1 00:00:05,840 --> 00:00:09,280 Speaker 1: Strap on your parachute. It's time for What Goes Up. 2 00:00:09,640 --> 00:00:14,040 Speaker 1: It's Sarah Ponzick and Mike Reagan. Hello and welcome to 3 00:00:14,160 --> 00:00:17,640 Speaker 1: What Goes Up, a Bloomberg weekly market podcast. I'm Sarah 4 00:00:17,680 --> 00:00:20,439 Speaker 1: pons Or, reporter on the Cross Asset team and on 5 00:00:20,560 --> 00:00:24,360 Speaker 1: Mike Reagan and editor on the Markets team. He didn't 6 00:00:24,360 --> 00:00:27,680 Speaker 1: even try this time. I've run out of wacky intros. 7 00:00:27,720 --> 00:00:30,080 Speaker 1: I I gotta get I gotta work on that. We're 8 00:00:30,120 --> 00:00:33,040 Speaker 1: done with it all right? Well this week on the show, 9 00:00:33,240 --> 00:00:37,080 Speaker 1: it's easy to get confused or spooked watching markets day 10 00:00:37,080 --> 00:00:40,240 Speaker 1: to day. Rising worries of a second COVID wave triggered 11 00:00:40,280 --> 00:00:43,360 Speaker 1: a nasty stock sell off yet again, but with the 12 00:00:43,479 --> 00:00:47,040 Speaker 1: rally still largely intact, what's an investor to do? We're 13 00:00:47,120 --> 00:00:50,360 Speaker 1: joined by a fund manager who has been in of 14 00:00:50,440 --> 00:00:53,559 Speaker 1: his peers over the last five years. He'll explain his 15 00:00:53,640 --> 00:00:56,480 Speaker 1: process for picking stocks and how he's looking at long 16 00:00:56,600 --> 00:00:59,840 Speaker 1: term secular trends that are being catalyzed by the pandemic, 17 00:01:00,280 --> 00:01:02,959 Speaker 1: and as always, will close out the show with our 18 00:01:03,000 --> 00:01:06,360 Speaker 1: tradition the craziest thing I saw in markets this week, 19 00:01:06,800 --> 00:01:09,600 Speaker 1: and by all means, if you see something crazy in markets, 20 00:01:09,640 --> 00:01:12,960 Speaker 1: give us a call on the Bloomberg Podcast Hotline at 21 00:01:13,319 --> 00:01:17,960 Speaker 1: six four six three to four three four nine. Oh, 22 00:01:18,000 --> 00:01:21,280 Speaker 1: and maybe we'll play your voicemail on the show. Or 23 00:01:21,319 --> 00:01:23,920 Speaker 1: if you just have some suggestions for us or a 24 00:01:24,000 --> 00:01:27,120 Speaker 1: guest you'd like to see on the show, or I 25 00:01:27,120 --> 00:01:30,600 Speaker 1: don't know, some criticisms of Sarah, maybe some praise of me, 26 00:01:30,680 --> 00:01:33,560 Speaker 1: whatever it may be. What do you think, Sarah. I've 27 00:01:33,600 --> 00:01:36,440 Speaker 1: got to say, Mike, it seems like people have more 28 00:01:36,480 --> 00:01:38,840 Speaker 1: time on their hands. There have been plenty of crazy 29 00:01:38,880 --> 00:01:42,400 Speaker 1: things in the market to talk about. Yet our listeners, 30 00:01:42,440 --> 00:01:45,280 Speaker 1: maybe I shouldn't be calling them out. After weeks in 31 00:01:45,319 --> 00:01:47,960 Speaker 1: which you were really giving it to us, now you've 32 00:01:48,000 --> 00:01:50,880 Speaker 1: just pulled back. You're leaving us hanging. Yeah, get on 33 00:01:50,920 --> 00:01:52,920 Speaker 1: the hotline, give us a call. We get lonely here 34 00:01:53,000 --> 00:01:57,680 Speaker 1: and on on our podcast, our socially isolated podcast. But Sarah, 35 00:01:57,720 --> 00:02:00,560 Speaker 1: as you pointed out, a very interesting guy on the 36 00:02:00,600 --> 00:02:04,040 Speaker 1: show this week, Um comes from a firm that I'm 37 00:02:04,080 --> 00:02:09,200 Speaker 1: I'm really fascinated with. Uh. They're called Poland Capital Management Management. 38 00:02:09,560 --> 00:02:12,040 Speaker 1: They're based in Florida, down near you, Sarah. So maybe 39 00:02:12,040 --> 00:02:14,440 Speaker 1: you can go and stop by and say hi when uh, 40 00:02:14,720 --> 00:02:18,720 Speaker 1: when the world's back growth's back to normal. Uh. But 41 00:02:18,840 --> 00:02:23,120 Speaker 1: his name is Dan Dividowitz and he manages the Poland 42 00:02:23,360 --> 00:02:27,560 Speaker 1: Growth Fund. Uh. He's also the firm's chief investment officer. 43 00:02:27,960 --> 00:02:30,000 Speaker 1: And so I've been I'm looking at the performance of 44 00:02:30,040 --> 00:02:32,360 Speaker 1: this fund over the last year, two years, three years. 45 00:02:32,360 --> 00:02:35,680 Speaker 1: I mean, it's really pretty impressive. It's beaten, you know, 46 00:02:35,840 --> 00:02:37,480 Speaker 1: not just the SMP, but if you look at the 47 00:02:37,520 --> 00:02:40,959 Speaker 1: sort of Russell growth indexes and the SMP growth indexes, 48 00:02:41,040 --> 00:02:45,760 Speaker 1: it's beaten all of them on basically last year, last 49 00:02:45,760 --> 00:02:48,880 Speaker 1: two years, three years, uh, four years, five years. So um, 50 00:02:49,480 --> 00:02:52,760 Speaker 1: it's it's good to have, uh a a successful manager 51 00:02:52,800 --> 00:02:55,400 Speaker 1: like this on the show. So, without further ado, his 52 00:02:55,520 --> 00:02:58,280 Speaker 1: name is Dan uh Divitowitz. Wait I already said that, 53 00:02:58,400 --> 00:03:03,200 Speaker 1: but regardless, welcome to the show. Dan, Thank you, Mike, 54 00:03:03,280 --> 00:03:05,799 Speaker 1: thank you Sarah. It's a pleasure to be with you today. Dad. 55 00:03:05,960 --> 00:03:07,920 Speaker 1: You know, I know a little bit about the firm. 56 00:03:07,960 --> 00:03:10,200 Speaker 1: I know you tend to run funds that are are 57 00:03:10,320 --> 00:03:14,079 Speaker 1: sort of concentrated portfolios. And correct me if I'm wrong 58 00:03:14,120 --> 00:03:17,200 Speaker 1: about any of this, but you know, usually about stocks 59 00:03:17,680 --> 00:03:20,880 Speaker 1: in a fund, um you tend to buy and hold. 60 00:03:20,919 --> 00:03:23,120 Speaker 1: You know, there's not a lot of of turnover in 61 00:03:23,160 --> 00:03:26,880 Speaker 1: the fund um. You know, both of those elements I 62 00:03:26,919 --> 00:03:28,800 Speaker 1: find fascinating. So we'll get into it into that a 63 00:03:28,800 --> 00:03:32,160 Speaker 1: little bit, but kind of walk us through basically, you're 64 00:03:32,280 --> 00:03:34,560 Speaker 1: you're sort of approach for picking a stock, you know, 65 00:03:34,639 --> 00:03:37,640 Speaker 1: just the simple you know, where do you start as 66 00:03:37,680 --> 00:03:40,560 Speaker 1: a growth manager when it comes to trying to find 67 00:03:40,560 --> 00:03:43,880 Speaker 1: stocks to buy? Sure? Sure, Mike, And yeah, almost all 68 00:03:43,880 --> 00:03:45,880 Speaker 1: of that was accurate that you said about us. The 69 00:03:45,880 --> 00:03:48,480 Speaker 1: only inaccurate part of I'm not the ce IO of 70 00:03:48,520 --> 00:03:51,480 Speaker 1: the firm. We don't have that title. I'm cohead of 71 00:03:51,480 --> 00:03:54,400 Speaker 1: our large company team. But that's okay. I like I 72 00:03:54,480 --> 00:03:56,840 Speaker 1: like a title inflation too, So thank you for promoting me, 73 00:03:57,480 --> 00:04:01,800 Speaker 1: all right, I appreciate that. Yeah. The simple thing is, 74 00:04:01,800 --> 00:04:05,640 Speaker 1: you're absolutely right. We we invest in what we we 75 00:04:05,680 --> 00:04:09,360 Speaker 1: think of as high quality, concentrated growth. And so my 76 00:04:09,520 --> 00:04:12,160 Speaker 1: team is the large company team. We have three different 77 00:04:12,240 --> 00:04:14,440 Speaker 1: strategies of my team. The one that I run you right, 78 00:04:14,520 --> 00:04:16,920 Speaker 1: is our our flagship, the Polling Growth Fund. It's also 79 00:04:16,960 --> 00:04:19,960 Speaker 1: called our Focus Growth Strategy. Uh. And that's a thirty 80 00:04:20,000 --> 00:04:22,520 Speaker 1: one plus year old product. And I've been a Polling 81 00:04:22,560 --> 00:04:25,240 Speaker 1: capital for fifteen years. I'm only I'm only I've only 82 00:04:25,240 --> 00:04:28,040 Speaker 1: had my hand in about half the track record of 83 00:04:28,080 --> 00:04:31,240 Speaker 1: this product. But we run two other portfolios that are 84 00:04:31,440 --> 00:04:36,760 Speaker 1: essentially very very similar, different geographic exposures, but high quality 85 00:04:36,760 --> 00:04:39,320 Speaker 1: concentrated growth. And then we also have two other investment 86 00:04:39,320 --> 00:04:41,719 Speaker 1: teams at Poland Capital, one that does small cap investing 87 00:04:41,760 --> 00:04:44,520 Speaker 1: small companies and one that does emerging markets and and 88 00:04:44,560 --> 00:04:47,640 Speaker 1: again high quality concentrated growth. So that's what polland Capital 89 00:04:48,120 --> 00:04:50,839 Speaker 1: is about. We think it's really really important first and 90 00:04:50,920 --> 00:04:54,280 Speaker 1: foremost to protect our client's capital, and that's really what 91 00:04:54,320 --> 00:04:57,520 Speaker 1: we're we talk about. It's the what the way we live. 92 00:04:57,880 --> 00:05:01,240 Speaker 1: It's a bit unique for a growth manager to think 93 00:05:01,279 --> 00:05:04,040 Speaker 1: that way, to think about preserving capital first and then 94 00:05:04,080 --> 00:05:08,000 Speaker 1: growing capital second. And so it's important for us to 95 00:05:08,120 --> 00:05:11,320 Speaker 1: only invest in what we think are the most competitively 96 00:05:11,360 --> 00:05:15,120 Speaker 1: advantaged and financially superior companies and nothing less than that. 97 00:05:15,640 --> 00:05:19,240 Speaker 1: And so concentration, a lot of people used to think 98 00:05:19,800 --> 00:05:22,720 Speaker 1: meant higher risk because you're investing in fewer companies. That's 99 00:05:22,760 --> 00:05:26,720 Speaker 1: against the concept of diversification. But what we found, and 100 00:05:27,040 --> 00:05:29,280 Speaker 1: actually academic studies have you even found, is that you 101 00:05:29,320 --> 00:05:31,960 Speaker 1: really don't need that many companies in a portfolio to 102 00:05:32,000 --> 00:05:35,279 Speaker 1: achieve adequate diversification. We think you get that. You know, 103 00:05:35,480 --> 00:05:39,200 Speaker 1: maybe at fifteen stocks in your portfolio. We typically, like 104 00:05:39,240 --> 00:05:42,599 Speaker 1: you said, around twenty five companies in our portfolio, but 105 00:05:42,680 --> 00:05:46,120 Speaker 1: we hold them to these extremely high standards. You know, 106 00:05:46,279 --> 00:05:49,760 Speaker 1: everybody says they invest in quality, right, nobody says they don't, 107 00:05:50,120 --> 00:05:52,719 Speaker 1: but we actually put metrics on that. You're talking about 108 00:05:52,720 --> 00:05:56,800 Speaker 1: concentration and how you can actually run a very well diversified, 109 00:05:56,800 --> 00:06:00,239 Speaker 1: wall performing portfolio that is so concentrated. I find really interesting, 110 00:06:00,360 --> 00:06:03,640 Speaker 1: especially in the current moment, when we are constantly hearing 111 00:06:04,000 --> 00:06:07,440 Speaker 1: people look at indexes passive indexes and pointing at how 112 00:06:07,480 --> 00:06:11,000 Speaker 1: concentrated they are, and they usually say that that is 113 00:06:11,120 --> 00:06:15,680 Speaker 1: a negative aspect of the indexes. But obviously, your growth manager, 114 00:06:15,800 --> 00:06:18,800 Speaker 1: your job is to find high quality growth companies. But 115 00:06:18,880 --> 00:06:20,800 Speaker 1: I do want to ask you, is it at all 116 00:06:21,040 --> 00:06:25,440 Speaker 1: surprising to you that growth has had such a long 117 00:06:25,720 --> 00:06:29,560 Speaker 1: and such a great run over other styles in the market. 118 00:06:29,560 --> 00:06:32,440 Speaker 1: I mean, I look at your Polling Growth fund hitting 119 00:06:32,440 --> 00:06:35,839 Speaker 1: a record high this past week, alongside the SMP Growth 120 00:06:35,839 --> 00:06:40,080 Speaker 1: Index and some very popular growth companies as well. Is 121 00:06:40,080 --> 00:06:42,279 Speaker 1: it's surprising to you that they have held up so 122 00:06:42,320 --> 00:06:45,200 Speaker 1: well through the ball market, but also in the downturn 123 00:06:45,240 --> 00:06:47,720 Speaker 1: as well. It's it's a question, Sarah. We get asked 124 00:06:47,760 --> 00:06:50,719 Speaker 1: like every day, is you know when this growth? When 125 00:06:50,800 --> 00:06:53,919 Speaker 1: is the growth run over after? Yeah? More than a 126 00:06:53,960 --> 00:06:57,960 Speaker 1: decade of growth outperforming value by the way, you know, 127 00:06:58,040 --> 00:07:00,760 Speaker 1: I consider myself a growth investor. A Poland Capital, we 128 00:07:00,760 --> 00:07:04,679 Speaker 1: are growth investors. Most of my investment team, including myself, 129 00:07:04,720 --> 00:07:07,760 Speaker 1: came from the value school of investing. So I I 130 00:07:08,040 --> 00:07:10,560 Speaker 1: worked in New Jersey before coming to Poland Capital fifteen 131 00:07:10,600 --> 00:07:14,160 Speaker 1: years ago at what was considered a deep value shop. UM. 132 00:07:14,160 --> 00:07:17,960 Speaker 1: Many of my colleagues come from the Columbia Value School 133 00:07:18,000 --> 00:07:20,560 Speaker 1: of investing or have worked uh in what they would 134 00:07:20,560 --> 00:07:23,600 Speaker 1: be considered value shops over the years. And so we 135 00:07:23,600 --> 00:07:26,040 Speaker 1: were very, very steeped. And our founder David Poland who 136 00:07:26,080 --> 00:07:31,360 Speaker 1: passed away UM eight years ago, also Graham and Dodd Disciple, 137 00:07:31,560 --> 00:07:34,400 Speaker 1: Warren Buffett disciple, So we come from that camp. We 138 00:07:34,440 --> 00:07:38,000 Speaker 1: believe in the margin of safety, right. But I think 139 00:07:38,040 --> 00:07:40,560 Speaker 1: it's important to kind of take apart the growth versus 140 00:07:40,640 --> 00:07:43,560 Speaker 1: value argument because we think it's kind of a false construct. 141 00:07:43,880 --> 00:07:47,280 Speaker 1: Growth and value are not um two different things, right, 142 00:07:47,640 --> 00:07:50,120 Speaker 1: And when you look at indexes, especially when you know 143 00:07:50,320 --> 00:07:52,120 Speaker 1: some of the ones you mentioned like the SMP Growth Index, 144 00:07:52,120 --> 00:07:54,200 Speaker 1: where the Russell one thousand growth Index, Russell one thousand 145 00:07:54,240 --> 00:07:58,320 Speaker 1: value index, whatever the way those indexes are constructed, are 146 00:07:58,440 --> 00:08:02,800 Speaker 1: using oftentimes valuation metrics, right, So, especially the Russell indices, 147 00:08:02,920 --> 00:08:04,880 Speaker 1: what gets in the in the value side is usually 148 00:08:04,880 --> 00:08:08,000 Speaker 1: low price to book, low price to long term earnings 149 00:08:08,000 --> 00:08:10,360 Speaker 1: growth and what gets thrown into the growth that's the 150 00:08:10,400 --> 00:08:12,880 Speaker 1: value side. On the growth side, it's the high ones, right, 151 00:08:12,960 --> 00:08:16,480 Speaker 1: high price to book high. So that to us, growth 152 00:08:16,600 --> 00:08:19,080 Speaker 1: is not defined by high pe That doesn't make sense. 153 00:08:19,200 --> 00:08:21,600 Speaker 1: For us, growth is defined by growth and earnings per 154 00:08:21,640 --> 00:08:24,640 Speaker 1: share growth and free cash flow over time. And so 155 00:08:24,880 --> 00:08:27,520 Speaker 1: we take a little bit of issue with the construct 156 00:08:27,560 --> 00:08:32,319 Speaker 1: of indexes that are compiled using valuation only as what 157 00:08:32,360 --> 00:08:35,079 Speaker 1: puts them in that in that bucket. So that being said, 158 00:08:35,640 --> 00:08:39,319 Speaker 1: what this growth outperformance what's been driven by It's not 159 00:08:39,400 --> 00:08:44,240 Speaker 1: really been driven by as historically has been by multiple expansion. 160 00:08:44,640 --> 00:08:46,760 Speaker 1: Right when you think back to the tech bubble especially, 161 00:08:47,200 --> 00:08:50,199 Speaker 1: and that's usually where people think about where growth outperformed 162 00:08:50,240 --> 00:08:53,720 Speaker 1: value for a long time and then finally underperformed because 163 00:08:53,800 --> 00:08:56,800 Speaker 1: valuation has got to extreme levels. That's not what we're seeing, right, 164 00:08:57,000 --> 00:08:58,920 Speaker 1: And for most of the great growth companies that we 165 00:08:58,960 --> 00:09:03,079 Speaker 1: study anyway, we're seeing their returns being driven by earnings 166 00:09:03,080 --> 00:09:06,040 Speaker 1: per share growth, free cash flow growth that's been well 167 00:09:06,080 --> 00:09:10,440 Speaker 1: supported the evaluations than well supported by the fundamentals. I 168 00:09:10,480 --> 00:09:13,480 Speaker 1: also think you have to, you know, look at what 169 00:09:13,720 --> 00:09:17,079 Speaker 1: is going on in the world today. So uh, a 170 00:09:17,240 --> 00:09:19,880 Speaker 1: huge amount of disruption in many, many industries. Right. A 171 00:09:19,920 --> 00:09:22,880 Speaker 1: lot of those industries, let's say, retail, energy, financial services, 172 00:09:22,920 --> 00:09:26,920 Speaker 1: tend to find more waiting in value indexes than they 173 00:09:26,960 --> 00:09:30,120 Speaker 1: are in growth. The disrupt doors, you know, which are 174 00:09:30,160 --> 00:09:33,720 Speaker 1: the large tech companies today. Internet enabled businesses tend to 175 00:09:33,720 --> 00:09:37,360 Speaker 1: be more in those growth indexes. And so you're seeing 176 00:09:37,400 --> 00:09:41,440 Speaker 1: real disruption and the disruptors being in different camps. And 177 00:09:41,480 --> 00:09:43,280 Speaker 1: we don't see a lot of that going back in 178 00:09:43,280 --> 00:09:45,800 Speaker 1: the genie bottle, so to speak. We don't see the 179 00:09:45,800 --> 00:10:04,720 Speaker 1: disruption stopping. So the key takeaway there is you may 180 00:10:04,800 --> 00:10:07,560 Speaker 1: claim Dan as a Florida man, but as you heard, 181 00:10:07,600 --> 00:10:11,160 Speaker 1: he's really a Jersey guy. I'm claiming him for Jersey, Rutgers, 182 00:10:11,400 --> 00:10:14,840 Speaker 1: Rutgers for the win. Mike. You're going to take any example. 183 00:10:14,920 --> 00:10:16,920 Speaker 1: You can take that and run with it. But the 184 00:10:16,960 --> 00:10:19,520 Speaker 1: truth is the two of us are currently both in Florida. 185 00:10:19,600 --> 00:10:22,400 Speaker 1: So where as of right now we're both Florida, Florida 186 00:10:22,440 --> 00:10:25,199 Speaker 1: mount or Florida woman. But you both have had alligators 187 00:10:25,200 --> 00:10:29,000 Speaker 1: in your yards. From what I understand too, it's not uncommon. Yes, 188 00:10:31,440 --> 00:10:35,000 Speaker 1: it's it's as Florida. Can you say to pick up 189 00:10:35,040 --> 00:10:39,200 Speaker 1: on that notion of valuation and growth? And I'm looking 190 00:10:39,320 --> 00:10:43,000 Speaker 1: at the growth funds holdings at least as I guess 191 00:10:43,040 --> 00:10:46,600 Speaker 1: it says the end of the first quarter, uh, and 192 00:10:47,120 --> 00:10:51,199 Speaker 1: top holding Microsoft. Boy, what spectacular run that stock has 193 00:10:51,240 --> 00:10:54,679 Speaker 1: had and like you said, one of those quality stocks. Uh. 194 00:10:54,800 --> 00:10:56,960 Speaker 1: You know, you don't have to worry about many hiccups 195 00:10:56,960 --> 00:10:59,360 Speaker 1: with a company like that. But looking at just sort 196 00:10:59,400 --> 00:11:01,920 Speaker 1: of the know, a pe on a trailing basis, I mean, 197 00:11:01,920 --> 00:11:05,240 Speaker 1: it's getting up close to thirty four thirty five times earning. 198 00:11:05,840 --> 00:11:09,320 Speaker 1: How do you sort of you know, look at that 199 00:11:09,360 --> 00:11:11,200 Speaker 1: as a growth manager. Do you look more like a 200 00:11:11,240 --> 00:11:15,439 Speaker 1: pet ratio type of thing, or you know, is there evaluation? 201 00:11:15,480 --> 00:11:18,160 Speaker 1: I mean I think that might be Microsoft's highest trailing 202 00:11:18,200 --> 00:11:21,400 Speaker 1: p at least since like the the scary days of 203 00:11:21,440 --> 00:11:23,840 Speaker 1: the turn of the century, around the bubble days, I mean, 204 00:11:23,880 --> 00:11:27,000 Speaker 1: not anywhere near the same situation it was then. But 205 00:11:27,520 --> 00:11:31,680 Speaker 1: when do the valuations really start to raise your eyebrows? Yeah, 206 00:11:31,720 --> 00:11:34,679 Speaker 1: I mean you have to think about evaluation when you're 207 00:11:34,720 --> 00:11:37,240 Speaker 1: investing in any company, but certainly in growth companies. You 208 00:11:37,280 --> 00:11:39,800 Speaker 1: have to. You have to have a reasonable basis for evaluation. 209 00:11:39,880 --> 00:11:41,720 Speaker 1: You can't just ignore it, at least not in our opinion. 210 00:11:41,760 --> 00:11:44,520 Speaker 1: You can't ignore it for our From our perspective, I 211 00:11:44,520 --> 00:11:47,040 Speaker 1: should mention that valuation is often the last thing we 212 00:11:47,080 --> 00:11:51,360 Speaker 1: talk about. So it's important for us to start with 213 00:11:51,559 --> 00:11:53,880 Speaker 1: and prove out that a business is so great that 214 00:11:53,960 --> 00:11:56,400 Speaker 1: we want to own it, right, that it's so superior 215 00:11:56,400 --> 00:11:59,400 Speaker 1: and so competitively advantage and so much growth available to us, 216 00:11:59,440 --> 00:12:02,040 Speaker 1: we want to own it. Then we decide is there 217 00:12:02,040 --> 00:12:04,920 Speaker 1: an attractive enough price. And the way we think about 218 00:12:05,320 --> 00:12:08,680 Speaker 1: valuation is in it is about the expected return over 219 00:12:08,720 --> 00:12:11,400 Speaker 1: the next five years. So we think about everything in 220 00:12:11,480 --> 00:12:13,600 Speaker 1: five and ten year increments. We don't think about anything 221 00:12:13,600 --> 00:12:16,200 Speaker 1: in quarters or even the next year or two. So, 222 00:12:16,440 --> 00:12:19,720 Speaker 1: you know, with great companies that have massive competitive advantages 223 00:12:19,720 --> 00:12:22,679 Speaker 1: and secular growth trends behind them, it's often not that 224 00:12:22,800 --> 00:12:25,280 Speaker 1: difficult to project what earnings are going to look like, 225 00:12:25,360 --> 00:12:26,920 Speaker 1: or what free cash fill is gonna look like five 226 00:12:27,000 --> 00:12:30,079 Speaker 1: years from now. Within a reasonable range. It's not like 227 00:12:30,400 --> 00:12:33,840 Speaker 1: the average company where the potential outcomes are so wide, 228 00:12:34,040 --> 00:12:36,600 Speaker 1: you know, for a company like Microsoft, it's actually fairly 229 00:12:36,679 --> 00:12:40,880 Speaker 1: narrow um set of of of circumstances that are gonna 230 00:12:40,880 --> 00:12:43,200 Speaker 1: happen over the next five years. And so we know 231 00:12:43,240 --> 00:12:45,000 Speaker 1: what the earnings and cash will look like today, we 232 00:12:45,040 --> 00:12:47,160 Speaker 1: have a conservative estimate of what it's gonna look like 233 00:12:47,440 --> 00:12:50,360 Speaker 1: five years from now. We know what the pe is today, 234 00:12:50,840 --> 00:12:53,480 Speaker 1: and then we make a conservative estimate five years from now, 235 00:12:53,520 --> 00:12:57,400 Speaker 1: so we never assume multiple expansion. We assumedly to be 236 00:12:57,440 --> 00:12:59,760 Speaker 1: the same or lower because certainly within the next five 237 00:12:59,840 --> 00:13:02,480 Speaker 1: year as most businesses will likely be growing slower than 238 00:13:02,520 --> 00:13:05,680 Speaker 1: they are today. And so we use a conservative vestment 239 00:13:05,720 --> 00:13:08,600 Speaker 1: again on both earnings and multiple five years from now. 240 00:13:08,600 --> 00:13:11,400 Speaker 1: And if we can see a path to double digit 241 00:13:11,440 --> 00:13:15,400 Speaker 1: annualized returns from here to there, we're very comfortable. And 242 00:13:15,440 --> 00:13:17,720 Speaker 1: with Microsoft, we certainly see that today. By the way, 243 00:13:17,920 --> 00:13:20,400 Speaker 1: we've owned Microsoft um this time around for the last 244 00:13:20,400 --> 00:13:23,480 Speaker 1: three or four years. We've owned Microsoft in our portfolio 245 00:13:23,640 --> 00:13:26,480 Speaker 1: now three times in thirty one years, and it's been 246 00:13:26,840 --> 00:13:29,600 Speaker 1: holding about half the time, so almost fifteen sixteen years 247 00:13:30,080 --> 00:13:32,000 Speaker 1: UM we've held it the last time we sold it, 248 00:13:32,040 --> 00:13:35,360 Speaker 1: back in two thousand ten, Microsoft was a much smaller company, 249 00:13:35,400 --> 00:13:39,520 Speaker 1: even though it's very very large, growing at about two paranum. 250 00:13:40,160 --> 00:13:42,320 Speaker 1: This was before they made a pivot to the cloud, 251 00:13:42,720 --> 00:13:45,680 Speaker 1: right before they moved to a subscription revenue model across 252 00:13:45,840 --> 00:13:49,199 Speaker 1: all of their franchises, before Azure, which is obviously tremendously 253 00:13:49,240 --> 00:13:51,720 Speaker 1: large now, and so it was about a two percent 254 00:13:51,840 --> 00:13:55,160 Speaker 1: grower ten years ago. Fast forward today, it's a larger 255 00:13:55,160 --> 00:13:58,640 Speaker 1: business growing in the load to mid teens organically, which 256 00:13:58,679 --> 00:14:02,760 Speaker 1: is incredibly difficult for a company this size. Why Well, 257 00:14:02,920 --> 00:14:05,080 Speaker 1: because the subscription revenue model gives them a lot more 258 00:14:05,120 --> 00:14:07,720 Speaker 1: pricing power. It allows them to fight piracy, which they 259 00:14:07,880 --> 00:14:10,000 Speaker 1: haven't been able to do for a long time. But 260 00:14:10,080 --> 00:14:12,679 Speaker 1: now when you can only get the most recent version 261 00:14:12,679 --> 00:14:16,040 Speaker 1: of Windows or Office by subscription from Microsoft's own data centers, 262 00:14:16,080 --> 00:14:18,000 Speaker 1: you've got to pay for it, you can't hirate it. 263 00:14:18,360 --> 00:14:21,920 Speaker 1: And Azure being a platform, uh that is, you know, 264 00:14:21,920 --> 00:14:24,760 Speaker 1: the second choice now behind Amazon Web Services, but certainly 265 00:14:25,560 --> 00:14:28,520 Speaker 1: a very very powerful engine in its own right, with massive, 266 00:14:28,600 --> 00:14:31,280 Speaker 1: massive opportunity for growth, and so it's a it's a 267 00:14:31,360 --> 00:14:33,280 Speaker 1: much better company today and it's a much faster growing 268 00:14:33,440 --> 00:14:36,600 Speaker 1: company today with much more sustainability. Even though it already 269 00:14:36,720 --> 00:14:39,800 Speaker 1: was basically a monopoly before this, it's now a fast 270 00:14:39,840 --> 00:14:42,320 Speaker 1: growing monopoly. And so that valuation, like you said, on 271 00:14:42,360 --> 00:14:45,680 Speaker 1: a trailing basis, you know, it is maybe a little 272 00:14:45,680 --> 00:14:48,080 Speaker 1: bit high when you look at it historically, but given 273 00:14:48,120 --> 00:14:50,360 Speaker 1: what we know about Microsoft today and where it's going, 274 00:14:50,440 --> 00:14:54,080 Speaker 1: it's very very reasonable. Looking at the waiting in the fund, 275 00:14:54,080 --> 00:14:56,760 Speaker 1: you know, it's creeping up to ten eleven percent at 276 00:14:56,840 --> 00:14:58,560 Speaker 1: least at the end of the first quarter. Is there 277 00:14:58,800 --> 00:15:00,680 Speaker 1: do you set a limit on on waiting? You know, 278 00:15:00,920 --> 00:15:04,120 Speaker 1: as you mentioned in the beginning, that running a concentrated 279 00:15:04,560 --> 00:15:10,200 Speaker 1: portfolio does have that risk that if a stock's really cruising, 280 00:15:10,280 --> 00:15:13,280 Speaker 1: you know, it's it's going to start really dominating the portfolio. 281 00:15:13,320 --> 00:15:14,840 Speaker 1: Do you have any sort of cap on on what 282 00:15:14,880 --> 00:15:17,680 Speaker 1: you would give a single stock as a waiting Yeah, 283 00:15:18,000 --> 00:15:20,840 Speaker 1: Microsoft is about as high as we typically let companies go. 284 00:15:21,000 --> 00:15:23,400 Speaker 1: It's around that ten eleven percent, and you know, is 285 00:15:23,880 --> 00:15:26,440 Speaker 1: about it as far as we're willing to go. We 286 00:15:26,480 --> 00:15:29,520 Speaker 1: will sometimes let them appreciate a little bit past that 287 00:15:29,600 --> 00:15:32,400 Speaker 1: level if we don't see any really compelling reason to 288 00:15:32,480 --> 00:15:35,360 Speaker 1: take it down. If we still think you have this combination, 289 00:15:35,400 --> 00:15:37,600 Speaker 1: which we think in Microsoft's case, you have where it's 290 00:15:37,600 --> 00:15:40,880 Speaker 1: a unique combination of moat, you know, competitive advantage that 291 00:15:41,000 --> 00:15:44,840 Speaker 1: is growth and valuation on your side. Then we're usually 292 00:15:44,880 --> 00:15:47,200 Speaker 1: willing to allow it to drift a little bit higher 293 00:15:47,200 --> 00:15:49,440 Speaker 1: than that, but not much. You know, we typically don't 294 00:15:49,480 --> 00:15:52,840 Speaker 1: go much higher than where Microsoft is right now? Do 295 00:15:52,880 --> 00:15:55,720 Speaker 1: you ever worry about regulatory issues or do you find 296 00:15:55,720 --> 00:15:57,440 Speaker 1: yourself discussing it? I mean, I can't tell you how 297 00:15:57,480 --> 00:15:59,760 Speaker 1: many times it's been brought up to me over the 298 00:15:59,760 --> 00:16:03,040 Speaker 1: past US here, especially leading up to the election. Everyone's saying, look, 299 00:16:03,080 --> 00:16:07,600 Speaker 1: antitrust regulation is a bipartisan issue, blah blah blah. But 300 00:16:07,720 --> 00:16:11,320 Speaker 1: considering the fact that Microsoft is a large holding Facebook 301 00:16:11,360 --> 00:16:14,240 Speaker 1: also Google parent Alphabet, is that something that you guys 302 00:16:14,320 --> 00:16:17,880 Speaker 1: do take into consideration at the moment. Yeah, absolutely, Sara. 303 00:16:17,920 --> 00:16:20,040 Speaker 1: I mean you have to. You have to think about 304 00:16:20,080 --> 00:16:23,080 Speaker 1: policy regulatory risk in in any business, and it's kind 305 00:16:23,120 --> 00:16:27,400 Speaker 1: of part of our investment philosophy and process because the 306 00:16:27,480 --> 00:16:31,360 Speaker 1: vast majority of the companies that we own have a monopoly, duopoly, 307 00:16:31,480 --> 00:16:35,120 Speaker 1: or oligopoly like structure to them. They became, they create 308 00:16:35,200 --> 00:16:38,880 Speaker 1: oftentimes they created industries and then dominated industry. So you 309 00:16:38,960 --> 00:16:43,480 Speaker 1: mentioned for sure, Microsoft, Google, Facebook, throw throw MasterCard and 310 00:16:43,600 --> 00:16:46,760 Speaker 1: Visa in on that conversation. If you if you even 311 00:16:46,760 --> 00:16:49,960 Speaker 1: more narrowly defined sub industries, you could say Adobe certainly 312 00:16:49,960 --> 00:16:54,120 Speaker 1: dominates the market for creative software. UM. We see this 313 00:16:54,200 --> 00:16:57,680 Speaker 1: all the time, and so what we're really interested in 314 00:16:57,840 --> 00:17:00,960 Speaker 1: is is there anything that can disrupt the business model 315 00:17:01,320 --> 00:17:05,520 Speaker 1: or the earnings compounding that we expect from these companies. 316 00:17:05,560 --> 00:17:07,840 Speaker 1: And so there's often a lot of saber rattling that 317 00:17:07,880 --> 00:17:11,359 Speaker 1: goes on, but it's rare that we find that that 318 00:17:11,480 --> 00:17:15,960 Speaker 1: governments will really destroy a competitive advantage or um the 319 00:17:16,000 --> 00:17:17,720 Speaker 1: earnings power of a company. So even if you're talking 320 00:17:17,720 --> 00:17:21,680 Speaker 1: about the potential breakup let's say of um, Facebook or 321 00:17:22,119 --> 00:17:24,800 Speaker 1: or Google, which we think would be really stretching for 322 00:17:24,840 --> 00:17:26,760 Speaker 1: a government, right because you have to prove, at least 323 00:17:26,760 --> 00:17:28,400 Speaker 1: in the United States, you have to prove that consumers 324 00:17:28,400 --> 00:17:30,280 Speaker 1: are harmed. And I don't know exactly how you prove 325 00:17:30,320 --> 00:17:32,880 Speaker 1: that when these services are free to consumers, but let's 326 00:17:32,880 --> 00:17:35,200 Speaker 1: just assume they do. We don't even think we think 327 00:17:35,200 --> 00:17:36,960 Speaker 1: that some of the parts could be at least equal to, 328 00:17:37,000 --> 00:17:39,040 Speaker 1: if not greater than, the whole that you see today. 329 00:17:39,440 --> 00:17:42,600 Speaker 1: And so you know, nothing really worries us at the moment, 330 00:17:42,680 --> 00:17:46,080 Speaker 1: But for sure, we're always looking at regulatory risks. You know, 331 00:17:46,359 --> 00:17:48,960 Speaker 1: it's kind of interesting because today a lot of people 332 00:17:49,000 --> 00:17:50,399 Speaker 1: want to talk about E S G and E S 333 00:17:50,440 --> 00:17:52,119 Speaker 1: g risks. You know, do we see anything How do 334 00:17:52,160 --> 00:17:53,840 Speaker 1: we think about E S G risks? Well, we think 335 00:17:53,840 --> 00:17:55,639 Speaker 1: about in the same way we think about all risks. 336 00:17:55,680 --> 00:17:58,040 Speaker 1: We want anything that gets in the way of the 337 00:17:58,040 --> 00:18:00,600 Speaker 1: compounding of any of our companies is something we want 338 00:18:01,040 --> 00:18:03,639 Speaker 1: to be concerned with. It reminds me of that there's 339 00:18:03,680 --> 00:18:06,600 Speaker 1: a Trump tweet a week or two ago about the 340 00:18:06,640 --> 00:18:10,120 Speaker 1: Microsoft government contracts that must have That must have turned 341 00:18:10,119 --> 00:18:13,359 Speaker 1: a few hairs on your head, Gray when you saw that. Then, well, 342 00:18:13,400 --> 00:18:16,840 Speaker 1: you know, it's funny because uh, I guess the narrative 343 00:18:16,880 --> 00:18:22,040 Speaker 1: before was that Trump was really so against Jeff Bezos 344 00:18:22,040 --> 00:18:24,399 Speaker 1: and Amazon Web Services that he was kind of handing 345 00:18:24,400 --> 00:18:28,200 Speaker 1: this over to Microsoft. I mean, it's it's a nice story. Um, 346 00:18:28,240 --> 00:18:30,000 Speaker 1: at the end of the day, both of those companies 347 00:18:30,000 --> 00:18:34,480 Speaker 1: have extremely capable services, and UM, if you're doing any 348 00:18:34,600 --> 00:18:37,800 Speaker 1: business with the federal government where you're supplying your data 349 00:18:37,800 --> 00:18:41,760 Speaker 1: centers to secure government information, highest level scrutiny has to 350 00:18:42,200 --> 00:18:46,520 Speaker 1: go into that and and honestly, both Amazon and Microsoft 351 00:18:46,680 --> 00:18:48,359 Speaker 1: and I throw Google in the mix on this to 352 00:18:49,119 --> 00:18:53,879 Speaker 1: have platforms to host, to be the platform for cloud 353 00:18:53,960 --> 00:18:57,280 Speaker 1: services for the highest levels of government and and that 354 00:18:57,680 --> 00:18:59,720 Speaker 1: is not easy to achieve. And one of the reasons 355 00:18:59,720 --> 00:19:01,639 Speaker 1: why we love those businesses is it's it's hard for 356 00:19:01,640 --> 00:19:05,399 Speaker 1: anybody else to come compete in this business. You know, 357 00:19:05,480 --> 00:19:08,879 Speaker 1: at that level. Facebook, for instance, certainly could have a 358 00:19:08,920 --> 00:19:10,639 Speaker 1: cloud platform if they want to do, they have the 359 00:19:10,640 --> 00:19:12,719 Speaker 1: infrastructure and to be able to do it. They have 360 00:19:12,800 --> 00:19:15,640 Speaker 1: no interest in being in this market because they don't 361 00:19:15,920 --> 00:19:19,680 Speaker 1: see a reason to be the fourth best cloud platform 362 00:19:19,880 --> 00:19:22,639 Speaker 1: in the Western world. You know, you mentioned Amazon. I 363 00:19:23,359 --> 00:19:25,119 Speaker 1: don't see it in the top ten. Do you do 364 00:19:25,160 --> 00:19:27,520 Speaker 1: you hold it in the fun somewhere? We don't. We 365 00:19:27,600 --> 00:19:31,040 Speaker 1: haven't owned Amazon in ten years. Um. And this is ah, 366 00:19:31,440 --> 00:19:33,359 Speaker 1: this is kind of an interesting thing. So you know, 367 00:19:33,400 --> 00:19:37,760 Speaker 1: in our concentrated portfolio, we don't feel compelled to own anything. Um. 368 00:19:37,800 --> 00:19:40,560 Speaker 1: So you know, obviously we're gonna look very different than 369 00:19:40,560 --> 00:19:42,600 Speaker 1: a benchmark. If we only own about twenty companies today 370 00:19:42,600 --> 00:19:45,360 Speaker 1: we own one, we're not gonna look anything like a benchmark. 371 00:19:45,680 --> 00:19:47,280 Speaker 1: And we don't have to get our returns the same 372 00:19:47,280 --> 00:19:49,560 Speaker 1: way the benchmark gets its returns either. So if you 373 00:19:49,600 --> 00:19:52,040 Speaker 1: look at our portfolio today, we don't own Amazon, we 374 00:19:52,080 --> 00:19:54,920 Speaker 1: don't own Apple, we don't own Netflix in the portfolio. 375 00:19:54,960 --> 00:19:57,000 Speaker 1: We've owned Amazon in the past. We've owned Apple in 376 00:19:57,040 --> 00:20:01,199 Speaker 1: the past, UM never owned Netflix. The reason um that 377 00:20:01,320 --> 00:20:03,840 Speaker 1: we we did own Amazon for a while and then 378 00:20:03,920 --> 00:20:06,479 Speaker 1: have not in a long while, it's because I mentioned 379 00:20:06,480 --> 00:20:09,520 Speaker 1: we we stick really closely to our guard rails, those 380 00:20:09,560 --> 00:20:13,800 Speaker 1: five guard rails that I mentioned before. Amazon. Uh, it's 381 00:20:13,800 --> 00:20:16,919 Speaker 1: an amazing business and probably the most competitively advantaged business. 382 00:20:16,920 --> 00:20:19,600 Speaker 1: We don't own in the United States for sure. Uh 383 00:20:19,760 --> 00:20:23,719 Speaker 1: is because they're building of Amazon Web Services and their 384 00:20:23,760 --> 00:20:25,840 Speaker 1: own logistics infrastructure, and all of the things that they've 385 00:20:25,880 --> 00:20:29,240 Speaker 1: been building internally over the years have brought the metrics 386 00:20:29,280 --> 00:20:31,400 Speaker 1: that we care about, the return metrics, the free cash 387 00:20:31,400 --> 00:20:35,840 Speaker 1: flow metrics below our thresholds right now. Those thresholds are 388 00:20:35,840 --> 00:20:37,960 Speaker 1: there to keep us out of trouble, because most companies, 389 00:20:38,280 --> 00:20:41,520 Speaker 1: when you see a deterioration in those metrics, it's usually 390 00:20:41,560 --> 00:20:44,960 Speaker 1: trouble coming right. Amazon is the exception to that rule. 391 00:20:45,320 --> 00:20:49,200 Speaker 1: Amazon has been investing from a position of strength, It's 392 00:20:49,240 --> 00:20:52,320 Speaker 1: been making itself better. It was hard for us to 393 00:20:52,440 --> 00:20:55,080 Speaker 1: know exactly what some of those investments were as they 394 00:20:55,119 --> 00:20:58,040 Speaker 1: were going because they weren't a hundred percent open about that, 395 00:20:58,200 --> 00:21:00,440 Speaker 1: especially as they were building a w US in your 396 00:21:00,440 --> 00:21:02,679 Speaker 1: early years. And it's also hard to know what the 397 00:21:02,680 --> 00:21:04,680 Speaker 1: returns on those investments are going to be over time 398 00:21:05,040 --> 00:21:09,560 Speaker 1: as well. In a company like Amazon. Remember Amazon's core business, 399 00:21:09,560 --> 00:21:12,720 Speaker 1: it's it's an original core business, which is online retail. 400 00:21:12,800 --> 00:21:16,240 Speaker 1: There is an extremely low margin business. So when you're 401 00:21:16,240 --> 00:21:19,560 Speaker 1: evaluating these type of investments in an already low margin business, 402 00:21:20,119 --> 00:21:22,960 Speaker 1: it's very very difficult to know what the sustainable margins are, 403 00:21:23,000 --> 00:21:25,040 Speaker 1: what the real valuation is at any moment in time, 404 00:21:25,119 --> 00:21:28,440 Speaker 1: very very difficult. Today, the vast majority of profits actually 405 00:21:28,440 --> 00:21:31,280 Speaker 1: come from aws, not from UM the retail business, and 406 00:21:31,320 --> 00:21:35,280 Speaker 1: so it's a different business, still a great business today. 407 00:21:35,560 --> 00:21:38,520 Speaker 1: It actually does meet our guardrails Amazon does today. The 408 00:21:38,520 --> 00:21:40,280 Speaker 1: reason we don't own it today is because the valuation 409 00:21:40,359 --> 00:21:42,199 Speaker 1: is not at a place where we feel like we 410 00:21:42,200 --> 00:21:43,959 Speaker 1: can get the kind of return that we hope for, 411 00:21:44,080 --> 00:21:46,920 Speaker 1: so we don't own it. Maybe one day we will again. 412 00:21:47,400 --> 00:21:50,640 Speaker 1: We love the business for sure. It's the only company 413 00:21:50,680 --> 00:21:52,399 Speaker 1: that we cover that we actually have two analysts that 414 00:21:52,440 --> 00:21:54,960 Speaker 1: cover not one not just because the company itself is 415 00:21:55,400 --> 00:21:58,119 Speaker 1: so great, but because it competes with or potentially competes with, 416 00:21:58,200 --> 00:22:00,720 Speaker 1: almost every company it wants to compete with. So we 417 00:22:00,760 --> 00:22:03,280 Speaker 1: have to be well versed on Amazon, but we don't 418 00:22:03,320 --> 00:22:05,800 Speaker 1: own it today. And and the same thing for Netflix 419 00:22:05,840 --> 00:22:07,399 Speaker 1: is also because of the guardrails. It does not meet 420 00:22:07,400 --> 00:22:09,639 Speaker 1: our guardrails today. We do study it, we do know 421 00:22:09,760 --> 00:22:12,800 Speaker 1: it quite well and apples a little bit of different story. 422 00:22:12,840 --> 00:22:14,159 Speaker 1: We did own it for a long time, but we 423 00:22:14,160 --> 00:22:16,399 Speaker 1: feel like kind of the best days of growth for 424 00:22:16,440 --> 00:22:18,760 Speaker 1: Apple or behind it. That's why we don't own it anymore. 425 00:22:30,400 --> 00:22:39,600 Speaker 1: M just considering the time that we're living in right 426 00:22:39,640 --> 00:22:44,360 Speaker 1: now with the coronavirus, many of us quarantining. Looking at 427 00:22:44,400 --> 00:22:47,080 Speaker 1: your portfolio or even stocks that might be on your 428 00:22:47,080 --> 00:22:50,240 Speaker 1: watch list, or have you found any company or any 429 00:22:50,280 --> 00:22:55,119 Speaker 1: industry that this has really completely changed the growth prospects 430 00:22:55,240 --> 00:22:57,880 Speaker 1: for going into the future, or even something you don't 431 00:22:57,960 --> 00:23:02,080 Speaker 1: own that now you might see value in considering what 432 00:23:02,160 --> 00:23:06,000 Speaker 1: this might encourage out into the future. Yeah, yeah, I 433 00:23:06,000 --> 00:23:08,840 Speaker 1: mean potentially, yes, I mean it's in the middle of it. 434 00:23:08,960 --> 00:23:10,639 Speaker 1: You want to be a little bit careful about how 435 00:23:10,720 --> 00:23:14,200 Speaker 1: much you extrapolate um because it's hard to know exactly 436 00:23:14,200 --> 00:23:19,399 Speaker 1: how how much human behavior is permanently versus temporarily changed, 437 00:23:19,440 --> 00:23:24,119 Speaker 1: but we do think there are some obvious beneficiaries and 438 00:23:24,119 --> 00:23:26,600 Speaker 1: and a lot of them are kind of the trends 439 00:23:26,640 --> 00:23:29,400 Speaker 1: that were already in motion. Right. So, if you think 440 00:23:29,440 --> 00:23:31,680 Speaker 1: about some of the biggest secular trends that we see 441 00:23:31,680 --> 00:23:33,439 Speaker 1: out there, and the ones that you see as you 442 00:23:33,440 --> 00:23:36,400 Speaker 1: look down our portfolio holdings are things like the move 443 00:23:36,480 --> 00:23:40,000 Speaker 1: from offline commerce, you know, to e commerce, and from 444 00:23:40,040 --> 00:23:44,359 Speaker 1: offline advertising to online advertising, from cash and check to 445 00:23:44,480 --> 00:23:47,080 Speaker 1: digital forms of payment. Those are those are obviously well 446 00:23:47,119 --> 00:23:51,440 Speaker 1: in motion for a long time, but because of coronavirus 447 00:23:51,480 --> 00:23:54,159 Speaker 1: and because of people sheltering in place and kind of 448 00:23:54,160 --> 00:23:56,840 Speaker 1: being forced to do things a little bit differently, those 449 00:23:56,880 --> 00:24:00,440 Speaker 1: have accelerated. Those trends have accelerated, and we don't see 450 00:24:00,440 --> 00:24:04,160 Speaker 1: those um turning back. If anything, they're just catalyzing, um 451 00:24:04,280 --> 00:24:07,320 Speaker 1: faster adoption of some of these technologies. Some of the 452 00:24:07,400 --> 00:24:09,480 Speaker 1: other things are a little bit harder to say, like, 453 00:24:09,800 --> 00:24:12,800 Speaker 1: you know, will office space not be as attractive, you know, 454 00:24:12,880 --> 00:24:15,919 Speaker 1: as people now become more comfortable with remote work. Um, 455 00:24:16,040 --> 00:24:18,920 Speaker 1: I'm not a hundred percent sure that's going to happen. 456 00:24:19,080 --> 00:24:21,159 Speaker 1: You know, there there may be a need for a 457 00:24:21,200 --> 00:24:24,280 Speaker 1: little less office space or not because maybe you need 458 00:24:24,320 --> 00:24:26,600 Speaker 1: to built in a distance or so maybe even if 459 00:24:26,600 --> 00:24:28,119 Speaker 1: you're gonna have fewer people in your workplace, you may 460 00:24:28,160 --> 00:24:30,640 Speaker 1: need more space for those people. So some of those 461 00:24:30,680 --> 00:24:34,040 Speaker 1: things are not yet I'm not really sure about, you know, 462 00:24:34,080 --> 00:24:37,000 Speaker 1: other things like UM the long term move away from 463 00:24:37,680 --> 00:24:40,880 Speaker 1: linear media consumption to non linear media consumption again very 464 00:24:40,960 --> 00:24:44,000 Speaker 1: very catalyzed by this. UM we own a company in 465 00:24:44,040 --> 00:24:46,959 Speaker 1: our portfolio today called service Now. UM. Service now as 466 00:24:47,080 --> 00:24:51,520 Speaker 1: a software platform that essentially allows people to automate workflows. 467 00:24:51,920 --> 00:24:54,560 Speaker 1: It's already been a strong growth company, but we see 468 00:24:55,160 --> 00:25:00,800 Speaker 1: tremendous adoption. We expect tremendous adoption for automated workflow because 469 00:25:00,840 --> 00:25:03,240 Speaker 1: as people have to distance more, you need to build 470 00:25:03,240 --> 00:25:06,760 Speaker 1: in more automation, and so UM we're seeing that pretty clearly. 471 00:25:07,400 --> 00:25:10,840 Speaker 1: We're seeing things like Microsoft Teams and Zoom being adopted 472 00:25:10,880 --> 00:25:12,960 Speaker 1: in a in a very serious way. We don't think 473 00:25:12,960 --> 00:25:16,800 Speaker 1: all of that, we don't think the adoption necessarily goes backwards. UM. 474 00:25:16,840 --> 00:25:18,720 Speaker 1: There are a couple of other companies that we're looking 475 00:25:18,760 --> 00:25:23,280 Speaker 1: at today where UM there is like a collaborative software 476 00:25:23,440 --> 00:25:25,680 Speaker 1: nature to them that we think it will be unlikely 477 00:25:25,720 --> 00:25:28,440 Speaker 1: people turned back from as they go back to work 478 00:25:28,440 --> 00:25:30,399 Speaker 1: from normal. But you know, again you want to be 479 00:25:30,440 --> 00:25:33,480 Speaker 1: a little bit careful. Yeah, Dad, I'm just curious what 480 00:25:33,560 --> 00:25:36,480 Speaker 1: it's like to be a fund manager during all this. 481 00:25:36,640 --> 00:25:39,240 Speaker 1: I mean, are you getting more sort of in calls 482 00:25:39,280 --> 00:25:41,919 Speaker 1: from investors in the fund or any any panicked voices 483 00:25:41,960 --> 00:25:44,359 Speaker 1: on the other line. I mean, I'm guessing it must 484 00:25:44,359 --> 00:25:48,119 Speaker 1: be a somewhat stressful time with all this going on, 485 00:25:48,800 --> 00:25:51,359 Speaker 1: you know, not so much. I mean in the in 486 00:25:51,400 --> 00:25:54,240 Speaker 1: the early you know, I would say in the March period, 487 00:25:54,240 --> 00:25:56,359 Speaker 1: in mid March, when we were really starting to see 488 00:25:56,359 --> 00:26:00,199 Speaker 1: cases start to come and and getting ready for quarantining UM, 489 00:26:00,200 --> 00:26:02,160 Speaker 1: there was a lot more concerned about what would happen 490 00:26:02,200 --> 00:26:05,480 Speaker 1: to some of our companies in the portfolio of people calling. 491 00:26:05,520 --> 00:26:07,800 Speaker 1: But you know, you gotta remember too that we're we're 492 00:26:07,800 --> 00:26:11,919 Speaker 1: mostly invested in these very financially heavy, you know, cash 493 00:26:12,040 --> 00:26:14,240 Speaker 1: rich companies with big competitive avantages. So we're probably not 494 00:26:14,240 --> 00:26:17,200 Speaker 1: the number one problem for people, you know, when they're 495 00:26:17,200 --> 00:26:19,480 Speaker 1: looking at the types of companies that they own. We 496 00:26:19,560 --> 00:26:21,520 Speaker 1: tend to have, you know, a lot of the strongest 497 00:26:21,560 --> 00:26:23,560 Speaker 1: one so there wasn't a lot of panic or anything 498 00:26:23,600 --> 00:26:25,320 Speaker 1: like that. There's a lot of questions, you know, there 499 00:26:25,320 --> 00:26:27,920 Speaker 1: are a lot of questions about what UM stock performance 500 00:26:27,960 --> 00:26:30,800 Speaker 1: would look like, and which companies were more vulnerable than others, 501 00:26:30,880 --> 00:26:34,439 Speaker 1: which ones would have UM significant UM cash flow impact, 502 00:26:34,520 --> 00:26:36,880 Speaker 1: and which ones would not. And we didn't really touch 503 00:26:36,920 --> 00:26:38,640 Speaker 1: on this at all. But at Poland Capital we don't 504 00:26:38,680 --> 00:26:41,639 Speaker 1: make market predictions or economic predictions. UM. We try to 505 00:26:41,680 --> 00:26:44,640 Speaker 1: stay fully invested in the best companies that we think 506 00:26:44,640 --> 00:26:48,440 Speaker 1: can power through any crisis. And and you know, like 507 00:26:48,600 --> 00:26:51,240 Speaker 1: we've been doing this at Polland Capital for thirty one years, 508 00:26:51,240 --> 00:26:54,040 Speaker 1: we've seen a few criss along the way. This one 509 00:26:54,119 --> 00:26:57,879 Speaker 1: is very very different, obviously, but it allows us to 510 00:26:57,960 --> 00:26:59,560 Speaker 1: know that we don't have to predict these things. We 511 00:26:59,640 --> 00:27:02,760 Speaker 1: just have to build a portfolio that's that's resilient and 512 00:27:02,840 --> 00:27:05,960 Speaker 1: companies that can UM survive and thrive and continue to 513 00:27:06,040 --> 00:27:09,560 Speaker 1: invest through periods like this and so UM that's exactly 514 00:27:09,600 --> 00:27:11,200 Speaker 1: what we have. The companies. You know, we have a 515 00:27:11,240 --> 00:27:16,880 Speaker 1: few companies that have been really really impacted negatively, UM, Nike, Starbucks, 516 00:27:17,240 --> 00:27:20,000 Speaker 1: Aligned technologies where businesses, you know, these are business where 517 00:27:20,000 --> 00:27:22,520 Speaker 1: you actually physically have to go somewhere to buy something 518 00:27:22,640 --> 00:27:26,080 Speaker 1: or to order clearer liners. Right, they've been severely impacted, 519 00:27:26,119 --> 00:27:28,800 Speaker 1: but they're continuing to invest in this period of time 520 00:27:28,840 --> 00:27:30,960 Speaker 1: because they have the balance sheets to be able to 521 00:27:30,960 --> 00:27:32,879 Speaker 1: do it. They're gonna come out stronger on the other side. 522 00:27:32,920 --> 00:27:35,639 Speaker 1: And so you know, I think that helps to be 523 00:27:35,680 --> 00:27:38,440 Speaker 1: able to articulate that to our clients, and I think, 524 00:27:38,840 --> 00:27:41,400 Speaker 1: you know, having that very proactive outreach on our part 525 00:27:41,440 --> 00:27:44,359 Speaker 1: has helped a lot. Well, it's a certainly a unique 526 00:27:44,359 --> 00:27:46,920 Speaker 1: time and I'm sure we could talk about this, uh 527 00:27:47,040 --> 00:27:50,240 Speaker 1: forever all day long. I wish that we could. But Mike, 528 00:27:50,440 --> 00:27:53,960 Speaker 1: I think it's time for the crazy things. It's that time, 529 00:27:54,440 --> 00:28:00,800 Speaker 1: I believe, so all right, stand clearer of the craziest 530 00:28:00,840 --> 00:28:09,679 Speaker 1: things we saw in markets this week, Well thanks to 531 00:28:09,800 --> 00:28:14,480 Speaker 1: Charlie Pellet. That's Bloomberg Radio's famous Charlie Pellett with a 532 00:28:14,480 --> 00:28:18,840 Speaker 1: little help for the show. Here we're ratcheting up the gimmicks. Sarah, 533 00:28:18,880 --> 00:28:21,000 Speaker 1: I love it. I love it. We have And if 534 00:28:21,000 --> 00:28:23,480 Speaker 1: you've been to New York you might recognize that voice. 535 00:28:23,520 --> 00:28:27,199 Speaker 1: And that's because yes, that is the man of the subway, 536 00:28:26,720 --> 00:28:30,480 Speaker 1: that's right, and one of the nicest guys in the world. 537 00:28:30,520 --> 00:28:32,960 Speaker 1: I will I will also point out, and I can't 538 00:28:33,000 --> 00:28:35,240 Speaker 1: believe he don't know if anyone would disagree, was playing 539 00:28:35,280 --> 00:28:37,320 Speaker 1: along with our gimmick. But that's that shows you how 540 00:28:37,400 --> 00:28:39,760 Speaker 1: nice of a guy he is. So Sarah, you kick 541 00:28:39,800 --> 00:28:41,840 Speaker 1: it off. What's the craziest thing you saw in markets 542 00:28:41,840 --> 00:28:44,360 Speaker 1: this week? All right, I'll go I had to, but 543 00:28:44,560 --> 00:28:46,760 Speaker 1: I'll go with the fun one. I don't know if 544 00:28:46,840 --> 00:28:49,080 Speaker 1: either of you saw. I just thought it was really 545 00:28:49,240 --> 00:28:52,160 Speaker 1: interesting and a little bit kind of gimmicky. I guess 546 00:28:52,200 --> 00:28:55,640 Speaker 1: you could say to UM, I guess the company shouldn't 547 00:28:55,680 --> 00:28:58,120 Speaker 1: come at me after saying that. But Goldman Sacks has 548 00:28:58,120 --> 00:29:01,600 Speaker 1: a new font, UH made headlines this week. It's called 549 00:29:01,720 --> 00:29:05,160 Speaker 1: Goldman Sands UM and the idea they say is to 550 00:29:05,240 --> 00:29:09,240 Speaker 1: create a clear, contemporary and credible font. And this was 551 00:29:09,360 --> 00:29:13,240 Speaker 1: huge on their website. So I feel like Goldman Sacks 552 00:29:13,240 --> 00:29:15,360 Speaker 1: when you think of that font, the old font, it's 553 00:29:15,360 --> 00:29:17,760 Speaker 1: really memorable, and I almost I think it's going to 554 00:29:17,800 --> 00:29:20,800 Speaker 1: be difficult to recognize the name for a bit, UH 555 00:29:21,000 --> 00:29:25,360 Speaker 1: with a new font that sounds like comic sands. I 556 00:29:25,360 --> 00:29:28,520 Speaker 1: had not seen that. It's a historic day on the show. 557 00:29:28,520 --> 00:29:31,440 Speaker 1: Because that's my craziest thing too. I can't believe it. 558 00:29:32,880 --> 00:29:34,760 Speaker 1: And you know what, one of the first I thought 559 00:29:34,800 --> 00:29:36,400 Speaker 1: it was crazy, but then they kind of sold me 560 00:29:36,480 --> 00:29:39,600 Speaker 1: on it, you know. They you know, they designed this 561 00:29:39,680 --> 00:29:41,760 Speaker 1: font so that the S doesn't look like the five. 562 00:29:42,320 --> 00:29:46,360 Speaker 1: They said, the letters need to be approachable without being whimsical. 563 00:29:46,480 --> 00:29:50,240 Speaker 1: And okay, but I wonder there's a lot of thought, 564 00:29:50,440 --> 00:29:53,000 Speaker 1: a lot of thought that goes I know. I check 565 00:29:53,040 --> 00:29:55,880 Speaker 1: it out on their website. They explain all the decisions 566 00:29:55,920 --> 00:29:57,680 Speaker 1: they made on creating this font. It's it's really kind 567 00:29:57,680 --> 00:30:00,280 Speaker 1: of fascinating. I'd hate to be the Morgan Stanley Zion 568 00:30:00,320 --> 00:30:03,160 Speaker 1: team right now. You know, they're burning the midnight oil 569 00:30:03,640 --> 00:30:05,840 Speaker 1: having to come up with their own their own fund now. 570 00:30:06,080 --> 00:30:09,200 Speaker 1: But all right, Dad, did they I'm sure they They 571 00:30:09,200 --> 00:30:11,520 Speaker 1: warned you about our gimmick. Have you seen anything crazy 572 00:30:11,520 --> 00:30:14,640 Speaker 1: in markets this week? You know, Mike, I I have 573 00:30:14,720 --> 00:30:17,800 Speaker 1: been struggling with this because, first of all, I don't 574 00:30:17,840 --> 00:30:19,560 Speaker 1: I don't. I yes, I was worried about it, and 575 00:30:19,560 --> 00:30:22,920 Speaker 1: and I don't spend a whole lot of time believe 576 00:30:22,920 --> 00:30:25,000 Speaker 1: it or not, looking at markets, So I have a 577 00:30:25,000 --> 00:30:27,600 Speaker 1: hard time coming up with crazy things. I'm gonna tell 578 00:30:27,600 --> 00:30:30,880 Speaker 1: you what surprises me, and and maybe Sarah can relate 579 00:30:30,960 --> 00:30:35,320 Speaker 1: to this, is that Floridians are actually surprised, uh, that 580 00:30:35,360 --> 00:30:39,880 Speaker 1: there's an increase in cases in Florida, And that to 581 00:30:39,920 --> 00:30:43,280 Speaker 1: me is crazy because if you're down here and you're 582 00:30:43,320 --> 00:30:47,640 Speaker 1: looking around, there's no surprises about that what people are 583 00:30:47,680 --> 00:30:50,719 Speaker 1: doing and what they're not doing and the effect that 584 00:30:50,760 --> 00:30:53,360 Speaker 1: it has. I mean, because I feel like, you know, 585 00:30:53,400 --> 00:30:56,480 Speaker 1: this isn't really markets right, but it is because anything 586 00:30:56,520 --> 00:31:00,880 Speaker 1: that we talk about these days starts and ends with COVID, unfortunately, 587 00:31:01,000 --> 00:31:05,880 Speaker 1: and so your people's opinions seemed to be influenced by that, 588 00:31:06,040 --> 00:31:07,800 Speaker 1: and the concern about what's going to happen with the 589 00:31:07,840 --> 00:31:11,400 Speaker 1: economy going forward certainly seems to be. But I am 590 00:31:11,680 --> 00:31:14,560 Speaker 1: in my conversations with my my friends down here and 591 00:31:14,640 --> 00:31:17,360 Speaker 1: my colleagues, and less of of my colleagues. They're relatively 592 00:31:17,360 --> 00:31:19,960 Speaker 1: intelligent people that have good thoughts on these things. But 593 00:31:19,960 --> 00:31:23,160 Speaker 1: but uh, down here in South Florida, people are genuinely 594 00:31:23,200 --> 00:31:27,280 Speaker 1: surprised that there's a massive uptick in cases, and not, 595 00:31:27,400 --> 00:31:29,719 Speaker 1: to me is absolutely crazy. So Dan I can fully 596 00:31:29,760 --> 00:31:32,040 Speaker 1: attest to that. I mean, I remember going to pick 597 00:31:32,120 --> 00:31:36,040 Speaker 1: up food just a couple of weeks ago. Um I 598 00:31:36,080 --> 00:31:38,840 Speaker 1: would stay in the car and family. Would we run 599 00:31:38,880 --> 00:31:40,520 Speaker 1: out with our masks. I'll just grab the food, get 600 00:31:40,520 --> 00:31:41,920 Speaker 1: back in the car. But the amount of people I 601 00:31:41,920 --> 00:31:44,840 Speaker 1: would see on the street not wearing masks, walking around, 602 00:31:44,960 --> 00:31:47,840 Speaker 1: people very close to one another. I actually had a 603 00:31:48,520 --> 00:31:51,680 Speaker 1: neighbor because I had a family member who came in 604 00:31:51,920 --> 00:31:53,959 Speaker 1: from another state and they were quarantining for a bit 605 00:31:54,000 --> 00:31:55,960 Speaker 1: to make sure they were okay before coming to the house. 606 00:31:56,160 --> 00:31:58,440 Speaker 1: A neighbor said, oh, you're doing that this. I didn't 607 00:31:58,440 --> 00:32:01,480 Speaker 1: think this was happening anymore. This isn't a thing um 608 00:32:01,760 --> 00:32:05,880 Speaker 1: and and people are now shocked. All right. Well, Dan 609 00:32:05,960 --> 00:32:08,000 Speaker 1: david Witz, thanks so much for joining the show today. 610 00:32:08,040 --> 00:32:09,880 Speaker 1: It was a pleasure to have you. Thank you, Sarah, 611 00:32:09,920 --> 00:32:19,800 Speaker 1: Thank you Mica. It's a pleasure. What goes up. We'll 612 00:32:19,840 --> 00:32:22,760 Speaker 1: be back next week. Until then, you can find us 613 00:32:22,760 --> 00:32:25,880 Speaker 1: on the Bloomberg Terminal, website and app or wherever you'll 614 00:32:25,880 --> 00:32:28,480 Speaker 1: get your podcasts. We love it if you took the 615 00:32:28,560 --> 00:32:31,400 Speaker 1: time to rate interview the show on Apple Podcast so 616 00:32:31,480 --> 00:32:34,200 Speaker 1: more listeners can find us. And you can find us 617 00:32:34,200 --> 00:32:37,640 Speaker 1: on Twitter, follow me at at Sarah pant Sack, Mike 618 00:32:37,840 --> 00:32:41,160 Speaker 1: is at Reaganonymous, and you can also follow Bloomberg Podcast 619 00:32:41,400 --> 00:32:44,120 Speaker 1: at podcast. We also want to say a very big 620 00:32:44,120 --> 00:32:47,320 Speaker 1: thank you to Charlie Pellett of Bloomberg Radio and also 621 00:32:47,600 --> 00:32:50,280 Speaker 1: the voice of the New York Subway. What Goes Up 622 00:32:50,360 --> 00:32:53,400 Speaker 1: is produced by Jordan Gospore. The head of Bloomberg Podcast 623 00:32:53,520 --> 00:32:56,560 Speaker 1: is Francesscalvie. Thanks for listening, See you next time.