This morning Bill Ackman went on to CNBC and he was asked about the stock market and what he thought stocks were going to go back up and he was asked about inflation, we had this conversation 12 months from now. No, do you think is a Realistic sense of what inflation could be in this country. Where is inflation going to be in 12 months? Well, in this episode, we'll get to Bill ackman's. Answer to this question where he thinks inflation is going to be.
And when he thinks the stock market will finally start to go back up again, but we also have some big news in this episode Church & Dwight. One of the new Holdings in my portfolio that I've been adding to is down a little bit today, it's down 4% on the day after they announced a new acquisition, they bought an acne treatment company, which is a maker of the product Mighty patch. I'm going to go through this and try to make sense of it. And then we also have news that Big Bad.
Apple is added again, apples really? Just a bully. They bullied Facebook with their iOS privacy settings. They hurt a competitor and then they're starting to grow the very same business. This is rightly so upset a lot of people but I want to go into these changes and see what Apple's actually doing with their ad business and then finally, we have something else I need to respond to which is this video of Mark Zuckerberg doing this UFC style sparring. I'll be giving my full review.
In reaction to this clip. So we have a lot of news to get to and a lot of topics to cover. Now, before we do a portfolio update, and I show you what's going on. And what companies, I'm buying I want to jump into the headline news. Bill Ackman went on to CNBC this morning, and I thought his comments were particularly interesting because previously, Bill Ackman has been looked at as the guy that's been making all of these very radical
predictions. And these very dramatic, and dire predictions regarding inflation saying that it's going to be like hyperinflation saying that is going to be out of control. Saying that the FED is way behind and they need to raise interest rates as much as possible. He's had many tweet storms, which is a nice name for saying that you're tweeting a lot, you
have a whole chain of tweets. He's been doing these tweets storms explaining, how bad and how big of a problem inflation is. But here we have is interview and he's changed his tone. A little bit. At least to me, I think he's actually change what he's been saying. Let's go ahead and start off with the beginning of this interview conversation and see if you have any new ideas about where we are in this economy. In the markets right now, we sucked. We talked to you over the summer.
You would talked about how you felt the FED needed to raise interest rates. They are doing that. Yes. The market has been having a, in terms of equity is a tough time as a result. What do you think happens is fall? What are you doing? So we on the same companies, we've owned really beginning in the year absent, a new investment. That was very short dated and Netflix. The first thing that he says, is that we On the same companies that we did early in the year.
So despite all of his predictions, he's remaining fully invested. The only caveat there is Netflix where he invested in it for three months and took a pretty significant loss. In that time, an Acumen owns, a concentrated portfolio of companies like Lowe's Chipotle restaurant Brands International and Hilton. And I think it's important to look at what investors are actually doing instead of the things that they say on Twitter.
Because in many cases, I think a lot of things investors say online and in Twitter is a little bit more dramatic and it doesn't necessarily match their Emmett decisions. Now, Bill Ackman goes on laying out what he thinks will happen with the future of the economy. Coming up, we had this conversation, 12 months from. Now, what do you think? Is a, a Realistic sense of what inflation could be in this country. I think it's come down a lot.
I think it's kind of what what's what's the number to you? It's 4% 4% three and a half percent hopefully and then they on his way down on its way down. Am I hearing this correctly? He just said in one year, his prediction is that inflation will be three and a half to four percent and on its way down. So it'll be down less than half of what it is today and it will continue on its way down, that is now his prediction and a stone as Evenly changed a lot in a very short amount of time.
Now, he's saying stuff like this starts to come off and you're seeing I think some some indications that inflation is coming coming up. We had this now. Inflation will be three and a half to four percent in a year. And we're seeing indications right now than inflation is starting to ease. That is the message we get today from Bill Ackman. But let's go ahead and Rewind just a bit. Here's a tweet from Bill. Ackman dated May 24th, 2022, inflation is out of control
inflation. Expectations are getting out of control. The markets are imploding because investors are not confident. That the Federal Reserve will stop inflation and If the Fed doesn't do its job, the market will do the feds job and that is what's happening now. And this goes on in this ongoing tweet storm, explaining how bad things are now.
I like Bill Ackman. I think he's a great investor and he's had good returns, but I think this illustrates why we can't really buy into all the hysteria and everything that people say when they're in panic mode, when they're tweeting things out, when they're Hang the Doom and Gloom in just a couple months time, the tone has changed a lot. The demeanor has changed, no longer are things. Imploding, were fully invested and in a year we think inflation will be half of what it is today.
That's the message that we're getting today. The message that we got just a couple months ago was entirely different. Now in this interview, Bill Ackman does give one other interesting prediction and that's when he thinks the market will make it the turn from being overall bearish to being overall bullish. I think, once people realize the FED doesn't have To keep increasing rates and will soon be taking rates down. That's kind of a Buy Signal for Marcus.
And so the question is, how far in advance does the market predict that kind of outcome? I think, if people see inflation come off, eight and a half. So you start to see a pretty powerful continuing Trend, then I think people will expect at some point. The FED to ease. His opinion is the market will start to go back up when it becomes clear, that inflation is no longer a problem and the FED can start easing on the interest rates.
On this point, I actually agree with Take, I think it's very difficult to have a very bullish and positive sentiment Market with inflation. Still being a problem and I think it will probably take numerous month-over-month incremental decreases in inflation before the market really starts to go back up, but keep in mind, the market is a
pricing machine. That's what everyone's doing is, they're baking and expectations of the future, and by the time inflation, no longer becomes a problem and the market price is that in, if you're not already in the market, you may miss that window. So I'm with Bill Ackman that I'm I'm staying firmly invested in the market throughout this duration. I also own, very good, companies in my portfolio and I can wait out this storm.
Now, speaking of good companies, there's one in my portfolio, that just announced some breaking news. They're acquiring a new company and it's in my consumer category, the company's Church & Dwight. This is a new holding to the passive income portfolio. It's one that I've done research on in past videos that you can reference, but they are a consumer discretionary and consumer staple company. They have a mixture of different products that go on to either one of those categories.
Now this holding in my portfolio is only valued at 8,500 I'm down seven hundred dollars so far. But I don't really consider that too big of a deal because I eventually plan on around doubling the size of this position. I want it to be at least 16 thousand to twenty thousand dollars. So I have a long ways to go and I'm going to continue buying this one. Now Church & Dwight is what I consider to be a bit of a sleeper company, meaning that it's had phenomenal performance.
It's a very powerful company, it has fast growth but somehow it has no buzz. Has its never talked about because it operates in a very boring industry but I consider this company to be very similar and this might sound odd but I consider it to be similar to Berkshire Hathaway meaning the way that they operate and grow their business, what church and white does is they own a diversified group of brands or different companies underneath them.
Those different brands generate free cash flow and they use that incremental increase in free cash flow to buy additional Brands which increase their free cash flow. And they've done this over and over for the past 20 years year after Year their free cash flow goes up, the use that additional free cash flow to expand their product, line by other companies and introduce them. Under the Church & Dwight
company where they integrate. Their back-end operations, they streamline their processes and distribution and make the new acquisition a productive thing for the company. And this is what they continue to do to this day overall. They own around 80 different brands but they have 14 of them that are really important. They call these power Brands. These 14 Brands make up the majority of their revenue and
their free cash flow. Now Church & Dwight just announced that they're doing the same thing. Again, they're picking up a new company, a new brand that they're going to acquire and integrate as part of their overall company that brand that they're acquiring is the mighty patch brand and it's owned by the company hero.
They say that the deal is done with 630 million dollars as a combination of cash and Equity. Now, the reason that they say they're doing this is because of the brand, they're buying, they consider it to be a very good strategic acquisition. They say that the mighty patch brand is a problem solution product with a Position in a growing category. The total acne treatment category in tract channels is approximately 700 million dollars.
The patch has grown to 18% of the acne treatment category as more consumers, transition away from lotions ointments to the patch solution. So this Mighty patch brand, is in a growing category in the acne market and they say the brand skews towards younger consumers and consistently has high levels of brand loyalty and repeat purchase. So right here, I see a lot of things with this acquisition. That I like the first thing that I like about this deal is a
category that is sent. It's not in a consumer discretionary. It's in a consumer defensive, which is beauty treatment, medical treatment or things like acne treatment. This Fall's firmly in that defensive category and within acne treatment, the patches are growing faster than lotions and ointments. So they're in the growing part of this defensive category and I like that. It has consistently high levels of brand, loyalty and repeat purchase.
So this is a consumer defensive product in a growing category that has Purchases so far. I like the basics of the deal. Now in terms of actual growth and distribution, this is where Church & Dwight can actually help out this brand Heroes trailing 12 months. Ibadah, as of June 30th was approximately 45 million dollars with 40%. Even a margins Church, & Dwight expects to expand Mighty patches, limited distribution by leveraging.
Its us retail relationship and international footprint right now, this Mighty patch brand is primarily being sold in places like Ulta off the shelves in the US and with Church & Dwight, sorry. Resources. They can easily expand that relationship outside of the US internationally, starting off with Canada and across Europe. So they should be able to continually grow sales, putting it into a different distribution channels.
Now, they go on to talk more about the product saying that it's going to be their 15th power brand saying that they have a unique patented solution that private label Brands cannot replicate. So the product does have a moat through brand power distribution and proprietary formulas. Now, after announcing this deal, the stock is down three point, seven, three percent. It's almost Down four percent for the day and the takeaway could be that.
Maybe investors don't like this deal but I don't actually believe that. That's the takeaway. What Church & Dwight did was give us some good news and some bad news in this press release. They also say that they're cutting guidance quote, we now expect full year, reported sales, growth of two to four percent and it was previously for 25 percent. So they're cutting their actual Revenue growth expectations for the year. And this all has to do with their discretionary items.
Now, if they're Growing to 24 percent with this acquisition combined, in that, that means that the discretionary brands are really hurting their Top Line growth for Q3. We now expect reported sales, decline of -1%. Previously, the midpoint of three percent reflecting lower demand for water pick by diffusion and Flawless earnings per share affirmed at 65 cents. No change from previous Outlook.
So both the full-year guidance and this next quarter had their revenue cut, although their EPS looks the same. So I don't think this 4% move. Work today has anything to do with this acquisition. Actually think this is a good product and a good category, I like the acquisition and this is the type of thing I expected from Church & Dwight to continually buy more of these defensive companies. And in the management call they said they're going to be
focusing on consumer defensives. Not consumer discretionary. He's so overall I like the acquisition and I still like the company even though it's having temporary difficulties with their discretionary items in my opinion.
And this is just a guess. I think that Church & Dwight is going through a transition period of difficulty with this High inflation and I think that will weigh down on their growth in the short term but if Bill Ackman is correct and inflation is down, considerably in a year, I expect them to do what they've done in the past and continue to grow. Now, we also have news that apple is a giant bully picking on other kids, like Facebook and Google.
And a lot of people are frankly upset about this. They don't like that Apple's picking on poor Facebook and poor Google by beating them at their own game and building out their own a Business. Now before I jump into the story, I have to do the quick shout-out for FTX u.s., they are a sponsor of this Channel and FTX u.s., finally released their stock brokerage app. It's live. Now you can sign up using one of the links in the pin comment
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Now, moving on, we have to talk about Apple for a minute. It's the largest holding in my portfolio so I have a lot invested in apple. And apple is a company that I think is misunderstood still to some degree. For example, a lot of investors consider Apple to have a smaller mode than many of the other big tech companies.
They say that Facebook has a large competitive Advantage because of the network effects associated with Social media networks, they say that Google and the search industry is basically a monopoly where Google has this massive moat. They say the Amazon has a bigger moat, they say that Microsoft has bigger mode, lots of investors you apple as having a smaller mode. Now, when we talk about Apple, we can look at a couple of the actions.
They've done to assess, who is at the top of the food chain here and this news is just one more thing. I think to clearly illustrate what companies, at the top of the food chain and which ones aren't apple is gaining on Facebook and Google and online ads. After iOS change the report shows apple is pushing heavily into the ad business. The first place to Apple showing
you ads is in the stocks app. They can simply display an ad whenever you pull up the business news, you can have banner ads there you can have advertisements for different things, related to the stock you're looking at. So that's one place to Apple can display ads, but they're doing
this in more than one place. Apples also going to be showing ads in the Apple news app, they can have people Ads for different magazines ads for different products in between different news stories, so on and so forth, but probably the biggest place the Apple can make money through ads is in their App Store, similar to Amazon, controlling amazon.com, and the mobile app, and being able to have sponsored ads, to put your product in front of others. Apple can do the same thing.
They can charge people to advertise and show their app before competitors. So this blade idle game shows up when you just search game before. Stumble guys, even though, stumble guys, is Much more popular game with 40,000 reviews, you can pay to get ahead of competitors in the App Store. Now, why does this make apple a bully? And why does this show that they have a bigger moat than Facebook
or Google? Well, in this case, it is ironic because Apple recently just made some policy changes that dramatically affected Facebook's business.
Apple created their app, tracking transparency, pop up which makes users decide whether or not they want to be tracked by apps like Facebook, not being tracked makes it so they can't have as targeted of ads which makes their whole advertising business, not as This is reportedly cost Facebook or meta around 10 plus billion per year in operating income and a lot of headache outside of that. So this has been a big blow to Facebook and other smaller developers.
So, Apple simultaneously hurting met as advertising business while growing their own and they surveyed. 100 different customer app companies and found that Apple's ad business has benefited from the company's major iOS privacy update in 2021. So they're pushing advertisers
off. Off of companies like meta because it's more difficult to track and now they're attracting advertising dollars on to their channels like the app store, that's one of the changes it's happening here and I think it shows what company is more an advantage position than the other Apple controls more Facebook's Destiny than the other way around. Now, with Apple and Google, there's a lot of people that still consider Google to have a bigger moat than Apple. And I think that's a fair
argument. But still a lot of the data doesn't support that Apple and Google have a deal together. Where Google pays Apple reported 8 to 12 billion dollars per year to keep their search bar. Defaulted to keep Google search as the default search engine. If Google's, moat was wider than Apple and Google was a more powerful company, why is Google forking over 12 billion dollars per year to Apple just to keep
their search bar defaulted? What would the reason be for doing that unless they were unsure about their position? The truth is that Google has calculated that. It's worth it to pay Apple 12 billion dollars that be Faulted to continue to keep their moat as wide as possible, but that's at the mercy of apple and that could change at any time, they change the rules with meta and they could change this agreement
with Google in the future. The one company that I think has its ad business protected from Apple is Amazon apples, rise and online ads for developers mirrors, Amazon's position, and e-commerce, as retailer spend more money to promote their product on the site, they rely on for customers Apple. Can't really do too much about Amazon's ad. Business because Amazon's ad business isn't reliant on
tracking. Now, a lot of meta investors will say that, this isn't fair, what Apple's doing is bowling, they're picking on Facebook in a very unfair way. And to those investors I agree. I don't necessarily think this is fair but investing is not about what's fair.
It's about finding companies that have a moat which in many cases is an unfair Advantage. Now, moving on we have a video that was posted about Mark Zuckerberg training like a UFC trainer he's doing sparring I'm with this trainer here and they released this little clip showing some of the things he's doing. Now I watch this tonight was impressed by Zuckerberg straining. I think he's actually you actually looks pretty good in
this. Now there's a lot of people making jokes saying Mark Zuckerberg must be planning on getting a divorce because he's putting up videos of him training in the gym, right? Or there's people saying, That Mark Zuckerberg is wanting to save money on its five million dollar, defense budget, but I think the answer is more simple. I think this is just an outlet for some anger, just some venting, and a way to cool things down.
I think what he does is he just imagines Tim Cook as the opponent and that's really where the ferocity and intensity in his training comes. Now, for me, personally, I'm no Pro. But I was impressed by this. I thought he looks pretty good here. Now, that's all for this episode. I hope you enjoyed and I'll see you in the next one.