Avoid ‘Boomer Pandering’ with your investments - Luke Laretive

This is an Equity Mates Media podcast. Everything you're about to hear is for education and entertainment purposes only. Whilst we are licensed, we're not aware of your personal financial circumstances. Any advice is general advice. Equity Mates operates under Australian Financial Services Licence 540697. Welcome to another episode of Equity Mates, a podcast where we explore what's possible in the world of investing. If you've just joined us for the very first time, a huge welcome to the community. My name is Bryce, and as always, I'm joined by my equity buddy, Ren. How are you going? I'm very good, Bryce. Very excited for this episode. How can I not be excited when the one, the only, the most controversial man in the Equity Mates community has joined us in our new studio for the first time? Luke Larative, welcome. Boys, as I came in today to the home of thematic investing, I thought, I might get struck by lightning like when I go into the church, but no, I've managed to make it to the podcast room. Luke taught us he's never bought an ETF in his life. It's our job to change that by the end of this episode. Yes. But Luke, you are the CEO of Seneca Financial Solutions. You also manage the Seneca Australia Small Companies Fund. We want to talk about some of the recent performance and what's been driving that because you've had some pretty good results. And then we're going to talk about a couple of other stocks you're watching. And we're going to learn how we can avoid, quote, boom of pandering in our investing. Geez, geez. So I'm going to put my hand up. I'm going to put my hand up. I'm going to put my hand up. I'm going to put my hand up. So a lot to cover today. Let's start with the small, small cap fund because it has done pretty well, 40% over the past 12 months. Yeah. I think 39.1 to end of September, it was 40 points up at the end of August. You know, they're thereabouts. Yeah. What's, what's 1% between friends? Rounding out. Rounding out. At least the numbers that I saw were 40.42% over the past 12 months. That's August. Yeah. Yeah. Let me give you your flowers. Beat in the index by 17%. Yeah. We're still beating index by 17%. Feeling pretty good. Yeah. Like it's, it's good, like I'm pleased, you know, we expect to do that, but like we expect to beat the benchmark. I mean, we expect to generate good returns. I don't really feel about it. I suppose probably not the right way. It's my job. You know, I go to work every day. We turn over the rocks and, you know, it's good when it works out and sometimes it doesn't, but you're trying not to get too stoked with it when it's going well and trying to get too upset with it when it's not quite working yet. So no, it's pleasing. Pleasing for all the people who have like back to sin, you know, large caps doing really well as well, which is always good too, to have the two products going well. We're just focused on, you know, continuing to improve doing the work every day. All the boring process of a performance type stuff that I always rattle on about. Yeah. But it is a bit like that. You've set yourself a pretty high benchmark there if you're saying you're, you're expecting 17% outperform. We're expecting to outperform. Right. And I mean. Okay. Yeah. What are some of the, I guess, high level drivers that have driven this outperformance? Software and like software as a service type businesses. So, you know, Caterpult's done 200% for us. Corey has done 80% in a pretty short period of time for us. Energy ones up like 250% since we bought it. So you know, they're all kind of inflecting profitability, software as a service names. Is RPM Global Software as well? Yeah. RPM Global is in there as well. Actually, probably the next, probably next, if I was to give you a top four, that'd probably the next one. Yeah. And mining and mining services. So, you know, Emma goes up like 30% in no time for us. That's a more of a cyclical recovery kind of asset play story and Tepa, you know. Yeah. I feel like you've had some big M&A wins. We've had six companies get taken over in two years. So I think, you know, one of the lessons is, you know, Ben and I thought we'd be pretty good at identifying takeover targets. And I think we can pretty much say now we can do it. Like we're pretty confident in doing it. We've still got a number. I mean, now Tepa's still yet to get a bid. I know I'm holding. It's going to go. God, that'll be a day price. I cannot wait. You and me in a pot bottom singular. Right. We'll be in the office that day. Yeah. Yeah. We'll be running down the street. So the main issue there has not been Tepa. It's been Greatland Gold, right? So they've been in the toilets. The stock's been worth nothing. So they're not going to have a license from shareholders to go and issue stock at those prices while they're still trading at like 0.6, 0.7 times NAV. Right. So that's now starting to rally. So it's back above $8 and on kind of their last quarter production, which was decent. So I'm actually cheering for the Greatland Gold share price because the higher it gets, the better this takeover will. Yeah, that's a better chance. So right. So I think it still happens before the end of the year. It's crazy that Greatland, any gold company can be in the toilet when the gold price is done so well. Man, they had a terrible. I mean, the first that six weeks up, like six weeks in after the IPO, that was one of the worst calls I've been on. Really? Yeah. It was a bit of a debacle, but credit to them, they seem to have, you know, steered the ship a little bit and I hope they can get that thing trading at 0.8, 0.9 and NAV because if they do, they've got a license to go out and issue some shares and buy Antipa. You did a good research right up on Antipa, didn't you? Yeah. A while ago. No, no, no. Well, maybe we recovered it. I can't remember. I think so. Yeah. Yeah. Good research is quite, it's every two weeks, so Benny and I kind of always doing it. It's kind of always part of our daily workflow is to kind of, you know, pull together the good research stuff for the fortnight. So it kind of all blows into one, to be honest, particularly being away, like, you know, did this Brazil trip. So it's sort of been, we did a couple before we left and so it sort of feels like a while since I've done it. So I flagged this boom of pandering term, which is not one that I've come across in my investing years, but I read it in a recent note that you shared. Yeah. I think it's just in my weekly newsletter. Yeah. Yeah. That's the note that you shared. Yeah. Go sign up to the newsletter. Yeah. Yeah. Explain what boom of pandering is. It's the idea that, you know, you can kind of know a historical fact or a data point and that's the basis for making an investment. So, you know, you should buy company ABC because it's got a 10% trailing dividend yield or you should buy company XYZ because the PE7 and that's a low PE. It's a bit of an old kind of like stockbroker trick, really sales trick. It makes you feel safe and certain about making a decision to make an investment decision, essentially, in an investment environment that's kind of, you know, dynamic, nuanced, uncertain at times. So, it's relying on the past? It's relying on the past, but usually anchoring to a single data point or two. The example I use is, you know, you know, like when your dad's giving you directions, but you've already got the destination in Google Maps, it's that stockbroking equivalent of that. So, you know, it's the client wants to know, you know, they want to buy CBA shares. That's what they intrinsically want to do. Is it the right thing to do? Well, no, probably not on four times price to book, but that's a nuanced conversation around why the best bank in Australia isn't a good investment, but it's much easier to say, oh, well, it's trading on, it's got a dividend and it's gone up 10% in the last quarter or whatever. You know what I mean? That's what we mean by boomer pandering. It's like reinforcing people's preconceived bias. Yes, with like these factual data points that you can't argue with, you know, historical returns, dividend yields, PEs, they're easy like things that everybody wants to believe that if I know this fact, I'm going to make money. And the reality is you're not. And what's wrong with it? You're not. You're not. So, you know, it's this and that stuff. Yeah, yeah, yeah. CBA has underperformed the other three banks last three months by 17%. That is true. Yeah, yeah, yeah. In fact, it's the number one source of like recovery, you know, our performance in our large-cap strategy is just not only CBA. Being underway. Yeah. Yeah. I mean, it's also the stuff that's like, you know, the thematic stuff that I'm always banging on about that people anchor to, so, you know, XYZ healthcare is a buy because of the ageing population. Yeah, yeah. Goodman Group is a buy because they're investing in data centers and data centers are good. Yeah. Like lithium is a buy. Exactly. Yeah, it's all those kind of, you know, if this, then that stuff. And I don't think you can honestly believe in 2025 with AHA and algorithmic traders and supercomputers that knowing this sort of shit actually results in our performance. If it was that easy, like, I wouldn't have a job. I mean, anyone can teach a year eight student how to calculate training, trailing ROE. That's not an advantage. So. Year eight? Yeah, you know. It's a good vision. I wish I'd learned investing in the U.S. Anyway, that's what we think is wrong with it. That was why I wrote the article, the newsletter about it. That's the way you shouldn't invest. Then on the flip side, what is the right approach? Well, money's in the gray. We always talk about the gray era, you know, you got black and you got white, it's always in the middle. It's in the nuanced probabilistic nature of markets. It's having that contextual understanding of things, being able to, you know, run scenarios and think about how things might work and then putting them together in a portfolio, understanding that you're never going to get more than five or six if you call's right at any given time. You need 30, 40, 50 of them in a portfolio to make sure that it's kind of how I'm not relying on. How many in the small caps at the moment? Small cap at the moment, I think 39 or 40 top of my head. It's usually around that like 35 to 45 number. When you say you'll never get more than five or six right in a portfolio of 39, we should clarify. You mean like at any given time, five or six will kind of like... At a 10. Yeah, yeah. Like 50%, 50% win rate. Yeah. So, I mean, if you look through the history of active management, you know, if you're getting 45% to 55% win rates, you can be a really, you can be a top quartile manager with those kind of hit rates. Yeah, well, the name escapes me. Renaissance. Renaissance, yeah. 50.1% win rate. Correct. And now delivering 60%. 66% a year. Yeah. Yeah. Not bad. Look, I mean, arguably best fund of all time. Yeah. I don't think I'll... Definitely the best fund of all time. Yeah. You would think you maybe can't replicate that at 50.1%. There's other ways to make money and high frequency coins, not the only way to do it. They were literally CIA code breakers and PhD mathematicians, so, you know... Yeah, which as much as... Benny might be one of those, but I'm certainly not. Let's keep it out so good. So, with the, say, 3940 stocks, if five or six out of 10 are your winners, like how often are you rotating the portfolio? Your turnover is a function of two things, one, you know, valuation and what you want to do in the portfolio at any given time, and then two, also inflows and outflows. So we haven't had an outflow yet, cross fingers, so if you're getting big inflows, it's going to drive up your sort of ex-post turnover because you're just constantly going to buy more and more of the same stocks to keep your portfolio, maintain your portfolio weights. So on a kind of inflow-outflow-adjusted basis, I'd probably guess our portfolio turnover is like 30, 40% per annum, but that being said, I'd say that probably ex-takeovers as well. Yeah. You know, we had 8% of portfolio in RPM Global, so that's 8% of portfolio that's just going to disappear. You know, we had a big weight in Mermaid Arena or MMA offshore when that got taken over as well, so like, that's going to be a problem, and Tipe is big weight for us at the moment as well, so when that goes, it's going to create turnover. If that goes... No, no, no, no, when? So, yeah, we are active most days in the market doing something. Some days, my order pad is like, you know, like really like multi-pages. Other days, you know, it's just one or two little things, tweaking around the edges, but we're always thinking about risk of return, we're always thinking about next best alternative, and I think having that kind of laser-focused is kind of like the bare minimum, you know, like we always want to be thinking, okay, is stock XYZ on that multiple the best thing we can do with the dollar today. We've touched on a number of your winners and we want to do a couple of stock deep dives later, but you know, the function of five or six out of ten being winners means, you know, four or five of the losers. Is there a recent loser that comes to mind where there's like a good investing lesson that comes out of it? Yeah, sometimes we kind of almost lose money by design, I know that sounds a little bit stupid. Oh, must be nice. No, it's true. No, it's true. No, I'm serious. Don't be too high. Don't be too good. No, no, no, not for that reason at all, right? So take, for example, ordinate, right, so 88, you guys know, well, we're going to cover it. We know it well. Well, I remember Ben coming on and slagging it a little while ago. He got it perfect, right, so in March, we know at the top of that thing, there's a live wire article where we covered it, and I think Ben was on buy, hold, sell or buy, sell, I should say, buy or sell, covering it as well as a sell March 24 would have been. So we can go into the, I can tell you why we've bought it now and why we own it, but we made a decision to take a starter position before the last result and it fell like 20% after that result. So the reason why we took a starter position before that last result, really like small weight in the portfolio was we thought there was a chance, but probably not, but there was a chance that that would be the turning point for the business. And we thought that, you know, there was a sneaky chance that we could make a lot of money by being the first fund essentially back in this stock, but didn't work out. So that's fine. We've now taken it, you know, we went down and then we just went, position size just went up again. So now we've got a proper weight in that stock, you know, we'll play this trading update period where we think, you know, something could happen maybe and then certainly into the next result in February where the business should be doing well. So we can cover the thesis for that company in a bit more detail later, but that's probably a good example of when I say we're losing money by design. We hope we don't lose money, obviously, right? But we know sometimes that we're taking a risk, but we position size appropriately so that, you know, if we're wrong, it's not really going to hurt us. And if we're right, we can use that position size to like average into a better position over the, over the journey. So tear at the moment, it's in the last three sessions as we're recording, 8%, 8% the market opened half an hour ago. Right. Where, um, yeah, well, that's good news for us, that is good news for you, that is good news for you. I feel like there's two, there's two good lessons there, um, one investing and then one around consumption of investing media, like the investing lesson you mentioned earlier, that investing is probabilistic. Yeah. That's an example of where, like, there is a range of outcomes and you position size accordingly to manage your risk. The lesson for everyone listening, and I think for Bryce and I is that every time you speak to an active manager or anyone who's talking about a stock is always moment in time. Correct. Like Ben's view on ordinate in March, 2024 was right. It fell 80%, but now you guys are buying it. Correct. And not, not every fund manager comes back on and talks about when their view has changed. So we've got to remember that. Yeah. Uh, we are not the smartest, not the best, we're just, we try really hard at what we do, but we are very flexible. Like one of the good things about working at Seneca, one of the things about the way we do things at Seneca is like we don't have doctrine. We don't have dogma. We don't have rules. Right? You've got one rule. What's my rule? No ETFs. Uh, that's not a rule. So like, I think that, I think it's, it's really just about trying to be flexible in your thinking and constantly reevaluating things. It takes a lot of effort, a lot of time, a lot of work. And you've got to always be challenging each other and challenging your sort of operating model for lack of a better word. But as a result, you can go through this constant sort of process of iteration and improvement. And you know, five years ago, I would have never bought ordinate back. I would have called it, I would have got the vowel thing right at the top, but I never would have bought it back. Whereas now we're buying it back. So I think that's kind of the difference in, you know, even me as a sort of practitioner improving over, over a period of time. And is that, um, is that like Ben having a different perspective and convincing you? Or is that the business changing or, I think just getting, we're both just getting better. Like we're just getting better, more experienced, seen more ball, seen more balls. You know, like it's a, yeah, if you're not improving, you're dying, you know, we want to keep that going. It's not like we're like, oh, we're finished now. We're geniuses. Like, yeah. So yeah. Anyway, that's the. Yeah. Well, we're going to take a quick break and on the other side, we're going to dig into a couple of stocks that are in Luke's portfolio. So we will be right back. Today's podcast is brought to you by Vanta. Now Bryce, we've learned a lot running equity mates for the last eight years. One thing that I've learned is that you think you're going to start a media business and then you spend a lot of time doing non-media activities. Absolutely. And that is certainly the case when it comes to staying on top of our security and compliance. A lot of paperwork. And we hate paperwork. But we've learned a lot over the journey filling up that paperwork. And one advice we have for new founders is look for tech platforms to automate some of that paperwork, one of them being Vanta. A hundred percent. Vanta is a leading AI powered security and compliance platform that takes the time, labor and overheads out of protecting your business's data and proving it to anyone who asks. With Vanta's superior automation, continuous monitoring and AI powered workflows, it's the perfect signal to your partners, team members and investors that you're compliant and you've been that way since day one. Though find out for yourself why Vanta is the proven leader of security and compliance automation. Head to vanta.com/equitymates to learn more and start your trial today. Welcome back to equity mates. We're here with Luke Larative, CEO of Seneca Financial Solutions who is delivering pretty impressive returns in his Australian Small Companies Fund. So Luke, we want to dig into a couple of stocks that you're interested in at the moment. Let's turn to E-Road. What is it? For the one you guys haven't heard of before. So they do, well Ben always calls it fleet telematics, but what that actually means in English is... What? Yeah, exactly. It's a smart device connected to the engine of a truck and it monitors acceleration, braking, engine performance, temperature, load, speed, so all those sort of things. So if you're running a fleet and all that software comes back to a dashboard-y software, back at head office for lack of a better word, so you can manage all your fleet, you can save money on fuel, routing, maintenance, safety, all those things, the insurance, it ties into lots of different things. This business was a darling on the ASX, it went up to like five bucks a share a few years ago and then tried to go to the US and pretty much just cooped it and then... It's a tale as old as time, isn't it? Great Australian business tries to go overseas. Yeah, so they were actually in New Zealand business, right, and so they went to the US, didn't work out, fell to 50 cents from five bucks and then they've sort of right-sized the business, got the cost structures right, they had a messy sort of past three years with... They had to do a $30 million hardware replacement across their sort of fleets because they were upgrading from 2 and 3G to 4G network. This is where the opportunity is essentially has been, is that these capex costs have kind of obscured the profitability and growth of this business. Now if you're listening to Ben and I a lot, you're going to hear this is very much like Seneca Playbook 101, but as this kind of noise clears, you're going to see the business generating robust free cash flow from essentially 95% SaaS style revenue, so it's a pretty good business. You've already seen that free cash flow inflicted FY25 result. We also think the quality of the revenue is getting better, more enterprise customers, bigger customers. A lot of the customers are using it like Main Freight, Lin Fox in New Zealand are bringing that to Australia. Oh really? There's also some regulatory tar winds in the US where everyone's going to have to use these E-Ruck road user charge as going to be standardized across the country. We think that's going to happen in Australia eventually as well. So they've got some sort of tailwinds and they do 50% EBITDA margins in New Zealand. We think they're in Australia now that it's going to trend towards, trend up towards those numbers and going to drag up kind of group margins. Yeah. It's cheap. It's only on two, two and a half times EBITDA sales, so seven, eight times EBITDA EBITDA. These peers that trade on 11 times. Yeah. I think it looks pretty good. Probably got 50, 100% from here. Nice. Acquisition target or nah? Not everything has to be added. I wouldn't think so. I wouldn't think so. I mean, we don't actually try and identify, take over time. That's not what we do. We're trying to find undervalued strategic assets with good customers and good growth optionality, and it just happens that financial sponsors or trade buyers look for the same sort of things. So they get taken over. Yeah. I think ERO is probably more of just like an earnings growth story. It's got good growth. It's got good technology and a pretty dominant market position already, but just come through a really challenging period for the business, and I think that's largely now behind them. Is there a question about like how big the market can be? Like are they going to have to try and tackle the US again? Look, I don't think our thesis really extends to anywhere beyond just New Zealand, regulatory change and growth in New Zealand plus Australia. So I think that would be as long as my forecast horizon really is, but I mean, at two times EV to sales or even two and a half, I think it might be on now, you're not really asking for too much. You know what I mean? You don't need it to be a world leader on those kind of valuations, right? It's not life 360 on 15 times. So you know, Horses of course is a little bit there sort of. Is it the same management team? Yeah, same, same, same crew. And when you think about, because I imagine like a number of fundees would be sort of once bitten twice shy when it came to a management team, but you're comfortable with these guys? Yeah, it's exactly the setup we like, you know, Emiko, same sort of thing, like another big position in our portfolio. They made an acquisition into maintenance essentially and underground servicing and didn't work out, a torch lot of capital, pissed off a lot of farm managers, stock ended up trading at a 30, 40% discount to NTA, 70 cents. We bought it. It's now buck 30 on takeover interest. Yeah, sometimes you need to understand the difference between bad management and bad strategy. You know, you can make a bad strategic decision as when you're a bad person, you know, you know, you've done the wrong thing by shareholders. Often the times, you know, these guys have lost more of their own money than they've lost anything else if you're, if you're sort of backing the right horse. Yeah, I mean, in the same way that investing is probabilistic, like business is probabilistic. We think it's deterministic where like you, if you make the right decision, things will work out, but everything is, you know, I'm making a decision based on the numbers that I see them and the chance that I see, and sometimes it doesn't work out. 100% I think, I mean, we wrote about it recently as one of our, like our lessons from the last 12 months. And that is, you know, if you're a salaried fund manager who's never run a business, sometimes when you see a blip or a bad quarter or about half, you think it's the end of the world. But if you've run a business, you kind of know that like, that's just shit happens. Like that's just, that's just the rough and tumble of, you know, running a business. So I think sometimes being an entrepreneur, having a small business actually helps you kind of understand the plight of the people that you're investing with a little bit better. And vice versa, you know, when you're, when you're investing in their company, they understand, you know, you're up for monthly, monthly reporting and you got to put good numbers up all the time and, you know, you're trying to grow and, you know, look after people in your shareholders and your family. Because it's, I think it's a nice, nice position to be in for us, small business investing in small companies. Yeah. Yeah. Yeah. That, that other one, I was just trying to Google it as you were talking. What was the name of it? Emiko. Emiko codes for that. E-H-L. Nice. Nice. Just for people listening along at home, writing everything down as you're talking. We've come with this. I mean, none of this stuff, I mean, ordinates new. So, you know, we haven't really written that up anywhere or put that anywhere. I don't think publicly much. E-Road, we've covered for good research. And we are covering Ordinate for Good Research, which will beat this podcast to air. Nice. So, well, you know what, the good news for us is that subscriptions for good research are currently full. Yeah. So, unless you're one of the 200 subscribers that have it, you can join the waitlist, but you have to keep listening to equity matters to good stuff. Correct. Yeah. Correct. We might, I might think about expanding. No, no, no, no, no. We're all people who are not. No, you lose. You lose it. There are a few other names, Luke, that are very popular within the equity mates community at the moment. Life360 and Drone Shield particularly. Yeah. Ben's been out in the media talking to them down a little bit. So, what are your thoughts on the two of them? A little bit. Yeah. He's not afraid. He's not afraid, young Ben. He's not afraid. Well, let's take them one by one, which, which do you want to start with? You choose. Well, I'm not afraid, 360 is easy, right? And I'll caveat this by saying, and I've learned this the hard way, Ben is very annoying, but he's often right. And I feel like at some point we need Ben in here to defend himself. Yeah. He's a very smart young man and he makes me look stupid all the time. He's right here again, and that is, you know, you buy stocks on 15 times AV to sales more often than not, you're going to lose money. You know, we like Life360 as a business, but we just don't think your probability of outperforming from here is great. I'm happy for everyone who's made money out of it and whatever, but you can go look at Ordinate, which was on a similar multiple, and you can go look at WiseTech, which is down 35% since it hit similar multiple. Like, you know, I can do this all day, guys, like if you think Life360 is special, all power to you, but I can tell you it's not. So you know, that's kind of that one. Well, I mean, like it can be a special business, but it's just an evaluation that asks too much. Even special businesses don't maintain those kind of multiples. Yeah. But it's so, and I mean, I think you've got a really good alternative in Coria, which is still on seven or eight times, AV to sales, you know, sort of similar thematic. If that's what you want to get involved in, QOR is the code for that. And then Drone Shield is just a meme stock, like Ben and I have a, you know, like good luck to all holders, GL, TA, H, you know, like you see on the internet sometimes, like, so we're like good luck to all holders, like it's, you know, like we're all power to you. Happy you're making money. Do you think it's a good business? No. I mean, we don't, we don't see how, I mean, you tell me which other Australian manufacturing company that's taken on the world, where are the competitive advantages? And, you know, this industry just aggregates to a handful of very large mega-cat companies. This has been my challenge with it. And like, it might sound like sour grapes because Drone Shield's up 400% in the past 12 months. Your return's a kick-ass PA and, you know, I'm not doing too bad. Yeah. So like, I'm not really sour grapes. Like, we've made plenty of money out of stocks. It's not. Yeah. The challenge for me has always been like, if, when does Lockheed just say counter-drone technology is something we're going to build, you know, or Raytheon or, yeah. And look, you can make that argument for lots of small businesses. I just think this industry in particular, it's very highly likely. And I think at 100 and whatever times PA that it's on at the moment. More than that. 833. Oh, that's trailing. Yeah. So even Ford with all the contract wins and everything included, the people who own it as well, like it's like the Momo funds and the Panthers. That also to me always tells you whether you're missing something or you're not. This will, of course, as they all do end in tears, but at the moment it's not. And yeah. Good luck. Hopefully it goes. I hope it goes to a million dollars a share. Like, I don't care. Right. Like it's people who own it, get all emotional about me not liking it. It's like, well, you want people for me like me not to like it. That's what makes you have a good investment idea. And why is because we disagree. So I'm not, I don't have a horse in the race. I don't care. I'm not like I'm short the stock and I'm trying to, you know, I think shorting something like this is lunacy. So, you know, these things can go on for a lot longer than you think. But if you asked me today, am I happy to buy drone shield stock at what is six bucks, whatever it's trading at? No, I don't know. What is the same thing? Two at a dollar. Yeah. You know, like, I don't think it's worth anything. So this is different to life 360 and ordinate where there was a price. So different. Yeah. Buy life 360 at the right price. Yeah. Just not 15 times, you know, 15 times AV to sales. Yeah. Okay. Is there a world where like the number of contract wins that's like at some point, show me the money, like, you know, and show me this is sustainable and, you know, but you're going to have, I'm going to be a high hurdle because like you, I'm not convinced. Yeah. So, you know, there's some stocks on the market that you make money out of that Ben and I just don't like don't really want to do for whatever reason. We don't like the business model. We can't, you know, we just can't really come to grips with how this is the kind of thing that fits into the best 30 ideas that we have, you know, is there a stock you're thinking of as you said that? There is. And I'm not going to. Because you're worried about offending them. No, I'm not worried about offending them because I just think that it will probably go up. So, you know, so we met with management recently and we're probably, we're probably wrong. We think it could be a 10 bagger. What? Come on. What is it? It could be. But we're not going to buy it. We might. I don't think we're going to buy it. I don't think, well, we haven't made up our mind. That's probably the answer. Yeah. We might change our mind, but we're struggling to buy it. Normally we find something like that and it's just like. You're trying to convince yourself. You know what I mean? Like it's a lot of boxes, but there's something about it. We just can't quite get come to grips with the strategy and the sector and the way it operates. And it's good. We're doing software stuff or recurring revenue, you know, high value customers, B2B sales, all the stuff we're always looking for. This is just a giant, this is a giant teaser. Yeah. Come on. Maybe next time I come up. Oh, when it's gone up and you've bought it. Yeah. Well, I mean, it's not even that. Like it's more that I don't want to send people down the river because I know what happened. I know what happens now when people, when I come on here and I know what happens to some of these stocks. So, um, I'm not going to do it. Ren, can I ask you a question before we wrap up? Cause I've got it. I'm going to. Oh, sorry. That's all the time we have. Yeah. Yeah. Sure. So you want to know my stock tips? No, I don't. Um, so I don't care about those. The, uh, you, so you're an investor in the small company's fund. Uh, yeah. Yeah. Racing, racing. Racing investor. And you're also a ETF fee obsessed person. Yes. Um, so, so we have a zero management fee with 20% performance above hurdle of the RBA cash rate. Yep. And people say to me, oh, look, why isn't your, your hurdle the benchmark of the, of the small lords and I always say, well, because we don't charge a management fee. So if we charged a management fee, we'd have a, uh, you know, but what do you think of the fees? Why have you invested? You know, what's been the, what's made in the catalyst for you? I mean, sorry. Your hurdle is what, what was the, what's the hurdle is the RBA cash rate regardless of the benchmark. Yeah. Okay. Okay. Interesting. So you could underperform benchmark, but outperform cash rate. No. Yes. And make and get paid. Yeah. Yeah. Yeah. So yeah, your benchmark for tracking your performance and your benchmark for fees. Yeah. They're two different things. Yeah. Correct. Uh, to answer your question. Well, first of all, on the, on the, um, fee structure, like, you're not the only fund that does that. Like a lot of absolute return funds will benchmark to, um, RBA plus or RBA. Yeah. Yeah. Yeah. So like, I mean, that's not crazy for me. Like what matters just generally is after fee returns. Correct. And I mean, like your after fee returns have spoken for themselves. But I think when I think about my portfolio, like what I want is a diversity of opinions. Like I think I can run into problems if I'm just picking my own stocks that like, I have a certain view of the world. I have a certain view of stocks, I have a certain view of valuations. And I think it matters to have smart people that have different views of the world and ideally that have different world views of the world to each other. And so we recently did a pit my portfolio and you said you are not a great fan of how Munro invest, but I, I like that. I like that I have Munro in my portfolio and now I have you in my portfolio because you guys aren't going to have a lot of overlap. And obviously like they're global large, you're Aussie Smalls, but like, I think that's really important for all people to have is like diversity of views because it's not just like some growth, some value, but it's just like different managers will outperform at different times. You don't want to be chasing that outperformance. You want to have a bit of everything. So that's why I like Seneca. Just generally why I'm going active in Smalls because I have you guys and then I also have Fairlight for Global Smalls is just because what we've learned over time is that indexes work really well in the large cap space because you get more of the good stuff, less of the bad stuff, but in small caps, you get more of the bad stuff that's falling out of the large index and you get, you lose the good stuff as it graduates into the large cap index. And you also get a problem at the bottom as well, often as well. Yeah, yeah, yeah. Dry and Shield. So like Small Caps is an area where active outperforms, fixed income is an area where active outperforms, emerging markets is an area where active outperforms. The important thing that I've learned as an investor is they try and put you in a box, value of a growth, property of a stocks, active versus passive. Correct. The other thing is like there's heaps of ways to make money and like you don't have to choose. And they're all good. Like there are 20 million ways to skin the cap and I even in Smalls, even in our tiny ASX Small Cap Investor universe, like I said, I did Livewire with Matt Griffin from Maple Brown Abbott yesterday, right? And Matt's a ripping bloke, you know, and really good investor. We disagree on so much stuff like and we invest totally, not totally differently, but there's a lot of around the fringes, there's a lot of different, you know, different opinions on stuff. That's cool. It's interesting to hear the other side of the argument. It's exciting to someone to push back on you and like we always, you know, have a few beers and, you know, chat about stocks and whatever. It's interesting. It's actually what makes you a good investor and kind of like what Benny and I do every day in our own little kind of way, I suppose at work. But yeah, look, we're stoked to have you as an investor. Obviously, we couldn't sign Bryce off as a sophisticated investor. Do you want to know why? Do you want to know why? Do you want to know why? Do you want to know why? Because you've told me many times that you wouldn't be going anyone that doesn't have a track record. Yeah. I think it's fair. And you've been running this for two years. Yep. So I think like, in my mind, it's like, I need to see, I want to see, I want to see you do it a bit longer. Yeah. And I think the- Not that I don't back you, obviously. The only caveat on that is like I have been doing it for direct for clients for 15 years now, you know, and I've built a business around doing this. So it's not- Show us those numbers. Yeah. Well, it's hard because they're all idiosyncratic to specific clients and not all clients take your advice perfectly all the time. So, you know, but they've obviously, nobody's with me for my amazing personality or good looks. So, you know, like, it's kind of the business speaks for itself, right? So, yeah, I think it's a fair criticism. We can't do anything except market the returns we have and the track, you know, we've only been- Yeah. I can only be as old as I am. You've just got to keep building and if you start underperforming, I'll be getting you in the studio and asking you- Oh, yeah. I'll be getting dragged over the coals. Yeah, your job is every time you come in here from now to give Bryce a bit more FOMO, just that incremental FOMO every time. I'm actually really happy that Bryce is interested because another 100 grand is not going to change my world. But- 100 grand, mate. I'll be doing a bit more. Oh, big dog! Big dog! But it will when I'm going to wind him up that Ren's making money and he's not. That's actually the ultimate. It's the ultimate. No, I'm excited because, you know, like, every time we talk- You're always excited, though. I know, I know. That is true. I'm at my default state. But, like, every time we talk, I always end the conversation with a bunch more tabs open on my computer. Yeah. I think, like, particularly, you know, the stuff you guys do in, like, resources and stuff is just an area that I have no skill in and no understanding. You're from WA. You live and breathe at all. I wouldn't say that. But- You're not from WA now, but you were born. Or you grew up there. Well, Ben's got money of mine this afternoon, so you can go and have a look at that if everyone gets a chance. So he's going specialist now, he thinks he's turning it, put the hat on to us, and he thinks he's a minor. Ben's the biggest risk here. His head might get too big for the door or something. It's going that direction. It's going that direction. Well, look, I think that's all the time we have. Obviously, I've got skin in the game now, so we'll get you back and we'll hear how you go. You'll be able to drag me around. Yeah, yeah, yeah. But we always appreciate you coming in. It's always a really interesting conversation. I think we should say there's- you send an email every Friday that people can sign up to for free. You can go to SenecaFS.com.au/subscribe and you can kind of get our monthly performance daily if you want it and my weekly. Yeah, yeah. And then good research where you share two stocks each month. It's currently full, but you can join the wait list. Join the wait list because I think I'm pretty sure we'll open up some more subscriptions maybe in like six months' time. Yeah. Nice. And then you're obviously running the funds. And if you want to speak to Luke and get advice from Luke, you can go to equitymates.com/advice and we can put you in touch. Plenty of touch points with Luke. Plenty of touch points with Luke. Don't worry. Love that. I'm going to put my portfolios. Yeah, and put my portfolio and we're going to get him back on equitymates, so make sure you subscribe wherever you're watching or listening if you want to hear more of Luke Larative's unfiltered hot takes. Boys, thanks for having me. Thanks. Thanks, Luke. You have been listening to an equitymates media production. In the spirit of reconciliation, equitymates media acknowledges the traditional custodians of country throughout Australia and their connections to land, sea and community. We pay our respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today. This podcast is intended for education and entertainment purposes. Any advice is general advice only and has not taken into account your personal financial circumstances, needs or objectives. Before acting on general advice, you should consider if it is relevant to your needs and read the relevant product disclosure statement and if you're unsure, please speak to a financial professional. The hosts of this podcast and their guests may have positions in the companies mentioned. Equitymates Media operates under an Australian Financial Services Licence 540-697.