SAM's Investment Outlook for 2025

Hello and welcome. I'm Austin Root and on behalf of all of us at SAM, thanks for joining. With me today are Portfolio Manager and Deputy Chief Investment Officers, Michael Joseph and Mario Valente. Michael, Mario, thank you. Michael Joseph and Mario Valente Absolutely. Glad to be here. Michael Joseph Thanks for having us, Austin. Michael Joseph Absolutely. No, it's going to be great. It's going to be a great event and we thank you at home for joining. We're going to make great use of your time. You know, we have three groups of audiences that are joining us, Michael, Mario. We have our clients. We've got hundreds of clients that signed up for this event. We have friends and prospective clients that kind of know us pretty well. And then we have, you know, a set of folks for whom SAM might be a little bit newer. Michael Joseph But I think that what we're what the three of us are going to go over today are going to be really valuable for all of those sets of folks. So let me just kind of quickly go through that list. In this investor briefing, we really want to do four things. The first is we want to review kind of quickly, but review last year and how importantly, you know, some of the movements of certain asset prices impact our outlook for, you know, markets going forward. Second, we want to go into detail about what the three of us and Sam think are the seven most important factors impacting the market right now and kind of our outlook for those. Third, we want to provide our specific actionable game plan for how to invest in 2025, kind of no matter what the market throws at us. And then finally, look, we're going to have a truly live live Q&A session. with all of you at home and try to answer as many of your questions as you have possible. Guys, does that sound like a good way to go? I like it. I know there's a lot to cover. So I say we get to it. Let's do it. Great. Let's get started. Fantastic. So we're really, you know, I think that, you know, the concept of freedom or liberty through wealth is going to be ever, more important. So as, as we think about our outlook for 2025 and beyond, it's really for folks, helping folks establish the right investment goals, meet those investment goals, and ultimately grow their financial freedom and liberty through wealth. So that's what we're looking to do. You know, as we look at last year and do a year in review briefly, you know, what worked? Well, the list of things that worked very well was almost a mirror image of things that didn't work well. Large caps did well. Small cap stocks did poorly. High multiple growth stocks well. Value low multiple stocks poorly. Technology, communication, consumer discretionary, sort of pro-cyclical type of things did well. Healthcare stocks, energy stocks did not do well. The US, as you guys know, massive massively outperformed international stocks on average. Kind of riskier high yield bonds outperformed and then kind of safer mortgages and mortgage backed securities didn't do as well. And then, as we all know, gold and Bitcoin did very, very well. And oil and most commodities actually trailed those results. I think the important thing to think about, though, and the reason that we put this chart up, not just to sort of check off what did well or what didn't, is the sort of natural visceral reaction for folks is that there's going to be a mean reversion right away. And so that list of things that worked well last year, you should be underweight those and you should be overweight, the list in red going forward because things get back to normal over the long term. Well, here's the problem with that. This list is a list of what did well in 2023. And it also is a list of what did well in 2024 and what didn't do well. So, guys, if, again, if you had set yourself up to be underweight, all those things in the left at the beginning of last year, you would have massively underperformed because the spread between well and didn't well even expanded even more in 2024. Yeah, I think it is a good reminder that, you know, as investors, sometimes we compartmentalize and think of things from the calendar year perspective, but the market doesn't necessarily follow that. And just because we flip the calendar, it doesn't mean that this mean reversion happens automatically. And I think it's also just to add a finer point, you know, mean reversion isn't automatic, right? If it was, then investing would be extremely easy, right? Oftentimes, a catalyst is required in order to trigger that reversion to the mean if it happens, right? And hopefully, you know, as we progress through the conference call webinar today, we'll talk about maybe some of the catalysts that we see kind of going forward in 2025. Both great points. Could not agree more. Yeah, it's stocks don't stop going up because they're expensive and they don't turn around and start going up after going down because they're cheap. A lot of times you need something in addition to that. And so let's kind of go to that next point then, which is, okay, as we move forward here in 2025 and beyond, how are we thinking? Should we be bullish or bearish? What say you, Michael, to that? I'm going to take maybe a safe tactic here, but I'll say I'm cautiously constructive. Gotcha. And then, Mario, how about you? You stole my line, Michael. But I'll also say, too, that I think it's important to at least talk about, and hopefully we'll get that across tonight, some of the notions or some of the dynamics that drive bullish sentiment or bearish sentiment in the markets, right? I think it's important for professional asset managers to at least recognize some of those dynamics that underpin both the bullish and bearish sentiment. That's right. And I think I agree with both. I think, look, as we frame it, as we're looking ahead, there are parts of the market, there are parts of things that we're very excited about, and there are things that we're very cautious about. And really, to lead to the next part of this, how you feel about these seven factors that we're about to talk to will determine whether you're bullish or bearish on the market. And so without further ado, let's go into those. You know, guys, I think this is not, this is in our eyes, the seven most important things. It's not a stack ranking per se, but I will say that some of the things on top are top of mind for me right now and for us right now. And I got to tell you, artificial intelligence is right up there, specifically artificial intelligence spending by the mega cap technology companies. So, you know, just to put some numbers around this. If we're just talking about the mag set, Magnificent Seven, and then I'm going to exclude NVIDIA, because they're an arms dealer to the other ones for all of this CapEx spending. And then I'm going to exclude Tesla because a lot of their AI spent, a lot of Elon Musk's AI spend is done not only at Tesla, but also at XAI, at GROC, at SpaceX, you know, Twitter. So leaving those aside, if you just look at the other five mega cap companies, the largest companies in the world, they spent $150 billion on CapEx in 2023. A lot of that on AI. Last year, they upped that by 52%, spent $240 billion on CapEx. And they have guided now to up that by another more more than 50% this year to more than $360 billion. So these are all B, I hope I didn't say an M in there. Billion dollars of spend. And so, you know, I think coming into this market, especially with the gains seen in 2024 and late 2024, when nothing else in the market worked except for these mega cap companies, the thesis in the market is powered by the belief that this AI spend will be productive. It will produce a good ROI, not only for the mega cap companies, but, you know, a lot of them are supplying a cloud infrastructure for other people to invest in AI. And so that this is going to globally be or produce positive GDP, positive growth. And again, the spend will be worth all of this, all of this capital. I think that's the, that's a huge question right now. I mean, we've, we've obviously got, we've gotten things like Deep Seek, which was a open sourced inference model that, that, you know, I think some people are concerned, built in China, built cheaper on, on lower end, but also lower end machines and GPUs, but also, you know, producing reasonably good results. Does that mean that the rest of the world and market doesn't have to spend quite as much as they thought before? That's question, one. I think the other question is, are these world's best businesses, the mega cap companies that were so great high margin, so free cashflow generative have the, as the nature of their business changed? I'll just give you one data point. These five companies I talked about, their free cash margins in 2023 were 25%. So meaning that every dollar of revenue that they generated after all expenses and taxes and capital outlays, 25 cents of it came into pure cash, incredible businesses. We'd all, we all want to invest in those type of businesses that are so free cashflow generative. By the estimates of, on CapEx that they put forth themselves, you know, Apple being the one that has most recently said how much it's going to spend, they said 500 billion over the next five years or four years. By that, by their, by their guidance, free cashflow marginals, is down to 19%. So that's really a huge question. Are these businesses less good? So do they, they become less of a leader in the market? And is the AI spend kind of less robust and productive as than we first thought? I'll stop there. Curious to get your guys' take. I'll jump right in there, Austin. I think that's certainly top of mind for me, right? Whether or not adequate ROI can be achieved on these CapEx programs. But also, you know, a kind of a derivative of that, and this is some, something we've discussed here in the investment team too, is yes, we know that the mega seven or the large, the large text will be increasing CapEx significantly in the 2025, greater than consensus expectations. Who will benefit from that, right? There are lots of, there are lots of other large and medium sized players that will benefit from those enhanced CapEx programs. And so we've been spending a lot of time here in the investment team trying to figure out who those players will be, right? So, so at the same time, even though the market is struggling with this question of whether, whether or not adequate ROI can be achieved, in the meantime, there will be companies who will benefit from these CapEx programs. Yeah. Michael, what do you, what do you think? Yeah. A few thoughts. One is, um, anything you say about AI. I feel like it has that early internet feel to it where 10 years from now, no matter what we say, it has a high probability of not aging well. So kudos to you for being brave enough to tackle it out of the gates. Uh, but the way that I think about it, something that resonated with me and I'll have to paraphrase them, but, uh, Alphabet CEO said something to the effect of, you know, there's a lot of risk in this spending, but there's even more risk if we don't do the spending and potentially get it. leapfrogged. So that's how I think about it. That's something that I think at least for this moment in time, you have to kind of accept that if you're going to be a shareholder of these companies is yes, hopefully you get a nice ROI on it. But at, at a very minimum to me, I think of it as like an insurance policy, uh, that, that keeps you from becoming obsolete, which is obviously not what you want as a shareholder. So that could certainly change. You mentioned DeepSeq. I mean, we're, we're still in the early days here. Maybe they find that the cash Apex isn't necessary, um, to the degree that they're spending now, but for right, right now, I think that's just, just part of life. If you're going to invest in these companies. Yeah, I think that's right. I think that's a great, great points by both of you. Um, let me, I'll pass it on Michael to, to hit the next couple of these. I just wanted to just, just reiterate a couple of things. One, these mega cat companies are very good businesses and we own most of them on behalf of clients and different strategies. But we own less, less than the S&P 500. We are underweight them given the valuations and given frankly, very high expectations in many of them coming into the, the, the, the year. So just wanted to flag that. Yeah, it's a good flag. So, um, I, I would just keep going down the list here, uh, if we can, because to me, the, the, to the jump out is Trump agenda and inflation. And I think that, uh, you can talk about those simultaneously. So, you know, a big part of, of what Trump has said is, uh, in his plans is of course, tariffs. And, um, yeah, I think that that has the potential to be inflationary. I'm well aware that there's academics out there that have, uh, pointed to his initial tariffs in the, in his first term and said, well, those weren't really all that inflationary. I think that's debatable, but, uh, even more important, I think you have to consider the timeframe that those, those occurred. It was, um, you know, overlapping with, uh, with the height of the COVID pandemic where we had global supply chains absolutely collapse. And then we, of course we had, um, massive inflation after that. So I, I just think it's a little too murky. I don't think you could separate the two and say, well, if that hadn't happened, this is what would have happened. So not a, not a great reference point to, to, um, try and envision what things will be like in this term. Uh, in addition to that, um, the, um, the, the scope of these tariffs is a lot larger than the first term, um, first, first term tariffs covered about 4% of us imports. Um, at least the tariffs that are being talked about now, I've heard 10 to 20% universal tariffs, 60% for China. We've all heard 25% for Canada and Mexico, uh, lately. And, and Trump just recently said that he's planning to go forward with those. So, um, the, the scope is, is massive. I think it's hard to say exactly what that means for inflation. The last president that was this excited about tariffs might've been William McKinley. And that was over a hundred years ago. And, um, you know, we had a much different economy then, and we have the gold standard and it does a lot, a lot different, but, uh, I think it's logical to say that if we, for example, have a tariff on a Chinese good and we're not capable or we're unwilling to produce that good here at a, at a competitive price, then the price of that good is, is going to go up. It just, just makes sense. Uh, so there's the tariffs. Immigration is another, uh, big part of the Trump agenda. He said that he would, uh, deport 13 million, uh, undocumented immigrants here. Give you an idea of what that means for the labor force. Um, these are just estimates because nobody can know for sure, but it's estimated that half of our farm workers are undocumented immigrants, uh, quarter of the construction industry. So this is, um, in my opinion, absolutely inflationary on multiple fronts. If it happens first, you have, um, supply shocks because if all of a sudden those workers disappear, there's nobody to, to get that work done. Supply shocks will be an issue, but longer term you're removing workers from an already very tight labor market, um, longer term wage inflation to try to fill those roles. If they can even be filled is, uh, is, is going to be an issue as well. So, um, both of those, I think, uh, can potentially drive inflation, but it's not all inflationary. I mean, there's parts of the Trump agenda that I think could, could go the other way and be deflationary. And I'll just mention one in brief. He's talked about, um, helping to end the war in Ukraine. And I think if that happens, it could absolutely be deflationary. So look, we're still early days, uh, in, in the administration and with these tariff talks, we don't know what's going to happen because it hasn't happened yet. We're just watching very closely, but I think it definitely has, uh, potential to, uh, to impact stocks. So it's one we'll be watching closely. Thanks for that, Michael. Yeah, I think I agree with all of that. I think, um, I I'd say just a couple of comments. One, you didn't mention Doge. Um, so I, I think, uh, I think that, you know, I think we can all agree that, um, efforts to reduce waste, fraud, abuse makes sense. I mean, that's, that, that makes a ton of sense. And if that increases productivity, um, for the government, and for our economy, it can be, it can do so in a, in a way that's not necessarily inflationary. Um, but I think, I, I think that we should be worried about inflation more than, um, maybe we thought a year ago. And so for that reason, we have focused on companies that have pricing power. We'll get into that a little bit more later, but it's not, inflation is not necessarily bad for markets, for equities. If you have, if you own the right assets. Um, great. Um, Mario, what, what, what are some things that you want to flag for us? So I think, uh, and, uh, you know, a lot of these things bleed together, like Mike, Michael emphasized a few minutes ago, you know, I think with inflation, what's I like to, I like to, I like to observe kind of, um, paradoxes in the market. And so for example, you know, about a week ago, the university of Michigan released our latest survey about consumer sentiment, U S consumer sentiment. And, uh, and, uh, I think it showed on that, on that survey that, uh, U S consumers expected inflation for the next 12 months to be about 4.3%, which was a pretty huge step up from the last survey data point, which was about 3.3%. So, so I think markets were down considerably that day when the, when the survey came out and whether that illustrates does that obviously, you know, collectively U S consumers are, are really concerned. About inflation for all the reasons that Michael, Michael stated. Um, but, but the paradox of that, the other, the other kind of side of the coin is looking at the 10 year treasury yield. Right. I think what's so interesting to me is that the, over the last few weeks to a month or so and change, the 10 year yield has been dropping. In fact, I think today it's about 4.29%. And you can kind of, you know, me reading the tea leaves into that is the bomb that's not a, you know, I think it's about 4.29%. Um, and I, and ultimately I think he wants, you know, the fed to continue on their, on their easing of their monetary policy. And if, if he can, if he can do that by perhaps, you know, weakening the job market, which is one of the two mandates, the federal reserve, right. Then indirectly he kind of gets what he wants. So, so I think it's just interesting to, you know, I, I agree with everything that Michael said, but also there's some thing going on in the bar on the, in the bond market that might be, that might be completely contradictory to what U S consumers are fearing as indicated by the U S university of Michigan consumer sentiment survey. Mm. Mm. Mm. Um, yeah, I agree. Yeah, I agree with that. It's, it's definitely not any one thing. Maybe Mario, maybe, maybe we'll keep ticking down this list here. Um, you mentioned, you mentioned, um, uh, uh, interest rates and the feds hit the next couple here. Right. Right. So, you know, so rewind the clock back six months ago or so and change was the last time the fed cut rates. And I think that was the low point of the U S 10 year treasury. I think it, I think it bottomed about 3.61, 3.62%. And over the subsequent six, eight weeks or so, it spiked, it spiked up to 4.8%. So arguably that's the bond market saying that, um, that probably shouldn't have cut rates. Uh, that inflation was probably top of mind for the bond markets. Um, and we've seen it trickle down since then. Right. So, um, I think one of the, I think the last thing, probably one of the last things the fed wants to do is reverse course and start tightening again. Right. Because if it starts to tighten again, because of, because of explanation, you know, arguably their, whatever, whatever credibility they've managed to claw back in the last X number of months or years is art would all arguably evaporate. Right. So they don't want to do that. Um, and then, and then on top of that, you've got, you know, you've got Elon Musk and the department of government efficiency, you know, tweeting. At the federal reserve, you know, wanting an audit of the fed, uh, you know, questioning their actions. And so I think, Powell probably is a little bit worried about, um, making the wrong step because he probably feels like he has these other powerful forces or entities kind of looking over his shoulder. Uh, so, so I think, I think, you know, we're, we're in a very curious time right now for trying to anticipate or trying to, you know, correctly guess what the units, what the U S federal reserve will do in the next six to 12 months. But I, I think, um, and this is probably market consensus. Is that they'll probably, um, only maybe, maybe do one or two more cuts for the remainder of this year. Um, and then probably wait it out. Right. And see how inflation plays out. Because again, like I said, the last thing they want to do is admit they were wrong and start hiking rates again. Right. Right. Yep. I bet we get one by the end of the year. That's it. Yeah. Um, interesting though. I think the point, um, not that this is on a list of ranking. I think the, um, not that this is on a list of ranking again, but, you know, the Fed was probably top of mind. First thing to talk about in 23 and certainly it's end of 23, 22 into 23, you know, it's not right up there right now. Um, it's really those top three and, but really all the top four lead into the economy and markets often will follow economic, uh, growth or decline. And so that next thing, Mario, is the economy. We, you know, we got to understand where the economy is going, uh, to know where the market's going. Right. And so far, you know, from a 10,000, you know, point of view, foot point of view, economy is doing just fine. Right. GDP growth, GDP growth, doing just fine. Jobless, you know, unemployment rate, right. Where we want it to be. You know, so if you kind of just take a snapshot or a photograph of the current state of our economy, I would argue it's doing pretty well. as evidenced by other factors, looking at the stock market, et cetera. Right. Um, but, um, you know, think things that I worry about, about the economy, you know, going forward, you know, to what extent will these, you know, um, the departure of undocumented individuals, as well as, you know, federal workers losing their jobs, you know, have an impact on GDP growth and three, you know, three Q and four Q. Right. Going forward. Right. We, that, that, that, that remains a big question mark, I think, in my mind. No, I agree. And I, I think, um, the signposts are continue to be favorable for overall economic growth and productivity and, and, um, and activity being positive, but there are pockets of the market and certainly pockets of consumer, uh, that are weak and, and, and struggling. So we'll have to figure it out. Um, just to hit these and get onto our next, next topic. Um, look, geopolitics, black swan events, hard to foresee, but certainly can shake the market, particularly when it was priced with high expectations as it was coming into this year. Um, we'll see on that. And I think this last point is just worth, worth pointing out, given that we've had a little bit of a change of leadership this year. Um, coming into this, the S and P five, the S and P large cap growth index, those companies in the S and the large cap growth, um, were, uh, were, uh, over, uh, over their long-term average valuation by 50%. So huge disparity. Their multiple was 50% higher than it was on average over the last 25 years. While the S and P small cap value was 20% lower than its long-term average in terms of multiple. So, you know, it's not that the, all the entire market was expensive, just the part that a lot of people were, were hiding out in. Now, some of these things have, have, have, have mean reverted at the beginning of this year. International stocks are outperforming, um, uh, domestic stocks. Value stocks are by and large outperforming growth stocks that the mag seven is underperforming the S and P four 93 after that mag seven, but it's not everywhere. Small caps are still trailing. Um, and in fact, small cap value, small cap growth. So there are, there are still things that we'll have to see. These are all super important though. I think, I think the way that we're approaching the market is to do these five things to kind of protect and, and produce favorable results kind of no matter what the market throws at us. Um, before I get there though, one sort of like key point that I think we know, but I, I want, uh, uh, clients and prospective clients to know that, you will go up in lockstep. So fundamentals matter over the long run. So point one that I want to hit, and then I'll hand it to you guys is, um, look, there are, I think the way that, how did you exactly frame it, Michael? Um, cautiously constructive. Is that, was that? That was it? Yeah. Almost as wishy-washy as you can get. I think the environment calls for it. Yes, that's right. I don't, I don't know that it's wishy-washy. It is. We are constructive. But we're not all in, um, by any stretch. And it's prudent to hold some extra dry powder right now. We, we do that across all our strategies in the form of three things. Actual cash that's generating a reasonable yield, short-term U.S. treasuries that are a proxy for cash and then gold and gold miners. Um, so all of our strategies own at least one, if not more of those things. I think every of our strategy owns a gold or gold miners other than our treasury strategy. So we like those assets as, as a store of value. If we get into a market that dislocates when people are selling world-class businesses and assets at fire sale prices, we want to be able to pick those up without having to sell something else. Um, so we want to have that, that, um, opportunity. We do not want to be only in cash. Um, cash, um, cash, um, cash is a depreciating asset. Um, we've said it many times, but, um, the value of your dollar is going to go down over time in part because of some of the things we talked about on the previous slide. Um, you know, the Trump, um, the Trump goals may be pro growth, but they're certainly not, uh, reducing spending. So we expect the value of our dollar, uh, to decline. Fiat currencies across the globe to decline. So you need to do something else with the majority of your capital. And with that, I'll, I'll, I'll hand it over to Michael. Thank you. Yeah. So, uh, another way that we're approaching investing this year is, you know, for almost every investor, we think that the core of your portfolio should be invested in productive assets. And frankly, that's not just an idea for 2025. We think that's a timeless idea that, that, um, that, that should be core for most, most investors. So we're going to talk about what those productive assets are and, and how we invest in them. Uh, thankfully, you know, there's more than one type of productive asset, but thankfully one of our favorites is open to all investors and that's publicly traded common stocks. Now, of course, we're not talking about every and all, every stock and all stocks. We are talking about a very specific type of, of equities and that's world-class businesses. So these productive assets are stocks of world-class businesses that we believe can grow at a high rate for a very long time. And we found that, uh, a lot of these, uh, productive assets, they share common characteristics. So I'm going to walk you through what those are. First, they tend to be capital efficient businesses. And that simply means that they're able to grow without a lot of capital being put back into the business. They're durable growing franchises. Some of you will have heard Warren Buffett talk about having a moat around a business. Uh, this, this is related to that. We want businesses that are in it for the long run, not something that can be, you know, replaced next year because somebody builds a better mousetrap. Attractive profit margins and returns on investment, pretty self-explanatory. We would rather have a business that keeps more of what they earn. That way they can reinvest it in the business or return it to shareholders. Talented, effective leaders. And particularly with smaller companies, we like to see that they have some skin in the game. This is a harder one to measure, right? You can't just pull up a financial statement and immediately know if, if a company has a talented leader at the helm, but there are ways to find out, uh, you know, who, who, who's in charge. And if, if you should believe in what they're doing, you can look at how they've done with previous companies that they led. You can look back, you know, maybe a few years, see what they said. You know, is their plan always changing or do they have a good plan that they stuck to and executed well? Are they always moving the goalposts? So these are, these are things to look at, um, with some companies that we own, we are in regular touch with management. So we take that extra step and spend that time because we think it's important. So we're, we're in communication with some of the management teams of companies that we own pretty regularly. And then reasonable valuations, you know, it could be the best company in the world and check all these boxes, but if it's too expensive, we're not going to go. So, um, this is what we look at for productive assets. I'm going to share a case study with you about a productive asset that we're pretty excited about. But before we get there, I want to provide some context because the way that we invest that the type of securities we own, uh, it really depends on our, our strategy and what we're trying to achieve. We are not a one size fits all type of investment firm. We have clients that come to us for different reasons. Uh, with different situations that are trying to achieve different things. And so for that reason, we have several different strategies. One of them, and the one I happen to be the portfolio manager for is the income strategy. And this strategy is meant to generate reliable income, provide growth and up markets and add some protection in, in market downturns compared to the typical wall street income portfolio in a few ways. One is the type of things we invest in. Um, you know, we're not just buying a dividend paying stocks and bonds. That's certainly a part of the recipe, but we own other assets like preferred stocks, real estate trusts, uh, closed end funds, just to name a few. I mean, the income investment universe is vast. So we want to, uh, pursue, uh, all the opportunities that we see that are attractive to us. In addition to that, we look beyond just dividends and coupon payments. Those are certainly important, but we take a shareholder yield approach. And what that means is that we look at all the ways that companies return capital to shareholders. So dividends are great. We're big fans of dividends, but we're also look at, for example, share buybacks and also, uh, debt reduction, all the ways that companies are returning capital to shareholders. So it's a, it's a broader approach that we take. Uh, we're also very interested in companies that are growing their dividends. Like high, high dividends are great. Growing dividends to us are even better. We don't want to own the proverbial melting ice cubes, which is, you know, a company that maybe has a nice dividend, but it's not going anywhere. The company is not growing. Maybe their business is actually shrinking. So we want a nice dividend. We want nice yields, but we also want to own companies that are growing. The number one question I get about this strategy is what does it yield? So we have some comparisons for you at the bottom here. Um, you know, the, the, the market is, I think by almost any measure you can think of it's, it's expensive these days. And part of what, what comes with that is, is the dividend yield is pretty low for the S&P 10 years been moving around quite a bit as Mario highlighted a little less, uh, these days, but, um, but, but, but, but quite a bit more than an S&P. Sam income portfolio is, uh, is besting both of them right now. And this is, this is pretty typical historically. It's a little bit elevated now, but I would say on average, we're typically yielding around three times what the S&P 500 yields. That's, that's sort of a historic range. As you can see, sometimes we're above that, but that's, uh, that's what you could expect historically speaking. So I wanted to give you this, this framework because the investment I'm going to talk about next would fit into an income type of strategy and that's Vici. So there's a, uh, a saying in, uh, the gambling world that the house always wins, but, uh, Vici is an opportunity to, to bet on the house. They are a triple net lease REIT and triple net lease means that the tenant pays, uh, taxes, uh, insurance and maintenance. Uh, and they own 93 properties, uh, primarily casinos. So they are not a casino operator. They own the, the literal casinos and, um, and then the operators rent these casinos from Vici. So again, they're, they're not paying for the insurance, the maintenance, the big part of what Vici does is sit back and collect checks. So it's a, it's a nice business to be in. Uh, some of their assets include trophy assets on the Las Vegas strip. They, uh, own Caesars. They own MGM. They own the Venetian. So these are mission critical properties. They, their, their tenant for these casinos is highly unlikely to up and, and leave and go somewhere else. The casino is obviously a, a, a key mission critical part of their business. So, um, we talked about moats earlier. This, this is certainly a moat for Vici. So in addition to just kind of having a cool story about what they do, what, what else do we like? Well, for starters, uh, it has a nice valuation to it right now. It's 13 times price to adjusted funds from operations for folks that maybe haven't looked at, at REITs as closely before. Um, funds from operations is usually how you would look at a REIT. It's an accounting thing, but, uh, earnings, um, are usually not very informative when it comes to, to REITs. Uh, so we use funds from operation instead. And this is, it's a historically cheap time for Vici. Uh, usually it trades above 13. And, uh, it's also cheap compared to their triple net lease peers. So nice valuation, relatively cheap, but there's a lot of cheap investments out there. Sometimes they're cheap for a reason. We don't want to own everything that's cheap. We need more than that. So let's keep digging. Dividend yield 5.7%. As, as I showed you, the typical S&P index is yielding, you know, close to 1%. So this is a great dividend yield in this environment, but importantly, it's a growing dividend. It's grown around 8% annually. And how are they able to do that? Well, they've grown their funds from operation by almost the, the same amount, uh, over the past five or six years. And this is the part that I like the best about Vici that we'll get into now. You know, investing, uh, is, is difficult because you try to ascribe a price today for what the future looks like. And of course the future is difficult, uh, difficult to tell. We, we just gave you seven reasons why. Uh, but we have tremendous clarity into Vici. And what the future could look like. And the reason why is they have long-term leases, uh, that, that are in place right now. When I say long-term, the weighted average, uh, term for these leases is 41 years. There's not a lot of stocks out there that you have an idea of what the next 40 years could look like, but with Vici, you absolutely have that. In addition to that, they have rent escalators built right into the, the leases. So just like a landlord raises rents on tenants, Vici is raising their, their rents. So, you know, we expect them to be active. They have to make acquisitions, but if they did nothing, we know that they're still going to, to see growth because it's built right into the leases. In addition to that, a lot of these leases are tied to CPI. So inflation goes up, um, the revenue going to Vici goes up as well. And so if you're a, an investor that's concerned about inflation, I mean, there's worse ideas out there than to own a company that is going to see more revenue and more earnings, the higher inflation goes. So pretty interesting one. Uh, to me, uh, hope that folks think so as well. Uh, but we wanted to share that with you as an example, Austin, I know that you, uh, are a big advocate of productive assets as well. So I don't know if you have anything you'd want to add here, if you want to keep things moving. No, I think it's fantastic. Maybe I'll just do quickly. Like, look, I think as you think about your total return for Vici, you know, you're getting that 5.7% yield, um, on the current price. But to your point, if you had a bond, most bonds, frankly, trade, trade below that yield right now, bonds are very expensive relative to, to stocks right now, even though stocks are expensive, but we expect that dividend to keep growing. So we're kind of thinking 13, 14% total return annualized per year, assuming no valuation improvement. And yet, you know, when people kind of appreciate how steady Eddie this business is, you could see that valuation go up. So I think there's multiple ways to win here. Really like it and agree that this is one of these that kind of has this, um, pricing power along with, um, uh, you know, CPI inflation going up, then they're going to, they're going to, they're going to earn more. So love it. Um, good. So let's keep, uh, let's keep rolling. So what's our third point for how to invest in 2025? This is not an environment to stretch for those highest possible returns in our eyes. This is an environment to, to prioritize favorable returns relative to the risk you need to take. And so, um, you know, one of those areas where we think that it's really attractive, attractive risk adjusted returns are in private credit. So alternative investing in private credit. And, you know, I can, um, since the fund is closed, um, since the fund is closed, I can say that we at Sam, um, you know, Mario was on that team with me and the rest of the investment committee put together a, a fund of, um, due diligence and, uh, diversified private credit managers investing in direct lending, very attractive opportunities to be strategic capital to growing small and middle market companies. And our outlook on that fund is equity like returns with a lot less risk. Many of those managers had, you know, less than 1% losses. A couple of them had, have had no losses over the history of their operating life, um, even in downturns. And so our idea there's net of all fees, um, our expectations continue to be, you know, kind of low to mid teams returns net on an annualized basis net to investors. Um, that fund is closed. And for clients that are in that we've, um, you will get today later today, a call of capital. Um, so that after this capital is called, you'll be about two thirds invested. Um, we started the fund last year, you know, kind of was hoping to get by up to two thirds level by the end of the year. It's happening a couple months later. Um, that's kind of the only negative on that, um, is that you do have to be willing to start with that. Sort of be illiquid and kind of wait for the capital to be called. Um, but if you're an accredited investor and something like that makes sense for you, it is interesting to you. We would love to talk with you about whether something like that makes sense. So in the Q and a, if you, if you're saying, gosh, alternative investing and, um, private credit investing in particular, something I want to learn more about, um, go ahead and put in the Q and a chat. That's something you learn more about. And again, you need, you need to be an accredited investor and we could talk more about opportunities that may, uh, make sense for you. Um, but I think more importantly, what's something open for all investors are owning those types of businesses, um, that, that Michael talked about the world's best businesses. And, you know, I, um, when COVID hit and, and markets were, were absolutely tanking, um, we at Sam have a forever strategy that, that, that, that, you know, looks a lot like that in our eyes has, has some, um, pluses to it. But the idea when we put it together was to build a portfolio of today's best businesses that at the time we're trading at absolute fire sale prices. Now, fast forward five years and markets have gone up. Obviously it's not as easy to find, uh, stocks that are trading at fire sale prices. Um, so, so what we're really focused on is first off, they need to be at least trading at reasonable prices. Number one. Um, second, uh, the other part of that is that we need to feel comfortable with them being durable franchises. Um, so that if we get into downturns, you know, we kind of, sometimes these downturns are excellent opportunities for the best businesses to gain market share and come out stronger on the other end. So we're trying to fill up the portfolio with those things. The other piece of this is to be forward looking and not just focus on what today's best businesses are, but the ones that we think will be tomorrow's best businesses. Um, and so that's where our forever strategy does. We also have a sister strategy that's called venture growth and that will own some of the same businesses that we believe are tomorrow's best businesses. Um, but it will also own, um, some businesses that are not obviously, tomorrow's best businesses. They're earlier in their life cycle. They're growing nicely. Um, we know management, we, we understand that what they're doing, um, but it's not as clear. They're not household names. And so, um, in the spirit of that, I want to provide a case study for, for a company that I think is as a world's best business, um, but is not, certainly not a household name. Um, and so, uh, it, but it is on a risk adjusted basis. A truly highly attractive business. And so that this, this company is called a Legion and a Legion provides locks, keys, doors, um, uh, electronic, uh, openers and closers, basically solutions for all sorts of, uh, uh, entrance, um, products, entrance products. So why do we at Sam think this is an attractive risk adjusted, uh, company? Well, first off they own strong brands with market leading companies. Um, you know, you can see some of the names of, of the locks and that you've seen, um, you know, Stanley, um, Schlage, et cetera, Von Dupre and et cetera. Um, market leading positions in these companies. This is a business that actually has very favorable secular tailwinds. So safety and security is not something that people are, are skimping on. In fact, it's, it's something that's more important as we kind of get into a world where, you know, unfortunately, you can't necessarily trust, uh, uh, uh, you know, people enough to keep your, your house or your office building unlocked. So those things are more important and you want to spend more on that, not less. The other thing is, um, uh, entryway systems and locks and doors are becoming smart, um, and they're becoming electronic. And those things are actually higher value add higher margin, higher prices for a Legion. These are attractive businesses. This is a diverse, sticky customer base. No one customer is any more than 1%. I guess if you were to say, okay, Home Depot is 4% of their business. Lowe's is 4% of their business, but those, the end customer that are individuals or, or builders. Um, but it's, it's diverse across different types of buildings, institutional, you know, schools, um, uh, say, uh, medical buildings, uh, commercial, commercial real estate, and then residential real estate. Um, the other key piece is that half the key pieces that half the business is replacement and reoccurring business. And so they have an installed base as you get an installed base. It's really nice, uh, recurring revenue. Um, look, uh, the stock has been fine. It hasn't been a great performer because they've actually had some, um, headwinds in, in two of their businesses. So in the industrial business, schools and hospitals that keep keeps clipping along pretty well, um, normalized pace, commercial and re and, um, residential is actually been, uh, been weaker. Um, you know, we could get into an environment, particularly as Mario pointed out with the 10 year coming down where, where mortgages come down, where, where those headwinds could inflect in the tailwinds. Um, this is a well run business. Um, uh, management is a great capital allocator. One of the things that I would have added to, to Michael's list is we want that well, these, these smart managers, um, that with skin in the game that are good capital allocators, these guys do nice tuck in acquisitions. Um, they have a, um, uh, 16% free cashflow margin, which is great. 50% ROE return on equity of 50%. So every dollar they invest, they generate excellent returns on, uh, trades at a, a, a mid teens multiple for what we think is a longterm. So that's a massive discount to the SMP, even though we expect earnings over the long run to be, to, to run fast. faster than, um, than the SMP earnings growth. So Allegiant, um, great risk adjusted return case study. Mario, take it away. Sure. So last point here, staying nimble, right? This is something that's, that's at the core of our investment philosophy, right? Is, is remain, is being tactical with our investments across sectors, across asset classes and recognizing, right? There are, there are, there will be certain times when other, when sectors or asset classes will appear more attractively valued than others. So it's our job as, as professional asset managers to recognize when that, when that divergence occurs and to capitalize on it. Um, and, and part of that, part of that tactical investing, we would also emphasize involves the ability to invest, um, idiosyncratically. In other words, finding investments in the marketplace, that have very little correlation, low beta to the markets, or perhaps may have, maybe, maybe have zero correlation to the markets because these investments are, are special situations or have very unique characteristics associated with the underlying investment. So we'll talk about a couple of those examples going forward. So the first thing, the first one I want to highlight is, is merger arbitrage. So, so very simply, the act of merger arbitrage is, oftentimes when, when a company acquires another company, the target, the target, the target stock price trades up to, but not quite the acquisition price. There's typically a spread associated between the two, right? And that spread is really a function of the perceived risks surrounding that transaction. Those risks could be capital raising risk associated with the acquirer. They could be shareholder approval risks associated with the target. Um, they could be regulatory risks associated with the target. Um, they could be regulatory risks associated with the acquire recognise risk associated with the COR. right? Whether or not we're in a regime where M &A is either encouraged or frowned upon, right? And so that spread could be anywhere from 1% to 30%, right? Based on the total perception of those risks. And as you can imagine, if you buy the stock of the target, right? Let's say it's a 10% spread to the acquisition price, right? You're effectively making an investment. You're making a bet, right? That acquisition will close without incident and on time, usually three months, six months, nine months down the road. And the reason why this particular investment sleeve or this theme is so lucrative and so compelling is that mergers are bound to close by merger agreements, right? Merger agreements are typically 100 page legal documents that bind the transaction, right? So it effectively makes it very difficult for an acquirer to walk away from a transaction. In other words, if they have cold feet, most of the time, I would say 99 times out of 100, too bad, right? And so as a result, right, if you have a basket or a sleeve of these mergers, you're of investments, you're effectively, you're effectively, you're making investments in names that you think these transactions will close. And as a result, right, as a result, whatever happens in the overall markets, whether, you know, we could, if we see greater inflation, or if the Federal Reserve changes its monetary policy, or something geopolitical occurs, it will have no bearing on these merger events. And so a great illustration of that is is on the graph on the graph on the left, right? On the table on the left, what you see there is days over the last five years, when the S&P 500 was down at least 1%, as indicated by the blue bar, okay? And the orange bar, what the orange bar represents is kind of the universe of merger of investments on those same days, right? I know it's a little hard to see, but as you'll note, right, almost always, those orange bars on those big down days, those orange bars are much smaller than the blue bars, okay? And in fact, you'll also, you'll probably note if you squint your eyes a bit, there are a lot of times when on those days when the S&P 500 was blue, right? Those orange bars are positive, right? So you have the ability to generate positive performance, despite the fact that the overall market may have a down day, right? Those are the kinds of investments that we love. So a great case study of this particular merger of investment dynamic is Ansys. So just over 12 months ago, Synopsys, which is a software manufacturer, which primarily provides their software products and services to semiconductor manufacturers, they announced the $30 billion acquisition of Ansys. And it was largely a 50% stock, 50% cash acquisition, okay? And over the next probably six, seven, eight months or so, the spread, the spread of the transaction widened to about 23%, 24%, right? Because there were fears in the marketplace that Synopsys would not be able to close this transaction. due to regulatory concerns, okay? Well, at 23%, 24%, which is kind of around the end of the summer last year, that's when we started to roll up our sleeves and figure out whether or not the market was validated in its concerns or whether they were overstated, right? And ultimately, we determined they were overstated and we felt like a 23% to 24 % deal spread for a merger of investment had tremendous, risk-adjusted return potential for our clients. And so we decided to underwrite the investment at that time. And over the subsequent five, six, seven months, what you've seen is Synopsys and Ansys working together to kind of quell the concerns of regulatory bodies in Europe, in the UK, in the US, in terms of ensuring that this combined transaction will not result in some type of monopoly. And so as a result, the deal spread over the last five to six months or so has kind of compressed to around 10%, 11%, right? Management teams have indicated that they still see the transaction closing by the second quarter of this year. So we think that's still extremely attractive. But the last thing I'll emphasize, right, is that since Synopsys announced the acquisition of Ansys, Ansys business fundamentals have improved significantly. In other words, Synopsys is getting a steal, right? That the terms that they struck to acquire Ansys are very lucrative to Synopsys. What does that mean? Well, let's say, let's say in the unlikely event that the deal is not approved, okay, and the deal breaks, Ansys business fundamentals have improved so much that we think, right, we think the downside here would be very minimal to nil. So in other words, so in other words, we see a situation where deal closes, okay, great, we capture 10 plus percent over the next three to four months. But if it doesn't close, right, if it doesn't close, then we probably arguably have the opportunity to make much more based on just a fundamental argument alone. Okay. So let me let me zip forward to the next kind of- Hey, Mario, so it's sort of a heads I win, tails I don't lose type of situation. It is, exactly. Yeah, which is fantastic. What I wanted to do in the interest of time, I want to make sure that we, our clients and prospective clients, we can answer some of their questions. What I was thinking, Mario, is what do you think about this? What if you give kind of a little, literally 30 second pitch on busted converts? If you can, I know that's a hard thing to do. But really, for you, if you're watching at home, and you'd like a copy of this slide deck, go ahead and put in the in the q&a, I'd like a copy of the slide deck, and we'll get this to you because there's a lot of great material in here. But I also want to make sure we're getting some time for folks questions. Sure. So let me let me do my best. So very quickly, busted convertibles are simply are simply convertible bonds that have lost their equity sensitivity. over time, because the underlying equity has declined. And and these busted convertibles, in essence, become somewhat of a neglected asset class in the corporate credit universe. Because most, if not all busted convertibles are not rated by the agencies, they're not rated by a standard and poor's, they're not rated by Moody's. And as a result, traditional buyers of fixed income, like life insurance companies and pension funds cannot buy them. Right. So that that leaves kind of a very small universe. of sophisticated managers like ourselves to kind of comb through this asset class, and determine, gosh, there could be some pretty compelling investments in this kind of neglected universe. And what one kind of case study I like to emphasize or highlight, very briefly, our snap snapchat, the 0% bonds due 2027. These were bonds that about just over a year ago, were trading with eight and a half percent yield. They were trading with probably on the far end of the high yield universe in terms of spread. And again, it was trading that way, number one, because we felt like they were they were neglected because they were unrated. But also to we felt like the fixed income or corporate credit universe just didn't understand how good the credit worthiness is a snapchat. So we did we roll up our sleeves, did our due diligence, determine that not only was there material liquidity and profitability metrics, that snapchat that were being ignored, but also Snapchat management team was very aggressively buying back their bonds, right? We love that huge green flag, right? When a company is saying that they're buying the convertible bonds or outstanding debt in the marketplace, they're effectively telegraphing to the market, that liability reduction is top of mind. And they're essentially setting a backstop price for that convertible bond. So we started to participate over a year ago, and since then we've realized equity like returns in that particular bond over the last 13, 14 months. And now, now the credit in our minds has improved so dramatically that we think this is investment grade credit. And with the current yield that in the marketplace, it's effectively a very adequate treasury bill surrogate for our client portfolios. Great. Thank you. Yeah, no, it's, it's, this has been a fantastic area of strong performance. and low correlation to your point. So we've stayed nimble to find these areas. And so we look forward to talking about more of these going forward. Look, I think one area that we're very focused on being tactical is in, is in our tactical select portfolio. This is in our eyes, a way to combine the best of both worlds where our team, Mario, Michael, and I, and the rest of the investment team have done the fundamentals. We know the fundamental work. We know the company well, we know the company well, and we've overlaid onto it, a quantitative analytical set of tools. One of those being some of the tools that Tradesmith provides, but also our own proprietary tools. And what, what you get in the end is something that in our back tests were fantastic through both two, two up markets and two down markets. And then in real life, returns have been fantastic. So we've had through, through February or through January 31st, we've averaged seven base 700 basis points or seven percentage points of outperformance per year over the last two years in this strategy relative to its benchmark, which is the S&P 500 equal weight. So, but also done in a lower volatility. So we'd love to talk to folks about that. It's, it's, it's a fantastic strategy. There's one more piece to this. I think that's super mission critical. Michael mentioned the term mission critical. I like that term. I mean, you can do all the rest of these things and yet not get success. And that is, you need to have to make sure that the investment plan that you're in is right for you. Look, let us help you with that. First, we want to help you figure out where you are now, and then help you figure out where you are now. We want to go. We would do that on a complimentary basis. You know, if you want to get a financial review with a, a Sam investment professional, if you're not already a client, then go ahead and raise your hand in the Q&A to do that. Happy to do that for you. I think that the key here, and maybe I'll, Mario, I'll ask you to talk a little bit about this because you've had the benefit of being a wealth manager in addition to, although now you're most focused on the portfolios is, look, two people with the same financial goals, but different levels of risk tolerance and different time horizons can have very and should have very different investment portfolios. So not only do we tailor our strategies across investment goals, but we also kind of want to make people know, here's the level of volatility to expect in these, in these strategies. Exactly. And I think, I think what really, you know, one of the many positive dynamics that comes out of a wealth manager relationship and discussion is kind of flushing out with a new client, right? Helping them understand their risk appetite and their investment objectives, right? I think prior to coming to Sam, sometimes they may not accurately assess or may have kind of a misconstrued notion of what kind of risk risk they can take in their portfolios and how that translates into helping them achieve their investment objectives. So I think with a pretty deep wealth manager discussion and the folks on our team are best of breed at doing that, I think it ultimately, it helps those new clients really think critically about not only the appropriate portfolio strategy allocations that they should be participating in, but also, right, also thinking about, kind of, you know, kind of, you know, kind of, you know, long term, right? What, what, what are my goals, not only for the next two, three, four years, but also, you know, beyond 10 years in terms of, in terms of generational wealth transfer that I may, I may or may not want to participate in. Right, exactly. No, that, that's, that's well said. And I know, I know we have clients that end up as a result of that, being invested in across a number of different strategies that's, that's tailored just the way that they'd want, or, you know, this, this pool of capital, we want to be protect this pool of capitals for my legacy and, and, and family and kids and grandkids, etc. So, you know, with that, I think, why not, let's, let's get to some questions. Here's, here's a way to reach out to us before I get to that. And we'll pop that up again later. But yeah, let's, let's hit those, those questions as they've come in. I'll give everyone a chance to, to populate these questions in that Q&A box, just go ahead and type. And we'll, you know, what I think, if it'd be better for you, or I think easy is, we'll just take turns trying to ask, ask some of these and, and answer some of the questions. Let's see. So we've got a couple people that have asked. How about this? So yes, replays will be available. Does Sam handle retirement accounts? Yes, of course we do. We, we're happily handle both your individual retirement accounts, but also all sorts of accounts, be they taxable or tax advantaged. You know, one question, Michael, since you, you hit it, Charles asks, do you see a ramping up of inflation? How, if so, you know, how do we respond? Yeah, I mean, I certainly think it's possible given, you know, some of the, the reasons I laid out and over the longer terms, the, you know, any, any fiat currency that can be infinitely printed, I think will be a, be a cause for inflation. But as far as, you know, like a sizable ramp up in the short term, you know, inflation is, is notoriously difficult to predict. I think the important part is that the, the potential is there. And so how are you positioned? Do you own the type of assets that will be resilient in that sort of environment? And there's, there's a lot of them there. We can go down the laundry list. I mentioned Vici, which is, has leases tied to inflation. We talked about gold a bit. I think one thing we didn't really touch on directly, we actually kind of mentioned it in the, the characteristics of those world-class companies when we talked about profit margin. But one of the, one of the, the hints that kind of gives you when you find a company that has great margins is those tend to be companies with, with excellent pricing power. And so we also look for those in an inflationary environment. And that just simply means that they can raise their prices without losing a lot of demand. So, you know, those are, those are the type of companies that we're looking for, which, you know, if we do have a ramp up inflation, I think, you know, Austin, let me know if you disagree, but I think, you know, whether inflation is one, two, 3% or more, it's, it's almost assuredly going to be a factor over time. There'll be spikes along the way as far as how extreme it is. But we, we certainly think that, you know, fiat currency will, will continue to lose purchasing power over the long run. Would you agree? No, absolutely. Yeah. I think, yeah, I, I, I do think that the, the challenge for inflation is, is if it doesn't, it, that it doesn't derail the economy and upset consumer spending. Consumer spending represents, you know, 70, upwards of 75% of, of GDP. And so, so long as that is the case, and I think it, I think it is so far here, it actually can be positive for companies that have a lot of money. have pricing power and that can, that can generate strong returns. We give the example of, of Visa. They, they have a, they're a toll taker. So if the price of that washing machine goes from $1,000 to $2,000, the, the amount that Visa makes on that transaction effectively doubles, but their costs didn't effectively double. So they, they actually can generate higher returns and earnings in inflationary environments. I'm going to take the next one. I'm going to take the next one I see here, which is for the use of AI to grow significantly. Won't there be a need to be substantial new sources of reliable energy? And the answer is absolutely yes. I should have, we should, you know, be remiss to say, to, to not say that we are bullish on energy, frankly, all forms of energy. I think one of the things that might be a little different from our take than some of the takes is, is we're not necessarily bearish on solar or wind or other renewables. I think it's a, a, a rising demand is going to lift all ships. And so some of those out of favor areas, natural gas was out of favor earlier. It did get a, a nice lift at the end of the year. We were interested in, and we are overweight energy. One of the ways that, you know, my, and this is one of Michael's favorite areas is where it's also a toll taking in effect business. We, we love the pipeline businesses. So, so long as we believe that demand for energy is going to be good, those businesses are great businesses, no matter what the price of the underlying commodity. So that's an example. Yes, we, we, we believe that there's going to be a growing demand for energy and, and we are, as a result, a little bit overweight energy. So blessing and a curse. I love those pipeline investments, but people got wise to how great they are. So now they got pricier. That's true. That's true. You know, we started buying those at, at much lower valuations and discounts than that asset value. So we still own them, but we own less of them as they've, as they've appreciated. Mario, since you talked about the, or actually this is maybe for you, Michael, I guess you talked about the Trump agenda. This one says that, you know, Chuck is, is arguing the real change that Trump and Musk are doing at government is modernizing government processes and work. And what do you think this does to government employment, size of government? Does that have an impact on the economy? I mean, I think that's to be determined. I wish I knew the exact answer. I think that the, the potential for, for some, I mean, it's, it's hard. You almost feel like it's impossible to, to imagine government shrinking because it's grown so much for so long. But I do think the potential is there that, that we, we realize some of those efficiencies. I hope that happens. The, the, the scale of it remains to be seen. I think we're really early days, but, but it's an exciting time. Just before I get to the next one for, for Mario, Michael, you, I know you're a Buffett watcher. We have one question just about Berkshire reducing its, its holdings in certain assets and holding more cash. Any, any thoughts on that? Yeah. Yeah. I think, you know, the market I mentioned earlier by almost any measure you look at. I think the market is, is awfully expensive. And I think that's a reflection of, of, of Buffett feeling the same way. You know, it's a little bit different in his camp because I think he has the potential to, you know, make a big acquisition, for example, when, when things get, get ripe. So, you know, his, his mindset, given the amount of capital he manages is, is probably different than most money managers. But yeah, I mean, we talked about being, you know, cautiously constructive. And I think that's part of the, the cautious part is we're doing something similar, maybe not so much in cash and, in liquidating positions, but, but I would say that we've had a more conservative slant in some of our investments. Yeah. Yeah. Taking some risk off the table when things have appreciated and so on. So I don't know if that that's helpful. I, I don't have a direct line to Warren, unfortunately, but it gets, you know, in, in keeping with his, his, his view of being more invested when the market is more attractive. I will highlight regarding Buffett. I am not a Buffett watcher, but he did, I think recently add to his dominoes position pretty significantly, Austin, which I'm sure you're well aware of, because you are also a dominoes evangelist as well. Right. That's right. And we may or may not own that on behalf of clients as a result. Do I, am I evangelist? Yeah, I guess so. I think it's a, it's a world-class business and you know, durable, et cetera. I would just say also on Buffett that he did point out that still the vast majority of what, of their assets, asset value is in publicly traded stocks and their wholly owned subsidiaries. So while the cash balance is large, it's still a minority of, of the overall enterprise value. So I think that, that goes in keeping with what you're saying, Michael, that, you know, he's reducing the share, but not going to zero. And that, that's in keeping with what we're saying is you can't hold just cash in this environment. There was a question on busted convertibles, Mario. Maybe, maybe what, what is it? What makes them busted? Maybe what, maybe you could just, just briefly. So. Oh, got it. Okay, sure. So let me go a little bit beyond the 30 seconds that you allotted me. Yeah. That's okay. That's okay. So, so very quickly. So, so when a convertible bond is issued and these are, these instruments are, are very unique in the sense that they have both equity and fixed income like characteristics. Right. And, and, and typically the, the reason why investors find them so compelling is that the offer, for an asymmetric risk of an asymmetric risk of war profile. In other words, in other words, right. So let's say of the underlying stock of the issuer work to go up by 10%. Okay. Then, then generally speaking, the convertible bond probably goes up about 6%. Okay. So it captures some percentage of that upside. Conversely, on the way down, if the issuer's underlying stock were to go down by 10%, then traditionally the convertible bond price will go down about 3%. Right. So you have a risk reward characteristic of up 6% right. So you have a risk reward characteristic of up 6% versus down 3%. That's great. Right. That, that, that, that's extremely compelling. But what happens to a busted convertible is that when the underlying issuer's equity declines so much, right. That at some point that, that, that convertible bond loses its equity sensitivity. So for example, you know, when the bond was issued, it may participate in, in 60% of the bond. So, you know, when the upside. But as that, as that stock price goes down, it comes to, it comes to a point where, you know, that bond, that convertible bond may only trade up 5%, 6%, 7%, uh, based on a particular, let's say if the stock were up, uh, you know, 10, 12, 13%. So, so what happens is the convertible bond declines in price. And it typically goes to bond prices, you know, 80s, 70s, 60s, depending again, upon the credit worthiness. Of the issuer, as well as the coupon of the associated convertible bond. Mario, here's what I say on it. It's like, let's say the stock, they, they issued the convertible bond when the stock was $200. It's now a $20 stock. So the conversion price, it's never, it's virtually never going to get to that conversion price. And that's when we think it's busted. The market says it's combusted at that point where it's not really ascribing any value to the conversion feature. So a lot of people just forget about it. Right. Exactly. Exactly. That's right. That's right. And what, one more compelling feature about busted convertibles, aside from the fact that they're largely neglected is that in, in the, in the bond indentures, right, which is a legal agreement governing the convertible bond is that in a take in a acquisition scenario, all cash situation, convertible bonds must be taken out at par. Okay. So what that means is, right. If you're, if you buy convertible bonds, that's 70 cents on the dollar and they're busted and the next day that underlying issuer stock is, is acquired for a 30%, 40% premium, that's great for equity holders, right? But that's also a home run for the bond holders because you make that 30 cents from 70 to par. So you're making equity like returns, almost, almost consistent with the stockholders, but much less risk because you own, you own a fixed income instrument at the fixed income instrument at the end of the day and not the equity. Yep. No, that's great. Look, I think we've got just time for a couple more questions. One was questioning about two, maybe hitting two things. How are we thinking about tariffs in the context of our domestic investments? And then also, how are we thinking about international investing? I'll ask that for either of you guys. Are we investing in international companies? How do we, how do we, how do we think about that? I can take a crack at that one. So yes, we do invest internationally, but I would say we do it selectively. We do tend to be more focused on U S investments. I think there is something to be said for U S exceptionalism. And we're, we're fortunate that a lot of the world's best companies happen to be domiciled in our backyard here. So we don't have to look far for them. The trouble is that most people know that. And so you get this valuation discrepancy that Austin talked about earlier. And so, you know, look, there's the, the world-class companies that we talked about wanting to invest in, they, they exist in the U S and they exist outside the U S. So the, the type of international stocks that we own fall into those categories. And I think international has done well so far this year, and that's been great to see, but rather than trying to pinpoint, you know, when, when does international do better than the U S? I think it's much more important to be invested in the right companies in the right countries and the, the long-term returns will take care of themselves as long as we're invested in the right places. Uh, and, uh, you know, I guess one other thing I would note is, uh, you know, particularly for emerging market stocks, it's, uh, it's been a challenging time for them because of the, uh, the strong U S dollar. Trump has talked about wanting a, a weaker dollar to make U S exports more competitive. We'll see if he gets it, but that could certainly be a, uh, a nice, um, tailwind for, for emerging markets. Yeah. I, maybe I just give one case study or example, um, for a finer point on it. We think Walmart is a, is a, it's a fantastic business. It's one of those enduring. If you're looking at those world's best businesses forever type stocks, they've just done a great job of innovating and, and continuing to up their game in terms of sourcing distribution, e-commerce, and integrating the whole thing. Um, but Walmart trades at 40 times earnings. Um, but Walmart trades at 40 times earnings and we think, you know, it's going to be growing high single digits, uh, type of earnings. And so we really, it's really priced its way out of our portfolios. And yet, um, there is an international version, Walmart to Mexico that trades a multiple at a third of that multiple, um, has the same, uh, heritage, heritage, and DNA. Walmart owns 70% of the shares outstanding, making a lot of the same decisions in terms of, um, e-commerce and distribution and building infrastructure. And so that is one where we would, and we're looking and we're doing some work on it. And for clients that are interested in, in a, you know, low correlation, um, uh, potential income play, it's a case study of something that, that would be interesting to us. It generates actually a higher dividend yield than Walmart as well. Um, that's the case with a lot of those international stocks is, uh, you know, they, they pay a higher dividend than a lot of their U S peers. So you essentially get, uh, get paid to wait. Yeah. Yeah. Um, there, there are some more questions and what we're going to try to do is, is hit some of these offline. And I really appreciate everyone's time. Mario, I was going to hit you with this last one, which is, um, kind of a two or three. So, um, two-parter what's the minimum, uh, to invest it at Sam. And then, you know, what would be some next steps? So, so minimum relationship with Sam is $500,000. And that, that can be a composition of one or multiple accounts, right? It could be a, a $250,000 IRA account and a $250,000 after tax brokerage account, right? As long as the two add up to 500,000, that's the minimum for our relationship. Um, number two, um, next steps. Um, I would, I would certainly reach out, go to our website. I, if you didn't take a photo, Oh, perfect. The QR code, uh, take a, take a, um, go to the QR code that should bring you up to arranging a conversation or dialogue with one of our business development representatives. You can also call us or email us at the numbers, um, and email addresses on the slide. Uh, and lastly, we encourage you to, to go to our social media sites, either on LinkedIn, Facebook, or, or Twitter, follow, follow what we're saying there. Um, and you can start to learn a bit about us if you haven't, if you haven't known about us already. Well, that's great guys. Thank you so much for your time. Thanks to everyone at home, um, for your time. I really appreciate your interest and your interest in your own future and financial success. So with that, we're going to sign off, but we hope to talk to you soon. Thank you.