Breakfast Burritos and Boom Time Stocks

In episode 31 of Stocks Neat, Portfolio Manager Gareth Brown and CIO Steve Johnson discuss Nvidia’s unprecedented rise, the recent Guzman y Gomez IPO, current investor sentiment and macroeconomic concerns.

They examine the future competitive landscape of the AI chip space and Guzman’s plans for global expansion. Moving onto the whiskey tasting, they then test a Glenturret whiskey from the "supposed" oldest distillery in Scotland.

The episode also features a discussion of geopolitical risks and the implications of government policy. Rather than looking at any policy changes from a market wide perspective, they argue that investors should focus on how that change may affect specific sectors. Listen to the full episode to find out more.

“If you can put aside the fear of missing out, there’s plenty to do in a world where investors are apathetic to 95% of stocks”.

Transcript

EPISODE 31

[INTRO]

[00:00:02] ANNOUNCER: Just a quick reminder, this podcast may contain general advice, but it doesn't take into account your personal circumstances, needs, or objectives. The scenarios and stocks mentioned in this podcast are for illustrative purposes only and do not constitute a recommendation to buy, hold, or sell any financial products. Read the relevant PDS, assess whether that information is appropriate for you, and consider speaking to a financial advisor before making investment decisions. Past performance is no indicator of future performance.

[EPISODE]

[00:00:39] SJ: Hello and welcome to Stocks Neat, a Forager Funds podcast where we talk about the world of investment markets, sometimes share a whiskey. Today, we're actually going to do that, Gareth. So, the people that have been keen to follow along and missing out for quite some months now, we'll get a chance to have a whiskey today. It's a bit of a difficult one to find, though, so might take a bit of chasing down. 

As we drink our whiskey, we're going to talk about how Nvidia has killed the everything rally, the rise and rise of what is now the world's largest stock by market capitalization. Then on the flip side of things, what's worrying people out there? You and I have had a lot of phone calls with investors, Gareth, over the past couple of months and some interestingly consistent fears about the world. 

[00:01:23] GB: Yes. We're going to try and tie it in with people's portfolios, although we, obviously, can't provide individual advice. Hopefully, something of interest to most of you. 

[00:01:31] SJ: I'm Steve Johnson, the Chief Investment Officer here at Forager, and that voice you just heard is Gareth Brown, who’s portfolio manager on our international fund and my regular co-host on this podcast. 

Gareth, I've actually stolen this whiskey from my wife, so I hope she's not listening to this podcast. I think we're probably pretty safe there, but she was given this as a birthday present not even by me. I didn't even steal my own whiskey, but it was someone else's gift. But we actually tried it last night. It's a very interesting whiskey that I hadn't heard of before. So I thought I'd bring it along today, and we can have a tiny little tot each. Top it back up with water and put it back in the cupboard. 

[00:02:04] GB: Yes. It's 46%. She’d never know, right? 

[00:02:08] SJ: It's called a Glenn Turret Triplewood. Maybe you can describe that a bit later on when we get to that part of the podcast. But as I said, one I hadn't heard of before. All right, let's kick things off, Nvidia. It's the story that everyone is talking about, became the world's largest company by market capitalization this week. It overtook Microsoft last week and Apple this week, Microsoft last week, Apple this week. It's a bit of a struggle there amongst the top three and was actually down a few percent last night. So I'm not even sure if it still holds that crown. But it has been a remarkable, remarkable rise from a business that very few people had heard of a few years ago. 

[00:02:45] GB: Correct, 3.6 trillion market cap. I mean, I remember the first one trillion market cap didn't feel that long ago, so we're moving up the scales. 

[00:02:54] SJ: I have a friend who invested in this company. He's a very, very enthusiastic gamer. Older than me, so he's probably in his 50s by now but has always been right into his games. Nvidia has always been integral to the games manufacturing industry. He thought it was an interesting business many years ago and put a couple of tens of thousands of dollars into it. I think it's now worth seven or eight million dollars, and he's never sold a share. 

[00:03:17] GB: Invest in what you know, huh? 

[00:03:18] SJ: Invest in what you know. Yes. 

[00:03:20] GB: I think one of the most interesting things for me here is just the speed at which this has happened. I recalled reading an article in Barron’s. I thought it was about 12 months ago. I went and looked it up. It was in May 2023, and the headline was Nvidia's market cap is now bigger than Berkshire Hathaway’s. This just feels so quaint now. Just over 30 days, Nvidia has put on more than a trillion dollars in market cap, which is more than Berkshire Hathaway. From last year on the same market cap as Berkshire to adding a Berkshire Hathaway in a month. It's just a stunning, stunning rise. 

[00:03:55] SJ: Old Warren spent so long. This business was founded in 1993. Warren spent what, 60 years? 

[00:04:00] GB: Sixty years. 

[00:04:01] SJ: What a waste of time. 

[00:04:01] GB: Yes. He could have just done this in a month, couldn't he? 

[00:04:05] SJ: The founder of Nvidia, Jensen Huang, is still not caught up to Mr. Buffett, though, in terms of his wealth yet because he owns a much smaller percentage of Nvidia than Buffett does of Berkshire Hathaway. But the way things are going, it won't be long until it overtakes. I mean, you never know. It is a point in time, and I think people attribute momentum to something that doesn't necessarily have it. People can change their minds overnight, and share prices can go down. 

It has been a stunning rise, and I think what's interesting here in plenty of valid arguments about whether it's a bubble and whether the hype's overdone. It's a very, very big market capitalization that this business has now, but it has also been backed up by a stunning change in the company's fortunes as well. 

[00:04:50] GB: Correct. I mean, the thing that, I guess, lazy people are not – I could be accused of this at times. The reach for here is the tech boom back in 1999, 2000. I think people that are making that comparison might be missing a trick. Those companies back then were mostly loss-making. Remember the old price-per-eyeballs-type metrics that were being thrown out at the time, and almost like profit was an insult. 

Nvidia is a company that is going to do 80 billion in sales over the last 12 months. That's up a couple 100% over the same period a year ago with an operating profit margin of 60% which is just a huge, huge number, very rarified air there. Same applies to some of the other magnificent seven businesses. They are some of the best businesses that have ever been created, and they're growing extremely rapidly, despite butting up against the law of large numbers and becoming enough to move whole markets on their own. 

[00:05:45] SJ: Yes. That large number itself has become a much bigger number for these companies. I think most of the great businesses, I guess, you could argue, the Coca-Colas of the world were an exception as global brands. Maybe McDonald's an exception. But lots of them were restricted to their home country.

Usually, the biggest companies were the US because that was the world's biggest economy. But these companies are selling their product all over the world and usually at very, very, very low incremental costs. They're not building factories, although what's driving Nvidia is the alphabets and Apples of the world spending enormous, enormous amounts on physical, tangible equipment to run their AI. 

[00:06:26] GB: These were businesses that were viewed as CapEx-light not that long ago that are becoming much more CapEx-intensive. I think there might be some lessons from the tech boom, despite the fact that I warned you off drawing too many analogies. 

Cisco is really the company that comes to mind when I think most about what was happening 25 years ago that is equivalent to this era. It had really fat margins going into the downturn, into the bubble. It got blown up for a year or two, and then it's had fat margins pretty much since. It's gone on to bigger and better things. It sells – its sales and its profitability is far greater today than it was in 1999 and 2000. But the share price still hasn't eclipsed the highs it achieved back then 25 years ago, 24 years ago.

That could be a lesson for shareholders in a business like this. I'm definitely not calling the top, but that experience might be possible if Nvidia doesn't grow as fast as people now expect it to and they're extrapolating and how quickly can people commercialize the stuff from AI that's really going to drive this. Where are the dollars?

[00:07:27] SJ: Yes. That tech bubble at the time was a tech and telco bubble, and Cisco is rolling. I think there are some interesting parallels there in its customers being the giant telcos weren't absolutely mental building out infrastructure to try and take advantage of the spend that their customers were doing and what people thought the Internet was going to become. Most of which eventually came true, but the CapEx spin was a long, long way ahead of the end customer demand. Then you went through this pocket of fiber had been laid all over the place that wasn't used for another 10 years, and they didn't need to keep buying more and more of Cisco's equipment. 

I do think there is a crazy rush going on at the moment. AI is the latest and greatest buzzword. Every single company's mentioning it. We heard it in our mining services company’s call the other day. Every single company's mentioning it. Lots of these companies have decided that they need to buy these chips, and they're going to spend a whole heap of money. I haven't seen yet a lot of great, “Here's what return we're going to make on that spend.” There is going to come a point here where people turn around and go, “Okay, this technology is amazing, and it can do incredible things. But is it worth us spending the amount of money that we have to spend on it?” 

The price that Nvidia is charging for its chips is a big contributor to how high those costs are. They have a huge amount of pricing power at the moment, very, very high barriers to entry. They actually make the software that people use to program not just their chips but most AI-relevant chips. They've got it very much wrapped up at the moment. But there are some big gorillas here that are spending huge amounts of money to try and catch up as well. I think at the moment, Nvidia is at least a generation, maybe two in front. 

I don't think it's impossible to imagine 10 or 20 years’ time, 5 years’ time even. There's less of a frenzy about people spending money on AI. It becomes much, much more calculated. Potentially, there's more competition, and that competition may well come from its customers’ alphabet or Google. 

[00:09:18] GB: Yes. The other –

[00:09:20] SJ: They're all working on their own chips, and they've got the data to be AI killers, in my view. 

[00:09:26] GB: The other side is just the demand is not as strong as it looks from here. It just disappoints versus what people are currently pricing in. It's perfectly possible that that's the case that ultimately AI needs to either generate revenue for companies or cut costs out from companies. I can see, especially on the latter, how it's very helpful. Maybe it does generate enough incremental dollars to justify these kind of market caps. But you can imagine an upset.

[00:09:51] SJ: Yes. Been an extraordinary, extraordinary rise, though, and I guess a sign that the madness of 2021 is back in some departments. I don't think Nvidia is probably a great example of that because –

[00:10:02] GB: Yes. The main stocks are better for that. Yes. 

[00:10:05] SJ: Yes, yes. IPO is starting to happen again. Yes, it's had an impact, I think, on the rest of the market as well. I think we felt that earlier this calendar year, that trend of a very, very small number of mega-cap companies delivering all the market's returns had started to broaden, and there were other sectors starting to contribute. But this past sort of four or five weeks, it has literally been one stock driving global stock markets and –

[00:10:32] GB: It's been – it was sort of like at least from October last year till about April, maybe into early May. The market had become a bit more widespread again and moving. We're making money in lots of different areas. Yes, the mega caps were pulling most of the weight, for sure. But we were making money on smaller caps. We were making money on commodity stocks. Even the UK stocks were making money for us, which is versus the last few years has been a welcome respite. European financials as well were doing well out of those. It seems Nvidia and those mega caps seem to be sucking the oxygen out of the room once again in a way we haven't seen for a few months. 

[00:11:12] SJ: Yes. I think that it just drives that mentality of the memes working, right? I think the people that have jumped on it have done very, very well, and it's kept going for a long time. The old buying stocks because they're on a high free cash flow yield just seems a bit boring in the context of the magnitude of the gains that have been made there in that stock. 

[00:11:30] GB: A lot of people buying just because they can't take the pain of not owning anymore, right? It’s not our game, but that's the way a lot of big money works in this sort of market. 

Moving on to other areas, any thoughts on the Guzman IPO? It’s the other thing that people in Australia at least can't stop talking about. 

[00:11:46] SJ: Speaking of euphoria, speaking of people feeling very bad about missing out on things. I mean, it's fascinating. I'm amazed in this market. There's a company called Golden Goose, makes very expensive $600 and $700 trainers that look used when you buy them. 

[00:12:02] GB: Damaged. Yes. 

[00:12:04] SJ: My mother lives out in country, New South Wales. My wife actually has a pair of their shoes. I'll fess up, and I love them. They're very cool. But my mom's just blown away by the fact that they come dirty. 

Anyway, this company was trying to IPO in Europe, and they've pulled the IPO recently for reasons that are not immediately clear. But it's not easy to list companies at the moment. We've seen Virgin put off its float here in Australia a number of times. Then this Guzman IPO comes along. It seems like a massive, massive price for a business at the stage that it's at. Not only have they got the IPO away, but it popped 30% on the day of the IPO and now trades with a three billion-dollar market capitalization. 

I mean, it's far too expensive for me. There's far too many things that have to go right. You cannot make the valuation stack up on Australia alone. It needs to work overseas, and we know that's very difficult. But I've just been fascinated by the amount of, I guess, animosity towards it or jealousy towards it or – I mean, it's just a stock, and it's a Aussie-founded business that's got some plans to go global. I don't own it. We're not going to own it. But I don't wish ill upon it, and I'd be quite happy to see that business go on and be very, very successful. We can have a good portfolio, and we can make our clients great returns without having in a strong set against a particular stock for it to go bad. 

[00:13:24] GB: There you go. Tall poppy is alive and well then. 

[00:13:26] SJ: Well, yes. I mean, there's lots of things that people get worked up about, and I think we were in our 20s when we were writing Intelligent Investor. I guess we had a job then to actually advise people about whether they should be buying shares in this company or not. Now, don't have to do anything, so we can just sit here and be interested observers from a distance. But I think when we were young, we were more worked up about these things. Yes, I don't know. I don't know what the problem is. If people want to pay a silly price for it and they can get the IPO away, then. The business, hopefully, does go well and has some success. 

[00:13:58] GB: It's the idea of opening up a lot of stores in America that's going to be really interesting because good Mexican food is on just about every corner in the US or most of the US. 

[00:14:06] SJ: Yes, yes. Yet I would – I mean, you've had both. Where would you rank the burritos themselves from Guzman versus Chipotle? 

[00:14:14] GB: I think I've only had Chipotle once. I can't really remember it. It was a long time ago, 10 years ago. 

[00:14:20] SJ: I mean, that company has absolutely killed it in a country that already had a fair bit of good Mexican food. It’s not out of the question. But, yes, we know how difficult it is going to that place and even just assuming that the consumer behaviors are going to be the same. They're not. A lot of the incredibly successful retail businesses over there, I walk into them and just shake my head about. It’s almost a daggy sort of look and feel about them that they've got that just wouldn't work here in Australia, that works very well in the US. I think it was Charlie Munger who said envy is the stupidest of all of the –

[00:14:50] GB: Yes, because you get nothing out of it. 

[00:14:52] SJ: Yes, yes. I think I've learned to be a bit more like that as I've got older. You just don't need to worry about it. On that note, let's give this whiskey a try. 

[00:15:02] GB: Sounds good. 

[BREAK]

[00:15:03] ANNOUNCER: Stay tuned. We'll be back in just a sec. Are you a long-term investor with a passion for unloved bargains? So are we. Forager Funds is a contemporary value fund manager with the proven track record for finding opportunities in unlikely places. Through our Australian and international shares funds, investors have access to small and mid-sized investments not accessible to many fund managers in businesses that many investors likely haven't heard of. We have serious skin in the game too, meaning we invest right alongside our investors. For more information about our investments, visit foragerfunds.com. If you like what you're hearing and what we're drinking, please like, subscribe, and pass it on. Thanks for tuning in. Now, back to the chat. 

[EPISODE RESUMED]

[00:15:46] SJ: You did a bit of research, I think, Gareth. Do you want to talk us through it?

[00:15:49] GB: Yes. Glenturret is from a town west of Perth in Scotland, not our Perth. It’s P-E-R-T-H, not P-E-R-F. That makes it a bit north of Glasgow and Edinburgh really. It's in a valley right on the edge of the highlands. You're in the lowland section, and then you hit the highlands, and it's right on the edge, really nice looking area. The story I found on Wikipedia looking up at the – so a) this is claiming to be the oldest distillery in Scotland. Apparently, it had. 

[00:16:17] SJ: On the bottle it says oldest working distillery. 

[00:16:20] GB: Apparently, it had a boot-led history prior to its official launch in 1760 and then hanging on that. But I think it's a little bit like oldest pub in Sydney. It's a hotly contested debate. But anyhow, according to Wikipedia, there was a cat that lived at the distillery from 1963 to 1987 named Towser, and Towser was a mouser. Her job was to catch mice, I presume, trying to eat the barley and stalls. Apparently the world record-breaking mouser, they estimate she killed 29,000 mice over a 23 or 24-year career. 

[00:16:59] SJ: Wow. 

[00:16:59] GB: I worked it out. That's three a day, 3.3 mouse a day. You can achieve some pretty amazing things if you stick out it over a long enough career. 

[00:17:08] SJ: Three mouse did you say? 

[00:17:09] GB: Three mice. Yes. I may have said mouse, but I shouldn't. 

[00:17:13] SJ: That was some fancy way of saying the plural, very interesting. Just looking at it, so it says on the bottle 2023 release. I don't know whether that means it was put in the barrel in 2023. It looks like it. It was certainly released. Did you find anything out about how old the actual whiskey?

[00:17:29] GB: No, I haven't. I think it's a fairly new trend. Probably, typically, you'd expect Scotland to be at the back of any trend like that. But rather than claiming a vintage, it's a blend. So my guess is that it's got some older whiskies in it and some younger ones. Then you don't put a year on it. Theoretically, I'm right behind that. It's all about the quality of the product, not the age, but –

[00:17:50] SJ: It is quite a dark color. A lot of the new ones I've had look very light because they haven't been in the barrel as long. So must be something in there that's a bit older. I guess just with interest rates where they are, the cost of holding inventory is through the roof, so you got to get it out. All right, give it a taste. 

[00:18:05] GB: Cheers, man. Thanks.

[00:18:06] SJ: Slàinte Mhath. 

[00:18:07] GB: It’s nice, perfectly drinkable. I think – do you get, I call it like fairy floss, like a sweetness? 

[00:18:14] SJ: Yes. Again, I'd say it's not the potency that I taste in some of the younger whiskies. It doesn't taste like that to me. It's got the nice warm follow through of an older one, so. 

[00:18:22] GB: Yes, 46%. This is after the angel share stolen part of the bottle. 

[00:18:25] SJ: It’s not 46. It's 43 on the bottle, same as usual. 

[00:18:27] GB: Forty-three. They’re up from 40 when you blend them down. 

[00:18:30] SJ: Very good. I'm going to give up commenting on whiskey because everyone just torments me about not having an informed opinion. 

[00:18:35] GB: The thing I would say here if you have a green whiskey, so they're whiskies that are made not with barley but other greens, I often get that fairy flossy kind of aftertaste. I get a little bit of that here. If you like that, that's probably the main thing that I'm picking up here. It's perfectly drinkable. Nice by a campfire I'd say. 

[00:18:53] SJ: You and I have done quite a few calls with investors over recent months. I've had a bit going on and just get in touch with people anyway. What are some of the most common questions you are hearing from people? 

[00:19:05] GB: People are worried. I dare say they're always worried, but it just really stands out that people are concerned about the macro backdrop, and they are concerned about the political backdrop wherever they look. If they invest in America, they're worried about America. If they invest exclusively in Australia, they think Australia is the basket case. There's a lot of concern. I think it's probably like a fairly normal background thing for people. 

I think investors generally overweight the concerns of particularly political risks. I don't think politicians move whole markets very substantially. When they do, they don't move the way you think they're going to move. Trump in 2016 is probably an example. Everyone was worried about Trump getting into power. He got into power and the market rallied 10% pretty rapidly. 

I think the concern around this is probably better brought down to a sector level or a company level. If you own a solar stock, government policy matters. If you own oil and gas, government drilling policy probably matters. I mean, dare I say it nuclear here, involved in that business in this country now, the fact that that's being brought onto the radar. Yes, I think people are probably overweighting their concerns. Hopefully, they're not acting on them. I think the most important thing is get your portfolio allocation right. Try and stick to a plan and maybe you can fiddle with the edges. 

[00:20:25] SJ: Yes. News, as always, had a negative tilt to it, right? What was the quote that you said earlier?

[00:20:31] GB: If it bleeds, it leads. 

[00:20:32] SJ: If it bleeds, it leads. We live in a world where they can measure even more how many clicks an article gets. That whole system is going to tend more and more and more towards trying to scare you about everything. Whether it's about your kids’ safety or traveling overseas or your investment portfolio, you are going to get more and more stuff that tells you that it's all bad, and it could all do with a gambling style. At the end of the gambling ads and the sport now, it says, “You win some. You lose more.” 

It should say at the end of all of this stuff, equities have produced very good long-term returns, and there's no reason to think they won't in the future. Do not let this turn you off what is a very important, useful asset class to have in your portfolio. Yes, things are going to go wrong, and there's going to be wars, and there's going to be changes of policy. If you sensibly diversify your portfolio and you ride these things out for the long turn, you will do just fine. 

[00:21:29] GB: I think people can be fearful of something and then just make the wrong strategic move anyway, right? It's cash you might be very fearful. You go to cash, things bad happen, and then it's just an inflation train work. Your cash is worthless anyway, right? I mean, maybe some Bitcoin people will come and interject their opinion here. But often going defensive is not the right way to deal with an impending doom. 

[00:21:53] SJ: Yes. You touched on, I guess, the company specifics there. I'd say as a general rule I've got a bit of an aversion to the business that's great where it's competitive advantage is some form of government legislation or structure. I just find that it grows, and it's profitable, and it's doing really well. Then one day you wake up, and the policy has changed, and your business has been decimated. I find that they're quite difficult businesses to invest in versus I've got a cost advantage. I pass on lower prices to my customers, and this flywheel just keeps working for me. 

You're a JB Hi-Fi with a really low cost of doing business. It sort of doesn't matter what the government does here policy-wise. That business is going to have a cost advantage, and it's going to be able to sell stuff to Australians, and it's going to keep taking market share. Now, IDP education is probably a really good example of a business at the moment that if you just looked at its historical financials, it's just got wonderful characteristics. The revenue line’s been growing. The profit’s been growing faster than the revenue. They're globally one of the dominant providers of English language tests. You want to go to university in Australia. You've got to pass one of their tests. 

If you're from overseas and there's been more students and the government put in place the rules that you've got to pass the language tests. Therefore, that business has been doing really well. It's been 12 months now. But particularly the last six, you've had two, three profit downgrades. They've said next year is not looking great, and the government's come out and said, “Well, we're not happy with a number of international students coming into Australia, and their business has been decimated by that.” 

Now, any business can be decimated by external factors, right? That can be a recession that hits you if you're a JB Hi-Fi. But I just – I do struggle with that source of competitive advantage being some government to exist. 

[00:23:33] GB: I think even there's lots of examples of it. The offshore wind industry in Scandinavia in particular was coming to my mind. It was a place that was heavily subsidized not that long ago to the point where they're now wanting to tax you for wind utilization of wind assets, right? You might have expected the incentive to disappear. You might not have planned on it reaching that far in like this is a public asset, and you're utilizing it. There's a lot. 

I mean, those innovated leases we've talked about a few times over the years, they're still around. They've had a few big scares over the years. There are industries where some bureaucrat with a pen can really almost destroy your business overnight. 

[00:24:10] SJ: I’ll tell you in a lot of cases where those businesses are making extraordinary profits, there's probably a case for society in wielding that pen and saying this business. That’s probably the perfect example of an industry that makes a lot of profit shuffling money around, taking advantage of tax loopholes effectively that they get to keep a share of. You sit there and say, “Well, why should the government be funding this?” For example, in that industry, there's a lot of government employees that can salary sacrifice almost all of their expenses. They can go out to dinner and pay for dinner out of their package.  

[00:24:45] GB: Yes. I think a lot of that loophole has been tightened over the last five or six years. 

[00:24:50] SJ: Yes. It’s still just – well, when it was in place and it's just the crazy idea that the government could have just paid people more money. They’re paying tax like normal people and –

[00:24:58] GB: That was federal state arbitrage is what that was. We own businesses that are heavily reliant on government, I don't want to say, support. But government potentially face risks around government interference. Or maybe they do get some indirect government support. We own Nextracker in the US, which is a solar software and hardware business. It's one of those things that helps to point the solar panels in the exact right direction to maximize efficiency. 

[00:25:27] SJ: Get 20 or 30 percent more energy out of it if you tilt the solar panel as the sun moves across the sky. 

[00:25:32] GB: Yes. Independently so, you can – it's actually changed the game in terms of you just have to dig a trench and make it perfectly level and put that row of solar panels on, so they all point in the same direction. You can put them out in the cow field now. They can all point slightly different directions, and these things will independently follow the sun. Just a good invention for the world but very reliant on the increased use of solar over the years, and that is going to dependent on government policy to encourage it. 

[00:26:02] SJ: Particularly the ensuring of that. I think there's a massive amount of incentive in the US at the moment to favor domestic production over Chinese production. They're very, very well placed to take advantage of that. I would imagine if you could just ship it in from China without the tariffs, you'd probably get some similar technology for a fraction of the price. 

[00:26:20] GB: On the flip side, we own some oil and gas, both directly drillers and services companies. Some of these face quite different political risks. Republicans are more likely to be friendly towards oil and gas and a little bit against solar Democrats the other way around. In some respects, there's a hedge there, but these are all important issues. 

I think worrying about the risk of we've had – I don't even want to name how many, but we've had a couple of terrible US presidents over the last little while. I don't know why anyone likes either of the last few options and the options that are coming up for renewal later this year. It could get worse, but the market just –

[00:26:56] SJ: Don’t you be agist on this podcast go. 

[00:26:57] GB: The market has – I'm not. I just don't think someone with dementia should be doing probably the most important job in the world. Anyhow, my point is that the concerns are probably you don't need to stress about them day to day I don't think. 

[00:27:12] SJ: Yes. The other thing to remember is that the market mostly does a pretty good job of pricing these things as well. Rishi Sunak, as the UK election called, he’s current Prime Minister. He has less than one percent chance of winning it according to the bookies. You can assume that every single stock that has a decent amount of liquidity and is a decent size is already pricing the fact that it's going to be a labor government in the UK next. 

You don't just have to predict these things if you want to protect yourself. You need to think about it. Is that actually factored into the prices that I would be selling any assets to do something about anyway? Yes, my view is sensible portfolio diversification at all times in terms of how much you're betting on any one country or policy or particular piece of technology. If you look across both of our portfolios now, we've just poured a lot of work into making sure that we're not going to lose money anywhere. It's that we're not going to have a third or a half of the portfolio exposed to the same things. 

Look, it's a really – you touched on this earlier in terms of the rally petering out for everything that's not Nvidia or AI-related. It is still a really interesting world to be putting money to work there. We’ve – people can see some of the ASX announcements around substantial holding notices and things. But there are some really significant portfolio transitions happening in small cap land in Australia. 

There's a fund run by First Sentier that's been closed down, so they're selling large amounts of stocks, a stock at pretty significant discounts to what I would say is the undisturbed market price. We'll be heading into the new financial year with four or five either upsized or new really sort of almost at the micro-cap end of the portfolio. But I think screamingly cheap stocks in the portfolio that hopefully set us up well for another good year ahead as well. That's the upside of people not being bullish about everything is that there's still lots of interesting things to do with your money. 

[00:29:03] GB: We've got analogies on the international side as well. I talk about this a lot, but Tesco and the banks in the UK just massive, massive yields. In Tesco's case, really heavily backed by property as well. The idea of disaster there is, to me, I don't care who's running the government in the UK. That thing's going to do quite well for us over the years and should protect capital. 

At the other end of the spectrum, we bought our first IPO in long, long time. I won't name names, but it was one that Harvey brought to the table, and we've more than doubled our money in a short space of time on a small amount of money. 

[00:29:37] SJ: Then just the stocks that we had taken significant amounts of money off the table. There's been a few of those come back to far more sensible prices again as well. We've talked about IBP a lot on this podcast. We haven't yet added back to that one, but I saw last night's back under 200 bucks a share. It went from what, 120 to 260 in the space of 12 months. Now back to a more sensible price. Yes. 

There's a number of stocks. I won't go into all the details there, but things coming back to prices where we want to be adding again and putting some money to work. I don't actually think it is that. It's not consensus optimism out there. There's plenty of parts of market and parts of the world that people, because of what's happening, don't have any interest in. 

[00:30:16] GB: If you can put aside the fear of missing out or whatever you want to call it, there's plenty to do in a world where investors are apathetic to 95% of stocks. 

[00:30:26] SJ: Yes. On that note, we will call it a wrap. Thank you for tuning in. As I said, I'm Steve Johnson and Gareth Brown on the other end of the microphone. If you have any topics for us, questions for us, or would like to discuss anything about the Forager business, please give us a call, get on email. You can email admin@foragerfunds.com. Or we're also both on Twitter @forager_gareth and @ForagerSteve. Thanks for tuning in. 

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