Stock Club EP #186: Stock Market Trends for 2024: Sweden's Rise, Air Arabia’s Prospects & The Santa Rally
Join Emmet and Mike as they explore key investment opportunities for 2024 incuding delving into the thriving market of Sweden.
Nov. 30, 2023

Key Highlights

  1. Sweden's Investment Boom

Discover Sweden's emerging market boom as we discuss why this Nordic nation is a hotbed for investment opportunities in 2024. We also explore the factors contributing to Sweden's economic surge and what investors should know.

  1. Air Arabia's Growth Trajectory

The conversation turns to the airline industry, focusing on Air Arabia's potential. The hosts analyse the company's current positioning and future prospects, offering insights for investors considering this sector.

  1. Decoding the Santa Rally

Emmet and Michael examine the Santa Rally phenomenon in stock markets. Is it a reliable trend or just market folklore? They provide a thorough breakdown of this seasonal market trend and its implications for investors.

Transcript:

Michael: 0:06

How are you doing, Mike? I'm good. I'm good. Another day in paradise.

Emmet: 0:11

Oh yeah, live, dream big. I can't work on that.

Michael: 0:16

Sorry, have you seen it? Okay, it's like a tweet or something and it's like how do you know if someone is on is having the worst day possible? You walk past their desk in the office and say how are you doing? They say live in the dream.

Emmet: 0:29

Yeah, I know, and actually it's. What is it Actually, mike? I'm really sorry to mind if we take it from the top.

Michael: 0:37

I'm getting too untied.

Emmet: 0:37

I'm really sorry, I just I'm getting embarrassed and I just got it all wrong.

Michael: 0:42

All right, let's do that again.

Emmet: 0:44

Okay, let's do it.

Michael: 0:49

How are you? Another day of staff club.

Emmet: 0:53

How are you doing, Mike? Glad to be back. You know this is what we do, so I'm glad to be. It feels like we're always here.

Michael: 0:59

Yeah Well, we had a bit of a break there. We had a bunch of interviews, but it's glad to just get on and talk a bit of waffle for a while.

Emmet: 1:05

So what else will we do? And I love this, you know, just shooting the breeze about stock market into a microphone. I mean, honestly, dreams can come true, Michael.

Michael: 1:15

You've been living the dream for eight years long, so that's right.

Emmet: 1:19

Yeah, I must do a count on how many podcasts we've recorded.

Michael: 1:22

I'd say 186 is the number. Oh wow, I'm impressed Mike.

Emmet: 1:27

Obviously, you've been looking at it already.

Michael: 1:30

Well, no, I took over that count, but that's what I have so far.

Emmet: 1:35

Good 186. There's absolutely no doubt I have recorded more podcasts than I've listened to that old David Walliams, it's good to know there's no quality control there for you. Well, you know at that, David Walliams, I said it before in the podcast, but he said I've definitely written more books than I've read, which I thought was brilliant. I thought, yeah, I can relate to that, but in podcasting, yeah, yeah, there's a bit of that too.

Michael: 2:00

Okay, let's get into the show and we're kicking off with a really interesting topic that I've heard a bit about before, but I would love for our podcast listeners to hear too, and it kind of comes from our live show. Well, no, it doesn't come from a live show. It's been there for a long time, but you were talking about it at our live show and I thought it's a great opportunity to share to a wider audience. And that's the concept of Sweden, basically the country, but from an investing perspective. So when you think about the country's Scandinavia, I think it's an easy argument that Sweden has had a greater global impact than its neighbors say, which, in fairness, I haven't been doing too badly either. I think, if anyone looks at the Norwegian sovereign wealth fund, that they kind of get a little jealous of not having a Norwegian passport. But what's going on up in Sweden that makes it such a good landscape from an investing perspective?

Emmet: 2:52

Yeah Well, I've always liked Sweden and Swedish culture, and growing up in the 1970s I vividly remember an Electrolux vacuum cleaner in our home, and my dad, who was a mechanical engineer, often said that Electrolux must not be making much profit from the Hoover's because their durability just seemed to go on forever and ours and just never broke. So that was probably the second Swedish brand that I was exposed to, and, I suppose, everybody else of my age. The very first brand from Sweden that they were exposed to was ABBA. Then in my consciousness, it's true, though, there wasn't anyone in the 70s who didn't have an ABBA album at home, and certainly, as far as I have memories, I have ABBA's music in my memory. Then into my consciousness over the years came Volvo and Sab, and then Skype and Spotify, ericsson and Auto Leave. What other Swedish rhyming pairs are there? Securitas and Scania, securitas and Scania. They're both Swedish. There's RA Flame, ra Flame and H&M. That doesn't even rhyme. The kind of plethora of Swedish brands that has taken over the world without really being directly noticed is just so admirable. I forgot IKEA. I don't know what IKEA rhymes with absolutely nothing. Anyway, jt, john Thierry and I were invited up by Nasdaq to Sweden a few years ago for the listing of an Irish company called Zutek on Nasdaq Sweden, which, as I said, on the Night of Horizon Live, was really great fun. Actually, I'll tweet a few photos I took in Stockholm after this podcast goes live. So what's going on up there? I think, for the sake of this chat mic, there's three perspectives the first is a business perspective, the second is a stock investing perspective, and then the third is its currency, because it retained its own individual sovereignty and currency. So, from a business perspective, sweden's business environment is just known for innovation. So, apart from all those big brands that we've encountered and I'm not going to tell you how innovative IKEA has been, because clearly it's there to be seen the country has a really strong startup culture, most suspectly especially Stockholm, which is very often referred to as the Silicon Valley of Europe. With that said, I also thought Dublin was the Silicon Valley.

Michael: 5:31

I think it gets bandied around a bit maybe. Silicon docks has gone there for a while. I thought it was awful.

Emmet: 5:37

I know Well, there's no governing body over who gets to claim they're the Silicon something of somewhere. My Wall Street is the Silicon Valley of investing in Dublin. I mean it doesn't even make sense, but let's just claim it. So the Swedes grabbed the title of Silicon Valley of Europe. But what's really great is that the government up there supports businesses hugely true policies that really encourage innovation and entrepreneurship and like we only have to look at Spotify to get a glimpse of what it looks like when it gets downstream. And Sweden's labor force is really highly educated, just like the Irish workforce, and they're very skilled and there's a strong emphasis on equality and sustainability in business practices. And really you can see in the words of Steve Jobs, you can see the Swedish culture imputed on all the businesses that come out of the country. So it's a good place to start or indeed just run a business. And if it wasn't for all those giant brands if it wasn't I should say all those giant brands would never have happened. So if it wasn't a great place to start, we wouldn't see the domination of these various industries all around the world. So when we say right, it's a good place to do business and it's a good place to start a business and from a stock investing perspective, it's really. It's actually an unbelievable place. 46% of Swedish adults own shares, which surpasses every other European nation by a very wide margin, with the exception of Switzerland, that has to be said. But there's something else going on there. But from an individual's participating in the stock market, sweden is absolutely kingpin, and that's down to the stable economy, political stability and, above all, a number of policies that encourage participation from individuals, such as an investment savings account which offers tax benefits for investors. Everyone just does it and that's just that, and I think that's so admirable. If I could wave a magic wand for Ireland, I would make I would replicate what they've done over here that people consider their long term future kind of a 401k equivalent.

Michael: 7:53

Yeah, absolutely, and I think it would alleviate a lot of the pressures around property as well In Ireland, especially because the investing landscape is so poor from a tax perspective and from access and all plethora of other reasons, not least of which is the whole country convinced in everyone to buy Was it air cell shares back in the day.

Emmet: 8:13

It was aircom. You're dead right. I mean the Irish individual adults. History with investing up until very recently was pretty much just hardwired to property, whether it was a land, a home or an apartment. And when you speak to, let's say, your average Irish investor, property is what sprung to mind until very recent times. I think at least the new generation, if I may say, people your own age or have a far greater awareness of the other alternatives. But anyways, as I mentioned, nasdaq is up there in Sweden and it's branded as first North or maybe to Stockholm stock exchange, or maybe even Nasdaq Stockholm, I'm not sure what is like?

Michael: 8:53

There's about six different names for exchanges up there. I think Nasdaq Nordics covers a lot of them, but then there's also the individual stock exchanges as well.

Emmet: 9:03

Yeah, but no, first North is definitely the brand over the door as we walk through it, and then it has the Stockholm stock exchange and then Nasdaq is written on the wall. So I think they might have been transitioning the brand. I think it's now just known as Nasdaq Stockholm, but I'm not certain. But anyway, the third factor I mentioned, Mike, is they have their own currency and the Swedish Kronor, which most of our listeners know. Despite Sweden being a member of the European Union, it never adopted the Euro currency. Mike, did you know that Sweden has the world's oldest central bank, the Riksbank?

Michael: 9:39

No, I didn't.

Emmet: 9:40

Yeah. So as I was diving in to all things to do with currency and when we were kind of, you and I in the team were working through Nexus in its final, let's say spot checks and making sure everything was ready to go, I encountered the fact that the country has the oldest central bank in the world, which really surprised me. I thought that I would possibly go somewhere like maybe China or where else is older, maybe the Netherlands but I was surprised to see it was in Sweden. But, like all currencies, the value of the Kronos influenced by a whole load of things like trade balance and domestic economic performance, monetary policy decisions, blah, blah, blah, snore, snore, snore. I've never been the world's greatest student of economics, but in essence, the country has retained its currency to allow more control over its monetary policy, which is important during economic fluctuations. But what's particularly interesting to me is that the Kronor is at or near its weakest level for almost 20 years, irrespective of the currency you compare it to. So that means if you walk into a bank with a dollar or a pound or a euro, your money buys more Kronos than it has done for 20 years, and these things always refer to a mean when you look at long term currency pairs, with the exception of some basket case countries, there is effectively a cyclicality to how these pairs perform and the Kronor is way out of favor if you're in Sweden, but if you're looking at the country, it looks historically to be a very favorable time to invest in the currency.

Michael: 11:27

By extension, Because it works inversely, doesn't it? It does An international Swedish company. A weak Kronor actually benefits it, and you see a lot of companies struggling with FX issues in the US that have multinational entities because of the strong dollar. So when they're transferring across or when they're selling in other nations, they actually are losing out on the transfer rate. Basically.

Emmet: 11:55

It's such a simple piece of maths and it always catches me. I always have to go one now. So if I walk into a bank with a bag of money and buy this currency in five years, while I walk out with a bigger bag of money or a small bag, like when you look at a currency, pair.

Michael: 12:11

it takes a lot of time, it's not intuitive. That's why I think it's like obviously, you think no, it's not. If you hear strong dollar, that should benefit a US company, but it's the inverse.

Emmet: 12:22

So that's my rough and ready, opener description of what's going on up there in Tinseltown.

Michael: 12:28

Tinseltown, lapland is closer to what I'd say yeah, but no, it is.

Emmet: 12:34

It's like, michael, let me point the mic back at you. When we were in the depths of developing Nexus, you made an observation about Swedish serial acquirers, so talk to me a bit about that.

Michael: 12:47

Yeah, it's a relatively new. I wouldn't call it an industry because they can be within multiple industries and much of them actually are, but I suppose it was a relatively new cohort of stocks to me. But I was just shocked at how successful they've been and the track record there and how many serious big winners come from this little kind of type of stock. We'll say so like as investors, and Wall Street especially. We know that we don't particularly like acquisitions. Acquisitions are seen as maybe kind of a last resort or if a company isn't able to sustain growth from its core business, it has to go out. And Peter Lynch a famous, he called it diversification and that's these big blockbuster acquisitions or mergers. Some would say Teladoc and Lavango is a good example of kind of destroying investor value through this acquisition instead of just focusing on the core business. But there are certain companies that do acquisitions really well. Berkshire Hathaway is an obvious one. I think it's becoming less relevant to this type of business now because I think 50% of the company is Apple and it doesn't buy as many companies outright anymore. It'll buy big stakes. But Constellation Software is a really good example. That's been a huge winner in the markets for the last 20, 30 years. It's one of the best performers and that goes around. It's a Canadian company and it basically buys smaller software companies and they're just bolt on acquisitions. So I think Constellation Software's market cap is up in the 50 billion plus range but it'll go on by a Dutch accounting software company for 50 million and just add it on and it just looks for specific characteristics that add to its own portfolio and for whatever reason, I think a lot of the reasons you just said about the Swedish investing culture. There's loads of these companies up in Sweden and their results are unreal. It's kind of mad to see so like there'd be very successful companies People might have seen Lyfko as one, indutrade as another, adtech is another that have just performed so well year on year on year. And it's because this formula is there. There's already a prescribed path of success, if that makes sense. Yeah, so a company will have a mission to buy, we'll say, five companies a year or 10 million worth of cash flow this year, to achieve a certain growth figure or a certain cash flow figure or a certain operating margin or whatever it is. But it's very predictable road to success and I think that's what investors love so much, and then it only becomes an execution issue, because we've seen the path work already, so we kind of already know it does. So does the management team have the abilities to pull it off? And a lot of them do so. Yeah, it's a really interesting part of the market that I'm still exploring and still finding out more and more about, and obviously they aren't all successes, but it's very exciting. And if you could go and look and identify a company say, we talked about Lyft Go which has, I'd say, maybe 260 subsidiaries and then say, all right, well, what does Lyft Go done? Well, and then look for a company in the early stages that's trying to do something similar, and the one we identified is Technia that has 26 companies Do you know what I mean? And it's got a 20th of the market cap. So if you can just follow the right path and execute on it, we already know that there's that success waiting for it. If it does so, yeah, it's an interesting one. I would describe it as like businesses made by investors for investors, and that leads into Sweden's investing culture a lot too. So, yeah, there's huge opportunities there and I think it's a really interesting part of the market and one people wouldn't know about either, which also is why there could be there could be some gains there. So, yeah, that's, that's. That's Swedish serial choirs. I've been which right.

Emmet: 17:09

I'm the co-orchestrated term. Baby Berkshire has been kicked around for as long as I'm a stock investor and initially I heard it, I suppose in relation to Markel Tom Gaynor's operation, which is next door to Berkshire almost, and then I heard it being applied to other businesses and we encountered what I would say at least six businesses that looked more like a baby Berkshire in Sweden. Then I have found our observed in America over the last few years, like Basta, and Oma has one that could be regarded as a baby Berkshire. I think Warren Buffett's grand nephew runs the operation and it's a fine business. But if you're going to say what truly looks like a baby Berkshire, what type of company is looking to buy a C's candy, as Berkshire did in the 60s and turned it into a money making machine? What other businesses are out there doing that? You're right, we encountered those names and and definitely our new service, nexus, highlighted a couple of them for sure I can't remember which ones up top my head, but for sure. Okay, look, mike, let's move away from Sweden and it's we're post Black Friday now. So I think we're okay to mention Christmas and specifically the Santa Rally, and it's something we talk about every year. But would you mind reminding me and our listeners what is the Santa Rally?

Michael: 18:29

Yeah, santa Claus, santa Rally or the Santa Claus Rally. It's one of these strange investing quirks that has a nice ring to it, and that's probably why it's mentioned so much. More than anything else, who doesn't want Santa?

Emmet: 18:45

and he doesn't want the rally.

Michael: 18:46

The Santa Claus Rally, just by happiness. Exactly just hearing that here in the word Santa Claus and stocks go up in the same sentence.

Emmet: 18:56

But also shows boring gray hair dudes like me actually get a cake a Christmas cake out of the stocks going up, like I mean, how banal is that? But anyway, let's go.

Michael: 19:07

So whether there's much scientific basis behind it or not. It's basically that the last five trading days of the year and the first two in January, for whatever reason, tend to be a great period for the market. So long term, investors were not really paying much attention to this or any attention really, but it is. It's just one of these interesting quirks, of which there are many in the stock market, but what's interesting, I think, is that now we don't like to talk about trading or whatever else behind this, but if you're a short term trader, this could be its own self-fulfilling prophecy in a way. You know, if you're putting on short term bets and everyone can almost rely on the Santa Claus Rally and do it in tandem, that in itself will lift the market. Do you know what I mean? So like it could be that clever strategy and where people are maybe unintentionally working together in some form of market manipulation. Yeah, but it was coined back in 1972 by this fellow, yale Hirsch, so he founded the stock traders almanac and, oh, yes, the stock traders almanac is important because it is definitely a trading phenomenon rather than an investing will say phenomena. But basically, the stock traders almanac, which is still going. It compiled data From 1950 up to 2020 and it showed that out of those 70 years, 57 times the S&P 500 was up. So 80 more than 80 percent, 81 percent of the time Wow and on average, the S&P grew by 1.3 percent.

Emmet: 20:50

So even if we, that's interesting, isn't it?

Michael: 20:53

If you go back to last year, over that course of those seven days the S&P was up 0.8 percent. So, it is a thing. Now. What causes it is up for debate, and there are a lot of great reasons. I was looking it up and One of the best ones I thought was when I haven't written here. Also, institutional investors are off on holidays, so it's just retail investors trading away.

Emmet: 21:19

And that's the truth as well. But it's like, as you say, self-fulfilling prophecies. They've always been there. If you take even the world, the word prophecy like if you believe in particular supernatural deity or God, you can assume that all the other ones are false gods. But they convinced enough people to rise the boat and create a whole new religion. And that's just the way it is. If everybody believes in something, it happens. Do you know?

Michael: 21:43

Yeah, well, that's very, very on tune to the name of this is Santa Claus rally, you know, and I mean if enough people believe, but yeah, I know they're another. Another great reason is just that people are more optimistic around Christmas time.

Emmet: 21:58

So of course, yeah, no one's feeling good.

Michael: 22:01

No one wants to be a Grinch and and be pessimistic and sell shares or short stocks or anything, so they're just buying instead.

Emmet: 22:08

Yeah, yeah, you don't want to be the Grinch. Well, mike, I hit up the, I hit up the internet for a list of investing idioms and I asked chat GPT to rank them Fragracy, because an in-house study would take months and years and that don't make no sense for a quick segment of a weekly podcast. Are you ready for me to hit you with those?

Michael: 22:29

Yeah, I'm waiting that God.

Emmet: 22:32

Right, I'm gonna open the door for my kid. Mike, hit the pause button there. Oh, oh, that's. I mean, this is unbelievable. Look at your hot sap on. Yeah, okay, sorry about that, mike so All right.

Michael: 22:54

She said in your podcast voice I was waiting for some that.

Emmet: 22:58

Well, I start that last sentence again. Yeah, go for Mike. I hit up the internet for a list of investing idioms and I asked chat GPT to rank them. Fracracy, because an in-house study would take. Months, are years and I don't. That just don't make no sense for a segment in a weekly podcast. So you're ready for me to tell you what the wisdom of AI has told us about all these different investing cliches?

Michael: 23:23

I go for it. I hope Santa Claus rally is at the top now, 80 81% of the time. It works well.

Emmet: 23:27

I tell you it ranks number three, but I mean I am now doubting it because you have real data, whereas I sometimes, when the as chat GPT are barred, I think it just sometimes just throws out a rough and ready guess. So top of the list is the January effect, which is an observed phenomenon where financial markets in the US, again in the month of January, as its name suggests. Now it's historically accurate, according to the AI overlord, especially in smaller stocks. But its impact has diminished in recent years as more investors Anticipated, so it took top spot. It does not give me real data, like you just did with the Santa rally. So I mean right now, I'd still, if you're, if you're going to back one of the idioms, you'd go at the Santa rally. The second one in In second place is Actually it's joint second place that selling may and go away on the Halloween indicator. Now I really doubt that this is correct. But let me just tell you what what the AI God said they both enjoy second place at the first selling may and go away says investors should sell their stocks in May and buy back After the summer, which is historically a weaker period for the stock market. And the Halloween indicator is just another take on selling may and go away. The two and it says are historically accurate, particularly in certain markets and time periods. It's not just empty, just really nothing. Nothing with that in third place.

Michael: 25:02

You're not paying any money for this.

Emmet: 25:03

You know, that's what you get a go to pay for right folks. But I'm the. But you're right, as you explained, the Santa Claus rally Last, the last couple weeks, december first, two training days of January, I've observed it over the years. I mean it's not that an anecdote doesn't make data, but it seems that these other idioms, they carry no water. Other ones are the year-end rally and the first half rally in the summer, daldrum's, there's the September effect and then there's ones that are out in the periphery of idioms and Cliche's, like window dressing, which is where a fund manager Generally starts to move stocks around to make it look good Before presenting to clients and shareholders and the bikes. But I, yeah, the Santa Claus rally is the only one that I would attach some credence to, despite the rankings that we've just been handed by Open AI.

Michael: 25:56

Most of them are new to me. Now I've heard the January effect and it kind of is a foreboding for the rest of the year, good or bad as well. They put a lot of importance on that. Yeah, you know there was a thing. I think which team won the Super Bowl, whether it come from the AFC or the NFC, depended on a good year for the stock market. It used to be a website.

Emmet: 26:22

It is. Do you ever remember? Did you ever see a website called Spurious Correlations? Yes, yes, and it's oh my God.

Michael: 26:29

The correlation between the amount of people who drowned in their own pools and Nick's Cage movies that came out in a year was like one to one or something.

Emmet: 26:40

I shouldn't have. That is a tragic element to it, but we got to keep Nick Cage off the screens.

Michael: 26:45

And I couldn't have told you about their training. No, that's more tragic. Nick was Cage movies. They're drownings.

Emmet: 26:51

Yeah, I know there was some absolutely wacky ones, but I think maybe we should start a small spin off website that shows various correlations between stock price and I don't know the number of donuts you had in January or something you know. There's definitely plenty there for us to mine.

Michael: 27:07

The mind's starting a website. We start a fund. Start investing in these trends.

Emmet: 27:12

Well, in the last two years it's like, as someone said to me once, if you had to pick three ducks, they'd all sink. You know, it's just been the craziest three years. Yeah, actually I have some big data on the specifics of that. But that's drifting into a whole new point, which is a small cap rally which happens, believe we're very, very close to, but that's, as they say, another story.

Michael: 27:35

Yeah, all right. Well, before we get too into it and we start betting money on the chiefs when in the Super Bowl, so the stock market's going to go up, I think we we haven't done an elevator pitch in a while, I'm so I think it's about time we did a couple. Yeah, one each. What do you think? Ok, let's do it.

Emmet: 27:51

Let's do it, I'm ready.

Michael: 27:52

All right.

Emmet: 27:52

You fire away there. I'm going to go with a stock that's not easy to buy and it's one that's on its way to charging and fearless quite soon. And it's Air Arabia, which is its hub, is up the road from from Dubai I can't remember the name of the town but it's 15 kilometres up the road from Dubai. But this is no ordinary airline and it's a stock that's only available on the main UAE stock exchange, so won't be handy to buy. But certainly, as I look at aviation as an industry, or rather carriers, there's very few that have that X factor, that grow from small carrier into Reiner or Southwest. But Air Arabia is just definitely no ordinary airline. It's been ranked with the highest operating margin in the world by airline weekly and has the top spot in Air Finance's Journal of Top 100 Airlines worldwide. It's been consistently recognized for its operational excellence. It's won tons of awards the world's best low cost airline and so many awards in its trophies in its cabinet. But what I suppose makes it particularly interesting to me is that, personally, it's serving a city that's growing like crazy. I mean, dubai is in its own right an argument for saying, well, that's a destination that's just going to go bigger, better, stronger. In the first quarter of 2023, dubai had just five million international overnight visitors, which was up about 20% on the year before. And when I think about the macro environment, which is the number of people who want to fly into Dubai and into surrounding nations and even further field, air Arabia is the reiner of that, and airlines are typically risky investments, but some just booked a trend. And, just to be specific, in the trailing 12 months, air Arabia's return on equity, which we're paying more and more heat to in recent years has exceeded 23.6%, and that's not good, that's absolutely elite. I mean, for any business to have return on equity up around 24% in its own right is elite, and it isn't just a recent phenomenon. That's trending up and up and up. And just for comparison sake, southwest Airlines, which has a pretty good return on equity it's currently at 10%, 10.2%, and that's actually risen over the last few years. So my elevator pitch is one that I really would buy shares in if I had a broker that could reach its arm into the local exchange, uae and its Air Arabia, and I think it's going to be a brand that grows in most people's consciousness over the decade.

Michael: 30:51

That's really interesting, and we have a decent amount of listeners in Dubai as well, so hopefully they have their areas peeled for that one.

Emmet: 31:00

Yeah for sure, and I'd love to hear their feedback. When the podcast goes live, I might solicit it on Twitter along with photos of Sweden. It's like I'm basically doing a tour of the world and wrap around.

Michael: 31:12

I love the parallels you made there with Ryanair because if you look back, ryanair is probably the most successful airline as an investment over the last 20 or 30 years. But if you think of Ryanair growing in tandem with the city of Dublin and the amount of foreign direct investment that came to Dublin and the amount of tech companies that blew up and Dublin got bigger and bigger as a city and Ireland grew as a developed nation we went through all the Celtic Tiger stuff and all the rest but it's really interesting the parallels there and I never really thought about it how Ryanair's growth kind of matched the country of Ireland's growth and especially Dublin and Dublin City and Dublin Airport.

Emmet: 31:52

That's a very astute observation, mike, because many years ago, when I was doing my master's in strategy, one of the lecturers was Michael O'Leary, and it was a very small class, there was only 12 of us and he said that Ryanair was, ryanair was. There were two industries that were wholly responsible for the Celtic Tiger's growth, and he said the first was the birth of mobile and mobile telephony, that suddenly this entire workforce on an island of Ireland could walk and talk and text and everything else that followed. And the second was that they could get off the island at affordable rates. So between the mobility afforded by telephony services and then the international mobility afforded by low-cost carriers, it created this fusion which utterly revolutionized Ireland. And then you throw in the other macroeconomic things like we're an English-speaking nation where most people go to university, and so on. It was an explosive formula. And you're right. I think there are strong parallels between that and a country, a rather city, that didn't exist in the 70s, like Dubai, wasn't there, with a pile of sand, possibly till the mid-80s, early 90s. I've seen photos I can't recall, but it literally was just a small town with respect, in the middle of nowhere, and now it's one of the most impressive mega cities on the planet that's going to get bigger and bigger and better.

Michael: 33:24

Yeah, that's a good shout. All right, I like that one. Okay, what do I have for you? So I'm going to butcher this pronunciation, which is awful because I have a French girlfriend, but it's Dassault Systems. I don't know. Yeah, so French software giant basically specializes in computer assisted design, or CAD, which a lot of people will know from Autodesk and Autocad. Well, this is essentially Europe's answer to Autodesk, where Autodesk, which we've seen be one of the best performers of the last 20 years in terms of stock market performance, autodesk's focus was more on the architecture, engineering, construction industries. Tassault Systems has more of a focus on product design and manufacturing. So both companies do compete with each other, but the lion's share of their revenue are in the other company's kind of smaller segment. Does that make sense?

Emmet: 34:26

Yeah, well, I always wondered what they did. I mean, I've seen Tassault Systems jump up on various screeners we have around my Wall Street, and French companies are very often a little opaque. They're harder to kind of get a clear picture of what you're doing and I don't know if it's a cultural thing or it's a reporting thing, but very interested to hear. It's like the Autodesk of Europe.

Michael: 34:47

Yeah, and it has all the same characteristics you like in investment. So the most is still there. It's taught in colleges, just like Autodesk. So if you are a product designer coming out of college, you already have two or three years of Tassault's software training basically. So if a company wants to hire you, you're the top talents they need to use that system. And then if colleges want to send people to these top companies, they want to use that system. So the network effects are there, the switching costs are there and not switching costs in. Like you know, our systems might be down for a week because we changed products. We're going to be down for a week because we changed broadband providers. Switching costs, as in, our staff are going to leave because they're all trained up on Tassault system software and we're moving to someone else where they have no expertise at all. So, really entrenched into the industry of product design and manufacturing. And yeah, and with these kind of companies, anything in design, your mind immediately goes to AI and this goes for Autodesk as well, which I've been reading more and more about recently is, if AI goes the way I think a lot of people assume it will, it'll become a technology that is somewhat shared, we'll say It'll be available to the people with the most resources, and these companies have been leading the charge. They're not catching up. So the assumption is to go, oh well, this will disrupt your business. But no, the companies are actually the leaders in this field for AI. So, yeah, the salt system is there at Tassault systems is there? Great business, great moat. So, yeah, if you're investing nice, one of the one of the top French stocks, software stocks, european software stocks really interesting business worth worth doing a deep dive in if you're interested, for sure.

Emmet: 36:39

So I'd love to know and I don't want to put you on the spot, but I wonder if there's any foothold in America, or does the Atlantic Ocean Act as a divide? If you're over there, you're going to use Autodesk, and if you're over here, use Tassault.

Michael: 36:52

No, no, no. So it's the difference between the industry. So architecture, engineering, construction is basically the standard is Autodesk, whereas product design and manufacturing it'll be a lot closer to AI.

Emmet: 37:07

Sorry, I got you.

Michael: 37:09

But isn't it a main, both strategic? Sorry, sorry, no, I was in it. Both companies do have those segments, but they're much smaller in comparison to each other.

Emmet: 37:16

Right, but the strategic advantage of being taught a commercial package in college in a strategic a strategic advantage for the business is just unbelievable. I think it's vendor.

Michael: 37:27

It's like vendor locking.

Emmet: 37:29

Yeah, it is Back in the day. Dolby makers of great speakers and sound systems founded by Ray Dolby was a very interesting study because they went in and they gave all of their sound systems to cinemas free of charge, but you could only play a movie that had Dolby formatted sound. So all these state of the art cinemas are rolled out with Dolby surround sound. They went to the studios and said oh, by the way, if you want to be able to play your movies in this chain of cinemas, you better use our I don't know what microphones, software, hardware I don't know exactly what it was, but this was a strategic advantage called vendor locking, and that sounds very like what the salt has. You know, like all these kids are young engineers or young designers, rather coming out of college, and they're ready to go. But you better be using that salt or we're not going into your business. So that's how it feels, very like that strategic advantage, and it's very, very interesting. Has it done well in this business?

Michael: 38:29

Yes, absolutely, and it's been around for years and years and years yeah. There's similarities there with Adobe as well. We talk about Photoshop and people using it in college and coming out, and the similarities then in margins as well. So yeah, three really strong software businesses that have all used this similar tactic of, say, infiltrating colleges.

Emmet: 38:51

Brilliant, brilliant, that's what we have to do. We've to hand out my Wall Street to students in college. I don't know what that actually means at the moment, but I think that should be our next step.

Michael: 39:02

We've got to train them up somehow.

Emmet: 39:04

We do.

Michael: 39:05

Yeah, all right, that's it for today's show. This show was brought to you by Vodafone Business, so now, if you're like us here in my Wall Street, you know that running your business is hard. There are countless things to think about, and many often simply get ignored or completely forgotten about. That's where Vodafone Business can help. They've crafted a suite of tools and supports to boost your business operations, and the best part is it's free for everyone. From cybersecurity to harnessing the power of AI, building a website and improving how your teams work remotely, vodafone Business will help you address the often overlooked but crucial elements for your business's success. To get started today, check out their one-to-one V-HUB digital support and advice service. You'll find everything you need right there. Find the link in our show notes or simply Google Vodafone V-HUB for more details. Emmett, thank you very much for joining me and everyone listening. Thank you very much for tuning in. Remember, if you have any questions you'd like us to answer or elevator pitches you'd like us to tackle, make sure to get in touch. You can find us on Twitter, at mywallstreetq, on tiktokmywallstreetcom. If you're enjoying the show, leave a review and we will talk to you next week.





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