Welcome back to the Rated Change with York Wealth Management.
As advisors to some of the wealthiest families in the country, the Rated Change is a podcast
designed to help you in the pursuit of building long-term wealth through the insights of some
of the brightest minds in asset management.
I'm your host Murdoch Ghani and in today's broadcast we're speaking with Andrew Mitchell,
one of the founders at Ofea Asset Management.
Andrew alongside Stephen Yang and other colleagues manage all funds.
Ofea has a fundamental bottom-up research approach aimed at identifying businesses domestically
and internationally with the ability to meaningfully grow and compound earnings over time.
To put it in another way, they want to find new companies before they end up in vogue.
For me, I really enjoy delving into the process of the how, in particular, how they go about
trying to first discover a new business before it gets into vogue.
Andrew unpacks Transmedics and Life360 plus others and discusses their process, which
enabled them to be confident enough to commence buying into these businesses before their
good old friend Mr. Market.
Also before we get in this conversation, let me put to you a question which Andrew put
to me, how long does it take to make 10 times your money compounding at 22% per annum?
If you have the answer, you're pretty good at maths.
But if you don't have it, don't worry.
Andrew is going to dig into the answer and explain why this number is an exciting number
for them.
So before we get into this podcast, please remember this podcast is intended for entertainment
purposes only and should not be construed as any form of financial advice.
Be sure to listen to this glam at the end of this broadcast and to keep your feedback
coming.
You can reach me at mgatti at ywm.com.au.
So that being said, I hope you find this conversation enjoyable as much as I did.
So sit back, relax and enjoy it.
Andrew Mitchell, Ofir Asset Management.
Welcome to the rate of change with your cloth management.
Well thanks very much for having me Murdoch.
Mate, good to be here.
Good to actually finally meet you.
I haven't actually met you and I've known you for years.
He's probably better.
I've seen you on a Zoom, on the other end of a Zoom many times before.
I feel like I have met you before, but I think it's just been all the Zoom calls.
This is the benefit of stalk book.
Every single social media these days.
You're a lot better looking in real life.
That's the only thing.
I forgot the glasses.
Anyway, Andrew, good to be sitting here in your offices.
Why don't we, for people that don't know you, why don't we kick things off and tell everyone
a little bit about yourself and how you got into this beautiful world of financial markets?
Yeah.
Andrew Mitchell, when people ask me this question, I've obviously listened to many podcasts in
my life and everyone seems to have this fantastic story about their grandfather taking their
hand and walking them down to the stock market and sitting in the corner and watching the
tickers roll over and just becoming hooked.
I don't have that story.
For me, I was just like any other kid looked up to their father.
My father worked for the government.
He was an economist.
I just wanted to be like my dad.
I studied finance and economics at university and when worked at federal or Commonwealth
Department of the Treasury when Peter Costello was the treasurer and did things like forecasting
international economies for the treasury forecasts.
After that, I went to Commonwealth Bank as an economist and I got into equities research
at ComSec when they had an institutional equities research team.
Met David Paradise through that and had been doing that for a very short time and then
became a fund manager at Paradise Investment Management.
In 2011, 2012, I went out with Stephen Ng and myself and we both went out and obviously
went out with myself and we started Ophiur Asset Management and that's the quick story
of how I'm here.
The quick story.
There's an article in the AFR, two young guys giving it a go and here we are today.
I was 32.
I'm 45 now.
So yeah, it's many years and the great thing and about that story Murdoch is that we invested
all our money in the funds when we started and that's compounded.
I'll ask you this question.
How long does it take to make 10 times your money compounding at 22% per annum?
Well, I know what is it?
7% over 10 years gets 100%.
So what's the answer to the question?
Well the answer is 11 years and 8 months and the reason I know that is because we have
just made in the month of March 10 times the money for our original investors in our original
Ophiur Opportunities Fund who invested right at the start 10 times and we've done 22% after
all fees per annum in that original fund for now 11 years and yeah, I was just counting
back from August where we are now.
So if anyone's wondering why I wanted to get Andrew on the podcast, you may have an
idea just to kind of throw that out there but look for people that don't know Ophiur
and besides those numbers, who is Ophiur?
What do you do and what's the investment philosophy?
Maybe I'll start with where Ophiur, I didn't come up with the name Ophiur, it was Stephen.
We had some really terrible names.
Stephen wanted Pursuit Capital.
Sounds like prosciutto capital.
Sounds like trivial Pursuit Capital.
It's a horrible name and I told him no, go away.
Let's research famous things that happened in history but let's also think about what
we're doing and we sort of we said, you know what, we're looking for gold nuggets and
we're looking to be the first to find it and so we said, okay, well, let's have a look
at the gold rush.
What happened around the gold rush?
Well in 1851, in a little place just outside of Orange in New South Wales, some gentleman
I do not know the name of found gold and that led to the gold rush.
So Ophiur or Ophiur as it's called in New South Wales was the place where that first
gold was found and we want to be, we are small cap investors, we want to be the first to
find that gold nugget because you read about the stories of the gold fields and my mother's
family and my mum is from Ballarat so I grew up learning about them.
It's the first guys to the gold fields that make all the money and then everyone, the
people who come at the end, they don't have, they have to be very lucky to make money because
the first people are the ones that clear out all the easy gold.
And the people that make a lot of money, people sell you the tools to go scourge.
The shovels.
Don't forget about those boys.
Yeah, exactly.
The picks and shovels.
They're maybe a bit smarter than us.
We want to be the first to the, that's maybe Bloomberg, make all the money as you know.
Well without the potential sniff of gold, you wouldn't have an industry.
Yeah, exactly.
So speaking of industry, for funds, right?
Yep, that's correct.
So why don't we just quickly knock that out.
So what are the four funds?
What do you cover?
And you know how much money are in the funds?
What's under management?
Yeah, right.
So we've got a few billion under management, but it's broken into, as you said Murdoch,
four funds.
The Ofea Opportunities Fund, that is the original fund.
It's been going for just under 12 years.
It's done 22% per annum after all fees.
And obviously there's some significant outperformance there.
So there's been quite a bit of performance fees taken out.
That I think is outperformed by 14%, something like that per annum.
Then we had our second fund.
Now this is the High Conviction Fund.
It has around a 40% overlap with the Opportunities Fund, which is a small cap fund.
Now the High Conviction Fund has less stocks, 30 stocks.
It's still Australia and New Zealand.
25% is actually in the top 100.
75% are the bigger small caps.
That fund is listed on the ASX.
It is a listed investment trust and it trades under the ticker OPH.
And I think it's trading at a 10% discount at the moment, which we think is pretty good
value because we've seen it before when it trades at a 20% premium.
And generally, LITs, LICs, they trade on discounts when asset prices are low because Mr. Market
is fearful.
And they trade on premiums when your taxi driver is telling you how they're buying Bitcoin
and all the different stocks in the share market.
And so when things get frothy again, we'd be expecting that to go from a discount to
a premium and obviously the unit price to go up.
So that's ticker OPH, our High Conviction Fund.
Now then we have two global funds.
So these have a lot of overlap.
We're talking 80% plus overlap, the global opportunities and the global high conviction.
The difference is the global high conviction has 30 stocks, the global opportunities has
35 to 40.
Now with these two funds, they invest in the Western world.
So global funds, 60% is the US, 7% is the UK, 20% is Western Europe, 3% is Canada.
This is very rough.
You've got 2% Australia, we don't have any Australian investments and around 10% is Japan.
We don't have any Japanese investments.
So we're investing really in US, UK and Western Europe and Canada.
And yeah, that funds been running for the global high conviction funds been running
and global opportunities been running since 2018, I think maybe a bit earlier.
And I think, so just be careful when you look on our website and check these numbers because
I could very well get them wrong.
But we've done something like 14, 15% per annum for six, seven years versus the index,
which has done something like 8%.
As I said, go to our website and check those numbers are right.
Don't make an investment on those numbers.
But that's what I think the performance is made for those.
Well, why don't we kick straight into macro first and then we'll get into how you look
at for competition.
The reason I want to get into that is what two nights ago, now we had the Fed come out,
put the rate range and hold a signal that they're going to work.
Sorry, I believe the exact language.
They're not going to increase rates by the back end of the year because their inflation's
kind of economy is doing well, right?
And we've seen equity.
I don't see any stag or any inflation.
Yeah, it's weird.
I love statements that don't mean anything.
And then all it means is essentially the market didn't get sold off dramatically.
And why this is interesting is, would you say that the economy feels like global markets
running a two stage economy, you have a number of companies that are all uplifted, absolutely
hammering associated with AI and then you've got companies like Google, Microsoft coming
out saying that we're going to invest more in this space than essentially the picks and
shovels of the same before all kind of getting dragged along.
There's that happening.
But on the other side of things, there's a whole lot of businesses that can't catch a
bit, but wouldn't you agree they're probably looking healthier than they've looked since
COVID times because they've tightened the belt, fired everyone, really reduced.
And there's businesses out there that from a value investing perspective look fabulous.
It's kind of not traveling that particular direction.
Would you agree with that?
And the reason where I was going with this was I remember you put out a chart where you
showed the Russell, like if you literally followed and made investments based on how
the Fed was going with the 10 year bond rate, it pretty much mimicked how the Russell was
performing.
Yeah, I don't remember that chart.
That is the car put out.
We do a lot of charts.
So the question is, is there opportunity in terms of value elsewhere in the market outside
of the AI and those things here?
So I guess you have a look at the factors that are working the greatest.
Momentum is working very well and if you're in AI or obesity drugs, electrification, those
thematics, well, you're going to have to have done a lot of work to have not made a lot
of money because that is where the momentum is.
Now obviously, and you look at the big seven and maybe big six, if you take out Tesla,
there's huge amount of momentum there.
They're driving the whole share market higher and that capital is coming out of small caps,
less so mid caps and less so other large caps, but still coming out of those.
When it comes out of small caps, maybe it's not in quantums actually more, but when it
comes out of small caps, it sends their share prices lower because everyone's chasing the
momentum and small caps have less liquidity.
What that has meant is that small caps in the US, and that's when Murdoch was just saying
the Russells, that's US small caps, the Russell or US small caps are trading on some metrics
at the cheapest level compared to large caps in the US than they have since the dot com
bubble.
And that is just that bifurcation of the market.
The large cap, big winners, the large caps S&P 500 is trading I think at 23, 24 times
PE versus its historic average of 18, whereas small caps are trading at 15, 16.
But then if you go to the smaller end of small caps where we operate, say the 2, 3, 4, 5,
6 US billion dollar small caps, they're still top 100 Aussie companies, they've underperformed
again the bigger US small cap companies.
So if liquidity is what's driving this because interest rates have gone higher, money's come
out of the market and it's gone into these bigger companies, and you're taking a view
that inflation, and you listen to what Powell said, that inflation is under control and
the next interest rate move is more likely to be down than up.
When liquidity comes into the market, where is it going to flow when interest rates actually
go down?
Well, I can tell you what happened in 1973, 74.
So for people listening to this, in 73, 74, you had a similar recession to the one you're
having now.
OPEC lifted, well, cut production and oil price soared, and it created inflation spiraling
out of control right around the world.
The Fed raised rates to try and get a hold of the inflation and small caps were hit for
6, so too were growth companies, similar to what's happened in the last couple of years.
But in the end of 74, so in December 74, the Fed went right, enough's enough, we're cutting
rates.
Small caps put on 420% over the next five years return after falling 50%, 60%.
It was the best performing sector of the US share market for five years running.
Liquidity flowed back and small caps went from being massively undervalued to massively
overvalued.
Now, I don't know if they're going to become massively overvalued in five years time, but
I do believe in mean reversion and on every metric, they are undervalued at the moment.
And so if you want to be the first to the gold nugget and you believe, I don't think
going out there and putting your incremental dollar into an AI mega cap, you are going
to be the first person on the gold field who's picking up the dollar bills or they're picking
up the easy gold.
You're the person who's probably selling, starting to sell to the smarter investors.
So how am I dealing with this?
And I'll just finish with this.
I have a direct debit every month going straight into our global high conviction fund, my bank
account, bang, money goes in and then it goes out and goes into the high conviction fund.
I don't know when it's going to turn.
Inflation is stubborn above 3% at the moment.
So the amount of rate cuts that we've been expecting this year, next year, they're getting
pushed out, all that for granted.
I don't think it's a question of if though, it's just when.
And for the patient investor, there's a lot of money to be made in US and global small
caps at some point in time.
So now we've set the scene or framed the picture, so to speak.
When you look at essentially putting the paintbrush to the canvas, what's the process?
What I love about investing is, as you said correctly, if you want something to happen
tomorrow because you've made the decision, the probability of that happening is not going
to happen.
Nearly nine times out of 10.
But as you're saying, if you go find companies that meet essentially what you're looking
for and then you back them at the right time and then you're patient with them, then essentially
it comes through.
So what is OFIA's process to go find the next gold nugget?
The process is complicated because there's not some straight formula.
There's a lot of people at OFIA.
I wish it was simple and to say it was just myself and Stephen, but no, there's quite
a big investment team here.
There's in excess of 10 people and we all have our different methods of going out and
finding that idea.
Some people are reading newsletters, other people are speaking to other fund managers,
others are speaking to brokers, newspapers, doesn't matter.
We get the idea.
But an idea is just an idea.
That doesn't make an investment.
How do you get the conviction to put an idea into the fund and think, right, this is how
we're going to make money?
So we need to get an information edge to do that.
And so how are we going to generate an information edge?
Well, we need to be clever.
One thing, let's work out what the market knows.
So speak to the brokers, speak to other fund managers and know where they're at.
But the next thing is, and there's many different ways to do this, you've got to go out there
and you've got to find the data, find the person who works at the competitor, all the
different people who are in the ecosystem that will let you work out whether this company
is going to do very well or not so well over the next one, two, five, 10 years.
And so that's basically Howard from a top level, how it works.
It's interesting you say that.
I remember someone telling me this a while ago when you're trying to find companies that
people don't know about or new products coming out.
As you said, you go speak to the industry.
And like say medical, medical is fascinating because things come out all the time.
And one thing someone said is you go to a particular event where the doctors are, right?
And you go up, you just chat to doctors, have a chat.
Oh, have you heard about this one?
Who's even you said?
I kind of remember.
Have you heard about this particular product?
Maybe you tell the story, right?
You tell the story, but there's essentially.
I'll tell you the story.
There's a company Transmedics, one we've owned for several years and done very well
out of.
We did exactly that.
There was a conference where, so Transmedics for people who don't know, and I imagine most
people won't know what it does is it's involved in the removal, storage and transportation
of hearts, lungs and livers used for transplants.
So there's a huge conference once a year in the U S where all the transplant surgeons
attend.
Well, not all of them, but a lot of them, they go, it's a big junket and we just rocked
up and we spoke to as many of these doctors, but also other companies that are in the ecosystem
and we asked them about Transmedics.
And what we got was one, the market's numbers for Transmedics about the number of heart
transplants that were going to occur in this year was going in the U S was under undercooked,
massively undercooked.
And the reason was, was because Transmedics was growing the market.
So because Transmedics is a lot more, has a lot better system, a lot more hearts actually
when you're competing against an ice cooler, a lot more hearts are actually making it to
a recipient's body.
And so we could see that the market was underestimating how this Transmedics was going to go, but
also how warmly the surgeons spoke about Transmedics and what it was doing for their business.
And the great thing about, you know, one thing I can tell anyone is probably doesn't surprise
anyone, but in the U S healthcare market, it's follow the money.
And so the one thing about Transmedics is the patient's happy.
Well, they got a new heart.
So that might not have made it that far.
The doctor's happy because they're not up in the middle of the night performing this
emergency surgery and having to remove this, this organ.
They are, they go in, the patient goes into surgery at, I don't know, 10 AM, 11 AM at
a really good time.
But also the doctors are now doing more.
And so they're making more money.
Furthermore, the hospitals are making money because they're doing, they make money every
time one of these transplants happens and Transmedics is growing the industry.
And finally, the insurers are better at making more money because it's a lot cheaper for
them, believe it or not, to get someone a heart than it is to have them going in and
out of hospital and on medication and in ICU and out of ICU and all those sorts of things
that go with these terrible ailments.
So what we learned very quickly, walking the floor of this big conference was everyone
wants Transmedics to succeed.
And that was, that's a pretty good one.
Normally there's someone trying to block and tackle her business if there's a competitor.
Well, the Yeti, Yeti ice cool is your number one competitor, right?
Like, so there's a lot of Yeti ice coolers.
Like everyone loves them.
They're expensive, but they don't have any bloody wheels and they're massive.
It just makes no sense.
It's a listed company in the US.
We know it well and I don't think it's done too well recently.
So you might, you might need to...
Everyone loves a Yeti, but can we have some wheels please?
Back on the Transmedics.
The one thing I find fascinating is, do you mind giving a bit of color around the statistics
about how much organ loss there was?
And then with the use of what they're doing right now, how much they've actually been
able to reuse and save, like they would have not made it, you know, dead on arrival.
Yeah.
So I'm, I'll need to maybe brush up on all these, all these statistics, but I think lungs,
80% of lungs don't make the, don't make it to a recipient being removed.
And I think it's 50 to 60% of hearts.
So Transmedics is obviously improving this dramatically and that is what is growing the
market in the US.
And you can actually plot how many heart transplants, lungs aren't so big, how many heart and livers
that Transmedics is doing.
And the amazing thing about this business is you can see that they've actually growing
the US market because their, the amount of hearts they're doing is just on, is basically
maps out.
You look at the last 20 years, how many extra hearts getting transplanted a year and then
Transmedics hits the market and it's just jumped up massively.
And that is the amount that Transmedics are effectively doing.
So yeah, it's good to, you know, this is a great thing about my job and yeah, we're talking
about a company here, but every company we look at is fascinating and they're solving
real world problems with some very, very smart people mixed with some very smart entrepreneurs
and they're solving world problems.
And the beauty, if you're listening to this podcast, I'm sure you're, you believe in capitalism.
I certainly do.
And I'm looking at the world we live in now and just where we were when I was here 30
years ago, when I was 10 years old and it's just amazing the leaps and bounds that we're
doing and just to be able to allocate capital and get to meet these people that are actually
changing the world is fantastic and Transmedics is one of those.
It's a really interesting story.
What else are you seeing these days?
What are the, have you also got, that's a silly question.
Why don't you give a couple of, but you know, what's the, what's the, also something, you
know, quite interesting that comes to mind at a company that you're following or something
that you're about to.
Well, there's a lot of companies always in this, you know, I'm, I'm, I'm in the mind
you to, but to, to sort of take myself out of that and look at what companies people
listening might find interesting in our Aussie funds.
We have a business called life 360.
It's actually a U S business.
Um, for those who don't know what it is, it is a family safety app lead leading globally
leading family safety app and enables you to see where loved ones are, um, see that
they're safe, um, all via an app.
I'll give you an example, a sort of thing.
It does.
If you have a 15 year old, that's too young, 16, 17 year old son or daughter who's just
started driving, uh, you and they're speeding or they're on their mobile phone.
Um, when they're driving, uh, as a parent, you'll get an alert.
Likewise, uh, if they, uh, were to start wagging school and leaving at lunchtime, uh, unless
they're leaving their phone in their locker, um, you'll get an alert that your kid is leaving
school, but maybe more from a safety aspect.
You know, your son or daughter has left school.
They're 11 years old.
They've got a phone.
You'll get an alert that they've left at this time and they've come back and they've got
to school at this time and those sorts of things.
And they've got home after leaving school at three 30, they got home at four, all that
sort of stuff.
So you really can see where your loved ones are.
Um, why do we like this business?
Well, it's been a bit of a roller coaster of a ride, but we've always believed that
this is a platform business.
When I say platform, it is actually going to be an amalgamation of many businesses running
from a running from the platform with these huge amount of customers that have one thing
in common.
They really care about the safety of their loved ones.
Um, and they just announced in February that they're going to launch advertising.
So for your listeners, what does Ofea do when we hear that?
Well, we need to work out how much they're going to make for advertising.
So they've disclosed that they've got to make five to $10 million.
They think this year from advertising, our view is this is likely to going to be a conservative
number.
Why would they go out there with a big number when they actually don't know at this point
in time?
So we all become problem solvers.
We put our hats on and we go and try and work it out.
So I went through all their presentations first thing and you can see they've got 65
million users around the world, monthly users, but they have 20 around 25 million daily active
users and there's a slide in one of the packs that says, and those daily users use the app
five times a day.
They're checking probably worried mum or dad checking, not so much the kids checking where
their parents are, but, um, I know that that's the fact.
It's actually the parents that are using it so much.
They are generating on my calculation around 50 billion to a hundred billion impressions
a year where people are getting on that app.
Now, so if you have advertising, you're generating a banner.
You can, you're, they're putting a banner ad on the, on this app.
So what did I do Murdoch?
I'm trying to get to the interesting point.
We have to be faster than the market and we have to work this out.
We've gone and spoken to all the top brokers.
Digital advertising is a sector in itself in the U S think Snapchat recently IPO, Reddit,
duo, well, not duolingo so much, but you can put that in there.
Duolingo, Pinterest.
So it's a, it's a big market.
Let's go and speak to all these analysts and I'm going to sit down.
We actually pay some of these places quite a bit of money.
So they sat down with me and they found it really interesting and we problem solve people
who have looked at this market for years.
And the conclusion that everyone's getting to, and so your listeners is going to hear
this before other people in the market do, is that they should be earning over $1 to
$2 initially per thousand impressions, but ultimately they should be getting somewhere
between $3 to $5 per impression.
Now if that, the numbers become really big on this very quickly.
And given advertising should be a 70% plus margin business, this has the ability to absolutely
just skyrocket their earnings when it comes, it comes through like we expect.
So the reason we were able to get that edge was moving faster than everyone else.
Now there's a couple of analysts in the last week or two, so they're months behind us,
are starting to do this similar work.
Does that worry us?
No, the share price is going up.
You know, it's up, up a lot last month, the month before, the month before that.
We know that we're still, we're a couple of it, we've done some very far more clever
work than that now in terms of this whole business as we've extended this.
And so we're a couple of iterations in front of the market in terms of our knowledge on
the business.
And you know, it's got to the point where we're saying, hey, there is a chance and
you can certainly point a map, point a picture where they end up with 150 million active
users.
They're making something like a $250 million of EBITDA from their subscription business
that they currently have, but from their advertising business, they're making something like $400
million of EBITDA.
And so that's $650 million of EBITDA US or a billion dollars Aussie put that on 25 times
EBITDA multiple.
And you've got a $25 billion business or $30 billion business.
And it's currently a $3 billion market cap.
Now what timeframe to get there?
Maybe it's 10 years, maybe it's faster at six to seven.
Either way, we can see that this business, if they do execute really well and it plays
out like we think it can, there's a big chance that this is going to make multiple times
the money.
There's also a chance that we're going to be wrong.
And we do get these.
Just a simple question, devil's advocate.
I haven't looked into this company.
Isn't this feature like inbuilt on most androids and Apple phones, like, you know, find my
find my phone or is this not find my family's phones, find my family's phones.
Right.
No, that's not just, I'm just curious as in like, no, no, no.
So the, like, I could talk about this company for a long time.
And it was just one question I had as in the inhale, like everyone goes like companies.
What's the, what's the fine, my, this find my friends.
So the biggest risk this business has as an existential risk is that Apple launches its
own app that does this.
The find my phone is that's finding your phone.
It's not finding where you find my phone or like, yeah, like my wife's phone on Android,
you know, find my wife's phone.
Like it just pops up.
It's in coming down the highway.
It doesn't, as you're saying, it doesn't say the speed.
Yeah, this is a freemium.
So you don't pay for this.
This app does, you know, like so much more than all of this.
And so that's a very elementary app.
This app is way better and they're growing.
It's free.
So you're not paying for it.
So basically they've got a subscription where you get all the bells and whistles or you
get the freemium, the freemium version, which just has a banner at it.
And that's all you're paying is that there's an ad that's in there that you probably don't
even notice.
It's free.
It becomes the client.
Yeah.
And so your products, so yes, it comes to, yes, it might be in built into the phone,
but they're growing the number of subscribers.
So I probably really Apple probably buy them or something like that down the track.
I don't think Apple would buy them.
Apple iOS makes a huge amount of money just from their app store.
So they're getting a chunk of every subscription business regardless.
So they effectively do own.
Yeah.
So what's the margin is that is it 30% or something like Google and Apple get from if
you, yeah, that's crazy.
That's right.
Yeah.
So they're getting it regardless.
Yeah.
But this is all like, we're getting a huge conversation here because with the game Fortnite,
this is all in the courts in the, in the U S at the moment.
And life 360 is in the courts as well.
Not, they're not in the courts, but they're getting spoken about with Apple because life
360 owns a business which is called tile.
And if you know the Apple, what do you call them?
The Apple, the tags, you know, they're, call them the, no, it's not an I's calling an
I tag, but the Apple tags, you know, so that you put them around your key ring.
So you know,
Oh yeah.
The trackers.
Yeah.
The trackers.
The tiles.
Yeah.
Finally stick to the keys.
Yeah.
And so it integrates into your app.
So you can see where your, where your keys are and all those sorts of things.
But Apple has been, is being mentioned not by life 360 about their anti-competitive behavior
and what they're doing against tile.
So Apple is in the existential risk.
Apple is in the courts at the moment about their anti-competitive behavior.
Yeah.
If they did come and launch a complete competing product and all that, this is not the time
to go and do that is our view, but it is an existential risk.
Apple doesn't have too many of these other than the Apple music, the Spotify competitor,
it doesn't have too many of these sort of style apps or anything that's out of stuff
that should look like it belongs on the phone.
Anyway, I could, I could talk about it for a lot, but it's a platform business.
They have 60 million users.
We think going to 150, they, as I said, you can paint a picture where you get a 25, $30
billion valuation.
Is that going to happen?
No.
But even if half of that came true, everyone's going to be very happy.
There's a lot of margin for error on this business that if they don't do so well, we
can still make good money and they probably won't get to that 10 times.
Chances they won't get that, but if they get anywhere near it in the middle, it's such
a big gap to drive that you can drive through.
They'll make more acquisitions.
We've got an idea of what they'll buy next and they'll be very creative and this is a
platform and you get to monetize these 150 million people by selling them things that
link in with family safety.
And I know when I flick on the news in Australia or in the US, there's a lot of school shootings
and they aren't quietening down and there's a lot of terrible stuff that happens in America,
their biggest market especially and Australia's a big market for them too.
I think that this is only going to be if the consciousness is only going to increase and
the need for these sort of things is only going to increase over time.
The final thing I'll just say, which this is actually just straight out of the presentation
pack, but nobody talks about it and it's huge and what it means, their fastest growing state
is Texas and they're saying their states in America, which are the most penetrated, are
the fastest growing.
So it's not really network effects, but it's a barbecue, you're going around and one friend's
on Live 360 and another friend's on Live 360, so you get on because you're hearing it.
So as it's growing, it's actually accelerating the growth.
So where the states where they have the least penetration, that's where they've got the
lowest growth.
But in Texas, 20% of people in Texas have got Live 360 on their phones and that's the fastest
growing state.
So that's telling you that as you hit these, it's got an adoption curve, which has got
that asymptotic shape.
It's in the presentation, you can just see this, but I haven't heard anyone talk about
it.
So that's sort of something as well.
It's quite funny you mentioned tile because I'm just thinking all the great products,
you mentioned Fortnite, you mentioned tile, you mentioned these drugs.
It's kind of like you see a mate using them about 12 months ago.
That's really cool.
And you kind of forget about it.
Then all of a sudden it just kind of pops up in the market somewhere and you're like,
I wish I paid more attention to that at the time.
But that tile business is brilliant.
It's genius.
Well, they bought tile and they've dusted a lot of money on it because I think they
would have been able to buy it a lot cheaper, but it's worth a lot more to them than it
is to as a standalone because it's something that it works well with their app that you
can see where your things are.
I know I've got my car, I've got a tile just in my car at home.
So when I go and park in the shopping center, I can find where my car is by using the tile.
It was a beautiful rainy Friday afternoon here in Sydney.
But just before we finish up for the day, we were discussing in the beginning, the two
speed economy and good quality companies, value stocks haven't been found, taking a
bit to get up and going again.
We've currently seen what the IPO and there's a lot of brokers out there doing capital raising
that made a lot of money a couple of years ago and it's dried up a little bit.
What do you think is needed to get the small cap side of the market really hammering again?
I think I said it before, it's interest rates.
So we need to see interest rate expectations go down.
Well, actually, let's take a step back.
We need to see inflation in the US start going below 3%.
What's happening in the moment, Fed raised rates, holding rates and inflation is bouncing
around just above 3%.
We need to see inflation that the financial conditions are at this point, tight enough,
restrictive enough, that inflation starts coming under control and starts trending below
3 towards 2.
Interest rate expectations come down and then effectively, the Fed will cut rates.
When the Fed cuts rates and interest rates go down, more money will flow into small caps,
just like when it goes out, they're the ones that get hammered the most because they're
less liquid.
When it comes in, they go up the most and they're trading well below their historic
average in terms of their valuations.
And so any return to their historic valuation will give a lot of alpha.
And finally, what keeps you up at night and what gets you out of bed in the morning?
What keeps me up at night and gets me out, like work just gets me out of bed.
It gets me out of bed in the morning.
I'm excited to go to work every single day.
I find my job incredibly fascinating.
What keeps me up at night?
It keeps me up.
I sleep pretty well.
I focus on, this is not really the question you're asking, but I go to bed at 9pm every
night and I go straight to sleep.
Sleep is so important for me and I get between 8 and a half hours sleep a night.
I think that's very important to have your mind functioning, you need to be putting the
right food into your body, but also be getting that sleep.
So nothing keeps me up at night.
I couldn't agree more.
Ever since I started crashing out at 9 and going on the carnival diet and eating less
crap, you feel so much better and you feel like you're in your mid twenties again.
Yeah.
And you have clarity of thought.
Clarity, start aching and all that type of stuff.
And you function so much better, advocate for it.
Well, Andrew, it's great having you on.
If anyone wants to learn more about Ophere or where should they go, what's the website?
Yeah, just go to the website.
Just Google Ophere, which is spelled O-P-H-I-R and our website is Ophere AM asset management
dot com.
And yeah, there'll be a lot of stuff there to read and you can just reach out to us at
any time or follow us on LinkedIn, anything like that.
Thanks, Hasee.
Andrew, great having you on and speak to you soon.
Thanks for having me, Murdoch.
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