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We're going to go next to Carmen Rennicke. She is a Bloomberg News equities reporter here with us, and she's going to talk about super Microcomputer.
Oh my gosh, that stock has.
Been on a wild ride.
What are you watching?
It has had an absolutely crazy week. I was just looking. Shares right now are up about eleven percent. This is on track to gain more than seventy five percent this week, which is the best week ever for this stock, which has also just had a completely crazy up and down year. So what happened this week is on Monday, the company, which had fallen out of impliance for listing on the Nasdaq, submitted to the Nasdaq a plan to regain compliance, which
means filing some delayed ten k's and ten cues. It also announced that it has a new auditor, BDO USA, And I think this is really the piece that people were excited about and the traders are trading on because this is it just means that it will be easier for the company to actually file those filings and get back into compliance to stay listed on the Nasdaq.
The fact that they actually found someone who agreed to testify that their numbers aren't fraudulent, Like, if that's the bar, it's pretty low, right, So.
Yeah, well, and that's the thing.
I mean, this is a company that's burned through a few auditors in the past few years. It's one of the reasons that it delayed filing its ten K was a short seller report from Hindenburg Research came out sort of calling into questions some accounting Ernst and Young. It's previous auditors stepped down in October, citing issues with govern and instant transparency. So yeah, finding a new auditor is a big deal, and it kind of remains to be
seen what exactly, you know, what will happen next. The Nasdaq still hasn't accepted super Micro's plan.
So they filed.
They said, we have a plan to stay compliant. The Nasdaq now has to say yes or no to that. It's assumed that it'll take two to five weeks for any anything to come out on that, and then if the Nasdaq does accept the plan, it has until February to file these reports, which as as I've reported this out, it seems like is not the easiest lift, right, Like it's this is still sort of a truncated timeline to potentially,
you know, deal with these kinds of issues. Still, that being said, some analysts seem to think that this really has removed an overhang from the stock and as we can see, you know, more more buyers than sellers today.
So what would happen to super micro if it was delisted from the Nasdaq?
Yeah, so, I mean it would be taken off the exchange, it would go over the counter. It would also be removed from the NASDAQ one hundred and s and P five hundred, which had just joined this year. So that's a huge deal. Obviously, it would mean a big rebalance for a lot of people, and yeah, a lot of a lot of trading.
It's pretty amazing.
I mean, it's still a twenty billion dollar company, you know. And if you're auditor, one of the most respected orders in the world says peace out, like we can't have our names even associated with your books, that should be a black mark, right, but if you look over the last five years, I always default of five years because they use the comp function a lot. On the Bloomberg the stock is up one four and seventy one percent.
It has had an incredible run. It's obviously gotten a huge lift from the AI wave. It's you know, it's it's a sort of a scene as a trading peer, at least to Nvidia, and it actually got a shout out this week on in Vidia's earnings call. Nvidia said, you know, this is one of our most reliable partners, and so, yeah, we've seen this stock really really take off.
What is the precedence for companies being delisted? Like, have we ever seen a company then return after delisting and come back to the good christage?
I mean, companies do get delisted. Super Micro itself has previously been delisted and come back onto the exchange. So yes, that's certainly something that happens. I don't know of an instance where a company has done it twice, but yeah, it is is definitely something that happens.
We'll have to look.
Into that match the Yeah, no, actually I was just starting to look into it. I'm like typing away and doing some research over here. One of the things I did is pull up SPLC, which is one of my favorite functions on the terminal for a company like this especially, It shows you the supply chain and you can see their biggest suppliers and VideA right at the top of that list.
Their biggest customers.
I note Big Blue is one of those which you know, back in my day, IBM was the most reputable tech company. Obviously it's dropped a little bit in terms of, uh, you know, it's size and weight, but still is a company that people know and certainly trust SMCI, I guess their earnings hasn't really been slowed down by the change from EY to bdo not.
I think it's too early to really say so. They did maybe a few weeks ago at this point, give sort of an update.
They called it a business update.
It was essentially an earnings report, and they gave I think a little bit of a weaker forecast than people had expected. So shares were actually sort of under pressure from that. If I remember correctly, I.
Should say the revenue has just been soaring, right you look back at twenty twenty, they were making like three billion in revenue, and now we're talking about twenty.
Five, just five years, four years later.
Carmen, great having it here with us, Thanks so much for joining us in the Bloomberg Business Week studio. Carmen Ryanicky there from our print team. Matt Miller here with Emily Graffeo filling in for Tim and Carroll on this Friday. We'll be back in just a moment with the CFO of Home Depot.
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Matt Miller here in the Bloomberg BusinessWeek studio with Emily Graffeo, and we have a special guest. As I said, the CFO of Home Depot joins us, Richard McPhail as well as Nina Trentman. She runs the Bloomberg CFO briefing. So it's great to have both of you with us. And I guess I'll just kick it off with one to Richard as we kind of gauge the strength of the US consumer and the housing market. You're in a perfect
position to give us an outlook on both. How do we look, you know, four days ahead of Black Friday.
Well, Matt and Emily, Nina, thank you for having me.
So.
Look, as we've said now for the last year or two, the US consumer remains healthy and strong and engaged in him improvement. We had a third quarter that just ended in October where we actually saw performance better than expected. Now we attribute most of that to the fact that weather was exceptional across the country. We also had some impact from hurricanes obviously, but you know.
It's a good sign when the sun is out.
Our customers are engaged and outdoors doing projects.
So we think we think the customer mindset is healthy now.
You know, you ask about the state of housing, there is some interplay here with home improvement.
You know, if you think about the.
Last five years, since twenty nineteen, we've seen unprecedented increases in home values and home equity. Home values up right around fifty percent since twenty nineteen, home equity positions up or right around eighty percent, and so you've seen unprecedented wealth creation.
And what's interesting about that is typically that.
Drives human improvement demand and hume improvement spend as homeowners invest in their homes. What our customers tell us though, is that the interest rate and environment is still sticky. You know, we actually saw mortgage rates increase since the September FED meeting, So that's led to a dis incentive for folks to move and.
Do projects that are oriented with moving.
And if you think about those larger remodeling projects that are oftentimes financed by debt drawn against home equity positions, our customers tell us, while those rates are decreasing slightly, they're still around eight and four to eight and a half percent, and so they're saying, look, we're just gonna we're deferring large projects for the moment until.
We see what happens with rates.
So you have a healthy customer with a deferral mindset when it comes to larger projects.
Richard, maybe I can follow up on that. During our interview, we also talked about the impact of your business potentially simming from to as the new administration comes in next year. Talk to us a little bit about that, how you navigated that in twenty nineteen, and also how are you thinking about that going into next year.
Sure, well, first, it's too early to speculate.
On what the administration might might be thinking here, So we don't want to speculate in particulars. In twenty seventeen, we saw tariffs of significant degree in certain classes of goods.
There were some.
Appliances classes that saw tariff supworbs of twenty five percent. Look, that's something that we sit down with our supplier base and work through it. And so we've got a lot of experience in this and we are ready for whatever inner environment we're going to be operating in.
Again, too early.
To speculate, but you know, we feel like if there's anybody who can manage through this weekend and you know, unique to the home deeper, perhaps over half of our products are actually manufacturer in the.
United States, and so if you think about the kind of the.
Less than half that is manufactured or sourced from foreign countries, we've been diversifying our countries of origin really for the last fifteen years. We're in a different position than we were in twenty seventeen in respect to diversification. That's something we're going to continue.
So, Richard, I'm wondering what is the strategy to grow the business right now when we're in an environment where home sales are at the lowest level in over a decade, how does home Depot kind of combat that?
Well, you know, Emily, there's so much improvement we can make in our current model. We have the fifth largest e commerce business in the United States, even though folks don't.
Normally think about that, but the uniqueness of that business is it is interconnected with our stores. Virtually all of our customers who shop online shop in our stores as well. But there still there are too many points of friction when you think about customer returns, order modifications, and the delivery experience. We're making huge gains and taking friction out of the process for our customer, but we're nowhere near
where we want to be. We know if we begin to delight customers more, that absolutely translates into higher sales. Another huge opportunity for the home depot is what the professional contractor. Roughly half of our sales are come from that professional contractor who's working on behalf of the homeowner.
We've made significant investments in an ecosystem to really drive into that larger remodel and so while the market is solvedware remodeling, our ability to capture market share really shouldn't depend on what the external environment is.
We've invested in a.
Digital experience, in rolling out a salesforce across the nation, and filment assets and capabilities, networks of platbed distribution centers that will be in seventeen markets this year where we can get products straight to the job site, not even touching the store, straight to the job site same day,
next day. And the uniqueness of Home Depot is, while there are plenty of companies serving the pro like that, we're the only one who can serve them across all product categories, so we can simplify the pros lives and they turn to us because they know that they can rely on us. And I should say, actually, and one thing that I think is unique to the Home Depot, you know, we're building stores again.
We really stopped in any material sense building stores in two thousand and eight. In twenty twenty three, we announced an eighty store build that will roll out over five years.
By the end of this.
Year, we will have built twenty five of those new stores, and we're so excited about what we're already seeing.
It's one of the best investments. We can actually make it Home Depot.
All right, Richard.
Great to have a little bit of time with you, and I hope we can get you back either here on Bloomberg Business Week or you join me on my show every day nine to eleven on Bloomberg Open Interest. David McPhail there, the CFO of Home Depot. Sorry, need, I'm kind of stealing your guests.
Yes here stealing my thunder you.
Well, you have a lot of it, so there's nothing go around. You talked to a lot of important CFOs for the CFO briefing, one of them recently CFO of Saudi Ramco, and what did he have to say?
Yeah, so that was earlier this week in Boston. I got to catch up with him there. We covered quite a range of topics sort of ranging from their dividends, spending, debt, financing plans CAPEX. So yeah, I was quite pleased to secure that interview. Amongst the things that we talked about was their plans to spend over one hundred and twenty billion this year on dividends, which is of course a mind boggling number. There is a lot of talk around sort of how much Saudio Ramco will keep spending on
on dividends going forward. I think the main point there is that they have a performance led portion of that dividend, which they implemented in starting last year when basically they realized, Okay, we're generating a lot of returns from high energy prices
following the invasion of Ukraine through Russia. This performance led portion will be reset at the end of this year, and the question is very much okay, well, what will this company be spending on dividends going forward, because they moved from having a lot of surplus cash into actually moving into a debt position at the at the end of the past quarter, and so there's been a lot of questions around that that the CFO received.
Yeah, very interesting stuff, and I know he is an MIT alarm.
He was there in Boston.
Giving a speech and some protesters made such a racket that he actually had to leave the event and not come back. You can see all of that and more in Nina's CEO briefing.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern nott, applecar Play, and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
All right, holiday season quickly approaching, and we want to get our finger on the pulse of the consumer. To do that, we go over to Katie Thomas. She's from the Carney Consumer Institute. They've recently done a study of fourteen thousand choppers. She joins us from Pittsburgh, in the middle of America, where the normal people live. Katie, thanks so much for joining us. How do the normal people feel right now?
The normal people are actually feeling okay going into the holiday season. There's a lot of optimism. Even talking to folks post election, people are surprisingly willing to spend. They say they're feeling better about the economy, or conversely, they're anticipating. In some retail therapy, they're concerned teariff prices will drive up the cost of electronics and other items. So I'm anticipating a healthy holiday season, even though it's a little
bit shortened giving the late Thanksgiving timing. Like you guys said, Black Friday sales have been going on for weeks already, so I think we're gonna have a strong season.
And what are these consumers buying. Are they going to the big ticket items or are they being a little bit choosier and just finding maybe smaller luxuries.
Yeah, I think right now we're seeing people still feel pretty thoughtful. I think we thought this in the last couple of weeks with earnings, right Walmart coming through with really strong price value. And that's what you're seeing with consumers in general. And that starts to tie into some of the work that we just wrapped up around tensions consumers are facing. So you see them wanting to spend.
People love to spend around the holiday, but they do still have these lingering concerns around how their wallet looks, and they don't want to overspend and start the year off on the wrong foot.
Yeah.
I don't love to spend around the holiday. I just feel like I have no choice, right, I mean, you got to buy people presents, you got to get plane tickets, you got to hire more staff or whatever.
I mean, I don't have I don't know.
I'm just trying to think of the things that he might want to be spending money on for the holidays. Are people feeling like their wages have really kept up with inflation, because it seems to me I get one answer from one economist and a different answer from another. So you know, how are we doing in terms of keeping up with higher prices?
Yeah, I mean I think objectively speaking, when you look at data rolled up, that is what you see, Matt, that technically wages are outpaced inflation. But to your exact point, we run some analytics with what we call the consumer stress Index. We have seen a slow uptick in concerns around cost of living as well as concerns about personal job security, which is a little bit concerning, even though you're not seeing that that much in the employment in
job growth numbers right now. People feeling concerned that if they lost their job they might not be able to find one, or that they could lose their job. That could be something meaningful that drives kind of a pullback and spend and a resistance to spend. But when it comes specifically to the holidays, people do typically like to spend on gifts and on gifts for themselves, and then what you'll see is a bit of a slowdown in the new year.
You mentioned demographics in the notes that you sent over, and I'm wondering what your research is showing about just how different different demographics are spending and how they act as a consumer. I imagine the gen zs are getting a lot of their favorite brands from TikTok and social media, and I'm wondering if that kind of spans across all ages.
Now, you know, we're.
Certainly seeing a pick up there. One of the things we see though, is it's hard to slice just by demographics alone. So we ask consumers in our work. For instance, one question is are you living paycheck to paycheck? And we you know, like two out of three consumers actually
say yes. It's self reported, so that could mean a lot of different things, but we well, we split that into paycheck to paycheck and then living within means we actually see a lot more similarities there in terms of behaviors and stressors than if we cut by just income alone. So we are seeing people kind of you know, it depends a little bit on more of those attitudinal psychographics, so not necessarily gen Z on TikTok, but just your likelihood to be engaging on a social media platform.
Matt.
To your point at the top, there are folks across the country who are who are not all that engage or all that online, as some of the rest of us are, So it really kind of depends on what your media consumption looks like.
Oh, they're so lucky, you know what.
Speaking of psychographic I noticed this sentence in the survey packet, just time for the holidays. This nuanced meta economic and psychographic view is based on a unique set of macroeconomic data and proprietary CASEI research. Are you sure you're in Pittsburgh because I don't know what that Those.
Are the notes I sent over, So I'm gonna have to That's a lot of a bit of a word salad there, matt.
But I think, what do you mean when you say psychographic?
Well, it is it's just really capturing the lifestyle of a consumer. So this research was really grounded and the fact that consumers have continued to see this proliferation of choice. You guys were actually talking about it with the mattresses. We have more options than ever, more access to information than ever. And then we tend to get lost in this narrative that consumers are increasingly demanding more and more options, when in fact, in most categories, consumers are overwhelmed by
what's out there, are simply satisfied. They don't feel like they need this constant influx of options, so the psychographics there will really gets It's the devils in the details. We have to understand the push pull dynamic that's happening there within consumers, in between consumers and brands.
So how does the how does a brand kind of build success off of that? Because I mean, yeah, the mattresses. Ultimately it came down to there was a mac, there was an avocado store around where I was. I laid on the mattress. I was like, this is good. I don't want to think about this anymore because there are so many options. So how does a brand figure out how to stand out?
Yeah, well, Emily, I think it's just that. So it's thinking. We we like to sometimes call it relevant choice rather than more or less choice. It comes down to portfolio strategy, growth strategy, innovation planning, and like if brands are really innovating for the right reason. So you think, for instance of grocery, sometimes innovation happens simply so they can hold
the place on shelf. When you think of you know, any kind of mall retailer, it's just like a classic merchandising calendar and just this continued churn or perhaps sometimes it's in response to competition. It's really starting to ask upper questions there. Do we need these additional options? Do we need to cause more confusion? Do we really like for instance, yogurt. Yogurt has over three hundred skews on most shelves, but the most popular flavors have been the
same five for the last like fifty years. So even though some new flavors are nice, it's just really finding the right balance.
Key Lime Pie, that's one of those five, right, That one's Tom.
I'm not sure.
Katie, Thanks so much for joining us. Always the pleasure talking to you and hearing from the Carney consumer, and too, Katie Thomas there out of Pittsburgh talking to us about how consumers in the US are feeling this holiday season. Avocado is a brand I had.
Never heard of before.
I thought I was being pretty new and you know, young and fashionable with Satfa, But what is Avocado?
I actually hadn't heard of it either, But I was in Williamsburg and they had a store. You're gonna you're gonna hate this, so they had kombucha and cold brew on tap complimentary for the customers.
It almost seems like it's a joke, like in Williamsburg there's a mattress vendor called Avocado that has kombucha and cold brew in the store.
Their their pitch. I don't know that much about the mattress, but I ultimately bought it again because I laid on it. It was comfortable. I needed a mattress. I didn't want to think about it. But they have a green pitch as well. They talk about like how their mattress is more environmentally.
It's so sustainable.
Yeah, that's good, so you feel good about yourself as you're sleeping on it.
I again, that pitch didn't allurd me in as much as just I need a mattress and this is.
Here all right. I need some tires.
So if you see anybody with Continental Extreme Contact DSW six plus tires on sale, I need to set it for those for my Dodge Challenger, which is not at all sustainable.
I don't think they have kob four Leader.
V eight No, definitely, definitely not just cold black coffee.
When we come back, we'll talk to Jenny Rook from the Genoa Ventures firm about strategies for investing in early stage, high growth companies.
You're listening to the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
We're joining now by Jenny Rook, founder and managing director of Genoa Venture. She's here in the Bloomberg Interactive Brokers studio, usually in San Francisco, but here today in New York. Before we get to the companies and the investments that you're doing right now, because Genoa focuses on biotech and healthcare, what's your background.
Ah, I'm a scientist at heart. I was studying physics and software engineering when I fell in love with genetics, went and got my PhD there, and so I really am excited about how those things are coming together. Let's technicalologies in biology, and then have spent.
A career trying to figure out how to put that to work.
All right, So.
Wall Street, I guess, is the one place that you could go to try and put that to work. Did you hit that street before sand Hill Road?
It's not really no, I kind of I walked through first. I guess my closest path to Wall Street was really consulting to very large pharma companies.
I spent some time at McKinsey.
It was a great way to get familiar with what the big strategy questions were to the companies that matter to Wall Street. And so that's great perspective in working with startups to think about how they're going to bring innovation to Wall Street eventually.
And is there a more specific theme than biotech healthcare? I mean, I note that you funded, for example, two female Nobel Laureates so far.
Yeah, we're trying to keep funding the great Nobel laureates. Keep keep more one per fund is my goal.
But the reason I think it's interesting is that I know, crazy small figure like only two percent of total VC funding.
Goes to women.
So the fact that you've funded too already puts you kind of head.
Of the pack by far.
I think, yes, I'm proud of that.
I think it comes down to you just looking at the fundamentals and really asking what are the needs in healthcare and beyond, and how do the innovations that are happening in the laboratory address those needs and really understanding what's happening at the fundamental level.
Okay, so tell us about some of the companies right now that you're invested in that you're currently excited about.
Yeah.
Well, so we're excited at companies that are bringing together biology and technology in untraditional ways. And so often they bring together founders who some might be coming from healthcare, but you might have a collaborator coming from electrical engineering or data science. Is really mushing those together in new ways. A great example is a company called Epitel. They are really bringing innovations to how we detect and monitor seizures.
If you've ever seen anyone try to get an EEG with a bunch of wires and leads coming off of their heads, it's a little bit difficult to bring that into people's everyday lives. So what Epatel is doing is making a small wearable version of a detector that patients can wear in the hospital, moving around even in their home eventually, which really changes how we can help those people.
So you can monitor I'm guessing that comes from epilepsypel, and you can monitor what how often the seizures are, how serious they are when they occur, and so on and so forth.
And try and help those people live better lives.
Yeah, And I think it's an extension of things that we all know well, which is continuous monitoring, whether you've got an iPhone or an Apple watch or an oral ring. Like these ideas of the more data you can connect collect continuously for a person, the more information you can give people to make better choices.
I'm thinking about an or ring for Christmas, you're considering. Yeah, Just as an aside, my wife.
Loves her or ring and constantly tells me when it's my turn to take care of the kids because she hasn't gotten.
Better choices for everyone driven by better data.
AI is a theme that we've all been focused on as well.
I know Emily recently was at a conference and talking about VC. I was recently at a conference talking about AI, and you're I guess investing in AI as well. I see it mentioned for Symbiosis, which is a company that you've invested in. What a treatment support a tool for even with breast cancer.
The category is called clinical decision support. It's providing clinicians for physicians better tools to make better decisions for patients and patient care. And that's more and more important these days. When we have a profusion of different types of say drugs and interventions, how do you make the best decision for each person with more and more information? And so the AI is a way too, as you know, from other fields, different kinds of information of different sorts and
sources into a single unified view. And so that's increasingly important to patient care as well.
How are you seeing AI being used in healthcare? Is it more just a tool to help professionals, because I have to I went to a doctor and there was an AI, Like I guess it wasn't a robot, but it was a phone that he held up and it was taking notes. But I've also heard about, you know, AI being used as a diagnostic tool reading MRI images. What are some of the surprising ways that AI is being applied into healthcare that excite you?
Well, so you gave some great examples, and so that's at the delivery of healthcare in but way up at the beginning where scientists are looking for new insights, AI is helping them in a similar way, pull together a bunch of different information about the science they're studying, come up with new insights and ask the next question. So it's accelerating the pace of basic research that gives rise to all these innovations that eventually show up in the healthcare setting.
So going through basically mountains of data that would take you and your team probably months or years, and AI can do that in a matter of hours or days.
Yeah, And it's bringing all that together in a way and helping us visualize it also in ways that our novels, so you can kind of poke and prod at it from different directions and come up with new insights, which is what's so critical for science.
So when you find these companies or these founders and decide that you want to invest in them, how.
Much further do you take it?
I mean, do you work with them to do you know, other things that are necessary that maybe they wouldn't be good at as you know scientists. Since you have a consulting background, do you find people to help them do the kind of back end stuff that a lot of us can't do. I mean, how far along do you hold their hands?
Yeah, I really appreciate this question.
Genoa was born because I'm also a next startup operator. So as everybody on our team, we love building these kinds of companies and helping other people build these kinds of companies. So we're builders for builders, and as you can imagine, the kinds of innovators who may come up with the latest thing in AI for bio may not also know about cap tables or preference stacks in the startup setting and ventures, so we like to bring that knowledge to them to help them on their way as well.
How do you think about valuations right now?
Very carefully, I think it's the answer. Yeah.
I think obviously it's been a tough couple of years in the markets, which is having an impact on valuations up and down the stack. But I think probably a pretty healthy reset. Things did get a little out of control, you know, twenty twenty twenty one.
But what was the Is that because you know SVB collapsed, or because everybody would rather invest in nvideo?
Well multifactorial now, I.
Mean, what's made it tough? Because I've heard that also from other vcs and I've heard my friend Jesse Draper from Haligen talks about a recession and I'm like, what recession?
You know, But a lot of businesses I know are feeling it well.
I think you do get this kind of circular situation where investors are working very closely with the companies in their portfolio, helping them through a tough time. Even just the bandwidth to look at the next thing, much less the capital is a little bit lacking. But as I think the macros start to trend positive, we're starting to see signs of things moving around a little bit. Liquidity is the word on everyone's lips. We really need to see some of the big exits in companies that have
stayed private quite a lot longer. As the IPO window opens up, as we see more acquisitions, we think that moves through the whole stack.
But I imagine in this sector, I mean, I just look at the companies that you are investing in, and I think, why does an Apple just that you know, so it doesn't have to be an IPO.
No, it doesn't.
And historically in bio, most of the exits were predominantly in M and A. You know, you have really market leaders in each of these different bio segments, whether it's healthcare, pharma, agriculture, industrial bio. We're not talking just healthcare that many many trillion dollar sectors depend on bio, and historically the exits have been by M and A to those leaders who are looking for the innovation and the technology to put
into their commercialization. Part of why we started Genoa when we did is that we really believe that the impact of bio is now significant enough that more and more of these companies deserve to be freestanding, publicly traded, and so we're excited about those as well.
How do you distinguish between I guess how does your background help you distinguish between something like AI hype and an actual piece of value.
Yeah, It's part of why we like to go very early, because do you have to have the expertise to look at the raw data? You know, we read papers, we read grants, we look at posters at scientific conferences, and back to that sense of going to the fundamentals and not just believing the story is really important for making a distinction.
There.
I'm just looking at you know, your CV and listening to you talk.
Are you from Georgia.
Or I spent it for a bit of time in Georgia? Yeah, my undergrad was at Georgia Tech. My family's still.
There Georgia and then Yale and now San Francisco. What is it like in San Francisco right now?
San Francisco is a really unique geography. I moved there deliberately to find these kinds of companies because it's truly a melting pot for different kinds of science and technical disciplines as well as different types of businesses, people from all over the world, and so you get this culture of really free flowing ideas, a kind of yes, and let's try it, as opposed to I would say most other places in the world that tend to be a little bit closed skeptical, which is healthy, but it's helpful
in that laboratory to have a culture of trying things.
The venture capitalist that I interviewed last night Michael mcdono from Light Speed. He's New York. All in weird, Yeah.
He.
Said, New York, but he does more consumer facing.
Companies, so it makes sense different different spaces. Yeah, I love New York. I lived here for three years when I was at McKenzie and then moved to Boston, which is where I got into biotech, which I think suffers by comparison to New York, and so I spent a lot of time back here. It's it's the best city in the world. However, thank you to do the work that I need to do for right now. It needs to be set up in San Francisco, and then I have the joy of coming.
Back and visiting you cool.
Well, we really appreciate it.
He'll you come back think because it's fascinating stuff. Jenny Rook, their founder managing director at Genoa Ventures, talking to us about early stage high growth investment.
The journal.
Now about you let me drive? Oh no, no, no, no, who's gone to drive?
Alright? Please, I'll do the travels. I want to drive.
It's the question.
This is the drive to the clothes.
I'm timer thick. We'll drive up Chela.
Don on Bloomberg Radio.
All right, Matt Miller here in the Bloomberg Interactive Brokers studio with Emily Graffeo, Carol and Tim are off today. I'm looking at a market, Emily, that continues to climb higher. The Dow Jones Industrial Average up to forty and thirty six, only reading that off the top of my WI screen. But the S and P it's only up two tenths
of one percent. However, it's up for the week. HCP space W shows me that the S and P is up one and a half percent this week after a two percent drop last week, and that was.
After a four point six percent rise the week before that, and then a one point three percent dropped the week before that. So it has been a wild fall.
Matt Miller, Yeah, absolutely, But fifty nine to sixty is the level we're looking at now, so we're really only forty points away from the big round six thousand number. We pierced it obviously in the week after the election, but came right back down. Let's get over right now to George Young. He is a portfolio manager at Villary Funds, and George, let me get your take on just first the broader market here. There was a huge bout of optimism after Donald Trump won and Republicans took the House
and the Senate. It seems to have calmed down a little bit, but we're still at very high levels. Do we continue going up into the end of the year.
I think we do.
It's sort of a tail of two cities, however, because what you've seen in the past year or two has been the dominance of Magnificent seven. I'm sure all you listeners are keenly aware of that, but those of us who play in the small cap MidCap world have not really seen those benefits. Magnificent seven has dominated things.
The S and P is up ten.
Percent per year for each of the last three years. Small cap world Russell two thousand base been flat for three years. So all of a sudden in the last six months and pronounced, especially in the last ten days or so, we've seen more credibility and more viability in the small cap sector, which is great for us, those of us who are in there.
Tell us about the small cap thesis here, because you're right. We saw a big rally in small caps after the election. I write about ETFs and there were a ton of people piling into ETFs that track small caps, so just a lot of money and I guess optimism here. But what is I guess the case here for buying small caps.
Well, the case here is that you want to buy what's cheap, and that's nothing new. You want to buy low and sell high. And you also don't want to fall in love with the doctor. There's an old add don't fall in love with a stock. It won't love you back. Nonetheless, people have taken the magnificent seven, and I'll pick on Nvidia in particular, which happen to be down today. People are saying things like I'd never sell
mind video, I love Envidio, that sort of thing. You can love grandma's pearl necklace that you inherited, but when it comes to a stock, don't fall in love with it. It's just not something that should be that emotional. It should be a very objective sort of game. You look at pe ratios, you look at any objective measures that will make a difference in what the market's going to do in the future.
That's very important.
Talk to us about how you're thinking about the rise in treasury yields, because that could also dent I guess small cap stocks, any stocks. Really, if we do see treasure yields continue to climb, we're now over about well, I can't pull it up, but about four point four percent on the tenure right now, right right, right.
So the ten year is very liquid. You're sticking your neck out a little far buying a tenure, but that is sort of a proxy for the bond market. And remember that if you're going to buy a corporate bond, take a little bit more risk. You can get let's call it a five percent yield right now in recognizable corporate names. So that's a very big challenge for the
stock market. Bond market yields are attractive right now in contrast to where they were two or three years ago, where you were buying two percent bonds, nothing to get excited about, but you wanted stability during COVID, and that made perfect sense. Now what's happened is the bond market
is offering attractive yields. And it's interesting because, yes, you now know the election's over, we know who won, we know who controls the both houses of Congress, you know what the policies are like that to be, you don't quite know what the effect's going to be on the market. That's all good from a domestic standpoint, but the bond market, the US bond market is international in scope and has
huge impacts worldwide. Everybody around the world trust the US treasury market, so when you see yields going up, that needs it's a harder bar for stocks. Stocks have to return more to get people to invest in them. So if the objective measures are there, then you want to buy what is compelling value right now. We see that in the small cap stocks.
I saw at one point last week, I think stocks and bonds were yielding just about the exact same thing. I have a chart with both of those two lines, and they collided. I was thinking, though, you'd probably be much smarter to invest in stocks over bonds if you had to pick one or the other going into Donald Trump's second term, because he's much more likely to be passing market friendly policies. Does that make sense that something you agree with?
Not exactly.
I'd say some people might be better off with stocks, some people might be better off with bonds. Remember, there's a huge panoply of different investors out there. You've got the long term trust fund baby, I'll say you've got
the widow that's got a limited amount of funds. What's right for everybody, it's a little bit different, but universally, i'd say introduce some bonds into your portfolio right now, specifically some corporate bonds that have some liquidity, some Ginny mays, whatever, it may be something that can respond to this potential or likely I'm going to say rise in interest.
Rates so versus.
Us stocks versus the rest of the world mscix us or versus bonds over a longer term chart.
I get it.
If you're a widow, if you're living on a fixed income, that's a different story. But for someone who's going to be invested for the medium to long term, is there really any reason to diversify. Don't you just buy us stocks and make money.
Well, let's go back to the beginning of twenty twenty two, and if we've made that statement, at the beginning of twenty twenty two, the only safe, safe place to hide that year was in cash or in gold stocks. Terrible, bonds terrible. I don't care if your short term, long term bonds. You had your head handed to you.
It was a tough year.
I'm not saying that's going to happen again. But anytime anything looks like a certainty, that's when you need to be cautious about things. So I'd err on the side of a bit of caution, and I'd say to most listeners, Yeah, take a little, a little, a few chips off the table and put some bonds in there. It makes sense.
We don't have a ton of time left, George. But I did want to ask you about Lineage. This is a company that owns four hundred and eighty two global cold storage warehouses. Why do you like to invest in that company?
Well, a couple of things we went to visit one of their facilities on Monday, so I feel like I know it pretty well. They have the state of the art technology. They have a Federal inspector in their office who houses there because they know how much shipment goes through their facility. Anything that you eat has to be maintained correctly, and they learned during COVID how to turn inventory and get food in and get out. Think chicken, think vegetables, et cetera. And these can be a light
freeze means it's still nice and healthy. But they dominate the landscape. They just went public in July. New company. It's based as an aerit so it has a two percent yeld right now, that's eniacrease. So unlike most reach and have you're caken it too. You get growth and you get income.
I think it's a great.
Company, all right.
George Young, partner and portfolio manager at Villary and Co. On Zoom from New Orleans. Thank you for joining us.
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