New Constructs' Friday Webinar: Intelligent Capital Allocation 23 June 2023

Welcome to our Friday webinar, folks. Thank you for joining us today. We've got a great agenda that we're looking forward to sharing with you. You have with you David Trainer, myself, Hakan Salt, and Kyle Guskey II. And here are our usual disclaimers and disclosures. Please be sure to review these. Our first and most important welcome and announcement today is to a new member of New Constructs, Hakan. David, would you welcome Hakan?

Yeah, super excited to have Hakan join the team. He's going to be part of our content management team and helping us put together the tremendous amount of excellent content that Kyle and team have been putting together for a while. As you know, those who follow our research, there's a lot of great detail, there's a lot of great diligence, and we're really excited to have Hakan Help us continue the trend and putting out some excellent content. Welcome, Hakan.

Yes, we're very excited to have you with us here, Hakan. So thank you very much, David. I'm going to go ahead and go through the rest of the welcome and announcements. We will not be meeting a week from today on June 30th. We will be taking that week off. And we will also probably be taking off some time in August just to make you aware of that ahead of time. After our week off next week, we will be having some great special guests coming up in July. So please be sure to make sure that you have those July meetings on your calendar because we'll have some great folks joining us. As usual, the agenda is to focus on your topics and questions. We are driving our agenda from comments out on the online community, Society of Intelligent Investors. And we do ask that you ask as many questions as you need to. Please do use the Q&A feature. That makes it much easier for us to track your questions and make sure that we're getting them all answered, which is very important to us. You can find the replays and slides of all of these events out on that online community, Society of Intelligent Investors. And now you can also watch all of the Friday webinars out on our YouTube channel. So if you go to the New Constructs YouTube channel, you'll find a playlist with all of our recent Friday webinars on it. So you can go through the back catalog more easily. There was some great research that came out last week. You can see the long list of research that came out last week. And then right above it, all of the new research this week. There were several position close updates that came out. As well as multiple focus list updates. There was an update to long and there were 2 updates to short. There was a remove and an add. So lots of movement there. 2 deep dives into particular tickers, the Steel Titan Rising and the featured stock in Exec Comp in ROIC. I wanted to point those 2 out as really deeper pieces of research worth a read. As well as a brief update to the Safest Dividend Model portfolio. So lots of out on the website for our members at the professional level and above. Next, I'm going to be handing it over to David for interesting headlines because there's been a lot going on out there, David.

Absolutely. I want to do our weekly update on the Bloomberg New Constructs True Earnings Index ETF. We are currently in the business of looking at marketing this or selling this to an issuer, or Bloomberg really is. And we've gotten some early great— there was one firm that said, hey, we've been looking for exactly this kind of ETF, a better version of the cash cows. That's great early indication that there's going to be a lot of interest in what it is we're doing here. And so excited, and we'll continue to keep you posted as to when you'll be able to invest in a Bloomberg New Constructs ETF. We're hoping that's going to be in the not too distant future.

That's very exciting. Yes.

And then in terms of other interesting headlines, we are going to be updating our legacy Gold, Platinum, and Pro product. Over the years, we've seen the use case for that evolve. It's quite different from the use case we imagined. And so we're going to update those products to better align with the actual use. One of the main things we're gonna be doing here is Helping people understand what it is we want to accomplish with these subscriptions. So we're going to have plenty of webinars and emails explaining what the changes will be. But the primary main change is that we're going to strip out the institutional-level data from those subscriptions. At those price points, providing details on NOPAT, invested capital, and core earnings and things like that is really just not appropriate. It's not the use case that we're seeing for those users. And so Access to that data is going to be reserved to the professional subscription and above. And so let's talk about the topic du jour, the Federal Reserve and the irrational exuberance we've been seeing in tech stocks. What does that mean for investing and how do we find good investments in a dangerous market? How do you get a good long idea? The answer to the question is to understand the context and the context of the market is one where Look, the Wall Street guys are looking to make as much money as they can in a short amount of time. They have order flow, and so they know where stocks are going to move before they move, and they know when they're going to fall before they fall. It's important to see that these narratives that continue to stack on top of each other. There have been papers written about how booms happen in the market, but it's typically narrative-based. Like the tech bubble was a narrative on the fact that Internet was going to change the world and all these stocks and companies were going to be super profitable. The financial crisis narrative was based on the idea that housing prices could never decline. And what we see is that things go up and they come down and things reset. We haven't had a reset in a long time. We just keep stacking narratives on top of narratives, including the idea that the Fed is going to lower interest rates. And that's created a very top-heavy market. In particular places. And so how do you navigate that? What's the answer? The answer is to focus on really good businesses still trading for cheap. And the good news is that we think we have found many of those with our system. And in particular, we highlight a bunch of these every month in our executive compensation aligned with return on invested capital model portfolio, which leads us to what have we been talking about on Circle recently? And that is a great post about our executive compensation aligned with ROIC model portfolio. And this is kind of a joke, but I love that Jerry brought up aligning executive compensation with return on invested capital because it is very important. Return on invested capital is the single largest driver of value in the stock market. And we can show this empirically and mathematically, but intuitively it makes sense for this reason. If you're paying executives in a way that teaches them or encourages them to create real shareholder value, well then you as an investor should do well. And let's take a step back and think about the purpose of the capital markets, right? The purpose of the capital markets is to allocate capital to its highest and best use, period, paragraph. There's no question with that. So then the purpose of the managers of capital or the company executives within the capital markets is to do the same thing. They're the agent of the owner's capital. As an investor, I'm an owner and that executive's the agent of my capital. What do I want that agent to do? I want that agent to grow my capital. That's their job. Not to deliver it to me, not to do anything but to grow it. Well, how do you grow capital? You take a dollar, You invest it in something and it produces more than a dollar. That's what return on invested capital is all about. It measures how much cash flow a business generates relative to how much capital has gone into it. So when executives improve return on invested capital, they're getting more money out of the same amount of capital. That's a good thing. That creates shareholder value. When executives are getting paid for improving return on invested capital, They're creating shareholder value. And so you want them to get paid for that. Now, if they're getting paid for non-GAAP EBITDA, what are they going to improve? Non-GAAP EBITDA. And how much value does non-GAAP EBITDA create? Oftentimes zero or worse. It destroys value. The best example of how bad non-GAAP EBITDA is Uber. The executive team and investors on Wall Street for a long time, their key performance indicator KPI for Uber was non-GAAP EBITDA. Well, when the Fed started raising interest rates and profits started to matter again, at least for a little while, one of the first things they did at Uber was say, oh, by the way, that's a bad KPI. It doesn't really correspond to profitability at all. So we're going to get rid of it. What does that mean? You were telling us for the 2, 3, or 4 years before you made that decision, oh, let's just forget about the fact that you actually tried to sell us for a long time. That non-GAAP EBITDA mattered. Another example, a little bit farther back, was Valeant. You know, Valeant is a company that had a super high, strong stock price. I remember Bill Ackman was all about it and supporting it, and we were categorically against it. One of the big things that was touted at Valeant by that executive team was how their non-GAAP EBITDA was looking great. And I always used to joke, you can't pay bills with non-GAAP EBITDA. There's no cash flow there. Right? You can't really pay a bill with it. It's really a useless number. And we warn people against investing in any stock that's paying executives for non-GAAP EBITDA improvement. It's about return on invested capital. That's where we should be. So how do we know return on invested capital is the right way to go? Well, we have a special section of our website dedicated to this exact thing. Go to the research section, scroll down to RYC Drives Equity Valuation. And we did a bunch of cool reports pointing out how important return on invested capital is. In fact, Ernst Young also wrote a report proving that we measure return on invested capital better than anyone else in the world. And that has a great appendix. We'll get into that a little bit later. Looking at how return on invested capital drives valuation, you can see we've got a bunch of reports on here, but this is the The Big Paradigm Report. The purpose of the stock market, as I mentioned before, is to put capital to its highest and best use. And this is a special report that we put together just to talk about exactly how we can prove return on invested capital matters. And it really comes down mostly to this regression analysis, which shows that 56% of the changes in the variable on the Y-axis are explained by return on invested capital. Well, what's on the Y-axis? The ratio of enterprise value to invested capital. That's a fancy price-to-book or a way of thinking about how the market values the capital put into businesses. What premium or discount does the market put on the capital put into businesses? 56% of the changes in that ratio are explained by return on invested capital. When we put this together, I've been doing this kind of work for probably 25 years, and typically this percentage for the S&P 500 overall averages between 56% and like 80+%? Anyone have any idea as to why it will never be 100%? Those of you who pay attention to our reverse DCF case studies and analysis will know the answer. And that is that the value of a stock is a function of not just how profitable the business is, But also how fast it will grow and for how long, or the growth appreciation period, it will maintain profitable growth. The most important factor in terms of how long it can sustain profitable growth oftentimes is how high the return on invested capital is. If they don't have a positive return on invested capital versus cost of capital, then they've got no growth appreciation period. It doesn't matter if they don't have a positive return on capital versus cost of capital. And they're growing, it doesn't matter either because the faster you grow with a return on capital below the cost of capital, the faster you destroy value.

I'd also add in for reference that 56%, when we look at other return metrics like return on equity, that value is 1% or less to kind of give a frame of reference on the magnitude here.

Yeah.

Do we have that one in here?

We don't.

But yeah, no, but it is in the education section.

It is here. And this, one of the things great about this report is that it's got all these additional reports showing why ROE is not useful. Here's what you're saying, Kyle. If we replace return on invested capital with ROE and use enterprise value to invested capital, look at that. You're very far away from even 1%. Same as for PE. It doesn't explain PE either. And why. We go through all the reasons that ROE is not, ROE is not useful. Same is true for a lot of these other metrics. We've done a ton of great research on this and the bottom line is return on invested capital is a super important number.

Hey, David.

Yes.

I've been thinking about trying to understand this from the individual contributor framework, and very often the individual contributor will get stock options. And the idea is that, oh, you give your employees stock options and then they're going to be very focused on ensuring that the bottom line of the company is as healthy as possible because that's how they get repaid. Is that similar to ROIC for executives?

It's somewhat similar if you're talking about how to best motivate the executive, you really need to think about not just what that reward is in any given period, but what the reward is over time as well. The idea is not just to look at return on invested capital in any one given period, because that can be manipulated as well, but to look at it over time. If you are incentivizing executives based on stock prices, that can tend to be a really short-term motivator. And we've seen that lead to some bad situations. Valeant Pharmaceuticals is the poster child of a business where the executives were paid based on stock price or total shareholder return, and they pulled out all the stops to get the stock price jammed way up. And I think that company ended up going out of business. There was a lot of fake stuff going on. Not the least of which was talking about the non-GAAP EBITDA performance of the business and how that was good. And that led to a lot of investors throwing good money after bad and trusting what was going on with the business or with the non-GAAP EBITDA. And at the end of the day, it was a house of cards and it all fell in. The executives made a ton of money because they got a bunch of stock and they sold it quickly. But I think they ended up in jail because there was a lot of grift or misinformation going on there. So total shareholder return and stock prices are not always the best way to, for sure, to motivate executives.

Yeah, I was going to add to Tim's question. Stock options by themselves, putting together the exec comp model portfolio, stock options aren't bad by themselves. It's what they're tied to. Especially with the executives, like David mentioned, total shareholder return, non-GAAP EBITDA, those kinds of metrics can be what executives look at if that's what they're told. Hey, you're gonna get a performance share unit based on achieving a certain metric. That metric is really what's important in those stock options. And we've seen egregious examples. David mentioned a few. I know WeWork, when they were coming out, had community-adjusted EBITDA. Which removed marketing and I think design and development costs. It was, the business wasn't functioning if you take out those costs essentially, but that was how they were showing they were profitable. And so items like that, if that is what those stock options are based on, or that's what executives earn stock options based on achieving those numbers, that's where you run into trouble. Like David mentioned with Valiant, I know they got performance units if they simply did an acquisition. That was literally one of the goals was do an acquisition. Completely ignoring whether that acquisition was good, bad, or indifferent. And so stock options can be fine if they're tied to metrics such as ROIC that actually do drive shareholder value.

Exactly. That's really well put. We're not saying cash is bad. You're going to pay people, or options are bad. It's what company or what the executives have to do to earn that. And you want to make sure that you're incentivizing them to move the needle in the right direction. Otherwise, you'll just continue to destroy shareholder value. And return on invested capital is by far the biggest determinant of shareholder value. In fact, one of the foundational books I read and recommend that people read when it comes to investing is Alfred Rappaport's book called Creating Shareholder Value. It was written back in 1984, and all the concepts still matter. are still completely true. And most of what Mr. Robert Porth talks about is how to measure and calculate return on invested capital with integrity, as well as economic earnings. The book is titled Creating Shareholder Value because improving return on invested capital and economic earnings is exactly how you create real shareholder value. Now, whether the market is going to appropriately value that, we live in interesting times. There are for sure disconnects in the short term. But one of the things I would emphasize strongly is that our friend, Mr. Warren Buffett, and our friend, Mr. Charlie Munger, what is the drumbeat and what is the rhythm of what they say every single time focused on? It's focused on return on invested capital and creating shareholder value. And those guys' strategy, I think, has stood the test of time pretty well. They get made fun of because they don't buy into the internet Tech bubble. I remember back during the tech bubble, oh yeah, Warren Buffett, he's washed up. He doesn't understand technology. Look at his performance versus the other portfolio managers. They said the same thing about crypto. They're going to say the same thing about AI. All he does is continue to crush it. And it's because there's a discipline and a focus on understanding the underlying economics of the business. Return on invested capital, when calculated appropriately, is the best way to understand the underlying economics of the business. It takes a lot of work, but it's the best way to go, no question. And one of the cool things we do is not just calculate return on invested capital on an individual company basis. You've seen that in our stock ratings. So for example, if we were to jump into the ratings page, you understand that return on invested capital is a core element of our ratings. Big driver. It is also a very important and core element in the economic EPS calculation. I'd say it's the most important. And so we have a lot of focus on return on invested capital. We calculate it for every single individual company we cover. And then we also calculate it at the sector and overall market level. Here's return on invested capital for our all-cap index and weighted average cost of capital over time. You can see it moves pretty cyclically here. We've seen a peak, we think here recently, and it's coming down. And we do the same thing on, at the sector level as well. We've got some really super cool, I think, analysis. These reports are, I believe, Pro and above, Kyle, or are you Institutional and above to get access to these reports?

Needs to be Pro and above.

Pro and above. So. Yes. Our pro subscription, you pretty much get everything except access to models. And I mean, this is a pretty, this analysis is absolutely, in my mind, I'm just going to say it's amazing. When I was on Wall Street and we built, as a Credit Suisse, and we built a platform to calculate ROIC on hundreds of companies, almost over 1,000 companies, we had enough for the S&P 500. We couldn't do this work. We didn't have tech support to do it. We'd have the technology, we'd have a database. We could pull it together maybe for the S&P 500, but not for the sectors. And it was all, I don't know, Scotch tape and chewing gum. But this is super cool.

Hey, David.

Yeah.

There, there is a question about this pulling together of the data. Is a longer-term ROIC, 3 or 5-year average, more important than the single year?

Yes. Right. I think it's important to understand, especially for executives. Because you can goose your ROIC up by just saying, oh, we're going to cut off on all investment and not spend anything on maintaining the business while the numerator or NOPAT is still rising. And so you do want to look at that over time. The way we would address that from an executive compensation perspective is that in any given year, the payment or the award won would not all be paid out at one time. It would be banked over time so that if you were able to just goose it and do, have a really good year and then hit the tank the next, You'd have to give some of that back. Wall Street doesn't work that way. They're taking as much as they can when they can. And that's not a good idea, no matter what your performance metric is. But yes, I love looking at longer-term return on invested capital because, as I mentioned before, sustainability of return on invested capital is just as important as the level of return on capital. And that actually gets me to a point that I want to touch on real fast in this report. And that is just how difficult it is to calculate return on invested capital. And that's why we don't see this very often.

It's hard.

It's hard to do it right. And most of Wall Street doesn't want you to know that it's hard because guess what? They don't want you to look at it. They don't want you to think about it. They want you to just focus on whatever metric they give you. Or that you can trust whatever metric they give you because they don't want you to know how much work goes into making sure that the numbers are right. And the 2 numbers that are hardest to get right are this NOPAT and invested capital. And that's really that Ernst Young paper I mentioned focuses on how we do NOPAT and invested capital better than anybody else in the world. And you'll hear a lot of our other clients and partners say the same thing. Nobody does that kind of diligence. So when you're looking at return on invested capital trends through the new constructs lens, you're getting the best possible measure. And what's really interesting when we zoom out to the overall macro level of things and how they're going, WACC going up, ROIC going down, economic earnings going down big time. What you find is that this macro trend is really a cover for a lot of noise at the industry or sector level. So what do I mean by that? What do I mean? Well, look, basic materials, return on invested capital taking a nosedive. Consumer cyclicals, it took a nosedive, but it's actually bouncing back. Consumer non-cyclicals, pretty flat. Not much of a difference at all. Energy still taking off. What is the point here? The granularity of the analysis matters. If you just want to trust one big number in the big picture, it's not enough. You got to go deeper. Financials, look how steady that's been. You see, not surprisingly, a huge decline during the financial crisis, but pretty steady. Healthcare, steadier, had a good rise, but a bit of a drop here. Industrials, looking good. Real estate, Not looking so good. Look at the WACC going way up as, as these guys carry a lot of debt. Reed Industry does. So cost of debt's gonna be super impactful. And also the valuations, I think for a lot of these are really high. So cost of equity is gonna be more impactful and that's always higher than the cost of debt. And then yeah, look at the returns on capital. There's a long-term downward trend. Which in some ways fits to me big picture because so many people have been crowding into real estate as an investment that at some point in time you're going to see diminishing returns. Technology, what's happening to returns on capital in technology? Pretty negative these days. So for all that talk about Nvidia and AI taking over the world, these businesses don't necessarily have great economics. Now we've seen since the tech bubble, Terrible return on capital, a huge amount of overinvestment. Too much capital flowed into technology stocks during the tech bubble. That's why there was a crash. What was the result? All right, well, they really weren't doing that well. There wasn't a lot of profitability there. Returns on capital plummeted big time. Now they earned their way back over time in the last 10 years or so. The trend has been pretty flat while the market has gone way up. That's part of why we've been saying that there's, there's a little bit too much valuation premium in the tech sector.

David, I just wanted to interrupt here before you move on to the next sector. We are probably going to be wrapping up this topic in the next 5 minutes or so, folks. So if you have any questions, please do be sure to add them to the Q&A. I know there's lots of questions about the links for particular pages. We will be putting out all of the links on Society, our online community. So please do join us on our online community to get all of those links for sure. We will try to get as many of them as we can in the chat right now. But if you do have any questions regarding ROIC or some of the other things that David's been talking about, please do get those in quickly for us. We want to get to your questions.

Absolutely.

I see a lot of action in the chat. I'm going to take a minute here. to point some of these out. Howard joking, investment bankers dump on retail? Say it ain't so, Joe. We did provide some links based on people requesting. Thank you, Tam, for pointing that out. I like Fazana talking about rereading chapter 8 from the Valuation Handbook. Super cool. You know, we actually, New Constructs has a chapter in that book. So that's, that's the joke there.

I can ask like one question if that's fine. Yeah, of course. Talking about all the metrics and how important and consistent ROIC has been. There's lately the last couple of years a trend where executive compensation has been getting tied to ESG. Is that, do you think that's gonna be a short-term Wall Street kind of thing, or would that be able to affect the long-term ROICs for companies, if not directly the exec comp being linked to ROIC, but in turn helping the company?

That's a great question. ESG is a super important topic. And it's a tough one because anyone with some expertise and experience in this investing industry and ESG and data in particular will tell you that almost all ESG ratings are completely unreliable because there's no real data or standard for determining whether companies are doing right by their environment or their employees. There's nothing there and they're making 'em up and it's a way for the pension fund consultants to sell the pension funds on effectively moral behavior. Hey, we can sign off and think we're doing good because we've got our ESG scores in here. One of the things I always say about ESG is that I think the G is probably the most important. No matter how much good you might be doing for the environment or for society, if your business is not sustainable, well then it doesn't matter because you're not going to be able to continue to do that good. And for me, the G, which stands for governance, comes back to what we talked about in the beginning, which is how's this business run? What are the executives motivated to do? Understanding the return on invested capital of a company to me is the most important part of ESG because it helps me understand what kind of governance is regulating the actions of the agents of investor capital. Executives are the agents of the capital. Investors are the owners. You want to make sure you hold your agents accountable for doing right by your capital. And so governance is first and foremost a function of what executives get paid for. And a couple of other things in this chart that's also super cool that we do that no one else has ever done that I know of, but certainly no one does in the world with as much rigor. And that is to look at not just return on invested capital by sector and for the whole market, But to break that down into the DuPont model of operating margins or NOPAT margin and capital turns. One of the people in the Q&A put capital turns as an answer to one of the prior questions, and it was very much partially true, but capital turns are often overlooked as an important driver of return on invested capital. One of the benefits of return on invested capital is that it's going to capture both income statement and balance sheet performance. So key elements of the business. And the beauty and the importance of the DuPont model is that it puts an operating approach to measuring success of the operating part of the business or NOPAT margin and the balance sheet or capital side of the business in terms of invested capital returns. So we can see what's driving the changes in return on invested capital. Is it a dropping NOPAT margin and dropping capital returns, or is it both? Or is there a situation here where capital turns have, were really still rising and really flat, but the margins are coming down. So it's all about the margin driving things down. In this situation, the margin's driving things down, but capital turns are actually looking good. This could be an opportunity to find some really good stocks whose earnings aren't looking so good because their income statement is suffering, but they're seeing more efficiency on the balance sheet. So return on invested capital is actually doing better than earnings. Energy, as we saw before, return on invested capital is skyrocketing. So it's not surprising to see both of these doing well. Financials, capital turnover's doing better, margins doing worse. That's to be expected in a rising rate environment. Healthcare margins are hurting, capital turns looking pretty good. Anyway, you get the idea.

We do have a question about comparing new constructs, ROIC calculations with Bloomberg's?

Yes, we do. Let's see, the quickest way to get to that is in that Ernst Young paper that I mentioned to you. And if you open this paper, you'll see that there's an appendix. And by the way, we love these kinds of things. All of our models, you can click back to the source and all of our papers. It's going to have very specific data. And one of the things they do is they compare new constructs to Data House A and Data House B. Data House A is Bloomberg. I think the company in Peer 1 is Comcast. So a major mega-cap company, no excuse for getting the numbers wrong. And you can see our NOPAT is very different from the Bloomberg. And I will tell you, we have some institutional clients. Who of course subscribe to Bloomberg, but also subscribe to New Constructs because they want a clean ROIC number. That's what one of the things they pay us a lot of money for every year. And that in many ways speaks to the use case around some of our retail offerings, what we need to do there. This is extremely difficult and valuable data, extremely difficult data to get and valuable data to have. So that's on the NOPAT side. And then on the invested capital side, you can see A very big difference. And again, a big difference between what Data House A and what New Constructs has. So that's your proof. And I always like proof that comes from somebody besides me because you don't have to trust that I'm just telling you the truth. You get to trust that Ernst Young, one of the most respected auditing firms in the world, is telling the truth because they go to jail if they don't tell the truth. All right.

I think we're about to wrap up on this. Any last questions or comments? Anything last there, David, before we move There is a question.

Can we get a sample paper to read? I think the answer to that question is go to the homepage and under research outperforms, you'll have links to all of the key papers that prove the superiority of our research. This page will take you to a summary of the Harvard Business School and MIT Sloan paper that was published in a top-tier peer-reviewed journal talking about the flaws in traditional data or legacy data and what makes ours superior with direct quotes from the paper. You've got the Ernst Young paper we talked about, and then there's a Harvard Business School paper that focuses on how our robo-analyst ratings outperform traditional analyst ratings or investment recommendations. So better data, better models, better ratings, all proven by places like Ernst Young, Harvard Business School, and MIT Sloan. They've got a slightly better reputation than I do. I think you can trust their word over mine. All right.

We're going to go ahead and move on to Kyle. I'm going to move back to my screen for a moment here. Kyle, it's everybody's favorite section of the program, and I've managed I do want some applause here, folks. I've managed to make sure that you have more than 1 minute to do this. So this is a new record. I'm very excited about it.

Yeah, we can jump right in. On the first one on the danger zone short side, Peloton is the featured one this week with a zombie stock down 17% over the past 5 days alone. The S&P's been flat over the same time, but the big one there being 72% since We warned before their IPO that David mentioned. The Kava IPO was kind of crazy recently. Peloton was one a few years ago that we warned about that has seen a big fall since then. They've had a litany of issues that we've highlighted through multiple research reports you can find on the site. But as the zombie stock and the dwindling cash, it's one that could fall a lot further than that $7.50 a share that they're around right now. And I think they were also one of many danger zone zombie stocks that fell big over the past week. Year to date might not be negative yet, but there seems a possible turn as some of the mania around some of these names fades away and we get a little bit back to reality in some of these highly overvalued zombie-type stocks.

Yeah, I got a theory, Kyle, to piggyback on what you're saying there, that Wall Street was looking to get one big last bonus before taking off for the summer and to cash in big money on Kava, some of these other IPOs, some of these other grossly overvalued stocks. And also I think the false narrative that the Fed is going to start lowering interest rates. There's a lot of combining bad narratives here and, and then things are going to slowly trickle down or even fall apart over the rest of the summer. But guess what? Those investment bankers made $25 or $30 million on that Kava IPO. Who knows how much they're making trading the Nvidia? So they're gonna be good to go. Plenty of beer money for the summer.

We're all headed for the Hamptons, right?

That's right.

Go to the flip side on the next slide. Long idea, D.R. Horton, up 4% over the past 5 days. 32% year to date, and it's actually up over 150% since our original long idea. And this was a see-through-the-dip idea that we wrote during some of the big COVID-related drops in the market where these companies were not only profitable before the pandemic, but they had the cash to withstand a downturn and really take market share on the way back up. And D.R. Horton has done just that. We've had a few updates on the company. Since our original idea and the past week we've seen new US home construction starts were up the most in like 3 decades in May. And so even with those rising rates, the limited supply of housing still bodes well for homebuilders. And we've seen that in D.R. Horton stock price as it keeps moving up.

I'd like to chime in and say we've also published a couple of really, I think, tremendous long idea reports. For me, it's been personally satisfying to know that there's still some really good and cheap stocks and good investments out there, given all the mania and all the other parts of the market. So if you're doing your diligence, you're keeping a sharp pencil, you're doing your homework, there are places to allocate capital intelligently.

We're going to go ahead and wrap it up for today then. Please remember, we will not be having the Friday webinar a week from today, but then we will see you again in July. For more discussion. And if you have any questions about how to join our online community society, don't hesitate to give us an email at support@newconstructs.com and we'll be happy to help you get out there. I hope you have a great weekend and a great week. Take care, folks.