00:08:56 · Deiya Pernas, Dean Pernas
Like, everything that they say. I'm not saying they're all lying, but some of them definitely do lie. Some way... Some of them definitely do omit key information. But your job as a public advocate investor is to is to always verify what they're saying. Like... So there's a healthy skepticism paranoia about, you know, leaders of management teams of of companies that I think private market investors, because of the access they have, can start to dissolve with familiarity even though it should because there's some key areas where the incentives may not exactly be aligned. And I think you just need a... You need to maintain a sort of reservoir of... I don't know. Pernas is the right word, maybe some sort of skepticism. Skepticism. So that... That's what I would say. [00:09:41] S2: Yeah. I would just... Yeah. Like like Deiya mentioned, all CEOs, there's some element of salesmanship there. They're not there to tell you the complete, honest, objective truth. And so you just have investors... Helping investors have to take a healthy dose of skepticism there. And, yeah, if you're a long term investor, you are going to... All you're trying to do is exactly the same thing as the private markets. Is this company returning more value to customers and relation to competitors, and is that getting strong over time? And if you can answer that question, then then it's investment in both public and private markets.
00:09:41 · Dean Pernas, Mikk
[00:09:41] S2: Yeah. I would just... Yeah. Like like Deiya mentioned, all CEOs, there's some element of salesmanship there. They're not there to tell you the complete, honest, objective truth. And so you just have investors... Helping investors have to take a healthy dose of skepticism there. And, yeah, if you're a long term investor, you are going to... All you're trying to do is exactly the same thing as the private markets. Is this company returning more value to customers and relation to competitors, and is that getting strong over time? And if you can answer that question, then then it's investment in both public and private markets. [00:10:13] S0: I was I was doing the research. I forgot. Was it some... Either of you or someone else saying that the CEO of of asking those questions from a CEO of a public company is expecting the same thing that the parent will say bad things or negative things about their kids and it just will never happen.
00:10:13 · Mikk, Deiya Pernas
[00:10:13] S0: I was I was doing the research. I forgot. Was it some... Either of you or someone else saying that the CEO of of asking those questions from a CEO of a public company is expecting the same thing that the parent will say bad things or negative things about their kids and it just will never happen. [00:10:32] S1: Yeah. I mean, CEOs their are very good at... You know, like, you know, they're very good at salesmanship. They're very good at... You know, the whole house could be burning down, but it... You know, they'll be like, well, you know, things are... But, you know, there's reason for optimism, and we're doing this, and we're doing that. And one of the things about being investors is understanding human nature. And at the end of the day, CEOs, they don't come from a different portal or a different planet. There are people like you and me that are trying to do the best they can, and a lot of them are scared to lose their job. And they they have the normal fear... They have normal fears that other people do. So if you think about the the average tenure for a CEO of public markets is about five or six years. I mean, lot of those people work their entire life to get in that position. They wanna stay there. They don't wanna get ousted, you know, prematurely. You know, they they wanna collect, so to speak, while while they're at the top. And, yeah, just understanding nature. They're all kind of being sentenced if they would be like that, I guess, you know, it's not it's not a surprise.
00:10:32 · Deiya Pernas, Mikk
[00:10:32] S1: Yeah. I mean, CEOs their are very good at... You know, like, you know, they're very good at salesmanship. They're very good at... You know, the whole house could be burning down, but it... You know, they'll be like, well, you know, things are... But, you know, there's reason for optimism, and we're doing this, and we're doing that. And one of the things about being investors is understanding human nature. And at the end of the day, CEOs, they don't come from a different portal or a different planet. There are people like you and me that are trying to do the best they can, and a lot of them are scared to lose their job. And they they have the normal fear... They have normal fears that other people do. So if you think about the the average tenure for a CEO of public markets is about five or six years. I mean, lot of those people work their entire life to get in that position. They wanna stay there. They don't wanna get ousted, you know, prematurely. You know, they they wanna collect, so to speak, while while they're at the top. And, yeah, just understanding nature. They're all kind of being sentenced if they would be like that, I guess, you know, it's not it's not a surprise. [00:11:32] S0: Now how you guys think and work? You've created this motor investing framework. I printed it out. I have a bunch of notes here. So maybe you can explain what this concept means and, what it is all about.
00:11:49 · Deiya Pernas
[00:11:49] S1: I'll go ahead and you can kind of fill in some of color if you want. But basically, our whole concept of investing is that investing is about prediction. And if you want to generate excess returns, you have to anticipate what a company's gonna do, be right more often than wrong. And the way... And your anticipation of what the company's gonna do has to be variants of the market. So it's like, what's this company gonna look like in the future? And is my conceptualization of the company in the future kinda different than what general market participants are thinking. And I know when we throw the word prediction around, like, it doesn't sound robust and or precise and maybe people have qualms with it. But the the example I like to use is that it's similar to, you know, when we're all in college and we see somebody who's, like, who's studying well. We see essentially a good student who's likable and it seems like that they're going places. They're probably going to do pretty good in life economically speaking. You know, they're they're industrious. They're light pole. They're not working. They're going in an industry that's growing. There are all these kind of potential factors that are kinda coming together where you would say like, oh, I wish I could buy a piece of that guy or that gal's earning right now because because I see how how they're gonna make it look on life. And that... It's a very similar idea where you're trying to... Your analysis more... Is more around potential and less around, like, what the output is today, like what the financials look like today. It's about what are the kind of decisions being made that haven't reached fruition in financial statement? What are the capital allocation decisions? Is the opportunity set kind of expanding? And then if many of those things kind of come together, then you could say that the motor of the company is strengthening, which is the concept we use to talk about the potential of the company. Similar, if you're thinking about a bow, if you're pulling back a bow, that's like potential energy that's being stored. And that's kind of when we want to invest in a company, when potential energy is building, building. It hasn't yet translated to Connecticut Energy in the financial statement. That potential is still building.
00:14:07 · Mikk, Deiya Pernas
[00:14:07] S0: Could you give a specific example, like a recent one, which you were like, okay, this is so obvious. We should go for it. [00:14:15] S1: Sure. The second qualification is very important. The the rep... You have to kind of... What you're seeing, that potential is building has to be kinda different than than the general market is is seeing. Because if if the if the entire market agrees with you about potential of this building or whatever, then, you know, there's not opportunity to fix this return. I mean, there's a ton of examples that we could use. Dean, do you wanna talk about an example or two?