactions happen. And I would guess, again, I don’t know the company at all, that the large majority of their money is probably from consumer discretionary.
Because if you’re gonna go and buy like your baked beans and your nappies and like your household detergent and the stuff that you’re gonna buy, no matter what the economy’s doing, you are probably not using PayPal for that transaction. You’re probably going into like your Costco and you are using your credit card, but you might use PayPal.
Tell me if I’m going totally off base, you might be more likely to use PayPal for like, you know, some kind of fun purchase. Something on, you know, some e-commerce site or an experience or something else, and another kind of things you might cut back on if money gets tight.
I think, see this requires a whole deep dive on PayPal, uh, stuff I’m pretty sure you don’t know about yet. Uh, so I think for sure. My bullish thesis is way, way more bullish than what you’re talking about now. I think they’re totally rebranding themselves in, in ways that most people don’t know about, but that’s not really, uh, for my question, let’s just assume, and I know it’s hard to play these abstract assumption games, let’s assume that my bullish thesis is more correct than not.
I’m still left with the same question, um, which is. Which is I, I think if I talk it through, the reason I think I might have made a mistake is because I bought the option that I thought was long dated enough in March, but I’m starting to sense that that’s still too short term. That’s only five months, and that at minimum, I’m gonna need three earnings calls.
To, uh, really either be right, proven right or watch it basically flow through the system, which would mean the more appropriate one would be for June if I still wanted to take a pretty, you know, uh, aggressive
there? Well, again, like you’ve, you’ve sort of thrown a question at me. I can’t really answer ’cause I don’t know what’s in your head, but, but I would just challenge that, like if March isn’t long enough, why is June long enough? Like that’s only another three months. Why not buy a 2027 option?
Right. Well, uh, I, in my urban portfolio, my real world portfolio, not, I’m sorry, not real world. My personal non king of the jungle portfolio, I have 27. Calls, uh, but in the king of the jungle here, the 27 calls are way more expensive, and I don’t have the bananas to fund it. So it’s a bit of a, you know, uh, for all our listeners, this is a bit, you know, I’m, I’m skating on the thin line, thin edge, where I could be completely wrong, and exactly.
March isn’t long enough. But the longer I go the more costs. And so that’s the safer thing. And I’m weighing, I’m legitimate. Oh man. Um. Of course, the moment I sell it, they’re gonna, of course they’re gonna knock it outta the park and the stock’s gonna jump 20%. But, but that’s greed talking too, right? That’s got kind of like Momo uh, mentality.
And so I do, by the way, have shares too in the king of the jungle. So I’m, I’m playing this both ways. Yeah, I’m not, I’m really not sure whether before today’s day I’m gonna keep this, this call or not. I guess our patons will find out in the trading channel to see what I, what I’ve done. Uh, I think the safe way would be to sell them and be happy if they go up, because I still have a couple shares.
If not, be happy ’cause I’ll get the June options even cheaper. That’s probably the, the mental model to, to go in and not get sidetracked by, you know, trying to get to a thousand percent gains for the year with, uh, four days left
in our portfolio.
Are you, are you, are you actually close to? So we, we’d have literally three days left until the end of year two of King of the Jungle. Are you within striking zone of a thousand percent return over that year.
I think so. I, this, this actually didn’t go in my calculations. I did not, you know, obviously I did not predict that kind of outcome, but, or when I bought the, the PayPal calls. But if PayPal. Says what I think they might say that could put me over the thousand percent gain with the call because of the massive leverage.
You know, I make hundreds of dollars on this pro possibly. So that is the greed, you know, that’s just fun and
do it. It’s like we’ve got, we’ve got a, a bottle of RUM bet on this and I think, I think the way the bet should work is I bet a bottle of rum that you would make more than 500% gain in the year if you make a thousand percent gain. I get two bottles of rum, be it.
Oh no. Come. I’m gonna go. I’m gonna go bankrupt. Just paying you. Hey. Investor who made a thousand percent in a year still ended up broke due to his rum debts.
Oh man. Anyway, it’s a good, I dunno, hopefully for our listeners, it was interesting to, for me to articulate this tension between greed and thinking sensibly about, uh. You know, greed versus timing things and using leverage and how that conflates with thesis statement and, you know, due diligence and all that.
So, yeah, hopefully it was interesting
We gotta, you gotta explain your thesis at some point. so yeah, like do that on the podcast in a future episode. Like why it is. You believe this is a market beating investment?
Yeah, absolutely. And I’ll have so much more relevant data, uh, starting tomorrow morning when they report pre-market. So,
shall we bring today’s episode home with a devastating estate tax that could wipe out 40% of your entire investment portfolio?
Do you wanna do that or do you wanna save that for
I wanna do it because it’s top of mind for me right now. And like, like I would feel, I would feel bad if one of our Patreons died before next week and they were.
Okay. Hey, hey. Don’t get eaten by by any pythons or anacondas that are lurking in the in the jungle please. But if you do has some really bad news for you.
Now, um.
That
I’m being a bit, I’m being a bit alarmist. I’m being a bit alarmist, but this is very real. And I and my buddy Albert and a couple of other my friends who studied this stuff and no investing, had no fricking idea about this. I was gonna get caught, potentially caught with my pants down. Um. So, and credit to the dividend talk community.
’cause uh, our friends Edgy and Derek amazing dividend Growth investing podcast and they got a really good community and I’m in that community and I read, I lurk a lot, I read a lot. I don’t, I rarely post. Um, but uh, this came up on their podcast two weeks ago and I think it’s really important. So I wanna share it here ’cause I’m sure this impacts at least one of our listeners out of our thousands of subscribers.
Right. If I had no idea about this, if you, you guys, you Americans, holy F right? How did you sneak this in to the way you tax? Because it’s completely
Wait, wait, wait. I’m
No, you, you, you are good. You guys are screwing us. You guys are screwing
Oh. Oh, good.
This is so counterintuitive, right? I thought. I was deluded into thinking, oh, I’m good, you know, I’ve got a will.
I, I remade my wills recently and I gotta pay, you know, UK inheritance tax and I’ll make some provisions and structure around that and I’m, I’m all set up. I have now learned about this US estate tax. So if you are a non-American investor in many, many countries of the world, if you own. US assets, which includes any US incorporated companies.
So, you know, like Teslas and alphabets and metas, like most American companies are incorporated in America. ’cause a few exceptions. Um, when you die, your broker will freeze your assets and they will require your estate to complete. A fairly painful process involving submitting a 7 0 6 dash na form to the IRS and your, I’m not joking.
Your estate will have to pay 40%, four 0% of all of your US assets to the IRS before your broker will release your funds to your estate so that your executors can deal with it and. There is a, if you are an American, like this tax applies to you as an American, but you have something like a $13 million exemption estate tax, like buffer.
So the first $13 million that you leave to your in your inheritors is tax free if you are a non-American leaving. American assets, so like your Google stock, if you’re leaving those to another non-American, like your wife who is not an American, 40% tax on all your American stocks above $60,000.
So the difference is, the difference is Americans get 13 million exemption and you pour, uh, Brits and oth other foreigners get 60,000, which is relatively nothing like, right, 13 mil, right? So, oh, that’s not good
it’s not quite Brits. ’cause there is a, there are certain treaty companies, but if you are like in Spain, Ireland. Hong Kong, Singapore, Dubai, Portugal, that’s it. That is the deal. Everything above $60,000 is taxed at 40% and it’s, you can’t get out of this, right? Uh, there are, there are ways to structure I’m gonna tell you about now.
So if you’re suddenly sitting forwards going, what? Like Google US estate tax, this is absolutely legitimate. I’ve been down the rabbit hole with this in the last few days. Now, if you are a UK citizen. Or Germany or France, and there’s a number of other countries. Then there is a tax treaty between your country, between say the UK and the us.
And as of the 1st of January, that means as a UK citizen, instead of being 13 million by limit will be $7 million. So you might go, okay, like boohoo, right? But if you’ve, if you’ve invested for a long time. You might be sleeping on by the time you get to your sixties or seventies, you might be sleeping on a portfolio that’s worth more than $7 million.
Um, and, uh, and in fact, not even a portfolio, you know, your, your net worth. If your net worth is worth more than $7 million, which is about five and a half million pounds today, then this tax kicks in and you would potentially liable for 40%. Of the all of your US investments as a proportion of the $7 million, so,
So if I could summarize right now, badge, uh, just, yeah. Uh, if so, bad news one, you’re dead. That’s, that’s the first thing, right? Two, because you just got yourself eaten by some poisonous snake. Uh, your state, the people who handle your business, unless you’re part of a a couple of these exempt uh, treaties zones, you are going to lose approximately 40% in all of the US Incorporated companies. That’s, is that correct for now? That’s the summary for now. So, uh, is there any good news in any of
this?
now that you are aware of this, go and look into it. If you are in like a country, like the uk, okay, sure. You know, $7 million is a big number. Like not many people have that kind of wealth. But maybe plan ahead and if it makes sense, like I am not a lawyer, I’m not a tax advisory, I’m just telling you about this thing.
Now go and do your own research. There are ways to mitigate this, and if you’re in Ireland, like this is particularly important because you only get that $60,000 limit, not the $7 million limit. So there’s two ways to legally avoid this tax. One is instead of owning individual stocks like Google and Meta and da, da, da, you buy.
A non-US domiciled ETF, that tracks the US stock market. So you would buy, for example, we talk about Vu, VOO, it’s like the s and p. So VU itself is a US, incorporated ETF, so you can’t buy that one. But there are Irish and other markets have their own versions. Of Vu, which track the s and p and they’re incorporated in the local country.
So those will be outside the scope of this. So, but that’s kind of boring, right? You don’t wanna own ETFs, you wanna own individual companies. That’s like, this is like my mission is to pick, beat the market, pick stocks. And so I, that’s no good to me buying an ETF, but that would be good for the majority of people who aren’t like died in the wool stock pickers.
If you must own. US assets, and if your intention is to leave like the majority of your estate to your spouse, um, then you can have a u So you, it’s recommended you create a US will. So a second will for the us, which has to meet certain criteria, like you’ll have to employ. Like a lawyer or you know, an estate person to help you set this up and your will, your US will, will create a qualified domestic trust, QDOT, and that would allow you, your estate, at least your spouse, to defer the taxes.
But the taxes are still due, so it just means.
Alright, batch. Sorry. I mean this tax talk, it’s making my eyes roll in the back of my head. I’m sure half of our listeners already also might have died, but this is important. No, sorry, not died. ’cause that would trigger all this. Uh, they fell asleep or they fell off their chair. Let’s get to the real most important point here.
Uh, let’s get to the, as they say, the monkey business. Uh, all the bananas that you’re gonna leave your, your, your humble co-host. Uh, after you, you, you kick the bucket, falling off some cliffs skiing or jumping off wherever you’re gonna be jumping off a motorcycle. What, what do I gotta do? What do I gotta do to secure all the
You’re you. You’re a US citizen. I could leave stuff to you. No problem. I just can’t leave it. yeah.
Oh, you can. Oh.
Leave it.
You know, you know, it’s not like I’ll reinvest it all in in, uh, what’s the in beyond meat? I wouldn’t do that. Would I, would I disrespect your legacy in that way? No. I would put it all into Greg’s
There you go. Yeah.
game.
Well, like, you know, I, I’m laughing ’cause it’s like the things like Greg sausages in my portfolio are some of the only positions that are immune from this because almost everything else is us incorporated. But you’re right, let’s bring it home. ’cause most people this won’t affect. Um, but this is real.
If you are not a US citizen and you own US stocks, you are exposed to this tax. If you’re not in a treaty country, you’re almost certainly exposed to this tax today as opposed to in the far future. Um, you should get legal advice on this if you think this impacts you. Um, and the key thing is. The place of incorporation of the companies you own.
So it’s quite interesting ’cause I looked down my whole portfolio and did a quick bit of Google to see kind of where they’re incorporated. So like somewhere a little bit surprising. Newbank is like South American that’s, um, incorporated in the Cayman Islands, so that’s good. Um, and I expected that. But Mecado Libre.
Is also like south of the border, but they’re incorporated in Delaware, so that’s bad. That falls into the scope of this ire one of your favorites. Well, that’s an Australian company. Great. Even though it’s listed on like the nasdaq, it’s incorporated in Australia, so that’s kind of a Okay,
So actually they’re moving
to the
Yeah. What wise, right?
They’re a British company that are about to like re headquarter and re-list in the us. That’s gonna be bad for this ’cause it will fall in scope. Shopify company. I used to own Canadian, like Immune. So that’s the kind of analysis you need to do in your portfolio to figure out the extent to which, uh, you might breach this.
Can I just give, can I just give like one more minute to this topic? Because in the dividend torque community, they were debating. Like things that you could do and it almost like, you know, half jokingly, but I just wanna kind of address these head on, right? You might think, oh, I’m just gonna leave everything to my spouse.
It’s tax free. We’ve now established that’s not the case. You can’t expect your spouse. To go into your brokerage and just quickly, you know, they’ve heard you’re dead. The first thing they’re gonna do is go online and find your two FA codes and log in and sell all your US stocks. Even if they were able to do, you know, overcome their misery or celebrate, and God knows and successfully do that, that don’t count, the IRS will look through that transaction and it will just make things worse and more complicated.
For your, the people who inherit from you. So if this impacts you, do it properly. Get financial, get proper estate planning advice, and then don’t get caught out as I may have done if I hadn’t have caught that two weeks ago.
Just make sure ma Monkey gets his bananas when you kick the bucket. That’s the TLDR. Okay. Do you, do you sign your, you sign the things? Okay. Uh, badge. Uh, thank you for bringing that to our attention. Yeah. So Patreons, uh, taking, taking Q from the good folks over at the, uh, dividend growth. Uh, podcast community. They, we mentioned that they have a cool thing where they solicit ideas from their listeners and they create their own community based portfolio, and we think it’s time to do a similar thing over at Wall Street Wildlife.
So we will write a post, a longer, more in depth post on the Patreon site@wallstreetwildlife.com. But the general idea is. We want to hear your stock picks and your ideas. We’ll give you a place to submit them to make a case, and then we’ll have a vote and then. Each month, the, the winner will go into an actual portfolio, which will then compete against badger and monkeys portfolios, and then we’ll have prizes and all kinds of delicious banana, golden fruit, uh, as, as prizes or maybe.
Badge will throw you some acorns and, um, I think it’ll be a good way to help process all of the good research that you guys are doing. Put it all in one place, make and have some fun with it. So stay tuned. Heads up on the Patreons badge. You wanna add
something to that?
If any community like this can deliver a thousand percent return and beat monkey, like wow, that would be incredible. Um, so look, really looking forward to seeing what our Wall Street Wildlife community come up with between them. And I think we, we we’re aim to launch it like soon, so we’ll get the details out in the next week or so.
Because we want it to go in sync with our King of the jungle. ’cause we review like every 1st of November is like the cutoff. Um, and then, yeah, let’s see how, let’s see our community do like, what’s that thing they say? You know, the wi the, not the wisdom of the crowds, but you know, when you’re like counting jelly beans in a jar, it’s like,
That’s a real thing. That’s a legitimately real thing that the crowd will tell you better than, uh, than the experts because it’s some probability networking flywheel effecting happening. But yeah, that’s exactly what we want to get started. So year three of the king of the jungle challenge will not be simply badger versus monkey.
It’ll now be badger versus monkey versus. The jungle critters themselves, and we look forward to getting this started. So again, more info, we’ll, we’ll type this all up on the Patreons. If you’re not part of the Patreon crew yet and you’re hearing us on the YouTubes for the first time, please go check us out@wallstreetwildlife.com where all of this will be in clear evidence.
All right. Back end of another long episode. Anything else you wanna touch on before we wrap up for this week?
nope, that’s, that’s
Did you check out Tron mode in your Tesla? You didn’t shake in your head?
I did not yet See that I, I, I, let me write
that down. Right now, I have PayPal, I have PayPal, March 20th calls to worry about badge. I got, I got a thousand percents to, to accomplish. I don’t, uh, tron Aries mode. Okay. I will, I will look into this
Um, and I haven’t seen one battle after another yet either. So they go,
Oh, so, okay. So we’re both flopping at each other, right. Okay. Shame on you. Go. Go.
if you enjoyed what we did with fiscal.ai, go check it out. If you go to fiscal, do AI slash wildlife, uh, you’ll get a handsome discount. It is a fantastic investing tool. Are you ready to become a beast of an investor?
Hell yeah. We’re ready.
Just started there.
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