This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Manser and Tim Stinebec from Bloomberg Radio. All right, everybody you're listening in watching Bloomberg Business Week, what are you thinking. I'm thinking that Romaine is like ready to go at it about meta earnings. I keep
staying with climate change. We're all going to be living in the metaverse because you're not gonna be able to go outside. But having said that, who knows? I know someone who knows everything? Does she? Yeah, we've got Alex. We're very pleased with her with us. In fact, she was in here before these earnings even came out. She's furiously typing away getting to the bottom of what's happening with shares of Facebook. It is formally, of course Facebook
now it's metal platforms just out with earnings. I want to get back to uh these right now. And we got Bloomberg Technology Report Alex Brinka here in our Bloomberg Interactor Broker's studio to do it. Okay, So Alex, I know you weren't paying attention to what Carol remained. Katie and I were all yelling about because you're actually doing important, real work. But now that you've had a good six minutes to give I was we were what are you
seeing what sticks out here? I'll tell you what jumping out to me in six minutes that we're also sharing on the blog on the terminal revenue beat for the fourth quarter um they also seem to have some pretty strong revenue estimates for the first quarter. First quarter revenue estimates of billion to twenty and a half billion straddle what analysts were estimating. So that's exciting. I bring that
add dollars. That is the majority of their revenue is AD dollars, so close to upwards of that is AD dollars. So that to me is saying that what we heard from Snap yesterday that the malaise in the AD market is leveling off, at least to the level of folks expect. That seems to kind of play out that narrative. Who knows what we'll hear on the call. We're looking for some more clues on where the AD market is going, but that top line number is really jumping out at me.
Another number that the back. The buy back was my number two forty billion dollars in share buy backs. Look, last year two was the worst year on record for Meta They fell what six um on the year, So we've had a little bit of recovering the stock. Definitely a jump of the stock this um this afternoon up. But clearly the company thinks that the shares are undervalued now. Investors sold off last year basically because they're concerned about
where this company is going in terms of strategy. You have the ad business, like we said, makes up a majority of revenue, but a lot of the focus and the renaming of the company has been on this kind of far flung virtual reality future that the company calls the Metaverse. Now, when it comes to earnings, the Metaverse sits in a business unit called Reality Labs. Reality Labs is a big loser. They lost four point to eight billion dollars in the fourth quarter, more than analysts estimated.
So when it comes to the hard questions that will be on costs, and Reality Labs seem to be the big cost suck with a big question mark these days. But Mark Zuckerbert coming out in a statement saying that three the management theme is quote year of efficiency focused on becoming a stronger and more nimble organization. Is it a nod to the thousands of people who were laid off just a few weeks ago of the workforce laid off in the end of last year. So yes, it
needs to be. And it seems like he's projecting that it's not just a change in the cost structure, but it's a change in how the company is thinking going forward. Remember this is a company that's only seen growth up into the right right. We we've seen now sales declines for the first time a few quarters in the row ever for Meta or when it was called Facebook. So it seems like they're trying to kind of um at least project to the street a reason to give patients,
which is what he was asking for last quarter. And he wasn't afforded by the market when the stock fell on the last earnings day, So it seems like he is needing to change his tune a little bit more from trust us. We know what the future is going to look like too. Oh look, we're actually going to be efficient now and kind of drive towards running a more kind of priority focus business. Is that first quote revenue outlook was a miss or disappointing, would we be
having a much different conversation right now. Absolutely, that's what we saw hopping with Snap yesterday. So if that first quarter was a miss, I think you can continue to have kind of questions around. Look, if you want to build a decades of virtual reality future, you've got to fund it somehow. Don't forget to forget about the bread and butter with the caveat that. This is an impossible
question to answer. I'm gonna ask you anyway, is the sixteen point six percent rise in Facebook stock right now about the share buy back or about the revenue number? I would guess it's a mix of both. Um, if this comes back down to earth, I will say it's the share buy back. If it continues to say stay high, I would say it's the revenue number and not to throw it to tomorrow. But we get Alphabet earnings tomorrow as well. Alphabet and Meta are the two kind of
monsters in the digital ad space. They've really traded all off as there's been kind of economic uncertainty and marketers pulling back on spending. So if that stays up and Alphabet hits, then I think, Um, this is more about about the first not necessarily scientific, but just doing our g I P O aftermarket you know function on the terminal. It looks like as soon as the revenue number hit,
the stock shot up. I'm not saying that it didn't go a tiny bit higher on the buy back news, but as soon as that revenue number and I would agree that if they're able to fund it right, people are going to invest in and say, okay, go ahead, because you're still making a ton of money. So Facebook, Facebook is an advertising company now that that sells ads in Instagram and in Facebook always it has, but you know, over the last year, Mark Zuckerberger said, we are a
metaverse company. We changed the ticker name. We're investing in Reality Labs, which, as you noted, lost billions of dollars in the fourth quarter. Uh, aleo remain two point Oh well, I'm Facebook stock up seventeen point seven percent right now, Alex. Okay, So a lot of so many questions for you. Um, if we think about this from the perspective of Snap, what they get right and Snap get wrong? Meta got right not taking a big hit to kind of change its ad product in the first start of the year.
Meta's ad ad ads on Facebook and Instagram are really focused on direct response, so that's where you are selling products immediately. That's the slice of the digital ad world where marketers are still spending because it is seeing their dollars go to work immediately. Snap had some very snap focus changes yesterday where they said, we're actually rolling out a lot of technology updates to our ad product and we're going to take a big hit in the first quarter.
That being said, Meta's the giant right aside techically, so Meta carries a lot more weight. They have a much larger chunk um. They had to do woppolie them and and Google, which they lost um last year, but they're still kind of the strongest ones out there. So I think again some leveling off in terms of some of this malaise in the ad market seems to be positive news and that's reading through and at least the revenue
projection to you. I think on the blog we're saying, I think that's the first time that they've hit two billion in daily active users. I mean, the behemoth cool stuff. Alex Brinka, thank you so much. She covers a lot of the technology world for us here at Bloomberg joining us in studio. This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted
business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim stinebec from Bloomberg Radio. All Right, so maybe you've heard of it, the nonprofit Core Response started by actor Sean Penn. That's really stepped up when it comes to helping people in Haiti that after the earthquake, for saving American lives during the pandemic and doing so much more so, Tim sounds
like a lot of good deeds. I'm really coming into help up, clean up messy and difficult situations, right and well. And yet, as a Bloomberg Business Week investigation has found out, what was going on in the inside of the nonprofit, according to employees, was another mess as well. It's an exclusive story. It's in the upcoming new issue with Bloomberg Business Week. It's out on news stands tomorrow. It's already online at Bloomberg dot com, slash business Week and of
course on the Bloomberg terminal. We've got with Bloomberg News Wealth Team reporter Sophie Alexander along with the editor of Bloomberg Business with Joe Webber, both in our Bloomberg Interactive Broker Studio. Joel, I, I I know this charity because they did so much work in the in Haiti and so
much work during the pandemic. What happened, well, when when they were when core U was getting started UH in places like Haiti really was disaster relief response, right, and it was actually fairly modest um not you know, dozens of employees, not you know, millions upon millions of dollars. But COVID really changed that. And what the Sean penn Uh nonprofit did was really doubled down in Los Angeles and it became effectively like a de facto healthcare operation.
But with that growth and this massive influx of money that it saw there also created some chaos. And think that chaos led to um so if he's reporting? Um so, so, if you what did you hear and where did that lead you? Yeah? So, like you said, they grew incredibly quickly during the pandemic. They were just about a dozen employees beforehand, and then they grew to thousands over the matter over a matter of months and less than seven million dollars in revenue in two million dollars, so that's
enormous growth. And so I started reaching out to employees after I heard about this, and basically they were saying, yeah, it was a total mess inside. A lot of employees said there were a lot of financial issues, a lot of employees told me about sexual harassment, and so some of the testing sites, including the one at Dodger Stadium, which was the one of the largest, if not the largest testing site in the US during the pandemic. What I found so remarkable about this was the way head
count exploded. You point out in your piece that head count went to three thousand plus people and some context there as you write, Sophie, it's larger in the bill and Melinda Gates Foundation at one point, that's right. They're an operating nonprofits, so you know, like they had all these people on the ground, and they started out just by getting volunteers to respond to the pandemic, but quickly started turning them into full time employees. And a lot
of these were young people working their first jobs. Um. But then later on they brought also very experienced nonprofit employees for from other organizations who knew what how this was supposed to go? Okay, So the story starts um with the fundraiser and to just give a sense of the star power in the setting and where you know money money gets raised for a nonprofit like core response like take us there, take us to Miami. Sure, so
nonprofit like this, you know it's a celebrity nonprofit. They spend a good amount of time and money on fundraisers. And these fundraisers are home to Seam Penn and a lot of his rich and famous friends like Leonardo DiCaprio. The one um in the story at art Bosel in Miami was hosted by the pop singer Anita Delphine or No, the heir to the world's largest fortune, was also there, and everyone was told that this was going to raise
money for Latin America COVID response. Um, that's what was on the invitations that were shared with Business Week, That's what was on the marketing materials. And I spoke with employees who said it took a lot of nagging of the CEO to hey, why hasn't this money reached Brazil yet? Because that was basically the only place they were doing such work at the time. And why hasn't gone to Brazil yet? Why hasn't gone to Brazil yet? And the CEO was essentially like, you know, it doesn't matter if
we actually spend it in Brazil. Um. That's what these employees were telling me. And so according to an email that we saw, it ultimately took almost six months to make it to Brazil and that's ultimately where all the money was allocated. But it's kind of a confusing mess in between. So fisis about like an organization, like when you talk about the money, how it started out, and then you know, you're talking about raising two million dollars.
Is it a case of an organization and nonprofit that all of a sudden just ran really quickly and they didn't have the people, the infrastructure, the systems in place. Or is this about an organization that maybe internally had some really bad eggs. Well, yeah, that that Their response to our reporting is basically, you know, they responded really
quickly to the pandemic. It was a huge challenge and an unprecedented one, and they rose their hands and said we're going to do this, and they did it well, to be fair, and and they did it well. They did you know, respond to the to the pandemic. Well, um, and that's what they're saying. But you know, I'm talking to people who are saying, we're almost three years on now and it's still internally a problem, financially a problem.
And they're saying that a lot of this runs up to leadership basically not wanting to do much and so walk us through some of the financial problems that some of the employees flagged to you and your reporting. Sure, so it's a lot of you know, kind of mundane stuff that's kind of technical, but like payroll stuff. For example, I spoke with an employee who was getting paid months after they had quit and they had raised the issue
with the nonprofit and didn't hear anything. I was going to say, beats the alternative, Okay, thank you, you know, no, but it sounds like like oversight financially coming in, dollars coming in and then somebody who's not even employed anymore is still getting paid. It's federal dollars to taxpair dollars, right exactly. Um, what about like, who do you hearing
from beyond the employees, anybody from senior management? They did sean calling up, you know, they declined to make Sean available for an interview, the CEO and the CEO available for an interview. Well, Carol makes a good point. What is Sean Penn's involvement. So he's the chair of the board, which basically means he's responsible for the thing. If there are problems, he's responsible for making sure that leadership is
doing their job and doing it well and responsibly. UM. But on a day to day what people telling me, he's not really involved all that much except for kind of as a figurehead. And who is Who's who's running point? It's the CEO and Lee and and tell us more about her and Sean and how they came to basically co lead this organization. Sure, so they met in Haiti in the wake of the two earthquake. UM. She has been had been working in nonprofits in Haiti specifically for
a while. UM. She kind of bounced around until ultimately she was brought into Core made CEO in and people say that Sehn and her close, you know, like they told us that they meet monthly. UM. People said that it seems like a lot of what Anne does is to try to make Sean look good and to try to keep Sean happy. UM. And a lot of people said that, you know, like it ultimately runs up to her. Everything runs up to her. She's the one who makes
their decisions. And if there's an issue and it's ultimately run up to her, she's the one who's saying it's it's not our problem. Okay. So obviously corn At this response to covid um as those test sites and vaccine sites have wound down, curious what's happened since uh they made those that that initiative. Now they're in Ukraine. UM. Sean Penn was with Zelenski the day Russia invaded UM and so that really opened up an opportunity for CORE at a time when it was kind of hard for
other international nonprofits to get involved. UM. They're also responding to domestic hurricanes, so in Puerto Rico, in Florida, UM. And what I've been hearing from not just employees but also some partners who are seeing Corps work on the ground is that, you know, it seems like they're showing up to these disasters, they're taking a bunch of photos, they're fundraising a bunch of money, and then they're paying less attention to how that money gets spent to actually
respond to the disasters. Yeah, one of the things that sticks with me is like they're known in this world for showing up with cameras before almost anything else, right, like be seeing in the dollars keep flowing that way, but maybe maybe there's not that much impact after the fact. That's what felt like one common denominator. They made sure that there was good visuals, even if they weren't necessarily very involved UM seconds and net net takeaway of kind
of whirreness is where it stands. It's complicated. I know, it's never well one thing that I think it boils down to this California All this rolls up to a G. So if AG is gonna look at anything, you know, they've we've clearly spoken enough current and former employees that there's some stuff to look into here. Yeah, and I would say definitely do a read through because the sexual harassment concerns um which were also brought to the attention at the top, that seemed to have been dismissed, at
least according to the employees accounts. Great story. Sophie Alexander Wealth, team reporter at Bloomberg News here in our Interactive Broker studio, the story and the upcoming new issue of Bloomberg Business Week, or thanks to Joe Webber, the editor of Business Week. You can also find it at Bloomberg dot com and always on the Bloomberg terminal. You're listening to the Bloomberg
Business Week podcast. Catch us live week days from two to five pm Easter on Bloomberg Radio, the Bloomberg Business
a band you do. You can also listen live to our flagship New York station, Just Say Alexa, Play Bloomberg, Elove and Dirty I focused on but just a few weeks ago, we were focused on Microsoft, their interests and then subsequent further investment in open aies chat GPT, which is really kicked off, safe to say, Tim another round of euphoria when it comes to all things artificial intelligence.
You add dot AI to the end of your name, or you say that you're you know a company that's working with AI or chat GPT like BuzzFeed, and you see what investors do. It certainly set the investment world scrambling to figure out who will benefit. Carol, our next guest, has some thoughts on how chat GPT could change voice first products and services. Very pleased to have with us. Nitti the Donni CEO at the voice technology software company Rain, joining us via zoom in New York City. If you're
good to have you with us this afternoon. How are you. I'm great, Thank you so much. It's good to be here. It's good to have you with us. Explain how RAIN works. So Rain is a conversational AI company. We build voice products for desk less workers. So if you think about um Alexa or Google Assistant, we build professional grade versions of those assistants specifically for an audience called deskless workers. So these are workers who do not work, you know,
at a desk literally every day. They're moving around in their jobs. So in industries like construction, automotive, healthcare, professionals moving around in their jobs and they don't you know, they need information and data at their fingertips. So we are able to give that to them through voice, critical information that they need at their fingertips. How fast is
your business growing? Um? You know, we just raised a recent round of funding, so we have fifteen million total and funding UM and you know, we're really excited for what the next eighteen months is going to bring. But but what does that mean in terms of how much your business has grown. I don't know, give us the last twelve months or so. Yeah, I mean we are so right now. Our core product is called ortho UM.
It is a product for the automotive industry. So if you think about technicians who are working on vehicles, UM, we essentially provide them o EM data at their fingertips. So instead of having to get out from under a vehicle, go over to a computer, search a database for specifications like fluid type and whatever, you know, whatever whatever else they might need in the moment um, they can get
that at their fingertips. So right now, our products is actually you know, we we are piloting in a number of different shops UM and and pre revenue at the moment is the technology that you have at RAIN? Is it about the database? Is about where where things are being found, where the answers are being found? Or is it about the voice recognition technology? Or is it both?
It's both right UM. So it's essentially taking what is you know, number of different databases that exist today O E. M data that then feeds into another database called MOTOR for example, where these these technicians typically get their information and making that data conversational. And I know we're going to talk about chat GPT, but there are just so many parallels between that kind of conversational nature of the interaction. UM. So you know it's it's it's UM taking this data,
making it conversational, but also making it domain specific. And what I mean by that is a lot of the AI that's out there today is generalist. So if you think of Alexa, or you think of even chat GPT, you're asking a question and you're getting a you know, they want to serve the general public, so you're getting a response back. UM. When you go really deep into an industry like automotive or healthcare, as we are, you really need to understand the nuances of that specific industry.
So I'll give you a little bit of an example here. If you were to say we'll hut, which is a very common term to a auto technicians who who's repairing a car, to our assistant, they'll understand it, as we all not. If you were to say that to a general assistant like Alexa or Google assistant, they'll hear it as will not, and that's because they they're not trained to hear we'll not, right. So what we're doing is really training our assistance for the way that professionals speak
to one another. What is the lingo that they use every day and how do we make sure that they understand that so that they're not changing the way they speak. So, in other words, if if they want information or something, they're speaking into something and then getting it on some kind of devices, that kind of the back and forth that ultimately is happening and will happen in your view a lot more yes, so they're in in this case.
You know, the modality can be a tablet, it can be a mobile phone, um, but you are essentially kind of asking for information. And it can also be a you know, a device that doesn't have a screen on it, but a microphone, um, but you're essentially asking for information in the moment and you're getting an answer back rather than kind of getting us a number of links or
more databases that you have to look into. Again, a lot of similarities to chat, GPT and that you know, it's kind of taking away the layers of searching that you would do on your own and giving you a distilled answer. To be fair, like, I walk into the house or walk out of the house, and I'm constantly like or especially when I'm leaving. Hey, Google, you know what's the temperature? Like I am, I'm definitely having a conversation increasingly, not just inside my head, but increasingly with
the devices in my home. And and they're useful, whether it's time, whether it's information. So you know, you take that on a professional level, and I get where you're going. Um, you did say you were pre revenue. Um, talk to us though a little bit about chat GPT and all the developments that have come out about it. How is that impacting how you're thinking about your business and the growth of it? Sure? Absolutely, I mean, listen, this, this
chatbot is kind of truly transformational, right. You've got, um, suddenly, something that allows you to ask any question on any subject or topic in natural language. So how you and I would speak to one another and you're going to get an answer back instantaneously in seconds, um, And so you know you can ask for you know, the history of pop music, and you're going to get an answer back within moments, probably faster than you could have asked
that question. And that's exciting and interesting to us for two reasons. Number one is it's not pulling that answer, it's generating it, right, It's almost as though the AI is reading a number of different information sourcing sources and coming up with its own perspective. That's why it's called generative AI. But the more interesting thing is that, um, it's really doing that in a human and conversational way.
Uh So, Carol, if you know someone would ask you a question and you didn't know that person, you would not answer robotically or kind of in a singular way. You would make inferences about the person based on the context where you are, you know, how they're asking the question, who they are, And that's what chat GPT is really doing. They are understanding human language, both written and spoken, and the nuances of it, and they're trying to mimic that.
So as that technology kind of moves forward, it's really exciting for us, you know, in this conversational way industry, to see more and more people engaging in that kind of human AI way. Totally can see it. It just makes a lot of sense. Um really nice, um Nthia to check in with you really appreciate it. She is the CEO at the voice technology software company Rain, joining us be assum in New York City. Just quick back to I guess safe to say, our top headline at
this hour. Certainly when it comes to earnings, Meta shares off and running up eighteen after the first quarter revenue outlook, definitely Rosie and a huge share by back authorization a journal. Yeah, but you're let me drive? Oh no, no, no, no, who's leaves? I want to drive. It's a good question. This is the drive to the clothes on Bloomberg Radio. Alright, a kill many times everything is awesome. You look at the market reaction because we have a rally underways. You
just heard from Charlie Rocklom everybody. Of course, this is Bloomberg Business Week on this FED Wednesday, first FED Meeting of three cow Master Tim Stanivic live in our Bloomberg Interact, a broker studio streaming on YouTube and Bloomberg Quicktake and yields backing off, I mean markets, investors traders saying we think the Feds just about done. Yeah. The big question is just FED chair j Powell think what this is awesome?
What he's seeing in markets right now? Well, it was interesting and I thought, you know, Jeff Rosenberger black Rock making a comment and stressing uh in reaction with our TV colleagues as the FED made its decision and we went of the pressor certainty is not appropriate. Certainty is not appropriate. That's what J Powell said. So you know,
there is no exact science in all of this. And J Powell yes, saying we're making progress on inflation, but also saying, hey, folks, we've got some more moves ahead of us. Here's some other things that stuck out to me. Carroll, further rate hikes will be appropriate. It's premature to declare victory. We have a lot of work to do, and if our outlook turns true, then I don't see us cutting rates this year. I think that's really key. And yet
the markets saying differently. They just ignore all that. I don't know, but the traders have been thinking differently. Despite the dot plot that we got in the last updata projections, which shows the Fed continuing to raise rates further along and above five percent, traders have been saying differently. I do think it was interesting that J. Powell said the Fed is strongly committed to bring inflation to that two
percent call. He's not backing off of it. He thinks it's doable, and yet we continue to get data that point in the other direction. I point no further than the Drolts data that we got earlier today one point nine jobs available for every unemployed per in here in the United States. Well, it's kind in the rock direction.
And he highlighted that as you know, we're still continuing to see some strength, significant strength, if you will, in terms of the labor market, and talking about you know, reducing inflation likely to require blow trend growth um and also talking about you know, the FED having to stay the course, but also talking about let's see the base cases return to two percent inflation without a big job list jump. That's the fingers crossed hopeful that's the soft landing.
You know, we shall see we you know, we talked about living in different times and maybe that will be it. All right, So let's get to the markets, because it's been an interesting day, no doubt about it. A lot of risk on trade here, and we've got a good guest who has to make some investment decisions and put money to work in specific names and entities. Sandy Hillary as portfolio manager at Villary and Co. We got a billion and a half dollars in assets under management. They're
based in New Orleans. On the phone from there, this afternoon. The Villary Equity fund. We should note, well this was you know, as of this morning, up ten percent so far this year. It's beating the S and P five hundred, putting it in eighth for centile. When it comes to other funds in the category, top holding has included Freeport mcmuren, Visa, J. B. Hunt and more. Carol, all right, so let's get to it. Uh. He is based in New Orleans and we find him
uh there on this FED Wednesday. So Sandy, good to have you here with us. Um. We do like to talk names and stocks with you, but let's talk macro first of all. FED decision a bit of surprise or the market reaction a bit of a surprise. How do you see it? Yeah, and Carol, thanks for having me. So you know, when we we looked at, uh, we looked at Powell today when he's definitely sounded hawkish. You know, he starts saying that rate increases would would be ongoing.
He gave little indication there at the end of the rate hike cycle. You know. But when I look at some of the devish language which you all refer in too earlier, I mean he said they are acknowledging the inflations easing, you know, and they are making progress. So I mean he's in a tough spot because he knows historically the FED tends to overdo it. They raised too much, and he's just trying to keep us out of a
deeper recession, you know. But he really doesn't want to pivot too soon, and then inflation just heats right back up again, you know, like it did in the set andice, and then we're in all sorts of trouble. So it's, uh, it's the cross currents. While you I guess saw the market you know, down sharply this morning, then rallying hard that people are trying to figure out, you know, which direction. And I think the bond market is smarter than the stock market, and it is telling you with with the
ten uere you know falling, the yield falling. Um, I think it's telling you that that even though he's saying he won't cut by the end of the year, that you possibly could see a cut maybe as you know, in November December. Well we know they're always dated dependent and you know, nothing is certain. J Powell did say the FETE is not exploring pausing them restarting rate hikes.
I think that's a big one, Tim, you know, because it's it's not it's that idea of okay, we're not going to pause and thinking we're gonna have to raise again. So I don't know whether he's just saying, hey, folks, we're gonna get it all up now, so we're going to continue, or he's just so certain that things inflation
will continue to trend lower. Why did the mark Why did the markets though, uh, Sandy latch onto the Dovish language rather than the Hawkish language, because there there was certainly some Dovish language in there, but the Hawkish language was there as well, and they're choosing to focus on
the Davish language. It's incredible. But I think maybe they're focused on, you know, simply the bond market, and when you see those yields fall, it's it's telling you're either going as some sort of you know, shallow recession or rates are going lower. And so I think they're they're looking at the way that that's acting, and then I think that's carrying forward into the into the stock market. Um,
it was interesting. We got that Joelt survey this morning, and you look at November, we had ten point four four you know, million job openings, and and now we've got a little bit over eleven million job openings and as you said earlier, one point nine jobs available for every every person looking. So I think he's got to be a little bit cautious that, you know, you could
get some wage inflation. But at the end of the day, the market, Uh, the market went with the bond market and and and started to rally as as you know, as yields fell on the tenure. How do you feel about valuations right now? You know, I think, uh, I
think it's a tale of two different markets. If you look at two thousand and in twenty two, you saw you know, growth stocks off over thirty percent um as interest rates went up and and growth stocks tend to move of inversely, and and you saw value only down about two So clearly last year people hid in the large gap dividend value stocks that Johnson and Johnson's, etcetera, and uh, and it just left growth, you know, sort of for dead, which is what we really do as
an active stock picker. We tend to try to, you know, find these these high quality growth companies that are trading at really reasonable prices, and I think there's plenty of great valuations in in individual stocks and so UM we you know, we like growth. Um. We were you know, adding to some of it in some of the lows last year and and it's picked up, you know, sharply this year. Um. We've seen growth already up you know, twelve percent year to date and values only up a
little bit over too. So there's been a great rotation. But I would be fishing in the UH in the growth pond rather than the the value pond. Give us some of those growth stocks that you'd be fishing for in that growth pond. Yeah. So, UM, one of the ones we like is is On Semiconductor, a great play on the five G build out. Um. They've also got a lot of demand from electric vehicles, things like alternative energy, industrial automation. UM. We tend to follow great CEOs and
Hassano Cory UM. He used to run a company called Cyper Semiconductor that we were a large shareholder in, and he's come over to on Semi some years ago. He's already transforming it from you know, a higher growth, higher margin business from you know, something that was more commodity orient if he's getting. You know, he wanted to have gross margins near fort you know, basically two years from now.
He's already he's already there and he's moving to because they're growing an area called silicon carbide um, which is which is just growing extremely uh quickly. Um. You know this is for things like electric vehicle batteries. And you know, Goldman will tell you thirteen million electric vehicle batteries will will use silicon carbide by two thousand thirty and that's only a one million today. So he's just a great manager.
It's a great business. And I think this is why you're seeing, you know, things like On do quite well when you have you know, competitor, maybe like an Intel. They can't get out of their own way. So even though it's up something like so far, oh forgive me, because we've seen in uptick, if you will, in today's trade kind of pushing everything higher. I mean alone today it's up another six percent here. Valuation feels about right
here based on the outlook. Yeah, I mean I still see, um, I still see these guys making over four dollars and in fifty cents uh in in earnings. Um. You know, basically this year. So you're looking at Stuck that's under
sixteen times earnings UM, which is um. You know my opinion, Uh, you know, I would say it's fair value or undervalued, given the the the transformation of a more profitable business, higher margins, and and just growing much more quickly as they get into the non commodity side of their of their of their business. All right, can I leave it on that note. Listen, Sandy, thank you so much, appreciate it. Sandy Villery, portfolio manager at Villery and Company, joining us
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