Lead-Lag Live
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Lead-Lag Live
Max Osbon on Tech Investment Resilience, Market Volatility Strategies, and the Speculative World of SPACs and Micro-Cap Innovations
Join us as Max Osbon of Osbon Capital Management reveals how tech investments can thrive amid market volatility and unpredictable times. Discover how to anticipate market pullbacks while unlocking the potential of semiconductor giants like Nvidia, which are essential for navigating hype cycles. Max provides expert insights on managing risk assets and grasping stock-specific momentum, crucial for making informed investment decisions in today's shifting market landscape.
Our conversation also tackles the surprising dynamics of government-supported markets, including the Federal Reserve's unexpected $2 trillion balance sheet contraction. Despite a reduced M2 money supply, market liquidity remains buoyant, hinting at unseen elements bolstering optimism. We examine the evolving challenges faced by VC-backed companies and the emergence of opportunities at market lows, as illustrated by Meta's notable rebound. Understanding your assets and anticipating market fluctuations are key themes, showcasing how investors can find value even amidst uncertainty.
Explore the speculative realm of SPACs and micro-cap tech companies, where innovation meets risk and potential gains abound. Max and I scrutinize companies like Butterfly Network and Aurora, emphasizing the need for thorough analysis and comprehension of the technologies involved. This episode sheds light on risk management across various asset types and highlights the flexibility of independent investment firms like Max's. With gratitude for our listeners, we eagerly anticipate bringing you more valuable insights in future episodes.
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I assume, volatility. So any of the risk assets that I'm buying or looking at now expect a 20%, 30% drop or pullback at any given time, and I think that's the right way to approach this market, which is you have to expect that you're not going to be in a Goldilocks zone, which it feels like today. Markets in a Goldilocks zone, which it feels like today, you know, markets in a Goldilocks zone and that can change in any moment for any reason. So I expect more volatility and I expect those drops.
Speaker 2:My name is Michael Guy, I'm publisher of the Lead Lag Report, and joining me for 40, 45 minutes is Max Osborne. Max, introduce yourself to those who are watching and listening. Who are you? What's your background? What have you done throughout your career? Sure, thank you.
Speaker 1:Michael. Yeah. So let's see, I run an RIA, osborne Capital Management. It's been evolving for many years to get to a more sophisticated area, so we've done private market investments early stage investments and we run SMAs that kind of cover the range of retirement assets which have particular risk requirements, and then SMAs that have high growth and high risk characteristics, which is kind of what I wanted to talk about today with Michael. And we also run a small hedge fund that has benefited pretty tremendously from Bitcoin. You know started as a crypto focused fund and you know we're probably going to continue to just broaden out the thesis there.
Speaker 2:Is it fair to say that philosophically, you prefer more disruptive type of investing, meaning Bitcoin is disruptive, right?
Speaker 1:Yeah. So my focus has really been on tech as a theme just because it's something that I like and that's the driving theme of what we'll talk about today. Why I like tech is a couple of things which we've talked about over many years, which is, you know, tech has the added benefit of sometimes it goes through massive hype cycles. So you know you can as long as you're early. Being early helps tremendously, but when you get into a positive hype cycle, you know you can see some pretty tremendous gains. So being focused kind of through through rough periods on tech and understanding where the um, where the strength is in the underlying asset, um, you know that can really set you up extremely well if you, if you had to guess, um, since you're saying it's a hype cycle, what inning are we in?
Speaker 2:So I think a lot of people that are thinking through hey, listen, it's been a tremendous strength in NASDAQ, tremendous strength in tech, been the clear place to be for the last two years. Where are we?
Speaker 1:Yeah, I don't think we're that far into it, honestly, if we look at like there's some really interesting caveats that we have to say on this because there are areas that are going through their hype cycle.
Speaker 1:So micro strategies, you know, is such an interesting topic and kind of issue to discuss, but not my focus for today. Also, palantir is, you know, one of the software companies with kind of an insane multiple back in sort of that 50 times sales range. That was kind of where we were around 2021, where we're close to the peak, but it's a little bit in a category of its own. So when I'm looking at kind of the peak or cycles or however you want to categorize it, you know you have to look at the details. Or look at the details, um, what, what makes up that, that, that cycle and and with the majority of the top tech companies being in sort of a 20 low twenties or even teens, uh, sales multiples, it's it's not in the arena of absurd, um, you know, with, with that, palantir being being kind of the only one that's kind of, you know, trading a bit like a meme, stock right, defense tech there's a lot of themes in there that are driving that stock.
Speaker 2:I wonder if we've entered sort of this phase where there's almost like an ADD aspect to the way momentum plays out, meaning you end up having a bunch of people somehow latching onto a single tech stock drives. Momentum becomes the only place to be and then other things which might be substantially similar competitors are not really responding because they just haven't had the momentum to capture the attention and imagination. I frame it like that because it seems to me that if we are in that world where it's very sort of stock-specific within a broader team, as opposed to everything benefiting rising high-lifting boats, does that make your job easier or harder?
Speaker 1:It's a great question and that's actually again like the focus for today. I you know, over time, time, the more you follow the details, the more shorts become a little more obvious, or longs become a little more obvious, or, uh, in in. You know, the semiconductor trade for the last four or five years, I think, was a great rising tide theme where you didn't really have to do a lot of the underlying digging for the company level. Um, because thematically you could look at it as, um, uh, how, how I've looked at it is it's the driver of, like the global brain. So, um, you know what it ended up with is Nvidia being, you know, the tip of the AI spear, but at the same time, um, you know all of the global compute being, you know, kind of looped into semiconductors or what is a semiconductor or what do they do it's about? You know compute and storage and and you know just just limitless, limitless collection, organization, processing of data and doing that on global scale continuously. It's If you're into tech at all. It's just that theme doesn't seem to be ending anytime soon. That's not a comment on the semiconductor industry or NVIDIA in general, but I think that was an easy theme.
Speaker 1:Now, looking at individual companies. There are periods where I think long short or getting company-specific work particularly well. I think we're in that kind of zone right now. However, I'll add one other caveat in this discussion. I can get specific on my views, but the breadth has increased quite a bit. So when we talked in January, it was really just that narrative of MAG7 was the only part of the market that was going up. But now you know you have small caps that have rallied, which, by the way, small caps have been kind of dead for many, many years, or we haven't really had peaking small caps in a very long time. They should, or historically have been, you know, higher beta outperformers and that just hasn't been the case. You know the two factors that I've been watching for. Small caps is, you know you need falling rates and falling inflation. Both of those things have happened.
Speaker 1:And now you have Trump in office, trump 2.0, which has unleashed a whole other layer of unknowns, but also positive unknowns. Other layer of unknowns, but also positive unknowns. You know the areas that people I think are most excited about under Trump 2.0 are deregulation, which is just extremely broad. It's kind of like a tax cut in that regulation costs money, but it also is looking it ung and, uh and and it removes these kinds of unlimited liabilities If you're out of compliance on something or out of regulation. You could just have quarter million dollars, a million dollars, tens of million dollars, the liabilities, uh, regulation law that you have to you have to pay for, um, so so removing that and then a potential for the peace dividend under Trump 2.0.
Speaker 1:Um, you know, there is some case I don't know the specifics or can't go into the specifics too much, but next year or the year after, if we can see a, which is like you know, the Cathie Wood Fund, which is so controversial among you know, sophisticated investors, very popular among retail, is back above 60 today for the first time since, you know, since the 2020-2021 kind of world. I think that's really a big deal round numbers and hitting new highs on this sort of, you know, controversial, smaller cap innovative tech funds that arc above 60 is a really bullish market signal in my view.
Speaker 2:Yeah, it's interesting, right. I mean, it seems like you're not going to have the same mania of 2020, 2021, right, but you are seeing some signs of life in some of these. You know what were then termed innovative companies, right? Disrupted. You know post-COVID right, everyone thought it would be the next big thing. Then they went round trip. But they're showing strength again, and I wonder if that strength is a function of the market starting to actively believe that AI goes beyond NVIDIA.
Speaker 1:Definitely, I've been mulling over this question with someone, which is what would be an AI index? Or, if you were to create some kind of AI index, would you have to do it in private markets? Would you have to try to get some allocation to all the major names that are private? And I think, actually, the SMP is just a fair proxy as a as an AI index. Um, and and I and I just say that because I'm a big user of all the AI tools um, just as a fan of tech, and then just, I just like it. I use it for working out, I use it for cooking, I use it for research, but, generally speaking, there is a academic term for productivity gains, which is like GDP per capita, but then there's also a very loose definition, which is just, anyone, at any level of any business, can become more productive or at least more knowledgeable, or at more knowledgeable or at least stronger, if they're using AI, and I think they are. I think they are doing it all levels. So I think there's a massive continuous AI tailwind underneath.
Speaker 1:I also wanted to say something about government supportive markets, because there's always a bit of a cynical take a justified cynical take about government supporter markets. I think it's pretty surprising how much the Fed balance sheet has shrunk in the last few years. I think people would be pretty surprised to see the Fed balance sheet has gone down by about $2 trillion. It is now back to 2020 levels and, at the same time, m2 money supply reduced for the first time you know, starting in 2022, was falling for the first time is, you know, has been back to growth. So M2 money growing money supply is typically supportive of markets, market liquidity and you know the Fed balance sheet has been shrinking and that hasn't seemed to have had any impact whatsoever.
Speaker 1:We also have Doge going into next year, which should shrink government spending. It doesn't seem like that's going to have much of an impact, could cause a recession, but again, we have no idea what they're going to do or how they're going to approach it. All of this kind of goes together into saying it's not government spending. That's that's supporting markets. Right now it's a high breadth bullish bullish indication. Everywhere I can see momentum.
Speaker 2:Of course, momentum is always a huge factor even though there's this uh for some time and you and I both know that, um, bullishness, uh, overbought conditions, you know, can stay overbought for a while, obviously, but there comes a point where the euphoria becomes something you need to fade. What would be some of the signs for you that say okay, we're getting a little bit too extreme here. Yeah?
Speaker 1:I am not a big Ripple guy, but I did buy some and sell some and now I don't own any. So compliance commentary don't take any of my trades. I can change any of my mind any moment. So if you want to talk to me about a trade, just reach out and we can discuss. But I keep my finger over the button. So there's no perma-bullishness, perma-bearishness in any of my comments. But when I saw the, I bought some Ripple and then I sold it. I saw what was going on with Ripple on Twitter. People were screenshotting. I sent a text to a friend who I was just in Vegas with playing craps and I was like this looks like the casino. People are just jumping up and down, clapping because the price is going higher. That's what it was like in 2021. I saw Euphoria with Ripple sold, but I don't see much Euphoria or screenshotting and posting your gains really anywhere else in the market.
Speaker 1:I think the majority of the participants in the market right now are riding out the S&P assets which they have been since COVID and before COVID, which they have been since COVID and before COVID. So really realistically, a lot of people have those allocations, have had those allocations and they have them globally. Everyone outside the US wants to own US companies as well, so I don't think there's euphoria at new market highs with those assets. I think it's more honestly business as usual among the major companies because earnings is there to support it. Typically, euphoria would also mean that there is nothing underneath. Some of the quantum stocks have a bit of euphoria, but it's so small that I don't actually think it gets that much attention. I don't know if you would really count those.
Speaker 2:You mentioned earlier. It's like nobody really knows what's going to happen with Trump and typically volatility is a sign of doubt. I always say that the VIX index is not a fear gauge. It's really a doubt gauge about what comes next. You obviously still have a volatile bull market, right? Do you think that the likelihood of market path behavior is that it's going to be more volatile on the upside or just kind of more steady eddy, kind of smooth the way we've seen?
Speaker 1:Yeah, I assume, volatility. So any of the risk assets that I'm buying or looking at now expect a 20% 30% drop or pullback at any given time 20% 30% drop or pull back at any given time. And I think that's the right way to approach this market, which is you have to expect that you're not going to be in a Goldilocks zone, which it feels like today. You know markets in a Goldilocks zone and that can change in any moment for any reason. So I expect more volatility and I expect those drops. The reason I'm able to, I guess, buy with confidence is if you know what you own and you're comfortable with it, you can get through market volatility and you can kind of also somewhat know where the bottom is.
Speaker 1:My favorite example has been Meta trading at, I think, 11 times earnings at the very bottom in its Metaverse era, and then, of course, its AI era has gone up about 550% from the low. No-transcript zuckerberg incredible entrepreneur, um, incredible business, very numbers focused, uh, growth engine, uh, supported by ratings, um, you know, is this company? Is this company really at 11? Should it stay at 11? Is it gonna go below that? I think that was a margin of safety, a fair margin of safety, buying opportunity, um so so you want to know what you're buying? Um, I don't. I don't see a lot of uh margin of safety in the major big tech companies, but but if you know what you're buying and you expect volatility, then I think you'll do just fine, high after a cycle where a particular asset class has done really terribly.
Speaker 2:Yeah, and I think you can apply that to certainly the VC space and to SPACs.
Speaker 1:Yeah, so that's what I was excited about talking today. If you talk to people who work in VC-backed companies which there are many I'm sure everyone has friends in that space it's been in a depression the companies who were expecting to get their exit in 2021 or maybe saw their exit within 12 months, in 2021, they've had to cut headcount, they've had to change their strategy, their financial strategy. They're not getting their term sheets for Tiger Global From Tiger Global, the money's not pouring in and, honestly, they had to spend about two years where there was no growth. You couldn't get people on the phone to sell the product, couldn't get any progress whatsoever. So, as everyone knows, the world shut down on the VC side, or the early stage at a tech side, for about two years 2022, most of 2023.
Speaker 1:Now it's back moving, and so I like this concept of where can you get a private market asset class in public markets, and my favorite example is that a lot of the venture capital returns have more or less mimicked or been exceeded by what FANG was able to do the last 10 years in public markets. So you could have allocated to venture or you could have just, you know, kind of bought the earlier stage tech companies. 10 years ago, you would have gotten roughly 10x your money on the public FANG assets. So where today are you seeing, you know, representations of publicly traded venture capital? Uh, or something that is similar to that, and I think it's in the SPAC world. Now there are a lot of SPACs. Uh, you know there were like a thousand SPACs that went that came to market in 2021, total disaster. Um, you know, for, for people listening, spacs start at $10. Um, you know they're. They're publicly traded vehicle that raises their money before they go out and buy. And I think the most important thing, that was a huge mess.
Speaker 1:In 2021, an IPO of a particular company requires the company to only talk about what has happened up until that point and then they can talk about their vision, but they can't publish future numbers. That's not true for a SPAC. What the SPACs are doing is saying you know, we're pre-revenue, we expect to get $2 billion in sales in two years. They can say that in the SPAC world. They can't in the IPO world. It just fueled the euphoria, it created a lot of nonsense and now what you end up having is that you have a huge collection of SPACs that are down over 90% from their $10, you know kind of you know SPAC IPO or even worse, because they, you know they kind of had some time to go vertical before they crashed. So so when you're looking at sort of fishing for the SPACs, that you have to look for companies that have a share price of under $10 as sort of your first indication.
Speaker 2:I feel like we should take a step back and explain what a SPAC is. I mean, a lot of people you know a lot of people that were newer to investing. Probably all they think about is just like oh, these weird shell dynamics where there might be a company or not that went vertical and then they're dead. I mean, let's do basics here.
Speaker 1:Yeah. So it's kind of an interesting structure because all you're doing is raising money as an acquisition vehicle. So you'd have a publicly traded ticker that has $300 million in cash and there are a lot of dynamics with this that really sophisticated SPAC traders will take advantage of. There's warrants. There's the ability to vote down the SPAC and just take the cash back. That's not really important in this case. It's really just a vehicle where it raises cash and then they can take that cash and acquire another vehicle to take it public, you know, acquire a portion.
Speaker 1:There's a lot of abuse. I'm not up to speed on all the abuse that happened financially, but there were some extremely expensive fees for some of these companies going to the sponsors when they were going public via SPAC. But, yeah, a lot of the SPACs that happen. If you think SPAC, what you should really think about is a lot of companies that hype their way into the market in 2021.
Speaker 1:Many, some justified, many unjustified or many just far too futuristic. Like when I'm thinking about tech, it's cool that they have a cool vision and might be able to do something, but being wrong on timing is the same as being wrong, so it has to be something that's valuable within the next few years, maybe next six, seven years at maximum. Otherwise, um, there's no point in being public and it's more of a public good, um, you know, research project and a real business. So, yeah, so the SPACs, uh, they take, they take a stake in a company, often a venture-backed company or something early stage or something, you know, aggressive on the innovation side, and they become a public company through that SPAC.
Speaker 2:And presumably you may have alluded to this they tend to overwhelmingly be on the tech side. Is that a fair statement?
Speaker 1:Yeah, so I wanted to talk about four SPACs today. They don't have to be on the tech side, but they typically are. So again, not investment advice. I took positions in these four companies, but I could sell them tomorrow. I could sell them next month. I have changed my mind before and I think the purpose of talking about these on the show is just. I think this is an interesting way for people to look at markets and I think they should think through these topics that we've talked about in the last 20 minutes or so to arrive at this conclusion and consider how they might want to participate or might want to research these particular companies or companies like these. I think there's a huge opportunity within the Distrex SPAC space, and the four companies I want to talk about are by no means anywhere near comprehensive, but yeah, so again, not investment advice, but the four companies I was looking at start with Butterfly, which is a handheld ultrasound company. This is a Jonathan Rothberg company. He was famous for gene sequencing tech many, many years ago Now he has an incubator with dozens of companies, some of them went public via SPAC.
Speaker 1:In particular, the reason we're talking about the SPAC market is, I think a lot of these companies went public at the wrong time. Butterfly went public at an okay time November 2020. So it had some time. It peaked at $25 and then it went down to $1 or under. The reason I started looking at this space is I noticed a lot of these were starting to come off the bottom and, given the macro environment we talked about at the beginning, again I think there could be. Look, it's like I'm reminded of Carvana, if anyone followed that. But Carvana was left for dead and some of these companies get so dramatically low, like Carvana was down at $4. I think it's at $250 now. So this is not not retirement strategy. This is high-risk companies, high-risk situations. But the point is some of these SPACs went to extreme highs and because there was interesting tech there, good teams, that's why. But anyways, they're not at that level now. They're between $3 and $6. And so still quite a bit off the high.
Speaker 1:But the reason I like Butterfly is it does have interesting tech. You know the medical device simplification. So if you can plug it into an iPhone and use it anywhere as an ultrasound device, implications, you know, for international markets to use these things that may not have access to the expensive machines the core of the technology and the Rothberg technologies have always had strength at the semiconductor level. So they build with a lot of intellectual property and patents at the genome sequencing level originally, and now you know they have this sort of ultrasound on a chip is sort of the concept, but it's not a huge sales company, not a huge sales growth opportunity.
Speaker 1:But as long as they don't have to wait too much longer, you know, if the world slows down and two years go by without much, you know economic activity opportunity like it was the last two years, as without much economic activity opportunity like it was the last two years. As long as that doesn't happen, they won't have to dilute so much. Your biggest issue with all these SPACs is dilution. If they don't have enough money, if they're not getting their sales up, they have to dilute and that hurts you as a shareholder. But again, I'm looking at the technology and I think they have really neat technology. I think the price is low the.
Speaker 2:The other can actually just talk to me about liquidity when it comes to these types of unit specs yeah, I mean these are best as retail assets.
Speaker 1:Uh, this is not. Uh, this, these are not. That's why I also like them, by the way. Um, talking from the top view, when you are indexed and most of the world is indexed or indexed aligned, in their philosophy, the S&P 500 kind of controls everything, controls flows. Not only are SPACs not in the S&P, most of them are not in any indexes, most of them are not in the Russell for various reasons. Actually, one of these got into the Russell recently, aurora, which is the one I want to talk about next.
Speaker 1:I have a vision or a view generally that, like, if a company can be successful enough to make it into the indexes it's not a unique view for me, a lot of people have done this but if you can find a company that you think will eventually make it into the indexes, that's just an enormous amount of flow that goes to those companies. So, in order to be in the S&P, you have to have earnings and you have to have certain size. You have to be you know, I don't know $25 billion, $50 billion in with positive earnings. And that's a real hurdle to get over for technology businesses who, most of them, don't have earnings for quite a while.
Speaker 2:But when you, when you try and take on a position right, I mean you're, you've got to accumulate that presumably right, I mean it's not going to be like that. I think these almost like micro caps.
Speaker 1:they're definitely micro caps, I mean. So all these companies are like couple hundred million uh up up to aurora is 10, which is the next one Um I don't want to talk about. So that's quite a bit more liquid Um, but yeah, many of these are are single uh are a couple hundred million dollar market cap companies, which is which is as micro cap as you can get. Um, but the what I like about them again is I think that they're um institutional, like kind of venture capital style assets, like they're not obscure. There are a lot of obscure micro cap companies, you know, that come to market through obscure broker dealers. They need to raise some financing and you're like, why does this company even need to be public? That's not really the case with these guys.
Speaker 1:You know a lot of the SPACs. They are exit liquidity for venture capital, but they followed a normal path in that they had a vision, they raised capital, they had, they found a market fit, they have, they have real technology, you know, and and they're they're going through their next cycle, which is, you know, just growth. They need to grow and they're public. They need to act like public companies. They need to hit milestones. They're public, they need to act like public companies. They need to hit milestones and report on them. But yeah, in terms of your question about liquidity, it's not something that like. But big funds can't take positions really in a lot of these companies, are too small and but I think that's an opportunity. I think it's an opportunity for smaller funds. That's why I feel like it's opportunity for, like, the small hedge fund that we run uh to to take positions in companies like these, cause we don't have liquidity issues.
Speaker 2:So what's the other specs you're, uh, you're paying attention to.
Speaker 1:Yeah, so Aurora was, uh is, a driverless truck company. It's like uh, uber owns 20% of them. Them a 10 billion dollar market cap. Toyota owns two and two and a half percent. Amazon owns two percent. Um, these are like a really long duration play. They're they're pre-revenue. They have a long roadmap. It's going to take them till 2027 to really start unlocking it. They're playing the game very conservatively, but they're pretty much the leader in driverless trucks. They're running a route between Dallas and Houston. I have to keep saying it in here, but it's not promotion. These are just views that I think are interesting for your audience. I think analyzing individual companies is really an important exercise, even if you don't invest in individual companies.
Speaker 2:It's also a rare art nowadays, right, it's like because everyone's really talking more macro and broad based.
Speaker 1:But that's why I'm doing it, because it's like you know, my whole career is people like don't pick stocks and don't try to time markets. And I, specifically, have exercised my right to pick stocks and time markets now and I've done well with it and I really like it. Plus, I just don't like the complacency of buying an index or the market without looking at the underlying companies, and the underlying companies exist at all levels, from Amazon down to, you know, spacs. It's just, I feel like you can't make a real confident comment on the market or the direction of market if you don't know the details of the companies that are operating within them, of the direction of market, if you don't know the details of the companies that are operating within them. So dilution is also an issue. With Aurora, they also went public on November 2021. The worst time to go public on the SPAC market, that's when the crash started, november 2021. But that's driverless, driverless trucks, which is just like a very obvious huge market, uh, ridiculously huge market. Um, I, I don't know how many driver truck drivers are employed, it's in the millions. Um, I I don't think analyzing these companies in terms of market TAM uh is is like a useful exercise in this case, because again, I think your, your biggest issue is biggest issue is execution on the price that you can get in. They can be really volatile, prices can move 20%, 30% in a few days, but again, if you're buying these, you know, not in 2021, when everyone was extraordinarily excited about them, but now in 2024, when no one even wants to look at them or talk about them again, I think you're getting like a venture capital, like deal, um, but again, you have to. You have to do your own research and and feel like you know what you're, what you're looking at and what you're buying. Um, but again, uh, dilution is your biggest issue. Um, by far. Um. The.
Speaker 1:The other two I'll just touch on the briefly um. Uh, helion is is um. They kind of failed at their first uh spec. Um, you know a vision which was um, these um, which which was running a generator on a truck to power an electrical kind of drive train, a generator on a truck to power an electrical kind of drive train. They kind of gave up on that and they acquired tech from GE Aerospace that allows them to run a 3D printed engine Emphasis on the 3D printing. By the way, when they print this engine. It's got a really beautiful geometry that allows them to basically extract heat and distribute heat to operate the engine. That allows them to run it on 20 different fuels, fuel sources they can run it on hydrogen, ammonia, diesel, gasoline, and they've demonstrated the ability to swap out the fuel live while the engine is running. So they've won some military contracts with that, which I think are interesting. They're kind of pre-revenues also.
Speaker 1:But, uh, if you, if you're going to look at any of these, I would look at the tech first, see if you understand and believe in it, um, and and then make your decision from there. But they had, they had a crazy run they. They went, uh, public June of 2021 and at 10 and went up to $50, like an absurd, absurd run and then went down to like 50 cents. But you know they're back off their bottoms, right, they're kind of in that $3 range. So that's what kind of caught my attention. I do think market tell you something about the future. So the price running and the momentum running, you know, tells me something.
Speaker 1:But there is a lot of work that a lot of these companies need to do. I happen to think that that GE asset that they acquired um is pretty neat. Um, you know, it'd be interesting to see how they, they monetize it. You know it's run by a young CEO, um, who's talented and happened to go to my high school. I didn't know him, but uh, I saw that. Uh, you know, I I looked at, I researched all the um, uh, all the uh management teams extensively. Cause, again, that tells you the origin of the company. It's not just management, is just so important, um, so so you have to know who's who's running these. I'll pause there before I do the last one.
Speaker 2:Yeah, no, that's good. And I'm curious how do you even come across some of these companies? They sound so, or was it you have to accidentally stumble upon them?
Speaker 1:Well, the screen again started with distressed SPACs so I had to look. There wasn't really a filter on what I was using to define just SPACs. I'm sure someone can use a filter there, but it's like companies that IPO'd three years ago, four years ago, down between 40% and 70%. I'm not ready to bottom fish. I'm not going to buy something for $0.50 or $1. I want to see some positive momentum. So, again, another screen. It's like the stock price is under $10. Once you know, once you do this, you can sort of get to a list of about a hundred or 150. And and, by the way, what I found was there was another one. Um, I think CTV was a ticker. They just got acquired, um, and have an 87% pop on the acquisition. So, um, your, I saw, we saw this with software like two, three years ago and probably still happening now.
Speaker 1:But companies that were so depressed after 2021, that were publicly traded software companies, were getting taken public en masse by Toma Bravo because they were doing their own underwriting, being like, look, this public price doesn't make sense, let's just take them private. And uh, look, they have the, they have the billions to do it. So they've done that. So I actually think that any of these specs are too, too low. I don't know about the process of acquisition, but there are specs that have been taken private at premiums to what the price is. Now another opportunity, but but, yeah, you have to know what you're screening for. Like I, I picked these four because they had real technology and and, uh, and you know, went through them one by one. Um, you know, based on like kind of the carnage that was left over from this, this back, you know, uh, cohort from 2021. How do you think?
Speaker 2:about um how much risk you want to take with you know portfolio in these areas. Typically, I mean yeah yeah, I mean.
Speaker 1:Yeah, I mean, these are small positions, Like it's just like you would take. If you're talking about your net worth, you have to look at, like, what would be your venture capital allocation, and then these would be a small portion of that, and then they would also be a small portion in terms of execution. So I'm a big believer in buying in thirds. First third for the research, you know, and to see if you're getting the timing and the momentum correctly, you know. Second, third is to double down. And final third is to, you know, not go all in, but just to like add to the position. So discipline and execution is really important. I would never buy any company and just and say like, okay, well, this is great. Never buy any company and just and say like, okay, well, this is great, I'm just going to wait now a few years. I think you you know it's it's night you you always want to find the companies that are going to run for many, many, many years, like bang has um. You know, any of the companies I'm looking for, I'm looking for three to five year holds as a, as a, as a goal, but they also may not pan out and I may want to change my mind. Like I said, I may want to change my mind tomorrow. I might see something that I really, really don't like, Typically something related to the management or the way that management is running the business. That just gives me cold feet Because, if you think about it, you want like 10 different measures and all 10 boxes have to be checked and the second one of those unchecked. You don't have to be involved with any of the companies, you can wait to your next shot. I think it's really important to have extremely high expectations for execution. You know the second management team lets you down. You should vote with your feet. Your feet, Um.
Speaker 1:And so the last one I'll just add before we run out of time is Planet Labs, which is, uh, you know, 10% owned by Google. They're a satellite constellation company, Um, and my kind of thought on the tech there is you can't really just strap a camera to all the SpaceX, um satellites and and expect to get all the imaging of the earth that you want. Satellites and expect to get all the imaging of the Earth that you want. Planet Labs is really focused on highly technical imaging satellites that are full spectrum, that can read the Earth in many different ways. You can say there's an ESG element in that they're monitoring for leaks, but there's also a safety element to that too. You don't want pipelines leaking methane gas or however you want to, whatever you're looking for.
Speaker 1:But actually, on Planet Labs, just a shout out to a hedge fund. I shared an idea with. Who got this idea from, for Planet Labs was Adapter Capital Mark over there. I just want to give him a shout out. They had done work on this and that actually, that did influence a little bit my interest in looking in distressed SPACs because again, this was this was a SPAC that went public at the worst time again, November 2021, right before the bust at $10. I think. They got to $11.50, they fell to a low of $1.70 or something like that, but they're about a billion dollar valuation.
Speaker 1:Look, very technical, CEO. I think you would look at any of the people running these companies and they're so unbelievably successful Generally speaking. These managers and their capabilities they're not business people that just found a business plan and spun this up. They have extremely technical backgrounds. So that's part of my interest there. But yeah, so their imaging system for the satellites for Planet Labs go down to what? 50 centimeters 20-inch pixel dilation. So to the extent that that's useful for people again kind of pre-revenue, but again it's tech. This is venture capital. It's up to them to find their market and capitalize on it. And you're not buying at $1,150, where it was in November the SPAC mania, You're buying at kind of like $3, $4.
Speaker 2:Max, for those who want to track more of your thoughts, more of your work and maybe choose you as their financial advisor. Where would you point them to?
Speaker 1:Yeah, so osboncapitalcom is the website. I write a weekly article that attempts to kind of put all this stuff together, although this is a unique one where I've gone into individual companies. You can't really do that with compliance. So that's why I keep saying you know, do your own research. And that might change my mind tomorrow. But we do run a small hedge fund, we run SMAs, we manage retirement capital. I think all of those are linked together. I think being a good risk manager on the risk assets makes you a better risk manager on the less risky assets. And we're an independent investment, you know, boutique firm. So we can and do implement all kinds of strategies.
Speaker 2:Everybody. Make sure you check out Max Osmond, his firm. I appreciate those who watch this live. Again, this will be an edited podcast under LeadLag Live and I will see you all on the next episode as I get ready to go to another event tonight. Thank you, max, appreciate it. Thank you, max, appreciate it. Thank you, michael, cheers everybody.
