00:00 Speaker A
So let’s talk about some non-AI picks. First up is Netflix.
00:02 Speaker B
After the Warner Brothers potential bid which they walked away from, the stock pulled back, there was some worries around that. We’re now back to the core story which is a combination of subscriber growth, a combination of the pricing action where you have the ability to have a lower price product with a higher margin for the company. Remember the advertise support business they have. Then the other part is the company is also doing a good job of experimenting its its its actual product offer, getting to things like some live sports entertainment, also live podcasting. The key thing we think of sourcing a lot of content from international and bringing it here. The nice thing is a lot of content outside the US is a lot cheaper to bring in. and they’re really the only streamer that can do that. We continue to see this as a very nice top line compounder along with very good earnings potential and now obviously free cash for growth as well.
00:46 Speaker A
Let’s say the consumer weakens. What would that mean for Netflix?
00:49 Speaker B
They’ve kind of thought ahead of this. It used to be it was the 1999 or $20 a month. You do have the ad supported tier which is half that price. And this is very attractive because it’s also growing the potential user base. So I think they’re somewhat recession proof there because for that quality of spending, you’re probably going to still be spending on watching Netflix at 10 bucks.
01:07 Speaker A
Here’s another name. uh Games Workshop. I’m not familiar with this one, so walk me through this business.
01:13 Speaker B
So this is a $10 billion market cap company, about a billion dollars of revenues, growing consistently sort of like double digit earnings. Their biggest thing is a board game called Warhammer 40K. It’s a table top game. It’s estimated there’s about 4 million people who’ve played this game globally, about half a million who spend anywhere between $1,000 to $1,500 a year on this product. It’s a hobby. So a hobby involves emotion, money, and time invested. It’s a fantastic very loyal base. What they’ve done correctly is every three years they update the game in terms of a new version. There’s magazines, books behind it, and we continue to see a very long runway because the number of stores outside of their own stores that sell product is about 6,000. So there’s that tam which is developing as more and more people get to know it.
01:54 Speaker A
Last one quickly. Uh Formula 1. Now, why the enthusiasm there? Is is that media rights, the the streaming influence?
02:02 Speaker B
So this was part of the Liberty media uh group. It developed into an asset owning company as of December end of last year. So this is a real company you can invest in the equity, you become a shareholder owner. They have the license to operate the Formula One racing championship around the world. Depending on what you look at is the third most followed sport in the planet after both cricket and British football. is appealing across the board, about 50% of the viewership is female, 50% male and you get exposure to three things. One is uh various cities are bidding to host the races every two or three years. You can only do about 24 races, so you have more demand than supply. So you get pricing power there. Secondly, you’ve got the media rights. The third part of the flywheel is advertising and sponsorship. Today you go to a Formula 1 race. Every great consumer products company on the planet from Google to Disney uh to tech companies, financial services companies that are looking to advertise both on the car, the teams, on the track and on the actual drivers. The final kicker we like here is that they acquired Moto GP, which for those who know about it is the Formula 1 of motorcycle racing. They’re bringing that in. It’s big outside the US and a bit like Formula 1, they’re going to roll the same playbook out, develop it in the US. So we think there’s a lot of drivers on both pricing, power, demand and volume.
