What Stock Would Warren Buffett Buy If He Started Over In 2024?

So Sam Tell me this. Do you like watching sweaty men fight to the death in their underwear? Me too. Every weekend.

I I build my Saturdays around it. Well, I think you should invest in in their Saturdays. Uh my pick for Stack of Palooza twenty twenty four. Yeah. I feel like I can rule the world, I know I could be what I want to

I'll put my doll in it like no day song on a rolling. Alright, we're live. Sean, did you just go to the uh Black Friday sale at Tommy Bahama. What's going on? I went into the old dad's closet today and got a little shirt because a special occasion and I needed to dress up. Oh, that's your version of dressing up.

Yeah, this is up, dude. All right. What are we doing today? Today this is Stock of Palooza. The first ever first annual

Stock of Palooza, which You may not know what that means because we made it up. Basically me and Sam said What if we Did an episode.

Where we pick a stock. So each of us are gonna go through the stock market. We're gonna each pick a stock that we have to make a case for. If you've ever seen there's a conference called the Sone Conference. And it's kind of like a TED talk. But for stock pickers. And all the biggest names go there. Bill Ackman.

Whoever Chama and they all they get on stage and they make like a twenty minute case. for a particular stock, why they're long or why they're bullish on something. And uh Those guys are good.

And those talks are fun. We wanted to try it too and uh do it our way. So the M FM style of this, it's called Stock of Palooza. Both me and Sam have picked a stock. We do not know what each other have picked. We're gonna get twenty minutes each. To present.

And so if you're on the like just the audio podcast feed. I know I've been telling YouTube's where it's at today. YouTube is for sure where it's at'cause we got slides. Your boys came prepared. And I have data. I got charts. I have a whole bunch of stuff there. So you wanna go to YouTube where you're gonna actually be able to see the screen. and see us uh sharing slides. So we got twenty minutes each to do it.

For the listener who are on not YouTube. We have to ask them to do something when they finally go to YouTube. That's right, that's right. If you go there and you don't hit the subscribe button. A curse is placed on your family for seven years. And I don't want that for any of you guys. So go ahead and hit subscribe when you're there because it's super important for your family. It's a simple pitch. We put all this work in. And they don't have to pay us back with anything other than a subscribe on YouTube. It's free and easy for them and it makes just a ton of difference to us. So just go do that. All right. Now what what are you saying? Okay, so

You ready to begin? Do we need to s should we just go into it? Uh no, rules. Okay. So we're kinda making up the rules of the fly. So uh we're gonna do how about twenty minutes. So you get twenty minutes. I'll ask questions, but I'll try not to interrupt. Too much. And then we'll do like we'll just we'll talk for about it for a few minutes afterwards. And then I'll pitch. And then the last ten or however many minutes left. We'll we'll each vote. But then in the YouTube comments, you guys actually have to vote who wins. But

When we say win What does win mean here? Because We're not exactly we're gonna be you guys can like we can play a drinking game where it's like count the disclosures. You're gonna see the dis disclosure constantly of saying We have no idea what we're talking about. It's just something fun and cool. But how do we base win on it? Is it by showmanship? Is it by what's a company you think is gonna have

It's who makes the best case. But what does best mean? A ten year? Well I don't know. And that's part of the fun here. Making it as we can we can say table. Is it just entertainment? Because that's different. Well, this is definitely entertainment, but the entertainment has to have a foundation.

Uh, but you can't just be making shit up, right? We gotta have actual good insights or good analysis presented in a in a wonderful way, right? The way that any presentation is sort of scored. You have style points and you have substance points. And we're gonna take both of those factors into consideration to pick the the ultimate winner. Um I don't know if you have you ever gone and watched any of these, by the way, like You know, in uh I remember when Shamath went on stage in twenty sixteen and he was like

There's a tr there's a multi trillion dollar company hidden in plain sight. And he made a case for why Amazon was gonna get to three trillion by twenty twenty five. This was back in twenty fifteen. What is it now? It's currently like close to two trillion. And we got far left your left. He's not far off. Um he then went up and did a case for box and I bought a shit ton of box stock.

And Bucks then just Shit the bed for the next three years. And if you go back, all the smartest guys, Bill Ackman, he goes up there and he makes a case for some housing thing. Terrible stocks, right? I went back and I actually charted how how these picks did really bad. So actually We might be just as good as them'cause we're also gonna be terrible. What's considered good for these guys? Like is it like a batting average where it's like if you're three hundred if you're you know, which thirty percent.

Uh right, you're the best. No, I think it's just based on the the returns, right? So like how much you put in versus how often you're right, right? The multiple the multiple of those two. So you know, uh they just gotta get enough right where the overall returns are there. But we should say this. First slide. is the most important slide, which is

that this is not financial advice. This is entirely for entertainment purposes only. Uh my lawyer has told me to say that. But it's actually true. This is only for entertainment purposes. I forbid you from actually investing in any of the things that we talk about. I am a idiot when it comes to the stock market.

So if you take my financial advice, I consider you an idiot too. That's my disclaimer. There needs to be a song where it's uh what did you say? Throw your hands in the air and lose your money like you just don't care. Exactly. Stockalooza. That's the Stocapalooza anthem. All right, let's jump in. All right, my turn. Uh I'm gonna start my clock. Let's go. Okay. So Here's the general idea. If you're buying one stock, Sam, I know you're an index fund guy, right? You like to go into the SP 500. And spread out your risk.

Uh, and you're right. If you're buying one stock, you're taking more risk than the index. And if you look back last 10 years, The index is giving you about a ten and a half percent annual return over a ten year period. Ten and a half percent over ten years. So that's We'd have to beat that to justify Taking the additional risk of picking One stock.

'Cause that's gonna Basically two point seven X your money. In a ten year span. So if you wanna do a little better than double, almost triple your money in ten years, just put it in the SP five hundred. So we're looking for something that

If we're gonna take more risk, we need to get more reward. So here's what I'm I'm thinking. I decided to pay for what do I think could get me a five X? In ten years. Okay. Five X to ten years. Double what the um what the SP five hundred is gonna do. So Wh which stock did I pick, Sam? I'm sure you're wondering.

Well let's ask the oracle of Omaha. Aka Buff Daddy. What would Warren Buffett do? Cause I'm not a great stockbaker. So I wanted to go and study the great stockbakers of all time and look at what would be their criteria. What are they looking for so that I can learn from them. And I went back and I learned everything I could from Mormon Buffett. And I realize that there's five big things that he looks for. Okay. So you ready for the five big ones? The first

Understandability. Meaning He doesn't invest in shit he doesn't understand. If it's too complicated or if it's outside of his circle of competence, he's simply not investing. And so the the idea is Is the business enough that an idiot like me could understand it? And that ideally an idiot can even run it, right? It's such a simple business. So understandability.

Number two. An economic moat. So we want Few competitors, we want some pricing power, and we want to make sure that this business is so defensible that it's going to be around in 50 years because. uh you know Warren is usually a buy and hold investor. He's he's not really trying to trade in and out and time the market

He's looking for time in market and he's looking to be in the in in the company for a long time. Um, and so we want an economic mode, something that's super durable. All right, number three, competent management. So management the basically s a strong management team is always gonna be a um uh, you know, big benefit for anything, uh for any stock. Okay, last last two. Margin of safety.

means we gotta be buying this We can't be buying this at some extreme price. Even if it's a great company, if it's massively overpriced, it's too hot in the market. then we're taking too much risk. So what we want to do is buy dollar bills for eighty cents, right? That's a mar that's a great margin of safety. And of course, lastly, strong financial. So high earnings, low capex, low debt. That's really what we look for. Okay. So

This is why Warren Buffett is buying brands, not stocks. I love this line actually in my research. He goes Don't buy a stock, buy a company. Subtle difference. But he's looking to basically like what would what don't try to buy the stock because you think the price is gonna go up. Buy the company because you think that company is gonna endure and be successful and and just grow steadily for a long period of time. That's a new thing that he did. So it's not new for I mean, he he didn't start doing that until his sixties. So before he was buying stocks purely on the financials, he's like, I don't care what they sell. And then he like met Coke. And then he like invests in Washington Post and he's like, Oh no, the brand is actually where it's at.

Exactly. He used to do the cigarette butt. Investing where, you know, if there's two puffs left on the cigarette. Um Okay, let's do it. There's value there. But he he credits Charlie Munger for showing him that actually It's better to pay uh you know.

A fair price for a great business. than a great price for just a fair business. And so this that's why he's now invested in Apple, Bank of America, American Express, Coca-Cola, Geico. These are brands that have been around for fifty years. And that's what he's looking for. Okay, so simple buffet formula, just to summarize. Buy brands. That you understand that'll be here fifty years from now. That spit off cash.

At a fair price. If you do all that. You can hold forever. You've done well. So I looked and I looked. And truth be told, I actually started with one in mind and then reverse engineered this whole presentation. But um I have one. So Sam

Tell me this. Do you like watching sweaty men fight to the death in their underwear? Me too. Every weekend. I I build my Saturdays around it.

Well, I think you should invest in in their Saturdays. Uh my pick for Stock of Palooza twenty twenty four Is T K O. T KO is the stock

that owns um WWE. And the UFC. And I think that TKO is a Buffett stock. And here's Buffett. You know, looking ready for WrestleMania.

Why is it why does it fit the criteria? So Understandability. Very easy to understand. It's a holding company that owns these sports franchises, it owns these leagues underneath them. Okay, that's the the that's all the business is. It's it does nothing else besides that. Um

Fighting is the easiest thing to understand in the world. Uh I don't know if you've heard this Great thing that uh that that Dana White says. He goes, Let's say you walk out into a a a sports field on a Sunday And there's a soccer game over here and a basketball game over there and these guys are playing flag football.

And you can go look in any one of those directions. You might have a favorite sport. But if somebody else Fight and there's a fight going on, everybody's head's gonna turn. It is a a human nature thing that we like to watch people compete and fight.

Um, and it is global. Everywhere in the world. People don't you know, if you go to China, people don't know the rules of football. You come to America, you people don't know the rules of cricket. But everybody understands the concept of these two guys are gonna fight each other. uh everybody around the world. And so it is the easiest to understand product and business. The business is very simple. Fans pay to watch fights. People pay pay-per-view. Sam, how much do you think you've paid in pay per view? I per year. What do you what are you spending on your UFC fandom? So uh I would probably say I

Um by the five a year. So that's five hundred dollars, I think. And then I only have a ESPN subscription. Like I dude, I don't know anything about sports. I just found out that's the Super Bowl is this Sunday. I thought it was in November. I only I pay for ESPN just for that. So that's another sixty. And then I attended.

One to three a year, which is uh quite expensive. That's a thousand dollars a show at least. Exactly. High L T V fans. Okay. So let's let's go through these now. Economic mode. Um Name the competitor to the UFC. Name a competitor to the to WWE.

They've all come and gone. Bellator was the the b most well funded competitor to to UFC. It was funded by Viacom. They put hundreds of millions of dollars into this thing. It failed. And they just sold it for, you know uh less than what they put what they invested into it. They sold it for a hundred million bucks. The number two competitor sold for a hundred million.

The UFC Sold for four point two billion. So that's the gap between one and two. Uh growing up, I loved WCW. That was the big competitor to WWE. Guess what? It folded and they took all the wrestlers. Uh AEW, all those things.

Basically these two brands have over ninety five percent market share in their market. This is total monopoly. More than Google has in the search market. Do you know how popular WWE is on YouTube? Have you have you did you look into that? I I have I have a couple slides later. They dominate social media.

It's the tenth. The 10th most popular channel on all of YouTube is WWE. That's insane. Right. Like the fact that these two have more market share in their market than Google has in the search market shows you they're just cut out complete and utter dominance. And the fact that Competitors have come and gone. People have taken their best shot.

And uh They haven't been able to touch them. So you you have you have two brands that have been around for a while and will be around for a while. Okay, competent management. We have Ari Emanuel. If you've ever seen Entourage, just the character Ari Gold is based on on Ari Emanuel.

He is an absolute power player, power broker in in the entertainment business. You have Dana White. The guy who's basically been the founder CEO of this essentially since they bought it for two million bucks. Bought it for two million, sold it for four point two billion. And he's uh he's still going and he's still going strong. This guy is an absolute animal.

And you have uh Egan Durbin who's with uh Silver Lake Partners, that's their kind of institutional capital behind this. And that guy's also, you know, got a pretty crazy track record with multiple billion dollar um or multi billion dollar plays like Skype and and whatnot. So Super good management team.

Okay, margin of safety. So Uh, I don't know if you know how much money these make, but they're basically the combined entities. generate over a million dollars oh sorry, a billion dollars a year of EBITDA. Uh and it trades at about fourteen X. So it's about a fourteen billion dollar market cap company right now.

with four with with a billion dollars of EBITDA. Um just to put this into comparison Uh if UFC plus WWE, two full like leagues. R

Fourteen billion. The Phoenix Suns, one NBA franchise just sold for five billion. Right. So this is basically three Phoenix Suns, and you get the entire universe of combat sport of of uh of of you know fighting entertainment, which is wrestling and UFC, everything except for boxing. Um F one, which is uh, you know, to me seems super niche. Like F one is is so so niche.

Do you know how much F one just sold for? No idea. Eight and a half billion dollars. And F one has a big problem, which is No matter how popular F one is, they have to pay out to all the teams, the franchises. So m you know, half the revenue goes to the Aston Martin team and then the Mercedes team and the whoever else. So

UFC doesn't have any of that. All the fighters are independent contractors. They don't even pay them salaries. There's no guaranteed salaries. Independent contractors. Who make About fifteen fifteen to seventeen percent of the overall revenue goes to the fighters. Way less than every other sport. No teams, no no no rev sharing with anybody, basically they get to the Do you bring that up later in your presentation?

We do I do have a wrist slide which is Uh around that. Yes. Uh, and the best part, this is all AI resistant. Like we don't know what the hell's gonna happen with AI. AI is pretty clearly the next big thing and it's gonna wreck a bunch of industry. It's gonna redo the way that insurance works and the way that cars work and the way that Um, you know, uh software is built and and

All the stuff. How are you gonna use AI to generate like you can't use AI to make two guys fight. in a in a in a ring. It's not gonna happen. And so this is a AI proof. uh industry, which is nice because Warren Buffett Buff Daddy, he's looking for things that are not gonna change. And I think this is not gonna change. All right. Last one, it's growing nicely, so it's growing twenty percent a year right now, but

There's also The big the big prize with any sports league is the media rights deals. And the media rights for both of these are coming up this year and next. And so they have a chance to renegotiate and basically double. uh what they're getting paid for by all the streaming companies by Netflix and by Amazon and ESPN and all the companies that want

They need live sports because live sports are one of the only things that people watch concurrently and have to look at the ads because they're watching During the thing, there's no D V R there's no there's no binge mode, there's no streaming. Um and so Live sports is w this one of the few live sports assets that exists.

And the media deals are coming up and they might be a lot bigger than people think. All right, last few slides. Consistent cash flow. So these are profitable companies. They spit off cash. Uh, you know, they're spitting off, you know, a couple hundred million bucks a year f free cash flow. And they don't need to invest it. They don't own a ton of uh

real estate or they don't have to buy more machines in order to grow. They just put on they just keep putting it on shows. It's all variable. A couple of the risks that are worth mentioning. It's got a bunch of debt. They use debt to buy the the franchises, the these leagues. And so um they still have a few billion dollars of debt.

The last thing, uh Stock performance has not been great. I think uh this is one where we're gonna have to buck the trend We're gonna have to know what the market doesn't know right now and we're gonna have to to go ahead and um What date did that drop? So the they merged

And like Mid twenty twenty three. D but does that drop because Vince McMahon? Um not just Vince McMahon. I think Basically what happened was They merged, people didn't understand the terms, they didn't understand

What was gonna happen, what was the plan, all that stuff, and the Vince McMahon stuff happened at the same time. Got and so they dropped about fifteen percent on the merger, which is kinda crazy. Before they were both public And they were both trading at about eight to ten billion in valuation. And so when they merged they were supposed to be like a twenty billion dollar Entity.

And they're currently trading at fourteen, um, right after they merged. And so that was that's what happened last year. Lastly, a couple other risks. like you talked about fighters not getting paid enough. So their cost could go up if the fighters ever unionized. And we're able to collectively bargain, which they haven't done, but the NBA and NFL all has. Um and lastly

I don't know what's gonna happen if Dana ever leaves. He is the powerhouse and the CEO who's driving this thing. He's cashed out. So he um does not own the same stake that he owned before. Um he's not even on if you go look at the Stock filings is not on the cap table. So he said he has skin in the game still, but it's not listed anywhere. So I'm not sure what he has.

And uh he might, you know. might w might retire one day and I I I think that would be a a big shock to the business, like Zach retiring or Or Bezos retiring, you know, it it can affect the business. Can I add a few a few risks? Let me add a few risks. Yeah, go for it.

Alright, first. Dana White is insane. So he's mostly insane in a good way. But there's a lot of liability. There's a lot of l liability in this industry because we're talking about grown men fighting in their underwear in front of millions of people. The t the person who likes that and runs that, as well as the person who actually does that. In order to be great at that, you have to be insane.

And so what that means is there's been risk with Dana. Dana has said a lot of crazy stuff. I don't even think that I'm not even gonna say if I think it's right or wrong that it's irrelevant. What's irrelevant is that a lot of people think it's wrong. Um, he also got in trouble for smacking his wife. Uh and that was on video. Vince McMahon's now in trouble for uh Not even sexual harassment. I think it's Beyond that.

And then also like the third famous guy in the UFC right now, Sean Strickland. Again, I don't care if you like what he says or dislike what he says. There's a lot of people who dislike what he says as it regards like the whole trans thing and gay thing. And so inherently there's gonna be all types of nutty people like that. I think it won't impact the business at all. I think the it's actually gonna make the business better because the people who are behind them are gonna be harder behind them. And I think the but but I do think it will scare institutional money. Um And that's basically my downside. Well in that lawsuit. That that lawsuit's actually a pretty big lawsuit. So I think that the only uh counter to that is

Usually the risks are what ifs. All the things you mentioned? They've already happened. They've already happened. Uh and the business is Doing fine, right? So like Dana has been saying crazy stuff for twenty years. It's what okay. It he I guess he'll just continue. That's a risk. That's a risk. That's a what if. I think there's some some risk there, but uh but not that much. In fact, I would actually say

Um They've the UFC have j has shown tremendous anti fragility. So for example If this is a business that depends on live events, It's all based on live events. And it survived COVID.

It can survive anything. Right, live events had to all shut down and the UFC Figured out a way. Why?'Cause founder CEO, he's got the willpower. The guy went to like Abu Dhabi, created a bubble. And start it created something called Fight Island.

and host of the fights in a bubble on Fight Island himself. Um you know, they found a way around the pandemic. I think they could find a way around But I'm an idiot. Keep in mind I'm an idiot. I don't think that's gonna impact any of the business. I think all those things are gonna make their business, their revenue, their profit greater. I just wonder how will that impact like if Fidelity or one of the if one of these big companies wants to buy a huge chunk of their Comp of the stock.

Yeah, yeah. I I think that's that's fair. Um All right. Last couple of things. I think the global nature of this is is underrated. And so when you think about where does growth come from for these types of leagues, it comes from two things. One is streaming streaming deals, which are getting bigger and bigger and bigger. And the other is Uh globalization. Uh, I don't know if you know, but the NBA does like crazy amount of work. to globalize. They you know have like camps all throughout Africa and India. They go every summer

They broadcast games, they cut deals to broadcast games. They will play a game in in Europe to try to get fans. The NFL does the same thing. They play a game in London to try to get fans there. But the UFC actually uh uh like Inherently has that. They get champions from all over the world. But they've never gone to Africa. They've I don't I I think maybe one time they've done one event in China. Basically China. India and Africa are still untapped.

but they're proven that they have product market fit. Um they have they have they have fans that just haven't done the events there yet. And the biggest case for this is really that These leagues devo uh they develop lifelong fans.

Um, you know, you've been a fan, and I I would guess that 20 years from now, you're probably still gonna be a fan. Your kids might become fans. Uh, this is how sports works. It's basically generational people watch them until they're You know, my grandparents will watch sports, but then they'll take their kids to the events and they'll get their kids involved and they they become fans as well. UFC's only thirty years old.

That's incredibly young when it comes to a a league like this. And you know what they're better at than everyone else? Telling stories and creating characters. They are without a doubt the best at this. They kick ass compared to any of the other leagues. So check this out. This is on Instagram. The NFL, which is the biggest, most profitable sports league in the United States, biggest, most profitable league, has twenty nine million followers. D UFC has thirty nine. million followers.

Because they are better at social media and they're better at storytelling. Which is Essentially saying they're better at the way the world works now. And then NFL was better at the way the world worked twenty years ago. Uh, same thing, you know, here's YouTube.

Here's the uh the YouTube channel has seventeen and a half million subscribers uh for the UFC on YouTube. baseball, which has been around for whatever, hundred years. Four point nine million subscribers. It's it's insane how they get dominated by this. And so they uh, you know, you get to you get to ride on the back of that. And the other thing is that

Um Raniels company which bought Uh bought these. They're just better at negotiating media rights. That's what they've been doing for their entire career for for, you know, actors and and television shows and whatnot. Better uh negotiating sponsorships. If you look at where the UFC was when they bought it versus where it is now.

Yeah, it was unprofitable there and growing you know Growing at it, okay clip. Now it's growing faster and more profitable. And it is profitable because of the work that they've done. WWE just cut a 10 year, five billion dollar deal with Netflix just for one of their shows, which is kind of insane. It's gonna go from USA network to Netflix. These are now like three hundred million dollar a year streaming deals that they're picking up.

And that is all, Sam. Thank you very much. Ladies and gentlemen of Stock Palooza. That was very good. That was very good. My um Bias is heavy here.

I I tell people that they they ask like what my hobbies are if I pay attention to sports. I say I pay attention to only two sports, fighting and the other one's way nerdier, track and field. I like track and field and UFC. I'm a super fan, and I think there's so many super fans like me. Uh I don't know how that those super fans compared to the other sports. I I don't know if it's as strong, but I'm a s huge fan.

Uh the stock It's a it's a good brand. I agree. I think the risks are too high though. I think There I think they're Dana's a is W do you think if someone left, he could you said that on their second point, it was like anyone can run it. Do you think someone can run it as good as him?

Uh, I do think you get the benefit of the kind of founder led company. When you have Dana there. Um And you would lose that. If he if he left. So I do think it'll it'll continue to run, but I don't think you'd get that X factor back of what Dana brings to the table. And what Vince McMahon brought to the table.

Till he was How old is Vincent Man? He's like eighty or something like that. The guy ran the league for like fifty years or something. And he was a character. He was a character on the show in the show. And I think Dana is a character in the show. I think Dana's the most popular UFC fighter.

Well Connor, but like I think he could run this thing for like thirty more years. Maybe. I think maybe. I think that I think that running this type of league It's the harder than any other league. Maybe F one actually would be really challenging because you're they're like they kinda seem like divas.

But the UFC, I think dealing with these types of fighters, have you ever hung out with a professional fighter or like up and coming professional fighters? I I've been around a a handful of them. They're insane. They're insane. They're they're hard to work with. They're they're nuts. And it would be very challenging. And also The lawsuit that they have. So to put that in perspective, you said that they pay their fighters fourteen percent. How much does the NFL pay their uh or the NFL and NBA are about fifty percent.

Um that's the the collective bargaining, that's what they negotiated. And right now you made a case that they're a monopoly. That's the exact case that the lawsuit is trying to make, which is that the UFC is a monopoly and that you guys you you have to allow us to do collective bargaining. And I I have looked into it a little bit. But it seems like they've got a great case and that could meaningfully change the economics.

It could. It could. That is I I I would put that as the number one risk to to shift the economics of the dude. There's some guys like they'll say in the post fight uh interviews, they're like I'm the champion now. Eight months ago I was driving Uber. And then like Frank and I'm still driving an Uber because I don't get paid. Well, like to put this in perspective, there's this guy named Francis Neganyo. I think he's from Cameroon. He's like the uh the American dream. He came over here with nothing. I think he worked in like a mind, you know, like a blood diamond type of mind, like crazy stuff. He's now champion. Do you know how much money he was he was a world champion in the heavyweight division of the UFC? He looked like an animal. When you think of a heavyweight champion, this is what you want this guy to look like.

look like beautiful story, great guy. Do you know how much he was getting paid per fight? I feel like it was like five hundred K or something. It was about six hundred thousand dollars. That's how much this guy was getting paid to fight the scariest people on earth. It's a mid level engineer at Google that makes more than that. It's insane. Yeah. It's insane. Uh it's it's it's insane. And so that needs to change, I think, for there to be true longevity. For the sport.

And if that changes, there's actually gonna be bad stuff for the business, or at least it'll be less good. But Great presentation. I uh I'm a fan of UFC. I think that was a great pres presentation. All right, your turn. All right.

Now it's my turn. So look. We said the disclosure already that this really we don't know anything. So I'm actually gonna not even focus too much on the numbers. I'm gonna focus on the story. And I just wanna put this disclosure up front. Now, before I get into this, I want to tell you a few other companies that I looked at. I looked at Rivian, I looked at twenty three me, that's a total shit show. I looked at container store because maybe that's the next meme style. And of course I looked at HubSpot because I own HubSpot and I'm trying to do a little pump and dump scheme. I'm kidding. I'm kidding.

I'm not gonna talk about that. Now I was trying to think about this and I was like Should we do like a Wolfle Wall Street pitch? You know how he's pitching penny stocks where he's like, Hi, John, the reason I'm calling is I've got this new patent technology that has huge upside potential and little downside potential. Is this something where I could maybe get in on the ground floor? Yeah. And then I realized I'm not gonna do that. I'm just gonna tell you, I'm just gonna base all of everything that I'm doing here on what do I think is cool and interesting.

And so what do I think is cool and interesting? Look, if you want to make great money, you invest in Amazon. It's a slow, predictable, it's gonna be I think it's a great company. But that's not interesting to me. We all know that. Same with El everything Elon's doing. At this point, he's the man. I can't invest in Tesla. I can't invest in anything he's ever done. That's Dorky. Plus look at him. I don't want to invest in that. Yeah, I like how you use the uh Pre plastic surgery, uh Elon won there. Nice. There's a point. I've got a point here. And then I looked at Bill Gates and I looked at this guy is like, you know, Microsoft also great company. I like the CEO. They're doing great things, but we've been there and done that. I think it all makes money, but it's a little bit boring. It's not for this podcast. So what is interesting. Look at this guy.

Do you know who that is? Uh that is uh the L VMH guy, right? The L VMH guy. I we're gonna call him Escargo because I don't know how to pronounce his name. What's his name Bernard uh Bernard all how do you say his last name? Bernard uh Arnold Yeah, we're gonna call him Escar guy. Arnold, as we call it. The slug eaten suit wearing beautiful Frenchman. That's what we're gonna call this guy.

Uh so he's great. So L VMH, what here's what they do. This isn't my company, but He this is the person I got inspired by. So they own uh a a hundred plus luxury brands. Do your Um, Fenny, Sephora.

Tiffany's, Hublow, they own luxury brands. And the reason why this guy this guy got into the luxury business, and I found three quotes by him. You use Warren Buffett as your kind of like rule setter for how you're gonna pitch a stock. I'm gonna use this guy. He used to own a construction company. And then he got super into luxury businesses. And I'm gonna explain three quotes as to why he said that. So he said

in luxury business, you have to build on heritage. And so have you ever heard that phrase Lindy? So Lindy's a popular phrase that's floating around on the Twitter circles. It basically just means the time of which something has existed. is directly correlated to the time that it will continue to exist. So something that's been around for a long time will likely be around for a long time. Something that's brand new and hasn't been around for a long time can go away easier. And so for in order to build a luxury brand, what attracted this guy, he's like, I need something that can last that's been around for a long time, and that means it's gonna last a long time. He also said luxury goods are the only area in which it's possible to make luxury margins. Okay. high margin. So I've got to find a company that has

That can last a long time because it's been around for a long time. It has high margins. And then the final thing he says is affordable luxury. Those two words, they don't even go together. Meaning w I've got to find some a product a company that sells a product that is expensive and exclusive. No. What fits that bill, Sean?

Originally. I thought of James Bond. James Bond, like that's like the definition of cool guy and exclusive, and like you dream wanting to be him, but it's gonna be impossible to attain. And so The c the product that I and the brand that I almost chose. was what's something that James Bond is a s synonymous for. Do you know what that car is?

Uh the Aston Martin, I believe. That is an Aston Martin. And so Aston Martin, that kinda that kinda That kinda got me interested. Asin Martin has a strong brand. But they have a shit multiple. They've got a decent product, but it's actually one of the least uh valuable car companies in the world. I believe right now it's only trading at like two billion dollars. So it's not that.

uh big of a business. Now Asid Martin. It's been around for a long time. I think it's gonna continue being around for a long time. I think a lot of young men dream of having an Asid Martin. Their margin is shit. So it's been losing money. So that kinda gets it out of the way. I can't do that. And in terms of like being exclusive and expensive, it is expensive, but because uh not that many people want an acid martin compared to all the other cars, I wouldn't exactly say that it's that exclusive. So Aston Martin.

Not good enough. So what is good enough? So I found a company. That has been around for a very long time. It's got huge margins. In fact, it's got the best margins in its industry. It's very expensive and it's so exclusive that even if you wanted to buy it, in many cases, you cannot.

Do I have your interest? Uh you have me interested. You had my attention, and now you have my interest. Okay, so you probably don't know who this person is. I do not. All right. This man, he's he's no longer around, but he was born in the early nineteen hundreds. His name is Enzo.

Enzo started out as a race car driver. And he drove I actually believe he might have drove for uh uh Aston Martin at one point, but uh he also drove for Fiat. An Italian car company. And he was so into race car driving that he goes

This these fiats, they ain't cutting it for me. I have to make my own car and I'm gonna make the best car. He goes, I'm basically just gonna make an engine. And I'm gonna put wheels on it. And aerodynamics be damned. That's what you say if you have a shit engine. I'm only gonna focus on the engine. And he was obsessed with making an engine. And eventually other people got obsessed with m his engines. And so in the first year he made a car for himself. And the second year he sold two cars. And the third year he sold only about eight cars. And he's kept slowly growing. And eventually.

That company became Ferrari. So Ferrari is my company. And you're gonna like Enzo Ferrari. Enzo Ferrari, he's a crazy person. He's sort of like Connor McGregor, that quote that we have from Connor McGregor. He goes, I'm like Vincent Van Gogh, I've lost my mind to this game.

Enzo Ferrari is like that. He's got this great quote where he goes, A great mania to which one must sacrifice everything without reticence, without hesitation. So he's one of these guys who is totally bought into his brand, sort of like Dana White, where he lives and breathes the shit. He was known as being kind of a shit dad, kind of a shit husband, and all he cared about was Ferrari making it great. So let me give you a little bit of high level facts about Ferrari in two thousand th twenty three, the revenue grew seventeen percent to about six and a half billion dollars. They're very profitable. Their net profit last year was one point three billion dollars. Now here's an interesting status. An interesting stat. So Honda last year sold something like one point two million cars. Ferrari only sold thirteen thousand cars.

Their market cap. Now when I started working on this, their market cap was a lot lower. They released some really big news on Friday and their market cap skyrocketed and they are now worth seventy two billion dollars. That makes them roughly the s eighth or seventh largest car company in the world. And they're still growing at around twenty three percent a year. Unfortunately, their PE ratio is crazy high. It's like fifty four. So fifty four times earning, which is like one of the highest. But check out this. Look at the highest uh or the most valuable car companies in the world. Number one, Tesla. Number two, Toyota, and then Porsche Mercedes.

And then you go down to Ferrari, sixty eight billion dollars, I think um On Friday it was like seventy five billion. So they're more valuable than B W, more valuable than Volkswagen, more valuable than Honda, and they only make something like thirteen thousand cars a year. Isn't that insane? That's crazy. So here's my case as to why this is an interesting company. I'm gonna try and talk a little bit about the numbers, but again, that's not our specialty. So I'm gonna try and stay a little a little bit away from it. But

They are a cash cow. They are the cash cow of the industry. In fact Ferrari makes more profit per unit uh For every unit they sell, they make more profit than any other car in uh maker in the business. Some car makers, in fact, like a GM, they actually lose money and they hope to make money through their other models or through selling parts or fixing the cars. Ferrari makes a profit on everything, everything they make. Last year, or sorry, in 2021, they made over a hundred grand per unit sold. The second place. Company.

that sold the m profited the second most was Tesla at sixty seven hundred dollars. And then it's saying Wow. So you know, whatever, fifteen X more profit per car than in than the second place. Person. But it gets even crazier. So in order to make the same amount of profit part profit that Ferrari makes per car, Ford has to sell nine hundred cars.

Okay, and you think four, that's just a middle line car. Okay, what about Mercedes? Mercedes has to sell sixty seven, B and W also has to sell sixty seven. They make the most profit of any other car uh luxury car maker in the business and then make more profit per unit sold than any other car in the in the industry. Now here's the what g where it gets even crazier crazier. You don't choose Ferrari. Ferrari chooses you.

So if you so did you do you know about this with Ferrari about their wait list? I did not know this. All right. So here's how it works. And there's a lot of mystery around this. Like they don't even openly say like exactly how it works.

But let's say you wanna buy a base. Ferrari, like the cheaper models. A lot of times you could just go in and buy it. But if you want to buy the more expensive one. What they do is they have got a wait list and they look at the wait list and they and in order to

buy the fancier ones, oftentimes you have to buy three to four of the base models. And so Jay Lennell, you know how Jay Lennell's a big hard nerd? Yep. He's he openly says, he goes, I r I refuse to buy a Ferrari because of how elitist they are. You have to they're not well, he's like obviously they're not the every guy, every man car, but you can't even buy one if you want one.

And you have to s in once you buy one, if you if you're able to acquire one, you have to sign paperwork that says that you're not gonna put any stupid parts on it. You can't repaint it certain colors. So there's this lawsuit that just ended recently. Where this famous celebrity Painted his Ferrari pink. And they sued him.

And he had to pay them. Three hundred and fifty thousand dollars because he posted it on Instagram and they said that that hurt their ret reputation. Justin Bieber did the same thing. Justin Bieber bought a car. And he did three or four things that were crazy. The first thing is he just left the car at the at a hotel parking lot for like a few weeks or something while he traveled. Another thing that he did was I think he took like the Ferrari badge off of it. You know, some people debadg the car to be cool. And so they banned them.

Justin Bieber can no longer buy a Ferrari if if he wants to. Another thing is Bummer for the Bebes. Bummer for the beeps. If you b and if you and and just this is uh very similar to the Rolex and uh luxury watch industry. So do you know that if you buy like a Rolex And they find out that you buy it at retail and you flip it.

For above retail, oftentimes the dealer will never sell you a Rolex again. Ferrari does the exact same thing. So if you flip a Ferrari and you don't tell them and ask for their permission, you get in trouble. So it's a big deal and they ban you. And so they have so much demand.

That they literally ban people from buying a five hundred thousand dollar item. Is that insane or what? I mean, that's like truly pinnacle of exclusive and elite, like people are dying to have this product. Nothing makes me want to get in more than a wall preventing me from getting in. And they do a great job of creating that wall. And their brand is incredibly hard to kill. So if you look if you Google one of the most expensive cars ever sold at auction.

A recent one is a I forget it's a GTO two fifty, I forget which year it is, but it was an eighty million dollar car. Eleven of the top fifteen most expensive cars ever sold. Ferrari. In fact, people love Ferrari so much that there's a theme park, obviously, in Dubai. Just for Ferrari.

They they make something so this company, what did I say? Seven hundred uh seven billion dollars a year in revenue? Is it something like that? Six billion. Six billion? Five hundred million of that comes from merch. So a pretty substantial amount just comes from people buying Ferrari hats. And this is even crazier. So for every Ferrari sold. Something like sixty five percent is being sold to someone who already buy or who already owns a Ferrari and has bought one from a dealer.

Meaning their L T V is massive. They've done a bunch of really crazy, crazy things to prevent like or to to keep their brand strong. So they have this bounty program. So They basically have just created a bunch of snitches. So if you're in the streets

And you see someone has painted their Ferrari a certain color. has put a modification on it, like a part that that Ferrari doesn't approve of. If you report that

The Ferrari. You get an allowance. You get a little bit of money. They pay you to report that people are breaking the rules. It's they have a new bounty system. It's insane. Now uh I talked about the Lindy effect. So here's the exact definition. the future life expectancy of some non perishable things like technology or an idea is proportional to their current age. Thus the Line effect proposes the longer a period of something has survived to exist. Or uh the the longer something has existed, the longer its remaining life expectan expectancy.

So Ferrari has been around. It's it's gonna be uh I believe they were launching the Fifties or so? They're gonna be around, I think, for an extended period of time. I think Ferrari is a very hard brand to kill. If you put Ferrari on a Rolex Someone's gonna pay extra to buy that Rolex. If you put Ferrari on anything. Someone's gonna wanna pay more money to have that.

That item. Not then that's not the same case with the Honda. It's often I don't I mean, there's like a handful of car companies that are able to pull that off, or there's a handful of any type of company. I just went to the website and put a six hundred dollar baseball cap into my cart. But I need to like have a cool down period before I click buy just because I think I don't know if you're selling me the stock.

But you're definitely selling me some Ferrari merch today. W it was the hat really six hundred dollars? There's yeah it's a six hundred dollar hat. The cheapest hat is like A hundred and eighty dollars.

That's insane. That's absolutely insane. Like I went to a kid's uh I went to a friend's house the other day and their kid had like a Ferrari coat that he was wearing.'Cause he like love he like you know, and he has like Ferrari toys and they they sell so much of this stuff. It's insane. Is it was it really a six hundred dollar hat? What makes it so good? Does it does it Does the hat drive? Uh the s entire story you just told me made it so good. It it's an insane brand. And

Have you Have you ever been in a Ferrari? Uh I have been in a fur, yes. I've been wonderful. I've been in a Ferrari. They're definitely cool. My takeaway is that there are

Fucking pain in the ass to own. Everyone stares at you. So they've um the that Ferrari red was actually formerly the um It was the national racing color of Italy and Ferrar Enzo, Ferrar was like, Oh, we'll just use that. And then eventually they got so popular, they patent it. Uh or they trademarked. that red. So that red is only for Ferrari. But if you're in one of those cars

You get stared at like crazy, which is one of the reasons why people love driving it. I hated driving it for that reason and they're loud and they are kind of rough. They're fucking race cars. It's a race car. And so if you like driving Ferrari, you're gonna love it. Uh my opinion was this is a pain in the ass to drive. But I get it. I get the appeal. Ferrari is badass.

But their PE ratio is insane. So I don't know how much value is left to be had here. But they are but they are growing uh they are growing consistently. So if you look at If you look at their last um If you look at their last uh I think they went public in two thousand and eighteen. It's grown on average roughly thirty percent a year their stock their stock price. So it's like been a pretty consistent growth. They Ferrari, Enzo Ferrari, when he died, he sold a lot of the business to Fiat and then Fiat spun it off.

And they built uh they they took it public on on its own. And so it's been very consistent since it's gone public. You had a great return. Recently they signed a deal with Lewis Hamilton, who's like the LeBron James of like F one Racing. And they're their their price skyrocketed because also their earnings, they're like, dude, we're killing it. So they make something like I believe their e bit down margin is thirty five percent. So

No car company has that much uh that big of a margin for I mean, that's like ridiculous. You gotta do the smart rich guy thing, which is you say, Ferrari is not a car company. It is a luxury brand. And it's priced incorrectly. They're pricing it like a car company, but it's actually a luxury brand, right? That's what all the stock pickers do. They're like, Tesla, it's not a car company. That was my argument. And then I looked at what the PE ratios of some of the other uh luxury brands were. You need to be like it's actually a It's it's actually a AI chip company, I guess, based on the speech. Well, my original point, I was like, this is a luxury company. And then I looked at what the what some of the numbers were for some of the other luxury companies. I was like, But this is bad timing. If you if we would've done this two if we would have done this like two or three weeks ago, it will it would have l it would have made a little bit more sense. But they just had they just released earnings on Friday and so they crushed it. But

There is a bunch of downside, so Uh, PE ratio is insane. It's at an all time high right now. I think it's sh what did I say? Fifty five times earning. That's insane. That's a lot. Another question. When you were a kid, did you have like car posters on your wall, like or like a folder, like a binder that had a car car on it? I did not. I had a life size poster of The Rock.

Okay. Well You're didn't do the probe move and prove my point. But many young kids when we were young did. You go to that book fair and you buy like a Ferrari eraser or you'd buy like a Porsche Lamborghini folder or whatever. We cared about that when we were kids and so it was very aspirational. Do you know that young people nowadays are barely even getting driver's licenses?

Yeah. It's like a loser move, right? It's like a loser move to have a driver's license. And so oftentimes I wonder, are young kids even gonna care about this? And then finally. EU regulations. So Ferrari's uh uh base in Europe.

The EU is cracking down. So for a lot of cars, they have to be hybrid. I I think the ruling is by like two thousand thirty, I think all cars have to be have some type of hybrid component. I don't think it's gonna kill Ferrari because they're already making hybrids and a large percentage of their cars, something like twenty five percent, are already hybrids. So I think they're gonna be fine. But that is a risk. Now

Beyond the stock. I just want to talk about a couple of lessons here. Ferrari's an amazing company to aspire to build. At least if you wanted to build like a luxury product, a great company. The first thing. They're fucking missionaries. They're not mercenaries. A lot of times we talk about we use that word arbitrage.

If Enzo Ferrari heard that word arbitrage, he would take off his leather glove and smack you in the face. He would ask you about passion. That's what he cares about. And it's paid off. He's built a brand. That You know, is one of the most valuable brands known by billions of people in the world that they aspire to attain. And it's all about him being a missionary. He's truly bought in the the people who work there are bought in. They built a brand that's aspirational. Now in order to do that In order to build one of those brands, you have to do something really hard. Something you and I struggle with, something that I think every entrepreneur struggles with, which is you have to say no to so many great opportunities. And that's really hard. So someone could have said,

Hey. And so What about like a fifty thousand dollar car that like everyone likes? Like we we would just we'd crush it. Like the average man would buy this and they all want it. We would kill it. He said, uh uh. How do they say no in Italy? They would say no.

Uh I don't know how they say it, but I bet it I bet it's just no. That's what he would say. And they didn't and they've refused to do that. But that's been very hard for them to do, I'd imagine. Um, because there's so much opportunity, but that's just a real lesson for a builder. However, The last lesson is if you can say no for that long and you do build a really good luxury brand, it can pay off

So much. I had no idea getting into this. I would have thought that Ferrari was worth like 10 billion. I didn't realize it was the seventh largest car company in the world, only selling 10, 13,000 units. That's insane compared to another company like Honda or Toyota that's selling. A million plus units. So anyway That's my pitch for Ferrari. Good job. Give it's give it up. Let's give it up.

Um That's kind of insane. And by the way, I feel like your point about Italians not just Enzo not doing arbitrage. Have you ever met an Italian running an arbitrage? Like is there is there an Italian affiliate marketer on Earth? I don't I don't think I've ever seen one. It just seems so beneath them. As it should be. They're the they are the luxury brand of

Ethnicities also. Yeah, dude. You want like an old lady in the back. Like I so I grew up in an all Italian neighborhood, by the way. I grew up in St. Louis. For some reason, St. Louis has a large amount of Italians. I was the only non Italian at my grade school. We used to learn Italian in grade school. They used to teach it to us. We have to go to Mass three days a week, and one of those days was an Italian. But you didn't know the Italian word for no? I wasn't a good student, but I could tell I could tell you the our father in Italian. And and the best part was like Everyone would have their old grandmom like in the back of the house, like rolling up these raviolis. I wanna hear you speak some Italian. Let's go. Don't put me on the spot, bro. I I You just said I could tell you the our father in Italian. Okay.

Tell me! No, I don't even want to say it. I'm so bad, dude. I got a thick I got a thick tongue, just like our boy Bernard. I got a tongue like a slug. It's a thick tongue. I can't roll my R's. It's disgusting. The back of the my first girlfriend in grade school, her name was Philomena. Like I was all in I was all in on the Italians. I feel like American Italian people, like it's Italian people who live in America are just they give it the the the wrong rep, really. It's sort of like it's like Tex Mex or whatever. It's like too Americanized. Italian Italians. Oh man, it's just Yeah, I want like a really s I want a skinny Italian with like wearing skin skinny tight jeans, smoking a cig constantly, drinking a espresso with a buzz cut. I don't want like these gabagul, like you know what I mean? That's not that. Sopranos. I don't want Tony Soprano, right? Like the Italian grandmother who still like, you know, smokes cigarettes.

And a lot of great uh car companies are Italian. You know, Lamborghini's also Italian, uh for and I believe the story, by the way. Do you know the story of Lamborghini? He uh invented the Lamborghini because Ferrari wouldn't sell him. a uh a car. And he was a bench? And he was making tractors. Lambertini was a tractor maker. And Ferrari wouldn't sell him a car, so he made his own.

And so they've been assholes from day one, and that's why it's such a great brand. You definitely sold me on how cool Ferrari is as a business. Um, I don't think you sold me on the stock just because it's like at an all time high and seventy billionaire. It's at an all time high. It it also sounds like they're not trying to grow fast, right? That's like part of the shtick is like Sell only a limited number of these

At insane margins. And so I think that's uh you know, maybe maybe one of the downsides. But very cool story and also More like MFN. More more of uh inspiring for how to build a business than uh being great stock. Don't discount. Don't discount me. Listen.

I actually don't know how stock w stocks works. Yeah, I'm a dummy. How does a stock work? I don't know. But if it's growing twenty percent a year and if we think that it could continue doing that. But you're saying the stock price is growing twenty percent a year, not the revenue. Revenue. Revenue is growing twenty percent a year. If revenue is consistent. Doesn't like that that other shit follow?

It does, it does, it does. But you didn't talk about that. So um you know. It was on the three. The business is growing. It's good. You started the pitch with It's for my stock analysis. We're not gonna be talking about numbers. Which was just a master. Isn't that what you said Warren Buffett said?

Breads or some bullshit. Something like that. Something like that. Um, I do think that uh You know, that's the best way, right? Like If you didn't prepare for your speech uh in school, you're just like, you know what? You rip up I'm not gonna read off those prepared notes. I'm just gonna speak from the heart. It's like you're ripping a blank piece of paper up and throwing it away.

Dude, I did prepare it. I pre I prepared a long time for this. I just I just really took Uh Uh Buff Daddy's Words to heart and I looked at the brand. Fair enough. Okay. It is kind of an interesting dichotomy here. We did just pitch the two exact opposite things, right?

Yeah, exactly. Yeah, the h the highest of high fashion and luxury And uh sort of the uh the lowest form of human behavior, getting in your underwear and fighting in front of other people for their entertainment. We give you the full spectrum here on MFM, right? We we we give you everything. So let me let me think about it. Okay, so if I had to put my own money, if I had to put a hundred thousand dollars, let's say Into either Ferrari or TKO. I think I would go Ferrari.

I think I would go Ferrari. But I think TKO has significantly higher upside. Significantly. Right, right. So So I don't know how you want to gauge the weight.

I would put it in neither. Oh I I emphasis on the if I had to, which I don't have to. Which I will not. Yeah. Which I'm not in that position. And I by the way, I don't know if it showed, but I definitely worked backwards from I looked at the stock and I was like I actually what happened was I saw that they merged and I was like These companies have no competitors. This is a true monopoly. And in tech people, you know, from the Peter Thiel School of thought.

really value a monopoly. And it's so hard to build a monopoly. Like There are so few businesses that are truly a monopoly. We talked about even Duck DuckGo eating into Google's market share last time, but You know, Google, Facebook, this is one of the few monopolies that exist. And I was like Huh.

It's funny that Like T KO thing is actually a monopoly, but I I don't know how good of a business it is. I don't know I don't know if that's gonna grow, but

if you're Warren Buffett and you're looking for something with a sustainable competitive advantage. That would be it. And so that's where I started and and to be to be short truthful, I didn't even consider any other stocks. I started with that, then I texted Sam, Hey, we should do a stock picking episode because I already have one picked. All right, I'll give you my vote. Yeah.

We have it. Unanimous unanimous decision. You w I got the vote too? Oh amazing. Well Guys, uh I don't know if I'm supposed to do an acceptance speech now or if I should just say

Um I'm not surprised, but uh that's that's where I stand as far as stock of balooza. I hope you guys liked it. Go to the YouTube comments. And vote in the comments. Who won, Sam or Sean, put it in the comments. We will tally them up and name the official winner. After we do that.

And if you got any joy from this. Or if there was a time that you were pulling your hair out and being like These fucking idiots don't know anything about this stuff. If it whatever that spectrum is, if you got a little emotion, click click subscribe. Uh and uh We'll owe you one. Um all right, that's the pod.

I feel like I can rule the world, I know I can be what I want to I put my law in it like my day song On a roadless travel never looking back

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