Episode #158: Tobias Carlisle, Acquirers Funds, “The Way To Get The Best Performance Is To Concentrate Into Industries When They Get Cheap”

Episode #158: Tobias Carlisle, Acquirers Funds, “The Way To Get The Best Performance Is To Concentrate Into Industries When They Get Cheap”

 

Guest: Tobias Carlisle is founder and managing director of Acquirers Funds, LLC. He serves as portfolio manager of the firm’s deep value strategy. Tobias is the creator of The Acquirer’s Multiple®. He is also the author of the books The Acquirer’s Multiple (2017),  Concentrated Investing (2016), Deep Value (2014), and Quantitative Value (2012).

Date Recorded: 5/14/19     |     Run-Time: 56:57

Summary: Toby begins by providing some detail about his new fund, The Acquirers Fund, a long/short deep value U.S. equity fund. He then spends some time talking about the short side of the portfolio, getting into the thoughtful approach he takes in considering positions including sizing, valuation, balance sheet factors, and stock price factors. He explains that the broad opportunity set looks good for short positions right now.

Meb and Toby shift to talking about the long period of underperformance for value investing. Toby hits on the fact that French/Fama data shows value has had its worst 10 year period ever based on the price/book ratio, and notes value has underperformed for an extended period based on other valuation metrics as well.

Meb then asks Toby about his process. Toby gets into some detail about his valuation process, and why he favors it vs. other valuation approaches.

As the conversation winds down, Toby chats about his own podcast, The Acquirers Podcast, some interesting guests he’s hosted recently, and what’s on the horizon for him and Acquirers Funds.

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Links from the Episode:

 

Transcript of Episode 158:

Welcome Message: Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the Co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Meb: What’s up podcast listeners, today we welcome back our guests from episode 77, which also happens to be my favourite number because it’s Hall of Fame Karl Mecklenburg Denver Bronco, have the jersey hanging somewhere in my closet. Anyway, our guest is the Founder of the Acquire Funds serves as the PM the Deep Value strategy. He’s also got a deep voice, and he’s the author of the websites Acquires Multiple and Greenbackd, and several books including “Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations.” Welcome back to the show, Toby Carlisle.

Tobias: Thanks for the great introduction, Meb that was awesome.

Meb: Yeah, Toby. What’s up, man? You’re here in LA and Congratulations, you’ve got some news. You just launched a public fund. What were you thinking?

Tobias: I don’t know, I was following your lead. I always say Meb Faber with seven years in the future. So I’m roughly seven years behind you.

Meb: Well, I don’t know what attracted to you about this idea of just… it’s almost like slowly drowning or getting water ported. But welcome to the party, glad to see you chose an ETF. Talk to us, what’s going on? By the time this podcast drops it’s already gonna be out, is the ticker symbol T-O-B-Y?

Tobias: The ticker symbol is Zig Z-I-G, as in zig when the market zags. And the fund is called the Acquirers Fund, which is a play on my “Acquirer’s Multiple.” So the idea is basically… it’s a deep value fund, but the wrinkle in this one is it’s a long- short, and it’s U.S. equities. It’s 130-30, so it’s a long-biased fund. But I wanted to put the shorts in there because I do think that the shorts add something very interesting to the fund. I think it adds a little bit of alpha in up markets, but particularly in down markets, it really stands up.

So the long side, because that’s the stuff that I’ve focused on most and written about most in “Deep Value” and “Quantitative Value,” which is a book that I wrote with our friend, Wes Gray, back in 2012. So the idea was that “Quantitative Value” in particular, we went through, we found every bit of academic and industry research that we could find on fundamental and value investment strategies, stuff that was decades old to update it and see if it still worked. And some of it had stopped working. Some of it probably never did work, because it was data mined at the time that it came out. And we built a model that ended up being que vous which was Wes’s strategy.

And I was sort of interested as we were going through that process that there are a lot of counterintuitive things that occurred. And basically, when you’re in the deep value world, sometimes worse, on a fundamental level means better stock price performance. And I think the reasons that people just give up on these companies.

So we’re looking for things that are depressed at a business level. So the business is having some sort of problem because say, the industry is no good, or they think there’s some competitor, some new entrant that might be a .com style competitive that’s gonna put them out of business permanently. And we try to buy them when it looks darkest. And then we hope that we get a little bit of mean reversion and the business improves, and we get a little bit of better performance from the discount to the intrinsic value. And so as both of those close, that’s how we generate returns on the long side.

And I use, as my screening methodology, this thing called the Acquirer’s Multiple. So when we tested all these different price ratios, the one that we found that worked the best was enterprise-value-on-EBITDA. And that’s what I call the Acquirer’s Multiple basically. It’s a metric that’s similar to the one that private equity guys use and activist use to find undervalued targets. It’s a metric that sort of looks through to find cash on the balance sheet, and operating income that… so the company might not be profitable at the very bottom line, but it could still be generating good counting. So then make sure that’s matched with cashing.

So we do a full valuation after that holistic valuation that looks at the balance sheet, looks at the financial strength and so on, looks at the cash flow, looks at the income to make sure that’s all there, make sure they’re buying back stock. So they’re taking advantage of that undervaluation. So we like to shareholder yield too, is one of the metrics which… I know that’s a metric that you like. And so our long book is a very traditional, sort of deeply undervalued portfolio of a lot of older style companies, big solid cash flowing, share buyback type companies. The short side…

Meb: Let me pause real quick. Talk to me a little bit about how that looks. So how many names do you own? Are they equal weighted, and I think you mentioned this, but it’s quant and discretionary as well?

Tobias: Right. So we screen first to pull up those names. And then in a previous life, I was a mergers and acquisitions lawyer, and the life of a junior mergers and acquisitions lawyer is going through and doing diligence. That means you go through all the documents, you try to find anything that’s sort of hidden in the management discussion analysis, hidden in the notes. And so that’s part of the process to try and pull things that natural language into… which should rightly be treated as liabilities, or sometimes even assets that should be pulled in.

Just to make sure because I think that the problem with many quant approaches is that the metric can be fooled by things that can’t be pulled in that otherwise we would all agree are genuine liabilities or very occasionally assets. So that’s an important step of the process. And what it means is that we end up with a portfolio of all the things that… if you can think of an industry that everybody hates at the moment, then it’s well represented in the portfolio.

Meb: What’s most hated right now? I’m just trying to think of industries… [crosstalk]

Tobias: Financials.

Meb: Financials, really?

Tobias: Lots of financials, lots of insurance, commercial banks, thrifts, I think that maybe energy, energy is pretty…

Meb: That’s what would have been my guess. My guess would have been energy. So how many names do you own?

Tobias: We’re quite concentrated for this style of funds, so it’s 30 names long, equal weight to 4.33 recurring at inception, to the extent that you can get that sort of level of granularity with positions that get into the fund. But that’s what we’re aiming to do. And we don’t necessarily constrain by industry, or by sector, because in my opinion, the way to get the best performance is to concentrate in the industries when they get cheap. Companies and industries tend to get cheap together because what ails one, ails all of them.

Meb: So theoretically, you could own 100% in airlines?

Tobias: It would be virtually impossible for that to happen. But I don’t think there are enough airlines around.

Meb: Well, now that WOW went out of business, I was so sad. I was a big WOW flyer over to Iceland. And not surprisingly, when you run $200 across the Atlantic flights from Los Angeles, it’s not a viable business model. But…

Tobias: That’s a business model of very many tech companies at the moment to basically sell below cost run.

Meb: Okay, I got a million more questions. But fund, is it domestic only?

Tobias: Yes. So U.S. companies only because the research that we’ve done is based on gap. So at the moment, gap is the way that we’re doing the analysis, and international companies suffer some version of [inaudible] local implementation. Therefore it’s just a wrinkle that we haven’t solved just yet. So at the moment, it’s a gap.

Meb: Well, good. That’s a perfect lead into an accompaniment, you better launched Zag as the international version, I assume that’s what…

Tobias: That’s where we’re going.

Meb: Good. That’s smart. All right. So got a portfolio, you own about 30 names…

Tobias: Let’s talk about the shorts. Shorts is not something that I’ve discussed a lot publicly because I think it’s a great way to blow yourself up really easily. But the way that we implemented first, we sized them small, each one is 1% at inception, there are 30 names at 1% at inception. And the sort of names that end up in there… Let me tell you how they’re chosen first. We look for… It’s not the opposite of the long, so it’s not just overvalued, to the extent that it’s possible to value these companies, they are extremely overvalued.

In many instances, it’s just they’re not easily valuable, because they’re not generating any income, they’re not making any money at all. For the most part, all these companies have done is raised money, and then burnt it. So the way that we find them is they have really junky balance sheets, you know, negative operating income, negative cash flow, they’re issuing stock to stay alive, they’re raising debt to stay alive.

And then that’s not enough, on top of that we look for things that haven’t gone up for a year. And the reason we do that is that, absent that last requirement that I put in there, you find there are lots of companies that are very popular, that have terrible financial statements, and no value investor could buy them. But somehow they kept to the public imagination, and they tend to go up a lot every year.

And a great example of that is Tesla. That’s actually not in the portfolio right now, so I’m gonna talk about it as an example. But it’s a terrible financial statement, losing money in a highly capital intensive business, raising capital all the time by selling equity and not making a great deal of money on the other side. So even though I think Musk’s a genius, I think the company has some real problems. And it has been a short up until the formation of this particular portfolio, but it’s not in this one.

Meb: That’s sad, that’s too bad. I love… By the way, I’ve no interest in the stock whatsoever being a quant, it very well could be in one of our portfolios, but I highly doubt it, but I love the cars. And it’s always fascinating to me with a lot of these stories stocks, because we tweeted out the other day I’m like there’s like tens of thousands of investment opportunities out there and everyone’s obsessed with two. At the time I think it was Tesla and Bitcoin. I don’t know what the other one is now, Tesla and something else. But there’s probably so many other just chunky terrible companies.

What general sectors or to the extent you could list any names? What’s the process? Like how do you treat the shorts? Do you treat them differently? What’s the exit cover criteria? Talk a little bit about the process. And how it may be different than a long process.

Tobias: Definitely need to be much more careful with shorts than with long. So with a long, if it goes bad, you can just hide under the covers, and the worst thing that happens is it goes to zero. With a short, the mistakes keep on getting bigger and bigger in the portfolio. So at some stage, you have to kind of deal with that problem. A lot of that’s taken away by the way that we rebalance. So the rebalancing is done on a quarterly basis. So we also screen out the most heavily shorted because those are… the borrow is just too expensive and they’re too popular, they’re driven too much by sentiment.

What we want is something where the narrative is very positive. But the narrative is completely divorced from the underlying reality of the company, which is reflected in the financial statements. It can’t be a very positive narrative either, because you want them eventually to reflect the underlying terrible business that’s actually in the financial statements. So that’s why we look for something that hasn’t gone up for about a year. If that is the case, then I think that that illustrates that investors are getting a little tired of the story, they sort of need to do something special. And they’re unlikely to do that, for the most part, because they’ve just run out of cash, they’re burning cash, they’re heavily indebted, they need to issue stock to stay alive.

So that describes a few companies in the portfolio. Snapchat is in the portfolio, Grubhub, Dropbox, lots of those sort of software internet type businesses. It’s not to say that those businesses can’t revive, it’s just that at the time that they are in the price and the value are so far divorced and the value’s deteriorating, that I think it’s a reasonable bet for a quarter ahead.

Meb: Are you starting to see a lot of these super high price to revenue stocks, there seems to be a lot of targets out there. Are you finding… just from a general standpoint, what’s the broad opportunity set look like?

Tobias: I think it’s good. I think it’s extremely good on the short side. And I think that now is a particularly good time because I do think that we can look at any of the… most of the listings that have come to market over the last year or two have traded well down. So Blue Apron, Snapchat, and more recently, Lyft and Tesla have really stumbled out of the gate.

Meb: Yeah, thank you for bringing up fresh wounds as a Lyft shareholder who’s locked in for five more months. You know, it’s funny, because I go back to my late 90s college student, you know, my favourite shorting strategy was shorting these IPO lockups where you haven’t seen a similar world really, since then. Where you have all these companies that were coming to market that just were losing tons of money. It was worse in the ’90s’ you had so many that just… at least lot of the big companies now have real revenues, and in some cases, real earnings growth, back then there was neither.

Tobias: Many of them do, not the ones in my portfolio, but that is right. So you could say, well, Netflix is in the same boat, right. But I think the underlying core of Netflix is a very, very good business. Even though I don’t think the financial statements are that great. The core of the business is excellent, like that sort of recurring revenue subscription, that’s potentially a very good business. I’m not entirely sold on it, but I do think it’s got potential. Amazon’s another one that’s phenomenal business, even though I think it’s probably very expensive. But you’d be a maniac to try and short something like those two.

Meb: Yeah, the shorting it takes a certain mindset. All my short friends are always a little bit crazy, I’ll put you in that bucket. There’s always like a little bit of wiring that just, like, I feel like it just doesn’t hit the normal synapses the same way. But I think you have to think that way otherwise… I’m the opposite, I’m like, the world’s easiest optimist every single stock pitch I hear, I’m like, that sounds like a great idea. So that’s why I’m a quant.

Tobias: I’m the same, but I’m a value guy too. And I think the financial statements tell the truth like I really do. I think that for long periods of time… and this is an unusually long period of time where the financial statements haven’t been a limiting factor on the stock price. But I think that in the ordinary course, the price can’t fly above the reality of the company forever, it has to come back down eventually. And if it doesn’t, then value investing doesn’t work. And there’s a chance that value investing hasn’t worked for five years. So maybe value investing doesn’t work.

Meb: Let’s talk about that for a minute.

Tobias: Well it’s been an unusually long period of time, you can pick a ratio the way… price-to-book value, the Fama-French data shows that price-to-book value has had its worst 10 year period ever in the data. And it’s actually negative over those 10 years, which is so difficult to fathom. But then there’s also… the prob there are guys like a Shaughnessy Asset Management have raised some serious issues with price-to-book value as a metric for uncovering a low price to book… for uncovering value.

Then you could look at any other flow metric like price-to-cash flow, price-to-income, price-to-dividends sort of broken, to the extent that it ever worked. Those metrics that I think are probably still good metrics still have this incredible underperformance unprecedented in data going back 60, 70, 80 years, where they’re now underperforming a negative over a five year period and looking very ugly over a 10 year period.

So it’s sort of almost an existential question, do these things ever start working again? And I think that when you start feeling that way when you start thinking that way, when value investing is kind of a punch slot… and I do think that that’s getting close to the point where value investing is about to start working again.

Meb: Well, I tweeted out this morning, I got a note from SocGen, that said, “The Value/Momentum combination strategies have struggled for most of 2019, recording one of the worst starts to a year ever. This follows an already very difficult 2018.” And you had a blog post on price-to-cash flow recently, which said, “In December last year, the value decile of portfolios formed on price/cash flow hit its worst performance relative to the glamour decile *EVER* going back to 1951, underperforming by 59% since June 2014. In the latest data to February it’s recovered a little, but still underperforming to the tune of 57%.”

I mean, some of this rhymes in my mind to… I mean, look how much Buffett underperformed the cues in the late ’90s,’ it was something like 150 percentage points. What do you think are the main drivers of this spread? And obviously, this is just gossip and speculation. But what do you think could be any potential catalysts? I mean, these are obvious in retrospect.

Tobias: That’s the question right. There’s two answers, what is the cause of it? That’s a much more difficult question to answer. What is the reason for the massive spread that exists now? So the spread between the most overvalued, and the most undervalued, is as wide as it has been since the peak of the .com, boom. And so after that, it was a very good period of time for value investors. You could be long only value investor and see your portfolio going up when the market was falling over.

But the reason for that at the time was because value stocks were unusually undervalued. The strategy was as cheap as it had been for a very long period before then in the data, probably it was unprecedented at the time. That’s not the scenario that we have at the moment. Unfortunately, what has happened is that the value stocks are still pretty rich relative to their long-run average. So they’re roughly 50%, overvalued relative to the long run average. But the spread is still incredibly wide. And the thing that is driving that is the overvaluation of the most expensive stocks. And so there are multiple causes of that.

And I talk to lots of people about… that’s sort of the first question I ask everybody that I meet. What are the causes of that? And the answer… the best one, I think comes from Michael Green who’s at Teall Capital Management, he says, “It’s passive flows, they’re just chasing the market-capitalisation weighted index, like the S&P 500, Russell 1,000, whatever it might be. The flows go to the biggest companies, which tend to be the ones that are the most overvalued, and they don’t flow to the smallest companies, which tend to be more undervalued.” And he thinks that that’s sort of reaching a tipping point where it will never go back into stasis.

I don’t subscribe to that theory but I understand what he’s saying, is he says that the passive gets so big eventually, that the fundamental investor’s, value investors can’t sort of guide it back into place. I don’t think that’s actually what’s gonna happen because I think that instead, what happens is what happens every single time, it just gets too big, and it falls over under its own weight. And when that happens, the way to capture that spread between the most overvalued and most undervalued will be in a long short portfolio, which is why I’ve implemented the shorts.

Meb: Yeah, we talk a lot about market-cap weighting and how it’s suboptimal here. I agree with you on the stance of market-cap often leads to overvaluation of the biggest stocks and it also… But I differ on all the people who pull their hair out, gnash their teeth about passive. Because in my mind, markets always succumb to gravity. And people are capitalist at the end of the day, and those sort of things can only last so long before you have the next generation’s Apple, which may be a $200 million company that starts exploding and becomes ascendant. And so people obviously are gonna invest in that. Now whether that’s Impossible Foods which just announced today that Katy Perry was investing.

Tobias: Impossible to beat.

Meb: Yeah, I love the Impossible burger, the Beyond burger, I think is mediocre. But we did a poll on my Twitter and 75% said they preferred Impossible over Beyond. But it’s funny because they were trying to raise money in a billion dollar valuation. Beyond went public, they were then able to raise money to $2 billion valuations. So they doubled their valuation just because of Beyond and actually saw the valuation going off on private markets so they have a handful of these. Private marketplaces where you can buy and sell stock, where they were trying to sell it at 4 billion. So the late stage private seems like a prelude to…

Tobias: It’s pretty frothy.

Meb: Yeah. So again, the catalysts are always obvious in retrospect, maybe it’s the massive flows going into Zig will put pressure on these companies. But you never know, right? I feel like… I don’t see any major catalyst but then again, I probably wouldn’t.

Tobias: As you say they’re only visible in hindsight. There’s a great… Bob at “Above the Market” has written a great post that came out maybe two or three years ago, where he talked about Phelan who… Michael J. Phelan P-H-E-L-A-N not F-E-L-O-N. Who was the president of the NYC in the 1987 crash, which is now… everybody says now, “Well, that was programmed trading that caused that, right. It was cascading selling in the futures market.” That was the first time I think maybe that people were able to the hedge their long equity positions.

And he was asked at the time what he thought the causes of it were, and he listed five and none of them were programmed trading. And he said, “It’s just one of those things it’s like a… How can you identify which grain of sand makes the sand pile tumble? You can’t. It’s just the straw that ultimately breaks the camel’s back. The camel’s back is not visible until well after the fact.” We might be wrong about what the eventual cause is, sometimes these things just collapse under their own weight.

Meb: Yeah, I mean, I think most of the research has shown that high valuations lead to markets being more fragile where they have a bigger chance of big fat drawdown over the ensuing three to five years.

Tobias: Spitznagel had some research like that, right. That’s exactly what Spitznagel shows. The scale of the drawdown increases as the market gets more overvalued. That sounds crazy to even say that, like that’s an idea that you’ve gotta tell people like of course, that’s the case, the more overvalued it gets, the further it’s gonna fall before it hits fair value.

Meb: It seems like basic arithmetic, but I always scratch my head when people talk about… globally I’m of the opinion, obviously, that I think a lot of some of these really cheap markets around the world are better opportunity. And they always say, “Well, those are so risky.” And I say, well, actually, the evidence is usually these expensive markets are quite a bit more fragile. And it doesn’t matter even the metric you use, where on the valuation side you could use any of them.

Let’s talk a little bit about your process. So I’m familiar, I’ve read all of your lengthy works, but you talk about liking… Who is it that doesn’t like your preferred metric? Is it Munger who claims to not like enterprise-value-to-EBITDA.

Tobias: Well Buffett and Munger have some criticisms of it. And it’s worthwhile dealing with those they don’t like EBITDA. And there’s two reasons why they don’t like EBITDA. One is that in the LBO craze in the ’80s,’ it was used as a justification for paying a too high price. And they said, if you’re using your EBITDA to fund debt payments, like EBITDA assumes that you’re able to make… it includes depreciation expense. Which… that doesn’t mean that you… even though it’s a non-cash expense, you do have to make CAPEX. Like that’s a real expense that you have to pay, you can delay it a little bit, but ultimately have to pay it. And I have no quibble with that.

I think that’s an accurate description, you shouldn’t over-lever these companies. So I don’t look for things that are over-levered, I look for things that if anything, they have net cash on the balance sheet. And the other criticism that they have is that EBITDA… And this is more of a ’90s’ criticism. EBITDA is a metric that’s non-gap. Management tell you what they think EBITDA is. And I think the easy solution to that is to ignore what management tell you and do the calculation yourself.

The only reason to do the calculation, and the reason I like it, is it makes different companies with different capital structures, different tax payments, different levels of debt and equity. It just makes them comparable on a like for like basis. It’s not the only metric I use, I wanna make sure the cash flows there. The thing is, I just don’t like a DCF. So I think a DCF… Which everybody holds up as sort of the gold standard evaluation, I don’t think that it is. I think that the gold standard evaluation is cash return on invested capital.

So if you compare, you have a 10-year treasury bill yielding 5%, and you have a company that’s earning a 10% cash return on invested capital, that company should be worth approximately two times its own equity. So if it’s trading at some discount to that, that’s a company that you can buy. If you think that in the future, it can continue to maintain that high cash return on invested capital.

The problem with using return on invested capital… And I’m using a variation over there to describe that, is that it’s highly mean reverting. Which means that when it’s very high, and that’s a company that you might want, it trends back towards the mean, it trends back towards the average. So what you’re doing is you’re buying something where the valuation tends to drop. So there’s about 4% of companies that avoid that. Everybody knows roughly who they are, and everybody pays a lot of money for them because they compound and grow pretty sustainably over time.

For the other 96% of companies, you want something trading, you wanna buy it in a trough because its better performance is in front of it, because it’s gonna tend to mean revert up. It’s gonna do better over time. So as a value guy forward-looking my valuation, I wanna try and buy something closer to its trough than its peak.

Meb: How much sort of turnover exists in your world? Are you sloth like Munger and Buffetts claim to be, are you a bit more active? And is it different for the longs and the shorts?

Tobias: The turnover… It’s about 50% on both at each rebalance state. And part of that is that you need a series of quarterly results to have an idea about the performance of the position that you have on. So it’s entirely possible. So I think about 50% of the positions that we put on are gonna be mistakes. I think we got a hit rate of about 50%. It’s just that we hope that we make more money on the ones that work, and we lose on the ones that don’t work.

So it’s a question of magnitude and frequency, we think that the magnitude of our winners is gonna be much more than the frequency of our winners. So we’re winners about 50% at the time. So we might put a position on. We’re always putting these positions on where it looks darkest that they’re not great businesses long, and they’re businesses we’re putting on short that we know that they’re terrible businesses, but we think that they’re massively overvalued. Now, it’s entirely possible that in between those two quarters, something happens that changes our view on it. And if that happens, then we’re gonna take it out of the portfolio. If I had Buffett’s genius, I wouldn’t need to do that. But I don’t. So I do.

Meb: I’m trying to think of that, like the beauty of having this process where you’re somewhat immune to the nausea of buying some of these companies. Are there any examples that you can look back on in your investment history where you just bought some just disgusting name, and it either worked out great or terrible? You’re just like, oh my god, I don’t wanna buy this.

I remember we were doing quant screens over a decade ago, and big dog t-shirts kept picking out, and I was like that’s a public company. I didn’t even know that’s a public company. And I was like God, I don’t wanna… I mean, it’s probably not anymore. This is literally a decade ago. I’m like, God I really don’t wanna buy that stock, it’s the most absurd, preposterous company. I don’t even remember how the outcome was. But what are some names either current or historical that come to mind when you think of like really hard investments you just don’t wanna make?

Tobias: It happens all the time. When I was just starting out, I liked the old Graham net, that’s a great way to get to understand how deep value works. Because Graham net-net companies that are trading at an incredibly depressed valuation, the net-net is net of the net current asset value. Which is the most liquid portion of the balance sheet, it’s cash, receivables, and inventory. And then you’re trying to buy at a two-thirds discount from that after backing out all the liability. So it’s an incredibly depressed price.

The kind of companies that get depressed like that are terrible businesses, there’s no question about that. And the research shows that if they’re unprofitable, they do better than the profitable ones. And if they’re not dividend payers, they do better than the dividend payers. It’s an upside down topsy turvy world. So every time I would put one of those on, I would think for sure this is the one that doesn’t work.

And then just because the business sort of improves a little bit, turns around a little bit, a few quarters later, they’re a completely different business. And people are like, “Well, maybe now this is something that… maybe we should following this on an earnings power basis. And maybe this is something that is gonna do a lot better.” But that stage typically, I’m selling it out and trying to buy something else.

So many, many times I bought something that I had taken a big discount to cash, they make a discovery or they get taken out that happened all the time. So now often we do the opposite with biotech in the short portfolio. If the biotech is issuing stock to stay alive, for whatever reason, it doesn’t look like they’re gonna make it. I think there’s still hope often that they’re gonna be able to do something and I think that’s a good time to short it.

Meb: You just brought back a memory. I was recently in the Morningstar Conference, and we were talking about dividends and buybacks. And I think there’s obviously a positive screen on shareholder yield, which can be agnostic, whether it’s dividends or net buybacks. But a question from the audience and I joked halfheartedly, but have seriously, as they talked about negatively screening against companies that are just issuing a ton of shares.

And the example that he gave was a lot of the mining companies that are just serial issuers, they just puke out shares outstanding all the time. And I said be careful because someone pretty soon probably GlobalX will launch a shareholder yield junior gold miner fund. But I was like, it’d probably be a pretty good idea because a lot of people forget that part of the benefit of doing these value screens is yes, it’s all well and good you’re buying the cheap stuff. It’s also that you’re avoiding the kind of mirror image or things that are the opposite.

Tobias: I see your point. I mean, this is a… I think it’s a very good signal. Shareholder yield, which is dividends… I’m not telling you I’m telling the listeners, dividends and buybacks. That’s a very strong positive signal. So a company that’s buying back more stock than any other company is a company that’s trading cheaply, has the financial wherewithal to do it. And has management that’s looking after the shareholders.

On the other side of the equation, a company that’s issuing a lot of stock, so that the negative drag on the companies that issue a lot of stock is more than 4% a year. And the positive tailwind on companies that are buying back stock is positive 2.5% a year, which is a very widespread. And we incorporate both of those into the model on different sides of the model naturally.

Meb: Interesting. As you look around, there was a topic that we hit upon briefly, that I think is challenging. Because I’ve heard both sides of these debates on… And this is something I struggle with, is the topic of some of these factors and throughout time. I mean price-to-book one being an obvious example. Are there cases where you run your screens, and you’re looking at sort of the discretionary side of this where over time you incorporate new research? Just talk about that process in general. I mean, about how you think about improving what it is that you guys do. And you can feel free to take this as many ways as you would like to.

Tobias: There’s two questions there. One is how often do you override the quantitative model? And the other question is, how do you improve the quantitative model as you go along? So let me deal with those two separately. Improving the quantitative model we’re constantly testing, anytime a new idea comes up, test that with all the normal rules for testing. Researching in one universe, testing in another universe, trying to do all the things so that we’re not fooling ourselves. And ultimately, trying to do things only because they make sense to me as a value investor first and foremost. They’re not sort of… like, I wouldn’t do anything that made no economic sense to me, but seemed to outperform if it had no reason. But I assume that that was something that was gonna be arbitraged away.

I try to find the economic reason why something will work, and let’s take the buyback, share issuance one as an example. If I didn’t know that there was that positive drift to buybacks, I’d still wanna be in a company that was undervalued and buying back stock. Because logically and intellectually, it makes sense to me that you buy something that’s undervalued, that management’s buying back stock, that’s concentrating the remaining value in my shares without me having to trade. So it’s incredibly tax efficient way of doing it. And the reverse is also true if you own something, and you think there’s value there, and it’s undervalued, management’s issuing stock, and they’re diluting your holding.

The other question is overriding the model. So I’m extremely reluctant to do that. And the reason is that there’s this very well established theory in this… I don’t know what the whole area of study is. But basically, there’s an area of study where they look at the performance of experts versus simple statistical models. And simple statistical models consistently outperform the best experts, even when the best experts are given access to the simple statistical models, we just override too often.

And that theory is known as the broken leg theory. And the idea is best explained by an analogy, where when you go to the movies… Meb goes to the movies because he likes action. He doesn’t wanna go outside when it’s raining. He’ll go outside if his wife wants to go to the movies. So there’s some… we could build some model for when you’re prepared to go and watch a movie. And then we discover one weekend, you’ve gone snowboarding, or you’ve gone skiing, whatever you prefer, and you’ve broken your leg. And then should we be then allowed to override the model because you’ve broken your leg? And the model doesn’t consider that piece of information. And the answer is no, you shouldn’t.

And the reason is, even though that doesn’t sound logical or intuitive, the reason is because we find more broken legs than there actually are. And that’s particularly true when you’re looking at deeply undervalued companies, every single one of the companies in the portfolio is undervalued for a reason. And so I can identify the reason do I therefore then exclude it from the portfolio just because I know why it’s undervalued?

So the reasons why I can exclude something are extremely constrained to basically, the economic reality of the financial statements is fooling the model somehow. So an example of that is insurers, insurers tend to carry their liabilities off balance sheet, but all their assets are carried on the balance sheet. So that’s something that looks extremely cheap to some of my metrics. But if we include those liabilities in there as they probably should be, the company’s much more expensive. So that’s one example of where conducting the diligence and just having that thought process of is this economic reality reflected in the analysis that we’re doing, where it keeps those sort of companies out of a portfolio where that would be a mistake.

Meb: Your example was a little on the nose. My wife consistently is like, “Dude, can we please go see a movie that is not a superhero movie?” I say, “Well there’s so many good ones out right now, this is some of the best-rated movies.” Come on. I had a huge pout because we just went to go see the recent “Avengers.” And I wanted to go to one of those theaters that has the, like, reclining chairs. And there’s one near you in Cinemark. And obviously, we’re going on like a Saturday night or something. And anyway, I’m still pouting about it, didn’t get a go went to some tiny theater where sound was terrible. So I think I’m gonna go back in.

Your comment is funny because… I said on Twitter the other day, I said, you know, at some point, if we ever get to large enough scale, let’s call it I don’t know, $5, $10 billion, I said I promise… I’ve always wanted to launch a fund called random. Where we do the old school, “Wall Street Journal,” Dart, or we just call it dart D-A-R-T, see if that’s a [inaudible] reserve. I don’t know reserve, but there’s RNDM and DART, where you just throw a dart against the wall and do the old school journal where I’m of the opinion, almost any methodology will beat market-cap weighting by a percent or two over time.

Tobias: As long as you equal weight it.

Meb: So equal weight 100 stocks we throw a big party each year, 100 people get to throw darts and that’s actually, what we buy. I mean, SEC will probably have a problem with that, but honestly, I don’t care if it’s my fund. Maybe we’ll have to do it a private fund, I don’t know. But going back to that concept of what you choose in market-cap weighting.

Tobias: But that raises an extremely interesting point. And it’s worth thinking about that it’s completely anomalous that market-cap weighted funds have performed so well. So exponential ETFs have an ETF called reverse cap weighting. RVRS I think the RVRS is the ticker. And so what they have done is they find the biggest companies and they weight them the smallest, that has the smallest weighting in the ETFs. And the smallest companies have the biggest weighting.

Now, if you believe that equal weight outperforms market-cap weight which it certainly does over the long run, then reverse cap weighting should outperform market-cap weighting materially, but it hasn’t since inception. Which it just goes to show it’s a very unusual time in the markets when basis point market-cap weighted ETFs are massively outperforming.

Meb: Yeah. Well, part of it we say a lot has to do with structure in the markets. And so mark-cap weighting I mean, it is the market, but it has absolutely no tether to reality. And if you were an alien or an Australian, and you said what is a reasonable investment strategy? It’s a totally nonsensical one. Why would you… I mean, it’s literally just price and shares outstanding. It’s the most nonsensical investing strategy in the planet. But you’re guaranteed to own the winners because you’re buying everything, and that just gives you the market. But literally, almost anything else should outperform that over time.

Tobias: I mean, you wouldn’t do it that way, right? You’d look at I think, Research Affiliates, fundamental indexing is a much more sensible approach where you say, let’s look at the actual size of this business. And however you might look at that. Of course, if you’re doing it that way, you’re a value investor, so you might as well go… fully recognise what you are and implement a value strategy.

Meb: That’s kind of my whole point with dividends, I’m like, if you’re gonna do value, do value don’t do some weird stepchild. But you bring up a good point because if you were to ask 100 people off the street, say, “Hey, look, the stock market, how is that weighted?” Or say “The S&P 500, how is the weighting of that?” And people would say, “The biggest companies get the biggest weight.” If you were to ask people, I bet 90%, maybe 80% would assume it’s actually the research affiliate. It’s fundamentally weighted by revenues or earnings.

I don’t think anyone would say, “Oh, no, it’s just the price of the stock times shares outstanding. I bet a non-significant amount of pros would get that wrong as well. I mean, if we took to Twitter, I bet the majority would get it wrong. You’d have to think about how to word it correctly. But I think most people when we give talks or talk to people, I think they assume it’s fundamentals driven, but it’s not.

Tobias: Well, the other thing to note, too, is that it’s not… well, if we’re talking about S&P 500, it’s not only market-cap weighted, it’s float-adjusted too. So that penalises companies where you have an owner-operator, who owns a material chunk of the company that’s not counted towards their market-capitalisation weighting. And then companies that have no owner operators that completely run by managers, which typically underperform, those are the companies that occupy the most space in the index. So you’re incentivised, as an owner-operator to issue stock all the time, makes no sense.

Meb: S&P is also not the best one to use, because it’s actively managed, you know, they have a committee which has shown to be value destroying. But then again, like it’s just the most representative phrase. I mean, you say the Dow it’s even worse, that’s even the most… more nonsensical is the price of the stock. It’s just so crazy.

Tobias: Price makes no sense at all. But the amazing thing is, though, that the Dow Jones tracks the S&P 500 pretty closely.

Meb: Well, I mean, I think what you’re capturing is you’re just capturing the exact same thing. I mean, you know, market-cap weighting is price times shares outstanding, where’s Dow is price. So you’re getting a trend following index, which is trend follow I love, you’re guaranteed to own the winners and less of the losers. And that’s not a bad inherent strategy. But there’s no reason not to include some tethered evaluation.

I mean, my classic example, that RIP John Bogle, I mean, I would love to go back and ask him, or any of these guys that are just the pure buy and hold purists say is there a point at which you would sell this investment that’s long only. And Bogle, before he passed, would say he expected U.S. stocks to do low single digits going forward to the next decade. But in my mind, I was like… And he did this in the late ’90s,’ where I think he had sold some of his U.S. exposure, but to be able to go someone who’s a die-hard buy and holder and say, is there a level? There has to be a level which you would say this is crazy. I mean, the Japan and the ’80s, [inaudible] ratio of 100, like how does that pass any common sense sniff test.

Tobias: It surely the best idea that was. At the outset of your investing, you have to decide what your asset allocation is going to be. And so you already know, I’m gonna allocate X percent to the U.S. stocks, I’m gonna allocate X percent to international, I’m gonna… commodities, bonds and so on. And then when any part of your portfolio is working, you’re taking money away from that, and you’re putting it into the parts that aren’t working. And you’re gonna get hopefully some mean reversion in there.

The thing that makes that outperformance, is this Shannon’s Demon, which is Claude Shannon, the inventor of information theory, which is bits and bytes, and on and off, that sort of powers all computers. And he had this… And you can show this, I think it’s kind of one of the most interesting things in finance, that you can have two anti-correlated assets that both go down over time. Provided that when one is going up, you take money away from it and put in the one that’s going down. And then when it goes up, you take money away from it and put it back into the first one. Over time the portfolio actually goes up, even though the components of the portfolio are going down. That phenomenon is known as Shannon’s Demon.

Meb: I think that’s probably a good example of commodities. I mean, there’s been a lot of papers that depending on how you construct commodity portfolios with futures, commodities, spot prices aren’t particularly that strong of a performer. But because so many of them have nothing to do with each other and they just bounce around super volatile that actually, you get a benefit from that diversification.

Tobias: That’s the reason that I implemented the short in the portfolio because the short should be anti-correlated to the long. I say should be because in any given quarter, anything can happen. But over time, you’re always taking money away from the winner putting it into the loser, whichever side of the portfolio that is. So it should be a compounding strategy that grows over time.

Meb: Well, I mean, hopefully, on the timing, you have done a good job of timing this, I mean, who knows.

Tobias: Impossible to time, right. But I’d rather be doing it now than five years ago. And I’d rather be doing it… And as a value guy, look at the size of that spread. And I say I’d like to start taking a big active bet on that spread closing, going back to a more normal time. I don’t know when that’s gonna happen, I don’t think it’s impossible to know. But I do think that in say, five or 10 years time, it’s clear that I don’t wanna call down the market gods, I don’t wanna call down the thunder and say just to prove me wrong, I’ll keep it widening for the next five or 10 years. But I think that it’s a reasonably good risk-adjusted bet now to be long, short value.

Meb: As someone who does a fair amount of public writing, you got a new podcast, “The Acquirer’s “Podcast,” what has been sort of the general sentiment and mood feedback of the people you talk to? It could be investors, it could be individual people, it could be Twitter trolls, institutions. What’s the general kind of lay of the land?

Tobias: I think that value guys have been struggling, there’s no question about that. So my podcast is focused on value investors. And I like small independent value guys who are completely undiscovered off the beaten path. Which is the value in and of itself is that kind of strategy. I think that they’ve all struggled over the last decade. Even doesn’t matter what their style is, if they’re more sort of systematic, deep value like me, or if they’re more discretionary Buffett style, franchise type investors, it doesn’t matter who they are. They’ve all struggled over the last decade.

But I think that they’re getting to that point where the opportunity set is very, very good for them. Even though I think that that… I set the decile value before, I still think that’s about 50% rich. But within that decile, there are individual names that are just way too cheap, that are just completely mispriced. And I think that they’re feeling fairly positive about that, you know, embarrassed about the track record. Anybody who’s kept up with the market over the last decade, and particularly over the last five years, is just an outright genius. And there are very few of those guys around in value world.

I think that with a better market and a better tailwind rather than a headwind, you’re gonna see some massive outperformance from a lot of those guys. And I think that they’ll be some more famous names come out of that group who are just completely unknown at this time. It’s one of the funny things that it’s easy to name guys who are 10 or 15 years older than me who sort of started in the early 2000s, they’re all fairly well. You know, Einhorn, Ackman, you know, [inaudible] Guy Spier, those kind of guys are fairly well known, but there’s really nobody in the value world from my vintage just because it’s been such a rough run for value. So I think that it’s a mixed bag, sort of, nobody’s got a great track record. But I think that they think that the next five or 10 years is gonna be very good, particularly relative to the market.

Meb: What’s also been this cycle has been a graveyard for old school… not even old school, but just managers that have been around. I mean, the amount of funds that have closed in the past five years it’s incredible. And there’s a lot of reasons for that, but did you go to Omaha this year?

Tobias: I did.

Meb: Was it sort of like a big self-help group where everyone… I mean, I think Berkshire’s underperformed like eight of the last 10 years in regards to stock picks, I’m also a trend follower. So we should get both sides in the same room and everyone can commiserate together.

Tobias: I think it’s underperformed since 2002. I would say this, the thing about value guys is they are all independent and pretty mentally tough for the most part. So they all think that the best stuff is yet to come. And that the market just hasn’t recognised the value in their portfolios. And ordinarily, I’d be extremely skeptical about that kind of view. But at the moment, I think that that’s probably fair that the market hasn’t really rewarded. So this has been a market where if you use Facebook and you buy Facebook, you’ve done very well true of Netflix, true of Amazon, that first order thinking has been incredibly well paid for the last five or 10 years.

But the guys who have one more step in their process where they go and say, “Well, I love Netflix, but let me see if I can value it” or “I love Amazon, let me see if I can value it.” Which is more than Peter Lynch style. Lynch said, “Buy what you know,” but he also said, “Then go into evaluation and make sure it’s undervalued.” If you did that second step, you’ve been punished for it for five or 10 years. And that is unusual going back decades, you’ve been paid to do that little bit more research, usually.

And so I think that we’ll go back into a more normal environment. I don’t know when we may need a big shake out for that to happen. But I don’t think we need that might just be overvalued, becomes a little bit less overvalued and undervalued, just starts working a little bit better.

Meb: So you mentioned on the podcast, you guys kind of have a focus on… I may be putting words in your mouth. Thought you said “Weird and small and different.” Who are some of the fans or guests that you’ve had to date that you think have been particularly interesting, we’ll throw up some show links?

Tobias: Tim Travis runs T&T Capital Management out of Coto de Caza. He’s a Californian guy, phenomenal track record, really smart investor. Looks at really complicated… say a short guarantee is one of my holdings. Also one of his… but then he’ll go in and look at… so it’s got some troubles in Puerto Rico. He’ll go in and he’ll look at, let’s look at the bonds, let’s look at the options. So he’ll think through the full capital structure in putting these positions on. And he will go very, very well in a more kind environment for a value guy. So he’s one guy that I…

Meb: Where did you say he is Coto de what?

Tobias: Coto de Caza. I’ve never heard of it before either, it’s OC, it’s in the OC in California.

Meb: Weird I’ve never heard of it either. I live almost in the OC.

Tobias: Aren’t you in Manhattan Beach?

Meb: I know I said almost, same thing. Keep going.

Tobias: Another one is Ben Claremon, he’s at Cove Street Capital which is actually based in Manhattan Beach. I’ve known Ben for a decade or so, he’s UCLA MBA. Cove Street is like classic kind of value investors where they don’t really care how the values defined, they don’t care if it’s a Buffett style compound, or if it’s an earnings machine, or if it’s an undervalued assets. They’ll just go where the value is. And then they’ll size their positions and trade them according to whatever is in there. They’re running about a billion dollars, meticulous process, and results. I’m not entirely sure what the results are. I’m not talking about their returns at all, but they’re not very well known. Whereas I think that in a better market, they will be much better known.

Meb: How many episodes have you done?

Tobias: I’ve just recorded my 13th, I just recorded Jim O’Shaughnessy a few hours ago actually.

Meb: He has his own podcast, but he only produces a show like once every eight months or something.

Tobias: I know Pat’s got one but I wasn’t sure that Jim…

Meb: Maybe like once a year. Man, that’s awesome he’s like on the Mount Rushmore of quants.

Tobias: Another good one who I loved talking to because our strategies are very similar is Dan Rasmussen. He’s pretty well known at the moment, I think he’s got some good press. And he’s been on real vision a few times. But Dan is sort of… you know, came out of Bain, the buyout shop, not the consulting firm. Did some analysis on what drives the returns to leverage buyouts and found that basically small, levered and undervalued as you’d imagine, that’s what drives the returns to leverage buyouts. Not anything that the private equity firm might implement in terms of improving operations.

And so he has set up Verdad Advisors, and Verdad focuses on basically the kind of private equity-style investments that you would try to take private, he just buys them on the public markets. And you don’t have to pay the takeover premium, you don’t have any illiquidity when you hold them, you can tip them out at any stage, and he has a preference. The point where we diverge is he has a preference for debt on the balance sheet whereas I have a preference for cash on the balance sheet.

When his works, his will go very, very well because that paying down the debt is a very powerful way of generating returns. I just think that there can be a tipping point where you have too much debt. So I just prefer the more conservative end with a little bit of cash on the balance sheet.

Meb: It just seems to me that theoretically, it would be the same thing as just adding leverage, whether it’s on the balance sheet or you leverage your portfolio. I would think that it would just show up you have similar return in Sharpe ratio, I imagine. But I imagine it makes the portfolio more or less volatile. That’d be my guess, I don’t know the answer of that but.

Tobias: He doesn’t short. And I think probably ideally, the way that you do it is you don’t put debt at the portfolio level, you put it at the holding level so that’s non-recourse. But I think that with a short… protection from the shorts, and I think that one there is pretty modestly levered. You can get much crazier 151-90 3x type levered ETFs that seems to go okay. I don’t mind being 130 long, because I really like that heavy concentration into deep value strategy.

Meb: Investors stay away from the 23x, I’ll say it those are fairly crazy to me. Although some of the marketing… I got a marketing email this morning. I don’t know why these guys put me on these marketing spam. But it said, “This is from the fastest growing ETFs shop. We have an all-weather fund.” So let me get this exactly right because I tweeted it out of sheer…

Tobias: Exasperation.

Meb: Exasperation. Says “This ETF’s an all-weather fund that helps your clients win by not losing.” Capital letters win by not losing. “Is a long-only U.S. dividend fund.” I’m like how could you possibly call this an all-weather fund and win by not losing? I’m like this has potential to go down 80 to 90%. And look at the metrics I pulled it up on “Morning Star,” this fund has a higher valuation than the S&P which is already high, on every single metric. I’m like this is… mismarketing people, I don’t know what to say.

I like Dan’s comments partially because the private equity industry… in my opinion, this could be the catalyst or one of the accelerators during the next decline. So many people have placed bets on private equity to be the savior of outperformance in this low return world. Where magically you’re gonna somehow get 12, 15% returns. And Dan’s been, I think, spot on about talking about the challenges and unlikely scenario there. But if all of a sudden all these institutions that have been betting on private equity be their savior with large percentage and just run into liquidity crisis.

Tobias: Right. Well as Charlie Munger points out and said Dan’s argument, and it’s a very good one, is that the only reason that private equity looks like it’s got less volatility is because they report on a quarterly basis, and they get to choose their own reporting metrics. Whereas if your positions like ours are publicly traded, you get an update every second if you want one. But Charlie Munger points out that it’s also attractive to the endowments and the people who are allocating because they don’t have to show the big drawdown in the portfolio, so that’s why they keep on getting the money.

Meb: Well, it’s like a wink handshake. I mean, I think like it’s kind of a funny behavioral tweak where like everyone’s in on it. They realise like if I only have to look at it once a year it’s probably not so bad so we should start a fund that only values the portfolio in even years. I think that’d be… everyone will say look it has no volatility.

Tobias: I know.

Meb: What else? What’s got you excited these days? You got a fund coming out as you look toward the horizon 2019, 2020. What else is on your mind? What else are you thinking about it besides procreating? Are you up to like five children now?

Tobias: Three and done I think, the little fella is 16 months, it’s a lot of effort, even one is a lot of effort. Three is bananas. So I think that I’m done on the kids front, I think I’m gonna do this fund. Maybe one more if this one works. And then I’ll just be managing those funds. I don’t have any great aspirations to have a family of ETFs, I really just wanna be a value investor in a world where value investing works, you know. And I think we’re coming into that kind of environment. So I’m excited about the future.

Meb: I think I’ve heard from most of my friends that have lots of children that power laws apply there where they’re like… the ones that have two are like “Oh my god, two is so much harder than one.” The ones that have three are like “Oh my god, whatever you do, don’t have three children.” And then after that the people that kind of just insane who have four, six, eight, I think they’re in their own category of… they’re like short sellers.

Tobias: I think two is harder than one, but I don’t think there is any harder than two honestly, I think that once you broken, each one is just sort of one more into the chaos.

Meb: One more into their locked cages at night. Toby, it’s been a lot of fun. Where can people find more of all your writings, all your goings on, everything you’re up to?

Tobias: So acquirersmultiple.com is the blog where we write about any sort of interesting research we find, we put up links to the podcasts, it’s got my books on it. So “Quantitative Value” which I worked Wes came out in 2012. “Deep Value” in 2014, “Concentrated Investing,” which is we did this analysis of the way value investors have typically concentrated and diversified and constructed portfolios. Because I think that stock selection is about half the battle, the other half of the battle is appropriately weighting and being diversified enough.

And so that’s “Concentrated Investing” and then most recently “The Acquirer’s Multiple” which came out in 2017. I’m on Twitter all day long because I have a sick Twitter addiction at Greenbackd which is a funny spelling G-R-E-E-N-B-A-C-K-D. And the fund is called the Acquirers Fund. It’s listed on the NYC and the ticket is Z-I-G, zig, and the market zags.

Meb: Toby. Thanks so much for joining us today.

Tobias: Thanks for having me, Meb. It’s an absolute pleasure, I love being on.

Meb: Listeners Toby promised if you email him and you’re in Los Angeles he’ll buy you one to three beers particularly to look into his new fund The Acquirer’s ETF, so check it out.

Tobias: You gotta bring the ticket.

Meb: Yeah, exactly. That’s right. We’ll post show notes, links to everything we talked about today on mebfaber.com/podcast. Send us some feedback@themebfabershow.com, we’d love to hear everything you guys have to say. Positive, negative. And please leave us a review, we read all of them, I promise we’ll appreciate it. Thanks for listening friends and good investing.

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