Investing Unscripted Podcast 123: Strangers, Sushi, and Stock Ideas

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 to Investing Unscripted, where we ask and answer the hard questions about investing. I hope you're ready because Jeff Santoro, he was born [00:01:00] ready. Jeff Santoro is the voice of the people. He is joining me today. My name is Jason Hall, but Jeff, you join me every day. 

Jeff Santoro: Don't you? This is the most awkward opening to a podcast. I think you've ever done. 

Jason Hall: Challenge accepted. 

Jeff Santoro: I don't even know what's happening. 

Jason Hall: Hey everybody. Welcome to Investing Unscripted where we ask and answer the hard questions about, I'm not going to do another intro. We're just rolling with this. 

Jeff Santoro: Yeah. I think at this point.

People have come to understand that we are not professionals and yes, they're gonna get what they get at the beginning of this podcast. 

Jason Hall: Well, I mean we are professionals. We make a little money doing this, but we're not good. 

Jeff Santoro: We're not good at it. 

Jason Hall: This is the yeah, there we go. You know, who's good though.

Tyler Crowe. He's good. 

Jeff Santoro: I never wanted to say those words on our podcast, but I guess he did give us the idea for this episode So we should we should throw some thank-you’s his way. 

Jason Hall: You'll allow it. You'll allow it this time. All right Yeah. No, Tyler is actually good at finding stocks. He [00:02:00] turns over a lot of rocks and we have a chat group together with Tyler and a few other, uh, colleagues and friends in the investing community.

And he regularly gives us ideas and thoughts for shows and just questions that he asks rhetorically sometimes that are good. And. He had a good question. It was, is it better to turn over lots of rocks or to deep dive on fewer ideas? And, well, sounds like a really great conversation. 

Jeff Santoro: What I like about it, and I think this will be a little bit of a challenge for you and I, because I think to some degree, We're going to have to speculate on what it's like to have to get new ideas because we're in the lucky position of never really being short on ideas.

 and that's just by virtue of the fact that we both do either full time or part time work in this world, but that's not everyone's situation. It certainly wasn't mine before I started to do, you know, The contracting work that I do now and same thing with you. So [00:03:00] it'll be fun to kind of talk about how we do find ideas now and how we might find ideas if we didn't have this seemingly infinite source of, of ideas.

And actually I have some aspirational things as it comes to finding new ideas that I want to talk through later. So it'll be a fun conversation. But before we dive into that, Jason, I, we haven't done any housekeeping on the front end of the podcast in a while. And I just want to take a few seconds here to remind our loyal and wonderful listeners that if they could take the time to give us a five star review and a Written review on Apple podcasts.

It would really really help people find the show in our 

Jason Hall: listeners You can do the same thing too. Yeah, right. 

Jeff Santoro: It's not just the loyal ones no, but in a world where Twitter has not really been the the platform it used to be in terms of driving engagement and trying to have people find our podcast. That's the best way for us to get the show out there.

So we would appreciate it. 

Jason Hall: Yeah. The easiest thing you can do is give us a rating. [00:04:00] The second easiest thing you can do is a rating and a review. The easiest thing you can do that is absolutely the most effective is to tell somebody about us. Yeah. 

Jeff Santoro: Yeah. Absolutely. Lie and tell them that it's good. Yeah.

You don't have to tell the truth. You just tell them it's great. Right. Exactly. 

Jason Hall: Okay. All right. So back to Tyler, um, and his idea. So I, it's interesting because, so those that watch our, our YouTube channel, I do a lot of videos with Tyler or we dig into individual stocks or 10 to 15 minute videos. Tyler has, a newsletter service that he does a stock discovery service that he runs, talks about his own portfolio. Uh, it talks about some IPOs, but also really digs into kind of uncovered, under-covered massive winners, big long term winners. And, uh, it's called Mistfit Alpha. Because of our relationship with, , with Tyler, we don't make any money for this, but it's a nice thing for you.

If you can get a discount on his, on his paid service, misfitalpha.com/unscripted, it'll be in the [00:05:00] show notes and we'll have it in the transcript too, if you want to check it out. So his idea. Jeff, what's the best way, and I think there's a lot of answers to this that could be the right answers, better to turn over lots of rocks or go deeper on fewer ideas.

Where does that take you to start? I think about this a lot because 

Jeff Santoro: as someone who's been paying attention to investing in stocks only since the beginning of 2020, I've done that in a very unique time. You know, during my like beginning months and years of learning all this, we were in this crazy post pandemic bull market.

Twitter was still, it was a different platform. Let's just say than it is now. It was before Elon bought it. And it was very overwhelming, but also very easy to just find tons and tons and tons of people talking about stocks online. And, you know, we've probably said this too, but it, it is a commonly repeated phrase that, you know, if you're, if you're interested in the stock that everyone's [00:06:00] talking about, you're probably going to pay too much for it.

And I, I largely agree with that. That said, there are massive winners that have been popular, talked about stocks for a long, long time. And so it's not like you can't find good ideas there. So I have that thought. In my mind, like on one side right. I understand that the more people talk about it, the more the price has been driven up, the more it might be expensive, but you can still find Big winners there.

All of the big tech companies, the mag seven, all of them are examples of that. People have been talking about Apple for 20 plus years and it's been great that whole time. Right. 

Jason Hall: Yeah. 

Jeff Santoro: And then there's the other side of it, which the intellectually curious part of my brain is interested in, which is what Tyler does in his service and what people who focus on micro caps or small caps or international investing finding those under-covered.

Uh, unfollowed big winners, solid businesses that no one really knows about. You could, 

Jason Hall: yeah, you could read 50, 000 new [00:07:00] words written about Apple every day. Some of those companies that Tyler and mentioned, there's other writers out there that focus on small caps and that sort of thing. There are companies out there that don't have 50, 000 total words written in their history and like publicly consumable format.

Yeah. 

Jeff Santoro: And I, I understand the logic behind that, right? If you find a company that there's no analysts covering. Or one analyst, you know, there's a bigger, a greater chance. You're going to find a dislocation in the pricing of that, of that stock. Right. 

Jason Hall: Yeah. 

Jeff Santoro: The part that I struggle with as someone who I would say probably has learned enough to be more knowledgeable than the average retail investor, but still not super comfortable flying solo, so to speak, is there's also with less People paying attention to it.

I think there's a higher possibility that someone like me misses something super important. You're getting it wrong. Yeah. Right? I'm going to see this. I'm going to put all the dots together [00:08:00] and say to myself, I just found the next 10 bagger and no one knows about it. I buy it and then I find out it's a massive fraud.

And it was actually really easy to see that if you weren't an idiot like me, right? That's like the fear in the back of my brain. Yeah. Yeah. Which is why if you find a someone who writes about those types of stocks that you trust and is a good analyst of companies and not just trying to make a quick buck, that can be a great resource.

But I just think those are the kind of like, just my initial thoughts about where to go find ideas and how to turn over rocks, like to turn over rocks and make your own decisions. You have to know a decent amount or else you're going to get You're just not gonna know kind of what you're looking for once that rock's turned over.

So that's why I think most people gravitate towards the things they know, the things that other people are talking about, the things that are, you know, over covered and very popular because, you know, more eyes means less chance that, you know, you could still find a fraud, but less chance that there will be one if a lot of people are paying attention.

So those are my [00:09:00] initial thoughts about like kind of the two sides of that coin. 

Jason Hall: Well this, this kind of it's a good segue into our, our first kind of leveraging your expertise. Topic, but I don't want to be too cynical before we, before we talk to that. I don't want to be too cynical, but I think broadly, Jeff, I think you're right.

You is you're, you're definitely far more, you know, you're working in education. You deal with, you know, a lot of just regular people that don't follow or aren't interested in investing. Talking to my wife who works in a professional field, same thing. I work full time in this. The majority of people I'm talking to are sophisticated investors, right?

It's easy to forget how little the average person out there knows. Like they don't understand that a stock that costs a hundred dollars might actually be cheaper than a stock that costs 10, right? Yeah. They just, just the basic lack of, of, of education about it is, is, is clear. [00:10:00] And you, you combine that, you know, lack of, you know, Sophistication with human nature, which is most people, they don't want to form their own objective opinions.

They want to borrow one that feels good. And that's the danger of just kind of following the crowd, especially on things like social media. Especially today, because it has become so much less engaging, um, and harder to find people that aren't just farming for engagement. Versus putting forth good work and trying to get engaged and have a meaningful conversation.

So leveraging your own expertise, I think, is critically important if you have it. It's just figuring out what it is. 

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Well, and it's, it's also, yeah, it's your own expertise. It's the time you have to devote to it. Right, like that's my biggest issue is I don't, it's a time management thing for me, like I'd love to be able to devote eight hours a day to learning more about this because it's the thing I geek out on the most, but that's just not not an option for me.

So I have to find other other ways or other ways to kind of get at it. So, but I do think, yeah. The next kind of place I wanted to kind of pick your brain is [00:13:00] not so much leveraging your expertise, but leveraging your network. Because anyone who's listening to this podcast is interested in investing enough that they have some sort of network of information.

And maybe this podcast is part of it. But it could be social media accounts. It could be newsletters or websites that you frequent. It could be YouTube videos. It could be friends you have that like investing. Maybe you're the member, you're a member of a, of a service like Motley Fool or something like that.

And I think, That's a perfectly good place to go looking for ideas too, but like with any of the things we're going to talk about, there's pitfalls that you have to watch out for. So what do you think about leveraging your network using the things that you consume as a, someone who's interested in investing as a way to find new stock ideas?

Jason Hall: Now for me, this is the, the by far how I, uh, the, Accumulate the vast majority of my ideas. Yeah, same again, working, working and investing. I can't have a conversation without a single colleague without, uh, new ideas [00:14:00] coming up or rehashing existing ideas, old ideas things like that. So, I think for people listening to this podcast, like yourself, when you first started before you started doing any, anything, uh, in terms of like the side hustle stuff, the gig, the gig work that you built, you were building a network, right?

You were making contacts, you were reaching out to people, you were getting to know people. And I think that I would like to encourage more people listening to this. To find there's groups on Facebook that investing clubs and things like that, that you can get involved in that. I think more people should, because what it's going to help you do is not just accumulate more ideas, but there's a little bit of kind of a filter at the top of your funnel that you get there.

I'm sure you might not find every idea. Um, maybe the more obscure harder to find. Stocks, unless you, your goal is to read, you know, 20, 10 [00:15:00] Ks from 20 different companies every month. You're not going to find everything right. But it is going to at least kind of start helping you filter down to some pre vetted ideas that then you can kind of kick off your own.

It's more gardening than hunting, if that makes sense. 

Jeff Santoro: Yeah. The thing that I think about when it comes to things like that, like a Facebook page is the perfect Facebook group, or like an online forum, which is not something that you see as much of it now is when we were like. In our twenties there's tons of tons of great stuff on about for investing on, on Reddit.

And yeah, right. It would be a good place, but I guess what I think with wherever that is, I, what I've sort of come to realize is a lot of that is you get what you put into it. So for example, if you're exactly, if you're just going to read and not engage, then you're limited to what other people are going to put out there.

And there are some people who will put everything out there. So what I I've seen people where, where I've seen people be successful in those settings is by asking. Asking the hard questions about investing, right? [00:16:00] So asking questions like, I'm really interested in this company. What's the bear case?

Jason Hall: Yeah. 

Jeff Santoro: Right. What should I, what, what's a pitfall for this company is, you know, is there someone here who doesn't like this as an investment? Tell me why. You can even do that on Twitter. I know that Brett Schaefer, who's the chit chat stocks podcast, a friend of ours, he, he's good about that. Like if he has a... 

Jason Hall: Friend and also a advertiser.

Jeff Santoro: Yes. That's true. He is an advertiser on our podcast. Um, you should, everyone should check out after you've listened to our episode each week. You should go listen to the chit chat stocks podcast because it's not before, after, after priorities, but he's good about, Hey, what's the bear case for this company and just seeing, seeing what gets put out there.

So that's an example of, you know, trying to Getting out of the network, what you put into it. 

Jason Hall: Yeah. 

What you know, what you put into it is going to factor what you get out of it. There's no doubt about that. But I also think there's a little bit of, when it comes to leveraging your network What you put [00:17:00] into your network to, you know, the value of your network and knowing the difference. For example, if I see something retweeted on Twitter by some people that I follow that I don't actually know I feel like they have a pretty good reputation, but, you know, I've never really looked at their returns to find, you know, even if, if it's even publicly available, for example I know that I'm going to take that with a.

Much larger grain of salt than I am something from an analyst that I've worked with for five or 10 years, for example. And just, here's an example of one. So I've got this big focus on investing in more fixed income. So of course, immediately I've gotten interested in another dividend stock that I wanted to buy that, uh, that typical me, right.

But no, I, I decided to, so today I did it today. So this is about a week before you're going to hear the show when we're taping this today, um, I opened a position in ups because of reading a little more about the company and hearing about it from an analyst that I [00:18:00] know 

And yeah, I've got some preconceived notions about UPS. It's hasn't been a great stock over the longterm. It's sold off a ton over the past year or so. Even before that kind of from the peak, if you look at its longterm results, it wasn't some massively market beating investment. But the thesis is.

Kind of changed the stock prices come down a lot. They've new management, new CEOs come in and they're really focused on creating value for investors and growing earnings and margins by kind of shrinking the business away from commodity parts of. Logistics and, and shipping and focusing on the opportunity where there's growth and higher margin things.

So they're, they're kind of refocusing the business in some smart ways. Long story short I didn't put anywhere near as much due diligence into this investment is I would. If you had told me about it, Jeff, for example, because I don't trust you as an analyst, I 

Jeff Santoro: and you shouldn't. So, 

Jason Hall: but I'm sorry, what is this you 

Jeff Santoro: speak [00:19:00] of?

I'm 

Jason Hall: not familiar with this. No, that's funny. But no, but seriously, like if I had just seen something about it on Twitter or some other social media I would be reading, you know, Multiple 10 case going back a few years in addition to transcripts from management looked at more recent quarterly results to see the trends, you know, are things happening based on what they're telling me and in this particular case because I do know the business relatively well, I've got that base of knowledge there and based on this analyst that I trust I decided to open a starter position now 

Jeff Santoro: you hit on a couple of things there that I think are important and things that I tried to do in my own process when I come across any kind of idea, whether it's for out in the wild, so to speak, or from someone who I know and trust.

And that is, I view people I trust as like the, like a screener. We'll talk about screeners later, but I try not to take someone else's idea wholesale. Now I've done it and I, I'm not saying I haven't, [00:20:00] but I try not to. And here's what I mean. I'm going to still try to run that idea through. My mental framework for if I want to invest in that company, like I would if I came across it randomly with no recommendation.

And I think my, I think that's a good way to view any, any idea you come across out there, whether it's on a newsletter, Social media or even a paid service. You know, even, you know, you and I both work for, in some capacity, the Motley Fool, which has tons and tons of stock ideas, depending on what services you subscribe to.

I don't recommend people blindly buy those. I think you should still, you know, read what's written. by people who know what they're talking about, but still kind of run it through your own framework because nobody is a perfect stock picker. Right? Like as, as much as someone might have a great track record and some of them are full services do not every stock is a winner and they wouldn't claim it is.

I'm not saying anything disparaging. So to me you know, there are some people [00:21:00] who I trust very, very Much when it comes to investing and they, they will pound the table on an idea and I, it just doesn't fit with the way I see the world. So I don't buy it. And I could be wrong. I could be missing out on a great winner, but I think that's the I think that's a good way to approach any kind of idea, no matter where it comes from.

Right. And I'm sure you did some level of that even with this UPS purchase, but you know, I think it's easy to say to yourself, Oh, I subscribed to this service. I'm paying these professionals or I, or forgetting that I have a financial advisor, right? Who I pay a percentage of my portfolio and they pick my socks for me.

If you're interested in this enough to be listening to this podcast, I think you should still try to. Run those ideas through your own, your own kind of mental framework. 

Jason Hall: Yeah, I agree. And I think, but no, you're right with UPS. I don't, I don't want it to be like this flip ins like, Oh Fred, the analyst told me about it and I flipped out my fidelity app on my phone and bought it right then, no, I, you know, I took a day or two [00:22:00] and I read the past couple of earnings transcript, uh, earnings, uh, releases and did some due diligence looking at valuation.

And like one thing I figured out, I was like, I looked at the valuation was 21 times earnings. Is it. Cheap. You know, that's not cheap for, for a company like this. It's like, well, what's, what's going on? It's like, here's their plan to grow free cashflow per share and grow earnings per share and earnings per shares down.

That's one of the reasons stocks them because you know, the challenges with the shipping environment the fact that their results have weakened. So you've started normalizing and you look at where the stock price is today versus where they're trying to take the company. And that's really, you want to be thinking about what you're paying today.

Is to buy future results, right? Not past results. And when you look at a PE ratio, it's completely past results. And so you really kind of, again, using a mental framework to think about how you evaluation the value value, the stock, whether it's a discounted cashflow model or just like a back of the [00:23:00] napkin thing, where I looked at the multiple today versus where the earnings were, not where they are, but where they were.

Just to normalize the business back to a healthy level and then where they want to take it beyond that doing things like share repurchases and just create more value. It's like, you know what? Okay, this falls right in line with. With where I want it to be. So you have to have those tools in your, in your toolbox to evaluate any idea.

One thing real quick, I want to comment, comment on, you were talking about like with, like the stock discovery service, like Stock Advisor, for example is it's. You know, they're giving you ideas to stock idea service. Our friend, Simon Erickson, 7Investing, doing something similar. Tyler is kind of a little bit the same, even though his is more just like research and he's kind of showing his homework the, the idea there.

Like I said, it's really to give you ideas and then for you to take those ideas and go act on them. And my experience from talking to a lot of people is it's again, it's that you, you borrow the ideas that. Resonate with you ignore the ones that don't resonate [00:24:00] with you and never do any due diligence.

And you get exactly what, what you deserve by doing that, um, which is usually poor results. I do think with those sorts of services, if you find one and it's really good stock pickers and they have a proven track record of delivering the kind of results that you'd be happy with. You either buy the whole thing, you know, you follow it and you say, okay, I'm going to take a thousand dollars a month or 200 or whatever.

And you follow every recommendation they make. You don't cherry pick, right? You're paying for the service to get their best work, follow their best work, or use it as a job, a jumping off point to actually do your own research. And follow the ideas or not based on doing research, not your reaction to reading the stock ticker.

Jeff Santoro: Yeah, no, I agree with that. So we're going to pivot into some other ways of thinking about this. But one last thing I want to say about a way that I've thought about how to process all the information that's out there, especially the stuff that's available for free. I've [00:25:00] noticed that a lot of what's out in the wild that is presented as analysis is really just like It's repackaged, uh, 

Jason Hall: information to market you to whatever they want to sell you or sell or sell to you or sell you.

Jeff Santoro: Well, yeah, there's that part of it, but that's not even the direction I'm going. I'm talking more about what is, uh What the author thinks is, is analysis, but it's really not. And here's what I mean by that. They're 

Jason Hall: just reporting the news. They're just distilling 

Jeff Santoro: stuff down.

I'll give you an example. When I was a brand new, when I was first starting to write articles for the free side of Fool.com several years ago One of the pieces of feedback I got from the editor that was training me was essentially could be boiled down to So what because I was presenting information and stopping short of any kind of analysis And what I like about your example with the reason [00:26:00] you decided to open the position in UPS is you talked about the so what?

Have it, you know the stock price is here because of these reasons and I believe those reasons and I think those reasons will Change. And that's why, you know, like that sort of thought process. And I think that's a filter that we can all use when we come across, uh, a thousand word write up on a company is the information in there.

Just here's what the company has done. Like to your point about what past versus future, or is it actual, and here's, here's why I think right now the market is mispricing it, or here's why, here's where I think it can change. Or here's why I think they're at an inflection point. And that takes a little bit of like, you have to kind of think, okay, is this really telling me anything that's so what ish or is it just, here's the information, like it's the what versus the why kind of a thing.

Jason Hall: Yeah, no, I think you're exactly right. I mean, and I think it's the difference between repackaging and, uh, original content I, uh, Alex Morris, The Science of Hitting [00:27:00] Incredibly in depth original analysis that he's providing. Versus, and I don't want to, this isn't a diss, but compared to sit like Brad Freeman provides these earnings takes that he does and what Brad is doing. And again, this isn't, this isn't a diss. Brad's like distilling down what's in earnings to like this one page quick take, but there's not deep analysis there.

It's not intended to be, but there's a lot of people that don't take the time to really think through the difference between those sorts of thing. And Jeff, I think that's the point that you were trying to make is. If you're looking for in depth analysis, the what and the why make sure it's coming from people that you trust, and it's useful, and if what you're getting is just a regurgitation, then use it to form an opinion, 

Jeff Santoro: So, we mentioned earlier, I mentioned earlier, the idea of using a screener. So let's, let's go there, because I think for people [00:28:00] who, If you're someone who's like, I want to find new ideas, the easiest kind of go to thing that people will tell you in response is go use a stock screener, which is essentially a website.

You can go to. There's a bunch of free ones out there. Your brokerage will probably have one. And you can plug in criteria and just narrow the thousands and thousands of companies that are out there down to maybe hundreds or maybe dozens or maybe one. So you could just as an example, I want only companies.

Listed in the U. S. With this market cap range that are profitable that have earnings growth above 10 percent like all these different criteria, basically anything you can think of, and it will just screen out the ones that don't fit that criteria. I played around with screeners a lot when I was brand new and I was like, just fishing for ideas.

And I it's hard because when you're new and you're doing that, you don't really know what, what criteria to choose. I was just picking like the big, you know, You know, the normal things that like make sense to anyone, like lots of revenue, but then you're down to like 10, 000 companies, you know, so it's not super [00:29:00] helpful.

So I'm curious I, I don't know how much you use them now, but were you ever a user of screeners? Do you, do you use them now? Are they helpful to 

Jason Hall: you at all? I still, I still do use them a little bit. And I was talking to a friend of mine about this actually just in the past couple of days. I, I definitely don't use them as much as I think other people can.

And I think. I think broadly screeners can be destructive as, as well as incredibly useful. So what I mean by that is that they're a great way to exclude good ideas and find bad ideas. If you use them improperly. So for example, a lot of times people will try to chase value or try and find high yield stocks and they end up buying.

Broken turnarounds and dividend traps, right? So you buy a dividend stock that the yield looks like it's going to be really good. The reason it looks like it's going to be really good is because everybody else is sold and driven the stock down because they know the company is going to have to cut the payout.

So you're not holding somebody else's bag and you're not going to get the dividend you were expecting. Right. And I think [00:30:00] the same thing can happen with like turnaround plays because sometimes stocks can look really cheap. When they're actually expensive again, prices come down earnings haven't come down yet, but everybody knows it's going to happen except for you and five other people that use that screener.

Um, so you don't do any due diligence besides the screener, right? The screener is simply a tool. It's a discovery tool. And then you have to go from there to take that, that, those computer, those, those are those few tickers that you got based on the, the things you screen for. And then you actually have to go do the actual work, right?

Which is okay. So why is this yield 10%? Why is it trading for a PE of eight? What's the story of the company? What are analysts saying? I mean, if you go, and this is one of those times where analyst ratings should actually be helpful. If you go and you look, it's like, Last time they reported earnings at three earnings down, you know, down analyst downgrades, like here's the clue, you know, then you can start doing a little bit of research to figure out and what you should be [00:31:00] doing.

And you mentioned this before a little bit, you know, kind of talk about the bear thesis. Um, when, when you're talking about maybe reaching out through your networking, talking to people. Uh, we should all like put this tool in your toolbox. This toolbox is the hammer and it is the destroy the bad idea hammer.

You should spend the majority of your time. When you found an idea that you think it's the idea, the rest of your effort before you buy the stock or before you walk away, should be figuring out why you should not buy it, not why you should, but why you should not. 

Jeff Santoro: Yeah. Screeners are like you said, they can be really helpful, but they can also be.

It is a first step, I think, and nothing more. Yeah. One, one place that I have found them to be helpful is you know, all things being equal. If you're able to find a great company, you'd rather find a great small company than a great large company. Right, right. Yeah. Like all things being equal. So I've used them for just finding small caps or even micro caps, right?

Um, now that's when [00:32:00] you get to like the, the. Under a billion and under 500 million. Like you're, you're in a whole different territory of stocks that we're not going to talk about today, but I've sometimes just when I wanted to play around with the screen or just said you know, 1 billion to 2 billion and very basic things like profitable, positive cashflow. Revenue growth above 5%, right. Just sort of, and just kind of see where it goes and it'll give me 300, right. Or 500, something like that. I'm not going to go through every single one. But actually what I, what I ended up doing, and this isn't maybe the best way to turn over on, Unfound ideas, but I look for things I've heard of, right?

So like maybe I'm, I'm skimming through and I'm like, Oh, I've heard of that company. I see it on the sides of trucks in my state. I didn't know that was a publicly traded company. And then I might go look into it, you know? So, but it is just kind of like a first step in terms of going from there though, I, I want to.

Plug one of our sponsors that people have probably heard us, [00:33:00] uh, advertise over the past several months on the podcast, which is Yellowbrick. It's a really cool site where you can just plug in a ticker or the name of a company and it'll, it aggregates write ups like stock pitches and articles about stocks, about that company on the bull side or the bear side.

So if you come across an idea, it's a small, especially if it's a smallish company that you haven't heard of, and you're like, Oh, I want to see if anyone else has ever heard of this or written about it. Like a lot of times you'll find something in a screener that someone has written about. And again, it's just another piece of information that you can go, cause maybe someone wrote a, a, a bear case on it and said how, you know, it's this terrible company and it's about to go bankrupt and don't buy it.

And that's just one source you should go try to find more, but I wanted to plug our sponsor there. It's just another Avenue to, once you do the screener to kind of go do that next step of actual research. 

Jason Hall: Yeah, so, one thing about screeners, so your browser, your, your, your broker probably has a pretty good one built in.

Um, I'm a Fidelity [00:34:00] customer, so it's got a good one. It's got a lot of things. So for like, I think one of the really useful things you can do is here's an example and I'm going to say what you already said, but I want to be like clear about like these things. So you can put in revenue growth. So like the fidelity screen or you can pick the past five years revenue growth rate and you can screen for a specific range of growth rate.

So like 20 percent per year plus. Average and then market cap. So like you can say 1 billion up to 7 billion, right? And usually what I'll do when I'm doing those sorts of screeners is I'll go bigger than like whatever numbers were in my head, because you don't want to exclude a company that's close to what the range you were thinking was.

It's 

Jeff Santoro: 6. 1 billion and 

Jason Hall: you put the screener at 6 billion. Exactly. Right? So whatever metrics you're thinking about, usually I expand it a little bit. As an example, like dividends, if I'm looking for a certain yield, I'll usually go a little lower than that yield, like the range that I want. [00:35:00] Because again, you don't want to exclude a company that's really close, especially if you find out that that company's dividend growth rate is really, really high because you can buy a company with a 3 percent yield.

That's growing the payout 5 percent a year. And over the longterm, you're going to be a lot better buying a company that pays a 2. 5 percent yield today, but they're growing their dividend 10 or 15 percent a year. 

Jeff Santoro: And, and by the way, since dividend yield is, you know, inversely correlated to stock price or correlated to stock price, right?

Like a bad week for that company or a good week for that company could put it in or out of your range. Right. So that's just another reason, another reason to go, go wider in your range than what you're actually looking for. 

Jason Hall: Yeah, the other thing too, that's useful is being able to filter by. Uh, sector, and then you can get to the industry and subsector within it, which can be really useful.

So for example, like if you're looking for, uh, low PE stocks, price to earnings ratio stocks, but you also want a good dividend, well, you just, you're going to, you're going to miss almost [00:36:00] all of the REITs. Um, because P their PEs typically are higher because we've talked about it before FFO funds from operation is the PE for that sector.

So you'll miss them. So, it's a way that you can maybe focus on specific sectors by just looking within a, within a sector. Uh, but also it can be a way if you want to exclude a sector. So you can look at these growth rates, but you're like, you know what? I am not interested in, uh, Any company in healthcare or, you know, I, I don't want tech stocks.

I want companies or I don't want, uh, material. I don't want mining stocks. Gold prices have been up lately. It's like, you know, you know what? I don't, I don't want to gold miners to pollute this small cap field because they're all their revenues are up because gold prices have gone up. You know what I mean?

So you could use it to exclude and include particular groups as well. But back to, back to Yellowbrick that you mentioned. Uh, I want to mention, uh, FinChat too, because one of the things that you typically [00:37:00] don't get with your, uh, research tools that are built into your, your broker are like KPIs.

So, uh, things that are specific maybe to a certain industry or to a. Certain company that are really important that you can, that I know, uh, FinChat does a really, really good job with and FinChat and others are starting to add it and you're going to see more and more and eventually it'll filter down, uh, but like generative AI being built into where you can just ask it a question.

 And it can start giving you a starting point, and then it will suggest follow up questions from there and kind of help guide you through the process of helping you figure out what you're looking for. And those aren't free. You pay for those. But again, you get what you pay for. And if you think about the amount of money people will spend over their lifetime, uh, investing in great ideas, sometimes spending a little bit for a useful tool

can make you a lot more effective at turning over more stones. 

Jeff Santoro: Hey everybody. We'll be right back. But first a word from our sponsors. If [00:38:00] you want to earn a 6.9 percent yield for the next four years or more, you need to check out the bond account at Public.com. It's a new way to invest in a diversified portfolio of bonds and receive monthly interest payments. The best part, if you act now, you can potentially lock in a 6.9 percent yield until 2028, the new bond account only at Public.com/Investingunscripted.

Hey, Investing Unscripted listeners. My name is Brett. One of the hosts of the chitchat stocks podcast. If you love Investing Unscripted, we think you will love listening to chitchat stocks. On our show, we research individual stocks, interview investing experts, and well chitchat about investing every single week from hot stocks, such as Nvidia and Celsius, the hidden small cap gems.

We have something for every type of investor. All of the chitchat stocks podcast on YouTube, Spotify, or Apple podcasts, and start discovering new investments today. 

 I have a couple of questions I want to ask you about your own process. We've talked a little bit about how we do this and I [00:39:00] think we're in a unique position from an idea discovery standpoint. But one of the things that I've come to think about recently is there's really no rush to find new ideas a lot of the time.

You know, I'm, Often- 

Jason Hall: when I feel the rush is the worst time to be rushing too. 

Jeff Santoro: Yeah. And I think a lot about, let's say I had to start over right now, right. With my current level of knowledge, but I woke up tomorrow morning and I own zero stocks and I'm building a new portfolio. I would probably advise myself to have like a big chunk of money in.

An ETF that tracks the S and P 500. And then if I'm in a tax tax deferred account, at least sell off chunks of that when I'm ready to buy a new stock, right? There's some system like that have a lot of cash and just kind of when there's an idea I'm excited about and I've done research on, buy it and don't be in a rush to have a hundred stocks in a month.

Absolutely. Which is what. I absolutely did when I started, I think I [00:40:00] went from zero stocks to a hundred stocks in probably six months, which is way too many bits of those, way too quickly. Yeah. I was just buying everything and five bucks of this and 10 bucks of that. And as soon as I got fractional shares, man, I was like, 

Jason Hall: well, there's no way you can build any level of conviction doing it.

Right. No way. Yeah. No way at all. And again, like the UPS thing is, I don't know. I don't know. I keep going back to that. There's recency bias in my brain here, but. Because I've, I've have 15 plus years of experience and knowledge base. That's there already. UPS was, is not a new idea to me. It's a new idea to me now, but it's a company in a business that I've followed for a long time in an industry that I understand pretty well.

So I'm leveraging my existing knowledge base to make a better decision more quickly than I could have made it. You know, five or 10 years ago.

Jeff Santoro: All right. So you may not have an answer to this question because it [00:41:00] Maybe you haven't had your own like idea that you found on your own in a long time just because of the work you do. But can you think of a stock that either you own or don't own that you, that you totally found on your own? Not from like a friend, not from a colleague, not in a service like you were doing a screener or whatever.

Like what's the closest thing you have to a stock that you can say was your idea? Because I have a couple that I never bought and I, for good reason. But. I can say that I found them on my own.

Jason Hall: Probably the, the closest that I can come up with is investing in Ryman Hospitality P roperties back in late, late March of 2020. And even that one is not completely originally mine because I had done some research and I'd read some things out there, uh, about about Ryman. They were kind of going through this turn up turnaround period.

But even I can't claim full, like original idea for that one because kind of on the way down, Matt, Franklin, [00:42:00] I, uh, it's two episodes in a in a row. Matt's come up. We were like, during, during the pandemic, we were texting like 20 times a day talking about ideas. Like we were both like rubbing our hands, getting ready, seeing this, you know, once in a decade opportunity.

I want to acknowledge. Yes, it was a terrible, scary, scary time. Right. But your investor brain knew what it was seeing, right? Right. So, and, and that quickly became one of the most obvious, like long term opportunities, because if, if this company doesn't come back, we have much bigger problems. Sort of, sort of thing.

And there was a little bit of the same thing with Tangier factory outlets where I had really followed that business super closely for five years heading into the pandemic. And luckily they had made like all of the moves before the pandemic to like fix their balance sheet and start reducing like their bad properties, like selling off properties that weren't productive and that sort of stuff.

And that one actually is an, is an older idea than, you know, Then Ryman. So, so I guess maybe I [00:43:00] could say tanger, but I didn't, didn't find it in any of the it wasn't from any stock picker services I was a member of or any of that kind of thing. So probably those. And then more recently here, when we had the bank downturn. There were a lot of banks that I followed for a long time, time that in early 2022, it became clearly evident that this was the time to be buying, to be buying bank stocks. Um, but yeah, so there's a, there's a few. 

Jeff Santoro: So as I'm thinking about the two that I'm going to share, I realized that they're actually going to be cautionary tales about screeners because I think that's how I found these.

So I'm going to, I'm going to screen share really quick while I talk through this. So the people watching on YouTube can see it, but I will talk through it for the people who are not. But when I was brand new and I was searching for stocks, I came across this company called Cytosorbents. I don't remember what they do.

They're a biotech. It doesn't matter what 

Jason Hall: they do. So you can see on the chart, they raise capital from investors and. Burn that capital developing [00:44:00] products. 

Jeff Santoro: Now I didn't know any of that, but here's what, but I, I clearly found it with the screener, because if you look in early 2020 on this chart, which to the moon is skyrocketing and crushing the market, I probably was putting things in 80 percent plus revenue growth and things like that.

And this came up and I noticed it was headquartered like 15 minutes down the road from me, right? It's a New Jersey company. And I never bought it. I just sort of like Kept it on my like radar to kind of keep track. Cause I, I was too scared to make that decision on my own, but I wanted to just see if my instincts were right.

They were not because as this chart shows, it is down 73 percent over the past five years while the S&P 500 is up 107%. and then similar to that is this company called rap technologies. Which has an even wilder chart from, uh, back in 2020. And they are sort of like Taser, except instead of shocking people, it shoots a web kind of thing [00:45:00] out and, like, wraps 

Jason Hall: They're like Spider Man technologies.

Jeff Santoro: Yes. Yes. And I actually looked into the company a little bit and I read about it and I was like, Oh, I could see how this could be like a thing police could use and stuff like that. And then I was like, maybe, maybe, uh, maybe axon buys them and incorporates them. This is also down like 60 percent over the past five years, but it just goes to show you like, depending on when you're using a screen or what you're looking for, you can absolutely trick yourself into thinking you found the next.

The next big thing. So I'm yet to come across an idea. I can claim was mine. That was actually a good investment, but those are two that I was smart to avoid and did not buy. So 

Jason Hall: Cytos, Cytosorbates, Jeff, it's obvious what they do. They sell a cytokine absorbing column. It's a blood purification technology based on porous polymer beads that act like sponges. [sarcasm — Jason has NO idea what any of this means]

Jeff Santoro: Yeah. Now I remember, I actually do remember I know that that's what that if you read me that description, I would have told you it was that company. I, so 

Jason Hall: I read all of those words, but I still do not know [00:46:00] what I just said.

Jeff Santoro: I remember something about little beads and that it absorbs stuff and something about heart attacks.

Jason Hall: Yeah. Inflammatory mediators, cytokines. Yeah. So I still don't know. So you found two penny stocks. Excellent. Excellent. Uh, 

Jeff Santoro: yeah, it wasn't a penny stock back then. It had skyrocketed to like seven dollars I think. 

Jason Hall: You found two future penny stocks.  

Jeff Santoro: Yeah, that's right. Um, all right. Here's a question for you.

How many over the course of like a year, how many, how many new stocks do you think you act on in your average year versus just adding to things you already have? Uh, probably 10, like 10 new, new stocks. Positions in your portfolio per year on average, you would say probably, 

Jason Hall: probably, but in terms of as a percentage of my portfolio, I would say those 10 stocks are probably on average, I would say eight of them are probably three or 4 percent of my portfolio.

Yeah, right. [00:47:00] Probably 4%. There's half half percent positions are smaller starter positions and a couple of them. I'll take, you know, one or 2 percent positions because they're like ups example. I took a little bit larger position because it's predictable. Like, I feel relatively 

Jeff Santoro: not as risky as some micro.

Jason Hall: Yeah, maybe doesn't have the high ceiling, but it has a much higher floor. Right. Yeah. So that's, so that's probably the difference and, and I can see that number going down. 

Jeff Santoro: What about you? If you're trying to transition away from stocks into bonds. Yeah. 

Jason Hall: I'm, I'm old Jeff. So I'm old. So yeah. 

Jeff Santoro: I won't make too many old jokes in this episode. People can go back a couple and, and hear that I, I'm probably on a pace right now for like one or two a year. Like I, that's how much I've really tried to slow. I've really kind of come around to the whole, like you don't have to swing at every pitch. I also, I've gotten to a point I have I think I'm down to 40 stocks in my portfolio and I would [00:48:00] say I have like enough conviction to add to the vast majority of those right now, like at varying degrees of conviction.

But so I, I feel kind of lucky that I like my portfolio and I feel like I have a lot of companies, I still have high conviction in there, so I don't feel compelled to like, , go search for a new thing. 

But I, I do have, I have a watch list of ideas. It's not a lot of stocks. It's like five that. I like the business and I'm interested in, but for whatever reason, I can't bring myself to buy it for some of those. It's I just the number one and I'm going to keep talking about it until I can actually bring myself to buy it as Costco, yeah. I, I get that. You know, it, it's going to probably always be good and expensive. But it's like 50 times earnings right now. I just can't. 

Jason Hall: Well, let me give you, let me give you the, the most important detail about Costco that tells me this is not a time to buy. Like you said, 50, 50 times or like 58 times free cashflow right now.

I 

Jeff Santoro: would pay 35 honestly. Yeah. But over the past five 

Jason Hall: [00:49:00] years, over the past five years, earnings per share has doubled, just about doubled. That's pretty good. Pretty good for a company, the size of Costco and their business model and all that kind of thing. The stock price is more than tripled. That's, that's multiple expansion that, and multiple expansion isn't always a bad thing.

Sometimes that you bought something that was deeply discounted and if they could get it right, the price was going to come up. The multiple was going to go up too. And the business was going to improve. With Costco, the business is perfectly fine, but 50 times earnings. That is a high premium to pay for a business that's growing.

It grew the revenue last quarter 1%. 

Jeff Santoro: Yeah. But it is a freaking fantastic business. It's an incredible business. At the right price, it's a great investment. So that's kind of where I'm at. I'm only buying one or two things a year probably, maybe three. But I have So for example, three years ago, everything on my watch list, I would own right now.

Right? Low conviction, high conviction, expensive, cheap. I would have just bought it. And then like [00:50:00] YOLO, I'll see where it goes. And some of those have worked out for me over time. But I'm just trying to be a little bit like, you know, and then even when I do buy, I'm still buying like a little tiny starter position and adding to it over time.

Like I'm not backing up the truck and buying a whole lot of anything. But I'm really trying to not balloon my stock portfolio and trying to whittle it down. So yeah, probably only like one or two Per year.

Jason Hall: Yeah, I think we've pretty much hit all the topics we wanted to go over. I just, a couple of things to kind of wrap up the show I think are super important getting back to that, the idea of having the toolbox of tools and stock discovery and kind of where it fits in the cadence of, of your process.

I think. Some level of diligence is so incredibly important and factoring in where's the idea coming from. How much conviction do you have in that idea versus how much conviction you're borrowing? How to build conviction. And the biggest thing to me, I want to say it again, is like having that hammer, right? That, that, that tool [00:51:00] of really getting, cause you, you build your conviction, the more you spend trying to find reasons to not buy the stock and continuing to. You'll run into that ends and you're going to learn like where are the pitfalls and you're going to go into the investment with a much higher degree of confidence and understanding of the business and far less likely to get completely caught off guard.

Jeff Santoro: Yeah. Yeah. I would agree with that. I think my little recap of the conversation is you can find ideas anywhere, like I, and I think you just, but you can't just take them once you find them. Right. I feel like everything we talked about is sort of a step one in a process You know, whether it's a really detailed write up from someone you trust, whether it's a screener, you know, something you found in a screener, whether it's something you came across in social media, like I think all of it.

Should be step one in anyone's process. And then there should be something you have as part of your stock buying process that you throw everything through. Like for me, it's making my spreadsheet. Like I talk about all the time. If I [00:52:00] find a new idea, the first thing I'll do is I'll plug all the data in, or I'll go to something like FinChat and look at if I don't want to have the time to do it, I'll go look at all the same things visually prepared by that website rather than me manually typing them in to see trends.

Cause that's how like. That's my process. That's how my brain works. Yeah. Um, and then I'll go read some stuff. So I, but that's me. Like everyone needs to have, some people think I'm absolutely insane to spend the time to build the spreadsheet. They'd rather just go to a place like FinChat and look it up.

Jason Hall: Well, correct me if I'm wrong, but I think part of that process for you is not just the manual process of doing it, but you're thinking about it. And you're revisiting old data as you're going through your process. Right. So it's giving you time to kind of process the information as you're, as you're building out your,

Jeff Santoro: I like what I do. Like I'm, it works for me, but I absolutely understand why someone else would look at me and think I'm absolutely insane when I can just. Go to a website like FinChat and type in Ryman Hospitality Properties and just see it all [00:53:00] visually prepared right there. Like, I get it. Um, so I think, but my point is I have my way of doing it and everyone needs to find their way of doing it.

And that needs to be the thing you do after you find the idea. Right after that initial like interest is there, like you got to have your own sort of process. Like that's the kind of takeaway I have from this conversation. 

Jason Hall: Friends, our final words on new stock ideas. Treat them like sushi. Whether or not you're going to consume that sushi is going to be heavily affected by who gave it to you. If a rando on the street gives you sushi versus your best friend, you're- 

Jeff Santoro: I'm gonna make sure that I put the outro music on right during this part. So people know they're near the end and they can just skip. 

Jason Hall: Treat your stock tips like people giving you sushi.

Jeff Santoro: Oh boy. 

Jason Hall: . You're going to make better decisions just based on that one thing. Okay, friends, as always, just a reminder. We love to share our answers to these hard investing questions, but it's up to you to find your own answers. [00:54:00] 

It is up to you to decide whether you're going to eat that sushi, or do some some due diligence on where that sushi came from. You know what? That's a metaphor. You can do it. I believe in you. All right, Jeff. We'll see you next time. 

Jeff Santoro: See you next time.