Dogs of the Dow

0:00 Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president, financial advisor at wealth enhancement group. One of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter. Here he is your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay Christopher Boyd. Welcome everybody to another episode of something more with Chris Boyd. I'm Chris Boyd. I'm here with members of our team from the AMR team at wealth enhancement group.

0:42 Uh, Russ Ball is in the studio with me. Jeff Perry is in Florida and Brian Regan is in Boston. So thank you all for being here. Uh, our topic today is to discuss the dogs of the Dow. I've run across this a couple of times recently after not having, uh, had exposure to the dogs of the Dow for, I don't know, it's been, it's been a long time since this came across my, my radar, but, uh, recently I've had a client who had this position as part of their portfolio and, um, I've, I've come across an article and a couple of things where people were talking about the dogs of the Dow.

1:25 So now, uh, typically the, what maybe Brian, you want to explain for our listeners, what the dogs of the Dow is before we, uh, I want to dive into some of the, uh, the impact of a defined portfolio, but, uh, in a unit investment trust, but tell us a little bit about what is the dogs of the Dow? Sure. Uh, thanks for having me today, guys. It's been a while. It's always fun to do this. Um, so the dogs of the Dow is you take the, the 10 highest yielding stocks in the Dow Jones industrial average, which has 30 stocks in it, um, and that you make that your portfolio for the year. Uh, that's, that's essentially what it is. The idea is if it has a high yield, if it's in a blue chip index, like the Dow Jones, um, then, uh, you know, that it might be a good indication of value.

2:10 Um, so that's, that's the idea. Yeah. So they're presumably, these are quality companies generally, by virtue of being in the Dow Jones industrial average. And then, um, you're taking the 10 best income. So people who might be looking for a good yield, we can, we're going to talk about that. Let me come back to this. Uh, uh, some of the virtues and merits or, or not of this as an investment strategy, let's talk about how this is often acquired. Uh, oftentimes the way people obtain this, it's sold to them by a financial advisor who, uh, is selling a unit investment trust, a unit investment trust is a, uh, a bundle, a portfolio that you can buy now it, uh, it's an investment product, uh, oftentimes it's sold by commission, uh, though not always, but generally, um, and.

3:07 Essentially, uh, it doesn't have to be as limited as 10 stocks. It can be something else, some other theme that drives the selection, but it is a portfolio that is retained for a specific period of time. Off, as you mentioned, the dogs of the Dow, the theory is often for 12 months. Um, the, a unit investment trust often will last for about 15 months, sometimes even longer, more like around three years. So depending on the product you might select, um, I generally think there are other products in today's world that I would utilize as a way to invest. Uh, by and large, um, uh, defined portfolio is something I'm going to buy in January, but there's no, um, Shane, excuse me.

3:55 There's no change in the portfolio in any way over the course of the year. So there's no window, there's no opportunity for assessment or revision. Uh, it's either you own the bundle or you don't, that's essentially what a defined portfolio is. Um, you could argue, well, isn't that true with an ETF or, um, uh, mutual fund. And in some instances that may be true, but oftentimes there is active management and we can come back and talk about that, uh, the, the benefits and drawbacks of that. But in any case, a defined portfolio, a unit investment trust is usually how people acquire the dogs of the Dow.

4:36 You could certainly do it yourself with the purchase. Uh, the question then becomes, are they held in equal weight? Are they held in cap weight? Uh, what's, what's the weighting mechanism you use? Is it somehow arranged by yield? So these are things you might not know. And, um, that's why people would typically acquire it and the form of a, a packaged product. Um, I generally am not a fan of unit investment trusts or defined portfolios. Anybody else want to weigh in on that question right out of the gate? Jeff, Brian, what do you think? Well, I don't really understand the point of a defined portfolio period ever, um, because things change.

5:19 I mean, if we just look at the dogs of the Dow in 2024, for example, uh, Walgreens Boots Alliance was in, uh, was in the Dow Jones at the beginning of the year and it fell out during the year. So, you know, just from that mechanism, you know, you're not even holding true to your investment strategy is, is, is, you know, uh, not great as investment strategy, I think this is. We're not even holding true to it. Um, just because we're in a, you know, a defined position from, from the very beginning. Uh, I believe that you, we should, uh, research, research our stocks, but also, uh, before we buy them, but also monitor them for, for changes in business model, changes in price, um, et cetera, et cetera. There's lots of things that could, uh, change the value proposition of a, of an individual stock.

6:02 Well said I I'm in complete agreement. Jeff, did you want to add to that in any way? No, I'm not, I'm not a proponent of it. It's, uh, the history of the dogs of the Dow and that's when you would buy those 10 stocks on the first trading day of the year with the highest yield and keep them, right? You don't, you don't take them out. If they fall out of the highest 10 dividends, you keep them. So the old, that's right. The, the, in this issue though, if, if you're having the dogs of the Dow and one, the position falls out of the Dow, what do you do? It's a, uh, is it now you, you replace that position or, yeah. I mean, I guess you keep it, right. I mean, the idea is that you keep it the time in the market and that's somehow reflecting.

6:44 I mean, it could, it could go out of the top 10 dividend payers and stay in the Dow because as a price appreciation, right, or a dividend decrease, I mean, if I'm going to, if I'm going to try to find a benefit of it, I like things that are, uh, have a little turnover. I don't want, I have, I have more selling stocks because when you sell a stock, it's, uh, you know, it can mean one of a few things. It could mean that the company has gone South. Uh, you know, the business model is no longer intact. The reason why you bought it is no longer there. Uh, or, you know, maybe it, uh, the price appreciated a whole lot and, uh, you're selling a company that you really like just because it's gotten too expensive. Um, you know, there's usually not a lot of great reasons to be selling a stock.

7:24 You usually want to be holding it for, for a really, really long time and get those compounded returns. So from that aspect of it, it might hold people to a strategy who might otherwise have trouble with that. I like that idea. I don't necessarily love the execution through, uh, the strategy of the dogs of the DAO. I would argue that, um, the, the place for, uh, defined portfolios, unit investment trust is, is largely a by-product of a gone by era. Uh, this is a product that's, you know, designed to be, uh, uh, maybe a stockbroker sold. Uh, you know, it's a product sale, uh, where a commission is earned.

8:08 Uh, I just think of that as something that, you know, today we want to design a portfolio. We want to have some ongoing, uh, control of that. And, uh, we're not just pushing a product that, you know, that this would, I think is more of that, uh, experience that, um, that era of, uh, experience. Chris for, uh, for our listeners. Can I take a second and just tell the listeners who they are right now or who they are for 25? Sure. Good idea. Might be helpful. So the 10 stocks with the highest dividend rate in the Dow are Verizon, Chevron, Amgen, Johnson and Johnson, Merck, Coca-Cola, IBM, Cisco, McDonald's and Procter and Gamble.

9:00 So, I mean, a lot of names people know. Um, let's, let's talk about just the, uh, the concept of one of the things that the dogs of the Dow implies is the, uh, investment approach of investing for dividend. And, uh, is that meritorious or not? Um, it's very common. It's very common. And there's some attractive features for people who particularly who are in maybe own, uh, names, stocks, or a fund that they could just retain and draw cashflow from. And that sounds appealing.

9:41 Right. Uh, but that's not really always the way we encourage investors to think. I'm going to let Brian tackle this, uh, the idea of income investing versus total return investing. It's not the first time we've talked about it, but I think it's worth, uh, revisiting as a topic. Yeah. Before I go on my normal speech here that you guys are all familiar with. I Chris, I thought you said something interesting that relates to this. He said, commission products are, uh, you know, time of a bygone era. Uh, but so is dividend investing. You know, there was a time probably, probably prior to 1950 where the dividend, uh, on an index like Dow Jones would almost always be higher than a treasury rate, for example.

10:23 Um, and the reason for that is because stocks are, um, uh, more risky than, than, than fixed, uh, you know, uh, treasury treasury bond, you know, so they should require a higher rate of return. Um, and in those days, you know, a lot of the industry was based on, uh, returning share returning cash to shareholders through, uh, dividends. Today we do a lot of that through share buyback and there's a lot more emphasis on, uh, research and development and capital expenditures, um, than there might've been prior to that time. So now the emphasis is on and the type of businesses that.

11:04 Comprised the economy. There's been some evolution of that as well. And that may be part of why, right? I mean, to say the least, right. Uh, before 1995, we were bricks and mortar economy, and now we're a much more of a bites and bits economy. Uh, and that has, uh, reshaped, uh, a lot of the ways that we should be thinking about investing. Uh, if you look at, uh, margins on the S and P 500, for example, from that time, we went from 6% in 1995 to almost 13% today, uh, that is indicative of, uh, of software eating the world. Um, you know, margins on software are much greater than, uh, you know, you'll get, um, from, from selling, uh, items through, through Walmart at a discount.

11:46 So, uh, you know, that's just one example of, of how, how the economies change and, and how we need to think about that. But in addition to that, the reason why we don't, you know, we, we buybacks were far less common than they are now. Uh, buybacks are a way of returning, uh, uh, capital to shareholders. Uh, that's more tax efficient than dividends. And it often gets overlooked, especially when people are concentrating on dividend yield. I, it doesn't say anything about the buyback yield here. Uh, part of that is good reason. Um, the buyback is, uh, often temporary, um, where the dividend is often more consistent, uh, but not all the time. And that's important, especially when you're looking at, uh, some of these very, very high dividend paying stocks.

12:27 Uh, sometimes there have very, very high dividend yields because the, the dividends going to be cut. Um, so that, that, you know, that kind of leads me into the four things that you can do with a company can do with its earnings, right? Uh, it could pay down debt. It can buy back shares. It can reinvest in the business or it can pay a dividend. Uh, and for each, uh, different type of business, uh, uh, different part of the maturity cycle, uh, different options might be appropriate, right? If they have, uh, if it's a new growing company, it might be better for them to reinvest in the business and get a high return on, on capital. If it's a more mature business, uh, you know, like say Coca-Cola, which is here on the, in the dogs of the Dow, it might make sense to pay a, pay a larger dividend.

13:10 Um, but that's, uh, you know, company specific and it doesn't necessarily mean that one is, one is better than the other. If you have a really highly indebted company, uh, that is trading at a very, very low valuation because of its prospects of possible bankruptcy or lack of funding, and then it gets a lot of funding, even if it's through the equity market, you might see that stock go up because the reason why the valuation was depressed was because of the heavy debt load. So, um, a lot of how we evaluate stocks, you know, it's too simple to look at the dividend yield and say it's a good value. Uh, you need to look at the cash flows, the growth and what they're doing with those cash flows and whether that business model is going to continue well into the future or if it's, you know, a flash in the pan.

13:56 So I think, you know, we, we have said over and over again to our listeners that as much as sometimes it can be attractive to think in terms of buying, uh, on the basis of dividends, very often we might be taking on risk. We don't recognize, um, the quality of the company, uh, that has a very high dividend, maybe at risk, right? There may be added risk there. And there may be some concern of the future earning capabilities, Brian, and you've talked about in many instances with clients, uh, examples of a high paying dividend, uh, company, but it's funding their dividend through a dilution of share value.

14:42 Uh, there can be other considerations that can be problematic, right? So we often see instances where, uh, yield is as much as it can appear to be attractive to the investor. They actually be a warning sign. Sometimes it may not be as appealing as it might seem. Um, and that can be true with bonds as well as stocks that can be more risk when it comes to higher yield, um, comments. Yeah. I mean, as you guys know, sometimes I struggle with being diplomatic with my speech, uh, and I've often called those types of stocks. I've often called those types of stocks that Chris has mentioned as Ponzi schemes, which may or may not be fair, but, um, you know, you'll see that they'll issue shares and then increase their dividend at the same time, which, uh, you know, you're basically, um, you know, robbing Peter to pay Paul, uh, which doesn't make a whole lot of sense to me.

15:36 It's not, it's not very common, uh, but it certainly happens. Uh, and I, you know, I, if anybody wants to contest me on that, I have a couple of stocks in mind that I don't necessarily, um, you know, aim right now. Yeah. But even, uh, less nefariously, right? Like Verizon is the highest yielding stock on this list at 6.82%. Right. Uh, we all are well aware of Verizon. We're well aware of the brand. I'm sure, I'm sure most of us, if not all of us pay a bill to Verizon. Um, so, you know, it's, it's very commonly thought of as, um, you know, a, a relatively low risk staple, which, you know, I think it is. If you, if you look at the financial statements, you know, the, there's no growth whatsoever.

16:21 Uh, there's not a whole lot of decline either. Uh, there's, there's marginal decline and there's marginal risk, but on the whole, I would say it's, um, you know, the revenue growth is flat. So the revenue growth is flat and we get a yield of 6.82%. What's your reasonable guess on what your return is going to be on this, on this stock, all things equal. My guess would be 6.82%, right? You're not, the company's not growing. Um, and you know, you, you, you're getting 6.82% in the dividend. You know, you're only going to get the income. You're not going to get much price appreciation. Now, um, yields could fall and that could lead to price appreciation. Um, you know, they, they could restructure their debt, which they have a whole lot of, which is part of the reason why it's the press stock.

17:05 Um, they are buying, uh, a competitor, uh, that could go well, but it probably won't. Um, and I'm not saying that that is disparagingly to Verizon. Statistically, most of these large acquisitions do not work. So we have a highly indebted company that's getting more into debt by a competitor that's already not growing very much. Um, you know, to, you're, you're taking a good amount of risk to get that 6 .82%. Now take, um, you know, the S &P 500, for example, that's average 14 to 15% over the last decade, uh, that doesn't match up very nicely. Uh, and if you think that's an unfair comparison, because you might recognize that, you know, the S&P 500 might have, uh, things in it that aren't necessarily staples, then you can look at the high yield bond market, which you could probably get close to a 7% yield in today, maybe, maybe, you know, six and a half, something like that on average.

18:00 Um, so I can actually go down in the capital structure, take less risk, diversify my bond portfolio and get a similar yield. Um, that is a better prospect to me. And that's why, you know, I don't think, uh, Verizon, despite its high yield shows, you know, significant amounts of quote unquote value, uh, which I think a lot of people would, would, uh, bucket this as a quote unquote value stock. Brian, are there any other names in the, uh, the dogs of the Dow list that you would, um, want to talk about that you'd look at and say, oh, well, you know, there's things out there. Yeah. Well, I love consistency and growth as you guys know. Right. So if you look down this list and I'll repeat it for everybody, Verizon, Chevron, Amjon, Johnson and Johnson, Mark, Coca-Cola, IBM, Cisco, McDonald's, and Procter and Gamble.

18:51 Um, that's the 2025 list. Do any of those scream to you that they're going to have any growth in the future? To me, they don't. Yeah. I mean, not a single one. Um, you know, Merck's biggest drug is Keytruda. Uh, it's one of the best selling drugs of all time. It's a cancer and, uh, it's a cancer therapy. Uh, but my understanding is part of the reason why Merck is trading down is that the patent is coming up relatively soon, which means that you will get, uh, and I also think it's part of the, on the Medicare list and the negotiated prices. Um, so, you know, for those two reasons, the, the optimism around that drug might not be where you might imagine it to be for one of the best selling drugs of all time.

19:34 Uh, Chevron is an oil and gas major. It's very, very highly cyclical. It might grow for a little bit, but we are, we know that cyclical is not consistent. Um, so it's not going to get up, you know, a nice valuation for that reason. Um, you know, McDonald's is, it's interesting. Uh, there's been times when I've thought about pulling the trigger there. Uh, there's certainly, it's certainly consistent. Um, you know, they've had some interesting history with their CEOs, uh, too much turnover for, for my, for my taste, uh, which is part of the reason why we stayed away. Procter and Gamble, again, very consistent, but you're probably only looking at three, 4% growth trades at over 30 times earnings. The last time I checked, I'm not, through some, uh, uh, revisions and, uh, they've had some iterations.

20:22 Anything, anything interesting happening there? I mean, it's been a while since I did a deep dive on IBM, but to me, they should be, they should be able to come up with something, you know, that, that could be interesting because if you think about we're in the age of artificial intelligence here, right. And who came up with Watson? Does anybody ever watch Watson on? Yeah. Um, I, I was always amazed at how that kind of disappeared into, you know, nothingness and never really found any, um, pretty common in the business, in the business cycle, development cycle, right? The first to have the idea isn't usually the one who makes all the money. Right. You know, it's like that Gartner hype cycle thing. Have you ever seen that chart? So it's pretty interesting, interesting chart.

21:04 I like to lay it over the.com boom. I think that's, you know, fascinating. I don't get much activity on my MySpace account anymore. I don't know. Right. I mean, there's a lot of things like that. And now, you know, Cisco, one of the interesting things about this, and I was actually talking about this, um, over this past weekend with somebody, uh, you know, I was basically asked, like, can a stock go down because it's priced too high? And I go, do you know that Cisco has never made its 2000 high again in the last 25 years, despite it's, you know, continue to grow, uh, and be a viable organization. So, um, there's nothing here that I'm excited about. Uh, there's nothing here that I own anymore, you know, for disclosure.

21:45 Um, so, you know, take that for what it is, but you know, the dogs of the Dow, uh, in 2024, if I'm looking at this article from, uh, investing.com only did 2.5, 3% in 2024. Um, I don't know, that's not too impressive in a, in a year with the S &P 500 to 25%. So, um, you know, that's kind of my take on, on these stocks. They're, they're kind of old, they're mature. Um, they might, uh, they're, they're cyclical. Um, you know, they might surprise you, but, uh, I, I wouldn't, they don't, they don't check my boxes of consistency and growth. I don't disagree with anything Brian's saying.

22:26 Um, but I do, I, I do have a question for Chris and Brian here. So I think one of the reasons that, uh, the dogs of the Dow maybe less than used to be, but is attractive to people because they want to own a significant number of investors, savers want to own individual stocks. They'd like owning individual stocks. Um, and how can they do that? Are they just going to randomly pick companies that they know and do a little research and buy them individually? This is a strategy that at least has a theory behind it. It's in companies that are, you know, known and there's information available about it, I think that's the attractiveness to some people to maybe employee, uh, dogs of the Dow strategy.

23:09 And they, because they want to own individual stocks and they really don't know how to approach it. Um, if you have a client framework, if you have a client that comes in and says, I'd love, maybe they have a portfolio that they're bringing in and it's individual stocks and they want to own them, what's, what's the best advice for people who, you know, maybe have the assets that they can afford the risk of owning some individual stocks. How, how should they approach that? Do you want to take that Chris? You want me to run with it? Yeah, go for it. I'm going to let you. Oh, well, you know, I, I, uh, we have a portfolio of stocks. It's, it's between, uh, you know, 30 and 40 stocks. It rarely ever gets as high as 40 stocks because we like to keep it concentrated.

23:52 Uh, why do we like to keep it concentrated? There's not a ton of stocks that, uh, we love. Um, and we want to have good allocations to, to the stocks that, uh, we really like. So, you know, I think my, my first thought on this, uh, you know, find somebody that you trust, uh, to, uh, invest, uh, logically in a, in a more concentrated portfolio, because if you're not going to do a more concentrated portfolio, you might as well, why do we diversify through it, through an ETF? That's, that's my position. You're probably not going to perform. Uh, one of the things about the dogs and the Dow is it's concentrated, right? It's only, it's only 10 stocks. I mean, it's not that it's not the 10 stocks that I would pick, but I would say it checks those boxes. Um, the second thing that you need to do when you're looking at, uh, individual stocks is make sure you're diversified.

24:34 I could argue that the dogs, the Dow isn't extremely widely diversified. It's diversified enough. You know, there's drug stocks, there's some tech stocks, but they're kind of old, old tech stocks. Uh, there's a material stock. Um, you know, it's, it's fine. Kind of a enough, enough, uh, there's consumer staples. There's kind of enough, uh, diversification. Um, what, what the dogs, the Dow is missing is growth, right? We, we want to find, if I'm going to pick on one thing that I really think we want to find business models that are going to continue to grow well into the future. Um, and that's hard to find. It's really easy to find companies that have grown recently.

25:15 Uh, they get a lot of play on CNBC. Usually their stock market, uh, stock prices are doing really, really well. Um, and there can be very tempting to buy. Uh, it's really hard to find stocks that, uh, are going to grow consistently for, for a long time. And sometimes, and this is a good thing. Sometimes they're in very boring sectors. Sometimes they're in exciting sectors. And the good thing about this is that's a great way that we can get diversification. I will take a boring sector. That's getting some good growth. I'll give you an example. I know consumer staples that are growing at, uh, 8% a year. Um, they're expensive, but, uh, you know, that's, that's not bad growth for a consumer staple, right? It's not a hundred percent growth. It's not 50% growth.

25:55 Um, but it's, it's, it's fairly good. Uh, you know, there are banks are reporting this week. They had blowout earnings. They don't always have blowout earnings, but some of the best banks do. I typically do do very well. And what do I look for there to get consistency? Uh, I look for a diversified bank with a good manager. So what do I mean by diversified? Usually they have custody, they have investment management, they have investment banking. Um, and they have, uh, you know, investment banking can have sales and trading and can have, um, you know, uh, uh, advisory businesses, investment manager, and then it has conventional banking as well. So, um, those are the four things I'm looking for. Uh, not, not every bank has that. For example, Goldman Sachs is very heavily indexed towards investment banking.

26:39 So, so they can be more cyclical. Uh, JP Morgan has, you know, all four, all four categories that I'm looking for. Um, but they're also growing. I mean, their, their, their growth, their earnings increased 50% year over year. They've had the same CEO for quite a long time. Um, you know, that's consistency, consistency with growth. You might find it in a place like the utility sector, which, you know, typically is the head one to 2% growth, but now is expected to have seven to 8 % annualized growth for the foreseeable future. You know, seven to 8% growth. Again, it's not, it's not mind boggling growth, but it's 4% higher than GDP. Um, it's 3% higher than nominal GDP. Uh, so it's not bad.

27:20 And if you can get those at a decent price, uh, plus, you know, a decent dividend yields, you, you, you could reasonably expect, you know, 10% on that, on a company like that. Um, then there can be like staples, like a Costco or, um, which again, unexciting, but they can raise prices on their membership fees, uh, which is cashflow to the bottom line. Um, and you know, they have over a 90% retention rate. So there's things like that, that are consistent, that have steady growth, that are in a wide variety of sectors that have proven business models, um, that you can have a fair amount of confidence that are, is going to be, um, consistent for, uh, the foreseeable future.

28:02 One of the things I wanted to include in this conversation, um, is something that I know it's not the way, uh, Brian thinks about, uh, investing, but it we'd talk about, uh, uh, investing, we'd talk about, uh, style boxes and, uh, growth and value and this notion of, um, uh, historically, you know, you'd have this battle between growth and value and, you know, alternate between the two. And we've had this long run where growth companies generally have done better. Um, but you know, the dogs, the Dow represents more of that value end of the spectrum.

28:46 Um, but, uh, you know, I, I sometimes, uh, you know, I know the way people think about value today is different. It's not necessarily the way we used to talk about it in the past. When you think about utilities and, um, you'd think about, uh, dividend payers and, and things like that. Um, and the way we talk about growth is not necessarily the same, you know, I perhaps it's more granular, it's more nuanced. It's, uh, it's not necessarily industry oriented, uh, you know, as much, uh, as it is company, uh, specific, but, um, Brian, uh, you know, I, I'll give you a chance to, to talk about that, but I, I do think that, you know, investors still sometimes think about the notion of, you know, will there be a, a cyclical, you know, element of the way the economy moves and whether industries will be benefited by different, you know, industry impact in the, in the economic cycle and, um, growth and value kind of feeds into that mindset, um, somewhat.

29:51 Uh, do you want to talk at all about that, uh, notion of, uh, how investors might, uh, maybe either correctly or incorrectly think about growth and value and how it should be represented in their portfolio? Yeah, I think, um, I think it's a big mistake to spend a lot of time thinking about the, the, the style boxes and what, especially when you're buying individual stocks, maybe not necessarily on an ETF mutual funds, um, allocation, it might help you get diversified, uh, in a way. Um, you know, if you're doing it from that perspective, but if you're looking for individual stocks, as far as I can tell, and you correct me if I'm wrong, but the biggest methodology used to determine whether a stock is growth or value is the price to earnings ratio.

30:38 Um, would you agree with that? I think that's true. I think that's true for the most part. Um, and I don't like the price earnings ratio. Uh, so here's, here's why I don't like the price earnings ratio. It only takes into account one year of, of earnings. Uh, and it only takes into account the current price. So, uh, if you have a trailing PE ratio, it says, you know, what's the price today versus the earnings that they made in the prior 12 months, if you're looking at the forward earnings ratio, you're saying what's the price today, uh, versus the earnings, um, that are expected over the next 12 months. So there's, there's some obvious problems with this, right? We can, a company might've had a great 2024, uh, and they, they would have a very, you know, relatively low PE ratio because they had a great 2024.

31:26 I mean, the market might be saying, Hey, it was a one-time thing, right? That it was a commodity cycle. For example, you see this sometimes with like steel companies. One time I remember I saw us steel had a PE ratio of one. Um, why did that have a PE ratio of one? Because it was expected to lose money for the foreseeable future. Um, that's not, that's not value to me. Uh, that's a, that's a dying organization. Um, and that would be bucketed as, as value. Uh, and to me, value is what you get and price is what you pay. Um, that'll, that'll adage and, you know, growth needs to be considered in that formula. So, um, you know, one of the recent changes that we made in our discretionary portfolios is we sold Verizon, which is on the, in the dogs of the Dow.

32:09 Uh, and we bought Uber. Uh, and if we're going to look at expected return, um, we already talked about how Verizon is expected. Let's call it 7%. Let's just round up. They're expected to have 7% growth. Uh, you know, Uber is growing, you know, historically the last couple quarters between the 15 and 20% range on, on revenue, uh, and they're, they're just became profitable and they're, they're, you know, clocking some, some serious revenue growth. The numbers are in the thousands, so it's not even worth quoting. Um, and the PE ratio is around 30.

32:49 So that you have a question of, okay. On the face of it, it, you know, Uber doesn't pay a dividend. Uh, they did, they did start a buyback. So if you're just going to look at that metric, you're going to say Uber is not very, um, it's not a good value versus Verizon, but it basically, if you look at any other metric, um, including growth, including, you know, uh, expected future cash flows, uh, it's, it's a much better value, um, than Verizon. At least in my opinion, I would expect a company growing at, uh, you know, close to a PEG ratio of one, let's call it, or, or some metrics, you know, PEG ratio well below one, um, would, uh, would have an expected return much greater than, uh, you know, the dividend yield of Verizon.

33:34 And, you know, that's, that's what we're hoping for. And ultimately I think that stocks do reach their value. I think the price comes to, um, close to what you get in the long term, not necessarily in the short term, but in the long term, I think that's true. So, you know, that's a good example of how I think Uber is a better value, even though it's a quote unquote growth stock than maybe the conventional company Verizon, which is probably bucketed as a, as a value stock. Thanks. I want to take a moment to just mention for compliance, uh, mention of specific stocks is not a recommendation or offer. Individual investors should do their own due diligence to determine opportunities for, for their own circumstances and, uh, always consult your advisor, or if you need help with that, you can certainly reach out to us.

34:25 So, uh, this was a good conversation. Thank you guys. I appreciate it. And, uh, anything to add, anybody want to add any additional thoughts before we wind down? No, thank you, Brian. Great. I just wanted to tag on at the end. Um, you know, I, I did a brief synopsis on, uh, on Uber and Verizon in there, but one of the things I think is important is the longevity of these companies, right? We, we want consistency with that growth. We've established that Uber has significantly more growth, but do I think it's going to last longer than Verizon? And this is why Uber is trading so inexpensively. There is a big debate, uh, about what is going to happen when automated cars come in.

35:06 I, I think it's a very fair and healthy debate. Um, what, what I, what my position is probably going to be is they're going to make a lot of, uh, continued agreements with companies that they've made with Waymo, with Waymo. They basically said, you can have access to our platform. If we can have access to your cars, they have a partnership. I think that's going to continue with most autonomous driving, um, which I think is an exciting opportunity. Why? Cause they have the network effects. They have the people who are already on the app. Why try to recreate that, um, community when it's already there, when you can just go into a partnership with Uber. So that's my position, right? So that's why you have to think about the business model in the longterm. Now, Verizon, it might seem like, you know, they have very few competitors, but they have two very big competitors in AT&T and T-Mobile, um, along with some, some smaller competitors.

35:52 Um, in addition to that, you know, goodbye to, uh, linear TV. That's not even a business that they're in anymore. Um, and, uh, hello to Starlink. Uh, you know, I don't think that gets a lot of, uh, talk yet. Uh, but you know, reasonably this is providing internet access to places that don't have internet access. Um, you know, satellite internet hasn't been reliable that reliable in the past. Uh, but I, I, I have reason to believe that that could change. I mean, just like everything, things tend to get better with time. So, um, you know, we get those two big competitors and they obviously have, they have more competitors.

36:34 They have some businesses that are dying. Um, they have a lot of debt. Uh, you know, these are, these are all things to consider about the longevity of, of that business model. And I'm not saying that Verizon is going to go away anytime soon or anything like that. I'm just saying if you're going to compare, you know, the upstart versus the incumbent, um, which in this case we kind of are, I think it's a, it's a fair conversation or fair, uh, thought experiment to have. Good stuff. Brian, it's been fun having you on. Thanks for joining us today. Thanks for having me guys. I really, I really enjoy it. Before we wrap up, I wanted to, uh, wish my mom a happy birthday and, uh, for anyone else, if you need any help with your financial planning or portfolio management, don't hesitate to reach out to us until next time, everybody keeps driving for something.

37:18 Thank you for listening to something more with Chris Boyd. Call us for help, whether it's for financial planning or portfolio management, insurance concerns, or those quality of life issues that make the money matters matter. Whatever's on your mind, visit us at something more with chrisboyd.com or call us toll free at 866-771-8901. Or send us your questions to amr-info at wealthenhancement.com. You're listening to something more with Chris Boyd, financial talk show, wealth enhancement, advisory services, and Jay Christopher Boyd provide investment advice on an individual basis to clients only proper advice depends on a complete analysis of all facts and circumstances.

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