Sydnee Gatewood: Hello, everyone! Thank you for joining us on GuruFocus Value Insights podcast! You can subscribe through Spotify or your device's podcast app, so you never miss an episode.
We are pleased to have Chip Rewey, the chief investment officer of Rewey Asset Management, join us today.
Founded in 2018, Rewey Asset Management is a boutique, value-oriented investment management firm dedicated to the needs of high-net-worth individuals and family offices. The firm has a fundamentally driven research approach that focuses on long-term capital appreciation and downside risk management.
Its differentiated philosophy on the markets and value investing stems from the fact that they have worked for large firms and had the fortune to be mentored by three renowned gurus: Laura Sloate, Jerry Cramer and Marty Whitman. The firm's three-pronged philosophy, 1) Financial Strength, 2) the Ability to Grow and 3) Valuation is its synthesis of the best lessons and experience of these gurus over its 30+ years of experience.
Please note that Rewey Investment Management is a registered investment advisor in the state of New Jersey. This podcast is only meant for educational purposes, and not meant as a solicitation.
Chip, who holds a chartered financial analyst designation and is a member of the CFA Society of New York and the CFA Institute, has been a guest twice on our Value Investing Live stream series and has been a speaker at the GuruFocus Value Conference in Omaha, Nebraska.
Thank you for joining us today, Chip!
Chip Rewey: Oh, thank you for having me and thank you to GuruFocus for being a good supporter over the years.
SG: You're very welcome. We're glad to have your support as well. Just to dive right on into our talk today, how has the current environment of high inflation and elevated interest rates affected, if at all, your three-pillar approach of financial stability, ability to grow and valuation?
CR: Well, in my view, it's reinforced it's the right strategy and take a quick step back and then dive into that and for value investors and really any active investors in markets. Why are we here? What do we have to believe? We have to believe that the markets are inefficient and, in my view, markets are very inefficient, woefully so, and I think worsening over the last few years is the rise of quantitative trading strategies and short-term-focus strategies such as hedge funds and day traders seem to be capturing a larger and larger share of capital. And it used to be that we used to say people were short term if they focus on quarterly earnings, now it seems day to day and macro shifts. And in my view, when you get to be very short term, it's very hard to have conviction.
This morning we had an employment report and the market's ripping because it was 20,000 jobs different than the consensus. If it was 20,000 the other way, we might have to move the other way. And in my mind, I don't think the long-term value of the companies that I own and invest in are really that different from where they were this morning or yesterday, that the true value is higher over longer. So I think it's important to have a patient and long-term focus, but also an opportunistic focus. So when you see an opportunity with a good solid investment case, you can, what I say, carpe diem, patiently, do your work, wait and and pick your spot. So back to my strategy and why I think it's the right strategy. Strategy shouldn't change over time conceptually, right? We get bumps in the road all the time. But, really what's happened with elevated interest rates is the end of QE and we know this, that the Fed spent a decade holding rates very low. And in my view, this supported excessive risk taking due to cheap financing. And with the rapid increase in rates over the last 18 to 24 months, now that period is over. So higher rates now are working their way through the economy, tightening credit standards and really ended the paradigm of easy money or what some people call the Fed put or what I think really impacted things is the ability to invest without worrying about some downside risk management. Theoretically, what's your upside versus downside trade off? I think value investors who focus on balance sheet and high quality over the last decade didn't get a lot of credit for the risk they took, which probably was more upside ratio versus downside versus other people who just focused on the upside and didn't have a conception of what the downside could be.
I think today with the market transitioning to higher rates, there's a lot of uncertainty in the market. Short termism in the transition are fueling emotions. Are we gonna have a recession? Are we not? And I think a lot of people don't have a lot of conviction in what they own. And you can see that I'm more of a specialist in the small- and mid-cap space and in this space has come under a lot of pressure and I see a lot of opportunity there.
But back to my philosophy and the question. The three-pronged philosophy of financial strength, the ability to grow and valuation. Financial strength really starts with the balance sheet. It allows you to weather bumps, it allows you to work through earnings, a jobs number that might be great or not great. It doesn't really matter because with strong financial strength, you can make time your ally, you can be patient. You don't have to be a forced seller into a panic market and you can take advantage of opportunities. Say last week, when everybody wanted to sell anything, if you saw a good balance sheet, that was a good time to accumulate given what's happened this week, in retrospect. Growth is important. It's a multiyear view. It's really your investment thesis. It's why you own the stock. That's where the work should go. That's where the due diligence should go. That shouldn't change if interest rates are elevated or low, it's why you want to be there and where the work should be in valuation. In my mind, I say all the time, it always matters. Valuation is never irrelevant. Those who look at clicks or eyeballs or market share or anything else and ignore cash flow-driven valuation parameters. Simply what I say, return on invested capital that's greater than the cost of capital whack over the long term are gonna run into problems eventually and those that focus on valuation that are supported and good balance sheets and ability to grow and discounted cash flows over time should do well over cycles, even if rates are higher or lower. So that's kind of a long answer to that one.
SG: Thank you. I agree. I think a lot of people are just trying to stick to what they know to have worked in the past and are just, especially those with experience, but yes, definitely for novice investors, it could be kind of scary. So that is good input there for us. You've touched on this a little bit, but regardless of market conditions, what specific metrics or factors do you pay the most attention to when analyzing a stock?
CR: Well, again, you do have a relatively sophisticated audience, but just breaking it down simply, lesson one on day one in finance class is the value of any asset is the sum of its discounted future cash flows. My research tries to come at that value from several different ways. And there's really no alternative to that metric even if you think set back a piece of art or a house or whatever it's worth. It's what you think you can get in the future discounted to today. Whether you're gonna sell it or not, there has to be a cash value to it if you're going to invest with conviction in my view.
The tools I use quantitatively are return on invested capital, operating cash flow and free cash flow and then, conversion of operating income to free cash flow. And that addresses the quality of the balance sheet, the quality of the earnings, quality of the cash flow statement, and it's kind of like bringing a whole toolbox, use all the tools and try to triangulate all of these measures. And there are things to get in the weeds, contract assets, percentage of completion accounting that you need to adjust for. As you're looking at the income statement, depending on how companies are structured, really those cash-based return measures are what I focus on. In the last week here, I'll say all these metrics are important, but at best they're backwards-looking. You need to look at these measures, high return on invested cash flow, free cash yield, book value, which I didn't mention, tangible book value and growth over time and ask yourself, why are these metrics, what they are today? And where are they likely to go in the future? Where are they likely to go in the future is the ability to grow pillar that I focus on. Just looking at a metric is trailing and it doesn't tell you a lot in isolation and this is, I think the greatest differentiation of my philosophy versus quant strategies. If you just look at a measure today, it's like driving down the highway looking straight in the rearview mirror; you could get in trouble really quickly. The question is, you've had these metrics in the past, why were they so good or bad? Can you sustain at these levels and, better yet, can you improve? Because, in my view, having not only strong measures of value along those lines of these metrics and improving are the ways I've had success in investing over time.
SG: Well, thank you. That is really appreciated. This is one from one of our readers and he's, I think this is an interesting question. Do you think a crossing of the 200-day moving average in major indices around the globe is a disturbing sign or an opportunity? Are 10-year bonds a good addition for a diversified portfolio now?
CR: I don't mean this to come off as heresy, but lines on a chart are relatively meaningless to me for a number of reasons.
First of all, I don't own the market. I own a concentrated portfolio of names within the market. So if I'm looking at an average, the average could have been overvalued or undervalued or there could be liquidity issues and it doesn't represent what I own on a stock-specific basis. Again, it's a past view. And in my view, what I'm investing in is tremendously undervalued for the long term. So, if there's a lot, a chart that doesn't look so good, I'm not sure there's liquidity behind that or information strength behind that. For example, in this market, many stocks could trade down a few dollars per share on a few 100 shares on a Friday afternoon. That doesn't, to me, there's not liquidity in some of those lines.
I know there's a lot of people who look at quant statistics and lines and, trust me, I love statistics, and they can make you feel comfortable when you have a high P value or, an R squared, but it really has nothing to do with future periods if you haven't done the work. Most quant models or most lines say you want to do 100 and 80 days or a quant model that takes 60 periods or 60 months is what they study the past five years. Why are those last five years relative to the next five years? Think of the previous question, look what rates have done in under two years in the pandemic. Why do the last five years have any relation to what the next five gonna be? So trying to base future investment decisions off of metrics that are trailing in isolation is not what I look at.
Ten-year bonds, to touch on that, yes, they're much more attractive for wealth management clients. We have been very, very short duration for the last few years. We've written extensively about that on our website and now for the first time, that they faded recently, the 10-year Treasuries were rising to 5% and they were more attractive. So, especially for those, I recommend people keep a good cash allocation in their portfolios, never be a forced seller. So whether you want to wait six months or a year through markets that could be poor, have that in cash or have that in Treasuries, it can be in the mix. But I would, it would have to be well thought out in somebody's complete investment portfolio. And I wouldn't recommend anybody just dive into one asset class.
SG: Of course. Thanks. That's definitely a good perspective to have. And I agree with that, like, you can't always depend on the charts and compare the past with what could happen in the future. So, thank you. This is another question from another one of our viewers, listeners, readers, whatever you want to call them. But in your view, what are some prudent investment techniques to address currency, currency inflation risk in order to retain the purchasing power of an investment portfolio? What are the countervailing risks of employing those techniques?
CR: So it's a very good question, especially with inflation popping up. And again, your readers are a little savvy because there's many people who haven't had to deal with inflation over the last decade. I grew up in an auto family in Detroit in the late ‘70s, early ‘80s, and I remember very rapid inflation. Um, price package of gum, when you are a third grader buying gum, changing week to week. So, first and foremost to deal with inflation of any sort, currency inflation, product inflation, raw material inflation, find a company with products that have the ability to raise prices over that inflation. That's the best defense. If you can adjust your prices quickly, you'll do just fine. For companies without pricing power or pricing deceleration, it gets tough. So, from a fundamental standpoint, that's incredibly important as I do my due diligence and I reference some of the metrics.
Pricing power, is one of the tools that I look at to support those metrics and help me understand how those metrics got there and where they can go. And that's kind part of what I was talking about as far as a macro point of what are the countervailing risks of employing techniques? I don't hedge the portfolio for currencies or interest rates. It's my philosophy. There is a lot of countervailing risk with this option. In my perspective, it's expensive, it's opaque. Their computers, running black shawls and algos on the other side, most likely pricing in whatever you're trying to hedge out anyway, meaning the price of what you're trying to pay for and protect you might be doing that damage getting in from the cost of those options.
And then who knows if that strategy is 100% effective. And hedge effectiveness is a big issue due to a holding period due to a mix of revenues, due to a mix of currencies, et cetera, et cetera. It's very hard to get a hedge. That's perfect in a company. So when you try to layer that over a portfolio, I think it gets tough, expensive and ineffective on a lot of levels. So I stay away from it. I've never really seen it work out either over my career.
Now I guess the easy answer is if you can't find a company with pricing power and you're worried about inflation, currency inflation, raw material inflation to the detriment of the investment case, sell the stock.
SG: Fair enough, fair enough. That's probably the best thing to do in my opinion also. All right, in a recent blog post titled “How Risky Is Your Index?” you wrote, “Although many investors think of an index ETF as a low risk way to invest in the markets, we believe ETFs do not really represent the market and that ETFs can increase one's risk profile.” Could you elaborate on your reasoning behind that argument?
CR: Sure. It's nice that people read my blogs, so thank you. For that specific blog, I was really referring to the concentrated position of the top seven stocks in the S&P 500. We've all heard about the Magnificent Seven and I was trying to point out that if you're a buyer trying to buy the S&P 500 for diversified market exposure, you are taking a concentrated technology bet because the top seven names are all highly correlated and they represent a large weight of the index itself. And in my view, many of those names, potentially not all, but many of those names are very overvalued or at least represent investments where I don't think you can see a return on capital, but potentially a return of capital over time. So, what sort of risk are you taking when you buy the index? And are you accomplishing what you're trying to do when you buy the index, given the concentration of a top position? And if those names came under pressure, and we've seen that recently, you could do much worse than the broader markets and moreover, the performance of the S&P 500 probably just doesn't correlate to the broader markets anymore given the impact of those top seven.
So, if you're looking for market exposure, you may not be getting it the way you think you are. There's tons of ETFs out there. Every ETF has what I call the problem of historical performers becoming larger positions. Buy low, sell high doesn't really work for ETFs. It seems like you're buying higher every day. The better the position does, the bigger position it is and the more money you're putting into it at that weight. So, again, it's just fundamentally something I'm not comfortable with in my investment approach is how the ETFs cycle through their holdings, just by definition of who they are. And if you're a sophisticated investor, sector ETFs might solve some of these problems. I think that blog was speaking just to the broad S&P 500.
SG: All right. Well, thank you for the clarification on that. You kind of touched on this a little bit, but in that same post, you also commented on the rise of AI this year and how despite your outlook on its potential for increasing productivity, “the current boom and valuations has likely ramped too far, too fast.” What sort of risks do companies that rallied on this trend face?
CR: Yeah, it's a good question. Look, I'm not saying AI is not an exciting technology and it's not here to stay. It is. I believe it will be pervasive and I think it'll have a greater impact across society than even the internet. And I see that, but if we think back to when the internet started to come into widespread investment views and there were a lot of companies that were established leaders whose valuations rocketed, for lack of better words, to the moon and were unsustainable. Worse, there were many companies that tried to adapt their business models or their names or their marketing messages to kind of fake it till you make it. And so there was a hysteria where anything that could be dotcom, dotnet rocketed ahead and, again, not on metrics of cash flow, not on metrics of return of capital or anything that we look at. And so I say, buyer beware, think for yourself.
So the points I was trying to make in that blog are valuation always matters. For the leaders, they will probably be the leaders, but what are they worth? What are they, what are you willing to pay for them? I mean, Jerry Cramer, one of my gurus that trained me over my career had a great line: Are you in it for return of capital or return on capital? I don't wanna participate. Yeah, I want to make a great return on capital and make money on the stock. And so I think that's where valuation matters. For many other companies, caveat emptor, be wary and skeptical; challenge companies when they say their products have AI, they can monetize AI. Challenge their funding needs, challenge their management team, challenge everything to see if they actually have a business model that can profit. Remember this is technology, it's a brand new technology. Barriers to entry are extremely low. And, just I think given what AI is, maybe AI reinvents itself and rewrites itself very, very quickly. So I find a way to invest in AI potentially for companies that are buying the tools and buying the modules and maybe trying to avoid who's gonna be the best creator of the technology.
SG: All right, that kind of feeds right into our next question. If you were to invest in a software or tech company boosted by AI, what conditions would need to be fulfilled?
CR: OK. That's funny. Yeah. I hope to invest in AI and profit from AI and look, I think I am today. I have companies in my portfolio that are applying productivity tools with AI, either through automation of phone systems or customer care contact or supply chain or inventory management or vendor management. And those can be real cases to me, knowing where everything is and maybe preorder and pre-identifying shortages or outages, but like any potential investment, what would make me invest in AI? My three investment pillars, and they're not going to change whether it's AI, the internet or anything else, financial strength, the ability to grow and a discounted valuation.
Does the company have the balance sheet not only to execute on its strategy with, if a company has to come to the market over and over for funding? I mean, look at the startups now that are taking down routes in the private equity. You don't wanna have to be selling equity or selling debt in adverse scenarios. So, have the balance sheet to execute your strength over a long time period and suffer through bumps in the market because there are bumps in the market.
The ability to grow, we talked about, challenge the thesis. Have a thesis, understand the competitors, understand how they can monetize it to cash and then again, bring it down to valuation. How do I justify companies that can be, 10, 15, 20 times revenues in negative free cash flow right now? I mean, where is that valuation? How does that paradigm turn into something I can make at least 30%, 40%, 50% on an absolute basis. That's what I'm after.
And then also last we haven't talked down a lot, but only a concentrated number of positions versus the broad market allows you to have opportunities to compete with each other, whether it's AI or deep down, dirty industrial, where do I have the best upside versus downside? And where do I have the most credibility to get there? I don't care. If it's AI, fine. If it's deep down, dirty industrial or something else and I have conviction of my investment case, that opportunity will win out.
SG: All right. Thanks for that clarification and connecting the dots for all my questions. It's great. In another blog post called “Growth: The Secret to Successful Value Investing,” you wrote, “We have always believed that value is not the antonym of growth, and a forward-looking path to growth is an essential component of a value investment decision.” What are some of the metrics or elements you look at when evaluating a company's growth?
CR: Sure. I talk about this over and over, but growth is not the opposite of value. The opposite of value is overvalued and the opposite of growth is shrinking. And so just be careful of labels in general and anywhere you don't understand a label, challenge it, define it, understand what it is. But some of the best successful value investors, Marty Whitman and, and even Warren Buffett (Trades, Portfolio) stress or have stressed the power of compounding, theoretically the compounding of book value growth, tangible book. Again, it's a historical looking metric. It can grow because your cash flow and your earnings grow, you have retained earnings on your balance sheet, it is high quality and you grow book value. So you can't look at just book value. You have to look at the components all the way through. But yeah, that's what I look at.
So if I'm looking for growth and evaluating growth, I look at general things. What is the market opportunity? What are the strengths and the weaknesses of the company? Who are the competitors? What is the potential market size? I speak to management; what is their plan? I ask questions. I love asking management questions. A lot of time you learn a lot. I have assumptions and they tell me, “Oh no, that's not how things work” or they tell me something and I don't think it makes any sense.
And you said connecting the dots earlier, but when you talk to management too, when you talk about growth, working on a company can lead you to new ideas. And this is a pure hypothetical, but say I'm working on an AI company in a server farm and they're having a hard time finding power supply components. My next job is to look at the power supply component players, right? And just connect the dots and chase down new ideas that way and, hopefully, think differently. But flipping it over a little bit, the importance of growth is not over 30 days, not over one day, not over 90 days. I mean, anybody who's worked for a company knows that you can't really accomplish a lot in 90 days, especially with a new idea, right? Try to get a meeting scheduled and a group of people together this week, next week. I mean, even get started. And that's why I like to have a growth thesis that's at least three years and put together an investment case of why I think growth will happen.
But critically, and again, Laura Sloate is a great guru mentor of mine and she instilled this into me: Once you have your thesis, flip it around and spend all your time trying to prove yourself wrong. Don't walk around looking for data points, trying to prove yourself right. That'll lead to disaster. Why are you wrong? Why can't this company make it with their balance sheet? Why are they going to need capital? Why are their products gonna fail? Why is their product better than competitors? Be critical and ask. And the more you can't prove your thesis wrong, the higher conviction you have because on the days where markets can be bumpy or there's an earnings miss and the stocks down five or 10%, of you've asked all the questions already and you're confident in your thesis, you can use that weakness to buy. As Warren Buffett (Trades, Portfolio) says, be greedy when others are fearful. How do you do that? Have a vision, do your work and look on it. So, metrics for growth. We talked about the metrics in the past. Again, how did they get there and how can they continue to be there? I think it is the question you consistently have to ask yourself.
SG: All right. Well, thank you for expanding on that a little bit more. You've mentioned your three mentors and the advice they have given you, but what would you say is the most important lesson you've learned from them throughout your time with them?
CR: Yeah, it's funny because they all kind of rhyme, but again, it's, I guess what Laura Sloate was kind of the first one who trained me, so, of course, she's gonna be the biggest impact, is have a vision. Laura is an individual. She's a good guru, but, she is blind. And so, we talked through things all the time over and over and we'd have a vision and we try to rip apart that vision. And when you don't know the answer, go find an answer.
Be critical of what you want, that's a Jerry Cramer. Is this return of capital or return on capital? Why are you even doing it? Why are you investing in this company? Is your thesis strong enough? So, all the things that I talked to, financial strength, ability to grow and valuation, are the ways I've tried to putstakes in the ground to answer those fundamental pillars of why are you investing in this company? And what are you hoping to see over a period that gives management time to control it?
If again, if the market, if the Fed raised rates 25 basis points today, yeah, it might not be great for my companies, but it wouldn't change the investment thesis if it did. I probably shouldn't be there. Because who knows, I mean, they might cut, they might raise and they don't call it the unexpected because everybody sees it coming.
SG: OK. What is your outlook for the market for the rest of this year and heading into 2024?
CR: So, I'm not an economist and I sometimes joke that economists make one yearly forecast and 51 weekly revisions. But, I don't see a recession. I see maybe a flat to very slightly growth market next year. And the reason for that is I think the Fed is done cutting short-term rates again; if they cut one more time or, I'm sorry, if they're done raising rates, if they raise one more time on the short end, I don't really think it matters. If that paradigm holds up, I think it'll be just fine for many companies because the rate of acceleration will slow and their business models will adjust. And moreover, and this is my background growing up in Detroit in an auto family, busts and slowdowns follow boom periods. Recessions come from selling over demand or periods of overconsumption and then we need a period of under trend consumption to balance it out and through the pandemic, we haven't had a lot of over consumption. I mean, industrials were hamstrung by so many things: supply shortages, now there's a UAW strike. I think if the decks can just get cleared and the supply chain can normalize, they'll do just fine.
Banks clearly aren't coming off a robust boom period. I think for people who have strong projects or looking for mortgages or loans, banks have plenty of money to lend at the right rate. I think people think are saying that there's too much tightness out there. I'm not sure I'm seeing that. I think people can get funded for the right project, and that's kind of where I see, and there are sectors like health care that were decimated, that still haven't recovered. So, yeah, I think we have had rolling recessions, so to speak, sector by sector recessions over the last two to three years. I think that will continue in the next year with periods of strength and weakness. Clearly semis are at the bottom right now or near the bottom and maybe that could reaccelerate, driven by some of the AI discussion we had earlier. But again, I think, in general, I see the economy bumping along. OK, next year, not a boom, not a bust, but maybe like the gist, right? But again, that's not really a forecast I invest against. I'm bullish in 2024 and even into ‘25 because the individual names I own. I think there's a lot of neglect in this market, a lot of fear and a lot of undervaluation, perhaps more than I've seen since. The Covid lows in March 2020. I think people are scared. I think people are selling without really knowing why if you miss an earnings estimate. And I have very high conviction in my investments. And so, I'm bullish even if the economy fumbles along.
SG: I appreciate the optimism. I'm pretty optimistic too about the market going forward. So,what advice would you do you have for individual investors in the current environment, who, may not be sure what to do?
CR: Well, just summarizing a lot of what I said, think for yourself, have your own investment thesis and keep a long-term focus as much as you can. It's hard to keep emotion out of your investment and trading decisions. If you have a thesis for what you want to own and your thesis is solid along my framework, if you wanna use it or yours, financial strength, ability to grow and undervaluation, buckle down and hold and add on weakness. And if something really accelerates towards your price target, don't be afraid to sell part of the position or sell into strength. I think too many people think binary. Do I have to buy it or sell it? If it runs into my price target, I'll start trimming on strength and if it starts weakening, I'lll add on weakness and on recovery, trim that out. And that's the way I do it. And I think that's worked over time. I don't buy 100% on one day or sell 100% on one day. And again, remember I, in my view, and I've seen over 30 years, valuation always matters and buy at the right price. It will protect you over time.
SG: All right. Thank you so much. Just wrapping things up here today, could you recommend three books and three movies, whether they're investing related or not, for our listeners to check out? Please also share why you like them.
CR: Let me think about it on the books. One investment book, it's not an investment book, but I tell everybody to read; really impactful to me is “Blink” by Malcolm Gladwell, and we haven't talked about my big behavioral influence: I try to say removes emotions. But the premise of this book is the power to think without thinking. And what that means is kind of trust yourself, trust your gut. If something doesn't feel right or look right, pay attention to the voice in your head. And one thing in the book, they talk about a firefighter who took his crew into a house and it was raging on fire and they walked through the front door and there was no smoke and it didn't feel right to him and he pulled his people out. He just said, “Something's not right. Get out.” And as they were leaving, the floor fell through because the basement was the inferno and it was sucking all the smoke down. And he just knew something wasn't right and he trusted himself. But that lesson he couldn't say why, he couldn't figure out what it was, but he knew something was wrong. That applies to investing in my view. Just if it feels wrong, don't do it. If it's keeping you up at night, get out of it. Listen to yourself.
Another book I like, again off the beaten path, is a book I read, “Lessons From the Titans” and this was written by Scott Davis and some of his peers, senior investment advisors and sell-side analysts for a long time. They talk about what makes good companies great, for lack of a better word. Danaher (DHR, Financial), Boeing (BA, Financial) and Cat (CAT, Financial) over their careers, how they covered them, how they talk to the CEOs. And we didn't really talk a lot about, one of the things I didn't talk about is governance. Everybody talks about ESG. It's G. I like environmental, I like social; they're important, but it starts with government. Your management team is your governance. They should protect the environment and social, but also their plans. And if you have a good management, let me rephrase that, you need a good management for a good investment case over time. They need to make good decisions, good capital allocation, good growth, good community standards, good on every level and good vision and good moves to execute that vision over bumpy markets. So just looking back about these great companies, we look at today, they always weren't great and they evolved. So that book I liked a lot. And hopefully, the goal again is to try to find companies that can do that; kind of go from good to great over time that those should perform very well financially.
Again, a lot of your listener base is very skilled, but for those who don't have a finance degree, maybe just get a finance book. And just read the terms and understand discounted cash flow or have it on the shelf for reference. And again, I say this, just understand terms. During the financial crisis, I looked up immediately, everybody saying CDO CDO. I tore into what CDOs were. I didn't know exactly what they were, but by tearing them apart, you realized how shaky they were. So, just know the terms. If you don't know something, research it, Google it, read it in the finance book, but, have something there that you can reference to at least know the basics if you're gonna do it yourself.
I would say as far as movies, I don't know. Well, “Wall Street,” the original one, comes to mind, or even “The Wolf of Wall Street. Both are jumping out at me and look, they're very entertaining, but when I watch them, I take away, “stay away from managers with poor ethics, avoid them.” Again, back to governance. In both those movies, you have people whose motivations were contrary to successful long-term investing. And that's always gonna be a problem. So again, if you don't think a management team or anything else is really executing just, don't be there. There's more ships in the sea.
And then the movie “The Big Short.” Yes, it's great to get it right and get it right big. But, just amplifying, showing the power of doing your work, having a long-term view, having high conviction and thinking for yourself. That's what the movie is about. Whatever it is and, just following the herd, that movie would have never been made and hurt investors. That's kind of anachronism. But anyway, I don't know movies. That's a harder one.
SG: All right. Those are all good suggestions. Thank you. I appreciate it. And I'll definitely check out a few, the books especially. But I haven't seen the original “Wall Street,” so I'll be sure to check that out.
CR: That's like a classic. It's entertaining.
SG: Thanks again so much for joining us, Chip. It's always a pleasure to have you.
CR: All right. Thanks again, Sydnee. Thanks everybody on your team.
