Episode Transcript
[00:00:08] Speaker A: Ladies and gentlemen, welcome back to the Wolf podcast. Today we are joined by Chris be my gnome as from growth to value on x. Hey, Chris, how are you doing today?
[00:00:16] Speaker B: I'm doing good. How are you, Shea?
[00:00:18] Speaker A: Doing great. Doing great. I mean, we were speaking on June 13 today, and Tesla is up 7% pre market. Elon is going to be the CEO for quite some time, so I'm super happy about that. But before we get into all that nonsense or all that fun that everyone's here to listen to, do you want to tell us a little about yourself? What got you into investing? Cause my fiance tells me all the time, like, why did you choose this? You're stressed out all the time. The ebbs and flows like, it's so uncontrollable, the emotions associated with it. Like, what chose what would cause you to kind of get into this space?
[00:00:54] Speaker B: Well, that was actually in 2013 when my wife was pregnant. I knew nothing about stocks, but I had some sort of primal feeling of having together for our unborn child. And my first idea was, and if you watch this, you can see the bottles behind me, single malt whiskies, because I gave tastings, etcetera. So I knew what to invest in, single malt whiskeys. And, you know, my wife is a lawyer and a tax specialist, and she's very good at keeping me with both feet on the ground. She said, you know, you will want to try those if you buy them. I say, of course I know that. So I'll buy three, and two are to invest, and one is for me. And she says, oh, so you're starting at -33% well, long journey. And then eventually I came across stocks and I thought, wow, this is it. And I started investing. And of course, like everybody who starts investing without any knowledge, you make the most stupid mistakes you can think of, really, really losing money. I actually started out as some sort of deep value investor.
My first stock was a coal mine stock trading at 3.8 times pe or something. And that could never go down, right? Of course it did.
So I started studying ferociously. And that has always been my hobby. Reading, studying. And I literally read.
I kept the record. I read more than 15,000 articles on seeking alpha, mostly, but on other platforms as well, I read about 80 books. I listened to about 700 podcast episodes, etcetera. So in a few years time, I got quite a bit more knowledgeable than I was when I started out. And then in 2016, on Seeking Alpha, you can also write comments and follow people, etcetera. So I wrote quite some comments there. And in early 2016, someone wrote, like, I follow you because your comments are often more interesting than the article you comment on and almost as long.
So wouldn't you consider starting to write and say, well, I had already thought about that, but I thought I, nobody's waiting for me. But, you know, that gave me the final push to start writing. I was seeking Alpha in February 2016, and then, you know, I gained followers, etcetera. And, you know, that's then I started my paid service called potential multibaggers on Seeking Alpha in 2020. And that took off like a rocket. And, you know, since then, it has been my full time job. And then in February 2022, I launched a second service called Best Anchor stocks, together with Leandro spanish author, who you may know as investquotes on X.
That's my story.
[00:04:37] Speaker A: Well, first off, that sounds amazing, that journey, the arc that you went on to get here. I want to actually talk more about your name from growth to value, because I do think there's a lot of names right now specifically that are going through that awkward period where essentially everyone's goal is find these growth stocks and they turn into value because they're compounding machines and you're starting to make a lot of earnings once that margin expansion story happens. But the valuation multiple completely changes from growth to value. Like right now, we're noticing as we speak right now, Celsius, for example, once their most recent earnings, they cut their guide. I underwrited them growing 50% this year it's down 35%. Turning to an earnings growth story, it's like, oh, the valuation right now is not justified for that earnings expansion component, and it's not hyper growing 50 plus valuation needs to come down. And I think a lot of people had that difficulty of swallowing that pill of like, oh, like, I got into Celsius this year, a lot of new investors expecting a growth stock, but that's not the case anymore. It's going to be more slowly transitioning from growth to value and more of an earnings story. So, like, can you elaborate more on, like, that concept and also what other names maybe are experiencing that awkward transition?
[00:05:57] Speaker B: Well, I would argue that actually Celsius is still a growth stock. I mean, revenue is still expected to grow at 30% plus. That's a growth stock. It's maybe not that hyper growth anymore, but that was always expected because of the Pepsi deal that was leap, but. Yeah, but you're completely right.
In general, there are many names who transition from growth to value. And that's a very can be a very, you know, painful period for many investors. And it often happens you have two possibilities. Either the stock drops a lot, or it goes nowhere for a few years and it grows into its valuation.
So those in betweeners are actually the very often interesting opportunities, because you always see the same thing, right, that the market is very, very optimistic or very pessimistic. And then usually the truth is somewhere in the middle. And I think those in betweeners are very often very interesting. If you missed the boat on the high growth trajectory, this is often a chance to get in. If you are a long term investor, and you will have to have patience.
It's crucial to have patients with long term winners, because if you look at the average holding period, it's like four and a half months now.
So if you look at, if you read the great book written by Chris Mayer, 100 baggers, it takes 26 years on average to have a 100 bagger.
That's quite big gap between four and a half months and 26 years. And I think, I think you have two quarters.
[00:07:58] Speaker A: Like, people won't even hold stock for two quarterly earnings report. That's insane to even hear that.
[00:08:02] Speaker B: Yep. And, you know, you have to know very well which game you are playing.
I think, I think many people are confused about the game that they play. They think they are long term investors, but they, you know, they changed a way too quick, too quickly.
They have a turnover ratio of like 80% per year. So that's not how you're going to win over the long term.
Then you are a trader. And if you are a trader, that's perfect. But then you have to play the trading game and not the long term investing game. So many people feel like they are long term investors, but they're probably, you know, not fit for that because of their character or, you know, their innate impatience or what have you.
So you really have to know yourself and, and the game you're playing very well to, to have your best form of investing. And, you know, I always refer to, you see a part of my library here behind me, and I always refer to books. If you would see all the books I have, you would see novels, you would see some shakespeare. You will see, of course, lots of stock market books, psychology, sports, et cetera, et cetera.
All those things together, all those themes together, say something about me. They express my personality in a way, or they are an expression of my personality. And I think your portfolio should reflect the same thing. So that means you can have a long term portfolio, but maybe you're impatient and you can have a trading portfolio to satisfy that need and to scratch that itch.
[00:09:45] Speaker A: No, I love to hear that. So before we get into specific names, I agree with you. Fundamentally, it feels like you're a fundamental investor because you kind of need to be in order to find those multibaggers. How do you implement the technical side of it? I always say fundamentals teach you what to buy, technicals teach you when to buy it. Do you have any kind of technical component to your.
[00:10:07] Speaker B: I completely ignore it. I completely ignore it. Why? Because if you look at long term, if you look at a ten year period and there are quite a few researches about this or surveys. No, not again. And there are three, two, one, there are quite some researchers about this. If you look at valuation over the long term, it doesn't matter that much. And actually if you try to time the market over ten years, that will make up, depending on which research you read, 1% to 5% of your total return.
For me, that's not really worth to look at it because the fundamentals will be much more important over that period than the exact timing.
Of course everybody will think of an exception, but these researches have been done over rolling ten years and those are quite clear actually that the timing part, if you are investing for the long term, that is, and that's ten years for me, then the timing part is actually very marginally important.
[00:11:27] Speaker A: No, I love that. I mean it also saves you a lot of stress. Like you're probably gonna live longer with that kind of mentality.
[00:11:34] Speaker B: But you know, you have, you have, that's, that's, I'm using my edge. I'm using my edge and my edge is that I'm extremely patient. You can even ask my wife, she would say the same thing.
And that's, that's good in our marriage.
And you know, something else that I also do to not use market timing is for me, investing for the long term is a process, not a moment. So I invest like for example the trade desk. I have probably bought the trade desk like 55, 60 times already over the years. So, you know, I don't need to time it because I will have opportunities like where it's, you know, very cheap and then, you know, I'll probably buy a bit when it's actually bit too expensive, but I will buy much less because I, you know, I invest more or less the same amount every two weeks. So I will not go full in on the trade as when I know it's probably a bit expensive. Maybe I'll buy one share then, and then when it's a lot cheaper, I will maybe buy five or ten or so. That's. And I call it dollar cost averaging on steroids. Because when the market is down, I invest more. So I don't contribute to my emergency fund, then I can even take out.
So I invest more when the markets are down and I have barriers, like percentage wise. Like if it, if the market is down, the total market is down 10%. I try to invest 20% more, for example, and that goes to more than 30%. Then I try to double the money. So I even take from my emergency fund. I always keep like four months of expenses there. But, you know, that's, that's how I do it.
[00:13:37] Speaker A: No, I mean, I love that it's, it saves a lot of heartache. A, b, it's easier kind of when there's fear in the market or even fear in specific names where the thesis hasn't changed for me, I love to pounce on it. Again, perfect example, snowflake. The narrative around Snowflake is disgusting. Right now I'm adding like a madman because I'm thinking five years plus so I can deal with the short term noise of their AI investments, making them miss their earnings. Like the breach, potential breach, databricks, competition, all that noise, that's short term. So we get see that long term vision, which if you have you, and I's like hat on of long term investors, like, we're able to go through these bumpy periods. But let's get into some specific micro names with that kind of mentality. So I saw that you have some fintech exposure. Fintech names have kind of been getting destroyed the past two years. It's due to higher for longer interest rates and also highly competitive space now. Wherever.
[00:14:36] Speaker B: Yes.
[00:14:37] Speaker A: Thin margins, highly competitive. For me, specifically. I don't have an edge in fintechs. I have no exposure. I have a trade for shift four on right now. But like, besides that, I mean, like, I can't see a long term moat in a lot of these names because I see massive consolidation happening. Like PayPal's trading at less than 20 times free cash flow, like D locals trading at less than ten times, build outcomes, even trading less than 20. That's a software component of the list. Goes on like, they're all trained, incredibly cheap, and they don't get the respect they deserve. I know Adian caught a bid recently, but they were down, like, what was like $6 at one point. That was a brutal two months. And that's with like a 40% plus operating margin. That's, like, what scares me. Like, oh, my God, addien could get tanked like that with growing top line, 20% with 40% margins. Like, I'm out this whole industry. So, like, what's your take on everything I just said and, like, how the fintech industry is right now?
[00:15:35] Speaker B: You saw a smile on my face when you talked about the period in which it dropped to $6.
Because I made it my biggest position then, and that's still my biggest position.
[00:15:48] Speaker A: Good for you.
[00:15:49] Speaker B: Allocation based on. Yeah, because I knew that company so well, and I wrote several articles about it, of course, first for my paid subscribers, but also on the. On the public side of seeking alpha, and even made it a free article on my substack, which is called multibagger nuggets, because I thought everybody should know this. Like, what happened first thing? Aden switched its reporting from gross revenue to net revenue. So if you looked at the numbers, it was like, revenue was down 38%. If you look at the data, 20 seconds after the earnings were released, the stock was already down 25%. That's not a fundamental. Investors who have read everything. Right? That's just.
[00:16:52] Speaker A: That's quantitative. That's a good example of FUD. That is FUD right there of just fear of the whole industry.
[00:16:58] Speaker B: It's just, you know, not even that. It's. It's algorithms which are trained to see that these are the expectations.
Adjan changes its revenue recognition, and they see, like, you know, this is a huge miss we have to sell. That's total algorithmic trading. And, you know, the 20 seconds show that the next day, it went like -40% because the next day, of course, that's also so much fun. Then the analysts come out, they say, oh, damn, that stock is down 25%. I've got to figure out why. And then they come up with something, and I called it nonsense.
Those so called. That fundamental sauce was complete nonsense. The results were good. And I even wrote an article concentrating on biases, because I wanted to know, am I biased? And I checked off all possible biases, like, am I biased? Versus the idea. My conclusion was, no, I'm not. But it was a great exercise. So I added more and more and more.
I did something atypical, because I added quite fast, which, as I said, I normally don't do because it's a process for me. But here I saw the, you know, the market being so wrong that I, you know, I really pounded the table, and I made in my biggest position in, like, two and a half months or so.
And then you know, then the investor day came, so that was three months later or so, and then everybody understood. And then the stock price was up like 35% that day. Or 37, I don't remember.
And it made me actually a bit sad because I would have added more if it would have taken longer. So, yeah, I totally understand what you say about fintech, and if you look at the industry as a whole, I think you are completely right. It's actually a race to the bottom. And if you have a race to the bottom, think of Amazon. Who wins a. That's the one player that's positioned the best, and that is AJ and maybe stripe. Those two are the only ones that, you know, I hear really good things about a four.
I have not really dug really deep.
I see great management there as well.
So that's one that I'm, you know, still interested in.
[00:19:40] Speaker A: But for shift, more specifically, I don't know what your take is on, so shift for. I did trade because it's under most undervalued among all the fintech names. And, like, CEO bought $10 million worth of shares in past months. Like, all right.
They also have a high floor because they're perfect products to get acquired, but their take rate is increasing faster than revenue. I was like, that's not, doesn't make sense. That's like, a very unusual thing. So, like, doesn't pass my sniff test. Like, what's your take on, like, that specific component of, like, a take, especially in fintech, where, like, D local is getting penalized, especially because, like, their numbers were very hard to believe. Uruguay based company. So Fintech has that heartburn of, like, are these numbers real and what's your take on that?
[00:20:25] Speaker B: Yeah, great question.
Take rates are everything in payments, and that's also why, you know, a can undercut everyone and still be extremely profitable. They have the lowest cost to serve customers, so they could actually compete everyone out on.
So they say our take rate doesn't have to be high.
And that's also something that I think many investors didn't understand because they say, oh, the take rate is going down. Yeah, but that has been part of the plan since the start because that's actually how it goes in payments. And you know, that management had already had a payments company and started one again because that's what Jen means, to start again.
[00:21:16] Speaker A: Oh, I didn't know. That's cool.
[00:21:17] Speaker B: Yeah, it's some sort of, I think, latin american dialect, something. I don't remember exactly which one it was, but so, yeah. And, you know, they didn't need the money because they had plenty of money by selling their previous fintech.
So, but that's actually D local has had extremely high take rates. And the only reason why is because in the countries they operated, big companies like, for example, Microsoft, didn't really have alternatives for their payments in those countries from a tech point of view.
And that's why D local could charge those high take rates.
If you look at what's happening right now at D local, I think that what you see is that they get a. A lot of pressure from IGN in Latin America because that's what Adjan said. We're going to concentrate a little bit more on Latin America. And what you saw immediately was D locals margins going take rates going down. So I think that the take rates were not sustainable and are not sustainable even at this moment at D local, they will go down. So I'm a fan of their CEO, Peter Arendt, who comes from Mercado Libre, but I think that, like Warren Buffett said, if you have the reputation of an industry, I have the reputation of a CEO, it's the industry that will win.
And I think that he will have a very hard time competing with Adiande specifically, although I don't rule them out. I mean, this is one that I keep on my radar for now. Those take rates are still too high for me. But if they can prove that with much lower take rates, they're still doing very well, then I could become interested. So, you know, overall, I have just one, one name in that industry, and that's Adyen. I think it's still underrated, maybe partly because it's european, but the quality there is extremely high. So I also have a scoring system in which I grade companies on several 18 or 19 criteria, and Aden has been the highest scorer for, like, I don't know, years already.
They have incredibly high margins. They have almost no stock based compensation.
I could go on and on and on.
The management knows extremely well what they do. What I mean is this. So in 2020, everybody was hiring tech people, of course, because there was a pandemic and people had to change, or companies had to change very fast, so they needed tech people. Adion said, oh, damn. Now tech people are so expensive. We're only hiring the most crucial roles for the most crucial roles, but nothing else. Then in 2022, all big tech like Microsoft and Facebook matter and Google, etcetera, they were all firing employees. And that's when Ajahn said, we're going to go to the market now. So they hired like crazy. So they doubled their employee, essentially, they.
[00:25:10] Speaker A: Went to like a talent auction right there. Like car auction, got a villain on sale.
[00:25:14] Speaker B: And that's actually like, really going against, you know, being contrarian. But for a company then, and they, they doubled their number of employees from 2000 to 4000, I think.
And they say, and now we're ready for the next phase. So what you'll see in the next three years is our revenue growth will be between low twenties and high twenties, starting with low twenties, because we still have to integrate those people.
And then I going up in the next few years when new products, and that's not the first time that they do that. They have done the same thing in the periods before 2017. I think they had a similar three year plan. Like, okay, we hire, we doubled our number of employees. So in the next three years, you will see this. And that was correct to decimal almost. So they have, you know, they really control their company very well and it's very planned. It's not like, oh, this is what the market wants now. We follow, they just follow their own plans. And I really, really like that.
[00:26:30] Speaker A: No, I mean, I think your fund mount score is absolutely accurate because right now add in has, like, the own. I could probably make that justification. The only premium evaluation among all fintech names. Like, there's a tier one Addian, like, similar how crowd strikes tier one for cybersecurity. That's what Addien is in fintech, where they're trading at what I think is like 40 times free cash flow, where all the other names are 20 times. That's because that's the premium valuation they deserve as being 100%.
[00:26:57] Speaker B: And, you know, CrowdSec has been the number two on the criteria for a very long time, Ezra. So, you know, always the same names, but no coincidence that they indeed are much more expensive.
So, yeah, you're absolutely right.
[00:27:15] Speaker A: So the one thing about the industry that's catching me like, oh, do I, I can see the moat here because, like you said, like, addien has the vast amount of data and, like, partnerships and, like, they had the luxury of just being such a wide base that they could, like, the take rate doesn't really matter as much because they're all about scale and volume. They have that already. PayPal owns the most amount of data probably among all the fintech names. All right, that is a moat in itself. The first mover advantage, Venmo is the first mover advantage of what that concept was. And they have crazy amount of data. They can do some of that data going forward. It could be maybe an ad play of. We're seeing that trend in e commerce with Carl Libre, like seed limited, they're going to sell ads, and that's a high margin business. PayPal can probably do that. But what's your take on PayPal, specifically as a name? Because they have those components of first member advantage, large data modes. Something should come up with AI that can, they can pair up with, but some partnership with some other brand. What's your take on PayPal?
[00:28:19] Speaker B: I used to be a shareholder years ago, and I sold it because I saw the deterioration coming.
I think that PayPal, if you look at PayPal from an american point of view, you don't really understand what's going on. What I mean is that the situation in the states is actually completely different from almost everywhere in the world. And this is the one thing that the states are years behind.
If you look at Europe, we have had instant money transfers since early 2017 or something. You have the same thing in Latin America, not in every country yet, but like Pix in Brazil, et cetera. So Venmo can only be that successful and like cash app as well, because that system is not implemented in the US yet. I mean, it is now to a certain extent, but it's not like, you know, mature.
So if you look at what happened, for example, like, PayPal underpriced their products, which also had implications for Adia. What I mean, with underpricing, they sold them at.
At a loss because they thought, well, we can make up with the pay.
[00:29:51] Speaker A: Button platform is essentially what you're talking about.
[00:29:55] Speaker B: That's their fancy name for, like, we're selling our stuff under the cost of service.
Now, what you see is that that worked to a certain extent in the US. Why? Because the US also has the simplest payments ecosystem. I mean, there's a, like, you have. You have much, much, much more payment players all around the world, especially like in Europe, for example, in the Netherlands, they have ideal. And ideal is a platform to pay online. And like, 80% of online transactions are done on ideal. I mean, but that's not nowhere else in the world. I mean, I'm Belgium and I live close to the dutch border here, but, you know, no way that nobody knows even what ideal is in Belgium, let alone that you can use it. So the payments industry, like in Brazil, you have hundreds and hundreds and hundreds of payment possibilities. In that sense, the american market is the easiest one for every player, and that's also what adjacent says. So we're not going to compete on price. Even though they can, they don't compete on price with, for example, idea with, for example, PayPal, because then it's a race to the bottom. And we don't want that. We want our products to be used because from the moment that we can use them, we can show the other things as well that we have. And if you combine the whole package, then we're cheaper. And that's, in fact, still true. Even if Paypal sold that payments part. I forgot the name now that competes with Adyen.
Braintree. Yes. So if they sell Braintree at a loss, the total payments package was still more expensive than that of Adjanjdev for services which were not at the level of adjust. So I think that PayPal does have a chance to turn around, but turnarounds are always very difficult. I hear that they are reaching out to many small entrepreneurs right now.
So maybe that could be the start of the change, because I think there, AJN doesn't care about those. So IGN mostly goes for huge platforms like Amazon uses them worldwide outside of the US, Spotify, all those kind of Netflix. Those kind of customers use adien for abroad because they're the, you know, the payments industry is so much more complicated than in us.
But that's, you know, if PayPal would go after the small entrepreneurs, I think they have a chance to do it. And I hear that they're really actively, you know, reaching out to small entrepreneurs now. I know you know why it's a.
[00:33:13] Speaker A: Low hanging fruit, those small entrepreneurs. SMBs, like, I think so. There's a reason you don't see AWS and Azure going after SMBs in the cloud computing space.
[00:33:21] Speaker B: Mm hmm.
[00:33:22] Speaker A: They want the big dogs. That's where the scale actually is. But you see digital ocean, who specializes in SMBs for cloud computing. That's a low hanging fruit where they can have a chance.
[00:33:31] Speaker B: Yes.
[00:33:31] Speaker A: I'm not saying PayPal deserves.
Maybe I am actually. Maybe PayPal is the digital ocean of payment services.
[00:33:40] Speaker B: Could become.
[00:33:41] Speaker A: Could become. Yeah.
[00:33:42] Speaker B: Yeah, I think so. I think so. And that, you know, if, if they do well, I think it. It will start from there. But I have heard, like, from three people already, small entrepreneurs like myself, who have been approached by PayPal actively. So they were not really looking for a solution. They were actively, you know, contacted, like, you know, we can help you, etcetera. So I think that that is the right way to do it. But that also, I think, shows that they know that for the really biggest enterprises, that will not work.
[00:34:18] Speaker A: Yeah, I mean, I agree. Is that so? I like that take. I appreciate your fintech 10,000 food lens on what the fintech industry is like. But let's stick with the globalization actually conversation. Let's go to e commerce now. So I get asked this all the time, like, how did I pick which e commerce exposure I want portfolio, because there's so many out there. C Limercale Libre, Amazon co paying, like the list goes on. But for me it was like, all right, well, who has the biggest moats? And it's Mercado Libre ticker me li I'm not including Amazon because there's a lot of aws noise in that and all that. But Mercado Libre during 2020, 2021, didn't care about expanding the whole world with that huge e commerce bump that we got due to Covid. They're like, all right, we know our Yden lane. Latin America, we're going to create this infrastructure there and create a high bar of energy for any competition going forward. We're not going to try to expand in Europe, Africa. That's all just wasted capital. In their opinion. We're going to have a network effect in Latin America where nobody else can kind of eat our lunch. Sea Limited went the other routes. They were like, all right, well, we conquer. We have Southeast Asia. We want more exposure due to free fires popularity. So, like we want to parts of Europe, parts of Africa, Argentina, even Latin America, they try to get into like that. All clearly failed because they were growing too quickly. There wasn't the appetite, the bulb versus. So all that working capital got wasted. And now Alibaba is starting to eat their lunch in southeast, southeast Asia.
How did you, is starting to become a competitor, for example, how did you find and pick your knicks? I know you remember caudal libreous shareholder, maybe your sea limited. I don't have a tell on that yet. But, like, what's your way of kind of choosing your e commerce exposure?
[00:36:09] Speaker B: Yeah, so I'm actually long. Of the three names you named, I'm long Amazon, I'm long Mercado Libre, and I'm long c limited.
My biggest position by far is Mercado Libri.
If you look at allocation based, and I always rank my, you know, my holdings according to original allocation, not to the current one. The reason is that I don't want to punish the winners and reward the losers there because you can say, oh, this is still a small position, and add to a loser, or you can say, oh, this position is already too big, and I'm not going to add there. So that's why I always rank them according to the original allocation. And based on the original allocation, Adjen is my biggest one. And my second biggest one is Mercado Libre, because I think it's incredibly strong. It's actually quite fairly valued on several ratios that we want to look at. And it's an incredibly good company.
It has proven that for 25 years already, which is different than c limited. C limited, I have a ton of respect there as well. Now, sea limited is actually one that is in that transition phase.
So it got cheaper, it got cheaper, and it got, you know, it can go sideways for years. So, you know, both are possible. I don't sell, I don't really add now, but if you look at what Sea Limited did, that was really impressive as well because it was all growth, growth, growth, and that's what the market wanted and that's what Sea limited delivered. And then the market changed and we had 2022. And Sea Limited went from negative operating cash flow of 1 billion in a quarter to plus 500 million in just two quarters. I mean, they made that switch in just two quarters. That's incredibly.
Even without firing too many employees, they actually cut costs everywhere, but not too much on the employees.
They just changed the role that they had. Now, what is so special about Mercado Libre?
First and for all, they are by far the dominant player in all of their markets in Latin America, despite Amazon. So for years I have already heard, yeah, but Amazon is going to eat Mercado Libres lunch. It's not going to happen. You have plenty of local e commerce players, and those are the ones who are losing to Amazon and Mercado deliberate. So if you look at, you cannot compare it to the US, where Amazon has more than 50% of the e commerce market. Mercado Libre has like 27% of the latin american e commerce market. And then you have Amazon at, I don't know, the most recent, but something like 15% that's probably a bit lower. And all the rest is like, you know, 10% and lower. But there are quite, you know, if you, if you add that up, that's still a big market. So Mercado Libre has the advantage that Amazon had originally in the US. So as you said, they have the network, they have the distribution network, and that's extremely important and they have the reliability. So, I mean, people trust Mercado Libre, and in the same way that they trust Amazon and all the rest, if you look at trust, is there's a huge gap there.
And Mercado Libri actually ranks a little bit above Amazon in Latin America. If you talk about trust. I mean, that says something, I think, because Amazon is supposed to be the most customer centric company in the world. Well, in Latin America, Marcado Libre tops them. And if you look at management as well, I had an interview with Feder Sandler, who was the investor relations officer for Mercado Libre for six and a half years. So he worked with management very closely there. And he said, they hate the yes man. So they want to be challenged in every meeting. They want to hear what's wrong, what can be done better. And if someone just says, oh, that's very good, they, they hate it. They say, no, I don't want to hear that. Tell me something that could be better. So I think that mentality is like, you know, if, if you hear that, that is Jeff Bezos, that is Steve Jobs. Right? So that's the mentality of management at Mercado deliberate as well, because I think that's still extremely underrated. Even though everyone says, oh, we pay attention to management, I think.
In what kind of way do you do that? I mean, you want people who press their people. And Fide told me a story about Marcus Gabrinzo, the founder and CEO of Mercado deliberate.
He said he actually refers to Mercado Libri as one of his children and is the difficult child. And that's the reason why he only sleeps 4 hours a night, every night.
This guy is a multi billionaire, but just like Elon Musk, he's crazy as well.
He had those periods in which he slept in, in the factory, etcetera. So you have to have the drive, you have to, you know, if you look at it from a distance, you must wonder, is this a lunatic?
And, you know, that's what you see in the top executives that can really push their companies for years and years and years. And that's what Mercado Liber has done. If you look at, you know, the stock, it's bottom left to top right since it ipo'd in, I think, 2006.
[00:42:48] Speaker A: No, I mean, Marcat Libra is an absolute beast. He's called out so many great reasons on why they did. Had some more recent news on that banking license. What's your kind of 40 vision on why that's a big deal for mercadolibre for the next couple of years? Are they trying to get some new banks exposure, seeing how newbie is succeeding in their specific realm? They want some of their lunch.
[00:43:14] Speaker B: I think that will happen eventually. I think right now the two are still different in that sense. That Nubank, which is also quite a big position for me, and I love that management as well. And Feder Sandler, who I'm interviewed, worked there and took them through the IPO as the investor relations officer as well. So if you want to hear that interview, it's on multibagger nuggets, the podcast.
So I think that my thesis actually was Mercado Pago. So the payment side of Mercado Libri, because if you look at successful e commerce, it almost always has to do with what do you build on top of the e commerce.
I say almost because for Shopify that's different, because they have the software.
But if you look at Amazon, it's what is built on top of the e commerce. They started AWS from the e commerce side. Of course, it was fast, something else.
But prime is typically built on top of that platform. Mercado Libre started with a Prime like subscription service as well last year. So that's great because that adds margin, and especially not directly because just like Amazon, they give lots of value for that subscription. But people that subscribe also have shopping carts which are three times higher, etcetera.
Well, not the shopping carts, of course, but the price you pay for it.
And that's what I saw coming quite early, that Mercado Pago was for Mercado Liberty, very important. And as you said again, ads, you already said that before, ads are very high margin on Amazon. Mercadolibre has also introduced them, Sea Limited has right now, recently, quite recently.
So it's not the e commerce platform, it's always what's built on top of the e commerce platform. That is the most interesting thing. You can almost see it like the Internet is the e commerce, but the SaaS is the functions they built on top of the e commerce. And that's what Mercado Liberty does so well. And to come back to your question, the banking license, I think the first phase will be what they are already doing to a certain extent, and that is merchants. So they will be able to give bigger loans to merchants if they have a banking license, but eventually they will also go to consumers. I think so, yeah. I think not immediately, but several years. I think Nubank and Mercado Pago then will be direct competitors.
[00:46:38] Speaker A: Do you think that? My only heartburn, honestly, for Mercado library has always been their credit component, like the risk on their credit, because if you look into the numbers, it is on the riskier side of the people who use it. Will the banking license kind of relieve that heartburn? Or is that maybe them giving them more of a leeway for those kind of credit risk that I'm sure analysts are also calling out in their calls.
[00:47:03] Speaker B: Yeah. So if you look at the numbers, I mean, it's still. It's not, to me, it's not really worrying. I mean, yes, there's a loss, but you also have to look at the situation in Latin America, which is completely different. I mean, you cannot compare the numbers of people not paying back their loans to the US. Why? Also because the interest rates are also that much higher. So that means that you can have a much higher percentage of people not paying back their loans and still be very, very profitable, which is not the case in the US because the market is much more competitive there and because the rates are not so high. So it's a totally different situation. And if you look at both Nubank and Mercado Libre, for the ones that they gave the loans to, the numbers are actually very impressive. They're still low because the people that ask a loan, especially for Nubank as well, are often people who cannot get a regular loan from a bank in Latin America because 60%, I think, depends a bit on the country. But overall, 60% of the people are underbanked in Latin America. And now underbanked means they do have a bank account, but they cannot apply for a credit card, they cannot have a loan, etcetera. So I think that is a huge market opportunity. So I don't even worry that Mercado Libre and Nubank will go head to head, which they certainly will do in a few years because they will both win. I'm pretty sure about that. Because that market is so huge and banks are serving their customers so badly that, you know, and they cannot adapt. Those old banks are unable to adapt to the race that Mercado libre and Nubank give. That's impossible for them because then they undercut themselves completely. That's the innovator's dilemma. Right? Clayton Christensen, who says the big ones, the big ones cannot change because they would have to give up their profitability and their I 6% dividend yield and what have you. So that's. That's impossible.
[00:49:31] Speaker A: No, I fully agree with that. It sounds like for the names that we talked about that you own, like, the competitive advantage or the moat is like, absolutely top, top notch of, like, what you look for in a company.
The way that works is like, you can't really tell until they become a mid cap. So I'm going to offer a smaller cap name in the e commerce space, global e. It's like a GLBE. What's your take on it? Because for me, it's smaller company. It's like a $5 billion company that essentially has a massive mode of solving the complexity chain for trillion dollar industry like e commerce. So I think there's a massive Runway for it. But like, what is your take on global e?
[00:50:12] Speaker B: Well, you summarize it for me. I have the same opinion. I am long. I am long global eternity. I think it's completely underrated. I think people don't really understand it very well and they think that such a small player cannot be of any significance in such a huge trillion markets like e commerce.
I think they are really completely underrated. I think that it will only show in the next few years if you listen to the calls, et cetera, you see that it will come next year probably.
[00:50:57] Speaker A: Are you saying that because of the Shopify inflection point or more that Europe's going to be out? That consumer goods recession.
[00:51:04] Speaker B: You fell away. Could you repeat the question, please?
[00:51:06] Speaker A: Are you saying the next few is because the Shopify, the merchants from Shopify will start becoming like more and more a part of their revenue stream? Like this, like Q three or Q four, like managers call, like Shopify? We're going to see a clear inflection on the Shopify partnership? Or is it more the consumer? The luxury goods recession in Europe is going to be finally over with. So that's going to be, that headwind will turn to a tailwind for easier year of year comps. Like, what's your take on? Like, why next few years will be big?
[00:51:36] Speaker B: Well, both, both of them and the third one, they have several big customers in the pipeline that postponed launching a little bit.
And those will come online as well, maybe the end of the year, next year, and then you will see bigger revenue growth. I mean, it's already big, but even bigger revenue growth. And, yeah, I think right now it's a very interesting stock to, you know, to research if you haven't heard of it. And yeah, I agree with you there, that globally is underestimated.
[00:52:17] Speaker A: I think it's, yeah, I mean, I think it's one of those names where if you factor in the rule 40, which is my favorite metric to quantify growth, combine revenue growth and margins, like they have a 50 plus score for the next three years.
[00:52:30] Speaker B: Yes.
[00:52:31] Speaker A: And that's a, with a recession, you're up. And it's b, with like the biggest infusion of Shopify hasn't really trickled down yet on the, like, their income statements or balance sheets like, that's like, oh, my God.
[00:52:46] Speaker B: Yes.
[00:52:47] Speaker A: Do you think the reason people aren't, like, adopting as aggressively as I assumed is because of that complexity of understanding what they do? It's kind of like the palantir effect. Nobody really wanted Palantir in the eights. Black box consulting company for the government. That's all they knew, but didn't really know how it was used. I feel like global e kind of fits in that box of too hard to understand, put it away type of mentality. Do you think that's what's holding back investors?
[00:53:11] Speaker B: Yeah, I think so. I think so. And maybe also I also hear worries about, it's a, it's an israeli company, so people are worried there as well, you know, if there's a war, etcetera, etcetera. But so those two probably hold back globally for now.
[00:53:29] Speaker A: I also do think D local heard it a little. I know that completely different industries, but it's as a retail trader investor, you think, oh, d local solves cross border transactions. That's a little component in global e. And essentially they're the same thing.
[00:53:46] Speaker B: Yeah, I hadn't thought of that. I mean, it makes sense in a way. Yes, because, you know, the take rate of the local goes down so much, probably globally will follow there, which is not the case, so. Yeah, yeah, I can see that comparison.
[00:54:00] Speaker A: Yeah, I will at the top of the hour. Thank you so much, Chris.
I definitely didn't talk AI or software, which I absolutely want to with you, especially with your knowledge. And, like, clearly you pick winners like you just saw. Doesn't matter what the fuck.
[00:54:16] Speaker B: I have my losers as well, and I have many of them because, you know, that's just part of the game of investing in multibaggers. So I have probably more losers than the average investor, but I don't care because you don't need like 20 nvidias, right?
[00:54:34] Speaker A: Yeah, you just need one or two. That's all you need. Also, like, you have the long term conviction of, like, when it goes down 40, 50%, you will add, you're not gonna be fearful. And that's why I wanna pick your space on the software, high quality growth and AI, because those names are struggling this year. So, like, I'm like, oh, like, what's your take on it? So definitely need you back on the pod sometime in the future. But you want to tell the listeners where they can kind of get your content and see your updated research, because clearly you know a lot and it's very knowledgeable, especially the way you present it, because you used to be a teacher, and the way that you communicate information is very valuable for the large scale people. So want to tell the listeners where they can find you.
[00:55:14] Speaker B: Well, first of all, thank you very much. And she I think you would be a great teacher as well.
So you can find me on value, on X or Twitter, whatever you want to call it.
You can find me on multibaggernuggets.com, my substack that will become completely free in a few weeks, and then in a few months I will make it partly a paid service. But in the meantime, you can have everything for free. And after that you can have several things for free.
So multibaggernuggets.com there. I also have besttankerstocks.com on substack. That's together with Leandro, of course, and then potential multibaggers on seeking alpha, and best anchor stocks on seeking alpha. And if you really still want to click something else, you can go to Chris Hendricks on LinkedIn as well.
[00:56:15] Speaker A: Well, thank you for that, Chris, and for everyone listening. I definitely think you need this time more than any.
Try to get as much alpha as possible by reading up on acknowledgeable people like Chris, because things are changing. There's massive consolidation happening across multiple industries. Like, the winners today will not be the winners in a few years because we are at a really interesting inflection point in the equity markets of clear winners and clear losers. You're seeing the mag five being the clear winners. Everyone else is lagging. I do think that disconnect is not gonna be as severe in the QQQ, but it will be in like the e commerce, fintech software and AI space. So thank you again, Chris, and tune in next week for the next speaker, everyone. Thank you. Bye.
