Chris Mayer, author of 100 Baggers: Stocks That Return 100-to-1 and How to Find Them and fan-favorite guest, is back.
Last time Chris was on the podcast, he recommended Texas Pacific Land (TPL)… which is now up over 150% for Dollar Stock Club members. [0:30]
Today, he returns to the show to discuss recent winners, current market conditions, and small-cap opportunities. [2:25]
As markets near all-time highs and inflation ramps up, listen to how Chris still finds great ideas. [4:00]
Turning to emerging markets, Chris explains why overseas companies tend to be cheap compared to U.S. stocks—and whether it makes sense to invest across the border. [7:00]
Next, Chris highlights the research that went into his book… and the 3 characteristics of companies that become 100-baggers. [12:45]
We discuss the changes we’ve seen in the markets during our careers… the importance of balancing growth with profits… and the rise of passive investing. [24:00]
Chris also shares his favorite way to gain exposure to the exciting crypto space… [27:00]
And of course, he names a few stocks he likes right now. [31:30]
Finally, I explain why Luke Downey is the Michael Jordan of options trading… why I’m incredibly proud of his new options advisory, Big Money Trader… and how he makes the strategy easy for anyone to understand—and follow. [41:34]
- Chris Mayer, author of 100 Baggers [0:30]
- Current market conditions and small-cap opportunities [2:25]
- How Chris finds great ideas as the market nears all-time highs [4:00]
- Does it make sense to invest overseas? [7:00]
- 3 characteristics of companies that become 100-baggers [12:45]
- The importance of balancing growth with profits [24:00]
- Chris’ favorite way to gain exposure to crypto [27:00]
- A few stocks Chris likes right now [31:30]
- Big Money Trader: Why Luke is the Michael Jordan of options [41:34]
Wall Street Unplugged | 827
3 secrets to finding a 100x winner
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media, to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.
Frank Curzio: How’s it going out there? It’s December 2nd. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving these markets.
Frank Curzio: So, great, great, great interview set up for you right now. One of your favorite all-time guests, who always shares lots of ideas and really great ideas. By the way, are usually off the radar, small caps, names you haven’t heard of, and probably why I get the most positive responses when this person’s on. He hasn’t been on for a year. The last time he was on, we should have him on more than that, he recommended Texas Pacific Land Trust, which you could find at The Dollar Stock Club, where we take a stock from our guests. And a lot of times, you don’t know that stock. Could be one they’re talking about, or could be one that I talk about before my interview, after the interviews, or offline. And, we throw it in The Dollar Stock Club Portfolio, which has a great, great performance. Allows us to track a lot of the guests as well, as what we’re putting the right people in front of you, and the right ideas. And that’s The Dollar Stock Club, which is only a couple hours a month. It’s one of our best products.
Frank Curzio: But, the last time Chris Mayer recommended a stock on this podcast, Texas Pacific Land Trust, up 150% plus in a little over a year. Chris Mayer is a close friend. He is a former investment banker. He used to write several newsletters, which is how we met in the industry, but is now managing money at Woodlock House Family Capital. Been managing money, pretty much the whole time. He’s been a newsletter writer for a very long time. Chris is one of the smartest analysts I know. He speaks at the Value Investing Congress, which is a venue that… You’re only going to see the highest profile hedge fund managers, money managers. I used to attend this a lot. I think it’s a couple of grand to attend, to get ideas. Now everything is covered. Even I, so it’s covered, where you know the ideas right away, doesn’t even pay to go to these things. Maybe a little bit of a network opportunity, but Jim Chanos, a lot of these guys, they’re not there to mingle too much. They kind of sneak out the door.
Frank Curzio: So, I haven’t attended those as much anymore, but to speak on that platform just shows you how great of analysis, how much credibility he has. He also travels more than any other analyst I know, in an effort to find the next, not 10 bagger, or a 20 bagger, but a hundred bagger, which he has done throughout his career. Chris Mayer, thanks so much for joining us on Wall Street Unplugged again. It’s been a while, man.
Chris Mayer: Hey, good to be on with you, Frank. It has been a long time since we talked last.
Frank Curzio: It has been. The last time we spoke, you gave out a stock pick called Texas Pacific Land Trust. And it’s one of the stocks my late dad recommended, about 30-something years ago, in the single digits. But that stock is up 150% since you came on, just to let you know. So expectations are super high right now for you.
Chris Mayer: Hey, yeah. And that, it’s come down quite a bit from its high. So actually, I still think it’s a good buy.
Frank Curzio: No, and if people are not familiar with you, right, because we’re getting a lot of new listeners every month, Chris is one of the people on this podcast I’ve interviewed for many, many years. And I could promise you one thing again, putting the pressure on him, but he’s always given us ideas that are off the radar. Well off the radar. Small caps and things like that, which is really cool. So, a lot of people love when you come on, and we’ll get those ideas later on. But, I guess let’s start with this, right? With the market conditions where, we have new COVID fears now, inflation, 30-year high, labor shortages. We have supply constraints as well, expensive valuations. Yet, we have a Fed that continues to be, pedal to the metal, low interest rates, still buying bonds. Is it difficult finding new ideas in this type of market?
Chris Mayer: No, I haven’t had a problem finding ideas. There’s all these things I like. I think where the challenge comes in finding an idea that clears everything. So, yeah. There’s things that are, that I’d love to own, but they’re a little expensive. I don’t think valuations are necessarily outrageously expensive. It really depends. It’s hard to generalize. I mean, in some of the hot areas of the market, it’s outrageously expensive, but there are other areas where I think you’re getting pretty good prices, especially if you have a long-term outlook.
Chris Mayer: So, I still think the environment is still pretty good for equities, because of some of the things you mentioned. Interest rates are still very low. There’s a lot of stimulus money floating around out there. Earnings have been pretty good for the most part, that what I’ve seen. And yeah, I think there are some pressures. The labor and inflationary pressures are definitely top of mind right now. And even just on earnings calls, everybody talks about it. Everyone’s talking about the price of raw materials going up, or the price of labor. So, those are things that I don’t think they’re going to go away anytime soon, but those, that’s definitely a headwind.
Frank Curzio: So, the things everyone’s talking about, and someone like yourself has been doing this for a very, very long time, when you’re talking about it, does that mean it’s really factored into the markets? Or, maybe we’re not seeing massive inflation factored in where it can go, get a lot worse than this? But the fact that, a lot of these companies have pricing powers, they’re dealing with it. They’re able to cut costs in other areas, and you’re seeing earnings surge. Is this kind of being priced into the market right now?
Chris Mayer: I think so. I mean, if we’re talking about it, it’s priced in. That’s a general rule of thumb. Now, as you say, the market’s not pricing in any kind of extreme scenario. I mean, look at the bond market. That 10-year treasury is still sitting there at one and a half, roughly. So, obviously a lot of people are not worried that it’s going to be sustained or that it’s going to be particularly strong. And, so that would be one surprise if we did have that, I think that, that’s not priced in if we have a 1970-style inflation.
Frank Curzio: Yeah, no, I hear you. I hear you. So, let’s get to a couple places that you like to look at. And, before we get to small caps, which I know you love, I want to get to emerging markets because yeah, I’ve been told by a lot of people who are smart, invest in emerging markets. And, if you look at that strategy, you can go back 15, 20 years. It’s kind of, has not been a winning strategy, right? Where emerging markets is sitting at right now, today, they’re sitting at 20-year lows compared to US equities. Developing nations stocks are 40% cheaper than the US. What’s going to change, where investors should be allocating capital when we see our market, everybody runs to it, right? When you have fears, everyone goes into the dollar. Everybody runs here, and we have tons of capital.
Frank Curzio: We have a great system here, but, I understand stocks are cheap and you’re better off going over there. And you’re still seeing some growth there, but that strategy does not work. What’s going to make it work going forward? And for guys like you, I’m talking about just the emerging market index, right? So, you’re a person who travels a lot, that may invest in certain countries, or different things where you’re easily outperforming. But overall, it hasn’t really been a good strategy, say for people in the 401k who select emerging markets, in a Vanguard Fund or something.
Chris Mayer: Yeah. Well, when you say they’re cheaper, I mean, they are cheaper, but they deserve to be cheaper in most cases. This is one of the things that I always point out when the media or anybody, they talk about a certain market being cheaper and they’ll say, “Oh, the UK index is so much cheaper than the US index on priced earnings.” But you look at the components. I mean, the UK doesn’t have a Microsoft, an Amazon, a Facebook, and Google. They don’t have those. They’ve got Royal Dutch petroleum companies, and they’ve got banks that have heavily weighted index. So, that draws and pulls down the valuation of that index. So, in emerging markets, it’s often the same. I mean, a lot of emerging markets, they have basic industries, or financials, or energy and those things carry lower multiples.
Chris Mayer: But, there are some markets that really have outstanding companies. So, this is where someone like me, who’s more focused at looking at individual securities, will see something different than someone who’s just looking at indexes. Or, as you say, pushing the button for emerging markets allocation in their 401k. I’ve spent some time looking, for example, at companies in Poland, and there are a lot of really good companies in Poland. And in fact, we own one, got a grocery store in Poland called Dino Polska. And, that’s a terrific company. I mean, returns on capital are 20% plus. They’ve been growing. They’ve been public since 2017. Stock’s been up a whole bunch. It’s been a terrific performer. The chairman owns like half the stock, so you’ve got a big insider there.
Chris Mayer: And what they do is they, it’s fresh meat, and groceries, in very small towns. And, so they don’t have a lot of competition over there. They buy their own real estate, and so they have a kind of a little bit of a competitive advantage there, from the bigger grocery stores that aren’t able to get as close to the customer. And that is just a phenomenal company. I mean, and again, that’s in the emerging markets in Poland, but these are the kinds of opportunities you can find, if you’re willing to go a little bit off the beaten track, and willing to get outside those big indexes.
Frank Curzio: Well, I was going to ask you about different countries, you travel a lot. I’m sure that’s been restricted because of COVID, but you travel more than anyone I know. People say I travel a lot. You travel much more than me, especially around the world, different countries. Outside of Poland, is there other areas that you’re like, “Hey, there’s some opportunities that really look good here?” Or is it kind of, again, you look from the bottom up point of view. So, you found a couple of ideas, we just mentioned Poland, but I was just curious if there’s any other places that you’ve gone to that you’re like, “Wow, there’s some good ideas here I need to look into.”
Chris Mayer: Well, I mean, I haven’t been there yet, but it’s top of the list for me to go to next year, and that’s Sweden. So yeah, Sweden has a number of really strong compounders. Companies that are just, every year putting out great results, and they’ve been phenomenal investments. So, one of these companies called Lifco, there’s another one called Addtech. There’s one called Lagercrantz. These are just a few. There’s a bunch of them that have done very well. And so, that’s something that’s not necessarily specific, like you’re making a bet on Sweden or something, because these companies do business across Europe and even in the globe. But for whatever reason, Sweden has this sort of culture around capital allocation where these companies are all very similar. They all have the same focus on returns on capital. They’re all very disciplined about that. And the returns on those stock prices have been phenomenal.
Chris Mayer: So, one that I like a lot now, because it’s come back quite a bit off its high, is a company called Evolution, Evolution Gaming. It’s live casino. So, it’s all online, and their customers are casinos. And, they provide basically a service where you can have a live dealer online, dealing you. They have also have their own proprietary games. So, it’s quite a technical product and it’s very popular. They are, if you look at the top 20 online games, 19 of them are Evolution Games. It’s… They really dominate the space, and their returns have been phenomenal. And that stock has come down a bit over concerns of how much of their businesses, perhaps in these gray market areas, where it’s the not legal or illegal. And then, there’s some concerns about, well, how much illegal betting might be going on in their site. But I think these things will eventually blow over it. I think that industry has a great future and Evolution is the leader in that business.
Chris Mayer: So that, again, this just give you kind of examples of things that you can find in certain markets. I mean, Evolution is a unique asset. There’s nothing like that anywhere else. And, you can find that just poking around, and again, I wasn’t necessarily that I was attracted to Sweden because I of thought, “Oh gee, it’s this market that’s growing X percent. And there’s something necessarily that attracted me.” It was more of a bottoms-up thing. I found this, a company there that did very well and had this kind of ecosystem. And as I do research on that one and talk to other people, they refer me to yet another one, and another one. And I start to cobble this list together, four, or five, or six of these Swedish companies that are amazing. And so, that’s how I get pulled into certain countries.
Frank Curzio: So, going outside of that macro view, I wanted to talk about small caps, because this is, I know this is what you love to do. You just finding these hidden gems that nobody’s really talking about. And you actually wrote a book about this. It’s called, “100 Baggers: Stocks That Return 100-to-1,” and the most important part is, “How To Find Them,” right? So, it’s right here on Amazon, a nice plug here, but it’s relative to our conversation. Because I think the most important thing is when I’m looking, when I see the title is a hundred to one, one, I’m very interested in how you find these names, considering a lot of good names, Chris, even today, the good growth names. I mean, they’ll come through specs, which the valuations are incredibly inflated. I don’t know if you saw the numbers, but as of, I think Barrons put out a report or somebody else, that 49% of all the IPOs this year that came in over a billion dollars, and now below the IPO price.
Frank Curzio: So, the inflations are so inflated, where these private companies in specs. I mean, you see 50 to a hundred percent being valued at 50, a hundred percent, even higher, just six months later when nothing’s really changed, right, because of the marketing campaigns. And also, companies like Snowflake that go through the IPO process, getting these names are coming out of inflated valuations. So, I’m curious to know, the hundred baggers would have to come from small caps most of the time. How do you find these names that are under the radar, because when they do get on the radar, it seems like the big investors get in, venture capitalists get in, they really inflate these valuations and try to take them public a certain way, or whatever. So, I’m curious to know how do you find these ideas that could have potential?
Chris Mayer: Yeah, well, it’s interesting, that book, doing the research on that book had a big impact on my investment style, because I came to appreciate a number of things. So, this book was based on a study that I did of all the stocks that had returned at least a hundred to one since 1962. And, I kind of tried to pull out what things they had in common, what lessons we could learn. And, you learn a number of things. One is that, these companies typically all generate pretty good returns on capital in some way. So, that’s kind of a generic term, but think about return on equity, return on assets, return on capital. Your listeners could Google some of these terms, but those are the things to focus on, and the ability to generate a high return and then the ability to reinvest it.
Chris Mayer: So, it makes sense when you think about it. If you have a business that you put a thousand dollars in, and it generates a profit of $500, that’s pretty good. And then, if they could take that $500, reinvest it back in the business and earn 50% again, that’s where you really start to get that compounding effect. And a lot of these hundred baggers, the ones that I’ve studied, were able to do that over a sustained period time. So over, let’s say if you do 25% return on capital every year, you’re going to at 20 years, you’re going to be a hundred fold. So that’s kind of like the formula, and most of them is kind of like a bell curve. So, the number one rule for finding them is, you’re going to have to focus on businesses that generate, or promise to generate rate a high return.
Chris Mayer: I would say that, a combination of, and then growth. You mentioned, this is why staying with smaller companies is more interesting, obviously, because it’s going to be difficult for say an Apple to be a hundred bagger at this point. It may be a very good investment, but you’re going to have to start small. If you want the oak trees, you got to look for acorns. That’s kind of the analogy. And so, how do you find them? One is, I would tell people focus on those returns or at least prospective returns, but the amazing thing also about a lot of these hundred baggers is that you had years and years to buy them.
Chris Mayer: So, one of the case studies in the book is Monster Beverage, and you could see Monster Beverage generated high returns on capital and good growth for years. I mean, you could have bought it for years, any day for a number of years, and still made a hundred times your money. So, that would be my best advice is to find them, is to try to stay small. And small doesn’t have to be micro-cap. It could be, something I would say, ideally, a billion dollar market cap or less, and focus on those high returns and think about whether that company has the ability to reinvest.
Chris Mayer: And the key part of that formula also is that, a lot of investors get hung up on present dividends. And if you’re really want to invest for those multi-baggers, you’re going to have leave the dividend payers aside. What you really want again, using my very, very simple analogy. If you had a business and you put a thousand in, gives you a $500 profit every year, and then has the ability to reinvest it, that’s better than a business that has a $500 profit and then just pays it out to you in a dividend. Because you want, if that business can earn a 50% return on its capital, you want to take it and reinvest it. You don’t want it to give it to you, because you’re going to pay taxes on a dividend, and then you’re not going to be able to generate a 50% return yourself.
Chris Mayer: So that’s an extreme example, but in the stock market, that’s what I’m looking for. I have portfolio full of companies that earn, 20, 30, 40% returns on their capital, and have the ability to reinvest it. So, over a long period of time, that’s going to be a winning formula.
Frank Curzio: So, I know that’s not the only formula. How important is it with management, right? Because if you have a small company, you have to be willing to innovate. Even if you have the greatest-
Chris Mayer: Critical.
Frank Curzio: Yeah, right. We saw it with AOL. I mean, that was the search, that search, that was the way to get on the internet for everyone. You just look at Research In Motion, they were basically the inventor of the smartphone and look where they are now. They don’t even make smartphones anymore. How do you, do you visit management team personally? I mean, how do you decide, “Hey, these guys really know what they’re doing.” And what’s that process?
Chris Mayer: Yeah, this is a critical, critical thing because you can have, a management team can destroy a good business by either, they can acquire something that’s worse. They there’s lots of ways to screw it up. So, there’s a number of things to do. The first thing is, I would stress for every investor is to look at the proxy. So this is, it’s a filing all companies in the US have to do, and see how much stock the management team owns. That’s your first filter. You want to invest with people who have skin in the game with you, and they’re more likely to behave as long-term owners of the business, because they are long-term owners of the business. And so, in my fund, for example, that’s a bar that screens out a lot of names right off the top. I mean, we want to invest with people that have skin in the game.
Chris Mayer: And then the second thing is, look at how they’re compensated. I’ve turned down some very promising companies just because compensation was excessive. And you look at some of these companies, and it’s egregious in terms of options, and dilution, and becomes quite a drag on the company over time. And that’s also indicative of a kind of greed that you rather not see. You’d rather have a CEO that pays himself relatively modestly, but because he’s invested in the stock with you, that’s how gets his reward primarily as his shares appreciate, which is the same way you get rewarded. So, those are two things I think are important.
Chris Mayer: And, the third thing I would is, look at the company’s literature, look at its own annual reports and annual letters. Does the CEO write them? And are they thoughtful letters in the sense that, do they really give you a sense of what’s going on in the business? Or, do they just seem like marketing speak that someone put together, just regurgitates the numbers, has all kinds of buzzwords. You know those are also another key distinction. You’re going to find that as you do this, you’re going to fail a lot of management teams, because that’s a tough hurdle to get over, especially in small cap plans, where I would say as a generalization, the management teams are not as good as larger cap names.
Frank Curzio: So, glad you said that. It’s a point that I had never brought up to my subscribers and listeners, is when you go through those, and this is available to everyone, right? 25 years ago, 20 years ago, you didn’t have access. Only the analysts had access to this, right? The conference calls, the quarterlies, or the annual reports, and you had to mail or whatever, getting through mail. But, it’s so funny you say that, because I know immediately, because I’ve been doing this for a while. You’ve been doing it for a while, but if the CEOs commit, if you like him, you’re like, “Wow, this guy’s really…” Like, I love Reed Hastings because he would just, he wanted to go after Blockbuster and destroy them. And that’s what his call was about. He said Blockbuster more than Netflix, back in day. And I was like, “Wow, this guy’s just, this guy’s really motivated and competitive.”
Frank Curzio: But it’s interesting you say that, because you could see that pretty easily, right? It seems like, “Oh, well, maybe I have to read a lot of transcripts of these conference calls, or listen to a lot of them,” but you could kind of see it and feel it, right? If the CEO’s all in, and if these guys are excited about their growth potential.
Chris Mayer: Yeah. You can see it and you say to yourself, “Wow, this guy gets it.” I mean, there’s some classics out there. Mark Leonard doesn’t write shareholder letters anymore, but Mark Leonard of Constellation Software is a classic example. All his letters are still online, but go back and read those, that gives you an example. What does he talk about? He gives you the important things you’d want to know as a shareholder. There are a lot of other guys who write great letters. I mean, Jeff Bezos writes a good, thoughtful annual letter. And he tells you about things that are important in the business. It’s not just a bunch of slick marketing speak. So, I mean, I’m sure you have examples as well, favorite CEOs, but that’s definitely a tell. A tell. One among many, that I would look for. Combine that with ownership and incentive comp, and you can do a pretty good screening on management just on that, on those three things.
Frank Curzio: Now, I hear you. And, I wanted to go back really quick, before we get to some of your favorite ideas in this space, is the return on investment capital part. Does that, has the world changed because, and I’m talking about the last like 15, 20 years, right? Because, you’ve done studies going back to the sixties to see, which companies had hundred baggers. But has the world changed to the point where the business model today seems like, don’t generate? Like, “We don’t care about profits at all. What we want to see is growth on the top line, and we want to see you add as many people as possible.” I mean, this is, for all the social media platforms, right? Just add, continue to, even Twitter. Twitter started falling when, not when they started monetizing their lists, and they monetize their lists amazingly, much, much better than Facebook did at the beginning. But once they stopped growing that list, that’s when the stock really started taking a hit.
Frank Curzio: But it seems like the business model is, “Grow at all costs, get as many people, and then we’ll figure out once we have all these people on the platform, what to do.” Does that make it a little difficult for you? Because, it seems like that’s the new playbook for small caps, which may be difficult to really measure return from capital sometimes.
Chris Mayer: Yes, it does. I would say, there are a lot of businesses that I’m just not going to be interested in. And so, those kind of businesses that you talk about where they’re just growing to, they’re not thinking necessarily profits now. Not that, that can’t work. Obviously, in some cases, that’s what they should be doing, but those are kind of outside my box. I mean, I like to see things that are generating profits now, and generating cash flow now, generating good returns on capital today. And that has good, very good odds of being able to continue to do that for a decade. So there’s a lot of ideas, a lot of ways to scale the mountain. I’m not saying my way is the only way or the best way for everybody, but, you have to kind of figure out what you like to do. And for me, I’m just not going to be involved in a company that is losing money now, and is adding lots of customers with the promise down the road, that they’re going to then be very profitable.
Chris Mayer: But, I’d say there’s a lot of things that have changed. I was thinking about this, Frank, because, we’ve been in the business a long time, but things have changed a lot, even just in, say 20 years. I was thinking about the growth of passive investing. I mean, this is something we really didn’t have at all 20 years ago, even 15 years ago. They were still, passive investing was a very small kind of part of the pie. And now they just dominate. If you look at almost any company and you look at the top shareholders, they’re ETFs and that changes things. I mean, what does that mean? That means suddenly large amounts, or large portions of the shareholder base, where they’re blowing in and out of the shares, not really based on any fundamentals of the company at all. When somebody like JP Morgan reports earnings, most of the shareholders couldn’t care less. They’re ETFs, they’re just there because they’re handling the flows in and out of an ETF.
Chris Mayer: And also, comes out sometimes with governance issues. So, we mentioned Texas Pacific, that’s kind of an interesting example. So for a long time, because it was a trust, it was off limits for institutions. And then, they changed to a C Corp, and now, they’re eligible to be owned by the ETFs, Exchange Traded Funds. And the volume has just shot up enormously, and suddenly a large shareholder’s in there. They’re just passive investors. And these passive investors are also not particular when it comes to governance issues. So, they tend to just vote with management on proxies when their proposals come up, and it makes it… I think it’s going to be more difficult to govern some of these companies. And, if you have such a large shareholder base, it seems so disengaged. And so, that’s one area that I think has changed a lot, not to mention just business models, generally, like you’re talking about, but also structurally in the market. So much of it being passive, it changes things.
Frank Curzio: Now, I’m going to ask you a fun question, which I probably know the answer to, but have you looked at cryptos at all? We’re talking about a market where you’re not getting an equity stake, it’s hard to even find any information out. Right? So, a fundamental analyst would throw this out the window. With that said, I mean, the moves that we’ve seen in Ethereum, in Bitcoin, in some really good technologies here, right? So maybe not so much of a company, but more system-based, even the Litecoins and stuff like that. Is this something you look at, because this is one area I know where you could see a hundred times returns probably quicker than any other market I know of. Right? But is it all… A lot of it is BS. A lot of people are going to get hurt. It’ll tell those stories. But I’m just curious, have you crossed over and said, “Hey, let me look at a couple of these names, because these gains are matching,” which the title of your book is.
Chris Mayer: Yeah. I don’t own any crypto, any of the currencies, or coins, or tokens, or whatever you want to call them. But yeah, I mean, I’ve paid attention, and read about it. I think one of the most interesting ways to invest in that is the mining operations that are mining the coins. So, we have a private investment in a Bitcoin mining operation. And the returns on that thing are phenomenal. I mean, you’re talking cash margins of 80%. So, that means generating a million dollars in revenue. After all your cash expenses, you’ve got $800,000 in profits. And that on an invested capital base, that’s probably, let’s say, maybe a quarter of a million dollars.
Chris Mayer: So, it’s mind boggling, the returns in that space. And the problem is there’s not, it’s hard to scale those businesses. So, I don’t know how that kind of investment will do publicly, although we’ll see soon, because there is… Horizon Kinetics is taking a mining operation public sometime this year. So, that will be an interesting one to watch, because they’re credible people, integrity, et cetera, et cetera. And so, I think you could invest in something like that probably safely.
Chris Mayer: But, you mentioned a point that is a problem, is that any time you have a boom, you bring in all the fraudsters and the touts, to take advantage of it and we certainly have that. I mean, and it’s an absurd, and irrational market in a lot of ways. I was reading today or yesterday about one of the coins, is called Omicron, named after the COVID variant. And the stocks up like, not the stock, but the crypto asset’s up 10 times, or something like that. And of course, how does that tie in? It has the same name as the COVID variant. Why should it be worth 10X more than it was before? So that, there’s bizarre stuff like that that goes on. But Blockchain as a technology crypto, as an asset, I’m not ready to dismiss it totally as just something that’s going to go away tomorrow. And so, I think more interesting ways to play it for somebody like me would be yeah, the mining, which I told you about. Or, some other ways. Maybe it’ll be interesting to own an exchange or something, like a Coinbase at some point, I don’t know.
Frank Curzio: Yeah. And I love getting your opinion on it, because you can get opinions from various people, various sources. But the fact that you are like a hedge fund guy, valuations and stuff like that, I love. Some people are just quick to dismiss it and others have come back, but I see it, right. Because it’s easy to find information on these things. Now, you said you’re buying it. Is this for the Bonner portfolio? Is this for the family office or?
Chris Mayer: Yeah, the family office has a private investment in a mine. Yeah.
Frank Curzio: Oh, that’s cool. That’s cool. And you still doing anything with Bonner, or no?
Chris Mayer: Well, no. I mean, I only thing I do now really is, I run Woodlock House.
Frank Curzio: Oh, Woodlock House. Okay.
Chris Mayer: This is my fund. Yeah. And, so that’s all really I’m doing. Yeah, I occasionally will work with the Bonner family on certain private investments and things, too.
Frank Curzio: Yeah. It’s cool. Because, Bonner is, he’s worth a little bit of money, I’d say, right?
Chris Mayer: Yeah, right.
Frank Curzio: But, he’s one of the founders of Agora, and we’ve all worked for one or another of those newsletter companies, and great company.
Chris Mayer: Very wide fellow, I should say.
Frank Curzio: Yeah. No, definitely, definitely. So, okay. So, let’s get to the fun part here, and go over some of your ideas that you like, maybe in small cap world, because people are going to expect these things to go up a hundred X by tomorrow, once you give them to them as you know.
Chris Mayer: Yeah, wow.
Frank Curzio: What are some of the names that you’re looking at, that crossed your radar and say, “Hey, this has a shot.” A lot has to go right for it to go up a hundred X. I mean, this is, it’s just continually innovate and whatever. If it’s intellectual property, I mean, everything’s got to go right. Because even if you see this growth, some of these things can get bought out, right, which kind of kills. That could hurt you a little bit. Right? You’d like to see these things really grow into their valuations, but what are some of the names you like?
Chris Mayer: Yeah. I mean on the small cap stuff, there’s a couple, but I don’t want to give those away, just not yet because it’s still-
Frank Curzio: Okay, fair enough.
Chris Mayer: But I think a couple of my favorite ideas now, are actually a couple that I mentioned. So, I think, really think Evolution Gaming is going to be interesting at this price. And with the growth that they have, a year from now, I think that stock will be quite a bit higher. Especially, as some of the turmoil and concerns over gray markets start to fade and the company’s results start to take over. I mean, that is a phenomenal business. And so, that’s one. I also mentioned the Polish grocer, Dino Polska, and that’s another business growing, 20% clip a year. It’s come back a little bit. Another one has come back a little bit off its high. So, I think that’s a really interesting play. Again, the underlying business there is strong. I mean, again, we’re talking returns on capital, well over 20%. They’re reinvesting all their cash to open new stores, and that one should run yet for a long, long time.
Chris Mayer: And then the third one, is one we mentioned, which I think still is attractive now. And again, it’s also come off its 52 week high, quite a bit. And that’s Texas Pacific. So, Texas Pacific Oil. The nice thing about Texas Pacific is, you’re not a hundred percent dependent on the price of oil. Because over the long-term, if you look at say a five or a 10-year period of time, price of oil’s actually come down, Texas Pacific stock’s up, multiples of what it was. So again, the underlying business there is also really strong, because they are only involved in royalties. They own the land, and other people do all the work of the drilling, and they just take a little piece off the top. So it’s high margin, free cash flow that requires very little in the way of reinvestment.
Chris Mayer: And so, I think that one will take another leg up next year as we get going. Also, they have a very promising water business underneath, where fracking requires a lot of water and they have the ability to provide water for drillers there. And, that business has been very profitable for them. So, all three of those ideas, I think, are poised to do well next year and beyond, really.
Frank Curzio: Yeah. So, Evolution Gaming right here. I just want to just pull this up really quick. So this is it, right? This is symbols EVVTY, right? I think you could buy it here.
Chris Mayer: Right, that’s it, yeah.
Frank Curzio: And yeah, about 50 cents off its high, but yeah, a lot of these names have come down. And it is, I guess we’ll end it there, because it’s been a really crazy market where I think people see, “Well, we’re closing on all-time highs.” And, this is before the stock market really came down on Friday, but it’s led by of these big names where the underlying names in small caps and also in mid-caps, you’re looking at a lot of names are getting hit pretty hard, 20% plus, I guess is a little bit more ideas, things like this. Right? But it’s been a crazy market over the past, I’d say two, three months. The Russell’s actually down over a six-month period.
Chris Mayer: I was going to say that exactly, the Russell’s actually down. So, it’s been quite a spread. And even among some of the bigger tech names, I remember seeing a list. Things like Peloton, and WIX, and just all these stocks that were high flyers are down 50% or so from their high. So, depending on where you fish, yeah. There’s some interesting things to at least consider.
Frank Curzio: No, that’s awesome. So once again, Chris, I want to thank you for coming on. If you want to buy Chris’s book, you can go to Amazon and do that, and I’ll pull that up for everybody for our YouTube page, which is, “100 Baggers: Stocks That Return 100-to-1 and How To Find Them,” but the how to find them is so important, which I love, where you really explain in that in detail. And it’s really, really good stuff, Chris.
Frank Curzio: So look, I want to thank you for coming on. Sorry, it’s been so long, man. It’s been really busy on my end, but I’d like to have you on a little more, because I always learn from you. I guess I’ll finish with this really quick, Chris. Are you planning on traveling any place, or going to conferences? Because I know you were speaking to Value Investing Congress, which is an honor in itself, but a lot of these stuffs are so virtual. I was wondering if some of this stuff’s opening up for you.
Chris Mayer: Yeah. I don’t plan to speak at any conferences, but I do have a travel itinerary I am developing now. So, I probably, I told, I mentioned Sweden. I’d like to get to Poland in 2022. I’ll probably get to Ireland. But, yeah. I mean, we have this new variant, so who knows? We’ll have to see what that does, but yeah. I plan to hit the road, and we’ll see.
Frank Curzio: Yeah, really good stuff. So listen, thank you so much for coming, Chris.
Chris Mayer: That was good to talk to you, Frank.
Frank Curzio: As always, we’ll be in touch, sharing ideas, but if you need anything on my end, please feel free to give me a shout. And again, I know the audience really loves you. You’re one of their favorite guests, and thanks for coming on, buddy.
Chris Mayer: Oh, very good. Excellent. Hope they enjoyed it, and hope their stock picks perform. We shall see.
Frank Curzio: We’ll see. We’ll bring you back on.
Chris Mayer: All right.
Frank Curzio: So, Chris is an awesome guy, just laid back, fun, and very, very smart. I think you should definitely buy his book. I think it’s like 10 bucks. Again, I don’t make anything by saying that, but I mean, Chris is not only smart, but he’s also a fantastic writer, and that’s why he is written so many books. And when I say fantastic writer, a lot of people write books, but Chris is able to take complicated things and dial them down to where anyone could understand them. And, that’s important because a lot of times he’s looking, he’s traveling all over the world, he’s traveling to different countries. He’s finding these new ideas and explaining technologies. This is things that I’ve done with my career. I mean, that’s pretty easy if you talk about Netflix, right?
Frank Curzio: But you try talking about one of my recent recommendations, which was a biotech company, a small cap biotech company with a $200 million market cap, man. And you get into their technology, and you try to make that sound very easy so everyone can understand it. It really is an art. I’ve been fortunate to have great teachers throughout the Agora System. Chris was trusted so much. He was managing the family trust for Bill Bonner. If you don’t know him, Bill Bonner, which we talked about a little bit, was one of the founders of Agora, which is the largest financial publisher in the world. I think it’s close to like 30 plus divisions, or whatever it is now. But, I’ve learned a lot and I credit those guys a lot for some of the marketing things, and how to market myself, and how to build a business, which helped me tremendously when launching Curzio Research. But that’s the guy they selected and say, “Hey, you know what?” Bill’s like, “I want you to manage your own portfolio.”
Frank Curzio: So, it just shows you the credibility there. But in his book, he describes not just his opinion, right? “Well, I think this is going to have, I think,” no. He has a lot of data behind all of his research. And like he said, it went back to whatever, 1960, whatever he said. But he’ll go back and say, “Listen, this is the formula that works. Here it is.” And he builds on that formula going forward, willing to adapt. And that’s one of the questions I threw at him, right? I was talking about, it’s a different market. Now, valuations, these companies come out, a hundred billion dollar valuations. How the hell are you going to make a hundred X on them? How are you going to make five X on them? So, you have to adapt with the ever-changing times. But, he’s got a good knack for this. He’s very, very smart, has great connections.
Frank Curzio: And again, he is a great writer, but you’ll learn a lot from purchasing that book, if you buy it. Again, it’s nine bucks. You don’t want it, don’t buy it. But the value that you get, and I don’t promote books a lot. I really don’t. Some of them I do, especially investment books, because I think they’re all a waste of time. I think a lot of the strategies are old, too old. I think you can learn a lot more from reading the Wall Street Journal, following this podcast, following real-time information, because we’re in an ever-changing market and people want to cite, “Well, historically this, historically that.” You don’t throw away historically. And we’re in uncharted territory right now. I mean, 10 and a half trillion in spending, zero interest rates. Now with this new virus, a strain, the Fed’s not going to touch rates, they’re not going to stop buying bonds or tapering anytime soon. Maybe a tiny bit, but we’re an uncharted territory.
Frank Curzio: I mean, everything’s different now. To look back at history and where we are today, and how it’s going to play out, forget it. It’s a waste of your time. I mean, if you did that, which a lot of people did, and even I did in 2010, ’11, after the credit crisis hit, you lost a lot of freaking money. Because you’re like, “Wow, this market’s going to crash.” You had no idea that Fed was going to keep interest rates at zero forever, forever. We had no idea. We’re like, “We’re just trying this policy out just to see what happens.” What do you think happens? Massive amount of capital flows into the markets. I mean, you have kids for projects that aren’t even off the ground, and crypto raising 10, $20 million right now, because money’s so cheap. Right?
Frank Curzio: So, investment books from my perspective, I think are a waste of time, a lot of them. You could learn from some of them, but for me, I just, a lot of times I read it and it’s stuff that I’ve talked about in the past. It’s, I’m not learning anything new, and that’s my perspective, that’s my opinion. Maybe you want to read a million investment books, but I can tell you, people who are meeting, just reading all these investment books, you don’t see them become much, much better investors. You don’t. It’s about learning, getting in there. It’s a grind, getting your ass kicked in certain stocks that you have conviction in, and what you got wrong. That’s how you learn in this industry.
Frank Curzio: But, Chris’s book kind of explains that. It shows the data behind, and this is some of the things you need to focus on, and then you can go your own way with it. “Okay, here’s this. And I want access to crypto markets,” which is a way, I think, you get a hundred X gainers, where we got 30, 40X gainers in that, in our Crypto Intelligence newsletter. Which by the way, that issue is now available for you guys with our new pick.
Frank Curzio: But yeah, Chris is just great guy, a great analyst. I love talking to him. I had a lot of fun, and I made money personally investing in some of his ideas. So, he’s a name that I trust. It’s a name that also made you money, if you listened to his ideas. Not all his ideas go up. I’ve had a couple of ideas that didn’t do well, just like everybody else, but he’s the first to let me know about them and say, “Hey, this is what changed,” or whatever, but, overall his performance, his track record is really, really good. And, he’s a great guy and very, very smart. So, he’s a good, good friend. Glad he came on. Hopefully, we’ll get him on maybe every quarter, right? Discuss some of his ideas.
Frank Curzio: So guys, that’s it for me. Last thing here, this will be the last week we’re offering Big Money Trader at a steep discount, where you pay for one year and get the second one for free. This is Luke’s new newsletter. And I feel like we haven’t done a good job explaining this, to be honest with you, because this is a product that I’m extremely proud of. And why? It’s based on options and options strategies. But Luke may be the smartest person anyone knows, when it comes to options training. He actually taught option classes on Investopedia. And he got that job because he’s fantastic on video. And like I mentioned, with Chris Mayer, he breaks down things, like complicated things.
Frank Curzio: And people get nervous about options, and are like, “I don’t know if I can understand that.” He breaks it down on video, exactly how to implement these strategies in very, very simple terms. Plus, he has an amazing track record. But option trading for Luke is kind of like basketball is to Michael Jordan. Jordan’s athletic, probably would’ve been professional baseball player, believe it or not. Yes, people disagree. But, a lot of people agree. Some people agree. At least I agree, that if he would’ve just followed it through, he could. I mean, he was batting over 200, which is like, man, I think that’s the average now, that the average, average in baseball, whatever it is, but his passion is basketball and he’s greatest at it. Right? You saw that. Luke’s passion is options, right? He’s one of the best at it. And, it’s a bold statement coming from me because I’ve been as an industry for a long time, I know a lot of good options strategists.
Frank Curzio: But this is a newsletter he always envisioned, when he came to us. And I said, “Okay, let’s start a smaller file. Build up your audience.” I said, “And then we’ll go with this,” because this is his dream to have a newsletter like this, where the upside potential’s enormous while using these strategies, they’re going to limit your downside risk. But imagine investing in Netflix, Apple, Tesla, early on, right. That’s what his system does. But now, imagine investing in those names and your own call options throughout their entire growth phase. I mean, now you’re talking about accelerated returns beyond belief, and that’s what he’s done. That’s what he’s done for his career. And he’s now sharing this strategy with everyone, which includes all Curzio Research followers.
Frank Curzio: So, for me as a business, I’m very happy. I only launch products that I think are going to benefit you. You’re going to educate and make you money, and have great people there that are going to teach you. And this checks off all those boxes, but we do have a fantastic offer on it. It’s not going to get cheaper than that, and it’s going to go away next week. But if you’re interested, go to curzioresearch.com, click the banner with Luke’s pretty face on it, and you can go there. And if you’re still on the fence, go watch this video because I could tell you, we haven’t had a lot of people watch this video, but we track all these statistics, right? Being open with you. The amount of people that watch this video, and then subscribe, is probably the highest rate we’ve seen as a company.
Frank Curzio: So as soon as they watched that video, and understood, and saw his passion, right, and you could have a better idea of his strategies for option trading, the more people that took him up on that offer. And it’s a higher percentage than even some of my videos, or some of the promotional things that we do, because you see it, you understand the strategy, and you go through it. So, even if you’re on a fence and you watch that video, if you purchase a newsletter, that’s fine. If not, no worries. For me, this is a great product. We launched to Curzio One members who get this for free and got amazing, amazing feedback from them already, but it’s a strategy, I think, in this market that’s extremely relevant. And I think you can do very, very well. That’s why I’m pushing this thing. And, I’m really happy we launched it. I’m happy Luke came to us to launch this thing, because this is his dream product.
Frank Curzio: And, we haven’t done a great job saying, “Yeah, it’s Simpson based,” or whatever, but this is something I think everyone’s subscribing to, which, you could learn from his other newsletter, right? I mean, he’s got tons of subscribers that signed up, and the response has been overwhelmingly great. So now, launching this product, we’re just really excited, Big Money Trader, and yeah. So, it’s on sale now, if you’re interested. If not, no worries. But, very, very excited to launch this product. I think it’s going to do you guys very, very well long-term, because now it’s an option market. Option strategies are dominating right now, record contracts everywhere on these exchanges. And a lot of people are requesting it, and ask, “Hey, I want to learn more about options.” So this is it, right? We listened to you. We launch newsletters accordingly. And this is a newsletter I know a lot of you wanted, I know Luke wanted. I think it’s a great fit, and it already is a great fit based on the feedback that we’re getting. So again, interested, go to curzioresearch.com.
Frank Curzio: Questions, comments, feel free to email email@example.com. Appreciate all the support, as always. I’ll see you guys next week. Take care.
Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.