Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio
Speaker 1: giving you that lovely setup on FedEx stock at its
Speaker 1: ties up four percent, still with about a one point
Speaker 1: two percent gain on some plans that it is looking
Speaker 1: to cut about four billion dollars in costs and by
Speaker 1: coppying a strategy of its main competitor. We're talking about ups.
Speaker 1: You want to get to it, yeah, but the details
Speaker 1: is Thomas Black, Bloomberg News, Industrial logistics and aerospace reporter
Speaker 1: at Bloomberg News. He joins us on zoom from Dallas. Thomas,
Speaker 1: great to speak with you the news today. Talk to
Speaker 1: us about it cost cuts, merging. What stands out for
Speaker 1: you there is the big transformation of their of their
Speaker 1: company to go from two delivery network to one consolidated
Speaker 1: network over time. That's really the big structural news. The
Speaker 1: cost cuts. It's a big number. Four billion and plus
Speaker 1: two billion more if they can get their network to
Speaker 1: run the way they want to, so it could be
Speaker 1: six billion in total out to their fiscal year twenty
Speaker 1: twenty seven, So big numbers there. It could really move
Speaker 1: the stock. I think the hesitation on the stock move
Speaker 1: maybe because investors want to see them really execute on this.
Speaker 1: There is some execution risk here, so we'll be watching
Speaker 1: for that. I mean, this is all about improving and
Speaker 1: shoring up its margins, right because UPS has easily outpaced
Speaker 1: FedEx when it comes to margins. And to be fair Thomas,
Speaker 1: I feel like when we talk about FedEx and UPS,
Speaker 1: you have to remember they're not really the same operating models,
Speaker 1: are they. They are not. There's a couple of key differences.
Speaker 1: One as UPS does have that one unified network already,
Speaker 1: it's a union workforce, which can work in its favor
Speaker 1: even though the cost for employees is higher. But there's
Speaker 1: a lot of efficiencies that they gain. I think FedEx
Speaker 1: wants to go after some of that. The other thing
Speaker 1: to keep in mind is that FedEx is a much
Speaker 1: bigger airline. They move packages more by air. So right
Speaker 1: now the market is pretty tough there because after the
Speaker 1: COVID sugar high, we're now getting back to a more
Speaker 1: normalized market where you're also seeing a little bit of
Speaker 1: competition from the belly cargo from the airlines as they
Speaker 1: fly more, so that market, the demand there is certainly slack,
Speaker 1: and FedEx is trying to adjust to that. Is that
Speaker 1: the big difference in terms of the margin difference where
Speaker 1: Ups even though it's got unionized workers and it pays
Speaker 1: a lot more to its drivers than FedEx does. Is
Speaker 1: it that FedEx has all of those planes and there's
Speaker 1: a lot more air deliveries that that's why their margins
Speaker 1: are not as good. What has been really the big
Speaker 1: difference that has made the two so different when it
Speaker 1: comes to the margin front. That's part of the reason
Speaker 1: the air business just isn't as a high margin business.
Speaker 1: They also FedEx loses some efficiencies with its contractor model.
Speaker 1: It pays third party contractors to make that last mild
Speaker 1: delivery at its ground unit, and so there's some inefficiency
Speaker 1: handing off packages to those folks and also communicating with
Speaker 1: them to make sure that they have the right vans
Speaker 1: and number vans and drivers there in the morning they
Speaker 1: pick up those packages. They've had a little trouble with that,
Speaker 1: and they're constantly renewing the contracts there and there's some
Speaker 1: churns so they don't have as much control over the
Speaker 1: drivers because the contractors actually hire the drivers. UPS has
Speaker 1: a lot of efficiencies that it captures because a lot
Speaker 1: of times the folks that want to be drivers, first
Speaker 1: they have to work in the sorting center in the warehouse,
Speaker 1: if you will, and load those trucks, and then if
Speaker 1: they do a good job, then they might get hired
Speaker 1: at the driver because they make pretty good money and
Speaker 1: they already know the system and how it works and
Speaker 1: so forth. So there's a lot of efficiencies that they
Speaker 1: gained there. Thomas and Maddie, you might not know this,
Speaker 1: but I actually worked for a day as a UPS
Speaker 1: driver when I was doing a piece here at Bloomberg,
Speaker 1: and it was and the company kept reminding me how
Speaker 1: different it was that UPS. It's all their own workers.
Speaker 1: There's no you know, outsourcing in terms of deliveries, and
Speaker 1: they talked about the importance in that different model. The
Speaker 1: other thing I will say, they were so nuts about data.
Speaker 1: Every move a delivery person or pickup person made, everything
Speaker 1: was tracked and they knew the way to turn, make
Speaker 1: right turns, to you to get stuck at lights. I mean,
Speaker 1: it was pretty obsessive and pretty amazing. But but it
Speaker 1: obviously has made a difference in the company. Yeah, it
Speaker 1: looked really good in Brown too. No, I really didn't,
Speaker 1: but irushed it obviously, I need I need you to
Speaker 1: dig up that video for me. But Thomas, I wonder
Speaker 1: I mean to Carol's point is all of this the
Speaker 1: culmination is at FedEx moving to become a UPS, to
Speaker 1: emulate UPS. I think the main difference is that they're
Speaker 1: going to try to do this without having a unionized workforce.
Speaker 1: They're going to keep those contractors. In fact, there was
Speaker 1: a memo by John Smith, who's head of the ground
Speaker 1: unit right now, telling its contractors, don't worry, we still
Speaker 1: need you. We're still going to use you. So they
Speaker 1: they're still betting on that model. The CEO Rode Supermanium
Speaker 1: talk about having a hybrid model, whether they'll have some
Speaker 1: employees and drivers on the payroll directly and then they'll
Speaker 1: have the contractors. But they're going to try to combine
Speaker 1: them into one unit so that when a customer draws
Speaker 1: off a package, it just goes in a FedEx system
Speaker 1: and pop that on the other end without having In
Speaker 1: some cases you can have two delivery vehicles arrive at
Speaker 1: the same location, one from express and one from ground.
Speaker 1: They want all those packages flowing through the same system. Hey, Thomas,
Speaker 1: how do you make sense to somebody who reports on
Speaker 1: a company that's doing, you know, massive cuts. Four billion
Speaker 1: dollars they're shooting for, and they do promise to raise
Speaker 1: their dividend. Is that kind of saying, hey, guys, we're
Speaker 1: on it, but we're going to make you investors, We're
Speaker 1: looking to make you happy again. How do we see
Speaker 1: that in terms of use of capital? Yeah, that's a
Speaker 1: complex question. They didn't talk about job cuts today really
Speaker 1: at all. They had announced about a ten percent cut
Speaker 1: on some top management folks, and they have been letting
Speaker 1: people go in their freight unit and with their contractor model,
Speaker 1: they really don't have that much control over the drivers
Speaker 1: on the ground. So it hasn't been massive layoffs so far.
Speaker 1: And they didn't talk about that. But then again, they
Speaker 1: are cutting capital expenditures and they're they're shifting some of
Speaker 1: that money toward dividends. They've talked about reducing some of
Speaker 1: that capex as a percentage of sales. And I think
Speaker 1: this is this is a new error for FedEx because
Speaker 1: for many years FedEx was always playing catch up to UPS,
Speaker 1: and UPS was the market leader, and FedEx has gotten
Speaker 1: very close to them on the sales. But I think
Speaker 1: FedEx is saying, you know what, we're going to cool
Speaker 1: cool down on the capex and we might not try
Speaker 1: to over you know, we may not overtake UPS as
Speaker 1: the biggest a career, but we're fine with that because
Speaker 1: we're going to make more money and we're going to
Speaker 1: give some of that back to the shareholders. I think
Speaker 1: that's maybe the pivot point that we're seeing as well.
Speaker 1: But two years ago, I believe FedEx was in a
Speaker 1: better position than UPS, partially because they pivoted quickly during
Speaker 1: the tightness of the labor market to hire a lot
Speaker 1: of workers. To what extent though, did that end up
Speaker 1: being the thing that killed them today, not killed them,
Speaker 1: but impacted their long term profitability. Well, this is where
Speaker 1: those two models really kind of showed how distinct they are.
Speaker 1: FedEx did have a lot of trouble trying to hire
Speaker 1: folks who handle the package packages in the sorting centers,
Speaker 1: and in some cases they would handle all the volume,
Speaker 1: and that was a direct result of all of that
Speaker 1: labor shortage. UPS was a little bit protective because they
Speaker 1: do pay top dollar even for their part time workers.
Speaker 1: They get full benefits, so the UPS didn't have as
Speaker 1: much trouble hiring workers. And but you've got to think
Speaker 1: that these these companies swell up and they and they
Speaker 1: shrink down often right every peak season, they swell up,
Speaker 1: you know, maybe by tens of thousands of workers, and
Speaker 1: then they swell down. So it's not unusual for them
Speaker 1: to flex their workforce, right. UPS does it too, right
Speaker 1: during the holiday season. And I will say that UPS
Speaker 1: will also, you know, if they need be executives during
Speaker 1: the holidays, they'll be out there delivering if that's what
Speaker 1: they need to do they need to Ye. Lately they've
Speaker 1: been hiring what they call personal vehicle drivers, which are
Speaker 1: just people off the street and they hire them and
Speaker 1: you know, give them a uniform and let them deliver packages.
Speaker 1: So that's been a pressure relief vow for them is key.
Speaker 1: It sounds like the uniforms. Y, it was a lot
Speaker 1: of brown. M Thomas Black. Thank you so much for
Speaker 1: minding time for us. We so appreciate it. Yeah, be well.
Speaker 1: Industrial Logistics and Aerospace reporter up Bloomberg News on Zoom
Speaker 1: from Dallas. You're listening to the Bloomberg Business Week podcast.
Speaker 1: Catch us live weekday afternoons from three to six Eastern
Speaker 1: Listen on Bloomberg dot com, the ihard Radio app, and
Speaker 1: the Bloomberg Business App, or watch us live on YouTube.
Speaker 1: Well shares of AI developers C three AI soaring about
Speaker 1: one month ago following a revenue forecast and comments by
Speaker 1: the CEO that we're both upbeat and led to more
Speaker 1: than a handful of analysts raising price targets on the company.
Speaker 1: Last two trading days though a little bit differently and
Speaker 1: I have seen the stock drop nearly forty percent. In fact,
Speaker 1: yesterday it was the most ever in a single day,
Speaker 1: after short seller Kerrisdale Capital alleged serious accounting and disclosure
Speaker 1: issues at the company. The company, meantime put out a
Speaker 1: statement saying the shortseller's letter was a highly creative and
Speaker 1: transparent attempt to diminish the stock price. So let's get
Speaker 1: to it. Joining us right now is Tom Siebel back
Speaker 1: with us. He's the founder, chairman and CEO of C
Speaker 1: three AI and the firm's third largest shareholder. The stock,
Speaker 1: by the way, has almost doubled here in twenty twenty three.
Speaker 1: We must also know Kerrisdale Capital, one of nearly thirty
Speaker 1: short selling firms being pro by the US Justice Department
Speaker 1: over potential trading abuses, and the company's owner, a saying
Speaker 1: earlier this year that the firm had not been contacted
Speaker 1: by any government agency's over investigation. Sadron is the head
Speaker 1: of the company. The chief investment officer, Tom Siebel, thank you,
Speaker 1: thank you so much for being here with us. What
Speaker 1: do you say to the short sellers? Well, first of all,
Speaker 1: how are you? I am great, thank you, how are you?
Speaker 1: I'm doing okay, trying to keep up with the news flow.
Speaker 1: I wish it would get a little quieter. So let's
Speaker 1: get to what the short seller is saying. They're saying
Speaker 1: that you used highly aggressive accounting to inflate your income
Speaker 1: statement metrics in order to meet self side analyst estimates
Speaker 1: for revenue and certain profit metrics, and to conceal a
Speaker 1: significant deterioration in your underlying operations. And they put this
Speaker 1: in a letter to your auditor. What's your response to this, Well,
Speaker 1: I think this was a enormously creative and successful effort
Speaker 1: by a notorious short seller who it's widely reported as
Speaker 1: under investigation by the Department of justice in the sec okay,
Speaker 1: and has drug and alcohol convictions. And it's highly creative,
Speaker 1: highly successful to issue this screed that contains not a
Speaker 1: word of truth. Okay, short the stock published this letter
Speaker 1: knowing that would move the stock. And I think yesterday
Speaker 1: this person made an excess of one hundred million dollars.
Speaker 1: So it was very creative, very successful attempt at what
Speaker 1: appears to be successful stock price manipulation. John the story,
Speaker 1: so tom so the charges or allegations of this short
Speaker 1: seller that's saying that you guys, are you know, presenting
Speaker 1: yourself as being in a high margin SaaS software service
Speaker 1: businesses rather than one based on lower margin consulting. This
Speaker 1: is the letter they put on are you a consulting
Speaker 1: company or are you a software as a service business?
Speaker 1: About eighty five percent of our revenue comes from software
Speaker 1: subscriptions and fifteen to twenty comes from consulting services. This
Speaker 1: person of this short seller alleges that we report to
Speaker 1: get your ninety nine percent profit margins off of our
Speaker 1: largest customer, Advange, which is Baker Hughes. And there is
Speaker 1: nothing in any financial statement that we'll support that. It's
Speaker 1: a complete fiction. And he says because it's ninety nine
Speaker 1: percent margin. There's something must be something wrong with it. Um, Well,
Speaker 1: he's you know, he's subtracting apples from oranges to try
Speaker 1: to come up with some sort of nefarious act. He
Speaker 1: alleges that the fact that we have unbuild receivables is
Speaker 1: very serious, suspicious, and good software companies don't have unbuild
Speaker 1: receivable holes. And in the neglects to mention you know,
Speaker 1: the many many companies like UH Salesforce, Data Dog, IBM, Adobes,
Speaker 1: an Altics, SAP, all of which have many many, you know,
Speaker 1: very large unbuild receivables. Unbuilding receivables is just, um, you know,
Speaker 1: something for which you've recognized revenue for which you haven't
Speaker 1: submitted the invoice yet. It's very common in the industry.
Speaker 1: It's well understood it. And he's trying to imply that
Speaker 1: there's something wrong with that. There's nothing wrong with that.
Speaker 1: It's proper accounting. But the guy succeeded. I mean sometimes
Speaker 1: crime pays, and it's stay off paid off for this
Speaker 1: person in a big way yesterday. So we you know,
Speaker 1: we after our hats are off to him. So Tom
Speaker 1: and I want to get into what you guys are
Speaker 1: doing in terms of AI, because that's initially why we
Speaker 1: asked you to come on UM. In terms of your accounting,
Speaker 1: Deloitte and Touch, they're the one who got the letters.
Speaker 1: You're comfortable with their accounting, You've talked with them. You're
Speaker 1: comfortable with their disclosures. Our disclosures are correct. Our accounting,
Speaker 1: our accounting is absolutely correct. We have we have unqualified
Speaker 1: opinion statements from our independent auditors. We have best practices
Speaker 1: in terms of accounting, in terms of audit committee practices,
Speaker 1: and that I mean, this is just a bunch of poppycock.
Speaker 1: This is a trick that this this character played on
Speaker 1: the market. And you know he made somewhere between a
Speaker 1: one hundred and two hundred million dollars at the expense
Speaker 1: of C three shareholders yesterday and so, and no regulators
Speaker 1: have reached out to you, or that firm hasn't reached
Speaker 1: out to you. Uh, they have not reached out to us.
Speaker 1: And while it's widely reported that these guys are under
Speaker 1: investigation by the SEC and the Department of Justice for
Speaker 1: stock price manipulation, we've not been approached by either those
Speaker 1: regulatary bodies of this firm. And have you been buying
Speaker 1: any of the shares on the downfall um me personally
Speaker 1: or C three uh both. I have not been buying
Speaker 1: stock in the market, as you know, of the stock
Speaker 1: is up about I think one hundred percent year to date, okay,
Speaker 1: and it's been you know, we've reported in earnings announcement
Speaker 1: that you know, business is quite good and the business
Speaker 1: climate is quite good. And my only hope is that
Speaker 1: these that this short seller in particular, and the short
Speaker 1: sellers short sellers out there, hold on to their stock
Speaker 1: because they're going to get in my opinion, they're going
Speaker 1: to get crushed real quickly, and then we'll pivot to
Speaker 1: AI A promise. How do you refute the short seller's
Speaker 1: argument that part of your success and gains is related
Speaker 1: just to the ticker name and the overall hype around
Speaker 1: AI right now, I think, I mean, it's just a
Speaker 1: silly statement. I mean, is I think the name. I mean,
Speaker 1: I think there's no value probably attributed to that. The
Speaker 1: fact that we're in the AI market. I think that,
Speaker 1: you know, a rising scene kind of lifts all boats,
Speaker 1: and so we are clearly a leader in enterprise AI.
Speaker 1: Enterprise AI looks like a half a trillion dollar addressable
Speaker 1: market in not very many years. C three AI is
Speaker 1: in a position to establish, if not the leading position,
Speaker 1: a leading position in that market. So there's no question
Speaker 1: that some of the upward pressure on the stock is
Speaker 1: due to the realization of the size of the addressable
Speaker 1: market opportunity to C three phases and quickly here I
Speaker 1: just wonder, as CEO, how do you not get C
Speaker 1: sick on these market moves because you had all these
Speaker 1: games then obviously a tough couple of days here, what
Speaker 1: is your thinking around strategizing for your long term goals
Speaker 1: despite the market volatility. It's very easy I ignore the
Speaker 1: market and focus on the long term goals. Business is
Speaker 1: to build a great company, have satisfied customers, have a
Speaker 1: cash positive, profitable business, market leadership position, and you know,
Speaker 1: if we do that, we can just look. We have
Speaker 1: I think the last of last quarter or something like
Speaker 1: eight hundred and fifty million dollars in the bank. So
Speaker 1: we are unquestionably an ongoing concern. And I think if
Speaker 1: we focus on the big picture here, stay focused on
Speaker 1: the big picture, I think this will work very very
Speaker 1: well for the shareholders. But we don't really look at
Speaker 1: day to day or minute to minute, or even month
Speaker 1: to month. I think, you know, as far as we're concerned,
Speaker 1: the market could close for five years. But I think
Speaker 1: this is going to I think this is going to
Speaker 1: work out very well for the shareholders, the employees, and
Speaker 1: the customers in the long run. And that's my job.
Speaker 1: So the reason I don't get seasick is I don't
Speaker 1: look at it. So Tom just got about thirty five
Speaker 1: forty seconds here. So I mean, what is the big
Speaker 1: win for you guys in the next six months that
Speaker 1: you say, hey, listen, churtsellers, you've just so got it wrong. Oh,
Speaker 1: I think that if you're on the short side of
Speaker 1: this year. I mean, our business is good, okay, and
Speaker 1: we're in a position, you know, we trans recently transition
Speaker 1: to a consumption based pricing model that's really well received
Speaker 1: by the market. We expect to see, you know, you know,
Speaker 1: as the fad when the fad gets ready to take
Speaker 1: its foot off the brakes, okay, as it relates to
Speaker 1: dealing with inflation, I think you're going to see C
Speaker 1: three as a very rapidly growing, market leading enterprise application
Speaker 1: software company that's profitable, cash positive, and that'll be reflected
Speaker 1: in market evaluation. Tom Sebel, thank you so much. I've
Speaker 1: c three a eyes. We said a lot of analysts
Speaker 1: upgrading the stock last month. You're listening to the Bloomberg
Speaker 1: Business Week podcast. Catch us live weekday afternoons from three
Speaker 1: to six eastre on Bloomberg Radio, the Bloomberg Business App
Speaker 1: and YouTube. You can also listen live on Amazon Alexa
Speaker 1: from our flagship New York station, Just say Alexa playing
Speaker 1: Bloomberg eleven thirty. I'm bring a journal. Yeah, but you
Speaker 1: let me drive? Oh no, no, no, no, who's gonna drive? Honey? Please,
Speaker 1: I'll do the bride gravels. I'm want to drive the question.
Speaker 1: This is the drive to the Clobe. Commmu than well,
Speaker 1: Brither Dawn on Bloomberg Radio. All right, everybody, we've got
Speaker 1: just about seventeen and a half minutes left in today's
Speaker 1: trading session, getting ready to wrap up on this Wednesday.
Speaker 1: Remember it's a holiday short and trading week. We do
Speaker 1: get the jobs report on Friday, um, but financial markets
Speaker 1: here in the US are going to be closed for
Speaker 1: the Good Friday holiday. Having said that, bouncing around here
Speaker 1: on the equity side, gaining the down just about a
Speaker 1: quarter of a percent, high. As Charlie mentioned tech stocks
Speaker 1: in particular, the nastack down the most on a percentage basis,
Speaker 1: But it's really a big focus on what's going on
Speaker 1: in the treasury trade right now. That to year note,
Speaker 1: just to reminder, three seventy eight ten year knit with
Speaker 1: the yield of three twenty nine. So let's get to
Speaker 1: it with our drive to the closed. Guest and with
Speaker 1: Maddie and me is Bill Davis, portfolio manager at Hennessey Funds.
Speaker 1: Bill specifically managing the Hennessy stands at ESG Large cap
Speaker 1: ETF ticker is st n C fun up roughly four
Speaker 1: percent year to day. Bill with us now on the
Speaker 1: phone from Boston. Bill, great to have you here on
Speaker 1: this Wednesday. Tell us a little bit about the fun
Speaker 1: and correct me if I'm wrong. But I think you
Speaker 1: guys made the debut. Was it like when we were
Speaker 1: kind of coming out of the pandemic. Yeah, I think
Speaker 1: Karrol and Maddie that's right. We actually launched the fund
Speaker 1: in the first quarter of twenty twenty one, so s
Speaker 1: TNCs A nicely listed it actively managed ESG Large cap
Speaker 1: ETF and yeah, and we've basically got two years in
Speaker 1: the actual ETF itself and assets under management. What kind
Speaker 1: of flows have you I've been seen, and I'm really
Speaker 1: curious in particular the last let's say six months or
Speaker 1: so and more recently, just to get an idea of
Speaker 1: investors sentiment. Yeah, I would say thats have well. So
Speaker 1: last year we basically even though the market was down
Speaker 1: eighteen percent, I think we were down twelve percent and change,
Speaker 1: and our flows went up by about ten percent. So
Speaker 1: we've got about forty five million in the fund today.
Speaker 1: We are expecting some inflows, some actually potentially significant ones
Speaker 1: really just based on track record and outperformance and risk management,
Speaker 1: and I think this is a market where risk management matters.
Speaker 1: I want to talk about the fact that it is
Speaker 1: an ESG fund, and Carol has flagged this and we've
Speaker 1: talked about it a lot. ESG funds falling out of
Speaker 1: favor a bit, garnering more and more scrutiny, the absence
Speaker 1: of consistency and ESG classification, showing the hurdles investor's face
Speaker 1: when trying to allocate capital, especially given these macro headwinds.
Speaker 1: But against that, backed up, MSCI has said it's planning
Speaker 1: to dramatically reduce the number of funds, it gives top ratings,
Speaker 1: and I wonder how you're feeling about those changes that
Speaker 1: are going to take effect by the end of this month,
Speaker 1: and are you feeling any impact as a result. Yeah,
Speaker 1: so no, short answer, not feeling any impact. I think
Speaker 1: that ESG is a political wedge issue, is largely a
Speaker 1: dead end as a sort of an investor sentiment issue.
Speaker 1: I think that there are a wide swath of investors, institutional,
Speaker 1: high net worth, ultra high net worth, mass, affluent, millennial,
Speaker 1: you know, people with ten dollars to invest and people
Speaker 1: with one hundred million dollars to invest, to care about
Speaker 1: these issues or they don't, right, So, I mean, I
Speaker 1: guest that there's people that don't care about them, but
Speaker 1: the people that do are not being dissuaded by congressional
Speaker 1: inquiries into you know, ESG. I just we have not
Speaker 1: seen any effect whatsoever. And by the way, I actually
Speaker 1: do welcome the idea of additional scrutiny. There are too
Speaker 1: many products that are either me too or you know,
Speaker 1: just lack authenticity, and I do think a weeding out
Speaker 1: of the general landscape would be a very good idea well.
Speaker 1: And part of the big problem is, you know, every
Speaker 1: ESG fund. It's not apples to apples. There's inconsistency, to
Speaker 1: say the lead in terms of classification. So how do
Speaker 1: you I want to get into we want to get
Speaker 1: into your picks, But how do you define ESG. You're
Speaker 1: an actively managed fund? So what says ESG to you
Speaker 1: before you look? You know that requires you? Then yeah, no, no, no,
Speaker 1: really good, really good point. And by the way, I
Speaker 1: will also say, there are a lot of valid approaches
Speaker 1: to ESG that are very different from what we're doing.
Speaker 1: Like I could make an argument that you could have
Speaker 1: an ESG product that invests in energy transition, right, so
Speaker 1: that's mostly investing in today's oil and gas companies trying
Speaker 1: to pick the winners and losers in the transition to
Speaker 1: a lower carbon economy. Our particular product, this problem STNC
Speaker 1: is fossil free, it's weapons free, it's tobacco free. And really,
Speaker 1: then what we look to do is invest in the
Speaker 1: intersection of good ESG and good fundamentals across as much
Speaker 1: of the economy. And I should point out our market
Speaker 1: universe as the SMP five hundreds sore basically US large gap.
Speaker 1: But we are you know, we happen to be overweight
Speaker 1: industrials frequently, and so we are not afraid to invest
Speaker 1: in segments of the economy within which the transition is
Speaker 1: not only important, but there are going to be inherent
Speaker 1: risks for companies in their investors when they aren't being
Speaker 1: ambitious enough in that transition. And so we think that
Speaker 1: there's real opportunity for investors to generate alpha there. So
Speaker 1: talk to us some names here and what your KPIs
Speaker 1: are for those doctics. So we have twenty four KPIs.
Speaker 1: I'm going to start by saying that key performance indicators
Speaker 1: for everybody ahead. Key performance indicators. Sometimes we call them
Speaker 1: material risk factors because I think really what we're trying
Speaker 1: to do is on an industry group basis, identify those
Speaker 1: material risk factors and then weight them in according to importance.
Speaker 1: So like a practical example of that is automotive products.
Speaker 1: We get asked pretty frequently about Tesla, and you know,
Speaker 1: we try not to let personal feelings, you know, get
Speaker 1: involved in decision making. And what I will tell you
Speaker 1: is Tesla is very good at certain things like low
Speaker 1: carbon or carbon transition, but it happens to be very
Speaker 1: bad at a lot of the S and G stuff
Speaker 1: like governance, injuries and fatalities, human rights, worker rights, those things.
Speaker 1: In the end of the day, Tesla sometimes is in
Speaker 1: our portfolio because it happens to be in the top
Speaker 1: fifty percent of its industry group, largely as a result
Speaker 1: of what it's good at and as a result of
Speaker 1: the waiting of what it's good at. And that's essentially
Speaker 1: how the KPIs work for us. And some are E,
Speaker 1: and some are S and some are G. Unfortunately, we
Speaker 1: only have about forty seconds left here. Pick your name, MasterCard.
Speaker 1: We know you like. You've also recently taken positions in
Speaker 1: GE and alphabet. You can pick one and just tell
Speaker 1: us why. Again, only about thirty five seconds. Yeah, well,
Speaker 1: I'll take GE as an example. I mentioned sectors that
Speaker 1: we like. We tend to like industrials, we tend to
Speaker 1: like healthcare. We happen to be overweight in financials for
Speaker 1: the first time. But GE is kind of an interesting
Speaker 1: name because it plays in both industrials and to a
Speaker 1: certain extent healthcare. It's a strong yes um, it's it's
Speaker 1: a strong um yes G name. And there is a
Speaker 1: very strong signal right now around new sentiment, which is
Speaker 1: not typically a big signal for us, but fundamentally we
Speaker 1: like it as well, and we think it's a good
Speaker 1: time down yet Catalyst, I mean, by the way, they're
Speaker 1: up about forty three forty three percent so far here
Speaker 1: in twenty twenty three. Great conversation, Bill Davis, thank you,
Speaker 1: come back to you and portfolio manager at Hennessey Funds
Speaker 1: turning matting me on the phone from Boston. This is
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