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Ladies and gentlemen, welcome to the Business Brew.
You're here for a solo episode with Bill Brewster.
Anyway, going to be me today. I thought about starting it out.
Back in the day, I was listening to Miami radio and a guy used to
start things and I was like, what's up, y'all?
What's it going to be? Yeah, you on the mic?
What's your homie Billy Bee? Anyway, he didn't go that way.
That's how I'm going. But anyway, you're welcome for
that. I just want to check in with you
all and say that I am a little bit.
I'm not going to say I'm sorry because I'm not sorry.
That would be fake news. But I apologize for not having a
more regular cadence. The reason has been positive
things going on. I was fortunate to go to
Richmond to see the one and only Saurabh Madan and his group of
investors that get together. That was a very fun time.
Shout out to him for organizing meetings with Markell and
Kinsale. It was interesting to finally
meet the Kinsale people. I somewhat embarrassed to not
know more about the company earlier and going back to the
Fairfax episode that I did with a Sheaf and Charlie, I didn't
know really anything that I should have known going into
that. And and it's especially
embarrassing having owned Berkshire for so long.
But anyway, sometimes, you know, the benefit of having a podcast
is I get to listen back to myself and I'm like, man, you
sound dumb here. You should really brush up on
that. So anyway, I've been brushing up
and my impression from the Kinsale guys is that is a heck
of an organization. The stock multiple may or may
not reflect that. I will tell you that I listened
to a short pitch on it and after the short pitch I said self.
This is something I think I want to own because everything that
the short pitch addressed I kind of got excited about would say
the Georgia case I think has been dismissed.
If you know what I'm talking about.
You know, if you don't, you don't.
But anyway, that was dismissed and I can kind of get behind the
valuation being stretched and I can kind of get behind it on a
cyclical short basis. But I would not bet against that
management team in the long term if I were laying bets.
So for those that can time things, you're smarter than me.
I own a small amount so that I continue to follow the company.
I am inclined to make it bigger over time, but you should
definitely not listen to me for your financial advice.
You should do your own work. I will say that yesterday I'm
address some things on this episode.
Yesterday I was listening to the one and only the big homie John
Malone. I if you've listened to this
long enough or followed me from Value After hours, I know enough
about cable to have lost a decent amount of money in it and
should have listened to smarter people.
Well, people that were more right on the interwebs.
One of which, which really it dismays me to say out loud, but
is Masa Son Capital on the Twitter machine.
It's talk about talk about being sad about being on the wrong end
of a trade with somebody else. But anyway, that's neither here
nor there. Mr. Malone, I would say, was
talking his own book, but also said some things that I just
kind of couldn't get down with. I'm going to share my screen
here for a hot moment. Let's see, we're going to go to
charter on the fiscal AI, which if you don't use the product,
you should. Anyway, Mr. Malone started lying
with numbers a little bit yesterday and let's talk about
the CapEx intensity of cable and he said, you know when our CapEx
went down, we had a run up in the stock to 800 and then once
the CapEx started here we're here we go.
These are repurchases. You'll see a ton of repurchases
in December of 2021. Then he says when CapEx goes up
again, right, not, not an untrue statement.
CapEx did ramp since 2021 as you can see.
If you can't see, hang on, I'm going to give a plug for fiscal
AI. Here we go.
We click that bang. Now you can see, oh, it's a,
it's an inverse chart because we got CapEx.
But anyway you can see that the bar is going down.
He said. Then our stock went down.
This is somewhat true. I will tell you as somebody who
has followed this for a long time, other things coincided
with the stock price going down. One, if you look at a chart of
stocks that go that do well, stocks that go from earning
decent returns on capital to not great returns on capital
generally do not work out very well.
And if you look at the residential customer
relationships on the KPI section of physical dot AI, you will see
that it started to turn over and it turned over at a time when
Charter disparagingly referred to the competition of fixed
wireless as cell phone Internet. And there were interesting signs
of which I actually followed some.
I will give myself some credit. I've been out of Charter for a
while, but one of the little math projects that I was doing
Once Upon a time was when the rural development started.
I, I was doing the math on the connections of the rural
development. And then I said to myself, I
said self, the core plant is starting to lose customers and
no one was really talking about it.
And I started thinking to myself, is it good for returns
on equity and assets to be laying more passings and having
fewer customers? Turns out it's not so good for
those metrics and those aren't so good for the stocks.
So along the time that Charter is investing in the Cap X,
they're bleeding customers. This is an issue and that's the
issue. The issue is that they are
getting attacked from both fiber and fixed wireless, which I
think they may still call cell phone Internet.
And you know, it's just kind of tough to listen to a company and
a management team say this is a parking lot for customers that
we will reacquire and then see their customer relationships
decline while their passings increase and continue to take
them seriously. Another thing that happened that
was kind of interesting, I'm pretty sure it's new Street
research. I clearly don't have access, but
I did get a report and new Street back in the day like 2
years ago said the and I may be misquoting, but this is off
memory. They said the NPS from fixed
wireless is super high and we think that NPS is a leading
indicator of where customers go and therefore we think that
customers are going to go there. And I read that and still we
still weren't having conversations about is cable to
sell. So occasionally if you follow
things close enough, I guess you can make quasi correct
decisions. Probably never should have been
there in the 1st place. I was talking to my man
Francisco today. We both should have just that
Sprint merger is the one that haunts us because then we could
have, could have own T-Mobile. And I remember I was standing
outside on my patio Once Upon a time when I had one and we were
talking about that deal and I was pretty sure the merger would
get through in. Alas, I did not buy 1.
So a mistake or did not buy that so a mistake.
I'll rub my face in. But I just think, you know, the
narrative of capital intensity has gone up and therefore that's
why the stock has gone down. Or, or then then, and I do not
mean this to disparage John Malone.
He is the man. I am just me, but the, the
suggestion of a dividend to support the stock price almost
offended me as a, as a, you know, somebody who's followed
him. I get that they want to signal
to the market that there's sustainable cash flow.
The issue is when you have operating leverage, financial
leverage and customers that don't like you and your metrics
roll over and your gross profit starting to decline for the
first time and you got fewer connections and you got pricing
power issues questions. I live in a Comcast
neighborhood. I just signed a deal with them
to lock in my price, up my Internet, lock in my price for
five years at a lower cost than I was paying, right.
So you got some some questions about pricing power stocks
probably not going to go anywhere positive.
I don't think a dividend helps that.
That's just me. I'm also going to, here's
another thing that has been fun in my life.
I call Comcast. I said, hey, I know that you got
a new plan. I'm on rack, right?
What do you have? They say, oh, Mr. Brewster, we
got this and you can add a phone line.
I said I'd like to add the phone line to that because I don't
really want to pay for two phone lines if I only have to pay for
one. Sorry for the nose issue.
Anyway, so I'm on the phone with a lovely man and I said to him,
I said OK. Now I just want to make sure
that when I connect this phone line, this is my wife's phone
line. It's not my phone line.
So any mistakes are a bigger issue in my life when it's her
stuff. So plus she's had this number
since she was like 16, right? I go to the guy, I go just don't
do anything to the number. Whatever you do, I do not care.
This is a billing issue. Just connect her phone to our
plan and let's keep it moving. OK, Mr. Brewster, Nothing will
happen to her number. OK, great.
I get off the phone, I go to sleep.
I'm happy I've saved. I think it was like 80 bucks a
month. So that's almost $1000 a year.
That's like money. Real money can pay for maybe 16%
of my healthcare insurance jump. Anyway, dude goes, oh, I go to
call my wife because I woke up in the morning.
I said I really hope her phone works.
I just had a premonition. They cancelled the freaking
number. How is it that you have an offer
and I want to take your offer and you end up cancelling a
fucking number? How does that happen?
So when you want to know why your EBITDA or your EV to EBITDA
is like 5, it's because you suck.
Like you suck at business. And the thing that is
frustrating, and I guess that Mister Malone is a much more
public figure than I am and he can't say it, but like
fundamentally these companies need to seamlessly transition
customers to their best offering.
Charters got a freaking slide in their earnings deck.
They show that they save customers.
I want to say it's like 1800 bucks a year.
Maybe I'm lying. Do your own research, maybe it's
only 1200. Either way, their contention is
that they save customers a whole lot of money if they take the
bundled offering from Charter. I think it's a plausible
explanation. I've actually always kind of
thought that cable companies were good at bundling.
My biggest issue with Comcast is I thought they should have
dropped the fees on the Xfinity video product because I still
think to this day it's the best video product out there.
But you know, they're addicted to the rental fees, so they
can't anyway. They just need to put their best
foot forward to customers. And then maybe the loyalty will
start and then maybe the pricing power will begin to manifest
itself. And then maybe the growth will
continue and, and God forbid they start actually getting
connections. I mean, look, everything that
I'm saying, these stocks are cheap now that's some value
investor shit. And that can really get you
burned. I don't, I don't know if it's
smarter to wait for the turn and the inflection in the numbers or
if you just kind of close your eyes and say there is a case to
be made that Charter can probably retire 10% of their
shares if they have the guts to keep their buyback on.
Because sometimes buybacks can be pro cyclical and you're
getting like a mid teens free cash flow yield, which on a per
share basis, which are famous last words, you got a mid, you
got like a high teens, low 20s compounder there.
That said, a lot of operating leverage, a lot of financial
leverage. SO20 can become 12 real quick
and you know, do your own models and what not.
But I don't know, it was crazy. I usually, I, I mean, I still
look forward to Malone talking. And I thought, I thought what he
said in in the investor day was quite a bit better than in the
interview with Mr. Faber, who is a GOAT interviewer.
But man, I stuff, I was here and I was like, this is some cope.
And I just don't, I feel like these wireless companies are are
on on the attack. The thing I never was able to
reconcile with the cable bowl pitch is it was always, it was
always sort of like wireless isn't economic.
So they won't keep doing what they're doing, but they've
always done it in the past. I bought into the fact that
there wasn't enough capacity. Turns out I'm not a wireless
engineer and miss that pretty bigly, but I'd argue the entire
industry missed it, which by the way, is why no one trusts you
when you're buying in your shares and you always have like
there's no signal here. So we'll see.
B Rob from Comcast, he just put in his bid for Warner Brothers.
Hopefully he went ham on that because I actually do think that
would be the not the best combination.
Probably Netflix is a better one just from a distribution
standpoint, but it would be interesting to see what Comcast
could do with the IP that that Warner Brothers has.
They probably don't have the financial backing to actually
get it done. But that was kind of an
interesting little moment for me yesterday.
I can't I part of me wants to put my hand in the fire right
now, though. Man, these the stocks are cheap
but is scary. There's another stock that I
can't really mention because it's small that like has
inflected and the CE OS are buying.
Well, the CEO bought in May. Some other people bought and
that one's kind of got more of my attention because the numbers
have turned. It's a little bit scary to say,
well, you know, the numbers are going in the wrong way, but it's
cheap. That is a great way to lose a
whole lot of money. Bed Bath and Beyond was the king
of the buy back into continued decelerating financials and news
flash, that didn't turn out so hot.
So, so there's that. What else have I been doing?
I went to Houston. Shout out to Chad Garcia and
Scott Weber for hooking me up out there.
That was fun. Got to see the people at NRP,
which was kind of interesting. I like how they think about
things. And then Chad took me over to
Land Bridge, which is a very interesting organization and
Chad has done podcasts on them and secure at I think Yabby, yet
another value blog. So I would I would recommend
checking those out if you're kind of interested in something
that you may not have thought about.
James Vallas. The Eris pitch here was somewhat
similar, though a little bit different.
Landbridge and Waterbridge are slightly different than those.
So I don't know. Can't stop thinking about how
cheap some stuff looks. I mean Twitter, Twitter fave in
a in a little sub cult AMN that feels ripe for 2026.
Not my idea. People much smarter than me are
are pitching that one Olin. I mean Olin's one of those that
like man, we talking about COVID lows.
I don't know. I don't cover it.
People smarter than me say that Buffett transaction is a pretty
good comp. You got some smart investors
that like it. It's it's interesting.
I was talking to somebody who knows what the hell they're
talking about. And I said, you know, why do you
think that your business is not bigger today than it then your
returns might justify it or suggest it should be.
And he said that if he were willing to do a model that was
market neutral, that he he thinks he could have a much
bigger business. But.
He runs a lot of friends and family money and it and his own
capital. And my sense is he cares a lot
about compounding, you know, like for himself and for the the
people that he's committed to compounding on behalf of.
And he was just talking about portable alpha where, you know,
the institutions want the manager to to just deliver
straight alpha and then they buy cheap beta.
And I said, do you think that the market structure has changed
in any way lately? And his commentary was that if
you go to sell a position through the day, they're just
like real pockets of illiquidity.
And, you know, he feels like the, some of his orders can
almost be front run by the high frequency guys, which is not
like a unique thought, I don't think.
But it, it's interesting to to talk to somebody who is
definitively skilled, has has returns, has been around the
industry for a very long time. And just kind of talking to him
about some of the issues that he's had raising capital.
And you know, just through this journey, I've, I've been
fortunate to talk to some people.
And I remember, I mean, I think Tidewater was at like 40 or so.
And I called somebody and I said, you know, what do you
think about? I might have written them.
I don't want to lie here, but we were, we were communicating.
And I said, what do you think about Tidewater here?
And he said, you know, I like it, but I'm not Bob or body and
I don't have the LP base that's going to let me take a draw down
on that name, especially when the markets doing really well.
And it's just got me, you know, thinking about how what is going
on in investment, how I should structure my life, what I really
truly believe and going back to cable.
Tell me who the buyer is. All the people that used to talk
about cable done ping them, say what do you think about cable?
They didn't none of them want to go back in that water.
I mean, it's it's scary shit. So you know, what does that say
about the opportunity, the potential opportunity?
I don't know. For the record, I don't own them
so. But if one were to say how do
things get cheap, the fact pattern here might suggest this
is how it happens. It would be nice to see some
management teams come out of their fat pockets and buy some
stock. You know, I'll tell you another
one that's it's kind of interesting to me.
It's been interesting, been not interesting, been interesting.
Disney seems to be at the point where they got the assets and
the timing is right. Can't stand Eiger.
That's my issue. I know some people like him.
I think you're all wrong. I think you're enamored.
He's got a great smile, he's got beautiful skin.
He's got charisma. I get it.
That's how he became the CEO of that organization.
I've seen that man hollow out the C-Suite and knife successors
for like 8 years now. I'm not convinced he's ever
going away. So I don't, that's the part that
I don't like. But at some point you're, you're
on the other end of the, you know, the, the what do they say
the snake has swallowed the pig? Yeah.
The next logical step is that the snake poops.
You don't want to own the poop that I know you.
I think you want to own the snake.
I think the snake gets bigger. I think we're buying the snake
in this hypo. I don't think we're buying the
poop. You were buying the poop.
But anyway, I have really derailed that conversation.
So. Yeah.
So that's that. I don't know if you're asking,
you know, as a host, if you're, if you're curious how the host
has been doing in the markets. I will tell you that I barely
even knew that there was a draw down going on because going into
this, I was not exactly participating in the upside to
those that were following clear point and cure.
I am sorry for what happened with Uni cure.
I am even more sorry for the patients.
I, you know, and clear point was a home run for me.
It was a small position. It's an interesting thing for me
to think about because I have these tensions between should
you be very diversified or should you be concentrated?
And it's wild to see. I mean, now between meta and
clear .22% positions ended up well, meta was 3.
But anyway, have really like driven a lot of return and both
of those are realized. So the tax is kind of hurt, but
that's that's a the rest of the portfolio needed it.
It's we're not we're not owning Palantir and Bitcoin out here.
So well, I understand that that the past week might not have
been fun or month for those people that own that stuff like,
you know, zoom out. Are you doing OK?
So I don't know, it's an interesting time and I just
like, I really feel like a basket of beating up shit would
do really well coming out of here.
I, I don't know, pick, pick your own beating up stuff.
But it's it's interesting and like there's some real, real
businesses trading at what appear to be some pretty decent
valuations. I I sometimes I like to check
Morningstar. I just see like, Hey, how many
four and five star stocks are there just as like a a gauge and
the list is starting to get populated.
You know, I don't know how many wide Moat compounder E type you
can find, but I I think you can do pretty well out there if you
keep your head about you. But the buying isn't as hard as
the owning in my experience. So man, GE, that's why that's
one. I never would have been able to
hold it through COVID probably, but man, that hurts to see that.
But anyway, Long story short, I think there will never be a
shortage of opportunities for the enterprising investor.
I still think the S&P is 1 hell of a beast to try to beat on a
on a tax adjusted basis. And it's just hard to look at
the studies of how many companies fail, how much of
return is driven by so few, and not think that a tax advantage
rapper that that is guaranteed to capture the right tail is a
great investment vehicle. It's also really hard for me to
look at how highly valued the right tail is relative to
everything else and think that's where you want to be right now.
Equal weight makes some sense. I do like that open AI is
finally saying that there's some bad vibes.
That dude gives me bad vibes. Sam Altman.
I mean shout out to you for having people that follow you
and will you can issue equity at apparently a bajillion dollars
and no one gives a shit. But like, you creep me out bro.
I don't. I don't know that I like that
guy dictating where the world is going, but it's a train that I
can't stop so might as well learn how to use the tools.
Was using Gemini yesterday. Shout out to the Google.
Everybody likes Google stocks high.
I got, I got people sending me. Somebody had the gall, the
audacity to send me a picture of Satya standing there watching
Sundar dance. I mean, if that's not a top
signal, tell me what is. Satya's just sitting there in a
dance floor, disco ball everywhere.
He's got to sit here and watch while Sundar has all the fun.
It's not right. It's not right.
Meanwhile, Zuck says I'm a spend a bajillion dollars again.
I guess the good news is he's got no history of spending a
bajillion dollars with no returns.
I realize there's returns and family of apps.
The revenues have been crazy. I get it, I get it.
I'm just saying it's a whole lot.
I promise CapEx. But Andrew Friedman thinks it's
a double or at least tweeted it. I don't know if he actually
thinks that You should sub to his service to see.
You should also sub to fiscal dot AI.
And I probably won't, probably won't be doing another one of
these by Thanksgiving. So you should have yourself a
hell of a Thanksgiving. And thank you for listening to
my little rant. I was I've I've been told by a
couple of people that they want to hear a little bit more of me.
I don't know that that's actually a good thing.
But here it is today. Shout out to you all.
Shout out to the 10 man, the people that have been down to
ride since day one. And I hope you all have just a
really family focused week next week and I hope it is fantastic.
All right, that's all I got. Goodbye.
None. The.