Investing Unscripted Podcast 95: Stocks in 2024: The Shortest Leash

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Jason Hall: Welcome back to another episode of Investing Unscripted, where we ask and answer the hard questions about investing. I am Jason [00:01:00] Hall joined as usual by Jeff Santoro, the voice of the people and my good friend. 

Jeff Santoro: Hey buddy. I'm glad I'm your good friend. I'm a little bit sad that that comes after voice of the people, but I'll take it.

Jason Hall: I wanted to end with the most important part. 

Jeff Santoro: Okay, cool. Thanks buddy. 

Jason Hall: Yeah, you're welcome buddy. So we've got a show today. It's going to be a fun show. So last week, the episode that you will have heard last week, some of you might not have listened to it just because of the name. Politics, Investing, and Bias.

Hope you did. If you didn't go back and listen to it, cause we don't talk about politics. We talk about one of the hardest parts of investing and this week's show, we're going to put a little bit of that to practice. And the episode of this week is the shortest leash, where we're going to be looking at stocks that we own. That we've either lost conviction.

Maybe we never really had a lot of conviction, but it's some, by some definition, they're really running out of rope and we're thinking about. Maybe moving on from these investments.

 Yeah. I'm looking forward to this conversation.

Jeff Santoro: [00:02:00] Before we jump in quick housekeeping. Thank you. We got two more reviews on the Apple podcast app. So thank you to those two listeners who took the time to do that. We super appreciate it. If you are so inclined to write us a review, we would love that. If you're too lazy to do that and you can at least push the screen one time, we could also use a five star review.

That is the single easiest way to support the show and help more people find it. And as always, Connect with us on social media. Subscribe to the newsletter at InvestingUnscripted.com. Check out the YouTube channel. We're trying to build our audience and give you guys as much content as we possibly can.

Jason Hall: Jeff, one of my favorite things about these two reviews that we got ones from Ireland, ones from Spain. This isn't just for US listeners too, because a lot of these algorithms, they're market local.

So wherever you are, you're helping us every time you give us a five star review. Every time you give us a review, we really do appreciate it. So thanks to those two reviews, Jeff. 

Jeff Santoro: Yeah, [00:03:00] agreed. Thank you for pointing that out. So we're modeling today's show a little bit after one we did last month where we took a look at.

A stock in each of our portfolios. Like you said, Jason, we're going to talk about stocks we have on a short leash, and we're going to keep to a similar format, but we're tweaking it a little bit and I'd love feedback from the audience. If you guys like this format, if you like the episodes where we take a look at a stock in our portfolios, we'll keep doing them.

That's kind of a new one we're trying. So any feedback is appreciated. So let's dive in. Jason, we are going to talk about, I'm going to talk about a company called Endava, the ticker is D A V A, and you're going to talk about Tellurian. And the ticker is TELL.

Okay, so let's dive in here. I think we're going to try something new where we interview each other about the companies that we brought to the table here. So do you want to it? You want me to go first? Do you want to go first? 

Jason Hall: Jeff, you go first. I'll interview you. That'll give me time to, cause you know I don't prep. That'll give me time to think about. 

Jeff Santoro: Right. While I'm talking and you're not listening. You can put your thoughts together. Got it. 

Jason Hall: Yeah. I know. [00:04:00] I'm one of the, I don't listen. I just wait for you to stop talking so that I can say something else. 

Jeff Santoro: I do too. Maybe that's the magic. 

Jason Hall: There you go. That's it. Love it.

Okay. Endava, that's the company that you've got on the short leash here. I'm going to ask you two questions in one. What does Endava do and why do you own it? 

Jeff Santoro: So if I was going to put it. Simply, Endava is a consulting company that will help older legacy companies with legacy systems in place, update their technology to compete with newer companies.

So let's say you've been around for 60 years, you probably have some sort of technological systems in place that are old and you've just been tweaking and building on them for over time. Now here comes this new startup company that is cloud native and is, using social media, all the different things that you would do if you were starting a company in 2023 or 2024.

So if you're in legacy company and you want to be more competitive on the technology side with these newer startup companies, you would have Indava come [00:05:00] in to do consulting work to help catch you up. That's what they do. Very briefly. The reason I own it is I was a subscriber to a Motley Fool service and it was one of the recommendations.

So I bought it way back when I was first starting out as an investor and it's been in my portfolio ever since. I have not added to it very frequently. It's still a relatively small position. That's why I own it. I don't know if I would have found it and or been interested in it otherwise. 

Jason Hall: So that that's interesting, right? Because, one could say borrowed conviction, but I think it's more accurate to say that you bought this conviction. 

Jeff Santoro: I did. And I want to say, like, I'm not saying I, I don't regret having done it that way. I do think that and we'll talk about this later on these services that you can subscribe to, whether it's a molly fool service or any other.

Service that you pay for, I think can unearth for you. Companies you never would've come across. And some of those can be massive winners. I'll give a quick example that we're not talking about today, but I would not have known about [00:06:00] Celsius Holdings, the energy drink company until maybe very recently to now had it not been in a recommendation four years ago.

Right. And I've benefited in returns from having. Found out about it four years ago and not this year. So I do 

Jason Hall: think it can work out. Not to detour, not to detour too much from our planned show, but just a little side venture. I think this is important to talk about. And we've talked about it before.

If you go back to our original how we invest series that we did pretty early in, in the run, When we started the podcast one of the things we talked about is making the most of your own time. And yeah, I'm a pro. I do where I do a lot of work for the Motley fool, Jeff, you do a little bit of side gig work for the Motley fool.

So we want to make sure that's disclosures put out there. We're not being paid by the fool to do anything for this podcast, but one of the things I've talked about before is trying to leverage your time the best you can finding, sometimes finding these reputable stock picking services. Even if it's just for like idea generation can be a great jumping off point [00:07:00] to being a better investor and creating more wealth for yourself.

So that's what you, you didn't start off that way necessarily within Dava. It was more of like, I'm paying for this service. I'm just going to buy these stocks, but you've transitioned to more of okay, now I own the pick. Now it's up to me. So make sure this fits in my portfolio. 

Jeff Santoro: Exactly. And it's why I've not added to it very frequently and not recently.

And it's also why we're here talking about it today, because I think it's fine to find those ideas through paid conviction, as you put it. But I think you have to do your own. Thinking to determine how you either hold it, buy it or sell it later on. 

Jason Hall: So next question here, and you talked a little bit about it.

I would like to hear maybe specifically, because I'm sure companies like this, one of the things you've talked about before, like customer concentration can be a risk with consulting companies broadly. How does that stand with Endava? 

Jeff Santoro: So their customers are primarily large businesses, so they cater to enterprise customers and mostly in the payments, financial services [00:08:00] and technology media telecommunications space, which they call TMT in their filings.

So they've branched out beyond that, like they do. Consult in many other industries, but in terms of like percentage of total revenue, it's really focused a lot on payments and financial services. And just as an example, one of their largest customer is MasterCard, which is a company we've all heard of.

We've all probably interacted with, and that's currently around 10 percent of the revenue. So that is something worth knowing that they have a pretty big concentration risk. And there's more to that, which we'll talk about in a little bit. They list other big. Companies they're based in the United Kingdom.

So I think a lot of the customers they list in their 20F, I believe it is are companies that Probably EU centric. Right. That we may not be used to them here in the states, but one that jumped out to me because it is a company I know which is Adobe. So that's another well known company. So they've done a nice job landing some big fish, so to speak It's just they have to keep [00:09:00] landing more of those bigger fish so that the concentration spreads out a little bit 

Jason Hall: And we'll talk about it further There's something more to, but the consulting industry can be pretty cyclical based on the cyclicality of the customers and the industries that you support.

So I know that's one of the things that's been a challenge, but thinking about. Analyzing the business. What are you following about the company? Particularly what is, what have you followed about the company that's caused you to maybe short in the leash? And then what are you looking forward, looking at going forward?

So 

Jeff Santoro: we've talked about this on previous episodes, but one of the things I like about Endava and other companies do this too, is they're very clear. If you read their financial filings and even their press releases, but it's even clearer I think in their financial filings. They tell you straight up what their, you know, key business metrics are.

When I follow this company, I follow all the normal stuff like [00:10:00] revenue and profits and cash flows and those kinds of things, but they say straight up like the things that they measure themselves on our revenue growth, revenue concentration, which is so that's something that they're we've talked about, but they're aware of it too.

Their number of large clients and free cash flow or specifically free cash flow yield. So those are the things I, I keep track of, too, because I am a believer that you should keep track of the things that business tells you that they think are important. I like doing that more than listening to what analysts think is important.

I'm sure there's some value in that too, but that's just my way of looking at it. And it's interesting when I look back at the time I was buying it, I can see why it was recommended in the service I was paying for, because there was a point in time when it was putting up revenue year over year revenue growth, 48%, 55%, 50%, 51%.

That was four consecutive quarters at the end of 2021 heading into 2022. And at the same time they were growing their large clients, which are clients that spend a million dollars or more [00:11:00] in revenue. That was growing 30, 40, 50 percent in those quarters. So this is relevant to the conversation of how we got here, but it being a cyclical industry, that's, there was that, that was the upcycle for them.

And that's where I bought. And that's where it was obviously more expensive. And that's why it is down in my portfolio. Now the customer concentration piece too. So just as an example, their top 10 clients represented about 36%, 34 percent of revenue two years ago. And it's 34 percent now. So that's something that they've not done a great job at in terms of diversifying over the last couple of years.

It's been in the mid thirties, sometimes kicking up to upper thirties, sometimes slipping down the lower thirties, but it's in that 30 percent range for a couple of years now. So that's something that they say is a metric to track. And it's something that is held pretty steady. So before we go on to the next part, I just want to mention one of our sponsors FinChat has [00:12:00] great.

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Jason Hall: Okay. So I know generally consulting companies. They often compete with other consulting companies that have similar disciplines that they focus on. But I think within DABA, there's a little more they don't just compete with the consulting peers, but they compete with some technology companies too, right?

Jeff Santoro: Well, that's my assumption, right? So they actually do a nice job of listing their competitors and their. And they're filing and it's a lot of consulting companies, ones you've heard of. As I thought about it, I think that's true. They're competing against other consultants, right? Because if you want to bring a [00:14:00] consultant in, you'd probably shop around and see who's the best person for the job.

So many companies that do cloud based software as a service technology products are pitching it to it. Companies as a way to replace their legacy software. So I would imagine that if you're an enterprise, if you're MasterCard or Visa or American Express, I'm just going to pick big financial companies and you're saying to yourself, okay, I need, we need to upgrade our.

HR system, just to pick a random thing that you might want to tweak. Do you pay a consultant like Kandava to come in, or do you reach out to ServiceNow, which is a company that does that kind of stuff and some other things too. And this, so this is my. Assumption. I don't have hard facts on this, but I would imagine that in addition to other consulting companies are also competing against any company that sells technology subscriptions, trying to get, you know, legacy companies to, to switch over.

Jason Hall: I think that's a good place to pivot [00:15:00] to blind spots. What do you think your biggest blind spots are with this company? 

Jeff Santoro: So I have absolutely no idea what it's like to work at an enterprise. I have no idea what it's like to hire a consultant, to be at a company that brings consultants in, and I don't have a real good sense.

And this is partially me just not spending the time, I think. And partially just cause I think it's an opaque business generally of exactly what, exactly what they do, right? Like I have a general elevator pitch explanation that I gave earlier, but I don't feel like I know. Anything about the enterprise financial world and also what consultants do and what these specific consultants do to have like a real good sense of it.

So I think my blind spot is that I'm limited to. What they tell me, right? Unlimited to like financial results and commentary they make in press releases during earnings. 

Jason Hall: You're not reading the transcripts from the earnings calls for their two largest publicly traded [00:16:00] competitors or going to trade shows where you're talking to consultants that in that industry and in others.

Jeff Santoro: And that, and again, we've talked about this when we did the episode last month about- 

Jason Hall: Knowing what you don't know. 

Jeff Santoro: Right. Which is that you're kind of going to be in this boat with almost any investment, but at least if it's you know, a retailer, you could say, Oh, I've gone to the stores and there's always a lot of stuff before.

Well, I mean, all kidding aside, like I think that's why a lot of retail investors are drawn to retail companies. Like you, if you go on Twitter any day, you'll see someone. Post a picture of a long line at Costco and say, I need to own more Costco. You know, like there is something to that. And the further you get away from consumer facing products, whether it's something like this or whether it's tellurian I think it's tough to really get a handle on it.

So I think my blind spot is just not knowing the industry. 

Jason Hall: Yeah, that, that makes sense. Put those things together. Two, two [00:17:00] questions and they're tied together. You can answer it however you want to. Why haven't you sold it and why do you have it on the shortest leash? 

Jeff Santoro: So I haven't sold it because I'm trying to sell things less if I'm being honest, like it, it's. And I- 

Jason Hall: One of your goals for 2024 was to not sell any stocks. 

Jeff Santoro: Yeah. I want to try to not sell stocks because I mentioned an episode or two ago that I sold a bunch of stuff in December and it's all up since then. So, of course, I'm second guessing myself if I'm just being honest about it. But part of it too, is I own something that I know is the cyclical in a cyclical industry.

So I should, I don't feel like I should sell when it's the down cycle. Like I, I should know better. And if in a year or two, it's looking like it did in 2021 and early 2022, I will have been right. So to me, it's like, it's, there's no harm right now in keeping it longer and watching it hopefully hit the up cycle.

That's the first thing. But if I'm being [00:18:00] honest, I wouldn't even have it on this list. If we were currently in the upcycle. 

Jason Hall: You're just ignoring it because the stock was going up. 

Jeff Santoro: Right. Then there are companies in my portfolio that I've done very well that I fully know I don't understand well enough. But I've not even bothered worrying about it because why? It's up, you know, so I think that's why I thought this would be a fun one to talk about.

Because a lot of I feel like I've sold things more because I don't understand them and or don't care to learn more about them more than because they're down, right? I think I've been fairly disciplined with that. And this falls into that bucket a little bit, but I'm trying to Be more patient. I'm trying to wait, see, learn.

Maybe I just, you know, I am skeptical. I've been skeptical about the consulting industry in general. It just feels to me like when you have to cut back on spending as an enterprise. Company, this could be like the very first thing you decide [00:19:00] not to do, right? We've talked about how cybersecurity is probably like the last thing a business would cut.

I feel like hiring a consultant might be the first, I don't know. 

Jason Hall: It's really interesting cause it's actually a little counterintuitive. And we've talked about that when we were having this part of our conversation, when we were planning out this show and the question that I put to you is, and I refuse, I put my fingers in my ears and said, la la la. So I couldn't hear what you were trying to say. 

I said, this is rhetorical. I want you to think about it. But because of the fact that it can be cyclical, but the longer over the longer term consulting companies have actually generally been really good investments over the long term. Is this a stock that you're putting on a shorter leash and considering selling?

Then you, that you really might want to be thinking about buying more 

Jeff Santoro: of. Yep. You're absolutely. I don't have a good answer to that question other than you could absolutely be right. And that's part of the reason I've not sold. Yeah. That's why I'm leaving it. I don't think I want to add to it right now because [00:20:00] I don't feel confident enough that I'm right to say, Oh, this is just a, the market's missing this.

You know, I did feel that way with some other companies. Absolutely. I've invested in when they were down, like we've talked about Amazon before, like the end of 2022. I was, my gut just told me Amazon will not be having negative operating income forever. So I bought, I bought a bunch of Amazon when it was kind of beat up and it turned out okay. 

Jason Hall: It's the difference, Jeff, it's the difference between FOMO and actual conviction. You know, I think that's the thing is that FOMO is you're chasing something. And your gut is pulling you that direction that's driven by all of the uninformed biases that drive you and conviction comes, should come from some level of knowledge, right?

That, that builds it. And that Amazon call that you made your gut position, and I'm going to continue to give you credit for this until Amazon falls 50 percent and then I'll tell you I was [00:21:00] right. Is that you laid out a very clear case for why. And that cases has played out and it's kind of invert that a little bit and quote our good friend Tyler here.

I mean, it sounds like you're just at the point where we've got just enough conviction not to sell. 

Jeff Santoro: Yeah. And yes, I would say that that's true. And the last thing I'll say about this, and then we can talk about your company is the. I'll never learn about cyclical consulting companies if I don't hold on to one for five or 10 years, right?

So I, because it's in my portfolio, I know I will pay attention to it. I'll check in on earnings. I'll try to learn more about it. And I could sit here three years from now and be like, I was right back in 2024. This, I, my skepticism was correct. This company's not going anywhere, right? Or I could, you know, Be very happy with myself when it starts putting up 40 50 percent revenue growth again, and I feel like I'll see some of those trends reverse early enough to build some of that conviction, maybe back up and [00:22:00] not feel like I missed the boat necessarily.

So I'm looking at it as a learning experience. But if you had, if you told me right now I had to sell one company in my portfolio, like just had to this would, probably be near the top. And I want to say it's less because of the price and more because I just, I feel so detached from what it does.

But I don't know, it might probably also be the price or the price performance, I should say. All right. Now for something completely different, we're going to, I'll interview you. We'll talk through Tellurian. So let's start off in the same place. And I'll, I might ask some of the same questions, but I might tweak them based on what you say.

What does it do? Briefly, and why do you own it? 

Jason Hall: So the reason that I own Tellurian goes back to Cheniere Energy. Actually before I even get to that. i've sometimes describe myself as a tailwinds investor. I look for clear demographic trends, macro things that are happening. 

And I don't mean how much is inflation going to change. I mean very large trends Where money is flowing [00:23:00] over multiple years or decades, even ideally, and then try to look for companies and industries that in the past have generated positive economic returns. I've often said the market doesn't give you bonus returns for degree of difficulty, even if you see a really good trend.

But it's in an industry that historically hasn't generated good economic returns. It's probably not a great investment. It's probably a crappy investment. 

Jeff Santoro: You've made this argument to me, right? The best company in the crappy industry is a crappy company. 

Jason Hall: Right. And you know, it's, I'm cribbing Peter Lynch a little bit, but it's, by and large, it's true.

And it may not be as obvious based on what's happened over the past decade, but historically the oil and gas industry, the energy industry broadly has been a creator of economic value. It really has. And if you look at Tolurian this was the first really large scale liquefied natural gas export company that was financially successful and it was a massive winning investment.

Jeff Santoro: Hey, real quick, can you explain what [00:24:00] that means? What is a liquid national gas, liquid natural gas export company. What does that- 

Jason Hall: Liquified natural gas. So natural gas. Yeah. So natural gas is natural gas. It's ambient state is a gas. The problem is that it's not very dense, energy dense.

If you want to move it over large distances that pipelines are uneconomic, say from the U S Gulf coast to Japan. Well, that's a hell of a long way to build a pipeline. And you can't just fill up a container ship with compressed natural gas. You just can't get enough gas on it to make the trip work.

So you super cool it down to negative 200 plus degrees to turn it into a liquid and you, and it becomes significant. It's like 20 times more dense when you can 

Jeff Santoro: fit more of it on the ship. Exactly. That's 

Jason Hall: exactly what it is. Of course. You have to have a really large facility to do it. If you want to do it at scale, it cost effectively, you have to do it at very large volumes to leverage it, you need to be, to build the facilities where [00:25:00] they're close to both shipping and also where they're close to the gas, where the infrastructure exists. So you have to be in the right place to leverage all of those things. And Sharif Souki, who was the founder of Cheniere Energy, when he initially Founded Chenieer they started off as an import business because all of that natural gas that's in North American shale.

We knew the gas was there. We didn't have the capabilities to unlock it and produce it at anything like a reasonable cost. So his plan was to build an import facility. And then basically in, within the first couple of years of trying to advance that facility, they'd acquired some land and had plans in place and all that kind of stuff.

Yeah. The folks in Texas that are really good at figuring out how to unlock minerals from the ground figured out how to do fracking and horizontal drilling. And all of a sudden, all that gas was accessible. Suki pivoted, incredible salesman managed to, Get his financiers to agree and to back it to, [00:26:00] instead of building an import facility to build a liquefaction, which is the plant that turns the gas into a liquid and export facility.

And it was, it was down to the skin of their teeth at some point, multiple points, whether they were actually going to make it. But. The long story short, it was a massive success and a huge, huge win for investors. The problem is that you had two very strong individuals that at some point went head to head.

You had Carl Icahn came in famous activist, investor came in, saw potential to unlock value, to take the cash flows that Chenier was generating and start returning them back to investors. And yet Sharif Sookie, the founder who is the CEO at the time saying, no, we need to keep growing. Carl Icahn won. Souki was ousted.

And within a couple of years founded Tellurian, and my thesis investing with Sharif Souki and his partner who had spent 30 years building the natural gas business for Shell and [00:27:00] others was they've learned a lot and they think they can do it better. I'm willing to invest along with it.

So that's why I bought, that's why I bought. 

Jeff Santoro: So then are there customers just like the big oil and gas companies that we've heard of before that? And they're using tellurium to help move the liquid, the liquefied natural gas around, or is it a different customer base? 

Jason Hall: Yeah. So again, in the oil and gas industry, things until the point where you're selling to that retail customer.

Basically everything happens at really large scale. You sell large, you make large quantities of something. You sell large quantities of something. You ship large quantities of something. And Tellurian's customers, Chenier's customers are these large integrated oil and gas companies that generally also have big trading operations too.

So they operate as the middle trading and then transporting that liquefied natural gas. You also have national oil and gas companies that are owned by. That's pretty common in a lot of the world that they're [00:28:00] the country itself owns and operates a lot of the oil and gas infrastructure and businesses.

So those are the customers. And it's important because you need customers that you sign a 10 or 20 year contract. You need to know they're going to be around to honor the agreement. And those are some of the kind of baseline things that are part of how that industry is structured. 

Jeff Santoro: So is there also a situation where potentially a customer is a competitor?

Because I'm wondering, are there. Who are their competitors, but also are their competitors sometimes these because you said vertically integrated, you know, multinational oil and gas industries are companies. Do some of them do some of the same stuff that tellurium does? Or are they all sort of, you know, Make having someone else do that transport piece.

Jason Hall: Yeah. So they're your customers can be your competitors too. There's no doubt about that. You look at Chevron, for example, Chevron's one of the largest operators of LNG facilities in the world. But at the end of the day, if you're also buying and trading in that commodity, if you [00:29:00] can get capacity.

If you can buy it from a competitor in a more economic on more economic terms, you do, right? You do. So there's a lot of dealing in the industry where companies deal together and work together. As much as they do compete they also work together a lot. So it's definitely not an impediment on the competition side, but I will say.

And I'm sure you're going to ask some other questions, kind of deal with that. But the bottom line is that like from that original thesis, almost nothing, Jeff, almost nothing has actually played out as, as initially, as I initially anticipated it would. So 

Jeff Santoro: that's a perfect segue into. The next question, which is, so I mentioned like very specific metrics with in Dava that I keep track of, and I'm lucky that the company tells me what they are.

So as you come across earnings and get updates on what Tolerian is doing, what are the specific things you're looking for? Have told you that it hasn't worked out and we'll tell you if it does work out 

Jason Hall: in the future. So tellurian is a startup still for the most part. They have their only commercial [00:30:00] operations at some point over the past few years they've invested some capital to acquire some natural gas production assets, which wasn't even on the radar for the original.

Original business. The original business was, they were going to get the infrastructure into like the Permian basin where they were focused on liquids. So oil and natural gas liquids, which is not natural gas it's like butane and propane, which those are, they come out of the ground as liquids, they're not.

Gases like methane is natural gas, but the natural gas still comes up, but their goal was to be able to access those kind of stranded gas markets and have competitive prices for natural gas that hasn't really realized. The other thing is that they were going to use like a joint venture finance model where their customers, they would sign these contracts would also be equity investors in the facility, right?

And they would have enough equity partners. That they would these customers would take equity also. And [00:31:00] then there'd be a certain amount of the volume capacity of the facility that was left over to Lurien would sell that it would have. And basically the JV partners would cover the overhead.

They'd get a discount. And then what's left over would be would be what tellurium would be able to count on as its profit. The problem Jeff is because it's basically still been in the startup phase and they've broken ground, but they haven't started even building the first liquefaction train, much less the full plant.

There are no operating metrics you can go on. Everything's about fundraising. Everything's about. Getting approvals, getting deals lined up, not just the memorandum of understanding, but actual executed contracts and funding and all of those sorts of things. And basically what we've seen is a really good business plan.

All of the federal government level approvals. A deal with Bechtel, the big construction company that does a lot of energy construction and a bunch of JV [00:32:00] partners that have walked away. 

Jeff Santoro: It almost sounds like it almost sounds like you're describing investing in like pre commercial product.

Biotech companies where you're basically watching cash burn and the product development pipeline and that's kind of it 

Jason Hall: exactly the same thing Yeah, now it's interesting take that and Only you're not producing a product that cures people of disease. You're producing a product that One could say probably cause people's health, but it drives the world.

But what you say, but seriously, you remove like the, that part of the business and you overlay this overly complex financial model of the way that you're going to try to raise capital that just utterly and completely failed to deliver. 

Jeff Santoro: So you've not. Sold me on this stock. So I guess I'm curious to know why you've not sold it yet.

Like it's, I think you've made the case of why it's on a short leash, but I'm curious why it's still in your 

Jason Hall: portfolio. So I have sold some, it's been a while since I sold any I've maintained a small a very [00:33:00] small position. That I probably won't sell as, as much as I probably should, because one of the things we've talked about is I'm very much one of those investors that if I don't, that's very rare.

If I don't hold a stake in a business, I probably won't pay it that much of attention. And I almost really would just want to see this one through. I really do, because there is still a world, Jeff, there is still a world where If they get financing, they get things lined up they managed to do this with even with a pretty large amount of dilution, but the stock could still be a 20 or 30 X performer from here.

So you 

Jeff Santoro: wanna keep it, there's also, what's that? I was gonna say, so you wanna keep it around so you keep an eye on it in case you start to see signs that they're trying, they're making it work. 

Jason Hall: Yeah. It, I mean, that's exactly it because it's one of those things where, and we can be very binary as investors and we walk away from a company or sell a stock and never, [00:34:00] and just never look at it again.

And sometimes that makes sense, but I'm far more with these kinds of companies the answer is not, no, it's just not right now. And it's always worth keeping an eye on what's going on. Because there, there could be an opportunity again. And if things start to change for Tulare, and that could be the case, but I think the odds are just as good that they don't figure it out.

And. The company gets acquired on the cheap and they just basically they're buying the permits, right? They're buying the permits. They're buying the plans that are in place. But honestly, I think it would, you would probably see a bankruptcy before that happened because why pay a premium when you can pay a discount?

Jeff Santoro: Yeah. And I'm curious just to return to the competitor question one more time. Is there a company or that you might know or have in mind that would be a potential to buy them? Or do you think they just get taken out by like private equity or something like that? 

Jason Hall: So I still think that it's pretty.

Relatively unlikely that it would be that, that it's an acquisition that's going to happen. But we have seen some [00:35:00] pretty big changes over the past few months where Sharif Suki is basically no longer involved in the business. Martin Houston, who is his co founder that came from from the natural gas side of the industry is back.

Running the show and they're trying to figure out their footing going forward. It's possible that they're trying to kind of polish up the business to try to find a buyer to save some equity scraps. But I would say based on the balance sheet, it's more likely they're just trying to reposition the business to go to more of what we saw worked at Cheniere and just raise capital.

So we'll see, but it's certainly one that I just, I want to kind of let it play out and see what happens. 

Jeff Santoro: All right. I hope everyone enjoyed that a little dive into two companies that we have low conviction in on a short leash, but we still own. Maybe we can revisit this down the road and see if we've made any decisions.

Stick around when we come back after this short break, we are going to do a quick review of the 2024 portfolio contest. We will look at the February [00:36:00] results. So hang in there. We'll be right back.

Jason Hall: Hey, Jeff. 

Jeff Santoro: Hey. 

Jason Hall: Are you, are you still kicking my butt in the 2024 Investing Unscripted portfolio contest? I 

Jeff Santoro: think everyone. is kicking your butt. I don't want to be the person who's pointed out here. I think you're losing pretty handily. But I am not far behind. 

Jason Hall: Yeah, that's, that's actually true.

That's actually true. If we look at the year 

Jeff Santoro: to date, we are, I'm not far behind. I, 

Jason Hall: I've, The only person, the only person who's chasing you is me. Is the 

Jeff Santoro: Yeah. Yeah. Yeah. But that's not what we're going to talk about. We're going to do a quick We're going to talk about February. We're going to talk about February.

We can't dive into all of these, there's too many. You the sheet is publicly available. It's in the show notes if you want to look at any of the results and also Feel free to double check them if I missed anything. But we're going to talk today about how the portfolios did specifically in the month of February.

So this is not year to date. This is just from February 1st to February 29th. And before we [00:37:00] dive in, let's just point out that our listener and loyal live stream attendee on our first Fridays is Teijo, whose portfolio is very close. I had to go To the first decimal point here he, his portfolio was up 17.

8%. Just in the month of February, slightly eking out our listener, Jamie, whose portfolio was up 17. 6%. So very close there for the monthly winner. But Teijo pulled it out. 

Jason Hall: So I don't think they have, I don't think they have any stocks in common, do they? 

Jeff Santoro: No, I don't believe so. 

Jason Hall: That's remarkable.

Jeff Santoro: Yeah. It's interesting. So what I like about this year's contest. Versus last year, but what also makes it hard to talk about on a podcast is because there's so many different groups of stocks It really is a wide variety There are some people who chose portfolios of what I would consider to be very well known companies There are others who chose portfolios that I would consider to be very unknown companies And then [00:38:00] there's a whole bunch that are a mix of the two and Nobody seems to be jumping out to an enormous lead at this point.

And there's been some interesting month to month changes. So just real quick, like you ended January down 22%. But you, in the month of February, your portfolio was up 2%. So that's a pretty big swing from one month to another. You know, my, I was down five and then I was up three in the first two months.

Comedian Mitch Patel, who won the January contest is holding steady. He's been, he was 7 percent in January, up 7 percent in February. I should say that's an additional 7 percent in February. , so anyway, yeah, it, it's interesting to see. The swings. And this is similar to what happened last year.

There was a lot of movement in the first couple of months. And then it was kind of quiet for a while. And all of a sudden in December, it got crazy again. So it'll be interesting to see how this shakes out over the course of the year. 

Jason Hall: I know we're not talking about the year to date amount so far, but I think it is interesting too that sometimes, and we mentioned them, we mentioned their portfolios after the, after January, but the one that's leading the [00:39:00] way so far, and this includes the first little bit of March, I do want to just, Hat tip to the Rosalillo's Nick and Casey they're winning so far.

Sometimes just kind of, you get a little steady performance, made a little bit, did a little bit in January, had a pretty good February. You put it together. You're ahead so far, you're ahead so far, right? Set a good pace, set a good pace. And another interesting thing about Because you can control that, of course, with a stock picking contest.

You can control the pace of your stocks. That's right. Yes. They've, they 

Jeff Santoro: clearly planned this out for a slow build over the 12 months. But they're an interesting, that's an interesting portfolio because they went all in on semiconductor related stocks. So there's definitely a theme to their portfolio.

Jason Hall: That's the chip stock investing, right? That's the YouTube channel. Check it out. 

Jeff Santoro: Check out there. Yeah. Honestly, it no joke. If you are interested in the semiconductor industry, I can't think of a better place to go learn about it than Nick and Casey's YouTube channel. 

Jason Hall: Beginning, I want to say it now in the show notes and the transcripts, you'll find the link to the sheet, to the Google sheet for [00:40:00] each of the participants.

Each of the podcast guest participants, you can click on their name. And it'll take you to a social media platform or something like that. And then you can find the other things that they're doing. It's a little bit of gratuitous free promotional opportunities for these folks. So these are all folks that do good stuff though.

Jeff Santoro: Yeah, and we are very generous podcast hosts by giving them free plugs throughout the year. So as we wrap here, Jason, I 

Jason Hall: know I'll send you my money. My Venmo buddy. 

Jeff Santoro: I don't think he listens. We could probably say whatever we want about him. Can you blame him? I wouldn't know. I don't. I'm surprised anyone listens.

So before we wrap, I do have a question for you, I guess, just looking at your portfolio specifically, is there a company that you are- 

Jason Hall: Do I, do I have to? 

Jeff Santoro: No, No. Here's the question. If I had told you before, like when the contest started that at the end of February, I know it's just two months.

This would be your portfolio. What would have shocked you the most? 

Jason Hall: Honestly, I would have been pretty shocked. This isn't exactly the question you asked, [00:41:00] but it's the one I'm going to answer. I love so it would have surprised me looking at so five's results. That the stock's down 27%. And also that down 27 percent is actually one of my, like middle of the road performances for these stocks.

That's the thing that probably would have surprised me the most. It certainly wouldn't surprise me that the portfolio is down 25%. I pick stocks that got the crap beat out of them last year. It doesn't surprise me that it's continued. Same question for you. 

Jeff Santoro: I think I have two, one on either side. If you had told me that outset medical would be down another 46%, I don't know. I would have believed you, although it shouldn't surprise me because all that stock seems to do is go down. I think I'd be surprised that pro core is up 9%. I picked it because I'm interested in it.

I think I said on the original show, which you can also get a link to on the sheet, that I picked it because I wanted to learn more about it. And I thought if I was checking in on it frequently and talking about it [00:42:00] throughout the year, I would learn more. And we did it. That was the one I picked on our no knowing your stocks in 2024 episode from last month.

So. You know, CrowdStrike up 17%. I can believe that often does really well. You know, DreamFinder homes up 6%. That makes sense to me. I was pretty bullish on home builders. I did not expect Procore to be up as much as it was. I'm happy it is. I think it's results you know, Reflect that I think they had a good Q4.

So that would be probably the one that sticks out to me.

Jason Hall: All right. If there's, is there a stock in your portfolio that you wish you had have picked a different stock instead of,

Jeff Santoro: I, I probably, I don't know that I would have substituted it out. I don't know that I would have picked again, health peak properties, which is a REIT that specializes in medical related facilities. It's very complicated. I think it just went through this very odd restructuring where it like acquired another company.

And then spun itself out of that company, but changed its ticker, but kept its name. It just all happened in the last couple of days. I got 100 [00:43:00] investor email alerts and the ticker changed. So I just had to update the spreadsheet. It just seems overly complicated for some REIT exposure in my portfolio.

So I don't know that I would have picked that one again. Everything else I'm pretty happy with. I want to see how they all do over the course of 12 months. And obviously this is silly to talk about after just two, but it's interesting from the standpoint of how quickly things can change.

What about you? What's, is there anything after the short amount of time you wish you had not picked? 

Jason Hall: Yeah I'm going to say instead of, I think a little bit, maybe I tried to, I don't think I tried to I kind of came up with the same idea as Brian for oldie who is kind of like bottom fishing a little bit.

I think he was focused a little more on the quality of the businesses that he picked and I was just. Okay. Looking through my portfolio and companies that I follow and just picking the stocks that went down the most, which is the worst way to invest. It is the worst way to invest. And I kind of wish I had a bit followed like a similar framework stocks that were down, but instead of just.

Broadly picking all stocks [00:44:00] that are down. If I had a focused on say, REITs, real estate investment trusts, the market's been down on REITs because interest rates are up. That means their costs are higher. That means they're competing with bonds and other things for yield for their investing dollars from investors.

And I kind of wish maybe I had have just built. Just a high yield portfolio to see how that would have finished the year instead of just bottom 

Jeff Santoro: fishing. Yeah. I mean, I have two reads in mind and I mentioned health peak, but I also have EPR properties and that was sort of my thinking too, was they're down.

And I. It seems like at some point the read industry has as a whole has to sort of rebound a little bit. So I was, it was a similar thing. I would bottom fishing ish trying to pick things that had done poorly last year that might do better this year. So all right, we will continue to do short monthly reviews.

We will do a longer quarterly review, and that's the one where we actually declare an official winner. And we encourage all of our listeners to give money to the charity of the charity. person or persons who won that month. So when we get to [00:45:00] early April, you can expect a Q1 review from us after we get to the end of March.

So for now Jason's still losing and we can all. Be happy about that. One 

Jason Hall: more, one more thing. I gave some money to Lance last month. You do may or may not a little bit, been a little bit fast and loose with the final numbers and the final dates, but Lance's charity, I gave 50 bucks to it. And I committed back then that. Anytime an audience member won a month, I was going to give 50 bucks to their charity of choice.

So that means Teo, you are, you're on the clock. Send us an email, send us a DM. You can reply in the comments at InvestingUnscripted.com on the transcript. However, you want to send us a carrier pigeon, however, you want to get us your charity of choice. I would love to kick a 50 bucks over in your 

Jeff Santoro: in your name.

And if he's not listening, the charity does not get the money. That's it. 

Jason Hall: That's it. Must be present to win. That's [00:46:00] right. All right, Jeff. That's it, right? We're done?

Jeff Santoro: We're good, man. We did it. 

Jason Hall: We did it. Once again, words about things about stocks. As always, love to remind you, we love to give our opinions, our answers, our thoughts about these hard investing questions, but it is up to you to answer those questions for yourself.

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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