The Smattering Podcast 79: November Mailbag

The Smattering Podcast 79: November Mailbag and Making Big Decisions

Note: Transcripts are edited. We may earn commissions from some links. Thanks for the scratch. 

Jason Hall: Hey everybody. Welcome back to the smattering where we ask the hard questions about investing. I'm Jason Hall. With the Voice of the People, my good friend, Jeff Santoro here with me.

Jeff, hey pal. 

Jeff Santoro: Hey, how are you buddy? 

Jason Hall: I'm good, I'm good. This is the first time I haven't referred to you as something other than Jeff.

Jeff Santoro: You know, we have to keep it fresh, we have to change things up. But I'm happy to be back to my regular name and the Voice of the People. 

Jason Hall: There you go. So, as much as we like to change things up and do different things on and have lots of guests on and aim for innovative and interesting topics, today's main topic is one of our old standbys, and that is mailbag.

It has been a while since we did a mailbag, so we got some good questions. 

Jeff Santoro: We did. We got good questions. It has been a while. And before we dive into the mailbag, I want to put out another thank you/request for reviews and ratings on the podcast apps. We have not had any new reviews since the last time I gave this plug, so I won't read any out, but it would be great if our loyal [00:01:00] listeners could do us a solid and give us a review, give us a rating.

And one thing we haven't asked for for a while here, Jason, is suggestions, feedback. I'm interested too, if there's any guests people would like to have us have on. Our guest episodes seem to do pretty well in terms of number of downloads. So any feedback, we're happy to hear it. Hit us up on the platform formerly known as Twitter or email.

And thanks in advance. 

Jason Hall: The platform is still currently known as Twitter on this 

Jeff Santoro: podcast. 

That's right. We will never, never not call it Twitter. 

Jason Hall: Let's get right back to it. But again, thanks to everyone. Thank you. Thank you. 

Jeff Santoro: I made the mistake of pointing out to Jason how to play sound effects live on the podcast. So it's terrible. 

All right, let's, let's move on to the mailbag before we lose both of our listeners. 

Jason Hall: Let's do it. Let's do it. The first question from Colin. Got a bunch of questions on Twitter. Most of our questions were on Twitter here. 

Colin says, "few stocks I have I've been waiting on to go on sale at a deep [00:02:00] discount for a long time, but haven't gotten the opportunity they have now, but I'm a lot watch watch this for years." Brings up WSO.

Jeff Santoro: That's Watsco. 

Jason Hall: Watsco, right? Watsco. COST, which is Costco, and LIN, which is Linde . 

I like this, he's not asking us our opinion on these. He has some, some strong conviction already. He's asking us what are ours. 

And also I like this part. "Is it a loser's game waiting?"

Let's each answer the first part first and then we'll share our thoughts on the, is waiting a loser's game.

Jeff Santoro: So I actually, one of the ones that's been on my watch list for a long time is Costco. I, every single time I go there. I can't believe I don't own it. I'm mad at myself for not having it on my watch list at some point in the past when it might have dipped into a valuation that I felt comfortable with.

And I have another one on my watch list that I am dying to buy and it is Winmark, which is not one we've talked about a lot. They are a reselling, reseller company. So they own a bunch of... 

Jason Hall: People are probably familiar, more familiar with like [00:03:00] Play It Against Sports. 

Jeff Santoro: Play It Against Sports. And there's a couple other, Plato's Closet, I think is the name of one.

But basically they're a franchise model that sell, that runs resale locations in different types of resale, and I just I like the business. I like the management. I've heard a couple of interviews with the CEO. They have their they do things, like one line press releases with their quarterly reports, which I like.

So those are two on on my watch list that I have the same question. Is it a loser's game waiting? I want to buy both of these. I just. I just can't do it yet. 

What about you? What's on, what's on your list? 

Jason Hall: So, Kinsale Capital is absolutely at the top of this list. 

Jeff Santoro: But you already own it. You're talking about adding to it.

Jason Hall: I do. I already have, but I never bought a full position because I got a starter position and then it just went on a wild run, and for good reason. It's expensive for good reason because it's a very, very, very high quality business. 

But if you look at it, even factoring in its wonderful growth record, if you factor it, if you compare it to any [00:04:00] reasonable valuation for an insurer, it is insanely expensive.

And I will be very happy with the small cost basis position that I have if it keeps running like it has for the next five years, and will continue to regret having not bought more. But I just, I can't, I can't justify paying this kind of a premium for what's just a really good insurance company. 

Jeff Santoro: Yeah, so to answer the second question. Is it a loser's game waiting?

I, here's my answer. I think it depends on how grossly overvalued a company might be versus it's just expensive right now. And I think it gets to your level of comfort with dollar cost averaging into a position or buying in thirds or whatever way you go about getting to whatever you consider to be a full position. 

And by the way, this is a perfect little opportunity to tease what we're going to talk about in the second half of the show. So stick around for that.

It's like, so what I've thought about for Costco as an example is maybe I should just buy a little now. [00:05:00] So I have it. It'll keep it on my radar a little bit more. I'll track it a little bit more. I'll have a better sense of what is expensive and, or when it is expensive and when it is not. And then maybe- 

Jason Hall: -it feels nuts to buy a little bit of a stock, hoping you're more likely to notice the price fall, right? How counterintuitive. 

Jeff Santoro: I know, I know. I don't know, but it's like I haven't looked at Costco's valuation in a while, so I don't know if it would be considered to be insanely overvalued right now, or just moderately overvalued, or I don't know. So I don't want to speak too much to that, but I also just feel like it's hard to know. Like we could, we could hit a bad recession in three months and then all of a sudden a lot of these stocks are going to become much, much more tolerable in terms of valuation. Or not.

So I, I don't have a great answer for this one. 

I think maybe, better off to not overpay and put your money towards some other opportunities that maybe more in the value range. 

What do you think? 

Jason Hall: I have a great answer for this one. 

Jeff Santoro: Okay, let me hear it. 

Jason Hall: But it is wholly unsatisfying. And that is, it depends.

And it depends a lot on the companies you're looking at. For example, if you're always going to be waiting for, [00:06:00] say, CrowdStrike to get cheap. A lot of investors have followed those kind of companies, and you very rarely get chances to get those sorts of companies cheap. 

I mean, you could say the same thing for Starbucks for a lot of its existence, until it ran into problems. And then the price fell a lot. The late two thousands, then the price fell a lot and then they got their act back together. 

And the problem is that when it got finally get cheap, it was questionable whether it was still the great business that was so expensive for so long. . So I think that's the risk.

Netflix, same thing, ridiculously expensive. And then, well, their growth stopped because they started to blow up the business and a lot of people weren't convinced that their decision to move away from DVD streaming or away from DVD delivery into streaming. 

When they did this, this is 15 years ago, Jeff. It looks obvious now, but at the time, that felt like a really risky move to move away from a cash cow business into the future. Everybody thought it was too early and the stock collapsed. So it wasn't so obvious how good of a business [00:07:00] is. 

Jeff Santoro: But what you're, what you just said made me think of something. And maybe this is a reason for buying a little bit of something you think is overpriced to track it. And I think it depends how good you are about keeping an eye on things that are in your portfolio versus just on your watch list.

And it's this: At least for me, when I own something over quarters and quarters of like looking at results and reading 10 K's and 10 Q's, I start to develop a very good understanding of what makes the business tick. And I think the times when you're not buying something, cause it's too expensive, are a good time to do the work on figuring out what makes the business successful. So that when it inevitably -or maybe not inevitably -so then if it does hit a rough patch due to some sort of business thing, whether that is a overreaction or, oh, wow, my thesis is actually broken here.

 I think the few times I have been smart/lucky enough to buy something when it was undervalued has been because I knew the business enough that [00:08:00] when there was a whatever, a 20, 30 percent drop after earnings, and I could make the best judgment in my mind that that was an overreaction by the market. And then maybe I pick up some shares and I take advantage of that.

But you can't do that with any level of confidence, if you're, if it's literally just a name on your watch list and you're waiting for a price. So you might as well take the time to really understand what would make it a good price to buy. 

Jason Hall: There's a little more I want to talk about. I think really, really matters, again, using Netflix back in 2010, 2011, 2012, when it was going into its second phase, right?

It's second growth phase moving from DVD delivery into streaming. The stock fell. It's so funny this, obviously this is a podcast. So for most of you, you don't, you don't really get the benefit of the view, but I'm going to do a screen share here just because we do run this on YouTube as well, because it is so, so powerful, like it's so powerful.

Like again, because this was a hyper growth business. Like if you look at the drop of Netflix's stock, this was [00:09:00] back in late 2010, like it peaked in the summer and then it fell like 80%. It was a year and a half, Jeff. Before the stocks started to recover a year and a half, but because this is a hyper growth business, like if you look at that, just not looking at percentage off the highs, like it looks like a little molehill, like you can't even tell it was a drop.

The stock has been such a huge winner. 

Jeff Santoro: Yeah. When you zoom out, you really can't even see that huge drop. 

Jason Hall: For growth businesses the time to overpay, or to be willing to pay a little bit more, is when they're small. And it's early, right? And their addressable market is much, much larger than their market cap is today.

Jeff Santoro: And when you have a lot of time. 

Jason Hall: And you have a lot of time, right? That's the time to do it, but the businesses, Jeff, I want to circle back to this as the last thing I want to say, because I think it's really important to answering Colin's question, and for people to think about building a framework, again, part of that toolbox.

When you're talking about a Wattsco or a Costco or a Linde, these are very established companies. These are not hyper growth, small disruptor, trying to take big [00:10:00] market share from a large business and starting from a small place today.

You wait on these companies. You absolutely wait on these companies. 

Jeff and I did a video this week talking about Apple after earnings, how earnings weren't that great. The business is really mature and growth is slow. Revenue growth is slowed and it's hard to really project the business continuing to grow. And it trades for 30 times earnings. So I think that's a perfect example of a wait for it. One of the best companies in the world, but it trades for 30 times earnings.

Jeff Santoro: And Apple wasn't, that, it was, there were times in the not too distant past that it traded for much better valuations. 

Jason Hall: You could get it for half that valuation within the past year. So, yeah. So that's that. 

Jeff Santoro: Alright, good question from Colin. Good conversation resulting from it. Let's move on to the next one.

This is also from Twitter, from a user named M1BobbyFlaaay, which is a pretty good Twitter name. It's a short and sweet one. 

"Will the Ozempic craze kill food stocks?" 

So just as a real quick [00:11:00] some context here, Ozempic is one of the drugs that's been on the market for a long time to treat other things.

Jason Hall: Diabetes.

Jeff Santoro: But it has, diabetes, but it has been found to be very effective at reducing or causing weight loss. So it is one of several drugs that are out there now that are being prescribed for weight loss. 

There are no shortage of articles and predictions about how this will end everything from Coca Cola to Pepsi to fast food and how it will benefit airlines because people will weigh less and they'll spend less gas. And there's all sorts of stuff out there. 

And it's interesting to think about. I guess we should talk about if it will kill food stocks. What do you think, Jason? 

Jason Hall: So I want to answer this question in a different way. 

Number one, I don't think Jeff and I either one follow a ton of food companies. And when the listener says food stocks, I mean, I think you're thinking probably like PepsiCo, that owns the Frito lay snack brands, like that kind of stuff that's going to be [00:12:00] potentially hit in an outsized way. Companies like Walmart that sell a ton of that kind of stuff. The grocers that count on high margins from like the snack aisle as an example.

So I think the way that I think about it is, every few years we hear about some thing, something, the next whatever, that's going to affect consumer tastes in some way that's going to affect some business in some way. Like we hear about it every year, at some company or some industry or subsector that's expected to get affected.

I think to Jeff's point, like you were talking about, like airlines saving money on fuel because the average weight of, I'm going to use Americans, because Americans, we are one of the fattest countries, we're one of the most overweight countries.

Jeff Santoro: We're fat. We're a fat people. 

Jason Hall: We are. We are. And Jeff and I are looking in mirrors right now. Small mirrors. 

Jeff Santoro: Speak for yourself. I am, I am the paragon of health. 

Jason Hall: Yeah. Okay. Anyway, I'm just going to move on from that obvious opportunity to say something mean. Because I [00:13:00] love you, Jeff, and I'm not going to say anything mean to you.

I think it's more likely to be law of unintended consequences sorts of things. So number one, I don't think, first of all, I don't think this is going to prove to be a craze. This is getting a ton of coverage right now, lots of coverage, because honestly, a lot of diabetics have been affected negatively because of it, because of supply chain challenges.

But I know people that have been on these medicines and it has changed their life in really positive ways. 

I also have family and a very large long term group of friends that work in the healthcare industry and work in the pharmaceutical industry. And I think it's really interesting because we're talking about drugs that have been approved by the FDA for other things, but because they're used to treat chronic illnesses there is a significant amount of data about the health of, about the safety of these drugs, right?

Because you see on the CNNs and the whatever's of the world, like, they've had some click baity headlines about side [00:14:00] effects from people. And the response from the healthcare industry is like, " yeah, we know about those. Because diabetics have dealt with those things and we have to be mindful of those things because it happens," right? 

So I think the law of unintended consequences is probably going to be more along the lines of having far more positive outcomes and positive impacts on society. I really truly believe that about these series of drugs broadly.

And I don't know if it's going to hit PepsiCo's business really hard, if it's going to hurt PepsiCo more than it's going to help, say, I don't know, other, what's a, what's a company that might help? 

Jeff, help me out here. 

Jeff Santoro: It's a good question. Well, I mean, I already used the airline example, right? That was one that I've, I've heard bandied about. I've, I've heard both sides of companies like- 

Jason Hall: How about Gap? They'll sell more clothes. 

Jeff Santoro: Well, yeah. So clothing companies, I think, and I've heard both sides of the argument with work fitness companies like Peloton or Planet Fitness, any publicly traded company that [00:15:00] deals with health, like, exercise, because... 

But I've heard both sides of it. I've heard everyone will be skinny, so they won't work out anymore. And then I've heard people will lose weight, feel better about themselves, and be less intimidated to go to the gym and work out because now they weigh X instead of X plus 200, whatever the numbers are. So, so I asked you- 

Jason Hall: They're not meant to be chronic treatments. These aren't like, a diabetic, that you have diabetes, you're diabetic for, generally now. With type two, it's not always the case. Some people lose weight, get healthy and actually can be no longer diabetic. But for a lot of diabetics, like you're on this for the rest of your life or you're on some sort of treatment.

With these drugs, they're not using them that way. They're using them until the weight is gone. And then the person comes off of the drug, right? So people are still gonna have to adapt to have healthy lifestyles to maintain the weight.

But I think here's the big thing where I think about it Jeff. Is I want to kind of, again I want to step back and use this more of like a thought exercise .

Because we always, every year, every quarter, all the time, there's always some little thing like this that investors [00:16:00] start trying to figure out some sort of an edge with it.

As an investor, it's too late. 

Jeff Santoro: Yeah, that's kind of what I was going to say. Yeah. It, well, I think it's too late, but it's also too early. 

So here's the way I think about it. By the time, I don't think this is going to be the kind of thing that happens so quick that before you can figure it out, Pepsi, just to use them as the continuing example here is no longer on.

Jason Hall: Yeah, I love me some Diet Pepsi. I just want to say that. 

Jeff Santoro: I don't think it's going to happen so quick that all of a sudden you're going to be like, oh, I wasn't paying attention and now Pepsi is down 50 percent and it's never going to come back. Like, so I think there's , the impact of this, if there is one, will happen gradually enough that two things will happen.

Investors will see slowly, oh, maybe this is really having an impact, and they'll slowly get out of the stock, and I don't think anyone's going to lose their lunch on it. But on the other hand, these companies aren't stupid. 

To your point, I don't think this is like a weight loss fad we've seen in the past with pills you buy from a late night TV ad and they don't really work. And this is a legit[00:17:00] medicine that works and it has a lot of data behind it. 

So I don't think it's a fad. I think it's going to have an impact. But I also think any company that actually does worry that this could impact their business is already trying to figure out a way around it. 

So I don't know what that will be, so that's why I say it's too early. Because who knows, you're right. Maybe Pepsico really does get beat up on this because they don't figure it out. Or maybe they figure something, a way to live in that world, and they do well, you know. 

I don't so it's like it's too early in the sense that we don't know where it's going to go. But then it also might be too late in the sense that some of this is, over time, this is going to get baked into some of these stocks as soon as the market starts to see any potential impact of these drugs actually negatively impacting business results. 

So I think it's worth keeping an eye on. I think it's an interesting thing to know and think about.

There was a really, really, just fun thought exercise episode of the Odd Lots Podcast from a couple months ago where they had someone come on and sort of give all the doomsday scenario, not even doomsday, just all the different ways it potentially could [00:18:00] impact different companies. That's just an interesting thing to listen to, but I'm a little bit skeptical that this is something we need to do anything about right now.

Jason Hall: Yeah, how long have we known smoking was bad for us? 

Jeff Santoro: Yeah, right. Well, that's the thing. Like I don't I don't think this makes people want to eat less junk food I think it just means like you might not eat an entire bag of Doritos at once. I don't think it's gonna mean you stop buying Doritos. So yeah. 

Jason Hall: Well, I mentioned the smoking thing because Altria stock is up 3,000 percent, that's 31 fold return, in the past 20 years. That's since 2003. We knew smoking was bad for you in 2002. 2001. 

Jeff Santoro: Yeah. And I know some people who've who are on, or have, who have been on, these drugs. I have a friend who used one of these years ago, not for weight loss, it was for another reason, and talked about the impact it did have on their weight and their cravings and stuff. 

But it was more like, like again, like I might go to a restaurant and eat half my meal and I take the rest home and have it for lunch the next [00:19:00] day, whereas I would have eaten the whole meal. Like it's that kind of a thing, versus like, I no longer want to go out to eat. 

Now that will have an impact, right? If you're eating a half a bag of Doritos and not a full bag of Doritos, well now. Pepsi. They make Doritos, right? They're selling less Doritos.

So, but I, again, it's, it's so early to tell like how much of an impact that will really have. I, I wouldn't be doing, I'm not making any decisions personally. Based on these drugs being out there. 

Jason Hall: Let's let's take ProShopGuy's question next. 

Jeff Santoro: Yep. Go for it 

Jason Hall: So good friend, Mike McMahon on Twitter ProShopGuyMF1. I love this. "Do you bucket your savings/investment based on goals? Big purchase like a car, paying for kids education, retirement, etc.?" 

I'm not paying for my kids retirement. He doesn't mean my kids retirement.

"Do you have a separate bucket for speculating?"

Jeff, how do you think about this? 

Jeff Santoro: So I do bucket by savings. So this is completely outside of my investing life. I do have buckets for savings goals like vacations, and saving to buy Christmas gifts, and things like that. A new car. I actually am saving [00:20:00] up for a new car. And then I have a-

 I'm sick 

Jason Hall: of you texting me that you're going to be late for a podcast recording because you're having your car repaired. 

Jeff Santoro: I'm so mad at my car right now. 

And I do have my kids retirement stuff. I, we've talked about this in the last couple episodes. If you missed those, go back and check them out. We did two episodes about investing with your kids and investing for your kids with Robert Brokamp.

So I have my 529 account that most of my kids college savings is in. And then I have some of it in cash because I'm not that far away from having to pay for college I don't ever think about these types of goals for my investing money. I don't know if you...

I'm curious where your thoughts are. I know some people do. Like they invest and they think to themselves, in five years I'll sell some of this and I'll put a down payment on a house, or I'll pay for a nice trip for my anniversary. I don't, I'm, I'm too new at individual stock investing. I've only had a brokerage account for three, for almost four years. So I just, I'm not I'm not anywhere near being able like- 

Jason Hall: Thimbles instead of buckets.

Jeff Santoro: Yes. Yes. Like the idea that I could like sell some stock and pay for like a car is just[00:21:00] beyond where I am right now. 

So I don't ever think of those accounts for that type of a thing. And I do not have a separate bucket for speculating. If I speculate, it's with very tiny amounts of money that I can just, I just have.

So what about you? How do you, how do you think about all those things? 

Jason Hall: So one thing that I definitely do, is when it comes to cash, specifically with cash, and that starts affecting goals. Because you have goals that are, kids education is a good example, right? 

You start saving for the kid. You've got at least a decade or more, right? Ideally that you're saving for their college. But guess what? When they're 12, 13 years old, all of a sudden college is only a few years away. 

Those goals start to become short term. So one thing that I am pretty rigorous about is short term cash. Short term cash for short term goals, lives in a separate place from investing assets. I don't keep short term cash in brokerage [00:22:00] accounts. 

Jeff Santoro: Same with me. 

Jason Hall: So keeping that in separate accounts I think is important. 

Jeff Santoro: I even go so far, I keep my cash I need on the sidelines for big things like college, not only in a separate savings account, it's a separate savings account that's different from where I bank. Just because that extra layer of having to transfer it.

Just, it's like, a little bit more friction, and so I don't get any ideas about, that money is sitting there for college. 

Jason Hall: No, I fully support that. And we've talked about that before too, as much as like the Robinhood movement. And I do think, we talked with Brian Feroldi when he was on about this. 

It's like, it's going to be a net positive, right? If you think about the changes that have been made, things like fractional investing, people being able to invest just a few dollars to buy stocks, not worrying about trading fees or having to buy whole shares. Like Robinhood, kind of, they weren't the first, but they were the first in a huge way, right?

You think about so many young people came to investing, and the timing with the pandemic certainly helped there. 

But it's so... the negative [00:23:00] side of all of that is there's no friction anymore. It's an app. It's so easy to do things. And you feel like, well, there's no trading fees, I don't pay $5 to buy. I don't pay $5 to sell. I remember when it used to be 20 bucks to buy or sell. So that's $40 to trade. It's like, that gets really expensive.

All of those things being gone, I think you have to build friction into it. 

So thinking about the buckets that Mike's talking about, I think can be really useful. Because you're introducing friction to keep your, to check yourself. And I think that's one of the most important things that people can do. 

And I think broadly, like if you think about the goals, and short term goals versus longterm goals. And then you think about the tools. Stocks are longterm wealth creation assets. Cash is how you preserve and protect it. Bonds kind of bridge the gap between the two a little bit.

It starts helping you start to do bucketing automatically, just based on making sure that you have the, you own the right asset based on those goals. 

Jeff Santoro: Yeah. The last thing I'll say on this, and then we can move on to the next question. I've always liked [00:24:00] the idea of allowing yourself an opportunity to speculate if you're the kind of person that is prone to do something when you shouldn't.

I think that can be a better way to scratch that itch, so to speak, than to actually go trade your actual investments. That being said, everyone's got to figure out for themselves, you know, you got to make sure that doesn't get out of hand just like any other sort of speculating, whether it's sports gambling or going to a casino or buying speculative stocks and trading them. Like you have to have that self discipline.

But I know for me, sometimes I do feel on a certain day, like I felt it today, the market was up and I was like, I want to sell some stuff because I was, there's some things I wanted... Weeds I've been thinking about pulling, and you get an extra six or seven percent on a random day and you're like, maybe now's the time.

But I just sold some stuff last week and I needed to not do that. And I didn't, I had the self control to not do it. But I did think to myself, this would be, if I didn't have that self control, maybe it would [00:25:00] be good to have a couple hundred bucks over here where I buy and sell things and scratch that itch.

Jason Hall: So we got one more question and it's going to, kind of a short A segment for us today. And then there are, our second part of our show is going to be actually close to a half of the show.

So last question was from Matt Hard. Matt, thank you for this. This is one a lot of people probably don't think about. "How long do you typically wait between having a company come onto your radar and making a purchase decision?" 

Jeff Santoro: I, because I am a small, a buyer of stocks in small amounts, I don't wait long.

If I get really excited about a company and I've done enough research to know that it's one I want to own at least a little bit of, I'll just buy it and then learn over quarters. That's a process that I know works for me. I know if I don't own it I will just forget about it. I won't spend the time looking at it.

Jason Hall: What is enough research? 

Jeff Santoro: So for me, I want to know, here's what I do. You can tell me if you think it's ridiculous. I like to look at, thank you. 

I've talked before about my nerdy spreadsheets. I like to make one for [00:26:00] this company I'm interested in, so I can see trends maybe back four or five years. How has revenue looked? What are the margins like? Is the company profitable? Does it generate cash? 

I can see that very easily on a spreadsheet. And I make little graphs, you know, it automatically makes little graphs for me. That's step one for me, because then I can see like, where it's been, and maybe where it's headed a little bit.

Jason Hall: This, of course, you know what the company is, what they do.

Jeff Santoro: Yeah, this is just me learning the company. And then I read the 10 K, not the 10 Q. I find a 10 K because the 10 K usually has a more in depth section about what the business is. If I have any further questions, I will seek other sources to try to make sure I really understand what the business does.

 And then I think the last thing I probably would do before I would buy it, is at least run through my head some just general questions like, do I think this is a industry that has growth ahead of it? Do I think this company has any sort of competitive advantage that would give them in,[00:27:00] , a head start over someone else? Can it be easily disrupted? 

I see, I think if I have any anecdotal experiences with the company, like we mentioned Costco earlier. Every time I go to Costco, I have an anecdotal experience that makes me want to buy Costco. But I don't go much deeper than that because I don't buy a full position a day after finding out about a new company. 

Like my process is to buy a little bit. And then I might not buy another little bit for a year. I might spend the next year just waiting for quarterly results and reading about it and talking to other people and that kind of a thing. Now, this is another teaser for the second half of the show. Were I to be the kind of person that did want to make bigger bets on the front end, or buy in larger chunks, right?

Jason Hall: I mean, the context here, I think is important, Jeff. The vast majority of your invested wealth is in retirement accounts and index funds. 

Jeff Santoro: Correct. So I can be a little bit more swing-for-the-fency if I want to be. 

But if I were the kind of person who, you know, as soon as I buy, I'm going to buy a full [00:28:00] position and that's going to be my purchase, I would absolutely spend, I might spend a year just watching the company. 

Jason Hall: Okay, Warren Buffett. 

Jeff Santoro: Well, I mean, look, if. 

Jason Hall: No, I understand. I get it. 

Jeff Santoro: If I'm- I'm, I literally am buying like percentages of my portfolio each time that are less than a half a percent. So like I am buying in tiny, tiny, tiny bits. So I can afford to just start a position, learn.

If I were buying 1%, 2%, something crazy like that, no, I would treat it like I was buying a new car. I would be doing tons of research. I would be, you know, really thinking, talking to other people. 

So I think it depends on how big of a purchaser you are at any given time. If you're a buy all at once person, if you're a dollar cost averager, if you're a buy in thirds. 

And I think you probably have a similar answer to me because I know you like to have a little starter positions in a bunch of different stocks. 

Jason Hall: Yeah. If it's a recently public company, I won't buy it for at least a year. I mean, there's rare, rare exceptions. 

Jeff Santoro: Yeah. I'm the same way with recent IPOs. Yep. [00:29:00] Yeah. 

Jason Hall: Phillips 66 was a rare exception. It was a spin out. Sometimes I'll buy pretty soon because you already know, right? You know the results, you know the management. 

But with IPOs, like just the track record of IPOs is so horrendous that it just doesn't make sense to buy unless you have some very specific knowledge about it that just, it's an obvious to you. Most of the time, the best thing to do with IPOs is wait.

But generally, yeah, I do tend to take starter positions with companies, particularly the more speculative companies out there.

And the better answer, the full answer to Matt's question is how long do I typically wait between having come on my radar and making a purchase decision, is that making that purchase decision, it may be a few days, honestly, right? 

I mean, because chances are a company coming under my radar, just because I've been doing this for so long, I probably have already heard of the company. Just whether it's come back on my radar is maybe the better way to think about it. I may open a position within a few days. 

But Building out a full position. Yeah. It may take a [00:30:00] year or longer. Again, because I'm going to be still contributing money for the next 20 years, I may be buying that stock for the next 20 years. 

Jeff Santoro: I think it depends too, a little bit on, well, I think it's a risk tolerance thing.

I know some very experienced, good investors who have decades more experience than me who do a ton of research and thinking before they even buy a starter position. I think that's a little bit of just the style of investor that you are.

I think part of it too , even more so for you than for me, because we do spend a lot of time thinking about this kind of stuff, either as our full time or or part time jobs. I think sometimes that can speed up the process.

If it is, I'll just give an example. If a company comes on my radar that's new to me, but has fairly straightforward economics. How the business works. It doesn't take as long to get up to speed on it than if I were a very casual investor and I was buying things based on that I've heard of them and I wasn't, you know, reading[00:31:00] financial filings and that kind of a thing.

So I think it also depends on how much time you have. How much experience you have looking into companies, how much time you want to spend on those types of things.

That's another thing to consider, too. 

Jason Hall: I have an extreme example of moving quickly with conviction. 

Jeff Santoro: I'm sure you do. 

Jason Hall: Yeah, this is the extreme. And-

Jeff Santoro: you are definitely the YOLO investor between the two of us, I will say. 

Jason Hall: But it's weird because I'm not like YOLO. I got a stock tip on WallStreetBets. 

Jeff Santoro: No, no, no. But you are definitely the... 

I'll get a text from you at like, whatever, 10 a. m. " I might buy a bunch of stocks today." And then I'll get a text like 11:03 and it's like, "I bought 14 stocks."

Like you- 

Jason Hall: Yeah, no, it's true. It's true. I'll go on benders like that. I will. But this is a, this most extreme version, and then we'll take a little break here, Jeff.

This was a stock, I guess you could call it a stock tip. I was chatting with a friend. This is somebody that's a professional, that I have deep respect for. Like deep respect and [00:32:00] trust, like explicitly trust. Their investing track record is very good. And I believe that they maybe do some of the deepest research of anybody out there.

This individual, we were talking about stocks. I can't remember the exact context, but- I actually do, but I'm not going to share it here- they, they gave me a stock, and we chatted about some. They mentioned this one. It wasn't even like, "hey, go buy this stock". 

They mentioned this stock and gave me some stuff about it. I asked a couple of questions. We chatted about a few other things. 

Three hours later I had made a substantial investment in this company. So yeah, so zero to three hours to a full position. That is the fastest for me. And I have high conviction and this is a business that I did not know well at all. At all.

Jeff Santoro: So I, we've talked about this a little bit and I think it might be a good future topic for a longer conversation, which is, we talked about borrowed conviction in the past. But I agree with you. There are a couple people I know who I just have a lot [00:33:00] of respect for, and I think their process is thorough, and they're value oriented, so I know they're not, you know, chasing the hot thing.

Jason Hall: These are bottom up investors.

Jeff Santoro: Yeah. Right. Yeah. So I think, I'm, sometimes I think borrowing conviction's okay, if it's the right conviction. Again, not necessarily, I don't know that I would go as far as you did and just make a substantial bet. 

But I did the same thing recently. There's a person who we both know who, I asked him, we were having a conversation and mentioned one stock and then mentioned another one. It's like, "hey, also keep an eye on this". 

And I didn't buy the second one. And of course it's up like substantially since we had that conversation, so. 

Jason Hall: Obviously. All right, Jeff, let's go get some coffee. 

Jeff Santoro: Oh, enough with the coffee puns. Guys, we're not going to get coffee. We're literally going to wait three seconds and then continue talking.

Jason Hall: Hey guys, you can, you can get coffee if you want. Press the, press the button.

Hey everybody. Welcome back to the second part of our show. This is fun. This is, this is going to be an interesting conversation. This is something Jeff's been talking about for a while with me. And the construct, the theme, [00:34:00] is called How To Make a Big Decision. 

Jeff Santoro: So I'm going to explain what I'm thinking about. But I don't want the conversation to be about my decision because I think that's not very interesting for people other than me.

I what I want to talk- 

Jason Hall: Narrator: The conversation was about his decision. 

Jeff Santoro: No, but I want to talk about... it got me thinking. It's a pretty big decision if I decide to do it. And I'm curious what your thoughts are on when, and how, to make a big decision about the way you invest, right? 

Because we talk a lot about frameworks. We don't talk about rules, but we do say we both agree that it's good to have some sort of system or some sort of process, right, and not just go willy nilly, buying without any thought. 

So here's the quick, I've said a bazillion times on this podcast, I am a weekly buyer of stocks. The dollar amount I have each month to buy, I divide it by four weeks and I buy every week. And because I'm still putting a lot of money into my 403 B, which is my retirement account, that's just index funds. It's [00:35:00] not a ton of money that I'm buying individual stocks with because the bulk of my investing money is going towards my retirement account, which is Index funds. 

What has been helpful is I've been slowly flipping a old 403b that I rolled over into an IRA. I've been selling that. I put it into a ETF that tracks the S&P 500, and I've been selling it off slowly and using the cash to buy individual stocks. So I've been able to buy larger amounts each month because I've been using that money, if that makes any sense. It's not like necessarily new capital, it's just I'm selling an ETF to buy stocks.

It's all within a retirement account, so I'm not paying taxes on the sales or anything, but that money is about to be converted. 

So I'm back to a point where if I buy weekly, it's going to take me I figured it out, it would take me seven months of buying the same stock every week to get to like a full position.

So, I have to either like be the guy who always has [00:36:00] just a tiny bit of everything, or be the guy who takes some bigger bets. 

So what I was thinking of doing is buying monthly. So taking the entire monthly amount, spending it all in one shot on one stock. Doing a lot more thinking, making less quick decisions, and taking bigger bets, right? Now I have to be a little bit more right about what I buy and when I buy it so that I don't kick myself for being wrong.

And then I even thought about maybe I need to be the guy who buys every other month, or three times a year, four times a year or two times a year and really, buy in thirds. So if I want a full position to be one percent, maybe I buy a third this month, I buy a third in January, I buy a third in March, right, I don't know. 

Like I'm thinking, but regardless, this would be a pretty big change for me. It would be a lot more, I don't want to say stress, but I would definitely feel the pressure of not making mistakes. 

We've talked about my outset medical position going down 80 percent over the [00:37:00] past couple months because they've had a rough go. You know that felt not as bad as it could have because the entire position is about 0.02 percent of my portfolio. Right. 

If that were 2 percent of my portfolio, different story. So again, that's the background. 

That's why I'm thinking about it, but it's got me, not freaked out, but I'm thinking, do I really want to do this? How do I know if this is the right decision? Am I just being impatient? If I wait a month, will I feel differently about this? 

And I don't know the last time you really substantially changed how you invest. Or if you've ever had a moment where you made a big decision, or if it was just sort of a slow evolution over time.

That's what I wanted to talk about, how to make a big decision.

Jason Hall: So I have a, I have a few questions that I'm going to ask you. And I think they can serve not just both for focusing on your decision, but also maybe some things that people can use as they're building their framework when they're thinking about the same thing.

Again, this isn't a roadmap, this isn't instructions. But [00:38:00] it's to help think through it. 

The first thing that I want to say is there's a big difference between making a change and reacting and overreacting. 

I think there's a lot of people, Jeff, over the past year that have re evaluated their investing process. And a lot of them are simply reacting to the fact that the number today is smaller than the number was six months or a year ago or whatever. I guess we're almost two years ago at this point, really.

But the point is that they're not, there's not enough, this is stock investing, right? It takes a long time for the market to really to tell you if you're right or wrong about each decision that you make.

So I want to, and I mean this too, I'm not being sarcastic. I want to give you credit for taking a really meaningful, thoughtful approach to this change that you're talking about making that's not about how- it's about how you've evolved as an investor. .

How you've spent three years, you've learned a tremendous amount in the past three and a half years. And you're taking that [00:39:00] knowledge and the experience, and you're combining that with who you are, right? To develop a more effective process, right? It's just an evolution.

I think that's fantastic. So kudos to you. 

Jeff Santoro: I don't know how to take a actual compliment from you. So I'm just going to move on from it. I think-

Jason Hall: You're also still a worse investor than me. 

Jeff Santoro: I think what, so I mentioned this once a long time ago. I don't think we've talked a lot about it. When I was In my early twenties and first set up my retirement account, the person who was advising me and I should put "advising" in air quotes because I think I got some pretty bad advice, put me in, he basically asked me like one question and it was like some variation of how risk averse are you? 

And I probably was like, what do you mean? And he said, like, how much do you hate losing money? And I probably said, well, I really hate losing money. That sounds terrible. And then he said, okay, here's what you should do.

And he put me in, okay. a insanely conservative fund for someone who was 23. Just, I mean, it probably would have been conservative for someone who was 63. And I didn't know any better, and I just [00:40:00] rolled with it. And that's a form of risk or lack of risk. 

Jason Hall: No, that was massive. It's a massive risk to do that because...

Jeff Santoro: I Know for a fact I've given I gave up tons and tons of returns just because of that decision made out of its- 

Jason Hall: Opportunity cost.

Jeff Santoro: Not knowing -exactly- so part of me that part of the reason that I'm driving towards this decision, and this is to your point about like not making a reaction based on numbers or the market, is again, 90 percent of my, of our, my wife and I's combined retirement account, so all of our invested wealth, with the exception of our kids 529 plans, I don't count that as part of our invested wealth. 90 percent of it is not in stocks. Well, one stock, the one stock is my wife's company stock, and then the rest is index funds, right? 

So sometimes I think to myself, I should just own 10 stocks, and, or some very concentrated portfolio, because even if the whole freaking thing [00:41:00] went to zero, I would suck. 10 percent of your portfolio is not something to mess around with, but it wouldn't destroy me right? I wouldn't, now I don't want to think that way. I'm not looking- 

Jason Hall: You're also not going to concentrate into 10 hyper growth cash burn-

Jeff Santoro: No. Yeah. Yeah. But, that, that's the thinking. I really do worry that I, you know, I will buy such small amounts for the rest of my investing life that I will get to retirement and my entire portfolio will look exactly like it does right now.

Jason Hall: Yeah, you will be rolling pennies across the finish line. There'll be a lot of pennies. 

Jeff Santoro: So, so that's kind of my thinking. If, so much of my, it's going to take a long time for like the stock portion of my portfolio to become such a meaningful part of the overall percentage, that I have to really worry about the stock exposure as much as maybe I don't have to worry about it all right now. So I don't know. That's sort of the genesis of the thinking, to your point about the why. 

Jason Hall: Yeah, well, and that's, I mean, that kind of, that answers the big question is number one, you have to ask yourself, why are you making the change? And so [00:42:00] you're making this change based on the observable facts and the realities about the amount of money that you're dealing with. So, okay. So, that's part of the why. 

The next question is, okay, so now what? What are you trying to accomplish? You've already answered that a little bit too, right? That your goal is to make more meaningful decisions. 

Jeff Santoro: Right. Well, so I'm, we've talked a lot about having a goal and not losing sight of it.

Again, my goal is to have enough money to retire and live comfortably. And because if... there's having a goal. Then there's a plan to get there. Exactly. And if I think about meeting that goal, I think we're on track. I think we're in a very good position. But if I'm going to buy individual stocks, I should hope to get more. Do better out of that portion of the portfolio, right?

That's sort of the whole reason for doing it. If not, I should just be in an index fund. 

And now here's where I'm going to be very honest. And I think this is part of if anyone's thinking of doing a big decision, I think this is what you have to be honest with yourself about. So, [00:43:00] part of the reason I think about this is I look at the things in my portfolio that have done really well.

NVIDIA, for example, up over close to 120, 130 percent my total position. It is a insignificant amount of money. It is a fun weekend with my friends amount of money. Like it's not going to change my life.

So of course I think to myself, well, damn, if that had been a 1 percent position that I bought back when I did that, now that's a really nice chunk of change.

But then-

Jason Hall: It would have basically covered your losses in Outset Medical, if that had been what happened. 

Jeff Santoro: Yes, but then I have to think about Outset Medical. If that had been the exact same situation in the other direction, I'd probably be really mad at myself. So, I have to go into it understanding that I'm taking a bigger swing if I do this, but I could strike out. Or at least on some of the pitches. 

So that's another thing that I'm just, I have to be honest with myself about. And honestly, that's the reason I'm not like, yes, I'm doing this. And I may not do it fully right away. [00:44:00] I might just tweak and take a step towards what I talked about rather than, all right, on December 1st, I'm changing my strategy.

Jason Hall: Well, you've already made some changes, right? Because you shifted away from buying multiple stocks a week to now just buying one. So you've started to find some of your conviction already, right? 

And to me, I think this is kind of an extension of that. But there's more to it too, thinking about it. I think those questions you have to ask yourself, and I think this is maybe one of the important ones is, like we were talking about with the question in the first half of the show about Ozempic and like the law of unintended consequences , is you have to start thinking about what are the things is it going to affect about the way that you invest? 

Because now you're dealing with more meaningful sums at one time and the potential implications and where you've bought stocks in the past that were on the riskier end, right?

Their business wasn't sustainable without them executing well and getting to that, like actually generating positive cashflow part of their business. Maybe those kinds of stocks [00:45:00] aren't the stocks that new Jeff can buy anymore because of the downside risk. 

Jeff Santoro: I do think about that. I also think about the valuation thing I think is going to become a much bigger, a much bigger piece of this.

So for example, if I knew I was going to buy, I'll just use NVIDIA as an example. If I knew I was going to buy NVIDIA another 40 times, then me paying too much for NVIDIA today is much less consequential than if I know I'm going to buy NVIDIA two more times. 

So I think, yes, it'll change the way I think about what to buy, but I think more often than not, it's going to change the decision on when I buy, and at what price. I think that's the bigger thing.

And that that's the piece of investing I still don't feel like I'm good enough at, is really understanding valuation. And I know it's not as simple as like you just learn it. Like it's more art than science in a lot of cases. But that's probably my weakest [00:46:00] skill set in terms of investing. So I do worry that I'm going to make bad- I'm gonna overpay for things at times because I'll be excited or I won't really want to do the work or I won't trust what I'm thinking about the valuation. So that's probably the bigger thing I think about. 

Jason Hall: So two more questions I think are useful.

One is, do you think this will add to or take away for from your enjoyments of the process?

Jeff Santoro: That's a good question. I think I'm ready to not buy every week from a, I'm excited and I like to do it standpoint. 

I've said that before, like one of the reasons I do it is because I like buying stocks and it's fun to do it every week. But I think I'm a little bit past that. I think some of the honeymoon is worn off a little bit about that.

Jason Hall: And there's something to be said for like exercising that delayed gratification muscle too. And part of the way you can exercise that delayed gratification muscle is like, acting less, even as a buyer, right? So you don't get that little dopamine hit when you click the buy button. 

Jeff Santoro: Well, and I have to be honest, there are days, there are [00:47:00] weeks when, because typically I buy on Wednesday, which is more a factor of the trading restrictions that the Motley Fool puts on us in terms of when I can talk about things. It just makes it easier to be able to talk about them on the weekend if I buy something on a Wednesday.

So there have been Wednesdays where I've been busy at work and I just, I kind of rushed myself into a decision because I'm like, well, this is the one period, part of the day I have to spend time on this, and I'm in a meeting and- 

Jason Hall: arbitrary decision for a bad reason.

Jeff Santoro: Yeah, now it's- I have enough of a process in place that I can rely on where I don't think I've made any terrible decisions. But I also don't think I'd want to make decisions that rushed if I was, again, buying once a month or once every other month or something like that. So I would have to build in much more time, like maybe time on a weekend when I can just really kind of think, and then make a decision sort of on the weekend for what I'm going to buy later that week, you know. And then barring any crazy news between now and then that'll be what it is. 

So I don't know that it'll change the enjoyment factor. I think the extension of what you asked me though [00:48:00] is I, what I wonder is this will, will this make me a better investor? 

Jason Hall: Well, and that was gonna be the next question is how do you think it will make you better?

Jeff Santoro: Well, I think it's gonna force me. I think it's gonna force me to learn more about, and build more into my investing process. I, look, I think most investors, even some of the people who go out on social media now and pretend to be value investors, a lot of those people were not paying that close of attention to prices in 2020 and 2021 there's some revisionist history going on out there.

And I am certainly guilty of it. I'm lucky that I get to blame being new at it, but I did some dumb things. So I, but I think now I've learned, and I think the interest rate environment is the biggest reason that I just have to be a little more disciplined about that right now. 

 So I think that's what I'm hoping. I'm hoping that this drives me towards learning more about the valuation piece. Like I said, that's the part of investing I want to get better at. I just have to find the way of learning about it that works for me. I've tried a couple things. They don't work. We [00:49:00] don't need to go into them right now.

So yeah, I think that's the big thing for me, is I'm hoping it makes me a little bit better in terms of knowing when the, what price to pay and when. 

Jason Hall: Last, well, actually before I give this, I do want to go back to one thing you talked about kind of having more time to think.

I just wanted to say that I can tell you one of the best things is happening in my investing process. And Jeff likes to joke about it with me because I'll send him this pictures of me, like I'm making a table out of logs with a chainsaw. Like I actually do that kind of stuff, but, and I always caption it with "thinking time." because I do, I like build these things into my day where I'll go tend the garden or, you know, I'll cut wood. I'll do like something physical like that because it creates space and time for me to think and to process.

And to not actually be thinking, but it's happening kind of in the background. It's not like actually, you running a chainsaw, you kind of need to concentrate on running the chainsaw. But your mind is still working on these other problems, and it's made me so much better at an investor. And it's helped [00:50:00] me to be more patient as well. 

So my question for you, is how, if you do make this change, how long are you willing to give it a try before you before you're going to, before you make a decision about whether it makes sense or not? What does that process look like? 

Jeff Santoro: So because I'm likely to step into it incrementally, I think I'll probably be pretty willing and patient enough to let it play out for several years.

If I were going to decide, like I said, December 1st, I am now going to buy once every three months and it's going to be a full 1 percent position. If I was going to go that crazy, I don't know if I would have the guts to live through the next bear market. We're doing that. Um, So I, I think I'll be able to stick with it.

Like I, all of the little tweaks I've made up until now, like the one you mentioned earlier about going from taking that weekly amount and spreading it around four stocks to spreading it just to one stock. That was just an incremental change and I never [00:51:00] even thought about going back. So I think I have to find a way to step into it slowly rather than make it all at once.

It still feels like a really big decision because it'll be, as you like to say, closer to big boy amounts of money. And it's that weird psychology of, you know, I will wear the socks with holes in them instead of spending $8 on socks, but then I'll go by a magnitude of that every Wednesday in the stock market. 

But when the dollar amounts, because I'm I think of that as percentages of my portfolio, right? So even larger amounts of money can seem smaller, right? But once the dollar amounts start to equal things that I equate to like big purchases in life, I'll probably start to be a little bit more scared about it. So it still feels like a big decision, even if I step into it slowly.

Jason Hall: All right, Jeff, I think we did it, buddy. 

Jeff Santoro: We did it.

Jason Hall: We said words about things, and we answered questions about things. And hopefully Jeff, the second part of the show that we just completed helps [00:52:00] other people build a framework around making changes. not just your investing, not just your portfolio broadly, but I think you can adapt these sorts of questions and build frameworks around making these sorts of decisions broadly in life.

Jason Hall: All right, friends. As always, like to remind you that we love to give our answers to these hard investing questions, walk through our processes and help build our frameworks. But it is up to you to find your own answers to the hard investing questions in life. You can do it. I believe in you. 

All right, Jeff. We'll see you next time. 

Jeff Santoro: See you next time. 

​