From Twinkies to Rolexes (IMA Client Dinner 2024 Video)

Once a year, we host what the IMA team gently calls “client appreciation week.” This week is very special to me, as I get to meet people who have entrusted their life savings to us. 

2024 IMA Annual Client Meetings

Once a year, we host what the IMA team gently calls “client appreciation week.” This week is very special to me, as I get to meet people who have entrusted their life savings to us. 

IMA teams, including yours truly, block out our calendars and have one-on-one meetings with our clients. IMA has approximately 350 clients living all over the US and in ten different countries. The pinnacle event of the week is our annual client meeting, where I answer questions from clients over dinner. 

Today I am going to share the Q&A session from the IMA Annual Client Meeting held in Denver on March 21, 2024.

This was a wide-ranging Q&A session. We discussed

  • What will happen to our portfolio and the stock market if Biden or Trump is elected
  • Why I should not travel to London
  • Why our portfolios are full of Twinkies and cockroaches
  • My fascination with the luxury watch industry
  • What will make the US stop running huge budget deficits
  • How derivatives can help reduce risk in your portfolio
  • The impact of EV adoption on our investments in oil and natural gas
  • Our buying process
  • Why melting ice cubes could be a good investment
  • Whether the US dollar will remain the global reserve currency
  • Why overnight success sometimes takes years
  • Our thoughts on the cable and tobacco industries.

Of course, we also discussed my failures and lessons learned from them.

We encountered a slight technical difficulty and my answer to the question on our hedged UBER position was truncated. I’ll share with you an excerpt from the client letter that discusses this hedge in great detail soon, so that should not be a significant loss.

For those of you who like straining your eyes more than your ears, below is a slightly edited AI-generated transcript of the video. You can also watch the Q&A session from IMA 2023 Annual Client Meeting here.  Note: To access this video and transcript, enter your email address to which my emails are sent. 

IMA Client Dinner 2024 Transcript


Hi, this is Vitaly Katsenelson. What I’m about to share with you is a Q&A session from IMA’s annual client meeting. But I would like to warn you, and the warning is this: I usually get two types of emails that I absolutely hate. The first type of email basically says, “Vitaly, here is my God, or here’s my religion, you should join us.” I feel like religion is a very private matter, and I think that people really shouldn’t email me offering their brand of religion to me. The second email that I get a lot more often than the first one sounds like this: “Vitaly, I just watched your interview, I just read your article where you discussed this company. I went out and bought it.” That email truly scares me. And this is, by the way, the reason why I share very few stock ideas over the years, because my goal in life is to be net positive for society. To do this, I don’t want to hurt people. And when I write about a company or when I speak about a stock, the context is very important.

Number one, we have a portfolio of stocks. And this portfolio is very carefully curated. Companies in the portfolio work together as a team. And we spend a lot of time thinking about how much of which stock we want to buy, et cetera. That’s point number one. Point number two, in my writing, what I’m trying to do, or when I speak, is just teach people how to fish, not provide the fish. Because here’s what could happen. Tomorrow, I may change my thoughts on a company. And if you’re a client of IMA, you know this happens from time to time. My opinion on a company reflects the information I have today. Tomorrow my thinking may change, we may have new information, I may change my mind. The problem is if you bought the stock just because I wrote about it, because you’ve done zero research, you have absolutely no foundation to base your purchase on. How am I approaching my analysis? If you find the idea interesting, this is fine. Just do your own homework. And if you decide to buy the stock, buy it because your research led you to buy the stock, not because this is a company we happen to own at this point in time.

So anyway, I hope you enjoy the video and thank you. Thank you for coming. It’s our client appreciation day. And we really appreciate you because what you guys do shows a huge amount of trust. I mean, many of you actually invested money with us without seeing me, just by reading my articles, and you know, I feel very humbled by that.

Team Member Introductions

So before I start, let me introduce you to our IMA team. Let me see where they are. They’re right there, okay, so I’m going to start with Lisa Martin. Right there, she provides adult supervision at IMA. I’ve been told I have to make you stand up so people can see. Here’s Lisa. Then we have Cyrus Pearo. Cyrus, please get up. This is the person who truly, truly cares about you. He has so much empathy and he truly cares about you. Then we have Barb. Where’s Barb? So Barbara came all the way from Buenos Aires. Yeah. And we are very happy to have her. And she basically creates time for me because she does many different things. But one of the things I appreciate the most is that she creates time for me by doing a lot of things that I’m horrible at doing, like scheduling calls and many, many other things too. So, thank you Barbara.

Then we have Stanley, where’s Stanley? Stanley’s right there. Stanley is our director of marketing. And you might think, as a client, why do we care about Stanley, right? Because he’s not directly helping you. But this is why you should appreciate Stanley: if he does his job well, then I have to spend no time on marketing. The more time I have, the better it is for you. So if Stanley does his job well, then I will spend zero time on marketing, which is the approach we want.

Then we have Dominique. Where is Dominique? Dominique is our newest employee, and her job is to make sure Cyrus has more time to help you, but she’s also doing trading operations. If you guys got option applications, she did that. So she’s wonderful, thank you.

And now one person we don’t have here is Max. Max couldn’t come because he lives in Kyiv, Ukraine. He’s our analyst. Yeah. He’s phenomenal. He could not come here for obvious reasons, but he really helps us a lot.

Okay, so there are some books on the table. Feel free to pick them up. If you get there and there’s no book and you want one, just let Dominique know and she’ll mail you a copy. She’ll print it for you.

Okay, what else was I going to talk about? So here’s the thing, I don’t have a speech. However, some clients sent us some questions, so what I’m going to do is answer them first. This is almost like user-generated content. So if you have no questions, then this is going to be a very short dinner. So I hope you brought questions.

Question 1: How will the election impact the stock market?

I think the question probably everybody wants to ask is about the elections – what’s going to happen to the stock market, to your portfolio, et cetera? So I’m kind of walking on eggshells a little bit when I answer this, for obvious reasons. Let me just frame my answers. I am just talking about economics, earnings, financial stuff. I’m not talking about who I want to be elected or my position on this. I’m not talking about any of that stuff.

So, as of right now, we have two potential outcomes that may change, but we have Biden or Trump. And in reality, it almost doesn’t matter. I’ll give you a couple scenarios:

If Trump is elected, then we kind of know what happens, right? His approach is more free market oriented – lower taxes, less regulation. The market likes that. Last time, the market went up a lot. Obviously, lower taxes means corporate earnings are higher, so that’s again good for your portfolio.

With Biden, you’ve seen what happens when he is elected, and we had several good years in the stock market during his previous term.

Now, if Trump is elected and we cut off funding for Ukraine, which I have an opinion on and think would be very unfortunate, it still should have very little impact on your portfolio because you have a lot of defense stocks in your portfolio. A lot of them are U.S. based and the U.S. is still going to be spending a lot of money on defense, no matter who’s in office. And European countries are basically looking at the United States and saying, you’re a good friend, but you’re a very fickle friend. You say you’re going to defend us, but you may change your mind. Like you promised Ukraine you would defend them, and now you’re not defending them.

So my point is that U.S. and European spending on defense will go up no matter who’s in the White House. If Trump is elected, and I’m only saying this for comedic effect, we own one company called Intermex that sends wire transfers from the US to Mexico. Okay, so if Trump is elected and they start deporting illegal immigrants, it’s not going to help that company. So that’s how we look at those things.

But the bottom line is this: if you look at the president, when it comes to domestic politics, they really have very little impact historically. The biggest impact they have is on foreign policy. So from a domestic perspective, I think Trump would be better for the stock market, Biden less so, but I think our portfolio would do absolutely fine no matter who’s in office. So that’s how we positioned it.

Okay, I think I covered the most difficult topic of the evening. 

Question 2: What happens to IMA accounts if something happens to Vitaliy?

The second question was, what happens to your portfolio if I get hit by a bus? Okay, so I have a three-layered answer:

Number one, let’s make sure I don’t get hit by a bus. To do this, I don’t travel to London anymore. Because when you go to London, you usually look left but the bus comes from the right. It’s happened to me, I always get hit by a bus when I was there. So this is what I try to do. That’s number one. Number two, I work out, I eat healthy, I get enough sleep. So I should hopefully have a long life. I have no intention of doing anything else but this, because I have no other real hobbies. I don’t want to be a full-time writer. I don’t have any home improvement projects. I don’t want to travel all the time either. So I have a perfect life, and I just want to continue. If I don’t get hit by a proverbial bus, or a real bus, then I’ll be doing this for another 30 or 40 years. Charlie Munger was 99 when he died, so I may have another 50 years ahead of me.

But then another question is, what actually happens to your money if something happens to me? Absolutely nothing. I’ll explain why. Because your money is sitting in Schwab or Fidelity, it’s in your name, you own publicly listed high quality companies. So if something happens to me, you would just have somebody else manage the money.

By the way, there was another point I forgot to make, and this one requires a small explanation. When we bought Uber stock, that was the most controversial decision ever. After we bought the stock, we literally got phone calls and emails from clients asking me if my kids are making investment decisions in their portfolio, not me. So my point is, if something happens to me, my kids – well, Uber has tripled, so they’ve done okay. My kids could manage your money if you want. Here’s my son sitting right there.

But the bottom line is, out of all of your concerns, the only people who should be really concerned about me getting hit by a bus are my kids. You shouldn’t really worry about that. Nothing is going to happen to your money if that happens.

And the last thing, and this actually came from a conversation we had at this table. I want to make a plea, and I’m not just speaking to you, I’m speaking to the camera because this is going to be recorded and watched by all other clients who did not come to this meeting but will watch it in the comfort of their own home. I want to stress the importance of reading the letters that I write and that end up in your mailbox.

When I was sitting at this table, I heard horror stories about when Chris and Nona were on a plane and something bad was happening and the pilot did not tell them what it was. They were in a storm and the pilot just said, “We are in a storm” and that’s it. People were just sitting and waiting to figure out what’s going to happen next.

So the reason I write these letters is because I want to bring you as close to the cockpit of the plane as possible. I don’t want you to have anxiety about your portfolio, about what’s going to happen to you in different markets. And so I spend weeks working on these letters, trying to write them so they are accessible to you. I’m not speaking down to you, but I actually use some humor in them. And I think if you read these letters, the volatility of your blood pressure will decline a lot.

And this is really my twofold goal – to hopefully, and I’m going to try very hard at this, not just me but the whole team, to produce good returns. But also, while we do this, to reduce the volatility of your blood pressure. So I plead with you – when you get a letter from me (by the way, from now on, emails will come not from my name but will say “IMA team”), if you get this email, it means you received it as a client. So open that email, and most of the time you’re going to find a letter that I wrote to you. Please read it.

Okay, so that’s all I had prepared. Now I’m going to open it up for questions. Yes, there was a question right there.

Question 3: Why you want cockroaches in a portfolio?

Okay, so the question was how do cockroaches protect against this? Obviously, you guys know that those insects can survive anything. And this is what we try to do in your portfolio. This is why, if you look at your portfolio – and there can be some differences between your portfolios because it depends when you became a client, if you have social preferences, et cetera – but if a client basically came to us five years ago and said “Vitaly, you can do whatever you want,” your portfolio would have a lot of defense stocks, tobacco stocks, oil stocks. Okay, these are like the cockroaches.

What I mean by this is no matter what is going on around the world, these companies will be selling whatever they’re selling. And I think that’s kind of my definition of a cockroach. It’s a company that can survive. Actually, you know what, I’m going to use a better word – Twinkies. Because Twinkies, they can last forever kind of thing. So it’s kind of, yeah, we have a portfolio of Twinkies. I don’t want to ruin your appetite.

Question 4: It takes time for interest rates to spill into the economy

Oh God, I don’t know, and I’ll tell you why, because I have such a horrible track record of predicting these things, as it’s incredibly difficult. If interest rates are at zero or negative, and then they go up to 5 or 6 or 7 or 8 percent, you would think our economy would crumble. But our economy is doing fine, and the housing market is still doing fine, to my surprise. So that tells you how difficult it is to forecast.

I could argue that it takes time for high interest rates to actually spill into the economy and have an impact. And what I mean by this is, if you took out a loan five years ago, like a mortgage, I’ll give you a couple examples. If you have a commercial real estate property, like an office building, and you took out a mortgage five or 10 years ago, and now the mortgage comes up for refinance, you’re going to have a hard time getting a new loan. You might be able to get one, but you’re going to be paying astronomical interest rates, and therefore your profits will be gone. And so that has not spilled into the economy yet.

Whether we have a soft landing or not, it’s very difficult to tell because historically, I don’t know if we’ve ever had this much borrowing. Interest rates are incredibly high. The government is going to be running a huge budget deficit. The math is simple. We have $30 trillion of debt. A 1% change in interest rates costs $300 billion. A 3% change in interest rates is equivalent to our defense spending, how much we spend on defense. So we’ll be printing more money.

So I don’t know, but here’s the best part – I don’t need to know. All I have to do is be aware of these risks, and then I have to position the portfolio accordingly. In fact, it’s one of my superpowers to be able to stand on the stage and say “I don’t know.” And then also to put that into the portfolio. In other words, I’m building a portfolio full of Twinkies for an environment with a lot of uncertainty, because nobody knows. In all honesty, nobody knows. And if things go badly, if we have a hard landing, it’s still going to be fine, and that’s all that matters. So I’m kind of answering your question by not answering the question. I’m very good at that.

Question 5: How can derivitives can reduce risk?

That’s a great question. So, when I say the word “derivative,” you kind of start feeling very uneasy, right? Because usually bad things happen in the stock market, and derivatives are often somewhere under the belly of those bad headlines. Derivatives are either good or bad, just like a chainsaw or a hammer – it depends how you use it.

So, our approach to derivatives, and in this case I’m going to be very clear, we’re just talking about stock options – our rule number one is do no harm. And what I mean by this is don’t blow up. So there’s a way to use options that’s responsible, where you reduce risk, and there is a way where you can blow up. And I’ve seen this happen, I’ve seen people blowing up on options.

Our approach with these options is we’re just basically looking to reduce risk in your portfolio. That’s all we’re trying to do. And I’m going to give you a couple examples:

We have a very large position in Uber stock in the traditional accounts. It’s a 10-14% position, depending on the account. When I look at Uber, this is a company that has characteristics that I really like. It has a very long runway for growth because we’ll be using more Uber five years from now, 10 years from now in the United States and in other countries. So it has a great business, very high return on capital. It has a significant competitive advantage because when you need a ride, you don’t say, “I need to do ride-sharing.” You say, “I’m going to call Uber.” Most of you don’t say, “I’m going to call Lyft.” So it’s becoming a verb and a noun. So this has a moat.

The problem is that while I could put Uber stock away for 10 years, not look at it, and I can see how 10 years from now it’s going to be worth a lot more, the journey to those 10 years is going to have a lot of volatility. When you have 10 or 12% of your portfolio doing that, it becomes very tricky. In my opinion, there are many things I could do. In the letter, I discussed this and said the biggest risk to your Uber position is me, because it’s incredibly difficult to hold on to those companies. So for me to try to sit on my hands and not sell Uber is very difficult.

So I came up with a second best idea. We basically created a collar. Okay, and let me explain it to you. I’m going to try to talk in home improvement terms. We sold the ceiling and bought a floor. That’s exactly what we did. We basically said we’re going to give up some of the upside on the stock, and that money is going to finance the floor under the stock.

The math is very simple. I’m going to simplify it. It’s an $80 stock. I’m basically saying we’re going to sell an option where if the stock hits $100 over the next nine months, they can take it away from us. So the most we can make on this is $100, which is a 25% return from $80.

In addition, we can buy hedges, we can basically say we’re going to put options on indices. If the market declines a lot, we’re going to make money. Now, if the market goes up, the most we can lose is the premium we paid. So it’s like buying insurance.

Think about it like this – it may be a good example. Let’s say you live in Florida, but you can’t buy insurance on your house, but you can buy insurance on adjacent houses. In other words, you can buy insurance on your neighbor’s house, but you can’t buy insurance on your house. So if a hurricane hits, it’s going to hit your house and your neighbor’s house. If your neighbor’s house gets wiped out and they have insurance, you’re going to make money on that, but your house is not protected because you can’t buy insurance on your house.

So this is kind of what we’re doing with buying put options on indices. Basically, if the market declines significantly, our portfolio will decline somewhat too. The indices will decline, and because we bought insurance, we bought puts on those indices, they will appreciate and offset some of the loss.

The trickiness of the strategy, and this is why in the past every time we tried to do it, it didn’t work, is because of the timing. When you buy these option contracts, they have an expiration date. So you can buy insurance and then two weeks after the insurance expires, the hurricane hits. This happens all the time.

So this is why when we do this, we use a little bit of your capital and just do it when we feel like the market is getting very crazy. We haven’t done it yet, but we may do this in the future. So if you see some puts on the S&P or NASDAQ or some other index, you’ll see what we’re doing.

The good thing about this is we know exactly how much we’re going to lose. The most we can lose is how much we pay for the contract. And usually, I think in the past, we lost maybe 30 or 50 basis points in the portfolio. So the losses were not big, but I’m just saying it’s very difficult to predict this. This is why if we do this all the time, we’ll be losing money and it would add up to a big amount. So we do it rarely when we feel we have an insight, and every single time we were wrong. So it is what it is.

Question 6: What is the future of EVs for consumers and investors?

That’s a great question. So you know what I learned about politicians? They answer the questions they want to answer. In all honesty, I have very little insight to offer about Lucid or Rivian, just because I haven’t studied them enough. Unlike Tesla, which has hit this kind of escape velocity – and what I mean by this is it’s now producing enough cars to cover its fixed costs – I’m not sure these other car companies have done that. Will General Motors or someone else buy them, or just wait for them to go bankrupt and then buy them? I don’t know. I just honestly don’t know.

So that’s the question you asked me. Now I’m going to answer the question I would like to answer and just talk about the state of electric cars in general and how it impacts our portfolio, because it does.

What’s interesting about this is that I was probably one of the biggest bulls on electric cars. I mean, we own two of them. We own two Teslas. And I’m still a bull, I still think electric cars are the cars of the future. What has changed in my thinking is how it’s going to look five years from now, when that future comes.

And I think, and I wrote about this, that basically at today’s state of technology, electric cars are probably going to be limited to grabbing about 15-20% of sales per year from companies like General Motors and Ford, not more. And the reason for that is very simple. The most enthusiastic buyers have already bought an electric car, people like me.

If you live in an apartment, you can’t really buy an electric car. But if you live in a house, you have a garage. Basically, you have a gas station in your garage.

Also, range anxiety is a real thing. Like we drive to Santa Fe every year in our Tesla, and I tell you, many times we experience that range anxiety. So today, when most electric cars get about 250 to 300 miles per charge, that assumes that you charge it from full to zero. Let’s use 300 miles to make the math simple. I promise you that when you drive an electric car, when you get close to 50 miles of range left, you start getting nervous. So you really have a usable range of 50 miles, not 300.

But then if the weather is hot or cold, the range drops by another 30%. So you’re really, like if I’m driving to Vail in the cold weather, I’m going to stop by Idaho Springs just in case and charge the car more. So range anxiety is a real thing.

If you live in Denver, let’s say, and you are driving to work and back, an electric car is perfect because most of us don’t drive more than actually 30 miles a day. So it’s great. If you need to travel, it becomes a problem.

So what’s going to happen is you’re rarely going to see a situation like what we have, where we have two electric cars. You’re probably going to have one electric car and one gasoline car. So that’s also going to limit how many electric cars are going to be sold.

But this will change when three things happen:

The battery will have a capacity of 600 or 900 miles. Charging speeds will go up from, I don’t know, 20 to 40 minutes per charge to just minutes per charge. Our charging network will be better. I don’t know when it’s going to happen. I would probably say less than 10 years but more than 5 years. Toyota, who made a lot of promises and did not keep them, just like Elon Musk in that case, basically said that they think in three years they’re going to have a car that’s going to have a 600-mile range. And then in a few more years, a car that has a 900-mile range. So that’s kind of my thinking about electric cars.

But why does it impact your portfolio even though you don’t own Tesla or Lucid? Because we own a lot of oil and natural gas companies.

The way I look at it is, I would love to live in a world where all electricity was generated by solar, nuclear, etc. And where everybody drove an electric car. Well, that’s not reality, but I have to invest in the world that exists, not the one I want to exist. So I have to deal with reality.

And so the way I look at it, just as a pure steward of your capital, is this: Over the last seven to ten years, we significantly under-invested in oil production and looking for new fields. I read somewhere that most of the fields producing today were discovered 25 years ago. I read an article in the Wall Street Journal that talked about enrollment being down significantly in schools that produce petrochemical engineers. And I understand why.

Imagine this – you have a daughter, and your daughter brings home a boyfriend and says, “Dad, meet my future fiancé. His name is John, he’s going to be working on an oil rig” or “he’s going to be a chemical engineer.” That’s most likely not the person that a lot of people would want to see their daughter bring home.

So this is why, on the supply side, we’re going to be constrained, because we’re going to have a hard time discovering new oil, we’re going to have less supply coming in, and demand is not going to change. The point of this is that demand for oil is not going to change significantly.

So supply is a challenge, demand is stable or growing, and oil prices will be higher. This is why we have oil companies in your portfolio. This is also why we own natural gas companies in your portfolio, because demand for natural gas will likely rise as well.

Question 7: How does IMA apply buying discipline when looking at new positions?

What other sectors are you focusing on right now to look for opportunities? I mean, electrification seems quite interesting, and nuclear seems particularly interesting. I’m not going to name names because some of them are… So in the last couple months we looked at a company that would benefit if the price of uranium rose. We spent a lot of time looking at this and realized we want to buy it at a much lower price. So we didn’t buy that. 

Right now we’re looking at a company that’s a distributor of electrical parts that are used by utilities, et cetera. If you want to increase electrification, re-electrification of the United States or Europe, you would be using this company’s services a lot more. Warren Buffett, in his annual letter, talked about how our infrastructure is very old and how, if you own a utility company, you now have new risks, which is fires, and you become liable for them. And Warren Buffett was thinking that there’s a good chance in the future, utility companies will not be public anymore, but will be owned by the government because of that risk.

So I’m going to talk slightly about one company we looked at just because I think the story is fascinating, and my brother Alex, sitting right there, will be happy about this. We look at this company – this part of the video we’re not going to release because we’re still doing research – but I think it’s just a lot of fun. We look at this company called xxx.

Over the last three weeks, I’ve been studying the luxury watch market. And I find this market to be incredibly fascinating. First of all, I used to think that the Apple Watch would destroy the watch industry. And then I realized that it has, but it destroyed the lower tier. Like watches between $2,000 or less, that market has been destroyed. But the thing is, if you look at the high-end watches, and now we’re talking about probably $5,000 or more, that is actually men’s jewelry. 

So this is actually what men wear. Men still wear earrings, usually, but we wear watches. And there are many other reasons why we wear a watch, for the same reason why we drive a $300,000 Ferrari. It’s to basically tell others that we have $300,000 to burn and we can spend this on a very impractical car, right? Or when you wear a $25,000 Rolex, you’re basically saying “I have $25,000 to spend on this.” And so women look at this and think, okay, this guy has $25,000. Again, evolutionary stuff. This is, you know, and therefore, I don’t have to worry about him being able to sustain me. Again, I’m generalizing. I don’t want to be canceled for this reason.

Okay, so, but anyway. And so we’re looking at this company. The stock literally declined from 15 pounds to three. When I see companies decline this much, it becomes interesting. We started looking at this. So this company is the largest retailer of fancy watches in the UK and the United States. We started to look more, and then we realized, this is where it gets interesting, that 50% of their sales come from Rolex.

Most of you probably don’t know much about Rolex. I knew nothing about this. So whenever we would travel, my brother Alex and my son Jonah, we would go to Switzerland and they would spend hours looking at the windows of Swiss watch stores, talking about these watches and stuff. I was listening to podcasts while they were doing it. 

Okay, so, but anyway, Rolex, this is fascinating. Rolex is a hundred-something-year-old company, and it’s actually a private company. So it’s not private, it’s a foundation, it’s in a foundation. And it is the largest watch company in the world. It has sales of $8 billion. Eight billion dollars, something like that. And it’s basically responsible for one third of all watch sales in the world. 

If you want to do an instant exercise, if you go to any jewelry store in Denver or Atlanta or whatever, and say, “I would like to buy a Daytona, a Daytona watch,” which costs, Chris is telling me that’s not going to happen. So if you want to buy a Daytona, if you have $13,000, you would think you could buy it. No. They say, “Give us your number, we’ll call you back.” And they will never call you back. But if you want to buy it, you can buy it in the secondary market for $26,000. Something similar to this is happening with 90% of Rolex watches. 

I was listening to an interview of an LVMH executive, and somebody asked them, “How many purses are you going to produce next year?” And the answer was, “One less than people demand.” So if you think about it – again, most people here are not buying this stuff, I get it. I’m not buying those purses, et cetera. But think about jewelry for a second. 

When you think about a ring or jewelry, it’s basically, when you buy it, diamonds are the easiest example. When you buy a diamond, you basically think about it as a commodity, and then you start, if you like the design, you’re willing to pay more for that. So there is a commodity plus X factor. And when you buy jewelry, that X factor is relatively small. 

Dominique bought what she calls a Rolex, which is a fake Rolex. For how much, $80? For $80, okay? So watch this, it’s going to look just like the Daytona that you can buy for $13,000 if they would allow you. She bought it for 80. And it’s going to look, it’s going to be fake, it’s not going to be made by Rolex, it’s going to look just like a Rolex. It’s going to tell time the same way, et cetera. It’s gonna work because it’s gonna tell you the time.

Okay, so what’s the difference between $13,000 and $80? It’s a story. And that’s where the Rolex is there to tell you a story. Just think about this, and again, I learned a lot more about this than I wanted to. So when you look at a watch, you have the hour hand, you have the minute hand, and then you have the circles inside of it, or whatever – anything else extra, they call it “complications.” That’s what they call it.

So in other words, when they add a date, when they add a day of the week, or they add other stuff, it complicates the mechanism. The more complicated that is, the more art goes into this little device, and then the more story you can tell. 

I’ll tell you some stories about Rolex. So I was listening to a lot of podcasts about Rolex. They have a machine that they custom-built to make sure that the clarity of the diamonds is perfect. They spent, I don’t know how much, millions of dollars to make this machine. And they were asked, “How often do you get a diamond that’s not perfect?” They said, “Maybe one out of 10 million.” 

So they built, okay, but think about this. They built this machine so they can tell a story that they have a machine that does that. So when you buy this watch, you can like, so when you go to this Rolex store to buy a watch, it’s an experience. They’re going to wine you, they’re going to have expensive cognac, et cetera. It’s going to be an experience because it’s a story.

So why are we interested in this? Because I can’t buy Rolex. I cannot go out and buy Rolex stock. But if I bought this company – by the way, we haven’t made a decision to buy it or not to buy it, so that’s why this video is not going to be released to the public, because it’s still a work in progress. But if you buy this company that sells watches, half the sales are Rolex, so basically this is almost like us betting on Rolex. 

And by the way, over the last 50 years, the average price of Rolex watches went up 7% a year. So it’s a good inflation hedge. Now Rolex is very careful about giving out licenses to be an authorized dealer. What this means is in Denver they have three or four companies that sell them. If Alex and I tomorrow decide we want to sell Rolex watches and want to open a jewelry store, we’ll have to go to Rolex and say, “Could we have a license to sell your watch?” And they’ll say no, because they want to have a limited number of licenses in every place. And they’re also going to look at what kind of history we have in retailing, et cetera.

Oh, and this is very important. This took me a long time to realize. Most companies that sell Rolex watches get their watches directly from Rolex. So in other words, if I open a store that wants to sell Rolex, and I don’t get that license, I will get zero allocation of those watches. Therefore, I’m going to have an empty store because I won’t be able to sell anything. 

We usually don’t like retailers because it’s a very competitive business. It’s very difficult to differentiate, et cetera. There is a lot of price competition. But having a license to sell Rolex becomes very important. This company is the largest seller of Rolexes in the UK. It is the largest seller in the US. They just bought a company in Vail and Aspen that sells Rolexes there. 

Anyway, so this is what I do all day long. I study this kind of stuff. Sometimes it makes it into the portfolio, sometimes it doesn’t. But I find this kind of stuff fascinating. That’s why I feel like I’m very lucky. So, anyway, I answered a question I wasn’t asked, but anyway, that’s my answer. 

Question 8: Why melting ice cubes can still be good investments?

All right. So, if you look at it, it’s kind of interesting. If I tell you, Steve, that the government comes in and says you’re selling cigarettes, and the government says from this point on, you cannot advertise – what do you think is going to happen to tobacco stocks? You would think they would decline, right? Because, you know, well, the opposite happened. 

Because when the government says, “From now on you cannot run any advertisements in the United States,” and 20% of your revenue goes to advertising for you and your competitors, now you say, “Huh, that’s 20% I can save.” So sometimes, what I’m saying is, sometimes things work in a very weird way. 

So when you look at tobacco companies, okay, I’m not going to ask you to raise hands, but I would bet nobody at this table smokes. I mean, nobody in this room smokes, okay? And I’m not going to ask you to do this because I don’t want to put you in a situation where you may be embarrassed. But in fact, the fact that if you smoke and you don’t want to raise your hand, that tells you a lot about what we think about cigarettes today. 

But if you think of a friend who smokes, and you ask that friend if he has friends who smoke, you’ll discover that that friend has a lot more friends who smoke. And this is actually what I call myopic circles. Usually, people who are more affluent, who are health conscious, they don’t smoke. And so therefore, we are surrounded by people like that. And therefore, we think nobody smokes. How can you own cigarette companies if nobody smokes? 

Well, 14% of Americans do smoke. That’s the statistic. And that is one of the most profitable cigarette markets in the world. However, 4-5% of Americans are quitting smoking every year, and that’s been consistent for the last 20-something years. The cigarette companies, the number of cigarettes sold has been declining about 4-5% a year, but the price for cigarettes was going up 5-6% a year. So if you look at American tobacco companies’ income statements, it looks like they’re actually growing somewhat. And the profitability is improving because, think about this, you are selling fewer products, but you’re charging more. So your cost of goods sold per product is actually declining because you’re raising prices a lot more. 

So the tobacco companies have been a phenomenal business because they don’t need capital, they just return it back to us and we get it as dividends. But that’s where the story starts, but doesn’t end. Now, if you look, if you go to Europe, in different countries, like in Western Europe, more people smoke and the cessation rate is lower. If you go to Eastern Europe, and so I was in Serbia, and we have two people who work for IMA who work there, and we went to dinner, we were sitting outside, and a girl takes out cigarettes and starts smoking. If this happened to any of you in the United States, you would have been shocked. But there, people smoke, so this is absolutely normal behavior.

The point I’m trying to make is that in Serbia, Eastern Europe, and Asia, a lot of people still smoke. But that’s still only just part of the story. The next part of the story is the next generation products. 

So, when I’m talking about this, I’m not really talking about vaping as much. I’m talking about two products. There’s a product called heated tobacco. When you smoke a cigarette, the cigarette actually burns. What actually kills you is not the nicotine itself, but carcinogens from burning. There’s nothing wrong with nicotine except it’s addictive, but so is coffee. There’s nothing wrong with nicotine itself. It’s the carcinogens that are the issue.

So heated tobacco, it’s basically, think of a device that looks like a larger version of a USB stick, and you put a little tiny cigarette, like it’s much smaller, and instead of burning the cigarette, it heats it. And by heating it, because it heats it, there is a lot less tar that comes out, a lot less carcinogens, so they would call it the next generation of products. 

The company that created that and revolutionized it is Philip Morris International. I forget the numbers, I think 35% of their sales today come from those products, basically from IQOS. And Philip Morris International was basically a maker of Marlboro. Philip Morris split up into two parts. The American company, the company that can sell only cigarettes in the United States, became Altria, and Philip Morris International is the company that sells cigarettes, Marlboro, anywhere but the United States. 

So we used to own Altria and Philip Morris. Then we were very disappointed with Altria because Philip Morris gave them the license to bring IQOS to the United States and Altria fumbled it. So Philip Morris paid billions of dollars to Altria, bought back the license, and then what they did was very smart. They went out and bought a company called Swedish Match. And Swedish Match has pioneered another type of next generation product. They created these nicotine pouches. So, something that looks like a big mint, you put it in your mouth, and it makes micro cuts in your mouth and releases nicotine. So, actually, it’s a very safe product. You know, it’s a very safe product. And Swedish Match dominates this in Europe and the United States.

So when Philip Morris bought Swedish Match, now they get access to this product, which is phenomenal, but more importantly, they get access to a distribution system in the United States. Now they can bring IQOS to the United States. 

So when we look at Philip Morris, Philip Morris is a $90 stock, and they earn roughly $5-6 of earnings. So that’s about 15 times earnings we’re paying for this company. However, they do pay $5 dividends, so it’s almost a 6% dividend yield. But it’s a more expensive company than your typical tobacco stock because it has an enormous growth runway. IQOS and those pouches, which we just mentioned, are the future of nicotine. So instead of looking at them as tobacco stocks, look at them as a company that delivers nicotine.

We also own another company, which is British American Tobacco. And British American is kind of in between, it’s kind of a hybrid, meaning that they sell, 40% of sales come from the United States, 60% of sales comes from the rest of the world. They are number two when it comes to next generation products. They’re behind Philip Morris, but they take it very seriously. I think that, if I remember correctly, 15% of their sales come from that. And in some countries, they have a 30% market share in the next generation products. 

So, when we look at British American Tobacco, that is probably one of the most, like, it’s incredibly cheap. I’ll just give you some numbers. This is a company that has a market capitalization of 52 billion pounds, and they generate eight billion dollars a year of free cash flows. They pay out $5 billion in dividends, so that gives you a yield of 10%. So they have $3 billion left to do whatever they want. They’ll be paying down debt this year a little bit, and after this, they’ll be buying back stock. And this company has been growing, they’ve been growing revenues 1% or 2% a year. So I look at this and I say, I wish I had more companies like that because we’re basically getting a yield that we’re going to get back of close to 15-16%.

Question 9: How the world reserve currency could change from the US dollar?

That’s a great question. So I think the way it’s going to happen, I don’t think it’s going to be kind of a binary moment, like one day you wake up and it’s no longer the reserve currency, because there’s no alternative. For a currency to become a reserve currency, you need many different things. You need a stable political system, which is the United States, despite its flaws. 

By the way, I would argue, Ian Bremmer, somebody I have tremendous respect for, he said there are three wars going on around the world today. It’s the war in Ukraine, war in the Middle East, and the United States is at war with itself. But we still have the most stable political system despite that. 

Okay, then you need a strong economy. You need a free flow of capital. And you can argue that what I just named, a lot of countries have that. But then you need another factor that nobody else has – size. You could argue Switzerland would have met the first three criteria. But if the Swiss franc became the reserve currency, it would have went up 100x and would have killed the Swiss economy. 

So there is no alternative. We happen to be kind of the least dirty laundry in the basket, whatever you want to call it, right? But I think what is going to happen is it’s going to be a slow kind of decline. If you are used to having 80% of your reserves in US dollars, you may take it down to 70% and allocate 10% across other countries. It’s going to be a slow decline, I think.

Again, the heart attack scenario that I’m describing, where we wake up one day and we try to issue debt and there’s no demand for that – if I lose sleep over anything, that’s what I would be losing sleep over. That’s my answer, I guess.

If interest rates come back down to nothing, then… It’s a function of interest rates and the pile of debt. We’re not feeling it yet because I think the average maturity of our debt is about five years, which is not very smart by the way. So therefore, the debt we issued five years ago, that rate is much lower, it’s maturing now, it has to be refinanced at higher rates. And so that takes some time. And at some point, we’re going to start feeling it. And this is when inflation will pick up, I suppose.

Question 10: Why does IMA holds cash in portfolios?

That is a great question. So, this is a very tricky question actually. Well, the question’s not tricky. The tricky part is that in this room, cash balances vary from 2% to 70 or 60%. It’s a crazy variance. And this variance is basically driven by several factors. 

So if two people walk into IMA’s global headquarters on the same day, five years ago, and they basically said, “You can buy us anything you want,” their portfolios would look identical. And they would have the same amount of cash at that point in time. And I’ll explain how that cash comes about.

If two people come in and one says, “Vitaly, don’t buy me tobacco stocks, MLPs, defense stocks,” well, suddenly that person has more cash because we’re buying a lot of those and therefore we would buy fewer stocks. 

But then, let’s say two people come in, everything the same, but they come in three years apart. Five years ago, we had a lot more opportunities and over the five-year period, we were able to accumulate undervalued companies. Today, a lot of the companies we bought in the past, they’re not quite sales, but now they went up and the margin of safety is lower, so they’re holds. So that new account would have a lot more cash and fewer stocks.

So our cash is really not, it’s a byproduct of the opportunity set we have at any given time. We literally just look for a company, we find it’s a high quality company, we figure out what it’s worth, we want to buy it at a discount to what it’s worth, and then if we can, we’ll buy it, and you’re going to have less cash. If we can’t, or we may buy a small position, then you’re going to have more cash. That’s what basically determines how much cash you have in your account. It’s not because I’m trying to time the market.

Imagine when you have a huge variance in portfolios – some clients are upset at me for having too little cash (those are the ones that have 2% cash), some clients are upset at me for having too much cash. And all I’m trying to do is just try to own high quality companies and buy them cheap. 

Historically, if you had, obviously you don’t have 70% cash, but if you had 70% cash, historically we didn’t stay at that level forever because we always found new things to buy when the market had a hiccup, et cetera, and then we were fine, we would put it to work.

Question 11: Why overnight success sometimes takes years?

So, Evan, you remember how painful that investment was for a long period of time, right? It was an overnight success, it just took seven years, right? Or six years. We just had a call with them a couple of weeks ago, actually. 

This is a company, so just for those who don’t know what McKesson is, there are three companies in the United States that distribute drugs. What does it mean, distributing drugs? Well, Pfizer makes their drugs. They don’t want to deal with 30,000 pharmacies in the United States. They just want to be in the drug creation business. They don’t want to deal with invoices, et cetera, all these different things. So they use companies like McKesson, and there are three companies that are basically responsible for probably 95% of the market – McKesson, AmerisourceBergen (which changed its name to something else and I refuse to remember it), and then Cardinal Health. Those three companies are responsible for basically most drug distribution. 

We should be very thankful that these companies exist. Here’s why. Because when you go to Walgreens tomorrow to pick up a drug, you don’t have to worry that it’s a fake drug. Because McKesson is kind of the railroad for drugs from Pfizer to pharmacies. They want to make sure that the drug you get is actually the real drug. It’s not a fake.

Now, this is a business that’s probably growing, it’s hard to tell, it depends what inflation is. But the volume is growing, the volumes are growing maybe 1% or 2% a year. Add your inflation assumption, maybe in pharmaceuticals you have a little bit higher inflation, but let’s say 3% to 4%, so maybe the top line is growing 5% a year. And they basically buy back maybe 4 or 5% of shares a year, it depends on how much you pay for it. 

I think our fair value for McKesson is about 600-something dollars. And so like when we were doing the Uber trade, another company we were thinking about doing this with was McKesson, kind of doing the same thing. So it took me, this is another case where it was very difficult to sit on my hands and not sell, but if I didn’t sell, it would have been a 21 to 25% position. So we did sell a little bit as it went up, but we kept a lot of it. 

So, like, the position sizing, by the way, let me just talk about this, this topic is important. The reason we have to reduce positions, even though, you know, it’s just because bad things do happen to good companies. I remember there was a fund in New York, Sequoia, and I think Valeant represented 25% of their portfolio, 20% of their portfolio, and suddenly Valeant declined by 70%. That’s a big hit, right? 

So, if you think about the story of McKesson. This is an example where it’s a black swan risk. I never thought McKesson, a company that all it does is bring drugs from Pfizer to Walgreens, would get sued for the opioid epidemic. It would be blamed for the opioid epidemic. This is a company that never touches consumers, etc. And the industry had to pay $18 billion in settlement. 

So the point I’m trying to make is that bad things did happen to McKesson and it survived, but we never know what’s going to happen in the future. So this is why we have to keep reducing the position. But McKesson is probably, I’m sure most of the returns are already behind it. It’s just a question of, are we going to sell it at $650 or $620 or something like that. We’re not far from the end of it.

Question 12: Why every struggle with an investment is a lesson?

So when Brendan says “we,” Brendan left IMA about a year and a few months ago. He was our analyst and he decided to try his hand at insurance. So we did work a lot on DXC and DXC is a case where we just did the best research we could and we made a mistake. It’s just, like I’m supposed to, when you make a mistake, you’re supposed to learn a lot, you’re supposed to learn from this mistake, and I’m not sure how much I actually learned from the DXC mistake, except just things didn’t work out. I know that’s not what you want to hear. 

DXC is a company that basically, if you’re AT&T or United Airlines, this is the company that would run your computers, that would help you to install whatever CRM software and set it up, this kind of stuff. They would provide services to large companies.

But I think the lesson for me is this, this is a company that came together from a merger of EDS and Computer Sciences. And I think, when mergers happen, usually what’s the first thing you hear? Synergy. What does synergy mean? Layoffs. Well, when you are in the human capital business, and that’s what DXC is, when you do layoffs, little by little, you start destroying the culture, and I think this is the only lesson I can get out of this. Don’t ever buy companies in the human capital business that grew through mergers, I guess. 

But Mike Salvino, I think everything he did, I really liked. I thought he was a good CEO, but he could not turn around that ship, and I think he was fired. We kind of bet on Mike Salvino, and when he was fired, we reduced our position, and we will most likely sell the stock as well. I just think we can probably get a higher price, but that falls into the category of mistakes, and at some point, we’ll make them.

But nobody asked me about Qurate, which is, I’m going to create my own question, because usually, every single time I talk to a client, they say, “So what’s going on with Qurate?” 

Well, Qurate is, now, for those of you who don’t stay on top of your portfolio as you should, I’m going to guilt you a little bit. Qurate, it’s not as bad as it looks. It’s a company that basically runs HSN and QVC. When we bought the stock, at maybe around $10 roughly, they basically said, “From now on, all the cash flows are going to return back to you.” And since we owned it, I think I forget the numbers, they paid us back $7 or $8 of cash flows. So, the stock is a dollar something. It’s down a bunch, except we got seven, eight dollars out of it, so our loss is more like 10 or 15%, not 90%. 

Okay, but here’s the good news. Oh, so that’s, okay, why is it down 90%? Very simple. They have a lot of debt, but they also had very good cash flows. And then, this is where bad luck happened. Their biggest distribution center caught on fire and it became more difficult to sell slippers to housewives. So, that’s basically, that’s exactly what happened to it. And then also this company was impacted by pandemic supply shortages. Volumes were short. 

It’s a tiny position and the way I looked at it, if they fix the business and they earn two or three dollars a share, then it’s worth a lot more. How much more, I’ll give you a number, it’s going to be ridiculous, maybe $20. I mean just put 10 times $2, you get $20. 

So once you look at a dollar stock, you say, okay, can it really go from $1 to $20? If they earn $2, it could. Or $3, it’s good for sure. Now there is a good risk they can go to zero. Here’s the good news. Two quarters ago, the numbers kind of started getting worse. The last quarter, the numbers were actually good. I mean, not good, but okay, which is a huge improvement for them. So there is a good chance they will survive, but there is also a probability they’ll go to zero. Since it’s 1% of your portfolio, I think we can handle that. But that’s basically, I decided to ask myself painful questions as well. But that’s kind of my look at Qurate. So it either goes up a lot or goes to zero. So that’s, yeah. 

Question 13: Why telecom has both winners and losers?

So the Liberty Broadband and Comcast positions are doing okay. You still have some AT&T from back in the day, and it’s like $17, I think. Is it getting any closer to attractive yet? Just let me ask a question. This is not to guilt you, maybe a little bit. Did you read my letter or no? You read it? Okay, so in the letter I actually talked a little about it, that’s why I was asking you. 

So, okay, let me explain to you what’s going on today in the cable industry, in the telecom industry. In the telecom industry, we own two companies. We own Comcast Communications and we own Liberty Broadband. Liberty Broadband does not exist as an operating entity. Liberty Broadband owns 25% of Charter, which is a big cable company. So really, when I say Liberty, I really mean Charter Communications because they own 25% of their shares, 27% of their shares. When you buy Liberty, you buy Charter at a 20% discount. That’s all it is. 

Okay, okay. So we own Comcast and Charter Communications. If you look at the cable business, if you look at cable companies, they really have traditionally had two businesses – the TV service and broadband. When you think of them, usually you think about TV service, and that’s the business that has been declining because of Netflix and other things. However, they make very little money on that business. It’s a large revenue business, but most of the cash flow goes to ESPNs and HBOs. So that business has been declining, but it’s irrelevant, because the broadband business is eight times more profitable than the cable business, than the TV business. 

Now, broadband, I think if we had a broadband outage, you’re going to be more upset than if you had a water outage. This is how important broadband has become for us, right? This is because we are on the internet all the time. So, Charter and Comcast, roughly, I forget the numbers, but they have about 30 million customers each. 

So what has been happening over the last year and a half, basically, is that T-Mobile, who merged with Sprint, they started to offer fixed wireless service. Let me just use a different name for that. They basically started to offer cellular internet, because that’s what it is. Basically, you put this little device that looks like a Wi-Fi router in your home, and then you get cellular broadband. 

Well, there are a couple of issues with that. Number one, it’s not as fast, it could be not as fast as normal broadband. Issue number two is that it’s more intermittent. It’s less reliable than your normal cable. And issue number three, it’s not available everywhere. 

Brendan remembers that. We went to, when we were doing research, we went to a T-Mobile store, and we said, you know, we’re doing our research, and we said, could I get that service at my house? If I remember right, I couldn’t get it, and you could get it, right, Brendan? So, yeah, so Brendan could get it, I couldn’t get it, vice versa. So that service is not available everywhere, why? 

Here’s the explanation, it’s very simple. A person who consumes wireless internet consumes 70 times more data, more broadband, than if you use your iPhone. So therefore, if you have a lot of people with wireless internet in your neighborhood, your service is going to be horrible. So they put caps on how many broadband subscribers you can have in different neighborhoods. 

Long story short, over the last year and a half, T-Mobile has been taking market share from Charter, not just from their existing customer base as much, but more from when people go from, and I’m talking to Dmitry sitting here who knows the business very well, but not as much from Charter and Comcast for broadband, but people who used to switch from DSL and used to have DSL and used to go to Charter, now, and those are more cost-conscious customers, those customers actually went to T-Mobile. 

Okay, a couple things. Our thesis does not need this part to work out, but I would argue most likely in a few years, these people who will be unsatisfied with that service will most likely come back to cable. Okay, but that’s not the important part of the thesis. 

Here’s where it gets very interesting. Charter and Comcast started to offer wireless service. And they offer it for a lower price than your AT&T or Verizon or whatever. It’s usually like \$20, \$30 a month less. I forget the number, but it’s \$10 to \$20 a month less, which is a significant amount of money. Now, they can do this cheaper because they have a structural competitive advantage. Why? This is where it gets interesting. 

Okay, forget the exact number, right? 60% of broadband is consumed in 3% of the geography. In other words, think about this. Most of the time, we consume broadband when we are at home or at work. Maybe some of it when we drive. But most of it is actually consumed at a house, at a home or office. But it’s more than that. Also, the people who live in dense areas, this is where most of the consumption happens. In other words, if you live in downtown Denver, if you live in dense areas, you have more people consuming broadband per square foot. If you live somewhere on a farm, you have fewer people consuming. 

Now this is where it becomes very important. Comcast and Charter are basically able to offload most of your wireless device usage to their cable networks, to their networks, because it’s Wi-Fi – you’re basically using their Wi-Fi. Or because they own their own cellular spectrum. But this is where it gets fascinating. In the places where they don’t have coverage, they buy buckets of minutes or broadband from who? Verizon. 

So in other words, when you are outside of their coverage, you’re buying minutes from Verizon, but this is where it becomes fascinating. And this is why I would argue AT&T and Verizon would be horrible investments. This is to answer your question. Because Verizon has to maintain the whole network. They have to maintain the network, not just where there are a lot of customers, but also in the middle of nowhere. Charter doesn’t have to. Where Charter has holes in that network, it can buy those minutes. So in other words, its cost of maintaining this network is a fraction of what it is for Verizon. And by the way, those extra sales they do come with much higher margins. 

One more point about Charter and Comcast. Part of the reason why the stocks are hitting so much is because their free cash flows are down. Why are their free cash flows down? Because they are going through this incredible upgrade of their network, they’re going from DOCSIS 3.1 to 4.0, which means absolutely nothing to you, and it should. But what it means is your broadband speeds will be 10 gigabytes downloads. It’s going to be synchronous, so you’ll be uploading at the same speed as you are downloading. So these services become much better, much faster. 

And so what we thought, and it will be done in a year and a half, is that when they’re done upgrading the network, they’re going to save money because this new network costs less money to maintain, and their cash flows will go up just because they’ll be spending less money on capital expenditures. And that also likely gives them pricing power, the ability to raise prices. 

So we look at them, they are hated today, and that’s what we like. You can buy them at very good prices and at some point they will be less hated and the stock price will go up. So that’s the long answer.

Thank you so much for being our clients. Thank you so much for coming. The message of the day – keep reading my letters. Thank you

Please read the following important disclosure here.

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1 thought on “From Twinkies to Rolexes (IMA Client Dinner 2024 Video)”

  1. Very nice review and commentary on your annual meeting of last week. I was in Zurich and Milan at that time. Your attendees raised several interesting questions.
    I hope they were able to integrate your responses into their own algorithms for decision making.
    Thank you for the summary.


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