the call: Thursday 21 May

[MUSIC] The call is brought to you by Centuria, an ASX-listed property fund manager with $21 billion in assets under management. Want to diversify beyond equities? Explore the Centuria Sydney CBD Prime Office Fund at centuria.com.au. [MUSIC] Good day and welcome to the call. Ten socks picked by U2 experts. So one hour it is Thursday, the 21st of May. I'm Andrew Gay. Thanks for joining us on an international special. We tend to do this on a Thursday and those that are taking us through it are the marks, Mike Garner for NBC Market and Mark Mullen from Valued Shreigh. Gentlemen, welcome to you again. Good to see you both. Good to see you. And Timings, good. Because we've got the biggest result of them all in terms of Nvidia, of course, the market was anticipating. Mark did it to liver. They did exactly. They are performing the, you can't pay much attention to what the analyst consists of numbers out because they tend to, I mean, all these companies want to outdo that. So they'll try and get them to do a bit lower because you get so smashed if you don't meet the consensus views. But it came out only a couple of percent above or some of that. And actually, I should stop you because let's just get straight in it. Because in our stock of the day, so let me set it up first. Okay. Okay. And we can get some analysis. Given we're running a little bit behind. So, Nvidia is the stock of the day. It reported better than expected revenue of the first quarter of 26. It made $81.6 billion in sales for the first quarter. 4 cars, $91 billion in US for the second quarter, which was above expectations reported at just an EPS of $1.87 a share. Cash dividend increasing from one cent to 25 cents. So it'd be reward for shareholders to chipmaker making records $75.2 billion from its data center business. That's up a more than 90% from year earlier margins increasing overall. All right, Mark. Look, okay. Overall, it's an excellent result. And they're continuing to improve. So effectively, there are up 85% on year over year, if you look at the quarter, it can be a last year. And then their profitability has gone up within the low 70s now. So all that means is that Nvidia is just continuing to grow, which of course is totally the opposite to what all the analysts said who had them forecast two years out of growing at 20% or less. So it's on a 45 trailing period, it'll probably be 22 or 23 forward. So it's very cheap. And my view is that we're still in the early stages of the AI build out. So I think Nvidia has gone a decade ahead of it. So I think it's an absolute buy. A absolute buy. Your view has not changed one bit there. No, by the way, it's my second biggest position. So I'm very happy with that. Now, by the way, over the last few months, it's done respectively. I think the last months have about 10%. There's nothing compared to what some of the other companies that have done five X in a month. So it's not busy, everything, but it's super safe, reliable, it's a fantastic business. I think they've got, is that 90 billion now invested in other companies? So they've got a very large portfolio of investments, which in things like anthropic and over the eye and core we've, they're all going to pay off massively as well. I think Nvidia's future is very bright. Okay, Mark, Garner, what's your view? And there are only risks ahead. We take a look at where those one years have gone. Obviously, increasing costs of debt. Is that going to drag on Nvidia's biggest customer, see thing? Categorically, yes. This is a strong buy on pullbacks. I'm probably not going to be, we're probably not going to get too many double buys today, because I think now, earnings season's out of the way. We're in for a 10 to 15% plus pullback at some stage, bonnet. The commodities, every part of the market is paying attention to bonn yields except the equity market. And I get that because we've had earnings and the hyper scalars make the headlines, etc. But look, it was, I think probably one of the highest quality earnings that Nvidia's had, because that exponential growth in GPUs, etc. Look, that's great. That's probably what the analysts were referring to. But this was what changed my mind a couple of years ago, a year and a half ago on Nvidia, was Jensen had a plan outside of the GPUs. And what was the edge computing stuff and the SNNib CPU where they're in the growth and the CPU part now, LP's now. And everything but the U. I mean, the circular financing things kind of seem to be built on I/O use. But they're, you know, it's a much more well-rounded business than just selling one product now. So long term, I'm much more confident buying Nvidia long term and they're not going to be a Cisco to go back to the tech bubble crash and things like that. These massive uplifts in anthropics valuation were accounted for half of the, so I think earnings was up 27%. It's actually only up, if you take out the valuation increases in anthropic and SpaceX for Google and the hyperscalers and all those guys, it's actually only about, it was not 27%. It's actually back then at 12, which is around about, so the earnings season is not as good as the headline number because of those valuations. SpaceX lodged this morning and they got their ticker code and it could be two to four weeks apparently until it's on supposedly. It's mostly on 12 June. Yeah, okay. The biggest ever IPO. Very exciting. Which may suck some money out of some of the other hyperscalers potentially. People want to get involved in the IPO. So yeah, look, I long term, I think I've never been more confident that this will be long term. You know, it's not going to have a fall off a cliff, but at the moment, the equity market in itself, I think inflation, the PPI numbers were 6%, that's going to take a month or two to come to filter through to the consumer. Consumer salmon numbers with a lowest they've ever been on record recorded history since non-N 52. I think there's going to be a dip in the economy disposable income and they rely, Nvidia relies 46.6% of their revenue is hyperscalers. So, you know, Oracle Apple, Meta, Google, etc. Microsoft, AWS, if they pull back on spending, it's going to hurt them. So, but I bet, like I said, it's very strong by and pullbacks, but it's more, I mean, it's a much more well-rounded company than it's ever been. So what, hold it now, just wait. Hold now and you add on weakness, basically indefinitely. And we're in an environment where we're getting lots of volatility. So it's actually compressing. You know, what used to happen once a year is now happening three or four times a year. So there's, with plenty of opportunities to buy quality companies when the market has a bit of a spedus for whatever reason. Yeah, we bought like a couple of weeks ago. So below 200, I'm very happy. You make a good point too, given the IPO. So SpaceX, OpenAI and SROPIC coming up, and they are going to be back in place, aren't they? Well, I mean, it's, you're going to have to find three trillion in capital somewhere. Well, anyway, not necessarily. SpaceX are only talking about raising 75 billion, but let's say they raise 150 billion. It's not that much. I mean, OpenAI recently got 120 billion on the private market. Yeah. So I think so, and 300 billion by argument. Because, remember, Musk is not selling. There will be some sales, obviously, from the early investments into the, into the flight, probably. But it's not how much liquidity is going to be there. I don't know. It's not too too, really. I think you're underestimating how much are in those three times ETFs in the States. They're, they're, and that's where it probably will get sucked out of. All right. Well, it's, we'll pick up on that conversation. But it's a little later in the year then, or maybe earlier than that. That was our stock of the day in videos. So it's really positive, obviously, Mark Mollen, clearly. It is a strong buyer still. All right. Let's get into the stocks as chosen by you. Bearing in mind, this is an international show. So the first five we're going to take a look at. Fast Retailing. United Pulse, a Pulse of Service, you've yes. Well, our Transmetics and Eli Lilly. All right. So, let's begin in Tokyo then with fast Retailing. And in fact, this, so I'll probably say it's gloting. Are those like global closing brands, Uniclo, G Theory, Helmet Lane, and the like. It's a vertically integrated retail model, essentially. Design, sourcing, production, logistics, and retail, Mark Gardner. Have you looked at this? Not really until today. I mean, I'm familiar with all the brands, et cetera. I mean, I've not done a day, I've not done a look into it. I was aware of the company and it was a vertically integrated, et cetera. But I think that particularly where their markets are probably in, well, particularly in Asia, are the hardest hit by this Hermannis Closer and Petrol Price and things like that. And the States as well, you know, the States are showing that sort of dent to consumer confidence. It'll likely be worse in Asia. I do like this business. It's way too expensive for me here at this point. If you look, and we're not really, we think that there's going to be a slowdown, a consumer led slowdown, essentially. and what a period what you might call stagflation, but I think it'll be fairly transitory. It's just not gonna be good for stocks like this. If you, a long-term holder, I think you'd probably would hold on 'cause I don't mind the business and they do seem to be able to replicate across brands and across stores, et cetera, which is what you wanna look for in a business like this. However, just at this point, I don't think you could put fresh money in it here. So, and I think if we do have a bit of a freak out to the downside, you're probably, it's not gonna be top of your list of things to scramble to buy. So, if you've got it, hold on to it. Maybe send an alert or something to the downside. If you're interested in owning retailers, but yeah, not for us right now, but yeah, if you've got it, hang on to it and for a long period. - Right at the whole McDonald's? - Well, I don't invest in Japan, that's first thing. So, like Mark, I looked at it this morning, UniGlo, why don't you invest in Japan? - Well, because there's massive opportunity in the US and there's about 60, at least 60% of the global market cap is based in the US and then what you have is a lot of significant companies like Makata Libre from South America and so on, dual listed on NASDAQ anyway. So, you get exposed, you do a lot of international businesses or you have ADRs. So, this company doesn't even have that. So, the complication of investing in different markets like South Korea is even harder, but the trouble is you absolutely increase your accounting and conversions and it's just a lot of admin. So, unless you can be serious about it, I wouldn't buy one stock in Japan. I do have a couple of members, by the way, who are pushing us to cover Japan, mainly in the semiconductor area, in the stack. There's a lot of chemical supplies and interesting businesses in Japan that haven't been bit up, you know, like they have everything in the US has or even in Taiwan. So, there's quite a lot of opportunities that is the argument, but you need to look at it that way, I think otherwise, it's too hard. But the business, look at the business, UniGlo, we travel around Europe last year and UniGlo was everywhere. They have a lot of specialist stores in Spain and so on. So, it's quite a strong business. I agree with Mark in that, you wouldn't want to be going into retail now because we're in a split economy, really. You've got everything to do with AI's booming and then everything else in consumer land, everything is going back down, within high inflation impacts and everything else. So, it's like these jaws that are widening. Yeah, AI trade will be okay. Yep. But the retail trade questionable. So, I'm out of all retail. I don't have any, I used to have JB high-fine and Nick Scali here. I don't have anything in retail now and I have no rush to be buying any, by the way. Yep. The company's on an 18 Peeve and it's got a 12.4 average EPS growth rate over the last five years, which is pretty good. So, it's not, I don't think it's expensive. I disagree with Mark on that one, but I wouldn't buy it anyway. So, you've only got 20% debt to work with. It's about a $40 billion company. So, if you own it, which probably the viewer does, I would definitely be a hold. Yeah. And then if it comes down, it comes back, you may be buying some more. It's good company. Right, that's just too hard being in Japan. Double hold then for fast retelling. Well, let's head back to the States. The next stock is EPS. Obviously, the freight handler, it's, well, management reaffirming for your guidance there. Highlighting costs savings effects. Undergoing what it's calling a transition year. So, interesting to what our experts think of that and how it's progressing bearing in mind over the past five years, it's lost half its value at night. Yeah, this has been a terrible performer. It's a big, big company. So, it's a bit like an aircraft carrier cruising along. So, it's got massive franchises on it against for parcel delivery in the US. It's also expensive. It's on a 21 PE, trailing. And it's the average growth for the last five years has been 3.2%, which is way full. So, it's actually growing less than inflation, which would explain why it's performed poorly from a share price point of view. So, it's also got a lot of debt. 1.8 times debt to equity, which is heavy. Look, it's not going anywhere, but I don't see why you'd buy it. Now, it's just, I don't sense enough on the horizon. They would give you confidence to say this is going an hour turn around and start growing strongly. Because if they can't get their growth back to five or six percent a year, you wouldn't want to buy it. And you definitely wouldn't want to buy it even at 21 PE. If it was six percent growth rate, 8% growth. Also, we've got an autonomous future. Remember, we've got Tesla with their semis and the whole autonomous driving is on the cusp of a happening thing. Now, that's going to revolutionize these businesses for the better or the worse. Whether UPS will be able to capitalize on that really well and reinvent themselves, they might. But I think it's a total unknown. And we are talking about a total reset of everything to do with deliveries and so on. So, I wouldn't, I would be a sell at the current levels. Yep. All right. Mark Gardner and I mean, you know, is facing all this in battle against the likes of Amazon? More than likely. And certainly, I mean, even if they pull off the turnaround story, like their logistics business. So, fuel prices are going to eat into their margins. You've got one of the biggest companies in the world coming after them in Amazon. I forgot to mention that. Yeah. And, you know, I've been talking about two or three fairly significant red flags. Like, increased cost reduced margins because of fuel. A turnaround story and, you know, why did it? I, well, it just wrote a lot to get up. And the flags go on. So, yeah. So, it is one of those stocks that, because it's UPS and it's an incumbent, people's mindset is, it's too cheap to sell, but it's not cheap enough to buy. I would, you know, I would say that looking at that chart, particularly, that's on the screen there, you probably thought that every dip on the way down every year. And if you just had some discipline at the start, you probably would have saved yourself a lot of grief and a lot of money. So, yeah. And as I say, I didn't even think about the self-driving thing in terms of package delivery, et cetera, as well. That's what that will support Amazon. Because Amazon has expertise in that area in their smartness. And they've got the leaders in their automated warehouses et cetera. And I can't see Elon turning up with, you know, with UPS, but I can seem teaming up with Amazon though. So, and, you know, with that self-driving thing, and that final mile delivery thing, that business is changing as well. So, yeah, I don't think you should be holding this. I think you need to sell it. There's just too much risk. Like, it's not, and it's nothing to say against the company, but they could turn it around. Who knows? They might do some key partnerships or whatever, but do you really want to risk your money on a five maybe's? Like, I don't think you do. So, from, yeah, from a common sense standpoint, I think you should be getting out looking at it lighter. - Double-cyl for UPS. - Hi, Nadine here. Thanks for listening to the call. Did you know becoming an Osbus contributor gets your stock picks straight to the front of the queue and to the expert of your choice? It's our very small way of saying thanks for your support. The link to become a contributor is in the show notes or you can go to osbus.co/contributors. That's osbus.co/contributors. And while I've got you, we'd love it if you could leave us a review. And thanks for listening. - Let's now turn to World Tower. This is a health care focused at rings. I'm developed to manage properties, particularly in the seniors, those housing, their outpatient medical providers, as well, Mark Gerdner. Yeah, we've got a few of these in Australia as well. And on the surface, it seems, we all know that today's in demographic, we all know that we're going to need this housing and things and down sizes, et cetera. And we've been sold that for ages. And the bottom line is it doesn't, particularly in Australia, there's regulation around, running these sort of senior housing things, where the moment you try to improve your margins, you're basically, it's at the cost of the people who, the elderly, and then you get dragged through the mud of the press. It's not something, look, I get the argument behind it, I just think there's much better ways to play an aging economy than real estate. And because the investment thesis makes sense, but that's very clearly US stock, because that's probably, if you look to the Australian versions of these rates, they'd be sideways or down. And that's more a headspace of Australian and ASX versus US. And while we're attending the US, much more in the US these days, because the Australian market's got a real sentiment problem. But look, I think there's better ways to play an aging population, and I just, and reats is not, you know, we invested in property, we invested in property, obviously, maybe not, with the tax changes, might not be on people's minds, necessarily now. But I look, you know, it's, yeah, I don't like it, I don't like the space, it doesn't, it just, I wouldn't be holding it, it's, I think there's a lot of better things you could be investing in, quite a lot of things. - All right, well, we'll move on because they may well come up. So I sell for you. - And that's all for me too. - Yep. - Same reasons. Also, I don't generally like reats. I'm not saying, at certain times in the cycles, they can be okay. They're also in the US, the, what I just read about it, there's limited operator profitability. It's in other words, they're clients, they lease these to, and so on, are struggling to make a profit as well. So there's not healthy financial dynamics that would enable you to get a higher return. They're five year return total is 5.8 per year, which is, look, I think that's probably similar Australia. by the way. Australian rates would be, - The big cheaper. - There wouldn't be any smaller. - It's on a 15.2 trailing peer. They've got demographic tailwinds in theory, but is this the trouble if you're trying to invest on themes? You know, we have a thematic and say, "Oh, raging population, we're gonna need more retirement homes. That's investing retirement homes." The trouble with it, you still gotta make a business and make it profitable in that whole thing. I, that's why I don't do thematic at all. This is, the other thing that came up too is the medical officer's winds. They've got hospital's and medical establishments as well, which they lease out on the telehealth and the hems and all what I think is happening with longevity and turning from away from sick care to health care is a major trend, which won't help the might. So I think that's just another thing that would be a drag on their potential performance and interest rates are going up. They've got a lot of debt. So, which, that's another drag. So it comes back to, is it going to do better? I would think probably not. - All right. There are a number of Australian rates that are trading and significant discounts to NDA. They probably do the same thing. And you don't want to, you don't want to take on them, you know, paying a premium for something. It's probably one of the only spaces with the Aussie market. You might get better value. - All right, so, well-tower, looking, well, unwell at the moment, double-selving. Let's move to transmittix the next stock. Now, this is a MedTech company developed so systems to keep donor organs alive that sort of functioning outside the human body, particularly as they're being transported and transplanted. And so one of those field with stocks are obviously for the greater good. Now, Joe, asking the question, would be great to get the opinion of your equity panel on transmittix. It is listed on the next day, a new organ transplant methodology says with a widening mode, recently flipped to positive cash flow, expecting more growth for the next years, potential or further organ approvals from the FDA, Mike Molland. - Haven't looked at it before. It's interesting. It, because it's pre-profit, you know, there's no really, or they've said they've got some pre-cash flow, that still doesn't mean you're profitable. So, anyway, that's encouraging. The technology is interesting. They may need your hearts and lungs, but they're expanding into livers and kidneys and so on as well. And they've got a better system, arguably, but they've had a slow up, uptake apparently from hospitals and the clients more so than you would think. And they've also, they haven't found it easy to be able to get the providers to subsidise, you know, the mediquer, the equivalents of here. So, it's had a, they've had a harder path than you would expect based on what the, you know, the story is, because it's really pioneering organ preservation technologies, what it is, path to profitability, visibility, okay, so that's encouraging. For me, I can't really give you an opinion because I don't know enough about it. It's definitely probably worth having a look at. I need to, I need to, I need to have an opinion. So, that's all right. That's interesting. I'll put it as interesting. - I don't know, that's a call, but. - Interesting means, I'll have a look at it. - Yeah, yeah. Okay, watch it. Think about it. - My cover. (laughing) - I tend to agree, but I'm not gonna create any, I'm gonna go spec by only because I like what they're trying to do. And, you know what, there's way worse companies you could, you could put your money into, like at least if you, even if you lost money on this, like, at least you feel good about, you know, putting it in there. But the European business is going really well. And look, it kind of makes sense because, you know, you're not having to do transatlantic runs with organs, et cetera. And it's not really just about the device. So, I like the fact that they've, they've capitalized on top of the device and then they've gone into the, they've sort of, horizontally and vertically integrated, I suppose. And, you know, there's an, what's called pad aviation. And I think they're just running it in Europe at the moment, but it's, you know, they're really embedding themselves into the actual, you know, shipping of it. And, you know, as opposed to UPS, where you're probably just getting crap from, you know, from Shane or, you know, T-Mill or something, getting shipped around, you know, these go, you'll pay a premium, obviously, for premium transport, for particularly for transplants, et cetera. And, you know, I think it, like, it'd be better, but it will also have a moat around it because I think there'll be, they would have to end up being approval processes, et cetera, around this too. So, you know, similar to the software industry, you know, things like medical software, obviously there's a massive moat because there's an FDA and a hipocompliant, so approval process, et cetera. I think that gives them, it gives them an opportunity to sort of grow without, everyone nipping at their heels. And the total addressable market is expected to at least double in the next sort of eight years as well, if not more, so there's a tailwind there as well. Yes, I suspect I wouldn't put much money into it, you know, just a small allocation, and probably watch it, because I think if it does do very well, it'll just end up hospitals and, and search, you know, medical care facilities. Once you're in, you're, you're embedded like a tick, you know, it's very hard to get you out, your customers are very sticky. If they manage to embed themselves in a B, you essentially, the Uber, you know, you still, you say Uber when it's ride sharing, if they end up being the Uber of, you know, that organ transplant, then I think you'll see, massive premium come back into it. And yeah, so, spec by small volume. Who knows the future, but you may give the way the technology's going is that you might be able to order a, a lab-grown heart or outdoor organ, and get it by our Amazon, you know, with an hour. I mean, just, I wouldn't, yeah, but certainly in that direction. Nonetheless, that's the way it is right now. So I suspect by from you, Mark Mullen is thinking about it. Now, let's turn to E. La Lillie, the big farmer. Now, first quarter revenue hit close to 20 billion, that's up 55% year, and he lives in the environment jar, that generated more than a half billion becoming the world's best selling drug in fact. And now, it's focused on the likes of its new oral at GLP One Drug Founder. Who are we up to, Mark Gardner? I think I've sort of discussed this last week. I don't mind the company. You know, doing good things is no patent cliff, except like health care is just so on the nose at the moment globally. Like, the results of these guys are coming out with two years ago, would have seen massive rallies and lately, like they're doing every, most health care companies are doing everything they can to not get their share price belted, just on a continuous basis. So, I mean, Trump's just based, is just in crisis uncertainty. No one really knows where the thing's going to get approved anymore. I think RFK's gone after the FDA approval process and things like that. This would be high on the list of ones. I would definitely be wanting to be going, but I think the knock on health care effects of the GLP One drugs is extraordinarily understated and there is just more and more increasing evidence around the side effects of use of them or abuse of them, etc. Which won't be a problem in the US, but in places like Australia and Europe, etc. In the rest of the world, there will be where there's actual regulators. There will be, I think there will be some pretty big problems. So, look, it's not enough for me to, it's not a sure thing at the moment. Like, normally I would say it was a buy, but I just want to see a broad sentiment turn around in the health care sector globally, because I haven't seen anyone be enthusiastic about health care or health care stocks from a global analyst point of view for the eye on 12 months now, I've got to say. And even with this, everyone's starting their analyst recommendations on companies like this, we've all of the risks and none of the upside. So, I know there's so many things so negative out there is that time to start looking at it. Well, maybe it is, but like I said, my broad of view on the market at the moment, I'm not willing to be a contrarian. So, but this is a high quality business and the market's going to grow and it'll be years before anything comes around to, you know, for the regulators to get this teak stuck into it. But yeah, I'd be more buying on dip than a buy here and now. All right, the way for the broadest sector to call it a hold in from you, Mark Morgens. Yeah, well, it's clearly the hottest name in Farmer and globally at the moment. Still, it's on a 68 trailing PE. How about that? Now, when you compare it to their major competitor on the GLP1 drugs, which is no-b0 Nordic, which is the Danish company here in Benedham, originally they are on a PE. They have about 12, I think. And look lately, but something like that. And that's their natural main competitor, which is a massive difference. So, from a value investing point of view, you would invest in no-b0 Nordic on the likelihood that at least you're going to come back some of the way back. But they've had management issues of changes here. There's other stuff going on whilst that's been happening. Eli Lilly has been very, very active in kicking goals everywhere. They've been getting market share on no-b0, not to just of our 68 times earnings. That's the key thing, but they have been doing a much better job. They also made very good strategic investments in some startup development type drug companies that have very promising things. So, they're buying AI technology, bringing it into the business. They're very aggressive on growing it as well. I think it's a fantastic business. I've never owned it. I'd love to own it. The current five-year average GPS growth has been 28% a year, which is a big deal. pretty spectacular by any language. That justifies probably a 50 PE maybe. You could argue. It's assuming you think it's going to continue. So for me it's a buy but we need to come back 20%. And by the way is the chance of coming back 20%? Absolutely there is. Or particularly on a 68 PE. Yeah. So bring it back to 50, 45. I'd actually buy it. And I would buy it over and over and over. Because I think the winners for my experience, when they, when they're winning and they have a good, there's a good rationale for it. They tend to keep winning rather than saying, I'll bet on the underdog or the one that's a turnaround story. Which is a long painful process, which is a buff at long term. But I've moved on a bit from that now. So I'm more, I'll be inclined to go e-live at it. I'd want to buy. I wouldn't buy it at this price. Yep. Okay. Well let's call it a double-hold there. But you're looking to buy it. Let's sum up the first half of the show. Beginning with our stock of the day, no surprise. It was in video given. It's just reported bid expectations yet again. Mark Molland, it is second biggest holding his portfolio. He would still be buying at this point. Mark Garden, though, are looking to buy on pullback. So it's a hold. Fast retelling out of Tokyo, it is a double-hold. Just cautious there, particularly given it is retelling at the moment. What we're seeing. UPS, look, obviously it's facing its own headwinds there. Not police, of course, being rising fuel prices. Also that challenge from the giant Amazon. Both would sell it. Well, tower, the reat in the health care sector space and seniors living. It is also a double-sell and transmetics that figured, come to you if you like, involved in the transport of organs. Mark Molland needs to do more homework and Mark Garden will need to put a speaky buy on it and just finally the double-hold for Eli Lilly. Just catching up with their own high conviction fund, picked by the Invest Committee, bearing a mind. This is looking at Australian listed stocks, latest episodes, live at ozbiz.com.au. And you can find out what they did in the last month by hitting that drop-down menu. The Invest Committee, they explain their reasoning as to why they've changed their waiting on some of the stocks and bought and sold. And overall the fund is up 29.4% on a keynote term. Vosis has since began in March 2022. So keep those requests coming in. Any double-buyers of ozbiz listed stocks goes to the Invest Committee for consideration. You've worked hard for your money all your life. Now your money needs to work hard for you. Whether you're building, transferring or drawing down, the right information makes all the difference. At ozbiz Retire you'll find the latest news and insight from trusted experts all in one place. Ozbiz Retire is powered by RAN. Retirement income done differently. Let's see the second half of the show. We're going to take a look at service Intel, CrowdStrike, Bloom and Plug. So let's begin with service systems. Now it's submitted. It's listing more terms of to debut in terms of its IPO. It's planning to raise about $2 billion filing revealed there and with a, he already has a $10 billion contract with OpenAI. So Mark Molland is this sort of essentially positioning itself as an alternative to Nvidia? No, not at all. It's a very interesting technology. I know a bit about it because we've actually followed this. I've got a tech, Nick Humal, tech lead in the US has met with them. I met with some of the engineers at Cerberus at one of the conferences we went to a few years ago. And what the difference with them with Nvidia is that they have developed this platter-based chip approach. Instead of having a silicon platter, these are square ones now for Cerberus because it's less wastage. And it's one big compute, it's one chip, the whole thing compared to Nvidia which chop up into about 60 chips or something. Now why do they chop it up in 60? Why would it be better to have one? You'd ask. Okay, so it sounds like a reasonable question. And the problem is error rates and failures. So one of the biggest problems when you make silicon chips and as they've got on thinner and thinner substrate down to two nanometers and so on is errors. So the problem that Cerberus had when they first started was there was so many errors all over it that then they had to work out, well how do we make this thing work as a one big chip and deal with how do we bypass all the errors? And we're probably talking hundreds by the way on the chip, maybe thousands. So then how much of the chips use? Useable. No, by the way, this happens within video chips as well. So there's very few chips that don't have any problems with them but they score them basically. So when they test them they stress test them and they'll come up with a rating and then depending on that rating it's where those chips get used and the way they used to use it was the ones that had a lot much lower ratings with a lot more errors. Therefore we're going to be less efficient when into the games, you know, to the into the market. So depending on where you are, like if you're a viewer or a rooven they're going to be the best ones. Anyway, just a bit of background on that. So Cerberus has actually worked for years on very difficult technical problems and they've managed to solve a lot of them and a big part of the how's how to cool the thing. You know, when you have one big platter how do you cool that even and you got to cool it all evenly. So they've developed their own proprietary cooling systems and anyway how long story short when we saw them the cost per chip was over five million dollars. They've now got the cost cost per chip down to about a million including the ancillary hardware and then our listing it and they've got contracts initially that had two clients both in UAE. So we're basically supporting the company as well. So that was their main two clients. They've now they now have distributions through Amazon so Amazon has put some of their chips in so you can actually book workloads on those if you want to. What they're really really good at is inference. So not for training but from an inference point of view they're way more efficient than an equivalent viewer or rooven Nvidia chip but it all comes back to cost and per what and cost for or by cost per token. I'm sure Nvidia would argue that they're not more efficient but anyway they've been argumented that you'd have to investigate but the point is the technology is so different no data senate can just incorporate it. You know it's not like you can you whack it into your into your into your tray with your Nvidia chips so you have to build specifically and dealing with a whole heap of cooling challenges and voltage control a lot. It's a very complex deal but they're in a sweet spot in that fundamentally their their score card on inference is spectacular. They're arguing they're 60 times more productive than equivalent Nvidia chips so that's true it means your inference cost would be 60 times lower so it's good argument and we're in a safe situation now where we're we're compute starved and we have a massive demand for inference and tokens which is good not gonna change this is a major major major upward path as far as the volumes and prices are going down but they're not going down as fast as the demand's increasing so service is a perfect time and they were going to list it a couple of years ago they pulled the listing yeah it was a wrong time right now because of this inference demand and because of the challenges of the industry a lot of these companies are going to go yeah we're going to back this and put money into it because we need it and we want also we want to diversify our way off in video but there's no competition to in Nvidia because they don't have the whole ecosystem Nvidia runs the whole data standards with CUDA and everything else so but having said that they will never beat Nvidia or not in the foreseeable future anyway that's for sure not the next decade and I'd say never because Jensen is of genius and he'll just keep it a rating in advancing anyway but having said that Sarah brass could be a very significant player and be very successful and turn out to be a fabulous investment now I say could because it's all about execution and the other problem they've got to scale it now not chip size between increase the efficiencies which Jensen's doing brilliantly with every new version is at least 10 times better than the one before Sarah brass can't do that without solving a whole heap of very very significant technical challenges which I'm not saying they can't do it but they're really big so in other words they've got an uphill battle to keep improving this thing yeah so I think look it's it's already spiked up the price so it's all enlisted so it's on the market now yes and it's double the sharp pressure by double I'll be sure on day one all right so I think it's very interesting current P700 but that doesn't mean you think is there they've any amount of the market yeah yeah that's right they're just starting it's got it's up 57% since last week and what's the market cap? 63 billion now so 63 billion compared to Nvidia at 2.5 so at 5.5 to 5.5 trillion trillion it's a minnow therefore like my part of my arguments been in the past that I think AMD will outperform Nvidia on a percentage basis on return not because they're going to be in Nvidia because they're off to a smaller base this is another example of that yeah and they seem to be going well on the distribution and I think OpenA Ice committed is a 12 billion don't quite know if I remember over 10 years or something of buying their compute I think it's a good story I'd be inclined to say it's a speculative buy I couldn't say it's anything else yet because it's but whether you buy it right now or whether it's going to be a pullback after the thing's settled down a bit I don't know all right maybe it's a dollar-crossed average argument my gunner try following that comprehensive analysis it was not much it wasn't said no we've looked at they're basically it's the first genuine bit of technology to come out then the challenges you know in video in any way shape or form like so I get I get where people they are very different but but in videos being top of class. in every category for this entire AI, you know, boom so far since 2022. And these guys, like this thing, you know, they're, they're elements that they need to get right, but like, if it, if they do get it right, and, and then companies know how to use it and when to use it properly, like it smashes Vera Rubin in many, in many metrics, well, sorry, in some metrics for specific tasks. So, and this is where this, we're always going to come to this point. Like, no one has carte blanche on, on a sector for long when there's 90% margin involved. So no matter how good Jensen is, like he's getting the whole world is nipping at his heels. And it eventually, margin compression comes, it's just, it's just a fact of life. Like, and whether it, you know, it's, you know, incumbents, there'll be a new technology, etc. There is a lot of what ifs with this. I mean, that's a daily chart. So like, it opened at 185. I think it went to, it was up 150 to 200 percent. And first day, I think it settled up 63% on the day. It's exciting technology. It's, it's, it, this is a risk. I, you wouldn't chase it. Like, I, dollar cost average. Oh, maybe, like, that's an hour chart. Yeah, it's an hour chart. Like, it's not a, yeah, I mean, it's been open for, I think it's literally a week today. And like, there is income coming, open AI, I don't, I wouldn't put any stock in the open AI contract because they've got a contract with everyone. And open AI, CFO said there was no chance that they're going to be able to go, like, unless their revenue growth basically accelerates at ridiculous levels, then, you know, why they're going to do it. So essentially, I, the, keep an eye on it. If you really like the sector and the theme, buy small, maybe, um, this is probably got, this has got a few years to go. I think it's really nice. Yeah. Okay. All right. We're going to call it a spiky buy then for service. All right. Let's, uh, emerge from the service, um, rabbit hole. I would better pick out the page because we spent all of the time on that. All right. I'm sorry. I didn't know. That's all right. No, it was good, good analysis. Um, Intel, this keeps coming up. Yeah. Um, anyway, we'll keep going. That's why. Let's keep going. And, uh, it's, um, now it's this tire, particularly with the on mask, uh, matter of fact, chips for SpaceX Tesla and XLR towards terror fab program. Mark, uh, uh, the, we, we've had this quite a few times. Um, and we, and literally the catalyst was, I think we said at the time, a picture of the CEO and Elon Musk shaking hands was the best thing that ever happened to it. Um, and basically that's when the chart started to spiral out of control of the upside. So, um, it bit, you know, because they needed that, it, I mean, they've been a lazy monopoly, um, I guess because they've been, you know, they need to keep a chip maker in the US, et cetera. Um, I do like the new CEO. I do like the fact that they're working with Elon Musk, a terror fab. Um, what, like, you know, I was too skeptical to get that, to get that run up, but mind you, there's been similar rounds in some of this stuff. Um, did, you know, in similar parts of the sector. Um, I, I would be, I'd rather own Nvidia and back them to, like, I've, you know, they're, they're CPU part that they're going into. I just kind of get the feeling that will, you know, the Nvidia end up dominating because I do a great, Jensen's very good, um, and, and, but getting things done. So, um, I'm not here. I'd be, I mean, I'd probably hold it. I'm maybe, I mean, I'm, maybe sell it even to it. I think the run's kind of done in this. And I think there's better options in the space. It's not the same. It's just not my style. They've, they've just got a horrendous track record and it's got me more interested than I've ever been before. Yeah. I do like the new CEO and the terror fab. Um, but yeah, it's just, I don't know. I don't, they've got a history of screwing it up. All right. But let's call it that benefiting from that mask momentum. Um, but you would sell it given how far it's run. Mark Molland. Um, well, I wouldn't have touched in till based on what Mark said. The history is, why for the big stuff up was when they rejected jobs when he offered them for Apple iPhone. So, yeah, did the silicon, they were now, they were too busy. And so they, they rejected that. And that was really the start of their downfall. And then AMD's eaten their lunch with the, uh, with the 8080, the chips and so on. So they just outperformed. AMD's killed them. So it's been destroying their market share in PCs and in gaming. So for me, Intel's been a dog. Uh, it's gone through lots of CEOs and nothing. The new guy looks good, I agree. And, uh, Gil, Gil Pat Gelsinger, I think he's, uh, he's a hope. The mask connection changed it for me. Uh, and I think it'll depend on how much influence mask has and where they fit into his terror fab planning. Uh, we don't know because he hasn't elaborated much about it other than saying that the part that we've done a deal with and they're part of it. So I don't know, but I think for Intel, it's the best thing that could have ever happened to them because, because if, if, if some of the mask magic rubs off on them in particularly to do with their ability to deliver, because that's the other problem. One of the things that Intel did do is they signed up first for, uh, ASML, the lithography machines for the A18 and A16, which are the, the thinnest of, there are the almost strong neurons. This is below, uh, toluan-semic adapter doesn't make anything less than two nanometers. This is going down into sub two nanometer. Now, the problem with that is the further you go down, the harder and harder it is to actually make it work and get reliability so you can get a productive result out of your manufacturing. That's the problem. You can do them. It's like, what's the failure rate? And what, what's his term on semiconductor have been really good at is having very high, uh, past few rates, which means they burn massive amounts of money. Intel has not been out of do that. Now, interestingly, Musk is going to have to help them be able to work these machines. I think the reason he's done the deal with him quite possibly is because they have the machines. These machines, you know what I'm supposed to go on. Can I go directly? Yeah. He's got no interest in him. So his term exchange. No, it may just be that he wants some machines. Yeah. And he'll, he'll be happy to let Intel be involved in that and make some money. He'll drive it. So I think I don't, I've had a big run up. So hard to put a valuation. The piece is still not that high. I think it's going to be, I've put it as a specie by or, you know, or could be a dollar cost average again. It's a very difficult to pick the prices easily with these companies, particularly when the business model is changing completely. Yeah. Okay. All right. Uh, specie by himself. So different opinion there. Uh, we better put our foot down because we're way behind. Crowds are like, is the next one. Sub-security protects organisations from hackers, essentially, that's what it's there for. It's a cloud-nated platform called FALC and, uh, just fourth quarter there achieved record results. Mark Moll. I like it. I'm a shareholder. So I'm biased. It's not a massive position, but it's done well for me. They're on a 58 p at the moment. They're, I don't think they're gap profitable. Oh, they don't think they're, they've a very little debt, strong market position. I think it's a, they, they, they, they specialise in point detection. So that's at the, at the edge, if you like, is where they specialise. Um, I think it's a buy on a pullback. It's too expensive at the moment at 58. I think. Yep. Yeah. Sorry. If you get a decent pullback at 20%, I'd probably add. Yep. All right. Um, we, so you can see about on the chart that was on the screen, that, that March April area was that, there was the SaaS Bocholibs. Um, this in Palo Alto, we categorically loaded up. We loaded up, leverage structure product wise and six times leverage. We, we bought the stocks as well on, um, on top. It's rarely 60% very happy clients. Um, but we are trimming. So just in the, in the, um, interest of time. Yeah, we're taking some off the table at the moment because we went really hard at it. And, um, and that look, I think this, this, this, and topic, um, and tropics mythos is, it's, it's scared. There's not a lot of detail around it. But governments are scared of this thing. And then everyone's just realized that, you know, letting these things loose. No, like this, this, no one's going to take a company down, you know, building something on Claude in a garage. So it's not going to happen. Um, but there was, there, that was that, what that SaaS Bocholibs fear was about, that every software company was going to have broke. Like, yeah. So, but yeah, um, we're trimming at the moment, the buying weakness. Okay. All right. Um, the double buying weakness. Yeah. Yeah, both looking to buy the pullback. Right. Let's now turn, we'll probably just start looking at energy. And in fact, we're going to do a comparing contrast. Blue energy. Uh, it's clean energy. Take a solid oxide fuel cells and electrolyzes that generating the electricity using hydrogen with that combustion. Um, Mark Gada. Um, yeah, look at interesting concepts. Um, I would probably back the small modular reactor, um, before this. And, um, I think hydrogen, you don't know how long they are going to take to build. What's happening? They say that they're quick to set up the small modular reaction. But I did, I mean, it's more than 10 years. Oh, no, where we two years. No, no, it's a four. Yeah. Oh, I was talking to a couple of different energy analysts. They already exist. And it's more about what, you know, what level of enriching uranium that they can use. So, um, anyway, given the US governments made key investments in three to four, um, uh, SMR, you know, they may be they loosen the regulations a little bit, but, um, but look at it, bit hydrogen as well. Like it just, it's still just too expensive per unit. Um, I'm a big fan of hydrogen long term, um, because obviously, you know, if they get it right, it's clean. Um, you know, we can run them renewable. It's a good way to store renewables and you can ship it and etc. Um, and I think there is definitely a future, um, for it, whether it's now, whether it this companies my money now, um, probably more. not. If like for those who are I guess ESG minded want to back something like this in you own it maybe hold it but it's it's really early stage technology. I don't necessarily see this. One thing I quite like about some of the SMR companies is they're already embedding their infrastructure and their power management and they're using natural gas and when the SMR is already they'll flick it over so they're kind of their businesses already but yeah more for the future and I'll definitely keep an eye on this but I just yeah I it's not I think encouraging signs because there's a lot of talk about hydrogen change in the world but it's not I don't think it's there. I'd be watching it like if you're a believer and you want to hold it hold it but just understand that it's not like it's not going to be a cornerstone stock and you pull it out like you get a like it. A bit of a different view on that they don't actually use hydrogen by the way it's all natural gas so all of these machines and the same with the other one is that they use hydrogen because they're sexy and they get governments and stuff. Now the machines the the the catalyst can use natural gas hydrogen or even methane and stuff off the rubbish tubs so they can use any sort of input gas. So you're saying they're not using it. No they could use hydrogen. Right. So what they are using in reality is natural gas because that's abundant and and check hydrogen is is a massive problems you can't deliver it in all the rest of it. Yeah. So that's not a problem. The companies now just reported first quarter and they reported a 70 million something gap profit so it's their first profit ever. This has been a historically a loss making company. I've looked at it before so we actually have done some work on this company and the technology is great but it's it's it's considered too expensive because but what because we're so energy starved now and that the big data center builds can't get any energy you can't get turbines, nucleus to the a few years away and so on. Bloom came in a base of the week in action to give you power in nine months but it's going to cost you more than you would have paid for the others but it also it gets them off the grid you know you can have it specifically for the data center so there's a lot of plus the plus it's green and you can get all the benefits of that for the company too. So the bottom line is I've got I think it's at least five billion dollars of committed contracts at the moment they're going to have a billion 750 million revenue this year so they've gone from loss loss loss profit and very big order book. Now I don't know about their their delivery so it's going to be about execution but it's looking really really good and they like we talked about Cerrobras they're in the market right place right time in that you can't get it so if I can get it from these guys I'm going to yeah and that's what's happening they can sell whatever they can make what I don't know is how fast they can gear up to make these things. So I think it's definitely I would hold it if you've got it and it's potentially a a buy but I I need to do some more work on I missed it I was going to buy it last year I wish I did because it's got up 500% or something in the last one. Well I was going to do it I was a speaker. I was going to get it didn't. But there's one other thing too that's happening is we didn't cover off before with the the nuclear one was SpaceX with the orbital compute is going to happen faster than people think I think the first lot will be up there with it well within two years and probably within a year you've got to think Musk speed yeah it'll probably be within a year and that's going to start bringing in another economic model in to compete with terrestrial data center so therefore it could take the pressure off of what people will pay for energy which then might hurt. Don't know. Alright in receipt if that comes to pass so quickly so Mark let's then turn to plug so now this essentially is another clean energy company it builds hydrogen fuel cells like flies us but the infrastructure also needed to produce the transport and store hydrogen. Don't know a lot about the company I didn't read comments on it and stuff and the review of a lot of the people in the market is this is a absolute pump and dump bullshit company and yeah not to touch it and they've had the whole history of coming out with stories they're not delivering they've been losing about 18% a year they've got quite a lot of debt. Market gap is about four billion. The plug is a pure play energy so there's they're arguing they're pure play hydrogen so they're really doing the green washing line whereas bloom don't so if you're going to invest in this space by bloom don't buy this. It's a big no for you that blooms more subtle about their green washing because things probably what you meant but yeah no this is categorically so like if you're going to pick one of the two blooms definitely better for sure and yeah there was too many there was too many sort of that bullshit bingo buzz words in there like I just couldn't I just read it just going this is written by a marketing person or AI I don't think actually AI could be as verbose as what some of the marketing was but it just goes to show like they've I mean they've been bloom that you know that underlying business that Marx talked about I look we're not because of the hydrogen it's been screened from from from our point of view but they lead with it though so that's I mean it's a kind of a missed opportunity you got to dig it because most of the time they are like this where they're just trying to greenwash and then you know and look if there's always that one story of that one company that makes it but like there's just a hundred people who have just suckered you in and on the money yeah I'm positive hydrogen just not right now and I don't like yeah I would pick the yeah I pick bloom I have a plug right oh let's sum it up then and Cerobris now I suggest if you want some detail on this watch the show back and get Martin Lawrence thesis of why he would put this as a specky bite a Mark Gardner or so in that camp as well Intel which keeps coming up obviously benefiting from that that must momentum it is a cell from Mark given where it's run to Mark more and more likely a specky bite but just Michael in its history which he calls it dog it's sort of one of those kennel stocks if you like crown strike it is a hold from Mark more and buy a pullback as would in fact Mark Gardner and bought it but you'd be trimming it at this point bloom uh Mark Gardner's watching it Mark more and would yeah similar maybe hollets and plug there don't plug in to the stock is the stronger stronger yeah it is a strong self if you want to be aware all right that is the show gentlemen Marks thank you thank you for value three by Gardner from MPC and thanks to you for watching the call is brought to you by Centuria an ASX listed property fund manager with 21 billion dollars in assets under management wanted to diversify beyond decudies explore the Centuria Sydney CBD Prime Office Fund at centuria.com.au