Investing Unscripted Podcast 109: Stocks in 2024: The Ones We Missed

It's not hindsight bias if you do it on purpose, right?

Note: All transcripts are edited for clarity. We may earn commissions from some (not all) links. Thanks for the scratch.

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Jason Hall: Hey everybody, welcome back for the third time to Investing Unscripted, where we ask and answer the hard questions about investing.

I'm Jason Hall. Indeed. This is the third take of me just saying hi. Hi Jeff. 

Jeff Santoro: Hey, yeah. After hundreds of episodes, it is funny how [00:01:00] hard it is for you to start this show sometimes. 

Jason Hall: It really, really is. If you're new to the show, that's Jeff Santoro. He is the voice of the people. He is my very, very dear friend.

We've got a good show planned. Jeff, should I maybe, uh, share a little bit of the making of the sausage and that this is not the show that we had originally planned? 

Jeff Santoro: Yeah, I think that's good context. And also, I think it's smart that you start off by saying we've got a good show planned. Like, we should just always do that because then people have the expectation that it will be good.

Jason Hall: I think I do say some variation of we have a great show, good show, or I'm excited 

Jeff Santoro: about this show. We have a terrible show planned, everybody. If you, if you turn it off now, we will, we will understand. 

Jason Hall: So I can't remember, was it, I don't think it was George Carlin. No, it was Mitch Hedberg. he'd go out on stage and people would clap. This was after he became very popular. People would clap and he'd be like, why are you clapping? I could be really bad tonight. So. 

Jeff Santoro: Well, I like to imagine that when people hear our theme music, there's some applause, but I guess we'll never know.

Jason Hall: Yeah. Now here's the question though. Is it [00:02:00] the 80s? Is it the slow clap? 

Jeff Santoro: It's slow buildup. 

Jason Hall: Yeah. Okay. We're making a good show bad. Let's uh. Yeah. We're already off 

Jeff Santoro: the rails. All right. Why don't you tell the good people how we landed here? 

Jason Hall: Yeah. So we started thinking we would do something. We want to do a little more of obviously we don't want to steal from our good friends over at chit chat stocks or some of the more stock based shows out there.

But every once in a while we do a show where we'll kind of dig in a little bit more. And we, something we've been talking about for a while is doing shows, maybe around certain sectors or industries that we like. Or that we know well we meaning me and Jeff asking questions because I know things.

Jeff Santoro: Yes, you do. You do know things and bringing it back to the common theme of financial therapy for me on this podcast, I wanted to just ask you questions about sectors that I don't understand. So that was the original plan and we will do that someday, but that is 

Jason Hall: not what 

Jeff Santoro: we're going 

Jason Hall: to do today.

No, we changed, we pivoted kind of last minute and started thinking about this great run [00:03:00] 2023 stock markets up a lot since then. And a lot of investors had expectations that it. Was going to be a tougher period, higher interest rates, slowing economy, all of that kind of thing in the market does what it does.

And that's not what anybody expects. And we thought it would be fun to, uh, we thought it would be. a good show to have fun with hindsight bias, right, Jeff, and talk about some stocks that have done really, really well. And we're regretting not having bought more of back in early 2023. 

Jeff Santoro: Yeah. And I think this will be a fun conversation for a couple of reasons.

I know, at least on my end, the stocks that I brought to the table, I did not buy more of for different reasons. And I think that'll be a fun conversation to have. But also I, I just, the hindsight bias piece is what's funny about it. And I think what I'd like to do at the end is kind of come back to how do you, how do you prevent yourself from feeling this way, if at all possible in the future.

And I have, cause that's something I think about a lot. So we'll talk more about that later. All right. So why don't we [00:04:00] kick things off Jason by talking a little bit about what brought you to this topic. You were the one that decided to, to kind of change, change midstream here. And I thought it was a great idea.

I know you mentioned that we've been on this run, but I know specifically this is related to some stuff in your portfolio in terms of cash and things like that. So why don't you kick off the conversation? 

Jason Hall: Yeah. So kind of the underlying theme behind it is again, this bull run that we've had on the S and P 500, Jeff is up 46%.

Since trading opened in 20 23, 40 6%, that's an annualized rate of 20, 29 0.4% over the past year and a half. It is a remarkable run. Again, that's just the s and p. I don't have it in front of me, but I think if you look at the nasdaq, lemme look it up. I'm curious. I'm looking at the NASDAQ 100.

It's, it's, how's it done? Wow. 84% up, which makes sense. That's a lot of Nasdaq. 100 stocks are the Mag [00:05:00] seven. And when those stocks, those big market cap stocks move up as much as they have lifts the index even more. So while we're talking 

Jeff Santoro: about, hold on, while we're talking about this, do me a favor, do a check from February 18th of 2020 to now and give me the annualized return for, for both the S and P and the NASDAQ.

Jason Hall: So why that date? I'll tell you why. So February 18th, 2020 the S and P 500 is up 74. 1%. And the NASDAQ 100 is up 114. 2%. 

Jeff Santoro: And does it give you those numbers annualized? 

Jason Hall: Yeah. Annualized S and P is 13. 7 percent and just over 19 percent for the NASDAQ 100. 

Jeff Santoro: All right. So the reason I asked that is that's the day I bought my very first stock.

And as, what, as what I was thinking as you were giving those numbers was, What a bizarre four ish years I've had in my stock buying, investing journey. Because squeezed into that incredible return [00:06:00] was a really, really terrible 18 months in like late 21 into, well, there were two, there were two scary 

Jason Hall: periods.

So you bought, that was a Tuesday, so that was a Tuesday that you bought. But that Friday, the 21st, that was the peak before. The pandemic crash happened right that Friday that was that was the peak and between that Friday February 21st I think March 23rd The S and P lost like 34%. You know, it was the fastest 30 percent drawdown in history.

And then we spent six months afraid to leave our houses. Right. 

Jeff Santoro: But when I think back to that, from a market perspective, that does not stick out to me nearly as much as 2022 does. And I think, yeah, well, yeah, yeah. And that's, and it's, I was brand new. I probably had 300 in stocks or something like that.

Well, and you remember 

Jason Hall: stocks go up from the second half of the spring and second half of 2020. 

Jeff Santoro: Right. But I just think it's wild that in that couple year span. Well, it's, it's, it's wild. [00:07:00] It's interesting. The S& P number is not far off from the historical average, right? The S& P average annualized average is like, what, 10 percent a year, 9 10 percent and it ended up being 13%.

Yeah, so no, 

Jason Hall: I'm glad you said that because I want to clarify. 13. 7 percent is way higher. It's not 3. 7 percent higher. It's 37 percent higher. 

Jeff Santoro: Right, right, right. That's a good point. 

Jason Hall: Then the annualized return, but, but, but that 13. 7 percent is lower. This is, I'm glad you brought that up because if we go back to roughly the bottom in the global financial crisis back in March of 2009, the S and P is up 14.

6%. So that's another 10 percent and bonus returns on, on top of it. So, but either way, you're talking about historically excellent levels of return. Um, Over these periods of time, 

Jeff Santoro: right? And the reason I wanted to have that be part of the conversation is a lot of what I've been thinking about and what I want to talk about [00:08:00] today is contrasting how most of my time as an investor has felt with what my mindset was in 2022.

When I. Was super sad about everything, but then also thinking to myself, like, is now the time to put a lot more money in the market? And then a week later is now the time to put more money in the market. And then a week later is now the time to put some more money in the market. And of course, now I look back to 2022 and I'm like, yes, the answer was yes.

I should have put all my money in the market in 2022. So that's part of what we'll, what we'll talk about. 

Jason Hall: Yeah, that's great. And just really quickly, my context is a little bit different because my investing journey started during the financial crisis, like right before and then during. So I was kind of, you know, laying down my foundation and putting down roots when it took the market five and a half years to recover from the 2000 peak before the market fully recovered five and a half [00:09:00] years later.

So, It's definitely very interesting how that informs how you view the market. So that's, that's fun. All right. So yeah, back to the show. So let's do this. So, the premise is hindsight bias. We're looking at stocks that have done really well, particularly ones that were looking back and saying, man, I really wish that I had a bot more back in January of 2020, 2023.

I'm going to be doing a lot of reality checking myself. As we go through this, so I'll be interested to see, uh, what, what you have to say. So, do we even want to talk about NVIDIA? I mean, we could probably skip it, to be honest. 

Jeff Santoro: I think we should I think we should spend just a minute or two Acknowledging it because I'm conscious of the fact that people are probably tired of us talking about it But we would be doing a disservice to ignore it because it for both of us is probably well 

Jason Hall: We have to get Nvidia in the the name of the that's right We have to help 

Jeff Santoro: our search engine optimization so people find the podcast.

I mean really quickly. It's just. It's the most clear example for [00:10:00] probably anybody who owns it. Like I would be shocked if anyone who owns NVIDIA has had anything else do anything anywhere close to its returns over the past 18 months. So I think for anyone who owns it, it's probably the first one that comes to mind.

Do you have any numbers handy to talk about? Exactly when you wish you would have bought 

Jason Hall: more so I do and well, it's less about the numbers and kind of more about the backstory. So I sold on May 22nd of 2023. I sold about half of my NVIDIA. The stock had gone up 123 percent since the September before.

So what is that? Nine months or so. Around nine months, the stock had, had just absolutely skyrocketed. Interestingly enough, it was only around 6 percent or so. From the, from the previous peak, which was like 2021 or so through the pandemic bubble. Peak kind of period, I think it was about 6 percent above that.

[00:11:00] So it wasn't at some insanely high valuation multiple that I had already held through before. But what I wanted to say is that I did, you know, I did have enough to, to crib our friend and colleague, Tyler Crowe had enough conviction not to sell all of my NVIDIA. I sold half of my position, but I didn't have the deep knowledge to sell it.

Of the full implications of AI and spending that we've talked about a lot in past few episodes and on the newsletter to really see the bigger picture. Right. I just, I didn't really have that full understanding. 

Jeff Santoro: It was also really, really new still, you know, I think it's, it's easy to forget like at the time, cause we both sold this, we had the same conversation.

We both convinced ourselves to like trim a little bit. I joked, well, it wasn't even a joke. I was dead serious. I said on the last podcast that I trimmed just cause I wanted to be able to actually trim something. I wanted to be a big boy. But I was in the same boat as you of thinking like, You know what, [00:12:00] if, if this does not go up another 200%, then I'll take a little bit of profit off the table.

I'll put it into something I have some high conviction in, and I just kind of wanted to see what that was like. I wanted a taste of that. But what's interesting is I, at that time, you know, it was like chat GPT was still kind of new. And I remember the conversation being, is this hype cycle? Is this like 3d printing and like the metaverse?

Or is this the beginning of a really durable trend? And I think that's the question. At least I've been asking myself about Nvidia ever since, really, to some extent, because you know, it every quarter when their earnings comes up, I think to myself, you know, is this the quarter where they'll miss? Analysts estimates by a little bit and the stock will drop 20 or 30 percent because it's just price for perfection.

And then it doesn't happen at some point. I bet it will. I just, I have a feeling there will be an inflection point at some point where expectations will not be met and the stock will drop [00:13:00] some double digit amount. I don't know if it'll be in 2024 or 2026 or 2030. It just seems like that's inevitable at some point.

But yeah, it's like, at the time, it was the very beginning of us all thinking about what impact, if any, will AI have? So it's important to remember the mindset we all had then versus looking back at it now. 

Jason Hall: Yeah, and the stock was trading for, I don't know, 200 times earnings. That's it, back then.

Here's the crazy thing about how much their earnings have grown. It trades for 79 times earnings today, so the earnings multiple has come down, actually, basically one third. Because it's about 79 times and it was like 240 times at the, at the 2023 peak, about the time that I was selling. Here's what's happened though.

Earnings has grown from, I don't know, 10 billion in earnings in the four quarters prior to that, to 43 billion. It's absurd. Yeah. Absurd is the way to put it. I [00:14:00] don't, here's my last question before we move on to the next one here. My question for you, I mean, do you, cause you lighten your position to it, but like I said, it was tiny, it was little, it's.

I don't want to say meaningless, but nearly immaterial. Do you, do you really regret that? 

Jeff Santoro: Yes. A hundred percent. Because the reason I did it was so stupid. You know, if it was like, if it had grown to be 6 percent of my portfolio and I was uncomfortable and it seemed like that was the right time to take a little off the table, then I know I don't think I would regret it, but I did it for, I mean, look, I did it for a silly reason because it was a silly amount of money.

Jason Hall: Yeah, 

Jeff Santoro: You know, but yeah, so I absolutely regret it even, you know, all the hindsight and everything else. I think what's more interesting to me is I just did this the other day. So it could be not accurate because I think NVIDIA has gone up a couple percent over the last handful of days.

But I looked at its current, I used price to earnings and I looked at its current price to earnings and I compared it to [00:15:00] the three, five and seven year median price to earnings. And it is. Right. In line with that. So like that, that's interesting to me. Like I, you could make the argument that it's not incredibly expensive right now, historically.

Now I understand that that's looking backwards and I get all that. If growth falls off a cliff, it's expensive. 

Jason Hall: Well, that, I mean, that's the thing, right? It's in the media, it's in that range from that's back when it was earning like 3 billion a year, not 43 billion a year. But I 

Jeff Santoro: did the same thing for some of the other stocks we're going to talk about and their current price to earnings is.

Yeah. Double the three, five and seven year median. So. Yeah. That's, that's it. I mean, no one talks about those in terms of being expensive. So that's why it's right. It's interesting to me. I've actually several times in the past couple of weeks thought about actually adding to my Nvidia position just cause I, I could make the argument that if we get, I'll say this, this will really be the last thing I've bought little tiny bits of Nvidia.

Maybe, I don't know. Let me see how many times here. This is the longest [00:16:00] one minute about NVIDIA and a history of minutes about it. I bought it 13 times all little tiny amounts that the least any of those positions are beating the market by is 370%.

 So and you could have made the argument along the way for a lot of those that it was expensive. So all right, let's move on. What's another one that you have hindsight bias regret over other than NVIDIA? 

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Jason Hall: So I want to pull this in forward a little bit from our outline, uh, Shopify. And the reason I want to talk about Shopify is like on, at first blush, it's up stocks up 80 percent since the beginning of 2023.

So it's easy to look at some, some of these that are up a lot more. We'll talk about CrowdStrike. I know it's up a ton. Um, NVIDIA is the pace setter here, but I mean, 80 percent gains in a year and a half is incredible, right? It's it's, that's like you get a few of those and they do it every few years. And that's how you get to like.

Life changing wealth. But the big reason I want to talk about this one is sure the stocks up and you look at what Shopify has [00:18:00] done, like the growth rates have just recovered. And, and you know, we kind of all thought, well, maybe this whole, the way they're going about building, like the e commerce competitor to the Amazons, the world, maybe it's just not as big of an opportunity as we thought it was.

And now you look at what they're doing there, you know, past couple of quarters into last year and then their first quarter this year, it's like, you know what, no, it's. The margins are back all the important, like the recurring rep, the recurring revenue part of their business is, is really doing well. So it's not just like the take rate stuff where they get a percentage of, of sales, but the things that their customers sign up for, right.

And pay and sign a con like they agree to recurring subscription. All of that stuff is really, really doing well. They keep adding features. They're. Customers add more of those features as they bring them online. They've moved up market. It's not just small and medium businesses. Now there's a lot of enterprises that are using Shopify.

All of those things are working. You want me to keep going or you want to weigh in? 

Jeff Santoro: No, [00:19:00] keep finish up. I have some thoughts. Cause I, I, I've also own it and actually bought it recently. So I want to talk about that, but go ahead, finish. 

Jason Hall: And as I was looking at it and kind of going through this, this thought process of man, I wish I had about more.

And I have bought more recently, actually. I bought this year. I slowed my process down and said, okay, let's go back and let's do some research because you know, I know the company really well and back in 2020, 2021, I think maybe it was, I think it's 2021. They started talking about getting into the logistics business.

Cause they really wanted to build like the vertically integrated full, like Anti Amazon, where if you're trying to compete in commerce and e commerce, you've got like the one stop shop with, with Shopify, where you get the website, the order management, they can help you with marketing. They can help you finance your business, like do all the things.

And also like the last mile in the logistics to like that was the goal. And back then money was cheap and then interest rates skyrocketed. And they said, Whoa, this is, yo, [00:20:00] let's take a step back and see if this is really the thing we want to put our capital towards. And what I didn't really fully remember Jeff was that it was only may of last year.

So barely over a year ago. That they reached the deal with Flexport to sell their logistics business and they didn't close it until June. So it's barely, it's like almost exactly to the day, a year ago that we're recording this, that they actually sold off the logistics business and went back to being like the asset light where the software, where the services provider, where the technical layer that you don't need to have the expertise to do.

It's, it's basically only been a year. 

Jeff Santoro: And I, I'm so glad you said that because. I had an experience with this recently where I sort of, it, it wasn't a realization. It was actually a reminder of something I used to think a lot about and feel pretty strongly about early in my investing career. And then I kind of got away from it, which is if you routinely get into the habit of reading both The SEC filing each [00:21:00] quarter, so the 10 Q or the 10 K and well, actually it's not that for Shopify, right?

Cause they're a Canadian company. The 20 K. Yeah. Yeah. But read the SEC filing and then read the transcript of the conference call or listen to it. And if you do that regularly, it's a really good way to not forget that a company is still dealing with the impact of a decision they made. And I was reminded as I, this is one of the ones I read, I read on my vacation a couple weeks ago.

I was catching up on all the Q1 stuff. I was reminded that yes, they are still year over year comping and dealing with the, you know, the impact of that decision to sell the logistics business. And it, and it reminded me a lot of what had pulled Amazon down for so long, which was this acknowledgement that they had to right size the business after all of the footprint.

expansion for the distribution network and the stocks getting hammered. But if you just were up on it each quarter and reading, you'd, you'd think to yourself, well, this will end [00:22:00] eventually, like they will figure it like this is, you know, they're burning money now to fix this, but then that will end. And, and I had the same sort of realization reading through Shopify.

And what was so nice about it was I actually bought it what's today? I bought it a couple days ago. a good, put a good chunk of my money into Shopify. And I don't regret not having bought it earlier. Yeah, I don't have the hindsight regret because had I bought it earlier, it would have been because someone else got told me to, or you and I talked and you convinced me, it would have been borrowed conviction, right?

We've talked a lot about that, which I'm trying to get to a point where maybe that helps me think about something or draws me back to Looking at a company I had not looked at in a while, but I want to make my own decisions and reading through all the information on my own, sitting quietly by by a pool kind of reminded me like, wow, there's a lot of all the stuff you just said, there's a lot of tailwinds for Shopify, a lot of things that would lead you to believe they have a bright future.

And yes, [00:23:00] there's some short term things are still dealing with. And they could not turn out the way management is spinning them, but it gave me enough confidence to add to my position. So 

Jason Hall: yeah, I bought a little bit last October. There were starting to be some indications that things were getting better, but it was really, it's only been when they reported the end of last year and then first quarter of this year that it's become like readily apparent that the business is really back to what it was before they moved through it.

They've gotten their, all their, all their resources reallocated to the real growth drivers. So, Yeah, I, I, this is one that I would like to say, yeah, I'm really smart and I know this business super well, and I wish I had about back in January of last year, but there was too much uncertainty back then. So I don't, I don't regret.

Jeff Santoro: Yeah. Same. And I think the last thing about this is it's a very popular, well, talked a lot about stock. And yeah, I think there are times when something it's talked about a lot and it's because it's bit up and [00:24:00] overpriced and you should probably be cautious. And then I think there's times when something's talked about a lot, but it's actually a good deal at the time, but because Shopify is so out there in this, in the Twitter, Twitter sphere and financial media, I'm always cautious that when it's conscious top of mind for me, it's because I'm, it's because of noise, not signal.

Right. And I think that gives me caution sometimes. So that's why, again, it was such a nice reminder to myself to just ignore all that and go read and make, make a decision, make the best decision you can based on the results and what the actual, you know, sec filing and, and conference call says. So.

Okay. Which stock do you want to talk about next from your list? All right. So I want to talk about I'll talk the two that have been the biggest winners and ones that I had not added to as much as I probably should have are Arista Networks and Broadcom. So I guess we'll talk about let's talk about Arista Networks first because it's one of the stocks I [00:25:00] bought Earliest on in my investing career, again, on a recommendation, not because I really understood the business.

So I made, remember the date I asked you about to check earlier was February of 2020. So I bought Arista in June. So this is early on in my investing life. It was a recommendation at the Motley Fool and I was a stock advisor subscriber, so I bought it. And I've added to it since, as I've learned more about the business and I still don't like completely understand it because it's a techie thing, but I know enough about it to feel like I have my, my head wrapped around it.

This one, I actually do regret a little bit because I remember when all the Nvidia stuff blew up middle of last year, in terms of, you know, the triple digit revenue growth in the data center segment for them, I remember thinking to myself, the smart move here. Is not to buy NVIDIA, but to buy another company people aren't talking about that will benefit from the exact same [00:26:00] secular tailwind.

And I didn't do the due diligence I should have to look through my portfolio and realize that a company like Arista Network Arista Networks and Broadcom, which we can talk about later, are going to be beneficiaries of the exact same tailwinds. So I, I did buy a little in the beginning of 2023.

So this is before the NVIDIA stuff kind of really, you know, you know, skyrocketed. But again, this is one where I have bought a dozen or so times in tiny amounts over the past four years, and they're all beating the market, all those little buys. And of course, now I look back as it's up as it's a four bagger in my portfolio and not a lot of money.

Again, this is not a humble brag. It's a dumb luck. That's something I turned a couple hundred bucks into something better. But, um, yeah, I absolutely regret. Not buying more of this one only because I should have been smart enough to realize like, Hey, this might've been something with some tailwinds. And, and since, since that happened, it has, it is just, this is one of the ones I talked about earlier [00:27:00] where it's trading for a massively more expensive.

Price to earnings ratio, then it's historical, uh, median. So, 

Jason Hall: well, for those that don't know Arista networks, they're one of the leaders in broadband switching and switches and routers in the big data routers and, and, and virtue virtual also to, they do, they bunch of software for managing it and creating like these flexible networking solutions.

They're just a massive leader. Cause like Andy Bechtolsheim , I believe is his name. He was at Cisco. And I think he was trying to get Cisco to do more of this and he ended up leaving and he and, uh, Ken Duda, Founded Arista Networks and built this business. And now it's become like the preeminent provider of the hardware and solutions that do what they do.

Jeff Santoro: And not just the preeminent provider of those hardware and software solutions, but they're all of the big giants use them. I think they, they have some, which is something to know. If you're going to invest in this company, they have a [00:28:00] pretty significant concentration to their revenue. I think the big cloud Titans are, I don't, I don't want to misquote, I'll look it up while we're talking, but like some massive amount of their total revenue comes from you know, Google and Amazon and you know, that kind of the, the big cloud Titans in their big data centers.

But those are the companies that have the money to spend on AI, right? So they're pretty well positioned. And I probably should have seen that. 

Jason Hall: Yeah, I think I misspoke about Bechtolsheim . He founded Sun Microsystems before founding Arista Networks. That's what I'm trying to remember. It's really interesting too.

One of the things I think is a strength of, of this business Jeff is it's the CEO. So you have two founders, one that's on the board and then Beckelstein, who's still an executive chief architect. But their CEO is not a founder. Jayshree Olal came in before they IPO'd. Um, as CEO, so you had self aware, highly skilled founders of this business who also had really good track records [00:29:00] of, of founding successful businesses in Silicon Valley. That we're self aware enough to say, let's find the right person to run this business. And she came in and she's been the CEO for over a decade since before the IPO. Um, and they have just a wonderfully talented executive team. And they just keep delivering and I wanted to really get into that.

I know this company pretty well. I don't own a single share. So I won't say that I, that I regret not buying shares back in 2023. I regret not getting to know the company back in 2015, 2016, you know what I mean? 

Jeff Santoro: Yeah. And it's, you know, I, I think one last thing I want to say about it and then we can go to your next one is.

I wrote in the newsletter a couple weeks ago about how borrowed conviction gets a bad rap. Yeah. Because I think this is, for me at least, Arista Networks is the perfect example of where borrowed conviction can really help, can turn into legit conviction. Can get you started. Yeah. Like I would have never heard of this company.

Had I not found it through like that [00:30:00] recommendation, right? I bought a little and because it was in my portfolio, I kept, I watched it and learned about it every quarter and I tracked its results. And now I think I know the company pretty well. And I will, it's one that I now have high conviction in and I want to hold on to, and I understand it better than I used to every quarter.

I try to understand it a little bit better. And. You know, if I hold this for the next 25 years and it ends up remaining a market beating stock, I will be wealthier for having borrowed conviction in 2020. So, you know, I, I, I think it's been my job since then to learn about it, but I don't think it's a bad way to start out.

All right. What's your next one? 

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Jason Hall: Let's talk about CrowdStrike. We had, we both had that on our list. I think. Yeah. Yeah. So it's up 280 percent since January, 2023 of the stocks that I own. This is the behind NVIDIA. This is the second best performer since then. So we're talking about nearly a four X in a year and a half, which is incredible.

It's incredible. I'm going to, so, so [00:32:00] what are the, what do they do? I just, I'll quickly kind of summarize what, um, CrowdStrike does. I'm sure a lot of our listeners probably know, but they're best in class. Cybersecurity endpoint protection is kind of where they built their, their business. The founder comes from.

One of the big security companies and left when they, it's funny, if you think about so many zoom Arista networks, CrowdStrike, I can name four or five more of, they were founded by people who were executives at big tech companies that were incumbents that didn't want to disrupt their, their, their, their golden goose.

So George Kurtz said, okay, we got it. We got to do better than this. Cybersecurity that's built into the device that steals all the resources that makes people unproductive has to be updated all the time because it's security and built a cloud based endpoint protection basically to protect devices before the cyber attack can get into it, [00:33:00] you push out the update.

In real time, all the time it's off the device. And they've just expanded from there. They do so much more than that. Now they've got, I don't know what, 24, 25 modules. It's, it's just incredible what they've done and they continue to be best in class by leading with making sure they have the best product and when they move in to another module, that's.

adjacent, they make sure that it adds value. One of the things that's just impressed, so impressive to me about this particular company is I think it was back in 2019 or 2020 customers that had four or more modules, I think it was like, I don't know, 25 or 30%. Now, 25 or 30 percent have six or more modules.

It's, it's just remarkable how their, their model of customer expansion and also new customer acquisition, both of those things continue to pay off and it taught, it just demonstrates how great the products really, really is. And you and I both have talked a lot about how [00:34:00] cybersecurity is, it's not recession resistant because if a company downsizes 20, 000 employees, that's less seats that they need, right?

Less end points. They need to protect from 

Jeff Santoro: that standpoint. Yes. 

Jason Hall: But, but they're not going to 

Jeff Santoro: cut cybersecurity out of their budget. No, exactly. 

Jason Hall: Right. So that's the thing. It's not like you cut your marketing expense for the next quarter. So you can make the year, right? You don't cut, you don't cut cybersecurity for, to make your, to make your year.

So. Just such a wonderful business. And it's just created a lot of value for investors. Anything to 

Jeff Santoro: add? I, yeah, I have a lot to say about this one. Cause I I've been thinking about this, but I'm curious. So what. Is your hindsight regret just based on what is it based on when you look back and say, Oh, I should have bought more.

Is it just simply like the company has consistently put up incredible numbers and I should have just been a little more confident back in the day. What do you think is the reason you have not? Did not buy more of it back at whatever given time in the past. 

Jason Hall: [00:35:00] Yeah. It's, it's certainly not that the stock has gone up 280 percent because it was just that, and I'm like, okay, well, this is going to keep being a winning stock.

I would just buy more, but the, I mean, the multiple expansion is kind of bananas how incredibly expensive this stock has gotten, and I think it's a price that five years out. Probably you still do really well 10 years from out, you probably do really, really, really well, but I'm not touching it right now because it's gotten so incredibly expensive and I think patients will pay off what I am regretful about.

Is this this is like so many other sass cloud tech stocks had come down a ton from like that peak in October of 2021. It had really fallen a lot. And it was trading for. Still compared to a lot of other stuff and expensive multiple, but considering the quality of the business, its growth rates, how it had made that transition from cash burn to cash neutral to just really starting to turn into a cash engine.

It was obvious that [00:36:00] that was really, really happening. And I just made the mistake of trying to get a perfect price. That's it. I was trying to get a perfect price. 

Jeff Santoro: Yeah, it's so this is an interesting one for me as I look at. All the little, little tiny purchases I've made of it. So this one's actually been in my portfolio longer than Arista.

I've actually bought this in June, early, earlier June of 2020. And that first purchase, which was a whopping 40, Jason is the best purchase I made that that is beating the market by 308%, that little 40. Yeah, let's just say it's worth more than 40 now. But here's what, here's, this is why I wanted, I wanted to put this on my list, right?

Because I think the sin I've made with this one has been, there's been multiple sins, right? So like, again, bought it on a recommendation. I remember every single quarter as I looked at the results and updated my spreadsheet, thinking to myself, like, there is no flaw in this business. Everything goes up every quarter consistently.

So I went from [00:37:00] being excited and I bought a lot of it in 2021. And maybe I should have had a little bit more caution because it was getting bit up like everything else, but then I would hear all the noise. Well, No one knows who the winners are going to be in cybersecurity, right? It's, it's absolutely going to be a growth place, but is it going to be CrowdStrike or is it going to be Sentinel one, or is it going to be Zscaler or is it going to be a Fortinet or is it going to be Palo Alto networks?

Right? There's so many companies. And then I got scared and then 2022 happens. Some of the best buying opportunities. I did add a little throughout that year to my, so I'll give myself a little pat on the back, but I did so very cautiously. Cause I, then I thought to myself, well, maybe I was wrong. Maybe this is the market telling me it's not going to be crowd strike that comes out at the end.

And then in 2023 and in 2024, I'm gaining even more confidence that it is going to be. A big winner for the longterm and now it's so expensive. I'm scared to buy it again. So I've made all of the, all of the [00:38:00] mistakes with CrowdStrike. And I think the lesson here is again, every single one of my tiny little purchases from June of 2020 to July of 23, which is the last time I bought it.

Is beating the market by triple digits. It's awesome. So again, I don't say that to brag to be clear. Just to say that I probably bought it every single time wondering if it was too expensive and it has turned out not to be so far. If the stock drops 80 percent those are all going to turn red. But You know, that's kind of how it is right now.

So I'm going to give myself 

Jason Hall: a tiny little bit of credit, tiny little bit of credit. 

Jeff Santoro: I'm not, so I'm glad you are. 

Jason Hall: Yeah. Yeah. I mean, I wouldn't, if I were you, but I'm me, so I will. I, I did buy in February. I did buy a little bit in February. The challenge for me to do that was a stock from the beginning of January through mid February when I bought was up like 18, 20%, but I still, you know, just buckle down and said, okay, this is, you're not. It's not a value stock. You've, you've already missed [00:39:00] the closest to a perfect price.

You were going to get during that part of the cycle. You love this business and you're not trying to sell it at the cycle peak. So I, I didn't buy enough, but I did buy some it's done. Okay. 

Jeff Santoro: Yeah. That's a good one. 

You got another one, right? Yeah. I mean, I, I want to talk about Broadcom a little bit because it, it's the same mistake that I kind of made with Arista.

In the sense that I probably should have gone back when all of the AI craziness with NVIDIA was happening and identified that one as another winner that would benefit from some of those same, you know, tailwinds in the AI chip space. And I didn't. I've only, the last time I bought any Broadcom was December of 2022.

Which was smart because that's, that was during the, the bear market. So I got a good price there. But yeah, it's another one. It's like, I have these two buckets of like the, with Arista and with Broadcom, it was just me not taking the time to go [00:40:00] back and identify what, what was probably a pretty clear opportunity and with CrowdStrike and Shopify to some degree not, not Shopify.

I think with CrowdStrike and maybe one of the other ones we'll talk about later, it was more about just. Psyching myself out and, you know, listening to the market noise too much. So I don't have much more to say about it. Other than I still don't understand that one as much as I want to. Broadcom is a very complicated business.

They do a lot of different things in, in the hardware and software space. What's interesting. I'll just mention it quickly is they recently acquired VMware and. The reason I think that's interesting is it has shifted the balance of their revenue stream pretty significantly. They used to be 80 percent semiconductor revenue and 20 percent whatever their other segment is called.

I don't have it up in front of me right now. And now, since they've acquired VMware, it's about Infrastructure software. Infrastructure software. Thank you. And now it's about 50 50. So I, that's an interesting thing to keep an eye on, I think, if, if anyone is thinking about investing in that company, it's something I want to learn [00:41:00] more about.

I haven't dug in enough to understand like how that's impacting margins and cashflow and things like that. But it's a very different look. For Broadcom, it has increased the revenue significantly. Like you'll see a big jump the last two quarters, and that's from the acquisition. But I'm more interested in over the longterm, does it, is this accretive to margins?

Is it accretive to cashflow? Is it accretive to profitability? So anyway, same mistake as Arista, but absolutely the biggest financial mistake I made from a percentage gained standpoint. 

Jason Hall: Uh, I think the biggest takeaway for me for a lot of what you've talked about, and it's the same for me, particularly for NVIDIA.

It's obviously the case. And honestly, when I said it with Arista Networks, right, I don't own the stock and it's one that my regret is not having gotten to know it a lot sooner. And with Broadcom, you're saying this kind of the same thing is, it's that premise that you nailed on your vacation learn, not trade, read, not trade, [00:42:00] right?

Growing your knowledge and we spend so much time and I'm going to be honest, I think to a certain extent, we contribute to the noise. With some of the videos we make and the content that we write where more investors would be served better just by reading more company filings, right? Reading the thin cues, reading the annual reports, go out there and read some research by Gartner and some of the big research firms that that's where the experts that follow these industries are.

So you can really get the bigger picture of the opportunity, the challenges and the threats and who are the leaders and what are they doing. And then work from there to find the opportunities. Instead, we turn on CNBC and we read articles that are served to us from Yahoo finance and on apps and that kind of stuff that I mean, they can be useful.

You know, I think they really can be useful depending on what you're reading and who's writing it. Um, but a lot of it's just noise and it doesn't really, it echoes, it amplifies something, but it doesn't actually offer any nuance or detail that you won't get a better, clearer [00:43:00] picture of just. Going directly to the source.

Jeff Santoro: Yeah. I mean, and I get why. It takes time to do it that way, right? Versus watching a five minute video or reading like a, you know, an article that takes you a couple of minutes to read through. I don't, I think it's fine to do all those things, but what I, again, kind of coming back to the idea of things I used to think were.

A lot about that. I'm kind of reminding myself of recently is the whole idea of the more you get used to looking at the actual documents. So the SEC filings, the cash flow statement, the income statement, the balance sheet. I think a very good framework for that kind of thing is something along the lines of what do I see?

What does it make me think? And what questions do I have? If you approach every, every official document, every financial statement with what do I notice? What And what's the why behind it? I feel like that, that goes a long way because you'll see things like, okay, cashflow for the [00:44:00] last four quarters is trending down.

Why go look, Oh, well, they're ramping up cap expand because they're trying to do this thing over here. Right. Or revenue growth has jumped up randomly for two quarters, like significantly out of nowhere. Why? Oh, because broadcom made an acquisition of a company, you know, and it's, you know, we're good at pattern recognition, look at a chart and, and see a trend that has gone in a different direction and go find out why.

But that takes time and effort and critical thought. And I get why people don't do it all the time. All right. Do you have any others on your list? 

Jason Hall: I mean, I could, I could do this for another hour, but let me, so let me wrap this up. Not you. Not you, Jeff. I don't value your time, but I do value the time of our listeners.

Jeff Santoro: I understand. Well, here's two more. I'll say on my end, I won't go deep into them, but because that it was the same different mistakes for each of these. So one is Amazon not up nearly as much as the other ones. This is not like beating the market by triple digits. And I was an idiot. [00:45:00] It's more just about, it's the last time I felt like Really a gut feeling that I was right about something.

Jason Hall: Yeah, 

Jeff Santoro: and then I didn't trust myself enough to 

Jason Hall: And I want to say too, it wasn't, we've talked about this on other episodes, it wasn't a gut feeling is in an emotion driving you. It was the, it was the outcome in your brain based on the research that you had done and your understanding. Yeah, yeah, yeah. It was, it was, it wasn't, yeah.

Exactly. Yeah. 

Jeff Santoro: Yeah. Um, and I just didn't have the guts or whatever fortitude to put a little bit more into it. Now, it's not the biggest mistake in the world. It's beating the market that since that one purchase I did make, but it's not crushing it. So it 

Jason Hall: would, would it be fair to say, and this, maybe this is a little bit too close of a question to ask, but was it a lack of confidence?

I mean, you're still a young investor a year and a half ago. That's Oh, for 

Jeff Santoro: sure. A third of 

Jason Hall: your investing career ago. 

Jeff Santoro: Yeah. All of this is. Absolutely. me not trusting myself and not wanting to be wrong, even though I have an enormous safety net of like 88 percent of my net [00:46:00] worth being in index funds or my invested net worth.

So I probably should let go of it a little bit. But anyway, yeah, I just, You know, this is total hindsight bias, right? Like I had reasons at the time to think to myself, I'll make a reasonable bet here, but not a crazy bet. And again, it's only been a year ish. So maybe that was the prudent move.

Maybe Amazon's going to struggle and go the other direction. And the other one is just ASML. I still refuse to believe there's any significant bear case for this company. So I feel like I should have just bought more every single time I bought it. Yeah. And I think the bear case is 

Jason Hall: there. It's just the likelihood, the probability of that bear case playing out seems incredibly 

Jeff Santoro: low.

Right. Yeah. So those are just two more that popped to mind. So yeah. But I think we, uh, I think we, we made our point here. 

Jason Hall: This was fun. I would love to hear your listeners tweet at us, email us, put it in the, in the show, in the comments in your, in your podcast player. Some of them allow comments now, I guess.

That's what I understand. I don't listen to podcasts, Jeff. So I [00:47:00] wouldn't know for sure. Yeah, no, never, never listened to one in my life. 

Jeff Santoro: I don't even 

Jason Hall: listen to this one. No, it's terrible. Um, comment on the, on the transcript in our newsletter. Um, we'd love to hear from you. Give us. What are some stocks we didn't talk about that you regret not buying back in 2023 and why?

We'd love to hear from some of you on that. So yeah, definitely housekeeping. 

Jeff Santoro: Then we'll wrap it up, Jeff. Yeah. I was going to say that was a perfect natural transition into our housekeeping. Cause I've been thinking recently a lot, Jason, about the fact that I wish we had more interaction with our listeners.

So if you're hearing this and you don't mind, shoot us an email or however you want to get in touch with us and answer the question that Jason just asked and or give us any other feedback on the show. In terms of helping us out, if you value what we do here sharing the show with a friend, passing it along and or giving us a star rating and a review on the podcast apps is super helpful.

And as always, if you follow us, At all of the places. That's great for us. So obviously you're listening to the podcast right now, but we do have a YouTube channel. We have a [00:48:00] newsletter. The links for all those are in the show notes. You can check out our portfolio on savvy trader dot com. So find us on all the things.

Give us feedback, share the show. We really appreciate it. 

Jason Hall: All right, Jeff. We did it, buddy. 

Jeff Santoro:We did it. This was a lot of fun. 

Jason Hall: This was. This was a very fun episode for me to record. Hopefully it was a lot of fun for you to listen. And of course, as always, we love to give our answers like we did in this show. These hard questions about investing, borrow our answers for a while, but we want to hear your answers and you need to find your own answers.

That's where investing success lies. You can do it. I believe in you. All right, Jeff. We'll see you next time.

Jeff Santoro: See you next time. 


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