I knew I wanted to do something in the business slash investment world. I had a few positions in investing. I really just wanted to take a leap out of my own actually.

About three years ago, I started an investment newsletter called Investing City and I have been doing that ever since. It’s a total privilege to be able to analyze businesses all day.

Robert Leonard  3:32  

I personally love analyzing stocks too. I love reading annual reports and things of that nature, but I’ve actually started to split my portfolio quite a bit between individual stock picks and ETFs. Partially because of guests that I’ve had on the show, but partially academics and finance tend to look down on stock pickers and show us research concluding that we’re only as good as monkeys throwing darts at the Wall Street Journal stock section.

Do you think that you and other investors can analyze stocks for above market returns? If so, how is that possible?

Ryan Reeves  4:03  

Yeah, I sure hope so or else nobody should subscribe to my stuff. It is a weird thing because anytime somebody outperforms over a long time, people will just say, “Oh, that’s the outlier. That’s luck.”

I guess to a certain extent, it is very difficult because there is a very fine line between skill and luck in this game. It is very difficult to discern what skill is really skill. I think a lot of it comes back to the thought process and the clarity of thought. That’s what I try to do with my subscribers. It is really just lay out “this is how I’m thinking about things.”

You can look at things a different way but hopefully over the very long term, it will bear out that we do better than the market. I think there are also really structural things so you know, a big hedge fund has a lot of things to worry about. If you make decisions by committee, you have to make decisions very methodically, which can on average, probably lower the times that you’re very wrong. 

Sometimes, however, you can’t move as nimbly. There are a bunch of structural reasons why I think like the retail everyday investor can do well. They don’t need to explain anything to anybody. You can change your mind, based on seeing something in a totally different way. It doesn’t really matter if you look stupid. 

There are just different sectors that people can research without, maybe looking crazy, or you can invest in these very unprofitable companies that are sort of getting more profitable. *inaudible* all this to say that there are some structural reasons why you’ll see those stats. 85% of hedge fund managers won’t beat the market. 

I guess the other thing is a lot of hedge funds are just trying to minimize volatility and drawdowns, which retail investors, again, don’t really have to worry about. There’s a lot in there. 

I’d say though that there are a lot of reasons why it is possible to beat the market, but you should always kind of keep track. I mean, that’s one thing I really believe in is that you should keep score. If you’re not keeping score, you can be fooling yourself. You can think you’re doing better in the market, but then you actually look at your after tax returns and it’s like… 

I might as well just stop wasting all this time researching 10 days on the weekend then just buy S&P 500. Anyway, I think it’s important to keep score. 

Then, if you look on paper, and you’re like, “Wow, I’m really not beating the market,” maybe it’s time to go back to the drawing board. So far, so good. I guess. It’s a really interesting question, but I do believe that you can beat markets as maybe controversial as that is these days.

Robert Leonard  6:41  

What do you use to track your progress? I’ve had a hard time personally finding something that tracks my returns well.

Ryan Reeves  6:48  

Yeah, totally. I guess I’m pretty old fashioned. I actually use Google Sheets. I think that’s maybe even more controversial. I think people really hate it but it’s not like I’m doing anything crazy…

If you look up all this stuff, I just have my portfolio on a simple Google Sheet and how many shares they can pull in the share price. They just do like equals google finance. Then you can pull in the share price. It automatically updates. 

Just at the very end of every month, right when trading closes, I looked at the dollar amount. I paste it so what the dollar amount was when the first day of the month, and then the last day of the month, and then you can kind of just calculate the month-over-month, and then you keep a running tally of the year to date. 

I just do that for every month and every year, then compare that to the S&P. You can pull in all of that data, but I just do it very manually. I don’t even use a portfolio tracker or something like that. 

Robert Leonard  7:49  

I don’t think there really is a great portfolio tracker, to be honest with you. I’ve done a lot of research and I’ve looked for a lot of software tools to do this because I want a tool that can track my trades. 

Say I own Square, which we’re going to talk about later in this episode. I bought Square at say five different times. I have five different cost bases. I want to be able to see what the different returns on that are. There hasn’t been a good tool that’s been able to do that across all of my portfolios. Even doing that in Google Sheets has been hard for me. 

I think maybe I should take your approach and just look at the dollar amounts at the beginning in the end. That’s the net gain that you had for the month.

Ryan Reeves  8:20  

It’s so true. I haven’t really found anything either. I mean even just capital gains stuff, like you said, you have maybe five different losses. So every time I make a trade, I will put in this is how many shares and this exact price. Just very manually. 

Then I can look back and say, “Hey, if I’m really wanting to sell this stock, what are the different losses?” 

So it is like a very manual process but then I also feel like I know the portfolio more intimately versus if the portfolio tracker was just doing all this behind the scenes. I think sometimes I might lose something. Maybe that’s an old fashioned kind of approach but I also like that Google Sheets also do a little rationale for why I made each decision. It’s nice to have everything right there.

Robert Leonard  9:07  

I don’t trade much anyway so I don’t really have an excuse for needing a software that can do it. I should do it manually like you do, because I don’t think I’ve made a trade since March 25. I think that was probably the last time so it’s been almost almost nine months. It’s not like it’s a lot of manual labor for me.

Ryan Reeves  9:22  

Yeah, well, that’s a good day to make a trade. Hopefully that’s a buy.

Robert Leonard  9:26  

I bought a ton and I was actually sitting in like 80% cash up until March and then I usex all the cash and invested it all in March and got some really good cost basis, thankfully. 2020 has been a good year for my portfolio. 

Ryan Reeves  9:38  

That’s awesome. 

Robert Leonard  9:40  

How would you classify yourself as an investor? Are you a value investor, growth focus, maybe something else, maybe a combination of the two?

Ryan Reeves  9:48  

I think labels can be tricky because I tried really hard not to… I don’t put myself in a box sounds cliche, but I think as soon as you identify with something, it becomes hard to evolve if you need to, if that makes sense. 

I mean, I don’t want to hate on value investing, but I think value investing is *inaudible.* Warren Buffett… All investing in its core is value investing but it’s very easy to do an “us  versus them.” 

I think that that thinking is really surface level, versus trying to dig deep and understand what are the drivers of these things? I think as soon as you put a label, then a lot of that thinking kind of goes to the wayside. I then am very intentional about saying, like not saying I’m *inaudible* growth investing, even though I would say that a lot of people would categorize the style.

However, if you like growth stocks from here, with no earnings, increases like2x, it might not be prudent to have your money in a lot of these companies. So if I hadn’t all of my identity, as I’m a growth investor, it’d be very difficult to kind of evolve, if that’s what the market was offering. 

As Buffett also says, growth is just a component of value. So really, you’re just trying to buy something for less than it’s going to be worth in the future and there’s definitely a lot of different ways to go about that.

Though I naturally am very interested in these cutting edge companies that are growing fast and disrupting different markets, amazing founder led leadership, and that naturally tends to be more growth-ish stuff. 

Robert Leonard  11:35  

When it comes to new investors who are just approaching the stock market for the first time, what is the best strategy for them? Should they try to pick individual stocks or focus on diversified ETFs?

Ryan Reeves  11:46  

I think it comes back to what’s your interest level. Actually, I mean, if you don’t care at all about the stock market, which you probably wouldn’t be listening to this podcast, or, or if you don’t care about any of this stuff, you might as well just take all of that time that you’re going to be spending researching and allocate that towards things that you’re actually going to be interested in. 

At the end of the day, life isn’t all about money and if you have to spend all your waking moments trying to beat the S&P 500, and you hate it, then it’s probably not worth it for you.  

I’d say that that’s like the biggest thing, what’s your curiosity level around this? Then if it’s really high, I would say jump in or start trying to start learning about these things, I’d say that the investment… If you really like investing, it can be very worth it. If you can beat the S&P for just little amounts for a very long time, it’s pretty powerful.

Robert Leonard  12:39  

For anyone who’s looking for consistently fascinating information about companies, you are a great follow on Twitter. I want to talk about a few companies you’ve talked about on Twitter, and others that have just been popular lately. 

Before we get into those specific companies, how do you come up with all the ideas you have for stock investments? Are you using stock screeners? Are you reading news articles, Wall Street Journal, things like that? How are stocks coming on your radar?

Ryan Reeves  13:05  

It’s pretty all over the place. I would say that a good idea can come from just about anywhere. I mean, Twitter is a great source. You might find different newsletters. There’s so many off the top of my head, but if you find me on Twitter, you can even go through the people that I follow. You can find some great people there. 

I used to do a lot more screening. I think that it can be pretty valuable. I found it to be valuable in like, the smaller cap names for some reason.

I think when you get a really large cap… I’ve looked at a lot of those, not definitely everyone, but I mean, just from different friends and industry over time. There’s honestly so many. 

You can set up Google Alerts. I have the Google Alert for IPOs. Anytime that’s an IPO, I’ll try to get the perspectives and try to read through it. Honestly, the longer that you’re sort of in different stock forums online… There are so many different places, newsletters, I’d say like good ideas. There’s definitely not a shortage of someone’s time to kind of ferret out what’s quality and what’s not.

Robert Leonard  14:21  

When you discover investment ideas online, whether it’s a resource like Seeking Alpha or Twitter, like you mentioned, how do you detach yourself from the bias that most investors have after reading someone else’s idea?

Ryan Reeves  14:33  

You know it’s funny. I was talking to somebody the other week and they were saying what are the sources of things you subscribed to and all these data sources to find different ideas, I was really like the main thing that I do to understand if an investment is worthy of my dollars is go straight to the source material. 

The most important website for data is really the company’s investor relations page. So if you just type in the company, and then Investor Relations after it, there’s so much information on there: the SEC filings, they might have the transcripts on there, the quarterly earnings calls, you can listen to the recordings of those, the 10 K… I mean, there’s so much on there that if you just go straight to the source material, you get a very unbiased opinion. 

Maybe the company will have some slant of how they present the information. Maybe you can find the investor presentation on there but then if you actually just find the source material, you can make your own judgments. 

I then try really hard to go straight to that and then if I’m not sure about something, maybe I can find somebody else’s opinion, but I think it’s very important to develop your own conviction, rather than latching on to somebody else’s, and then not actually doing that deep original research on your own. It’s definitely a shortcut to just take somebody else’s thinking and it could be helpful.

However, one thing that I like to say is you really can’t borrow conviction, because if the stock falls out from you, you’re not going to have that person that you read about their thesis. That’s not yours, actually. It’s way more difficult to kind of keep conviction if you don’t do that original work.

Robert Leonard  16:18  

Let’s talk about that a little bit more. Why is it a bad idea to follow other investors blindly? You just mentioned conviction. Though what about super investors like Warren Buffett? Why can’t we just buy what Warren’s buying? He has to publicly disclose it, why can’t we just buy what he buys?

Ryan Reeves  16:31  

I mean, it’s worked for some people like Mohnish Pabrai. He really talks about this concept of cloning investors’ portfolios. Maybe it works for people, but for me, if I don’t know exactly why I’m holding a stock or the basis of why I’m doing it, I get way more nervous when the stock sells off. 

It’s more of just a peace of mind thing for me. If you know exactly why you’re holding a company, and you can see the results, quarter after quarter building to do something really special, and then when it sells off, you’re going to have the nerve to plow more money in at really good times. 

It’s really, if you just clone Buffett, and he’s not going to update his 13F until every quarter. If you can sit through that, and you don’t really care then maybe it works for you. However, I think that borrowing conviction can be very difficult to sit tight when things get hairy.

Robert Leonard  17:29  

I want to dive into one of the specific companies you’ve talked about quite a bit on Twitter. For full disclosure, I am long this company, it is my largest individual position in my portfolio, that has been for quite some time. That company is Square, which is ticker SQ.  

I’d like to do a deep dive into this company for the listeners, both so they can learn about this company, but more importantly, so they can see how you analyze and research companies. 

First, tell us a bit about Square. What does the company do and how do they make money?

Ryan Reeves  18:01  

I love that that’s the first question because that’s pretty much the first place that I started understanding the business model and really peeling back the layers and understanding exactly how they make money. 

I mean, if you look at Amazon, the real profit center is AWS, which a lot of people now think Amazon is just for e-commerce. However, if you peel back the layers, you understand that there’s something different going on.  

I think that’s similar with Square actually. There are two ecosystems or two sides of the business. They really started out with the seller ecosystem, but they’ve really built up the cash app business. You have the seller ecosystem and cash app. 

The seller ecosystem, if you’ve ever been to the farmers market, or small business, and you see that classic whites or squares, you can plug it into your phone, swipe it for credit card payments… You can get into the details but basically, they are a payment processor for those merchants. They take roughly 2.75% and that’s sort of the profit on each transaction. 

Then the cash app side of the business. So Cash App started officially in 2013. But they really only started making serious revenue in 2015 or 2016. It’s been growing very quickly since then. You might know it is just an app that you can download. You can buy stocks, you can buy bitcoin, you can transfer money. 

Right now actually, about 50% of the revenue comes from the seller ecosystem. And 50% of revenue comes from Cash App. One of the bigger storylines is that Bitcoin revenues as a percentage of Cash App have really skyrocketed. 

On a gross profit basis and seller ecosystem is more like a good amount more than 50% right now, but Cash App is growing very quickly. Is definitely catching up. That’s sort of the big story that Cash App is becoming an increasingly bigger part of Square’s overall business.

Robert Leonard  20:09  

How does Cash App compare to Venmo? The reason I asked that is because anytime I have friends or family that want to send me money, they say, “Hey, I’m going to Venmo you. What’s your Venmo?” 

Like I said, I’m a big investor in Square. I’m very long in Square , but I’ve never had somebody say, “Hey, what’s your Cash App?” 

Everybody always says Venmo and Venmo is owned by PayPal. For those who don’t know, that’s my second largest position, or it’s up there, PayPal. 

How do these two compare? How does Venmo and Square compare with Venmo and Cash App?

Ryan Reeves  20:38  

I’ve had a very similar experience where I’ve just haven’t noticed as much adoption with Cash App. However, it is actually a very different demographic, actually. 

Cash App has kind of typically targeted underbanked individuals. Even if you look on Google Trends, in the geography of the United States, on the West Coast and East Coast, Venmo kind of rules, but Cash App is way more popular in the southern United States and in more rural areas, which is really interesting. 

Though yes, that might be one of the reasons for that kind of discrepancy. 

Last quarter, Square reported that Cash App has 30 million monthly active users, which is very impressive. Venmo does have more, but Cash App is actually growing faster. 

Bitcoin is an interesting piece of it. Bitcoin revenues, year over year, grew something like 1,000%. What’s really interesting is that Cash App is using Bitcoin as sort of an *inaudible* so people can buy and sell Bitcoin very easily. Then they can kind of cross sell them different services, whether it be the cash card, which is almost like a debit card, or instant deposit. You can get your money on a peer to peer transfer immediately if you pay 1% of the value. 

There are different things that Cash App is doing but they’re very innovative. I mean, Venmo right now, the core use case is just peer to peer payments, as I’ve already alluded to Cash App has brokerage services. They’re kind of creating this closed loop payment system, which is really interesting. I’m sure we’ll get into it. 

However, if you can imagine a transaction at a Square seller, so let’s say a retailer uses Square for its payment processing. That retailer may also gas employees that they need to pay. What if they could just peer to peer pay them with a Cash App, and then they can kind of cut out all of the middlemen rather than having to pay ACH fees. 

All of these things have kind of created this closed loop ecosystem where Square can kind of cut out a lot of these payment middlemen. I think that is like the grand vision of Square and Cash App is integral to that vision.

Robert Leonard  22:57  

How is Square making money off of Bitcoin via Cash App? How are they actually making revenue?

Ryan Reeves  23:04  

Yeah, so what’s interesting is they are making a lot of revenue, but very little in profit, just the way that the accounting works.

Technically, Square X is the principal for the transaction in Bitcoin. I don’t know what a Bitcoin is, let’s say, it’s just 20,000, right? So if I buy a Bitcoin for $20,000, Square will actually recognize $20,000 in revenue, but the way that the actual transaction works, they make very little gross profit. 

The gross margins on these transactions are like 1-2% basically, like the bid ask spread is the difference and is their gross profit. Very little operating profit from these huge growth in revenue. 

Though as I said, the Bitcoin you can kind of think of it as this engagement *inaudible* so it’s like a nice place for people to start using the Cash App. Then they might use it to buy stocks, or they might use it to actually like their bank account, which is really valuable. So Bitcoin while it’s not really making much in profit, you can think of it as really important for engagement.

Robert Leonard  24:15  

With the way that they’re recognizing revenue off of that Bitcoin, do you think that could be artificially inflating their revenue?

Ryan Reeves  24:22  

That’s kind of the point I’ve made on Twitter is that you see the top line… Square is growing 60% but if you back out all of the Bitcoin growth, the revenue is really not that impressive. 

One thing I’ll say as the counter point which I think is important is if you take out Bitcoin, the Cash App is actually growing very quickly. The last three quarters, it’s accelerated, I think, off the top of my head, it’s something three quarters ago, it was about 100% growth, then 130% growth and last quarter is like 174% growth. That’s x Bitcoin.

So removing Bitcoin, Cash App in its own right is still growing very nicely. I think that the key metric to sort of look at is Square is overall gross profit rather than the top line, and just look how fast that’s growing because Bitcoin can, as you mentioned, distort that.

Robert Leonard  25:15  

How did Square even make it on your radar in the first place?

Ryan Reeves  25:18  

I think the first time I ever really noticed it was I started seeing it pop up in all these really small businesses. I was just seeing them use this tiny thing that they can plug into their iPhone and all sudden they could start taking credit cards. I don’t know, this might have been like eight years ago, even before it IPO-ed, I think in 2015.

I took a more serious look and I was pretty impressed. I mean, it’s growing very fast, very small penetration in all these small businesses, but I think it was just like classic Peter Lynch trying to observe and recognize things, I guess.

Robert Leonard  26:01  

For those who don’t know, Peter Lynch wrote a book called “One Up on Wall Street,” where he talks about how individual investors have an up on professional investors because they’re able to get investment ideas from things they see in their everyday lives. 

That’s what Ryan was saying there is he saw small businesses, he saw the Square, a little Square Reader at all these different merchants. He was able to recognize that and then start looking into the company, and a lot of investors have been able to do that. That’s that Peter Lynch style of research that he’s mentioning there. 

Once you notice that and it was on your radar, you mentioned that one of the first things you dove into was learning about their business model, understanding how they made money. From there, what did you dive into? What did you use to understand those things? Did you look at the annual reports? Do you go to the financial statements, maybe something else?

Ryan Reeves  26:48  

The first place I tried to start is simply the annual report, also known as the 10K. I didn’t really understand exactly what the revenue segments are. 

What’s interesting is right after its IPO, the subscription part of the business, pretty much known as Cash App, was very small in terms of revenue. I think it was under 10%. It was really this payment processing company. 

Once I understood that, that’s the big piece to focus on. I really tried to dive into the  payment processing industry and it’s incredibly complex, actually, just how a payment happens is very interesting. 

You can think of Square as like a payment facilitator. Basically, they take like a bunch of sub accounts, which are the merchants. Typically, before Square, a lot of companies, they would go to their bank branch and say, “Hey, we need a business banking account to accept payments,” and then the bank would have partners with these big terminals where you can swipe your credit card. That would be another fee. It would be like this huge paperwork ordeal in order to just get a bank business bank account and get up and, and start taking credit card payments. 

Square basically did all of that for you and then made the onboarding process very simple. They kind of aggregated all of these different merchants and then the bottleneck was this very lengthy process of actually getting up and running. Square did that for you. For that convenience, they charged a little bit of a higher rate. 

For small businesses, 2.75%, that’s a bit higher than maybe for like a high volume retailer they might be doing… I don’t know? 1.5%? So it definitely makes a difference but it takes a lot of the headache out. 

I tried to really understand what was going on, like how much of that revenue that 2.75% was Square taking, and just trying to dive in the payment industry because I think that’s important, because then you can have a good sense of what’s happening and how early days on and opportunity it is.  That’s the next thing I tried to do. 

Then just looking at the financials, trying to understand is growth accelerating, decelerating. I was noticing that subscription revenue, although very small is growing incredibly fast. That’s something that I just kept in my mind. 

Looking also at competition, versus the legacy players. There are a lot of things that you kind of do for the research process, but it all gets around: am I paying less for what I think this business can be worth in the very long term? 

Everything is just centered around that and understanding is somebody going to come in and undercut Square? Is that possible? Just trying to do research. If you have a question, try to figure out the answer and talk to smart people. Really it’s almost like an investigative journalism thing. Just trying to find out different answers to questions that you pose yourself.

Robert Leonard  29:56  

What are Square’s KPIs or key metrics that you look for when you’re analyzing their results?

Ryan Reeves  30:04  

Two things that I look for these days, especially as Cash App has become a bigger part is the Cash App growth taking out Bitcoin? So X Bitcoin, how fast is cash up growing, and then kind of off of that is just gross profit. 

The gross margins are going down because Cash App is becoming a bigger piece of the business. Since Bitcoin has a very low gross margin and it’s making up a higher percentage of revenue, it’s making the overall gross margin look like it’s shrinking left. It’s gone from like mid 30% to I think last quarter, something like 20%. That would be a worrying trend.

However, if you actually look at the overall gross profit growth, I think it was over 50% last quarter, which is very impressive. I’m just trying to get to like a true metric what moves the needle rather than like all of this noise. 

I think top line growth is not nearly as a useful metric for Square these days. I would say gross profit is pretty important as well as Cash App X Bitcoin.

Robert Leonard  31:07  

How do you go about valuing a company like Square?

Ryan Reeves  31:11  

The most impressive valuation methodology on Square that I’ve seen comes from Ark Invest and Max Friedrich. They have a model that is really interesting how they value Square.  

I’m going to kind of just copy what they said because I think it’s really insightful. So Wquare right now has about 30 million monthly active users. If that continues to grow at a pace that it’s growing at, maybe in five years, they’ll reach 75 million monthly active users. 

Then *inaudible* basically figure out, out of all these big banks like JP Morgan, Wells Fargo, what is kind of average revenue per user of a bank customer, and they came out to this number that was roughly $900. 

So out of the original 75 million that we’re talking about, what percent of those can be monetized at a full $900? Probably not a ton, because I was talking about the underbanked population of Square, they’re probably not going to monetize it at a full $900 because maybe these customers are just like using it on the side for Bitcoin. 

However, a very small percentage will actually monetize at a pretty high rate. Let’s just say that like 10% of the 75 million monetized at the full $900. So you can do rough math, just to make the math very simple $1,000 of average revenue per user, and 10%. 

So 7.5 million and they use at $1,000, which is $7.5 billion. Then going from there, you can kind of think of what would the margins be on that? Payment processing has like very high margins, especially what Cash App is doing so maybe you can get to 30% margins. 

From there, you can put a multiple on that. This is like the very back of the napkin. So going from 7.5 billion 30% margins, something like 2.5 billion in earnings, and you can put a multiple on tha. Maybe 25 or something. I’m just kind of like using fairly reasonable numbers. 

Then from there, you can say Square’s full valuation is something like $93 billion of enterprise value, and Cash App right now makes up more than 50% of that value. How much would you attribute to the seller ecosystem?

Also, in five years, in my view, I can see it easily doing $200 billion in gross payment volume. These are a lot of numbers that I’m throwing around but basically, just trying to understand the opportunity costs, or the alternatives of Cash App is these big banks that are spending a ton on customer acquisition. Cash App is getting all of these users at a very low cost.

So what is that worth? Kind of trying to back into the valuation.

This is more like a creative way to look at it. A lot of people will just look at price to revenue or price to earnings, but I think with companies growing this fast, thinking about it in a  maybe an unconventional way can be helpful to get a true value. So yes, what I think the team at Ark has done is really interesting. 

Robert Leonard  34:37  

I like how you went about it creatively. That’s exactly how I was hoping you would explain it because I want people to understand that it’s not just saying, “Oh, this company is trading at 10 times earnings. A low PE or low price to sales, and that must be an undervalued situation.” 

I think there’s a lot of different ways. I personally classify myself as a value investor. I know you don’t like to put yourself in a box. I agree but I think Square is technically for me, I considered it a value play because I thought the asset was undervalued even though somebody would look at that and say it’s a gross stock, how can it be a value play? 

Well, for me, I think it’s undervalued. That’s what value investing is, right? You buy companies that are undervalued. 

I want people to understand and who are listening to the show that there are a lot of different ways you can value a company. Just because it’s high growth doesn’t mean it can’t be a value pack. That’s how I at least think about Square. 

Ryan Reeves  35:25  

Totally, I think that’s well said. 

Robert Leonard  35:28  

As we wrap up the show, I’d love to finish by talking about two of the most anticipated IPOs of 2020 that just happened. Those are Doordash which is trading under ticker DASH and Airbnb, which is trading under ticker ABNB. How have you approached these IPOs? How do you approach IPOs in general?

Ryan Reeves  35:49  

I’m very curious about them, because they’re both amazing companies, they have very high mindshare, a lot of people know about them. I just try to read the prospectus. Try to go straight to the source material, look at what growth is doing, what are margins doing. 

They have interesting models. They’re both at the core business model, they’re both pretty similar, kind of marketplaces connecting. In Airbnb’s, guests and hosts, and then Doordash is basically restaurants, drivers and eaters. Then they kind of sit in the middle and take a rate from the overall kind of food or guest sales through the entire ecosystem. 

You can kind of think of both of them as like these mini cities that kind of take a tax on the constituents. I think they’re both very interesting businesses, both founder-led in very high profile stories, but I have a kind of a rule for myself that I try not to invest in IPO until at least after the first earnings call, just so I can see how things are trending. 

I think that it’s very interesting since both businesses… Airbnb was really affected by COVID, obviously, and Doordash, it really accelerated the business. It’s kind of tough, because like how permanent are these things after COVID hopefully dies down? What do these businesses look like? 

I think there’s a lot of uncertainty. Right now I’m just trying to learn about both of them so that when I get a better picture of what the long term will look like, then I’m kind of like primed and, and sort of know how things are going to work. 

I think a lot of investors will say, “I went out at crazy valuations. I would never look at these companies.” I think it’s always valuable to look at something. Then you can always make up your mind if you say, “I don’t really like the business model. I think the valuation is terrible.” 

You can always say no, but I think it’s important to look at something even if you think it’s ridiculously valued, because you can always learn something. That’s what I try to do. I try to look at everything and make up my own mind. 

Robert Leonard  37:56  

Ryan, thanks so much for joining me today. I enjoyed our conversation, and especially our deep dive into one of my favorite companies. Where can everyone listening go to learn more about you and all the different things you’re working on?

Ryan Reeves  38:09  

So if you just type in Investing City on Google, it’ll pop up and sort of the tagline is “save time and boost returns.” So I have my personal portfolio on the site, and then all of this research bundled around it. 

The goal is to really help out really busy folks beat the market. I’ll try to get conviction and try to give insights on a silver platter so you can get comfortable with these companies. You can check it out there. Then you can also find me on Twitter: @investing_city. DMS are open and I love hearing from people. 

Robert Leonard  38:48  

We’ll put a link to both of those resources in the show notes below. If you want to connect with Ryan, just click those links. Ryan, thanks again. Really appreciate you joining me.

Ryan Reeves  38:56  

Yeah, no problem, Robert. 

Robert Leonard  38:58  

Alright, guys. That’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro  39:04  

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