This morning Bill Ackman went on to CNBC and he was asked about
the stock market and what he thought stocks were going to go
back up and he was asked about inflation, we had this
conversation 12 months from now. No, do you think is a Realistic
sense of what inflation could be in this country.
Where is inflation going to be in 12 months?
Well, in this episode, we'll get to Bill ackman's.
Answer to this question where he thinks inflation is going to be.
And when he thinks the stock market will finally start to go
back up again, but we also have some big news in this episode
Church & Dwight. One of the new Holdings in my
portfolio that I've been adding to is down a little bit today,
it's down 4% on the day after they announced a new
acquisition, they bought an acne treatment company, which is a
maker of the product Mighty patch.
I'm going to go through this and try to make sense of it.
And then we also have news that Big Bad.
Apple is added again, apples really?
Just a bully. They bullied Facebook with their
iOS privacy settings. They hurt a competitor and then
they're starting to grow the very same business.
This is rightly so upset a lot of people but I want to go into
these changes and see what Apple's actually doing with
their ad business and then finally, we have something else
I need to respond to which is this video of Mark Zuckerberg
doing this UFC style sparring. I'll be giving my full review.
In reaction to this clip. So we have a lot of news to get
to and a lot of topics to cover. Now, before we do a portfolio
update, and I show you what's going on.
And what companies, I'm buying I want to jump into the headline
news. Bill Ackman went on to CNBC this
morning, and I thought his comments were particularly
interesting because previously, Bill Ackman has been looked at
as the guy that's been making all of these very radical
predictions. And these very dramatic, and
dire predictions regarding inflation saying that it's going
to be like hyperinflation saying that is going to be out of
control. Saying that the FED is way
behind and they need to raise interest rates as much as
possible. He's had many tweet storms,
which is a nice name for saying that you're tweeting a lot, you
have a whole chain of tweets. He's been doing these tweets
storms explaining, how bad and how big of a problem inflation
is. But here we have is interview
and he's changed his tone. A little bit.
At least to me, I think he's actually change what he's been
saying. Let's go ahead and start off
with the beginning of this interview conversation and see
if you have any new ideas about where we are in this economy.
In the markets right now, we sucked.
We talked to you over the summer.
You would talked about how you felt the FED needed to raise
interest rates. They are doing that.
Yes. The market has been having a, in
terms of equity is a tough time as a result.
What do you think happens is fall?
What are you doing? So we on the same companies,
we've owned really beginning in the year absent, a new
investment. That was very short dated and
Netflix. The first thing that he says, is
that we On the same companies that we did early in the year.
So despite all of his predictions, he's remaining
fully invested. The only caveat there is Netflix
where he invested in it for three months and took a pretty
significant loss. In that time, an Acumen owns, a
concentrated portfolio of companies like Lowe's Chipotle
restaurant Brands International and Hilton.
And I think it's important to look at what investors are
actually doing instead of the things that they say on Twitter.
Because in many cases, I think a lot of things investors say
online and in Twitter is a little bit more dramatic and it
doesn't necessarily match their Emmett decisions.
Now, Bill Ackman goes on laying out what he thinks will happen
with the future of the economy. Coming up, we had this
conversation, 12 months from. Now, what do you think?
Is a, a Realistic sense of what inflation could be in this
country. I think it's come down a lot.
I think it's kind of what what's what's the number to you?
It's 4% 4% three and a half percent hopefully and then they
on his way down on its way down. Am I hearing this correctly?
He just said in one year, his prediction is that inflation
will be three and a half to four percent and on its way down.
So it'll be down less than half of what it is today and it will
continue on its way down, that is now his prediction and a
stone as Evenly changed a lot in a very short amount of time.
Now, he's saying stuff like this starts to come off and you're
seeing I think some some indications that inflation is
coming coming up. We had this now.
Inflation will be three and a half to four percent in a year.
And we're seeing indications right now than inflation is
starting to ease. That is the message we get today
from Bill Ackman. But let's go ahead and Rewind
just a bit. Here's a tweet from Bill.
Ackman dated May 24th, 2022, inflation is out of control
inflation. Expectations are getting out of
control. The markets are imploding
because investors are not confident.
That the Federal Reserve will stop inflation and If the Fed
doesn't do its job, the market will do the feds job and that is
what's happening now. And this goes on in this ongoing
tweet storm, explaining how bad things are now.
I like Bill Ackman. I think he's a great investor
and he's had good returns, but I think this illustrates why we
can't really buy into all the hysteria and everything that
people say when they're in panic mode, when they're tweeting
things out, when they're Hang the Doom and Gloom in just a
couple months time, the tone has changed a lot.
The demeanor has changed, no longer are things.
Imploding, were fully invested and in a year we think inflation
will be half of what it is today.
That's the message that we're getting today.
The message that we got just a couple months ago was entirely
different. Now in this interview, Bill
Ackman does give one other interesting prediction and
that's when he thinks the market will make it the turn from being
overall bearish to being overall bullish.
I think, once people realize the FED doesn't have To keep
increasing rates and will soon be taking rates down.
That's kind of a Buy Signal for Marcus.
And so the question is, how far in advance does the market
predict that kind of outcome? I think, if people see inflation
come off, eight and a half. So you start to see a pretty
powerful continuing Trend, then I think people will expect at
some point. The FED to ease.
His opinion is the market will start to go back up when it
becomes clear, that inflation is no longer a problem and the FED
can start easing on the interest rates.
On this point, I actually agree with Take, I think it's very
difficult to have a very bullish and positive sentiment Market
with inflation. Still being a problem and I
think it will probably take numerous month-over-month
incremental decreases in inflation before the market
really starts to go back up, but keep in mind, the market is a
pricing machine. That's what everyone's doing is,
they're baking and expectations of the future, and by the time
inflation, no longer becomes a problem and the market price is
that in, if you're not already in the market, you may miss that
window. So I'm with Bill Ackman that I'm
I'm staying firmly invested in the market throughout this
duration. I also own, very good, companies
in my portfolio and I can wait out this storm.
Now, speaking of good companies, there's one in my portfolio,
that just announced some breaking news.
They're acquiring a new company and it's in my consumer
category, the company's Church & Dwight.
This is a new holding to the passive income portfolio.
It's one that I've done research on in past videos that you can
reference, but they are a consumer discretionary and
consumer staple company. They have a mixture of different
products that go on to either one of those categories.
Now this holding in my portfolio is only valued at 8,500 I'm down
seven hundred dollars so far. But I don't really consider that
too big of a deal because I eventually plan on around
doubling the size of this position.
I want it to be at least 16 thousand to twenty thousand
dollars. So I have a long ways to go and
I'm going to continue buying this one.
Now Church & Dwight is what I consider to be a bit of a
sleeper company, meaning that it's had phenomenal performance.
It's a very powerful company, it has fast growth but somehow it
has no buzz. Has its never talked about
because it operates in a very boring industry but I consider
this company to be very similar and this might sound odd but I
consider it to be similar to Berkshire Hathaway meaning the
way that they operate and grow their business, what church and
white does is they own a diversified group of brands or
different companies underneath them.
Those different brands generate free cash flow and they use that
incremental increase in free cash flow to buy additional
Brands which increase their free cash flow.
And they've done this over and over for the past 20 years year
after Year their free cash flow goes up, the use that additional
free cash flow to expand their product, line by other companies
and introduce them. Under the Church & Dwight
company where they integrate. Their back-end operations, they
streamline their processes and distribution and make the new
acquisition a productive thing for the company.
And this is what they continue to do to this day overall.
They own around 80 different brands but they have 14 of them
that are really important. They call these power Brands.
These 14 Brands make up the majority of their revenue and
their free cash flow. Now Church & Dwight just
announced that they're doing the same thing.
Again, they're picking up a new company, a new brand that
they're going to acquire and integrate as part of their
overall company that brand that they're acquiring is the mighty
patch brand and it's owned by the company hero.
They say that the deal is done with 630 million dollars as a
combination of cash and Equity. Now, the reason that they say
they're doing this is because of the brand, they're buying, they
consider it to be a very good strategic acquisition.
They say that the mighty patch brand is a problem solution
product with a Position in a growing category.
The total acne treatment category in tract channels is
approximately 700 million dollars.
The patch has grown to 18% of the acne treatment category as
more consumers, transition away from lotions ointments to the
patch solution. So this Mighty patch brand, is
in a growing category in the acne market and they say the
brand skews towards younger consumers and consistently has
high levels of brand loyalty and repeat purchase.
So right here, I see a lot of things with this acquisition.
That I like the first thing that I like about this deal is a
category that is sent. It's not in a consumer
discretionary. It's in a consumer defensive,
which is beauty treatment, medical treatment or things like
acne treatment. This Fall's firmly in that
defensive category and within acne treatment, the patches are
growing faster than lotions and ointments.
So they're in the growing part of this defensive category and I
like that. It has consistently high levels
of brand, loyalty and repeat purchase.
So this is a consumer defensive product in a growing category
that has Purchases so far. I like the basics of the deal.
Now in terms of actual growth and distribution, this is where
Church & Dwight can actually help out this brand Heroes
trailing 12 months. Ibadah, as of June 30th was
approximately 45 million dollars with 40%.
Even a margins Church, & Dwight expects to expand Mighty
patches, limited distribution by leveraging.
Its us retail relationship and international footprint right
now, this Mighty patch brand is primarily being sold in places
like Ulta off the shelves in the US and with Church & Dwight,
sorry. Resources.
They can easily expand that relationship outside of the US
internationally, starting off with Canada and across Europe.
So they should be able to continually grow sales, putting
it into a different distribution channels.
Now, they go on to talk more about the product saying that
it's going to be their 15th power brand saying that they
have a unique patented solution that private label Brands cannot
replicate. So the product does have a moat
through brand power distribution and proprietary formulas.
Now, after announcing this deal, the stock is down three point,
seven, three percent. It's almost Down four percent
for the day and the takeaway could be that.
Maybe investors don't like this deal but I don't actually
believe that. That's the takeaway.
What Church & Dwight did was give us some good news and some
bad news in this press release. They also say that they're
cutting guidance quote, we now expect full year, reported
sales, growth of two to four percent and it was previously
for 25 percent. So they're cutting their actual
Revenue growth expectations for the year.
And this all has to do with their discretionary items.
Now, if they're Growing to 24 percent with this acquisition
combined, in that, that means that the discretionary brands
are really hurting their Top Line growth for Q3.
We now expect reported sales, decline of -1%.
Previously, the midpoint of three percent reflecting lower
demand for water pick by diffusion and Flawless earnings
per share affirmed at 65 cents. No change from previous Outlook.
So both the full-year guidance and this next quarter had their
revenue cut, although their EPS looks the same.
So I don't think this 4% move. Work today has anything to do
with this acquisition. Actually think this is a good
product and a good category, I like the acquisition and this is
the type of thing I expected from Church & Dwight to
continually buy more of these defensive companies.
And in the management call they said they're going to be
focusing on consumer defensives. Not consumer discretionary.
He's so overall I like the acquisition and I still like the
company even though it's having temporary difficulties with
their discretionary items in my opinion.
And this is just a guess. I think that Church & Dwight is
going through a transition period of difficulty with this
High inflation and I think that will weigh down on their growth
in the short term but if Bill Ackman is correct and inflation
is down, considerably in a year, I expect them to do what they've
done in the past and continue to grow.
Now, we also have news that apple is a giant bully picking
on other kids, like Facebook and Google.
And a lot of people are frankly upset about this.
They don't like that Apple's picking on poor Facebook and
poor Google by beating them at their own game and building out
their own a Business. Now before I jump into the
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So sign up now and let me know what you think.
Now, moving on, we have to talk about Apple for a minute.
It's the largest holding in my portfolio so I have a lot
invested in apple. And apple is a company that I
think is misunderstood still to some degree.
For example, a lot of investors consider Apple to have a smaller
mode than many of the other big tech companies.
They say that Facebook has a large competitive Advantage
because of the network effects associated with Social media
networks, they say that Google and the search industry is
basically a monopoly where Google has this massive moat.
They say the Amazon has a bigger moat, they say that Microsoft
has bigger mode, lots of investors you apple as having a
smaller mode. Now, when we talk about Apple,
we can look at a couple of the actions.
They've done to assess, who is at the top of the food chain
here and this news is just one more thing.
I think to clearly illustrate what companies, at the top of
the food chain and which ones aren't apple is gaining on
Facebook and Google and online ads.
After iOS change the report shows apple is pushing heavily
into the ad business. The first place to Apple showing
you ads is in the stocks app. They can simply display an ad
whenever you pull up the business news, you can have
banner ads there you can have advertisements for different
things, related to the stock you're looking at.
So that's one place to Apple can display ads, but they're doing
this in more than one place. Apples also going to be showing
ads in the Apple news app, they can have people Ads for
different magazines ads for different products in between
different news stories, so on and so forth, but probably the
biggest place the Apple can make money through ads is in their
App Store, similar to Amazon, controlling amazon.com, and the
mobile app, and being able to have sponsored ads, to put your
product in front of others. Apple can do the same thing.
They can charge people to advertise and show their app
before competitors. So this blade idle game shows up
when you just search game before.
Stumble guys, even though, stumble guys, is Much more
popular game with 40,000 reviews, you can pay to get
ahead of competitors in the App Store.
Now, why does this make apple a bully?
And why does this show that they have a bigger moat than Facebook
or Google? Well, in this case, it is ironic
because Apple recently just made some policy changes that
dramatically affected Facebook's business.
Apple created their app, tracking transparency, pop up
which makes users decide whether or not they want to be tracked
by apps like Facebook, not being tracked makes it so they can't
have as targeted of ads which makes their whole advertising
business, not as This is reportedly cost Facebook or meta
around 10 plus billion per year in operating income and a lot of
headache outside of that. So this has been a big blow to
Facebook and other smaller developers.
So, Apple simultaneously hurting met as advertising business
while growing their own and they surveyed. 100 different customer
app companies and found that Apple's ad business has
benefited from the company's major iOS privacy update in
2021. So they're pushing advertisers
off. Off of companies like meta
because it's more difficult to track and now they're attracting
advertising dollars on to their channels like the app store,
that's one of the changes it's happening here and I think it
shows what company is more an advantage position than the
other Apple controls more Facebook's Destiny than the
other way around. Now, with Apple and Google,
there's a lot of people that still consider Google to have a
bigger moat than Apple. And I think that's a fair
argument. But still a lot of the data
doesn't support that Apple and Google have a deal together.
Where Google pays Apple reported 8 to 12 billion dollars per year
to keep their search bar. Defaulted to keep Google search
as the default search engine. If Google's, moat was wider than
Apple and Google was a more powerful company, why is Google
forking over 12 billion dollars per year to Apple just to keep
their search bar defaulted? What would the reason be for
doing that unless they were unsure about their position?
The truth is that Google has calculated that.
It's worth it to pay Apple 12 billion dollars that be Faulted
to continue to keep their moat as wide as possible, but that's
at the mercy of apple and that could change at any time, they
change the rules with meta and they could change this agreement
with Google in the future. The one company that I think has
its ad business protected from Apple is Amazon apples, rise and
online ads for developers mirrors, Amazon's position, and
e-commerce, as retailer spend more money to promote their
product on the site, they rely on for customers Apple.
Can't really do too much about Amazon's ad.
Business because Amazon's ad business isn't reliant on
tracking. Now, a lot of meta investors
will say that, this isn't fair, what Apple's doing is bowling,
they're picking on Facebook in a very unfair way.
And to those investors I agree. I don't necessarily think this
is fair but investing is not about what's fair.
It's about finding companies that have a moat which in many
cases is an unfair Advantage. Now, moving on we have a video
that was posted about Mark Zuckerberg training like a UFC
trainer he's doing sparring I'm with this trainer here and they
released this little clip showing some of the things he's
doing. Now I watch this tonight was
impressed by Zuckerberg straining.
I think he's actually you actually looks pretty good in
this. Now there's a lot of people
making jokes saying Mark Zuckerberg must be planning on
getting a divorce because he's putting up videos of him
training in the gym, right? Or there's people saying, That
Mark Zuckerberg is wanting to save money on its five million
dollar, defense budget, but I think the answer is more simple.
I think this is just an outlet for some anger, just some
venting, and a way to cool things down.
I think what he does is he just imagines Tim Cook as the
opponent and that's really where the ferocity and intensity in
his training comes. Now, for me, personally, I'm no
Pro. But I was impressed by this.
I thought he looks pretty good here.
Now, that's all for this episode.
I hope you enjoyed and I'll see you in the next one.