Hedge Fund Tips with Tom Hayes - podcast - Episode 329 - February 4, 2026

Welcome to hedge fund tips with Tom Hayes. Tom Hayes, and this is your 329th video cast podcast for the week ending February 4th, 2026, just another boring week in the markets, just kidding. Anyway, we're gonna get right down to data, but as always family first, the girls had an incredible weekend, intense couple of days of water polo with Mimi and Annabelle. They played a total of 12 games in two days, and both girls had some incredible goals and assists. Both Mimi's 14 new team and Annabelle's 12 new team were undefeated this weekend. Mimi shots from outside the six meter, where rockets and Annabelle's speed down the pool, left her wide open for passes and goal opportunities. On top of that, the girls Mimi and Annabelle play with are a fantastic group of athletes and people, by the way. It looks like it's gonna be an incredible season for both teams. So, there's Mimi, there's me with Annabelle, with my vans, by the way, one of my five or six pairs, there's me with Mimi, she's getting tall, five, 10 now. There's Annabelle, and then one goal each, and then we can get down to business here. There's Mimi, boom, placing that rocket, love it. And then Annabelle getting open down the pool. Let's take a look at this one, boom, love it, nice placement. All right, here we go. We're gonna start with Yahoo, because I had the pleasure to talk about PayPal, about an hour after they reported earnings, no pressure, Tom. Here we go, wanna thank Justin Oliver, Brian Sasi, and Brooke DiPomma, who had the quote of this segment, which was Tom, drop the mic. Here we go. Check my OB roundtable has a few thoughts on all of this madness. Tom A's Great Hill Capital Chairman, a matching member alongside Y'all fighting senior reporter Brooke DiPomma. Top coming into the show, I set it up. I wanna talk some pounds here, but let's just start with the breaking news that we just got Josh tomorrow replacing OG CEO, Bob Eiger, the CEO of CEOs, is this bullish for Disney shareholders given how well he's done in the park's business? - Yeah, it is bullish, we own the stock. We were hoping for this because the parks and experiences have the highest return on invested capital of all of their business lines. So this is a guy who's made massive investments, got massive return on that invested capital over time, and is gonna expand that with the cruise business, with the parks, with the reinvestment into innovation in the park. So we like this story. I think that this story was a little tired because they were waiting for the succession announcement. The board read that and they delivered in spades, and I think this is positive for Disney on a go-forward basis. - Yeah, no one is also interesting to Brooke here that the Feliz from right now, Dana Walden is staying in the business, they signed her to a big deal. I encourage everyone to go to SEC.gov, pull up the filing on this Disney news, and you can see how much of a, I would argue, a retention bonus they have given to Dana Walden, and a large annual bonus for Josh Tomorrow. I think it's 27 million stock grant annually. So big numbers here, but Brooke, this is a flair of what Disney Chair James Gorman did at Morgan Stanley. When he left there as CEO, really made sure that they had management continuity at the top. - Brian, I think that this just goes to show not only management continuity, but in addition to that, hopefully hoping here that this is a different story than when Bob Chapack joined the helm a few years ago that ultimately led to CEO Bob Eiger coming back in 2022. There really is high expectations, a high bar set, but also a bit of a different landscape than what Bob had stepped into when he joined the helm, you know, number of years ago. Really, Josh is stepping into, as Tom alluded to, a business that is far different with their cruise line, with consumer business doing well, with the parks business doing well, really a standout in the quarter, but investors have been waiting for this. They have been ultimately thinking that Josh would be named. And so we are seeing the stock under a little bit of pressure this morning down more than 1% as investors sort of digest that this is the case. This is going to be a Disney, the next generation under Josh, but also that Dina did not get the top job, but they're keeping her on. And it just goes to show the importance of what Disney's content and ultimately the brand will look like in a future with AI. - All right, let's keep it room here because I think, Tom, you have a lot to say on PayPal. I will add, I caught up with the incoming CEO of PayPal this morning in Rican Loras. I've covered his entire career in HP going back to 2019. And my take, Tom, is this. I think he's going to lean hard initially on cost cuts, driving better margins because it is going to be hard to turn around that branded checkout experience in an era of a firm, Clarenna, Stripe, and I don't know, 50 other Fintech companies I'm failing to mention right now, 'cause it's still early in the morning. - Yeah, I think look, when you have free cash flow, you have a lot of options. I immediately went to his history. He was at HPQ since 2011. The low price of the stock since he was there was $3 in 2012. The high price was $37 just about a year ago. From the time he became CEO, he was elevated to that position in 2019. The low of the stock was $10. It went up to $37. Here's the big thing, HPQ, when you think about it, you say, wow, that is a boring business with little innovation. And yet, they were able to have a 10-bagger over a decade. How did they do that? Well, they did exactly what PayPal needs, which is they took a boring business that wasn't innovating and they reduced the share count, get this. From two billion shares outstanding in 2012 to 953 million shares today. So basically, if you had a slice of the pie in 2012, your pie got twice as big, more than twice as big, without putting one more dollar of cash. They continue to buy cash. They continue to generate cash. They continue to buy in the stock. Where now, how does that compare to PayPal? Well, PayPal is generating $6 billion of free cash flow. You would have thought today, based on the response this morning, that they generated negative free cash flow and sales were down 20%. And that's simply not the case. Total payment volume was up 9%. Revenues were up 4%. Operating margins were up 19 basis points. EPS was up 38%. And they guided, not only are we going to generate $6 billion of free cash flow again in 2026, we're going to buy in another $6 billion in stock, which basically means at this morning's valuation, they're going to buy in 15% of the company over the next 12 months and you can't give the stock away. So that'll be the case. People will be puking in the whole this morning and guess who will be buying it in the next few days after the blackout period ends. The weak sisters will be selling. PayPal will be buying and the story will go on. And Enrique Lawrence, I think, is the right person at the right time. I do think, look, Alex Chris did do a lot of partnerships. He did create a lot of things. He was trying. I think it's going to be very much like Gelsinger. Gelsinger did a lot of the work to get the fabs going. The board got tired of waiting. They brought in Lippu Tan, which was a good decision. Lippu Tan walked across the goal line from the 10 yard line and spiked the football, even though Gelsinger laid a lot of the foundation. I think it's going to be similar for Enrique Lawrence. I think Alex Chris did lay a lot of the foundation. He did try to do a lot of positive things. The board got tired and Enrique Lawrence is going to spiked the football. And when you have 14 billion of cash on the balance sheet, you got $6 billion of free cash flow. You got a lot of options. And even if you can't innovate, you can just buy in the whole company over the next few years. And the stock will go up on an EPS basis on that basis alone. And God forbid, he actually innovates or some of these initiatives actually work, which, on the early signs, they're OK. The guidance is not ideal. The market hates the guidance. The market hates the uncertainty of a new CEO. But math is still math. And we continue. We own the stock. I can tell you we're not going to be a seller. I can't tell you what we are going to be in the next few days. But look, it's a detour. It's not ideal. And I think you remember this a little bit Brian, you've known me for a while. We went through this exact same thing in Alibaba. It was a huge free cash flow generated. It was the most hated sector a couple of years ago. And we made a fortune on it. So yeah, you got to deal with the short-term volatility. But if they're generating free cash flow and they're buying in shares, and God forbid, they kept a little innovation and a little bit of break, you got real upside here. So not ideal, but math is still math. And we remain sanguine. Broke top data analysis by Tom. That's where we have this guy off, because he shows the power. He's not mad at him. That was what he was like. And you got to burden yourself with the facts. And that's what we're trying to do this morning. Leave the emotion out of it. The short-term noise is not ideal. But the long-term prospects and the optionality is something that we're confident in it. We were a little surprised by Enrique Lorre. And then we saw their game plan at HPQ, which you want to talk about lack of innovation. And they still made it work. Because they put that free cash flow to good work and buying in stock. Broke your big hand that I was on PayPal. And I think the innovation is also going to kick in on top of it. Broke use Venmo, right? Yeah. And well, I was just going to say, Brian, I know that we were chatting about this earlier this morning. But really, the acquisition or rather the creation, thereof of Venmo, was really so significant for PayPal. But the lack of awareness on Main Street, that PayPal owns Venmo, that it is all one company, definitely something that will be a huge opportunity for Enrique to capitalize on. All right, we're going to short here. 30 seconds, 30 seconds. Tom, are you a buyer, seller, and palantir? Giant quarter, I still think the stock is misunderstood. Because nobody's reading the financial statements. Misunderstood it, what way? Well, let me-- let me say that number one. Take a side, Tom. They just say, palantir is hyped. There's no fundamentals behind it. There's companies crushing it. Look, the fundamentals are the fundamentals. The revenues are up 70% year on year. The adjusted EPS is up 79%. They're guiding for 7.2 billion revenues in 2026, which will be up 61%. So all that is great news. But prices, what you pay, values, what you get. So if all that stuff happens, you're still paying 100 times free cash flow. You're still paying 158 times forward multiple. And you can say, OK, this time is different. It's going to continue to grow. And therefore, the super high multiple is justified. And I would say, maybe that's true. But if they miss by one or 2%, the stock doesn't go down 10%. It goes down-- like Silver went down on Friday, chasing shiny objects. Look, I hope it absolutely works for them. But at these valuations, you have very little margin of safety. It was a great company like this about 25 years ago. The name was called Amazon.com in 2000. And they promised all these crazy things. We're going to be the store of everything. We're going to deliver to your house. We're going to get into the computer business, blah, blah, blah. They did all of that and more beyond what they promised in 2000. The problem was, in the interim, you had this little 90% drawdown because you were already paying for 30 years of great execution all up front in 2000. And it corrected. They delivered everything they said they were going to do. And 15 years later, the stock was at new all-time highs. So you could have a situation like that. Or you could have a tree that grows to the sky. And it continues to deliver. And it continues to command the high valuation. And that's something you have at these type of multiples, you've got to know that you're making that bet. And if you're making that bet, just know what you're in and why you're doing it. And it's a momentum trade, not a mathematical trade. All right, we're going to have to leave it there, friends. Awesome analysis on a big morning. Appreciate it. Thanks for hopping on the OB roundtable. And we're back. So that gives you some color for those of you wondering how I feel about PayPal these days. Then I had the pleasure last week, Friday, to join the great Stuart Varney, want to thank Maggie Edwards. We're going to listen in here. Tom Hayes joins me now. Money is flowing out of tech. So you tell me, where is it going? And how do you play that trend? Well, Stuart, money goes where it's treated best. That's the old saying. Money is moving from tech to cyclicals. We've been talking to your audience about that for months. And the reason it's moving from tech to cyclicals is because earnings growth for Mag 7 is decelerating from mid 30s, percent last year to down to 15% by the third quarter of this year. The rest of the market, the unnamed 493, which had negative earnings growth last year, is now going to have mid teens earnings growth by the third quarter of this year. So it's going to materials. It's going to industrials. It's going to financials. It's going to energy and it's going to health care. And that's where you want to start to allocate. And maybe lighten up and take a little bit of profits on Mag 7 if you didn't already. All right. Is Kevin Wash as Fedger, good or bad for the market? I think the market's telling you what you need to know today, Stewart. He's perceived to be hawkish. His whole history has been hawkish. And it's interesting when President Trump chose a drone powell and drone powell did not do the things that President Trump thought were good for the stock market. He blamed minutian. He said minutian gave me this guy. But with Kevin Wash, everyone knows he's a hawk. And he was chosen. So if he acts hawkish, don't be surprised. So the stock market sound today, the bond market sound today, because historically, he doesn't like quantitative easing, which they're doing right now, 20 to 40 billion dollars a bonds per month. And gold is down because he's hawkish. So you basically have very pro economic policies, which is one foot on the gas. And now you have one foot on the break with a hawkish history. Will he follow through on his recent change of tune of being more dubbish and cutting more because he believes AI is disinflationary? Time will tell. I thought he was in favor of lower interest rates. And now he's being called a hawk who doesn't want a lower interest rate. I can't work this out. Yeah, he has zero evidence in his historical pattern of being dubbish until he came to the interview process of becoming Fed share under President Trump. So if he will follow through on what he has represented in the last six months, which is inconsistent with what he has represented for the last 20 years, will be OK. If he follows through with his history of being hawkish, maybe the market's going to be a little bit unsettled in the near term. All right, Tom Hayes. We'll be following, obviously. We'll see you again soon. Thank you, Tom. Still in. And we're back. Quote of the week, this is the understatement of the year, the most important organ in the body as far as the stock market is concerned, is the guts, not the head. Anyone can acquire the know-how for analyzing stocks. That's from Peter Lynch. As they always say about turnaround, Tom, he's got ice in his veins and no fomo gene. So that's that. I want to thank everyone for their continued support and pictures. For those of you who can't become clients just yet, I want to thank you for your support of sharing the podcast. That's all we ask. Once a week, tell one person you care about that could benefit from this about the podcast. An easy way to do that is where the hat, the shirts, the hoodies, and send in your pictures so people can see you in the community. Now the list is getting long of all these incredible, amazing supporters that make us want to do this every single week. This quote, I was texting with a close friend. And he's talking about PayPal. People were asking about, I get all these messages. There was some comment. Oh, Tom's been right about 30, 40 stocks in a row. I guess his luck has run out. And I'm like, number one, it's one position that is our largest position, by the way, was close to 12. Now it's over 12 in the last 48 hours. And I hope it's going to get even more-- we're finding more space for it. But yeah, look, no one wants to see that. But I got to be honest with you. With the amount of cash they're generating and they're balance sheets, I'm really-- I'm not worried about it. I'm not worried about it because when you have free cash flow, you have a lot of outs. And we're going to go through the parallels of Baba and the parallels of Intel. But I want to get back to a lesson we haven't covered in a while, which is you have to have a position size limit. The highest we ever got in the history of the firm was Alibaba at 20%, which was a white knuckler. And it's interesting yesterday reminded me of that day that Baba shot below 60. And we were just buying a ton of it. And brought our bases down to 81, and then got the options and the 7x on the spreads and everything else. So we're now over 12% with Baba. It is our largest. The general filter is-- and we've covered this on the podcast-- quote, there can always be something that you don't know that you don't know. Never let them take you out on a stretcher, which means, quote, this is a filter we ask ourselves. If any one of my 9, 10, 12 positions were to go to 0, would the remaining positions and the options be enough to compensate and still outperform my benchmark neta fees? If the answer is no, we don't initiate the position. So we're very comfortable with PayPal. We leaned into that comfort in the last 48 hours. And the detour hurts our IRR because we lose time. We're going to lose a couple quarters. It is what it is. So we'll see if we can make it up on price by bringing our bases down a bit. And that's exactly what we did with Baba in Spades. It's what we did with Intel in Spades and so many others. VF Corp, which is now over $20 if you can believe it and just getting started. So that's that. And then the other context is it's like, you know, we had a pretty awesome January. So not an ideal way to start February, but nice to go in with the cushion. But if you look across the board, everything is kick and ass. I mean, advanced auto parts is rising from the dead and starting to recover here. Boeing has been a strong performer. Now consolidating the gains, it'll take its next leg higher. Baba has been, well, it's just a monster. Baxter is coming off the floor match. OK, you got to deal with some of these that weigh you down. Biden's been a great winner. Crown castle is waiting for rates here. Putting in a base, it's been kind of just collecting the dividend waiting for it to go. But now it's a pure play and we love that story. Cooper Standard is waiting for some refinanced catalyst and/or earnings from a good Q4. We'll see how that plays out for the next leg higher. That's been a monster for us. I mean, and by the way, as geniuses we were, we started building it at $5 a share in May of 2022. It immediately went to $3.50, which we bought more before going to 30 in chains. So you got to be patient with these. Comstock resources has been a monster. So people are like, oh, I hope Tom's OK. I'll live, guys. We're doing just fine. Don't worry about it. And actually, it was shocking yesterday with such a huge hit in our largest position. The total portfolio at the end of the day was down 2.2%, which was like, wow, I expected it to be like 4%, it wasn't. And it's a lot more relaxing when you go in with a nice early year cushion because of the rotation into the un-magnificent 493, which we've been telling you guys about forever. Diageo is coming off the mat now, straight up from 85 to 97 in the last few days. Disney finally announced the new CEO. They're going to invest in the highest return on invested capital. This has been, you know, came off the mat, obviously, from 80 to 120. But we needed the catalyst in the new CEO now to take it to the next level. So we're excited about that. Estee Lauder, our little sleeper that no one wanted to touch because everyone hated China is rocking. It's up 140% off its lows. I mean, you can't make this stuff up and no one's even paying attention. We love that one. Estee's kind of hanging out there. We got to get, you know, understand this new CEO. But it's a huge free cash flow generator. We just want to get comfortable with the new CEO. I will say my 11-year-old came up to me and said, I want to resell stuff. I was like, okay, I'll finance your inventory and then you're going to pay me back. Where are you going to resell it? And she's like, this platform called D-Pop. I'm like D-Pop. I was like, we own part of that. Through our holdings in Estee, she's like, really? Oh my God, everyone's on D-Pop. So we'll see. So that's that generated, generating a huge cat. Generac is moving back up, got down to below 100. And now it's back over 176. And we haven't even seen the housing recovery or the magnitude of the data center backup. They've got a half a billion backlog on data center generators. Goose. We're continuing here. This is a play on China, just like Estee Louder. So we think this is going to continue to work. Record revenues, record cash flow. Can't give it away. We love that. Obviously, up big off the lows. But we're in it for a lot more than that. GXO has been doing great since the CEO, Patrick Keller, came on our podcast. That's then creeps up, no one's paying attention. We're doing a OK, ladies and gentlemen. Don't you worry about luck or any of those silly things. We don't rely on luck. We rely on math, OK? Hormel foods coming back to life, paying us a huge dividend while we wait, been increasing the dividend every year for 65 years with their protein products, which are perfect for a GLP one world. Until we discussed last week, it went super fast. We took off half in the before earnings. We're going to ride the other half. We believe in lip-boot tan. But it was just too much money and too short a period of time. So we're excited about that one. National oil will varco. Again, no one paying attention to. Now knocking on the door to $20 up some 70% now from 13. Pfizer is even coming off the mat with Borla, saying he's going to cure cancer with their $23 billion CGen bet. We love it, cure away. We're going to make a ton of money off of that one. PayPal has been the red-headed stepchild, forcing us to buy more, but PayPal will be OK. We're going to talk about that today. Definitely not a fun morning, but we got through it. And it's not what happens. It's how you respond to what happens. And we know exactly what to do. We've been to this movie before, and we know how it ends. And the name of the game is when they have free cash flow, there are a lot of outs for all of my poker players there. Papa John's putting in its base here and scaring people out. And when it goes, it'll go a QXO hangs out in the '20s up from 11. So that one's been great, but it's going to have to consolidate the gains and do more deals for the next left. Even Stanley Black and Decker, before the housing recovery kicks in the full year as we get rates down, the Worsh is talking. He wants to shrink the balance sheet, which is hawkish, but as an offset to be able to aggressively cut rates. So maybe there's a way they can work this out between the Fed and the Treasury. Bessent will buy in on the long end, an issue on the short end. Worsh will be lowering rates and trying to offset the inflationary impulse by stopping up liquidity selling bonds through the end of quantitative easing. So we'll see how that goes. But nice to see Stanley coming back VF Corp. What a beast. 13 back over 20 on its way to 50. Growth bracket is kicking. But super excited to see that. We have a huge amount of operating leverage in that with our options. So that's really been helping the P&L this week. And what a very nice day today. So we're excited to see that. And then what else? Dense splice, Serona. My Serona still up big from 1137 hasn't even begun. We were hoping it would come back down so we could get even more shares. But it's become a pretty big position up in our top few, top few, for sure. So hopefully we can get a few more shares, but we like it. So that's that. And that's why you own. Yes, we're concentrated because the math says, if you look at all the academic studies, it's not impossible. But the odds are against you to outperform with more than 15 positions in a portfolio, which is why we run concentrated 8, 10, 12 stocks. And because we're buying them with such a margin of safety, and we're doing the turnaround Tom framework, which I guess is much different than the value framework, because the results are nowhere in the same ballpark. When one goes a little sideways, we don't care. And that's the thing, I think that where most people get hurt, it's like Peter Lynch says, people will spend two weeks planning their family vacation to save a couple hundred bucks. And then they hear a stock tip on a bus and they put their whole life savings in it. And that's reckless is what that is. So you need to have a portfolio, which we've covered since day one. You can be concentrated 8, 10, 12 positions, but you have to do the work and you have to underwrite it the way we underwrite it. Private equity in public markets. If we wouldn't buy the entire company with 100% of our net worth, we won't buy one share. And nothing has changed with that thesis, except in the case of PayPal, we would 100% buy the company with that framework, because there's so many outs that we could do. We could sell off pieces. We could just buy in half the outstanding float and double our position. So when you have that level of outs, eventually good things happen. What we lost here was a couple quarters and we're going to gain it back by bringing our basis down onto the next. Oh, we got to do our market data. So the bull bear indicator got a little over bought from Bank of America. So they flushed out all the software people, all the fears about Claude disintermediating off all the software people, which is, which is why we generally avoid technology, unless it's out of huge margin of safety like Google was and Amazon was in 2022, fall of 2022. Or Intel was in September of 2024 or Boba was three years ago. Of course, we've gotten technology has been PayPal and well, you know, that's what it is. But we tend to avoid software because you can't discern the moat as well. And that's what people are worried about with PayPal. But we're quite comfortable that with 438 million users and 6 billion of free cash flow. And Enrique Lures, he'll go in and chop 10,000 heads in his first week. You know, I'm not proponent. It's not never nice to see people lose their jobs, but it's been a bloated bureaucracy for too long. They need to just focus on the core business, sell off the non core, buy in the stock and make it a cash generating machine. Even more so than it is right now. This is very interesting, ladies and gentlemen, pay close attention to this chart percentage of the US stock market trading over 10 times price to sales. You have not this seen anything close to this since 2000. And that was the time to be getting out of the tech area and getting into value, which is what Buffett was doing when they put him on the cover of Forbes and said has Buffett lost his touch in late 1999, because he was buying banks and staples like PNG and Coca-Cola and then the next three years while the NASDAQ crashed 80%. He was up huge and had among his best few years ever. I don't think we're going to get a NASDAQ crash, but I do think as we've seen in the last year, plus a lot of the high flyers air has been coming out of the balloon. And we will continue to see that. Net profit margins are back to all time highs, which is great to see. That's the 493 ladies and gentlemen, every 1% labor cost savings translates to a 2% EPS boost for the S&P, but a 6% EPS boost for the Russell 2000 AKA small caps. So who are going to be the biggest AI beneficiaries, productivity beneficiaries, when labor cost comes down 1%, well, number one is small caps, number two is healthcare, number three is staples. What have we been pounding the table on because not because we're trying to predict the market, but because it's the type of stocks that are falling into our framework that are showing the greatest discount relative to intrinsic value is our portfolio. We've been small caps, healthcare, staples and discretionary like the Papa Johns, like the VF Corp, like the goose, like the staples, like the hormone, like the backster, like the health care, like the dense by my serona, and like the small caps, the goose, the Cooper standard, the dense by et cetera, slumer, let's just get step back and put things in perspective as we like to do. Looking at the long term S&P 500 goes through periods of 17 years of sideways consolidation 17 years of bull 17 years of sideways consolidation until it breaks out 17 years of bulls so we're about since it broke out in 2015, we're about 12 or so years in. What is this 17 when it broke out so they're projecting that the bull market continues through 2034, which is consistent with the millennials age and housing and family formation, which through all of these bull markets you've always seen a large percentage of the population in their 30s starting housing formation, family formation this time will be no different. Wait till we get that 18% of GDP humming with housing with lower rates with the different things that the administration's doing to rock and roll the implication for the S&P on the basis of their expectation would be 14,000 on the S&P were at 7,000 now so another double between now in 2032, which is actually not that big it implies 10% a year. Rule of excuse me, let's see, we're at 2006, yeah, about about 10% a year. 3 to 4 year cycles, so here S&P's knocking on the wall of this resistance, we'll see if it can break through sentiment got a little bit high, so that's come down microcaps just breaking out small caps just breaking out after a long time. Europe, Australia, Israel and the Far East breaking out emerging markets breaking out after basically two decades of sideways consolidation, this is just beginning, Baba, by you and more. 10 year yield went back up to this resistance, this is going to work its way back down. Dollar breaking through that major up trend, probably have a counter trend move higher here in the short term to the bottom of this before resuming its normal cyclical downtrend, which should last for the next few years, that'll help exporters that will help companies that get a large part of their revenues abroad, like GXO, VF Corp, dense supply, serona, there's a method to the madness of why we own these positions ladies and gentlemen pay attention, Canadian dollar all my Canadian hockey friends now getting the benefit of a stronger loony early days you guys are going to be smiling so wide. You can eat two hockey puck sideways as you see the loony go up and you come to the states for vacation and you feel wealthy, you will be wealthy because you're following hedge fund tips with Tom Hayes and being conservative buying great businesses when they're out of favor we try to buy the highest quality assets in the most dislocated sectors, whether it was. Energy Exxon during covid banks Wells Fargo during covid at 25 tech in 2022 in the fall Google and alphabet office buildings in 2023 when you couldn't give them away with for not oh Boba with China when it was quote unquote uninvestable we're very predictable we do the same thing over and over and over we stay in our lane we don't deviate. Doubles and triples rinse and repeats over and over the compounding machine which we covered last week so if you missed last week you should probably go back and listen if you're only going to ever listen to one podcast with Tom Hayes that was the most important one I will ever do so listen in I think it's about nine minutes in. And get the road map okay so silver and gold they took them out to the wood shed last week the shiny object chasers so now you'll have a counter trend move this will work lower over time you're like how can that be the dollar is going to keep going lower Tom. Just hang tight get your popcorn and enjoy the show WTI monthly this took a spike up we think this is going to work higher over the next year. We have our national oil well varco can't believe that's already all what up to 20. And you have your comm stock resources in the 20 I mean look these were you guys were here $12 $13 on varco eight nine $10 on comm stock resources these are not predicting the future who's going to cure cancer who's going to win the AI race. These are just buying great business good businesses at great prices when they're out of favor top China official valves to boost consumption to overhaul the economy. Oh we got we got some more data sorry about that biggest inflow into energy since October 2023 opinion follows trend next global rate cuts to outpace heights in 2026. Long China end of deflation plus political change so everyone's getting bullish on China after a triple off the lows in Baba and they're right but they're late but this will make money record outflow from China likely national team related. Positive January good thing for 2026 is from Carson he's saying because we had a good January January effect on average you're up 16% I don't think we're going to be up that much this year on the passive indexes I think stock pickers are going to make a fortune this year. And we're going to be a well ahead of the pack there. Just like last year and the year before and the year before S&P index monthly volatility since 1970 volatility and spikes spikes leading into midterm elections tend to be January which we had February comes down a little bit then it picks up in June July August September and October is the biggest volatility. Contribution to the S&P 500 performance has broadened we've been talking about that as a core theme for a year and a half I SM manufacturing first reading above 50 after 50 months which favors what ladies and gentlemen. Cyclicals Unmagnificent 493 real world economy mainstream getting rich instead of just Wall Street I love what's going to happen this year with best in talking about 5% real GDP 7% nominal that's going to hit mainstream what is that going to do for consumer confidence okay. Remember consumer confidence because it has a very important bearing on what happens to PayPal to Papa John's to VF Corp there's a reason we're in these things now when no one wants them because it's going to be short order when everyone wants them and then we will help them out big five US dollar bear markets since 1967. This is the exact same play okay early 80s early 2000s early mid 2020s. Developed markets manufacturing PMI turning up what do you want to be in during these periods unmagnificent 493 dollar index breaking down. Finder margin debt month on month where do you think all this margin debt is you think they're trading Stanley Black and Decker on margin you think there's a meme trade on PayPal do you think there's. A bunch of people levered long or mail no those are not going to be the stocks that get hurt the stocks that are getting taken out to the wood shed are the software stocks that they're levered momo the ones trading at 10 times sales and losing money or 100 times sales and barely making money. These are the ones that are going to get monkey hammered and you don't want to have material exposure there merging markets price relative to the US major regime change here of light of the likes which we haven't seen since 2001 if you don't have exposure you're going to miss out. Consensus cap expending estimates for AI hyperscalers continue to go up which means their margins go down the free cash flow goes down and they become less attractive as an investment alternative relative to the beautiful companies we own vans results improving. Turn around is in place the prices starting to reflect it early days and stocks gone up quite a bit since when since back in Darrell who we nicknamed on the call gross back and came on the call and explained his plan and it's been up ever since and early days so kudos to him kudos to the CEO of the F corp for coming on the CEO of Cooper standard who came on when the stock was 10 bucks. Now it's 30 kudos to Patrick Keller for coming on he's been straight up since he came on and you know what I asked Alex Chris three times to come on the podcast he said no he got shit canned and he deserved it so on to the next if I ask you to come on the podcast come on the podcast. Joking not joking inside or selling accelerate so that's what we saw in tech in in 2021 so just pay attention there. Moving along private equity versus public equity met a free cash flow and cap ex their free cash flow is declined from 54 billion to 2 billion and their cap ex has increased from 37 billion to 135 billion. So many other companies you see this in the thing would be down 70 80% the market's giving them the benefit of the doubt on a hope of return on invested capital the problem is you're not going to see that return on invested capital for another year and a half so these stocks are going to get hit short term we will be there to buy them but it's not yet. People think I hate tech I hate expensive tech I love cheap tech so value of select companies data center leases not yet started so you see excess here Hong Kong records busiest January for new listings while the US is asleep at the wheel Hong Kong is booming again global new highs and all world country index that's interesting chart. Global equity risk love is in euphoria so these high flyers are going to get hit. High yield credit spreads are record lows this is a good time for Cooper standard to get their refinancing done and announce it so we can get their next leg higher in the stock so let's. Let's see how that works out in coming quarters this is what Ryan Dietrichs talking about if January's off your average return is 16.9 but he should probably adjust it for midterm election years because that that would probably get you mid single digits number which is what we're looking for for passive investors and. A lot of opportunity for us who are picking stock traders and most bearish the dollar on record is just why you're going to get a counter trend bounce. People are going to say that's over consumer staples prime book haven't been this short since 2002 and that was a time to be a buyer and make money. Same with health care versus the S&P 500 and European gas storage is dropped to one of its lowest levels in years we will help you out thank you very much. Small cap 600 percentage of companies with positive earning surprises near a record we love that value outperform growth by six percentage points in January which is why we were smiling so wide we could eat a banana sideways coming into February until someone put something other than a banana in our mouth yesterday morning but we spit it out we're dealing with it and and we're excited about it actually now. Month on month surge in ISM that favors 493 consumer staples seasonality kicking in mid February we love that seeing it in you know it's funny I saw these things up on the screen today pretty pretty big like diagio has been creeping up up like 10% in the last few weeks. That's a staple I'm like did they report today no backsters up big did they report today no so all these or mail up big did they report today no I'm like why are these up so huge well it's it's because that's what should be up and that's why that why they earned a spot in our portfolio based on that framework of what's ready to go. Value stocks outperform growth by the most since 2022 hallelujah for all of you worried about my one position we're going to be fine alright evaluation support for software names is a long way away there's got to be a pony in that pile we're not going to be the ones that get it because we just can't understand how the moat doesn't get disintermediated. But I'm sure some of those are over shot maybe we'll find a easy softball but we kind of stay away. Microsoft the founding member of the lag 7 it was so much euphoria around Microsoft the last couple years and came back down to earth. Price sales ratio of the tech sector is now in aggregate 10 time 10 time sales levels higher than the 2000 so you could say this time is different I'll take the other side. Population growth and that's that on the data top China official vows to boost consumption to overall economy told taker is baba pay people bank China's key bank loan rate falls to record low bolstering growth amen hallelujah Alibaba AI chip push hits 100,000 mark beating local rival camera con how you doing how AI is rewiring consumer commerce in China Alibaba. Hedge fund investors renew China appetite as us interest Wayne's Alibaba by you. PayPal bulls set to win big as spooked investors quote puke in the hole says analyst well they were referring to me on Yahoo finance dot com so you can read that article. HP in recalores reveals why he is leaving to be the CEO of PayPal home builders working on massive program to build up one million dollars one million Trump homes to boost affordability. The housing boom is just getting started we benefit from genera we benefit from QXO we benefit from Stanley black and Decker we have the right exposure at the right time to benefit from this over the next 36 months housing market is swinging towards buyers affordability is coming in Intel CEO says company will make GPUs popularized by Nvidia this is our free call option with the houses money and we do believe he's going to deliver. And we do believe he's going to deliver and we do believe we're going to make a lot more money over the coming years. Disney's future now depends on ultimate theme park insider as I said on Yahoo the highest return on invested capital business he ran it Josh is going to be great. Disney supercharged at park the booming division it still has room to run we agree Pfizer says obesity injection shows promise as monthly treatment in mid stage trial. Fantastic will save the world from cancer inside Pfizer CEO's 23 billion dollars post covid bet on oncology so they took all the free money from covid put it into cancer I think they're absolutely right they will win on that front and we will. Vans is starting to deliver on turn around strategy for for vans BF corp CEO growth bracket is doing it the biggest indicator he said when he joined will be when the DTC turns and it did this quarter so the market is figuring that out and trying to get ahead of it Papa john's hopes this nostalgia inducing pizza brings people back that is the pan pizza I haven't tried that yet I want to try this protein pizza that they're. Coming out with and their the big one that they've been promoting is really delicious. It's like a supersized pizza it's like grandma or grandpa I don't know let me see here all my clients got Papa john's gift cards for Christmas like last year they got vans. Where is that one that was coming along. I don't know I'm not going to select the store all right let's keep going move on Toyota plans 30% boost to 2026 hybrid vehicle output by 2028. And we love that Cooper standard benefiting from the hybrids higher cost per vehicle than I see ease us factory activity post fastest gains since 2022 that benefits our entire portfolio. Let's see here that is well in lawmakers approved sweeping overhaul of oil sector national oil well varco will benefit largest on short offshore drilling rigs sales service maintenance etc wall streets rotation into value has a dot com warning to it. Value stocks outperform growth by the most since 2022 pay attention when that happens get out of the shiny objects Trump picks Kevin Worsh as Fed share let's hope it's not a Powell part to where he says one thing to get the job and then does whatever the hell he wants and everyone else bears the consequence once the hottest bet on Wall Street private credit has started to crack. Mark to market is mark to make believe all of you buying things because you don't want the quote unquote volatility of short term price movements in the public markets when they finally take a mark it's not down 10 or 20% it's down a hundred percent and that is what we will see more of in private equity and private credit in the coming years. Facts over feeling stock market and sentiment results. So I referenced how the CEO change was like the change at Intel and how the price flush yesterday was like the price flush in October 2022 in Baba when the stock flush below 60 dollars and we were. Just white knuckle buying all day and and then sure enough that was the final capitulation as a matter of fact daily volume yesterday was like 10 to 1 normal times in any other scenario that is a. Capitulation day let's just take a look at what it was. And what it is today so it's two times normal volume yesterday I think this is like 150 million shares trade it was like 10 times normal volume that is panic capitulation and I think I think the worst is probably behind us wouldn't mind to get a few with a three handle on it but I don't I don't know that that's going to be possible they tried to get it there this morning and man someone came in and stepped in like an elephant and just start buying every share between $4 and two cents and $4 and 10. It was slamming into them so I think PayPal may already be in the market based on the way that they defended 40 this morning but there's no there's no way to really tell but there was a lot of stock for sale at the open lot of weekends and they were it was just stopped up like a mop. So that's that where were we. So just remember the free cash flow was the same here as it was here as it was here pretty much as it is here at a hundred you know when it got up to 181 90 on its way to 200 and beyond. This flush day feels very much like that flush day yesterday we've got everyone out of the stock at the exact wrong time accompanied with all the losers on the sell side with their down grades and they'll be upgrading at 120 dollars in a couple of years. The market doesn't like surprises and we certainly got one with PayPal's cute for earnings report after a brief two and a half year tenure the board decided to part ways with CEO Alex Chris following what it viewed as an underwhelming pace of change and execution. We thought Chris who spent 19 years at Intuit overseeing the small business division responsible for 50% of revenue and helping turn the stock into a 38 bagger would have had a longer leash to turn things around at PayPal to us this looks like nothing more than a board that was desperate to keep their jobs after getting spooked by the short term stock price fluctuations. We think Chris did much of the necessary heavy lifting for the turnaround during his tenure raining and cost firing on profitable enterprise customers and playing offense by gaining ground on innovation some initiatives included fast lane PayPal world successfully monetizing Venmo pushing further into omnichannel and partnerships on the AI front with heavy hitters like Google and open AI. One of the biggest undertakings of his tenure was the overhaul of the legacy brand to check out as it turned out untangling more than a decade of legacy integrations prove far more complex and rolled out at a much slower pace than planned in many ways this situation reminds us of the Intel story with former CEO Pat Gelsinger after serving as CEO for nearly four years and laying the groundwork for the turnaround with the five nodes in four years plan he was essentially forced out by the board's impatience after bringing the company to what we saw as the 10 yard line. That paved the way for current CEO lip botan to step in as the hero spike the football in the end zone and claim most of the credit we suspect a similar setup unfolding at PayPal with the appointment of new CEO and reek a lures. And just like lip botan was at Intel before taking the reins lures to spent the last five years on the PayPal board holding the chairman position for the past 18 months he's no long no stranger to pay pal's business which gives us confidence. That the learning curve will be short and helps avoid the playbook reset that often follows CEO changes they gave you your negative guidance yesterday so he doesn't have to kitchen sink anything is first quarter so maybe we only lose one quarter instead of two on top of that he brings a proven track record from his over three decades at. He'll a packer where he spent the past six years is CEO with the stock climbing from a trough levels of $10 in 2019 to peaks of $37 during his tenure like PayPal today rather than reinventing the world what wheel he was it was this was a boring business that delivered value by aggressively reducing share count buying back nearly half the shares outstanding over the past 10 years here is Enrique lures playbook of buying. In 37.5% shares outstanding since he became CEO in 2019 you can see that 1.52 billion shares when he took the helm and they took it down to 953 million shares so. He will a factor had a much bigger problem than PayPal their revenues were actually declining their earnings were declining and he was still able to create a trough to peak triple plus by buying in shares and cutting costs I mean this guy's a killer. Alex Chris was a little bit of I don't want to say dillitat but you know he was kind of like one of these corporate guys that had never you know developed real grit and you know. Anyway this lory is a killer he'll come in the first quarter and probably fire 10,000 people okay it's not good but that's what he's going to do and then he's going to take the cash and he's going to buy shares like there's like it's nobody's business and then you'll have a 50 $60 stock and then a lot of the things that Alex Chris did do well with all the partnerships and all the soft types that he has. So that is we'll start to kick in and we'll actually start to see some growth in some areas like Venmo growing 20% by now pay later growing 20% and they'll get branded stabilized and maybe they'll sell brain tree maybe they'll spin some stuff but they're going to unlock the value and we're going to make money off of this and and I think they kind of had to do it would be nice to give them another couple of quarters but it was what it was so. I see sweet change came as a bit of surprise we know way expected to derail the pay pal turn around if there's one thing we'd like to see lawyers do is step into the open market and put some real skin in the game personally by buying stock taking a page from lip botan's playbook and something Alex Chris never did moving on which you know it kind of just tells you like Alex Chris was. Sound death you know you should have jumped on the podcast he should have bought stock in the open market but it just tells you he was just a corporate cog in the wheel at into it and he didn't understand the market game and the market game would have been at 60 bucks or 58 bucks go in by a couple million dollars a stock and then deliver and double your money with your partners that's the way you do it but he didn't do that so you know he's out. Moving on from the CEO change to what so he'll be on the board of like all these little five dollar venture startups for the next five years and find his way and then someone will make them a middle manager at a big company again. Moving on from the CEO change to what really drives returns fundamentals based on the markets reaction to the print you would think pay pal recorded collapsing sales negative free cash flow and was getting taken out on a stretcher this is simply not the case. Total payment volume increased 9% to 475 billion ending the year up 7% at 1.79 trillion net revenues trillion ladies and gentlemen 1.8 trillion trillion trillion total payment volume net revenues increased 4% to 8.7 billion ending the year up 4% at 33.2 billion transaction margin dollars increased 3% to 4 billion ending the year up 6% at 15.5 billion adjusted dps grew 3% to 1.23 1.23 cents finishing the year up 14% at 5.31 cents adjusted free cash flow came in okay at 2.1 billion for the quarter and 6.4 billion for the full year. So ladies and gentlemen here's a tough math question if Lori buys in 50% of the stock. Well doesn't even have to be but if he buys in half the stock over the next six years because he's going to buy in 15% of the company already told you they're going to do 6 billion of free cash flow this year they're going to buy 6 billion so at the current valuation that's 15% of the company. So assuming the stock doesn't go up too much and they buy another 10 to 15% of the company next year another 10 to 15% of the company the year after another 10% 50 company thereafter so in 4 years they bought in half of the shares. And the business is as big of a bag of you know what as the market thinks it is right now okay you're going to double your earnings per share okay so if you're telling me with no new money out of your pocket. So if you're telling me that the business can earn 10 dollars and 60 cents 5 years from now and still trade at 50 or 60 dollars which would be 5 to 6 times earnings I have a bridge to sell you okay so God forbid they actually grow with GDP and we're going to talk about that and consumer sentiment turns around and the game gets back on and actually things start growing and there's no supply of stock. Oh well that's what happens when Intel goes from $18 to $55 in a couple of months that's what happens when Boba goes from $70 to $190 in a handful of months that's what happens when Vornado goes from $13 to $42 in 8 months that's what happens when Albumaro goes from $58 to $164 and we sell it in after 10 months and then it goes on to $190. If you can't take a joke okay so I think it's back down but I don't look at it after I sell it but so that's the story adjusted free cash flow came in at 2.1 billion for the quarter and 6.4 billion dollars for the full year which is now a 15% free cash flow yield and all these morons on Twitter are saying are they going out of business because they can't do math go back to the first grade and start with basic arithmetic and you'll know everything you need to know. Everything you need to know to invest in great companies or good companies at great prices let's not call it a great company it's a good company at a great price great companies rarely come on sale to the margin of safety that we want to buy it to make doubles and triples in a reasonable amount of time. The market clearly hated the 2026 guidance which admittedly looks ugly it's called kitchen sink and may very well prove sandbagged the weakness is largely tied to branded check out which represents 30% of total payment volume but contributes an outsized 50% of profit dollars and decelerated to 1% growth from 5% q on q unfortunately weakness in the core button overshadowed the many positives that are getting almost no intention. Venmo's 5th straight quarter of double digit growth to 1.7 billion in annual revenues by now pay later growing at 23% year on year to more than 40 billion in total payment volume and brain tree returning to double digit growth after lapping the firing of unprofitable customers. So what's brain treat you know people are like I never use PayPal I have Apple wallet and all this bullshit yeah okay did you take an Uber today or yesterday or the day before did your kids take Uber. That's all powered by PayPal you are paying PayPal money every time you take an Uber every time you buy a ticket from ticket master that's all brain treat you don't see PayPal you just pay PayPal and you don't know it. So do a little work and you'll realize why we are very very comfortable with this position not to mention even if you take management guidance at face value and assume a 5% EPS decline in 2026 guidance of low single digit decline to slightly positive you get an EPS of $5.5 a share that leaves it stock trading at eight times earnings today complete silly season. What is being completely overbooked overlooked with this week guidance is that PayPal still expects to generate over 6 billion free cash loan buyback 6 billion dollars worth of stock after this capitulation that's enough but to buy back 15% the company over the next 12 months meaning our slice of the pie gets that much bigger without putting up a dime although we did put up some more dimes in the last 48 hours. So as the weekend where there was room as the weekends get flushed out and puked into the hole over the next few days it will be PayPal on the other side of the trade buying up as many cheap shares as they can get their hands on and I think that was them aggressively at $40 today we'll see at the end of the day companies generating 6 billion of annual free cash flow with 14.8 billion of cash on the balance sheet and net cash position of 3.2 billion don't go out of business regardless of what Mister market short term pricing. We saw the exact same situation in short term noise with Ali Baba for years where fortunes were ultimately made we think this setup with PayPal is the next Ali Baba and just as we did with Ali Baba in the dark days we zoom out bird in ourselves with the facts and take advantage of Mister markets manic behavior beyond PayPal pulling its own internal levers to fix itself. Burdening ourselves with the facts also lead us to the chart below showing PayPal is one of the best leveraged ways to play a consumer sentiment recovery. You can see here you miss sentiment sits near record lows worse than during covid worse than the great financial crisis and so on even worse than the vulca era inflation time and time again history shows these dislocations are generational by opportunities rather than the self proclaimed end of the world if Scott essence look at the PayPal chart overlaid on Michigan consumer sentiment and you'll know everything you need. To know about what's next here's the low in sentiment here's the low in PayPal before big rise and here is the advent of PayPal with all the consumer sentiment recover in 14 through 20 which created the company as it recovers in 20 26 we will see PayPal recover along with it on a lagged basis. If Scott essence call for four to 5% real GDP growth in 2026 7.8% nominal has legs which we believe it does expect the sentiment rubber band to snap back sharply there are countless arrows in the quiver to support that view bigger tax refund $1,000 plus boost for households potential tariff dividend checks the easing cycle etc. When this does recover as it always has expect PayPal to follow suit and suddenly catch a bid giving the turnaround even further room for upside from the current price for death levels. So we've included the earnings release we've highlighted and started the most important things the investor deck the earnings call transcript and the top 10 key takeaways which you can read at hedge fund tips calm while you are at hedge fund tips calm click on terms this is all opinion not advice we'll go over the terms at the end of the call as well. Moving along we are on to vf corp with our friend growth bracken and excited about what he is doing with his turnaround and i'm seeing vans everywhere now those gum gum soul things are getting super popular anyway vf corp delivered another strong quarter as bracken jar will reminds us why his nickname is now growth bracken not just turnaround bracken. And he is starting to earn that nickname in spades over 75% the businesses now back into growth mode america's region posted as strongest performance in over three years up 6% global dtc inflected to growth for the first time in a couple years plus 3% at the brand level vans global digital channel return to growth for the first time in 19 quarters. Love it bracken all in vf this position for its first full year positive revenue growth since fiscal year 2023 this long awaited return to growth is something we have been underwriting for quite some time the market is finally starting to wake up to the power of vf's iconic brand portfolio and what happens when the flywheel begins spinning again whether it's a north faced firing on all cylinders with 8% growth and tracking towards this long term path of two times apparel and equipment and three times footwear. Or Timberland posting its fifth straight quarter of growth across global growth across dtc and wholesale while still in the early innings of its major us expansion push or breakout star ultra which is set to more than 5 x revenue in since the 2018 acquisition and is steadily building toward becoming vf's next one billion dollar plus heavy hitter and last but not least vans showing clear green shoots in tier zero accounts strong sell through on new styles and momentum building toward the long anticipated inflection back to growth which increasingly looks closer than many expect the most exciting part about this return to growth is what it means for operating leverage as revenue re accelerates margin expansion should follow in a meaningful way. As vf marches towards its fiscal year 2028 of targets of 55% gross margins and 10% operating margins targets based largely on cost cuts with minimal growth assumptions those goals are increasingly looking like lay ups wall the stock has made a nice move from our initial cost basis zooming out quickly reminds us what inning this story is still in which is like the second inning ladies and gentlemen so sit tight. This growth bracket is not only restoring growth across the existing brand portfolio but overcoming years we expect vf to be adding the new hot brands of the day to the portfolio running the same playbook that has defined the company since 1899 ladies and gentlemen rince repeat. Here's the earnings results circled highlighted underlying starred with the most important points for you to take advantage of on hedge fund tips dot com along with the top 10 points. This investment for the overall market is back to fear okay which caught you know we got a bounce today as a result of that and we closed out our 1 million dollar raise several weeks ago congrats everyone that came in new in existing and existing people added new money and then larger accounts 5 or 10 million plus can come in at any time bespoke service for them not a solicit. Consult with your financial advisor equal 8 biotech earnings estimates revisions earnings power was revised up 29 basis points for this year last 60 days and regular biotech up 47 basis points for this year. We do here this week manufacturing PMI was the biggest story this week we've been saying that would come that finally came and that's that's the kind of thing that really benefits main street and the un Magnificent 493 and everything we've been position for so we're super excited about that and the number is this Tuesday and that's that okay earnings growth 33% of the companies 75% beat rate 11.9% earnings growth which was better than expected PE at 22 times skewed by the mag 7s you know avoid the overly valued huge opportunities in the underly value that's what we try to steer you towards every single week. Now let's move on to our ask me anything questions from our incredible audience super excited to get started we got quite a few this week I wonder if they're going to be any about PayPal let's see first one all thanks for all the great content and greetings from Spain I have a question on PayPal are you concerned with the EPS forecast for 2026 to write share by backs of 6 billion flat EPS. I did notice did they they have guidance I'm kidding or hey we covered that thanks for tuning in Theo Dumont view on charter it's a pass for us we don't like the cable business I know they're starting to balance but it's just not what we want to be involved in I think that'll work but we're not going to be involved in it. Alex cano long time listening podcast consistent my or your work thank you very much blah blah blah. Oh he's worried is the buyback program big enough they'll expand it and yes it's big enough for what they need to do this year and then they'll just expand it next year. David T. I. R. D. M. Yeah it's interesting like the charters and that. Okay so with the ridium voice and data communications land mobile and user yeah so this is like a charter almost it's different but it's it's in the same group. And they all look like they want to bounce I just don't want to be in that business I think it's actually going to work in both cases but. It goes in my two hard box when trying to figure out. How to be involved I I like both of those and we're not going to be involved in either we just want to avoid that area. Jason Z. STM. Free cash phone negative revenues are showing no sign of improvement I mean it might work as a trade but I'm a pass on that one next Jeff Vanderberg. At what point would you decide that your bullish thesis on PayPal is wrong and therefore exit your position to suck this is same question I got with Bob at 60 that week all day long. And the answer is if they reported negative cash flow and revenues were falling off a cliff and even then it's kind of price for those things happening so it have to be material impact and I start to be worried about the balance sheet but these prices none of that is even remotely on the table. Eric flame flame flame flame. I'll just buy second what's going on with PayPal. Yeah we'll get to that one Wilhelm Cooperger this so reminds you the week that Bob I went below 60 and the sad thing is the sentiment was so negative and the Twitter and all these guys who were bullish at 100. Sold out of their stock I was wrong and all the cell side Morgan Stanley were downgrading it and the sad thing is and and barons was going crazy Regma Kapati it was writing her weekly. F Bob a notes every single week on barons and and the sad thing is it put everyone out of their stock at the exact wrong time and people like me were helping them out and buying all that stock. And this is going to be in our view the exact same story and it's a shame because I see it all over Twitter that the guy who had Alex Chris on his podcast capitulated sold at the exact lows yesterday and and every single every single other person that was bullish on PayPal on Twitter sold in the whole and then you got this guy. I work to PayPal for 12 years I never said anything publicly I want to tell you why the company is a bag of shit well that would have been helpful at 120 at at $40 that looks like hindsight bias and and really not helpful to anyone so. You know as much as you think it makes you look smart it's really not helpful to anyone and it's known because just look at the stock price so. So that's that Carl Zees. Meta Tech they have this is from Wilhelm Cooperger take another look at Carl Zees Medtech 1848 classical German hidden champion. Okay Z E I S S. All right so this is broken for now it's going to take a little while to build a base. So stock has gone down with free cash flow. I think what you have here is a stock that's probably broken for a little while it's going to take a little while to build a base especially coming off to 25. See the difference between this and sure it could bounce right away and it can recover and Baba and PayPal. Is that Bob and PayPal had been building a base for years after collapsing off of its highs so they they they've got a lot of the weakest sisters out this was the final flush in the case of Baba. And then you know all the retail guys that flushed at 55 jump back in at a hundred and got their faces ripped off the same thing's going to happen to PayPal again it's it's going to run up to 80 bucks all the people that sold at 40 are going to jump back in because they're afraid of missing it and then we'll pull back to 60 and get them all out so they'll lose twice it's just human nature. And and then we'll work back over a hundred again and PayPal also has had two years of building a base. Okay so you got a final flush here but most of these guys are out most of these institutions are well out so there's no real sellers left this was the final flush for the people that were bargain hunting that are weekends and over levered. So you know this will take a little while and then it'll it'll work its way back and i'm telling you back at 80 all these idiots on Twitter who just sold in the whole will be buying again and saying we've been in Twitter for three years we're so excited about the story and and then when it goes back to 60 you will never hear them again and their Twitter accounts will go silent just like everyone in Baba. So you know the difference of us and anyone else that does it is we face our problems head on and we always have and we always will and I think that's why we have such a loyal following here for six years is because people know I don't run away from the fire I run straight into it and when we've got a problem I address it head on I explain exactly what we're thinking how we're taking advantage of the situation and when we're served up lemons we turn it into the sweetest taste and lemonade you've ever heard. And seen in your entire life and we're going to do the same thing with PayPal. Okay so pass on that not because it's not cheap because it's just going to take two years to probably rebuild a shareholder based trip. The key here is just going to be what is the differentiator and the mode I'm guessing this is cheap and I'm guessing that starting to recover a little bit I think it works for a trade it's not the type of business I want to own I don't understand what the durable mode is with that but it probably works. Jamie Jones Professor Tom for Intel did you you did a price per share value if it were to be bought out at 22 I did not do a price per share value if it were to be bought out at 22 I've covered this a hundred times. What I said was when it was trading at 1819 and I was warning I said it's trading below book value which means if they liquidated the damn company today and put it out of business we would get back 22 dollars that's not selling it they would have tried to sell the company they wouldn't have taken an offer less than 40 45 dollars because that's what the legacy business was worth the cyclical CPU business which was still valuable. As far as PayPal if Elon Musk was going to buy it and all the rumors circulating I think they would have to do a deal at at least 75 to 80 dollars because management is scared like little babies right now I think they're stealing from me if they ever did a deal at that price because I'm in it for well more than a hundred is where I think this is going well more than that and we just have to play the time arbitrage game. But boards do stupid things when they're nervous and they could do something stupid enough to sell it in the 70s and 80s and we'd make money but that's not why we got in we get in for doubles and triples so so glad to clarify that thank you for the question Chris Williamson. So you're aware of software destruction roper we're avoiding we continue to avoid stock someone's going to make a fortune trading them but that's not what we do so roper yeah I mean this has been a long term compound or it's not down quite 50% yeah I mean what you have to do is convince yourself that all of these vibe coding and other threats and AI software creation clawed etc can't replicate this in five minutes and I can't have zero confidence in that I think they probably can't and this is an overshoot but I don't it just goes in my two hard box and anyone who thinks they have an edge there they're guessing it's just like when someone gets on TV and says I think Bitcoin is going lower or higher like are you are you kidding me like are you just making this up like I am making this up like on what basis on literally what basis is Bitcoin going higher or lower please explain that to me but I leave that for the people who like to to deal with that stuff at least a theorem has a use case that I can understand all the banks are building they're going to be smart contracts blah blah blah blah blah but even there I have no edge but I just defer to people who are a lot smarter on that area but it's funny Kimberly Clark I like it here I'm not even going to look at it it's fine let's just take a look but again you're not going to get a double a triple from these levels so you're going to make some money you're going to get a dividend yield you're going to protect you downside mostly that's fine Ben workman CSW industries all right so this was a 20 bagger now it's off a little bit I don't think that I want to be involved in this you know mark it price it up now it's it's not the right time next Roberto Carlos travels to same story is trip this will benefit from consumer discretionary but it's a trade there's no differentiating moat probably like trip better but TZ oh it's a trade it'll work as a trade probably but that's not what we do okay that's that Tim D asking about Papa Johns we cover that today next Patrick Kelly Brown and Brown so the insurance brokerage business has had a run of all runs and this is a great business at a good price we prefer good businesses at great prices so I don't see an imminent double their triple so for that reason I'm going to pass but yes it's a great business P at gas TFF still negative free cash flow revenue is still declining pass for that Matthias CNCX concentrics I'm not seeing that anywhere or CNXC okay let's try that there we go wow this thing is beat down CNXC all right let's take a look here all right so it took some looks like they took some impairments the net income is down a lot let's see what the free cash was flying half a billion revenues are growing slow compound let's take a look at the balance sheet five billion dollars of debt three million of cash two billion of receivables what do these guys do design engine front and back office automation vertical surprising technology coverage it looks like a software play so I think the financials look okay just like they do on Adobe and CRM but I don't want to be involved in that core is a compliment for QXO this is something I can understand a little bit better let's see here down a bit D I'd probably consider this one income statement yeah I think that one's pretty good not like cartwheels good but I think that'll benefit from the housing recovery Mahendra TFX there's a lot of opportunity in this market it's crazy and everyone's chasing the things that are yesterday's news all right I'm sure now I'll see 2.6 billion of debt or it's a little worried about that that should be okay free cash flow it's okay and uh sure count what do they do single use medical devices critical care catheters yeah I B's had structure yeah um you know I think it's generally okay I think it's going to take a little bit longer to build a base I'd probably be interested on it between 75 and 100 if you get it and it's going to take longer than you expect probably a couple of years to build a base from here but I do like the idea and I think you did good work on that uh sandy block are you digging into the software pile no next Seth Lyman SMC I just from Seth who can't stop singing my serona okay no not for me next Zach P okay he's got a 10 page thing about how he likes wars so good like it like that matters to the cash flow of buying a company it really doesn't Darrell muscle glad you like him hope he's as good as you think DVA Davida these things were destroyed because of the kidney business because of the GLP ones starting to recover here I think it's probably fine but you're chasing it up 50 bucks so you're a little late on this but I think it's going to work higher over the next few years for sure yeah good one software one now we're not touching that rock and I know they're all going to work but we're just not going to be involved LYB LY the chemicals and materials should start to work you just got to watch the balance the balance sheet on these so I mean it's negative the cash flow and revenues have not been good so generally we would avoid these it's a highly cyclical business just like Albumara was starting to recover I think I mean just take a look at the balance sheet wait for a pull back but you're probably okay here with the chemicals finally starting to get a bid wow revenues cut in half ten billion dollars of debt two billion of cash three billion receivable I think you can take a pont on it but I just don't like buying it up 45% off the lows see if you can get it below 50 next HubSpot I think this is a software play yeah not for me next Daniel Murphy asked uh he's new so he's asked like six different tickers FMC we've talked about high risk reward treated like an option size it small if it works you're going to make multi bags but if it goes to zero if you've sized it size it small you're okay Campbell soup it's just been such a poorly run business but it's a staple right now I think it'll be probably okay at these levels trade desk I'm going to avoid that's kind of software it's like an ad serving platform con agra I think you're going to be okay at these levels yeah it's already starting to recover we've had that on the show for a while now I kind of like that's along the lines of what we yeah it's already started to move and Roblox the metaverse not yet maybe not ever good one next oh he's saying like you do such deep research and you know met with Brad Jacobs and John Edwards how did you do it with Ali Baba I mean I'd math the financials I didn't have to meet with Jeff Edwards we had a position before we met with Jeff Edwards I didn't have to meet with Bracken Darrell we had a position before we met with them didn't have to meet with Patrick Keller we had a position before he was even CEO that's just whip cream if we can do it we like to do it and but actions speak louder than words words are nice to meet them but the numbers tell me everything I need to know okay here's a guy tell me how to do the AMA is faster Tom love the podcast okay thank you David Joe WKL filters yeah this is going to take a while the answer is not yet you're going to have a couple of years to buy this software solutions not not ever for us but they will come up time again for software this is definitely an overshoot but we avoid software anyway so we learned from the goat names Warren Buffett made 400 billion gave 200 billion away race on my stock list so he wants to buy Ferrari you know usually when you want to buy a stock people say or when you want to buy consumer product people say just buy the stock you'll make more money I think in this case you'd probably be better off buying a rare Ferrari then the stock at these levels and you may make more money appreciation over time this would probably be the only instance that I said by the product not the stock I think we're done let's say yeah with that we'll be back next week same time same place in the meantime make it a great one buy for now 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