Christmas gifts for investors
This week's episode is our Christmas episode, including a stock pick and book recommendations.
Mentioned: Endeavour Group Ltd (EDV)
In our Christmas gifts episode, Mark and Shani exchange Christmas gifts, discuss a stock pick and a few book recommendations from Mark. If you'd like to get Mark and Shani a Christmas gift, a podcast review on your podcast app would be the best gift you can give. Thank you for your support in 2024 and we hope you have a safe and happy holiday period.
Listen on:
Shani Jayamanne: Welcome to another episode of Investing Compass. Before we begin, a quick note that the information contained in this podcast is general in nature. It does not take into consideration your personal situation, circumstances or needs.
LaMonica: All right. So, we have an exciting episode today, Shani.
Jayamanne: I feel like this is my favorite episode of the year.
LaMonica: Because it's the last one we record?
Jayamanne: Yes.
LaMonica: Okay. But we're doing our Annual Christmas Gift episode. We'll get into some other Christmas gifts as we go through it. But really, this is our tradition of giving each other a Christmas gift, which is nice. So, last year, we bought each other an investment under $50. So, why don't you update people on where we are with those?
Jayamanne: All right. So, I'll start. I bought a multi-level marketing company because they're often shortened to MLM, just like your nickname, MLM. The one I chose was eXp World Holdings, which is up 2.24%. And seeing as the S&P 500 is up 35% when we're recording this, that's not a great return.
LaMonica: Yeah. So, you bought me that because of the whole nickname thing. I gave the speech about how you inspire me and how much you've done for financial literacy, especially with women. I bought you an ETF and it tracks the Morningstar Women's Empowerment Index. The ticker is WOMN. This is a U.S. ETF, I should say that, and it's up 28.62%.
Jayamanne: That's a lot more than mine, but we're long-term investors, Mark. Let's see where eXp Holdings goes. Might be able to buy some meal. That was our goal. We wanted it to be able to buy us a nice meal.
LaMonica: Yes. So, we're both, I think, still working on that.
Jayamanne: Yes.
LaMonica: But at this point, maybe if things go well for you, I'll be able to pick something off like a McDonald's menu.
Jayamanne: Yeah. Exactly.
LaMonica: We're still hoping for a really nice meal once we sell the Women's Empowerment ETF. Okay, there we go. So, this year, we're doing something a little bit different and it's not investment related.
Jayamanne: We've recently started recording our podcast with audio and video, and we're uploading the episodes to YouTube. So, we're going to celebrate that and we're going to have a more visual gift.
LaMonica: Yes. And for people who are not watching, Shani went and bought this nice bag, and she bought a card. I have a cardboard Amazon box, and I wrote your card on a piece of paper, but then I folded it into a...
Jayamanne: A Regency letter, which is how Jane Austen used to fold her letters.
LaMonica: Me and Jane Austen. Okay, so you go first.
Jayamanne: Okay. Well, I should say it's something visual, but it's something that we're supposed to wear.
LaMonica: Yes.
Jayamanne: And we were toing and froing about whether we were going to wear it for the podcast and we thought we'd get in trouble from Morningstar.
LaMonica: If anyone from Morningstar watches or listens to this, but okay, open up your...
Jayamanne: Am I going first?
LaMonica: Yeah.
Jayamanne: Okay. I'm reading the cards. Is this anything embarrassing?
LaMonica: You'll have to find out.
LaMonica: Okay. It's folded very nicely. Well, you made me watch a YouTube video on it. So, at least I can follow instructions.
Jayamanne: Merry Christmas, (Shanika). I'm so proud of everything you've accomplished this year. You continue to inspire me to always put our listeners' outcomes first. I'm lucky to work with you and to call you my friend, Mark. That's very nice. This is the present.
LaMonica: I'm a nice guy. You don't know what's in the box.
Jayamanne: No. Do I just open this and then you'll tell me...
LaMonica: Let me explain it to you. So, I got you two different things.
Jayamanne: Sure.
LaMonica: It's supposed to be something, obviously, you could wear. So, one thing about Shani is she gets very cold and not just exclusively in the winter.
Jayamanne: All the time.
LaMonica: All the time. You always complain that you don't have hoodies to wear. This is at home, not at work. So, I got you the first thing is a hoodie. So, there you go. Open that, well-wrapped. I got you a University of Alabama hoodie.
Jayamanne: Nice.
LaMonica: So, now you are a Crimson Tide fan. They're doing terribly this year.
Jayamanne: I feel like this has come from the U.S. So, did you not stick to the $50 limit?
LaMonica: Don't worry about what I did. The next thing I got you is a hat. Now there's a little bit of a story. Number one, Shani has a color palette apparently, which is white and black. So, I got you a white hat. But when I was in high school, back in the Dark Ages, wearing a white hat was very cool. I had a white University of Alabama hat. So, it goes with your color palette, which means you have no excuse not to wear it. You can think of what happened as you characterize it 50 or 60 years before you were born. And that was me wearing that hat. You're supposed to get it really dirty because that was cool back then.
Jayamanne: Okay. All right. Thank you, Mark. That's really nice. I will wear this.
LaMonica: Okay. You're welcome. So, should I open …
Jayamanne: Yes.
LaMonica: …your nicely? I will do the card first. Mark LaMonica, co-host of Investing Compass Podcast, which is good in case, I don't know, it got delivered to a different Mark LaMonica. Sydney Harbor Bridge.
Jayamanne: So, you wanted to do a visual thing …
LaMonica: So, for people listening to this, a bridge popped out of the card and Shani has written nothing in it.
Jayamanne: There's – you have to pull on there. There you go.
LaMonica: Wow. This is a lot. So, dear Mark, grateful for you as a mentor, a colleague, a boss, but most importantly, a friend. The best gift you could give an investor is someone to bounce their ideas off, sense check, and play devil's advocate. I'm lucky. I have that with you. I can't read this next part. In lieu of that, never forget your ABCs, (Shanika).
Jayamanne: You'll understand when you get your gift.
LaMonica: My ABCs?
Jayamanne: Yes.
LaMonica: Okay. Well, thank you. That was a very lovely card.
Jayamanne: So, there's two parts to this gift.
LaMonica: What would you like me to pull out? I'm doing this by feel here.
Jayamanne: Okay. There should be a hat. You should be able to feel that.
LaMonica: Would you like me to take that out first?
Jayamanne: Yes.
LaMonica: It is a hat. I don't know what color it is because I'm color blind, but it says Investing Compass on it.
Jayamanne: That’s our first Investing Compass merch.
LaMonica: No. Remember we had those water bottles?
Jayamanne: Did they say Investing Compass on it? It did.
LaMonica: Yeah.
Jayamanne: I have a short memory. This isn't nicer?
LaMonica: That is very nice. Well, thank you, Shani.
Jayamanne: No worries.
LaMonica: It goes with my color palette. I'm color blind, so any color goes for me.
Jayamanne: So, I had to change the podcast schedule around for this to make sense.
LaMonica: It's a T-shirt, which I don't know – Buffett is on.
Jayamanne: Yes. So, an episode before this, if you're listening to this, you said that finance bros wear shirts that say always be compounding.
LaMonica: Sure enough. This says Always be Compounding.
Jayamanne: There's four pictures of Warren Buffett on it. I designed it myself. Do you like it?
LaMonica: Yes. No, it's lovely. One of Shani's favorite things is to embarrass me. I do think wearing this around will be sufficiently embarrassing.
Jayamanne: You do have to wear it, though.
LaMonica: I will wear it.
Jayamanne: Okay. That was a very long introduction, but we normally do those for our Christmas episode. So, hopefully you're still with us.
LaMonica: You're checked out for Christmas. Apparently, we are.
Jayamanne: Okay. So, let's get back to the rest of the episode. Thank you for your gift, Mark.
LaMonica: Thank you, Shani.
Jayamanne: We normally go through Christmas gifts for investors. I did – now we have a bigger team, I put the call out to our team, what would you get an investor to Simon Joseph, who, if you want to read their articles, it's on Morningstar.com.au. And the answers were very strange. Joseph suggested an AeroPress because he assumes that investors drink more coffee. Copper cubes, I don't know what they are. I don't know what the purpose is. Apparently, you hold them in your hand and you think.
LaMonica: Because when he said that, I thought they were the cubes that you put into a whiskey glass so that the ice doesn't melt.
Jayamanne: No. They're just cubes.
LaMonica: Maybe I just have a one-track mind.
Jayamanne: Yes. A Charlie Munger bronze bust that goes for $16,000 on Etsy.
LaMonica: That's a lot. I mean, did he have any – I don't remember. Did he have any good answers?
Jayamanne: He had one pretty good answer, which is wine. And he said wine because it requires to be cellared. That was to help investors practice the art of patience.
LaMonica: That's funny. Every time I put wine down…
Jayamanne: …I drink it immediately.
LaMonica: My cellar, which is a cage in the basement of my building by the parking spot I rent out. Yeah. I tend to go down there and drink it quickly. All right.
So, we're going to start with some better gifts unless you want that $16,000 Charlie Munger bust. It's probably cheaper before he passed away. But we're going to start with books.
Jayamanne: Mark's going to speak about a few books actually that he read this year. And they are Poor Charlie's Almanack, Die with Zero and Rich Dad Poor Dad.
LaMonica: Okay. Do you care where I start?
Jayamanne: No. Go for it. Take it away.
LaMonica: I might only speak about – well, I'll speak about all three of them. So, Poor Charlie's Almanack is just a group of speeches that Charlie Munger gave. And it's cheaper than the bust, which is nice. So, what I like about the book, so Charlie Munger always talked about non-investing topics relating with investing. So, he's kind of like a Renaissance guy and like to study all these different things.
I won't go through each one of the speeches because they are all very different. But he talks about how you need – he gave this speech at the University of Southern California. And it was supposed to be about picking shares, and it was to a class of MBA students. And basically, the speech was worldly wisdom, according to Charlie Munger. Like none of it was about investing. But what he talked about is that investors need to – that you can't just memorize all these facts. You need, what he called, a latticework of theory to hang all those facts on.
I think it's good because we're always bombarded with all of these news and data and everything else going on with investing. And if you don't have this overarching latticework of theory, it's very hard to interpret all of that stuff. And most of it you should just ignore, right? Which we always talk about in here. The problem is if you don't, you think you should always make changes to your portfolio. So, I really like that part of the book. So, that's that first one.
So, the next book is Die with Zero. And that's been out a while. I feel like people are very into it. I had kind of mixed feelings about it. I think mostly because the concept, of course, is, as you expect, die with zero. So, the idea is that not necessarily you just spend all your money, but whatever you want to do with your money, you should do that before you pass away. So, whether that's giving that as inheritance to people, which I think is great because then you can actually see them experience and use that money. But also, of course, around spending. And I guess my only concern with that book is I feel like a lot of the people that like that book, they're just using that as an excuse to spend lots of money when they're younger. So, I don't know. I had mixed feelings about that book. You've read it. You have not read it. Okay. For those of you not watching, she just shook her head.
Then, the last book was a little bit ridiculous. It's that Rich Dad Poor Dad book, which I never ended up reading for a good reason. I don't know. It's hard to know what to say about this. I got the book and that was right after he declared bankruptcy with hundreds of millions of dollars' worth of debt. So, if I had to pick a book of those three, I would read the Charlie Munger one.
Jayamanne: Okay.
LaMonica: So, those are my books, Shani.
Jayamanne: But you recommend them for investors to give as gifts.
LaMonica: I do. So, give gifts to someone you hope to inherit money from. Give them Die with Zero. That could encourage them to give you the money now. So, that's a really good one.
Jayamanne: Thats a good one.
LaMonica: If you have a friend that you would like to go bankrupt, you can give Rich Dad Poor Dad to them. And then somebody you like and respect, you can give the Charlie Munger book, too.
Jayamanne: (Or an) always be compounding shirt.
LaMonica: Exactly. I mean, I assume that these things will go relatively viral and soon you'll be a fashion designer.
Jayamanne: There you go. All right. So, we're going to move on to the stock pick because they're crowd favorites and we always do one for our Christmas episodes, and it is a stock that ticks all our boxes. So, it has a wide mode and it's a five-star stock and it has a low uncertainty rating and it has exemplary capital allocation.
LaMonica: Yeah. So, that's basically every good thing our analysts could say about it. And Shani and I will help support you as an owner of this company.
Jayamanne: That's very true.
LaMonica: So, there we go. So, what is it, Shani?
Jayamanne: It's Endeavor Group. We've done a whole episode on Endeavor before, but we'll give a quick summary for this podcast.
LaMonica: Okay. So, it is important to note that these share opportunities that we put on these episodes, of course, the market constantly moves. So, all of those ratings we gave are based on where it is right now, particularly that five-star rating, which has to do with how you compare what the stock's trading for, for what our analysts thinks the fair value is. So, it is that point in time snapshot. So, something important to remember, and it is, of course, updated anytime there's something material that happens to the share. So, just remember that.
Jayamanne: Yes. So, this is what our analysts think at the end of 2024 about Endeavor.
LaMonica: Okay. So, start with what Endeavor does, and we gave a little bit of a clue saying that we go there a lot. So, Endeavor is an omnichannel liquor retailer. So, it operates the largest network of brick-and-mortar stores in Australia. They have 1,600 of them, which is a lot. I've been to most of those. And the brands which are very well-known are Dan Murphy's and BWS brands.
Jayamanne: And the business is divided into two. It has a retail segment in Australia as Australia is omnichannel retailer, as Mark said, but it also has its hotel segment that provides hospitality services and gambling. The retail segment is vertically integrated, meaning that the company controls the supply chain and it's supported by Pinnacle Drinks private label portfolio. They operate several wineries, as well as bottling and packaging facilities. The products from this process are supplied exclusively to Dan Murphy's, BWS and ALH Group in Australia. What they – sorry, go on.
LaMonica: Nope. Go ahead.
Jayamanne: Okay.
LaMonica: I was just really excited about what I was going to say next.
Jayamanne: So, what they get from this is higher margin, which is notoriously tight in retail businesses. They're also able to have a large amount of control in the wine supply chain, which minimizes risk.
LaMonica: So, apparently that and this makes a little sense when you look at the larger economic environment. Australians are cutting back on their liquor spending and that we're actually seeing some cyclicality with liquor spending. Now, I have kept mine up and just cut back on everything else that I do in my life.
Jayamanne: I probably increased mine.
LaMonica: Exactly. Exactly. So, we are seeing some cyclicality. We are seeing some softer demand. We're seeing a lot of these liquor retailers having to offer more promotions to get customers in. We saw this particularly that in the September quarter of 2024, liquor retail sales were flat, but sales in its pubs are increasing. That's underpinned by food, beverages and gaming.
Jayamanne: Endeavor is taking market share, setting it up for a strong cyclical recovery. The smaller hotel segment is performing better than we did forecast. They gave us some market share in the gaming market by voluntarily adopting shorter trading hours. But Endeavor is now picking up shares in Victoria after trading hour restrictions became mandatory in that state.
LaMonica: All right. So, we go through this in a lot of detail in that episode that Shani referenced earlier called This Stock Ticks All the Boxes. But on the 13th of November, 2024, it is 28% undervalued. As Shani said earlier, this makes it a five-star stock. We started this process to come up with the share for this episode. We just went through our investment screener. We put in all the metrics that would make a stock attractive from a research standpoint, all those things that Shani went through. And you, of course, can conduct the same exercise and look for a stock that ticks all the boxes that you need.
So, for example, the stock may not be right for investors that are looking for a reliable income stream. So, Endeavor has not committed to a dividend policy or a payout ratio yet. If you're an income investor, it doesn't matter where it ticks all the other boxes. From our analysts, it may not be right for you.
Jayamanne: So, we do encourage you to find these stocks. And many quality investments don't dip into undervalued territory or then rarely trade at a price that's considered a bargain. So, a good idea to find these stocks that do meet your criteria is that it can be added to a watchlist. And then, when there are buying opportunities, you can take it.
LaMonica: Okay. I've got one more, because I was thinking when we're talking through those books, and I kind of wasn't that positive about a couple of them, I didn't put down the book that I thought was most valuable that I read this year. Is that okay if I go through one more? So, The Psychology of Money, you've read this, right? Okay. Did you like it?
Jayamanne: I thought it was really good. I think, like, one of the things that we said to each other about the book was that a lot of it is repetition, but we like that because it means that it sticks with people.
LaMonica: Yeah. So, there's a couple of things that I think I got from it, if you mind, if I go through those. All right. So, I think one part I really liked about it is he has this chapter on anyone can be a great investor. He uses this example. He's got this guy up in Vermont. We hear these stories all the time that somebody dies and all of a sudden they discover they had like $15 million and nobody knew anything about it. But he's trying to make the point that anyone can be a great investor and that yes, we often talk about how investing has to be done by professionals. And it's just not true, right?
You wouldn't want me to perform surgery on you. But something like investing, it's very easy to be self-taught. Really, a lot of it being successful is about time and about behavior. So, I think it's something we both believe and hopefully why people are listening to this podcast that anyone can do that.
I think the other thing I really liked is he talked a lot about financial freedom and what financial freedom means, what it means to different people. And really, I think another thing that we always say on here, so, we just like the book because it agreed with stuff we say, but that it's really important to come up with your own definition of financial freedom and working towards that. He made a lot of different references, the difference between looking rich and wealth, which I think we both appreciate. He talked about debt; I think similar views that we have. So, yeah, that is a great book. Pick that one up.
And there we go. Those are all our gifts. One share, I guess four books, although for a couple of them...
Jayamanne: Really just two.
LaMonica: Really just two. And anyway, I wanted to wish everyone listening a great holiday season. I'm very thankful, as I said, for the gifts that Shani got me, and of course, Shani. And we hope you listen in the new year.
