[00:03:00] Clay Finck: Especially those that are interested in learning more about how we analyze a company or just interested in some of the companies that we’re looking at for our own portfolios. So on today’s episode, we’re going to be covering a company called Old Dominion Freight Line. A lot of people probably haven’t heard of this company or haven’t really dug into it, but to my surprise, this happens to be one of the best performing stocks over the past 20 years.

[00:03:24] Clay Finck: I recently came across this list of the stock market’s best performers over the past two decades. And to my surprise, Old Dominion came in at number seven. So this seemingly boring, best in class trucking company that we’re going to be getting into, it outperformed well known companies like Amazon, Costco, and Microsoft.

[00:03:43] Clay Finck: But that is the backdrop. I wanted to dive in to the company’s history here. To learn more about the history, I picked up this book titled Helping the World Keep Promises by Jeffrey Rodengen. And it really gave an overview of the company’s long history and how they got to where they are today. The company was founded in 1934 by Earl Congdon, Sr. and his wife, Lillian Congdon. And in the beginning, they just had a single truck and they were just a family trying to get by. They did a daily route from Richmond to Norfolk, Virginia. And being founded during the Great Depression meant that they had very, very humble beginnings. And they tell a story in the book about how a couple of years into the business, they wanted to buy a water cooler for 36 so they can enjoy cold drinks on these hot summer days.

[00:04:31] Clay Finck: But they didn’t even have 36. They had to go out and finance this sort of purchase and pay it off over the year. Which just sort of points to some of the humble beginnings that they had starting in the Great Depression. So, as any great business, they expanded the company, they started hiring their family members, and throughout the book, you see many of these same patterns just repeated over and over again.

[00:04:51] Clay Finck: So, they would have trouble with unions from time to time, they had to weather through tough economic periods, like any great business did over its long history, the trucking industry is quite tied to the overall economy. And over time, the company just put more and more of an emphasis on providing a high quality service in addition to expanding their reach, oftentimes doing so through acquisitions.

[00:05:12] Clay Finck: But that hasn’t been much of their strategy nowadays. One of the key early setbacks I think is worth mentioning was that Earl Congdon Sr, the co founder, he unexpectedly passed away. At age 43 and his wife, Lillian really played a major role in keeping the company alive. And then Earl Sr.’s son, Earl Jr., he stepped up to be a general manager at age 19.

[00:05:34] Clay Finck: And one of the important takeaways for me personally from this book is that the trucking industry is just a brutal, brutal industry to be in. It’s highly commoditized. Many companies just go bankrupt and don’t make it over the long run. And these unions really put significant pressure on many of the players.

[00:05:51] Clay Finck: So there was a statistic in the book that really just sort of blew my mind. So Old Dominion, they’re an LTL trucking company, and I’ll be getting into what that really means, but of the top 60, only eight of them remained 23 years later in 2003, the rest either went bankrupt or were sold off. So overall, this industry is just absolutely brutal for the companies in the space.

[00:06:12] Clay Finck: I think that given how much pain Old Dominion has gone through over the years, it’s led to them just being humble, not resting on their laurels, and ensuring that they just continually offer the best service possible, and to ensure that they’re running a really lean operation. Another brutal story I feel like I have to mention was The union strikes from 1959.

[00:06:32] Clay Finck: It was just amazing to read. The union workers were striking and they were wanting to get a fair pay. So they weren’t showing up to work at Old Dominion and the management team was actually able to get people to replace these workers that weren’t showing up. The fact that Old Dominion was able to keep their operations going without the union workers just made these workers just absolutely furious because they weren’t getting what they wanted.

[00:06:57] Clay Finck: So they started just opening fire, shooting at the people that are working and throwing dynamite. They blew up one of the terminals, and it’s just amazing to read about that because it’s just not. Something that’s even heard of today in the United States. So the strike ended up lasting just over a year and almost brought the company down, but they ended up surviving.

[00:07:16] Clay Finck: And over the longterm, it’s just been an incredible growth story. I think another key part to highlight from the book is just the family culture within Old Dominion, Earl Jr. is the son of the founder. He joined the company in 1946 at age 16. He served as CEO from 1962 to 2007. They may still sits on the board today.

[00:07:39] Clay Finck: And then Earl Jr’s son, David Congdon, he was CEO from 2008 to 2015, and he’s currently the executive chairman of the board. And David, like his dad, Earl Jr., he joined Old Dominion very early in life to learn just every aspect of the business. He started at the company at age 14, and after college, he was a truck driver for the company, which given their financial means at the time, like he certainly didn’t need to be a truck driver, but it just sort of points to the culture, I think, which is quite interesting.

[00:08:07] Clay Finck: So the concept of these family roots and family values are deeply rooted in Old Dominion’s culture. I also mentioned they put a big focus on providing a high quality service. I think this has allowed them to charge higher prices than their competitors in a highly commoditized industry. And since Old Dominion really wants to avoid being a unionized company, they had to essentially just provide a really good place to work because they didn’t have that support of unions.

[00:08:33] Clay Finck: So while the union workers would fight for these small raises, oftentimes you’d see Old Dominion, just focus on the business, focus on solid execution. And then typically the Old Dominion workers would end up getting better raises because of these superior financial results that Old Dominion oftentimes got.

[00:08:48] Clay Finck: And nowadays with corporate America, I think a lot of companies simply look at what decisions are going to maximize the bottom line for today. But these family owned businesses, I think they just look to do what’s right. And even if it might negatively impact to the bottom line in the near term, they’re optimizing for the long term strength and health of the business.

[00:09:07] Clay Finck: And this idea is actually expanded on in Chris Mayer’s book, 100 Baggers. And since I mentioned that book, Old Dominion has been a 300 bagger since the IPO in 1991. And also to give some examples of Old Dominion thinking long term and not giving into these shorter term pressures that can be tempting at times.

[00:09:26] Clay Finck: We look at the great financial crisis. Some of the other trucking companies, they were lowering prices in light of weak demand and Old Dominion. They just kept their prices where they were at, keeping their higher prices. This was really so they can assure that wages and benefits weren’t cut. And this really helped keep employee morale up.

[00:09:43] Clay Finck: I think it would have been really easy to follow just what other companies did and just lower prices, let go of people and cut back on wages and benefits. But when a crisis hits, I think time and time again, Old Dominion has showed that they’re willing to make the difficult and unconventional decision just like many other family operated companies is what you see with those two.

[00:10:03] Clay Finck: An employee also shared a few stories in the book about the family culture I thought was quite interesting. She talked about how one employee had been with the company for 15 years, and he was having health issues. And Earl Jr. had told that gentleman’s manager that as long as he wanted to work with Old Dominion, they were just going to let him work there.

[00:10:22] Clay Finck: And Earl Jr. knew that this gentleman wasn’t particularly financially well off, but he had invested much of his life with Old Dominion. So Earl Jr. wanted to really ensure that he was well taken care of. And then there’s one other story I’ll point to here of how one of the Old Dominion managers, his father had died in 1991.

[00:10:40] Clay Finck: And then David Congdon, he was actually the president at the time. He was a pallbearer at the man’s funeral. So of course, some of these stories are from many, many years ago, but I think it sort of points to the company’s history. And sometimes these small acts that you can catch really stand out and give us a glimpse into the DNA of the company and the culture.

[00:10:59] Kyle Grieve: That’s right, Clay. I think like you pointed out, they really have a family feel to the entire business. And I think In the book that you mentioned and that I also read, they did a really good job of displaying that and showing why they highlight some of their employees who have been with the business for such a long period of time and how they’ve maintained that family culture throughout, you know, multiple decades now.

[00:11:19] Kyle Grieve: So while reading the book, I had a couple more notes. That I think are really important that helped me learn just a bit, a bit more about the history of the Kong and family. So I feel that throughout the book, they do a really good job of showing that the Kong has really, really cared about the business.

[00:11:32] Kyle Grieve: They had multiple ups and downs, obviously, like Clay mentioned, Earl Congdon Sr. passed away. And that was, you know, a big loss to the business, but Lillian stayed on and brought her two sons who were literally just teenagers to help run the business. And they just kept it going despite the fact that she actually had multiple offers to sell.

[00:11:48] Kyle Grieve: Lillian, she’s left the business and had to come back and multiple times, for instance, when Earl Sr. was still around, she wasn’t super involved in the business. But then when he passed away, she had to come back and you just kind of get the feeling that legacy of this business really matters for the Congdon’s and that Old Dominion is part of that legacy.

[00:12:04] Kyle Grieve: I mean, Earl Jr. he’s kind of retired now, but he has an advisory role with the business. So he probably still poking around a little bit and you know, he’s 90 now and like clay mentioned, he started at 16. So he’s been there for a long, long, long period of time. So I think there’s really something to be said about the strength of having owner operators at the head of a business.

[00:12:22] Kyle Grieve: So I was relistening to a part of Clay’s interview with Chris Mayer that he had about a hundred bankers, and Chris had some really good points on the interview about why family owned businesses with these really high levels of insider ownership are just super powerful. So Chris listed a few points that I found really fascinating, and these are patterns that you’ll see along the lines of many family owned businesses that also have these kind of long term shareholders that are owning the business and running it.

[00:12:47] Kyle Grieve: They’re more likely to think long term. They’re looking more to build for the future, not the present. So I think Clay showed a really good example of that during the financial crisis where yes, they could have cut their prices. And even when they cut their prices, they actually knew that they were going to lose some customers because people were going to just go with a cheaper opportunity.

[00:13:02] Kyle Grieve: But they knew that over the long period, it would be better for not only the business, but also the morale of their employees, which clearly has done very well for them. So another thing is that these family owned businesses are less likely to think short term, same kind of thing. They don’t necessarily care about the next quarter, right?

[00:13:18] Kyle Grieve: They know that they’re going to own these shares for maybe they’ve already owned it. It’s been part of the family for decades. They know that hopefully they’re going to pass these shares onto their kids and let it keep going. So they’re really, really not worried about what happened in the short term.

[00:13:29] Kyle Grieve: And now that they’ve been doing this for decades, they know that it’s cyclical and you’re going to have downturns. Another thing is that most of these family owned businesses kind of avoid giving guidance, and that can be a big plus because it lowers the chance that you’re going to disappoint shareholders.

[00:13:43] Kyle Grieve: I think it also just kind of speaks to the long term nature of how they look at the business. As an investor, I want to hopefully align myself with people who are running the business who also are shareholders. And so a lot of these insiders have large blocks of shares cause they found out the business.

[00:13:57] Kyle Grieve: Oftentimes they founded it as a private business and you know, they might own 50 percent 60 percent 70 percent of all the shares, right? And so as the business goes longer and longer and enters public markets, obviously they get diluted, but they still end up having quite a few shares and it’s really obviously a bonus when they don’t really sell any of their shares too.

[00:14:13] Kyle Grieve: That’s a really nice thing to see. A few more things here. So these kind of long term family businesses, they tend to be more conservative with their use of leverage. So as Clay points out with quality businesses, you know, these are types of businesses that you can hopefully hold for a long period of time and having the ability to not be scared of going out of business due to having excess leverage is a huge bonus.

[00:14:32] Kyle Grieve: That’s an interesting one because you’d think that whether you’re family owned or not family owned, you wouldn’t necessarily want to use too much leverage. But I think that because of The family’s really being embedded in the business and wanting it to succeed and also caring a lot about their employees.

[00:14:46] Kyle Grieve: Maybe that’s why they’re less likely to use leverage.

[00:14:50] Clay Finck: So I had a point to add there. It’s interesting how when you have managers that think on just different time horizons So you might have company a with a hired hand type ceo who is really just sort of ensuring He doesn’t lose his job and ensuring that the company gets by over the next say one, two, three years or whatnot, or even just hit their targets over the next quarter.

[00:15:11] Clay Finck: Just that mindset shift to like a legacy, the legacy piece that I think you mentioned, we’re like, what’s my son and my grandson going to think about my decisions when they look back 10, 20, 30 years from now, I think that sort of mindset shift can be really powerful and it can really lead to just vastly different.

[00:15:29] Clay Finck: Sort of businesses and business models. I know we were going to also tie in Copart and kind of compare them to Old Dominion, but you see a lot of similarities, how you have this industry, whether it’s trucking or they use car sales that Coparts. And I think you can look at companies within these industries and how just the differences between them is just like enormously different.

[00:15:47] Clay Finck: And when you look at the balance sheet, the return on capital and whatnot, and it’s just really just, this is why the family operator aspect is so important in my opinion.

[00:15:56] Kyle Grieve: Absolutely, Clay. And we’ll be going over management a lot more in depth later on this episode. But needless to say, even though they have managers who are no longer Congdon’s, these are managers who’ve been with the business for a really long period of time.

[00:16:07] Kyle Grieve: So I think they’re trying to kind of continue on with that family legacy point of view. So just kind of getting back to the final point I want to make on that Chris Mayer point was just that a lot of these family owned businesses are a lot more resilient to economic shocks and are more likely to survive due to their high levels of conservatism.

[00:16:22] Kyle Grieve: So you already may give that really good example of how they survive through the crisis. And even though they did take hits during that time, they ended up all the better for it through researching. I also came across this really interesting McKinsey report that talks about some of the secrets of why a family owned businesses, which they called FOBs outperform.

[00:16:40] Kyle Grieve: So they actually found that family owned businesses deliver higher total shareholder returns than non family owned businesses. Now Chris has said that you can find conflicting evidence to either side. So, I mean, it kind of depends on where you’re starting your numbers at and whatnot, and he actually just discussed this the other day with us, with the community, but you know, I still think there’s something to be said that I think that family owned businesses just, they’re really strong and there’s some evidence there that shows that they can outperform non family owned businesses.

[00:17:07] Kyle Grieve: So the reason for this outperformance that the McKinsey report gave was just that basically these companies have better underlying operational performance. They basically outlined four mindsets. So two of them I kind of already discussed, which was the long term view and the conservative use of debt.

[00:17:23] Kyle Grieve: But then they had two others that I found really interesting that I haven’t really touched on yet. So the first one there was just It’s a focus on purpose that’s beyond profit. And then the second one was an improved process that allows for efficient decision making. So I’d like to go over those both in a little more detail here.

[00:17:37] Kyle Grieve: So as the book is called and the company motto is it’s Helping The World Keep Promises. So I think that this purpose alone, it is beyond just making profits for the business. So I think the business knows that if they keep this model and fulfill the model to their customers, profits will just take care of themselves and they don’t necessarily have to just worry about the profit part of the business.

[00:17:58] Kyle Grieve: And then a couple of other aspects, I think that the business shows that they care more about a purpose is just, you know, they have this profit sharing program with employees, that that helps keep the employees loyal to the business and working well, but they really want their employees to stick around.

[00:18:12] Kyle Grieve: And there’s multiple examples of employees that have been there for multiple decades. So that’s a really cool thing to see. If you go back to when Earl Sr. passed away and Lillian Congdon took over, as I kind of discussed earlier, she actually fielded multiple, not just one, but multiple offers for the business.

[00:18:27] Kyle Grieve: Cause you know, I guess the vultures came pecking thinking that they could maybe acquire ODFL at a discount or whatever, because she didn’t want to have anything to do with the business. Even though maybe she could have used that money, she didn’t sell the business. She wanted to hold onto it because it was her and her husband who created that business.

[00:18:43] Kyle Grieve: And I think she just want to keep building it because they’d been doing such a good time for such a long period of time. So I think maybe it’s changed now compared to then, but it feels like they have this history where money’s not the only motivation for building up the company. And then just looking at some of the kind of improved processes that they’ve made.

[00:18:58] Kyle Grieve: My best example here was just with the current chairman and former CEO, David Congdon, who just has a really good history of creating a lot of value for Old Dominion over his entire career. So one of his first major tasks that he had when he was with the company, as he started moving up, the ranks was running the Old Dominion furniture segment.

[00:19:15] Kyle Grieve: This was a segment that kind of, it wasn’t a very high quality part of their business. I mean, it wasn’t profitable. They were constantly losing money. I mean, yes, they had sales, but part of the reason he wanted to join there was to see if he could turn it profitable. So when he first started, it was making about 12 million per year in revenue, but it was losing millions of dollars in profits.

[00:19:34] Kyle Grieve: So it was kind of a drag on the overall company. But David, through just improving the processes of that segment of the business was able to turn it profitable. So that’s kind of his first big win with the business. And then as he took over the CEO, He did several things to help streamline the business.

[00:19:48] Kyle Grieve: And I think help continue getting that operations ratio lower and lower, which Clay is going to go over in a little more detail here for you. So a couple of these initiatives he did. So he invested in the dockyard management system, which is just a simple way of going from paper to digital records, which it doesn’t seem like a big deal now, but that was pretty groundbreaking technology back in the day.

[00:20:06] Kyle Grieve: He also utilized technology to help improve the routing of freight and service centers. And then, you know, they did things like researching losing and profitable accounts to help improve the processes, maybe get rid of the losing ones or find out why the ones that were losing were losing and improve upon those.

[00:20:21] Kyle Grieve: And maybe, you know, double down on your winning account. So, you know, just kind of simple things. But these are really interesting processes that I think he did to help make the business better. And the last one here I just want to mention was he helped standardize the terminal routines and processes to make it easier for employees to work at different locations.

[00:20:36] Kyle Grieve: So that one was really important because part of Old Dominion, the interesting thing about it is that, you know, they have this network of service centers, and so a lot of them are pretty close by. But if you have 1 employee that maybe you want to move from 1 service center to another service center, it could be really hard if the service centers all have different processes.

[00:20:51] Kyle Grieve: And that was kind of a problem that David was running into, so they weren’t able to really move 1 employee from 1 service center to another. So they standardized the processes so that 1 person could theoretically move from probably 1 side of the country to another side of the country and still understand the processes of the business.

[00:21:06] Clay Finck: Yeah, you’re kind of pointing to the logistical nightmare that companies like Old Dominion have to deal with, and you mentioned also the technology that they’ve had to invest in over the years, that’s still something they are focused on today. So here I wanted to transition to give an overview of the company today, now that we’ve gone through their history.

[00:21:25] Clay Finck: Old Dominion Freight Line is really as simple to understand business. For the most part, they operate in what’s historically been known as an industry that is really, really difficult to do well in. And I think if you like boring businesses with long track records of doing really well, achieving high returns, then I think this company is worth taking a look at.

[00:21:45] Clay Finck: So Old Dominion, they’re a transportation and logistics company that offers a variety of services, primarily in what’s called the less than truckload shipping, which we can really just refer to as LTL shipping. They primarily operate in the U S, but they also have a little bit of presence in Canada and Mexico.

[00:22:01] Clay Finck: But I think most of the focus as investors should be on the U S. So, really there are two major types of trucking companies. There are what’s referred to as truck load, where the shipper fills up the truck and then the trucking company hauls it from point A to point B. LTL is the other major type of company within the trucking industry, and this really just consolidates shipments from a number of different customers.

[00:22:24] Clay Finck: And given the nature of the LTL industry, a significant investment is needed in the service centers and all the technology and logistics that goes behind it. And you can think of Old Dominion’s trucks. They have all these different types of packages, all these boxes, and they may have a truck filled from a number of different customers.

[00:22:43] Clay Finck: And logistically, it just makes it much more complicated than if you just pick up one item from one location. There’s a lot of logistics that goes into this business. So the trucking industry, one thing that’s nice about it for the condoms and the management team is that this industry is not fast changing, and it’s not something that’s going to be highly disrupted overnight, like many technology companies, for example.

[00:23:06] Clay Finck: And it’s all about just getting a product from point A to point B and doing so in an efficient and a reliable manner. And Old Dominion is really, really good at doing just that. So logistics professionals, they assess everybody in the industry and they give out what’s called the Mastio Quality Award. So Old Dominion Freight Line, this just really sort of blew my mind when I started digging into it.

[00:23:28] Clay Finck: So they’ve won this award for 14 years straight. In the most recent year, they had 28 different categories of determining who wins this and of the 28 categories, they won in 25 of them. So these categories include things like meeting their delivery promises. They’re looking at the number of damaged products.

[00:23:47] Clay Finck: They’re looking at the consistency of their transit times, how easy it is they are to do business with and all these different metrics they’re looking at. So these types of metrics are critically important. Because in many ways, the shipping industry to at least a number of customers is very much a relationship type business.

[00:24:04] Clay Finck: So there are a lot of customers who don’t view this as a commodity and they aren’t purchasing just based on price. They care more about the consistency, how easy the trucker is to work with, the reliability and price is also in consideration, but it’s not the only one. So even if Old Dominion charges more for their premium services, they’re still getting their share relative to competitors.

[00:24:27] Clay Finck: So when we look at market share and how that’s changed over time for Old Dominion in 2002, they had just under 3 percent market share in the industry. And today that’s just under 12%. So their market share is up four X over a 20 ish year time period. And the industry over time has become more consolidated.

[00:24:45] Clay Finck: So the top 10 players control anywhere between 75 to 80 percent of the market. Old Dominion’s number two in terms of revenue. FedEx is number one. And then when you just look at the LTL industry overall, Old Dominion, from what I can tell, just looks to be in a league of its own. So you look at the return on invested capital.

[00:25:04] Clay Finck: It’s nearly 30%, well above all of the competitors. They have an operating ratio of 72 percent and competitors typically are all 80 percent or more operating ratio. This really just helps show that their cost structure is superior to their competitors, which is obviously very important when you’re looking at.

[00:25:22] Clay Finck: Industry that’s fairly commoditized. Then when we look at the weight per shipment, they lead the industry. They have over 260 service centers across the US so that kind of creates that cost advantage and helps create this network effect as well. I should also mention they own their land rather than lease it, which we’ll be talking a bit more about.

[00:25:41] Clay Finck: And then they have near minimal debt, which gives them plenty of flexibility to continue to reinvest and then opportunistically buyback shares like they did in 2022. And then I like to see that their return on invested capital has been rising over time. So in 2014, this is around 15%. And that metric’s almost doubled in the past decade.

[00:26:00] Clay Finck: Old Dominion, they’re consistently stealing share from their competitors. I mentioned the market share numbers. And then I see the return on invested capital has been increasing over the years. And that really just tells me that they have some sort of competitive advantage that’s allowing them to continue to earn super normal profits that their competitors are able to replicate.

[00:26:19] Clay Finck: And then one other quantitative piece I wanted to highlight here before I throw it back over to Kyle, is their operating leverage. So this is another stat that just sort of blew my mind as well when looking at this company. So Old Dominion, they own the land that they build their service centers on, and this really helps them manage their cost structure over time.

[00:26:37] Clay Finck: So to help illustrate the power and the importance of their operating leverage, we can look at their revenue and their earnings growth over time. So over the past decade, revenue has grown at 7. 7 percent per year, pretty modest to moderate growth, nothing too crazy. But their net income has grown at an average rate of 16. 6 percent per year. So over the past decade, their revenues have doubled, but their net income is up by nearly five times over the decade. So this essentially illustrates that as Old Dominion grows, their revenues grows, their business steals share from competitors. Their expenses aren’t rising near as fast as their revenues.

[00:27:16] Clay Finck: So they’re able to keep more and more of that money that they’re bringing in as they continue to grow. And this is also a part of why we’ve seen that return on invested capital figure. Just generally rise over time.

[00:27:28] Kyle Grieve: That’s right. And I’d like to actually just look a little bit more at that operating ratio that Clay mentioned, because I mean, when you look at the industry, it should really be studied because the amount of efficiencies that the industry has gotten over time is incredible.

[00:27:40] Kyle Grieve: Like when you go back in the book, they share their operating ratio from many, many years before they were public. And it would regularly be like in the mid nineties. Now that that number is down to 70%. And like Clay also mentioned, the industry is around 80%. And so the industry has just, even though it’s ridiculously competitive, it’s just gotten more and more efficient over time.

[00:27:58] Kyle Grieve: And it’s been quite impressive just to see that. And I don’t know how far Old Dominion can take it, but if you look at their operating ratio, it’s still continuing to go down today, which is really impressive. I just think it really shows that the industry, even though it’s in a boring industry, as Clay alluded to, it’s consolidated significantly over time.

[00:28:16] Kyle Grieve: And I think it’s part of the reason is that just the companies with the lowest operating ratios are the ones that stay in business. And if you’re running with a high operating ratio, these little economic shops have really, really big impacts on you. And that’s why I think you see some of these smaller or other competitors just unfortunately leave the arena.

[00:28:32] Kyle Grieve: So I wanted to kind of cover here more about Old Dominion’s competitive advantages, so we can really just optimize our own understanding of whether they can continue separating themselves from competitors and eating up more market share, which I think they’ve been doing a very good job of now for multiple decades.

[00:28:46] Kyle Grieve: I think Old Dominion really has multiple modes, some of them granted are going to be stronger than others, but let’s jump into a couple of the reasons why this business I think has been gobbling up market share in the LTL logistics industry. So there’s 3 kind of primary modes that I want to go over that I think they have some of the attributes.

[00:29:03] Kyle Grieve: So the first one here I want to go over is processing power. So processing power was outlined in Hamilton Helmer’s excellent book, Seven Powers. And as I think one of the rarest competitive advantages out there, I got a chance to actually ask Hamilton, did you have any other good examples of processing power and businesses?

[00:29:17] Kyle Grieve: And he actually said, no, he wasn’t able to come up with one. So I’d preface that by saying he might disagree with me here, but let me just tell you what processing power is. And then you can think for yourself about whether they have processing power or not. So processing power is essentially when a business offers a lower cost And or a superior product due to its internal processes that can only be matched by an extended time commitment by competitors.

[00:29:40] Kyle Grieve: So when looking at other businesses, I basically never attribute a business to having processing power just cause I think it is really, really rare. But I really do think that ODFL does have some processing power because part of the reason the business is so good is just. All these little processes that they’ve now created over decades.

[00:29:57] Kyle Grieve: And, and so if you’re going to look at a new competitor coming into the market today, they don’t have that decades of experience. Maybe they can hire out people that have decades of experience. I don’t know, but I just don’t think that they would necessarily be able to replicate a lot of the processes here.

[00:30:10] Kyle Grieve: So I’m not going to say it’s as strong as Toyota, which is the example that Hamilton gives them that book. But I do think that they have some attributes of processing power. So just a couple of interesting factual evidence that would point me towards this is, you know, if you look today, 70 percent of their shipments arrive within two days, which I think is industry leading their on time service is improved from 94 percent in 2002 to 99 percent this year.

[00:30:32] Kyle Grieve: So, I mean, that’s incredible increases in process. Then when you look at their cargo claims ratio, which is damaged goods that’s declined from 1. 5 percent in 2002 to only 0. 1 percent in 2023. And then the part that Clay mentioned about the business, they’ve tried to keep their employees as happy as possible.

[00:30:48] Kyle Grieve: Cause obviously they’ve had these not so nice experience with unions as Clay alluded to, and unions have been a big pain for the industry over a long period of time. So I really think that their process for making sure that their employees stay happy and don’t want to unionize over a very long period of time has been a huge bonus for the business that is very hard to replicate.

[00:31:06] Kyle Grieve: And then so the next competitive advantage I think they have has to do with economies of scale. So the simple definition for this is just a business where the unit costs decline as volume increases. So Costco is the simplest example here. As the business increases in size, they can secure prices for their goods at cheaper and cheaper prices.

[00:31:24] Kyle Grieve: So as Clay also pointed out here, you know, Old Dominion isn’t actually cheaper than its competitors. If you look at the prices from what I’ve heard, it’s actually more expensive than some of the competitors. So even though they do have, I think some of these economies of scale, it’s different than Costco.

[00:31:36] Kyle Grieve: Costco passes along all these savings to their customers. Whereas Old Dominion, I’m not saying that you take all the profits for themselves, but I think instead of making their product cheaper, they make their product better and far superior to the competitors. And that’s why people stick with them over a long period of time.

[00:31:51] Kyle Grieve: But I do think that, you know, this scale advantage allows them to make this product better. And I think, you know, if the company was smaller, if the density of their network was, wasn’t as good as it is now, it just wouldn’t be the same business. If you look at some of the reasons that this company scaled up, a lot of it has to do with.

[00:32:07] Kyle Grieve: They’re service centers. So as Clay pointed out, they have about 260 service centers all across the country. And because they have so many of them, it just allows them to service a much larger geographical area than its competitors. So if you look back in their history, they started just in Virginia, that’s it.

[00:32:22] Kyle Grieve: And then they want to expand. And obviously they had to expand outside of Virginia. And now they’re all over the United States. And like Clay said, parts of Canada and Mexico as well. So this service center has multiple advantages on both a regional and national level. So on regional levels, it just allows.

[00:32:37] Kyle Grieve: The density of the routes to be closer to each other. It’s just easier to move things from one point to another. It’s cheaper, it’s more efficient. You can make sure the trucks are full rather than in partially empty, which I’ll be going over more. And then, you know, on a national advantage, same thing, better route density, but then, like I already alluded to their service times are a lot lower and continue to decrease, which obviously customers are going to like.

[00:32:57] Kyle Grieve: They want their stuff on time. And then their claims are lower. So that obviously causes less disruptions as well for their customers. And then just another interesting point here that I found about scale is that back in 2010, one of their management said that due to their size and their increasing scale, they were able to actually increase their negotiation power for diesel prices and gas.

[00:33:15] Kyle Grieve: So obviously that’s something you’re not going to be able to replicate if you have, you know, a fraction of the amount of vehicles that Old Dominion has. The last one here that I want to talk about is corner resources. So a corner resources is when a company such as Old Dominion Freight Line basically has preferential access to a coveted resources that independently enhanced value.

[00:33:33] Kyle Grieve: So the important part there is independently enhanced value. And the reason is let’s say a competitor for some reason was able to buy Old Dominion Freight Lines business. Then now they would have access to all of Old Dominion’s network of service centers and obviously it would probably make their business a lot better too, but they don’t have access to it because Old Dominion’s not for sale at this point in time, so I think that their service centers where they have them located is really hard to compete with and like Clay also said already, they own a lot of these locations, so they don’t have to worry about getting kicked out or their leases going up.

[00:34:04] Kyle Grieve: They own this land. And also another interesting point is the service centers. There’s tons of pictures of them. They’re, they’re not horrible to look at, but if you were living across the street from one of them, you probably don’t want to see that. So, you know, competitors moving into some of these more denser populated locations, it’s going to be harder just to build it.

[00:34:20] Kyle Grieve: Cause you’re going to need to get the community on board. And the fact that they already have these laid out, I think is a really big competitive advantage. And then I just want to talk a little bit about LTL economics. They’re different than the truckload. So with LTL, a lot of times what that means is your truck isn’t going to be full because, you know, sometimes you have a customer who just wants, maybe they just want a small shipment.

[00:34:39] Kyle Grieve: Maybe they want, you know, one crate, but the problem is one truck can obviously carry multiple crates, right? So you’re either going to have to charge them a whole bunch of money because they’re going to have to pay for the whole truck, even though, you know, maybe 95 percent of it is empty. So that’s where comes in where they can basically load up the truck with multiple crates from their customers, and then they have their own system for delivering it and making sure that the trucks are optimized at, you know, a very, very high utilization rate, which just isn’t really, you’re not able to do that in just full truck load. And then the other thing that’s interesting too, is that obviously if you have one truck carrying multiple.

[00:35:11] Kyle Grieve: Goods from different customers. You have to have all these different relationships and trust with all your customers, right? Cause if you say, oh, I can’t make it on time because we were dropping off your competitors stuff or whatever, they’re obviously not going to enjoy that. So I think this trust that they built over this long period of time is, is really powerful as well.

[00:35:27] Kyle Grieve: And then just lastly here, just looking at the service centers. One interesting point that I found was that their service centers are just, the way they lay them out is really interesting. So they actually talk a lot about. How many service doors they have. So if you have a service center, which is where these trucks come and drop their stuff off for sorting, there’s like an interesting thought experiment that I thought about, you know, if you have one door in that service center versus 50 doors, which is going to be more efficient, it’s going to be that 50 door one, because you’re going to be able to accept way more freight and you’re going to be able to sort it a lot more efficiently.

[00:35:54] Kyle Grieve: So that’s why they have these really big service centers. And then another interesting point here is that a lot of their service centers actually have 25 to 30 percent latent door activity. So that basically means that they keep these open in case their capacity goes up, which I think is really, really cool because it just shows that they really care about service because if something were to happen where maybe one service center gets hit with a lot of packages, if they were running at a hundred percent, then there’s a chance that maybe they’re going to have delays.

[00:36:20] Kyle Grieve: So they run with this latency specifically so that they can increase their capacity if needed. And the interesting thing about that is obviously if they were running at 100 percent capacity, that would probably mean that their margins and stuff would be better, but they want to make sure that they’re getting the optimal service to their customers.

[00:36:34] Kyle Grieve: These are the three primary competitive advantages I think that ODFL has. And while none is, I think, super obvious, I think that’s. That’s part of the reason why this business has had such good returns and why it’s remained somewhat misunderstood. And despite being somewhat misunderstood, the returns have been really good.

[00:36:48] Kyle Grieve: I mean, it’s at a 25 percent compounded annual growth in the share price of the last decade. And then their net income’s been increasing in the high teens now for the last decade as well, which is, I think, a really good proxy for intrinsic value. So I just wanted to finish this section off with just kind of talking about how this business kind of feels like the type of business that Buffett would really, really love.

[00:37:07] Kyle Grieve: But I was thinking about it. I’m like, okay, well, Buffett already owns Burlington Northern Santa Fe Railroads, and obviously he understands logistics at a really high rate. So what are the differences between a railroad, for instance, and a trucking company? And I think that’s the key, because when you think about it, railroads probably are still better, right?

[00:37:22] Kyle Grieve: Because yes, okay, Old Dominion has all these competitive advantages. It’s been an excellent investment. I’m sure if Buffett knew what was going to happen, he’d probably love it. But the fact is, is if you had a lot of money or if you, and if you have a little money, you can literally just build it, make a truck and just ship things from point A to point B.

[00:37:37] Kyle Grieve: When you’re talking about Burlington Northern Santa Fe railroad, you can’t literally just build out a whole network of railroads you physically can’t. And there’s all those regulations. So I think that’s why Buffett probably would prefer a railroad over the business of a trucking industry. So that I just thought was an interesting thing to think about.

[00:37:53] Clay Finck: Yeah, I also read up on an article related to the economies of scale piece where there might be a city where Old Dominion has like three service centers. And if you compare the economics of having three to having just say one, that’s really a lot of what can make up for the difference in the returns.

[00:38:11] Clay Finck: Or what their margins ended up being because just how far the trucks end up having to go. And logistically, it just helps them in terms of scale. And then another comment related to owning the land that I’ll piggyback on, it gives them a lot of flexibility because whenever they see the opportunity to expand these service centers, they can just do it.

[00:38:30] Clay Finck: They can just add on or add new, add more doors. Whereas if you’re leasing, you’d likely don’t have near the flexibility that Old Dominion has, I was also going to mention the latency you mentioned. So I had read that usually the excess capacity is anywhere between 20 to 30%. They prefer it to be in the 20 to 25 percent range.

[00:38:48] Clay Finck: And currently it’s actually at 30%. So it sort of shows kind of where the industry’s at today. On the one hand, you could say they’re sort of in a down cycle in terms of the trucking industry. And the other hand, maybe they’re foreseeing future growth. I think this really enables them to continue to deliver that exceptional service and always be prepared to deliver that service whenever their customers are needing it.

[00:39:10] Clay Finck: And I guess I’ll also continue on with the cyclical piece of the business. So whenever the economy slows down, you tend to see a pullback in the trucking industry. Occasionally they have years where revenues decline. So that happened in 2009, 2020 and 2023 and the growth isn’t going to be linear for a business like this.

[00:39:29] Clay Finck: It’s a bit choppy and many investors. Probably see this as a bad thing, but in some ways this could actually turn out to be a positive for investors that are interested in investing in Old Dominion. I think the reasoning would be that the market tends to value certainty over uncertainty. So even if two businesses are growing at similar rates, sometimes uncertainty can keep a lot of investors out of a business like Old Dominion and that short term uncertainty.

[00:39:52] Clay Finck: Yeah, it can kind of spook them a bit, but the business over the longterm has consistently been a really strong performer. And like I mentioned earlier, the trucking industry is just absolutely brutal and time and time again, there are companies being sold off or going bankrupt and Old Dominion has really positioned themselves to benefit from this.

[00:40:10] Clay Finck: Occasionally they buy up competitors at a price that makes sense. Or oftentimes if they don’t buy the competitor, they just benefit through increased market share of those customers. Now going to Old Dominion and Old Dominion is also feeling that slowdown in the broader economy today. They actually released earnings the day before.

[00:40:27] Clay Finck: We’re recording here on July 25th, and they actually posted pretty solid results. But when we look at the past 20 years, revenue growth has averaged just over 11%. 2023, we saw revenue declines and that’s bounced back here in 2024. And they’ve seen an uptick in activity due to one of their competitors going bankrupt.

[00:40:47] Clay Finck: So that was a company called yellow corp. They shut down their operations. And obviously the whole industry has felt weakness, especially in 2023. And when looking at the competitive environment today, there was that bankruptcy, the yellow corp, they were mismanaged and they ended up going bankrupt in August of 2023.

[00:41:04] Clay Finck: And this is a pretty big deal because they were the third largest LTL player in the space. They were around for nearly a hundred years. Again, shows how brutal this industry can be. Other players in the space ultimately ended up bidding and getting the assets. I think Old Dominion was interested, just the prices didn’t make sense for them, which has been an issue over the past decade.

[00:41:23] Clay Finck: They haven’t done any acquisitions to my knowledge, but I think this also helps Old Dominion. As I mentioned, more customers I think are going to put more of an emphasis on who they’re working with in the trucking industry. And some are putting more focus on things like quality of the business and when I look at the competitors, I had mentioned earlier, the top 10 composer around three fourths of the market.

[00:41:42] Clay Finck: And then I’ve ran into a chart that showed the market share of each company over time. And it’s a pretty stable industry. I think a lot of these customers stick with who they’ve been working with for a good period of time. The number one players, FedEx number three is XPO logistics. Both are publicly traded companies.

[00:41:59] Clay Finck: And XBO is actually in the works of divesting its European business to become a pure. LTL carrier in the US and they purchased some of the assets in the yellow corp bankruptcy. And then the operating ratio I mentioned earlier that Old Dominions ahead of the pack in terms of this, when we look at FedEx, their operating ratio is 80%.

[00:42:19] Clay Finck: They’re the number one player and Old Dominion again is currently at around 72%. And if I were to ask myself why that is, I would say part of it is because Old Dominion is just a more efficient operator. They’ve invested in technology, they’ve got the logistics figured out, but I think the other part of the equation is just pricing.

[00:42:35] Clay Finck: If they’re able to charge higher prices and operate at a similar cost level, then they’re going to have a better operating ratio. So I also wanted to mention a stat I saw in the investor presentation and it showed a number of different competitors in the space and showed six of them that were publicly traded.

[00:42:50] Clay Finck: And then it listed the number of service centers. For each competitor and then the total shipments per day. And one of the stats that sort of amazed me is half of these players saw their shipments per day decline over that 10 year period. And then Old Dominion, their number of shipments, it increased by 75 percent far above.

[00:43:08] Clay Finck: Any of their competitors, and it just sort of points to how far ahead of the pack they are. There are some strong competitors that are Old Dominion definitely has to take seriously, but in terms of the metrics related to this business, I mean, it’s just amazing to me and how things have changed over this really long period of time.

[00:43:25] Kyle Grieve: Yeah, that’s such a good point, Clay. I mean, it’s funny because we were talking with Chris the other day on the community, he was talking about how Old Dominion Freight Line doesn’t really seem like the type of business that would be interesting because, you know, it’s just, it’s in this competitive industry, but you see numbers like this and it’s quite clear that Old Dominion has some advantage.

[00:43:41] Kyle Grieve: There’s no reason why. They’re going to be increasing their shipping volume at these rates, while the competitors are dwindling. So hopefully some of the competitive advantages that I went over are the reasons that they’re taking this market share and continuing to outperform. So I wanted to move on here and kind of look at comparing Old Dominion here to another business that.

[00:44:01] Kyle Grieve: Might not necessarily be so obvious to our listeners. So obviously Old Dominion is in the shipping industry. And as we pointed out, they’re different than their competitors. They just seem to have some special sauce. So, or one strategy, sorry, I like doing that. Clay and I have spoken about on path is comparing one business to another business that might not even be in the same industry.

[00:44:19] Kyle Grieve: And so we’re going to do the same thing here. So for both of us, we kind of came up with the fact that Copart is a really, really good comparable for this business. And there’s kind of three primary reasons for this. So the first reason here I think is just the family history and culture of each business.

[00:44:33] Kyle Grieve: So you look at Copart, Willis Johnson co founded that business in 1972 and he was the CEO of it until 2010. So, you know, very, very long levels of tenure there. And it was his baby and he held onto a lot of his shares and you know, he’s enjoying retirement now. And then his son in law, Jay Adair, who married his daughter, he started in the business at the age of 19.

[00:44:52] Kyle Grieve: He had a stint as CEO and now he’s the chairman of the board. He’s at a relatively young age of 55 and, you know, he’s still involved in the business, but you know, they have this longevity as well. And then Copart has this long history of culture that exists that is kind of out there to really best serve its customers.

[00:45:06] Kyle Grieve: And I’ll be going over what some of those reasons are. Another thing is Copart really Cares about their employees. They have this employee stock option plan that really helps try to keep the employees aligned with shareholders, which I think has really been a huge driver of shareholder value for a Copart.

[00:45:21] Kyle Grieve: And then just kind of comparing that with Old Dominion, there’s now three generations of Congdon’s and who knows, maybe there’s some other Congdon’s in there that are even on the fourth generation we don’t know about. I didn’t really come over anything, but you know, you never know. And then, you know, just looking at kind of the cultural part there, Old Dominion has multiple instances of people working there their entire lives and they like working there.

[00:45:39] Kyle Grieve: Maybe they, I remember seeing, I think a video of an employee saying that I could work somewhere else and probably maybe get paid a little bit more, but I really just like the family feel of Old Dominion. And I feel that they treat their employees really, really well. And then Old Dominion also has a profit sharing program.

[00:45:52] Kyle Grieve: So obviously they’re trying to incentivize their employees to continue creating profits for Old Dominion. So there’s just an interesting point here as well that Chris Mayer said in his research. So he said two salesmen I spoke with a few years back had their entire 401ks in Old Dominion stock and conveyed that Old Dominion stock is widely held among rank and file employees.

[00:46:12] Kyle Grieve: Old Dominion shares comprise over 20 percent of employees 401k assets. A significant portion of service center managers quarterly bonuses are directly tied to profitability and service levels. Old Dominion employee turnover at 10 percent is the lowest I’ve come across in the industry and the labor force, unlike most of LTL peers is union free.

[00:46:32] Kyle Grieve: So now I just want to move on to the second reason here, which I think, you know, I already talked about. So I think both Copart and Old Dominion have this corner resource mode. So one thing I kind of already talked about is that, you know, NIMBY, not in my backyard effect where it’s hard to build certain things where people live in, in dense residential areas, because people don’t want to go out of their house that they spent a lot of money on and look at something that maybe might be unseemly to the eye.

[00:46:56] Kyle Grieve: So in Copart’s case, it’s junkyards. I think it’s probably even worse than Old Dominion. No one wants to look at a junkyard, right? But the thing is, is Copart’s been around now since 1972, and they own all their land. So maybe, yes, residential areas have built up around where they are, but there’s not really anything you can do.

[00:47:13] Kyle Grieve: They own this land. So for a competitor, you know, if you’re a competitor of Copart, and you want to just set up shop right next to a Copart place, you can’t do it. So yeah, so this basically means Copart’s network is just better and because that network is better and because they can’t have competitors kind of infringing on their land, they save on things like logistics, their ability to ship parts from one place to another is going to be shorter distance than their competitors are going to be able to do and they can pass those savings on to their customers.

[00:47:39] Kyle Grieve: So Old Dominion has kind of a similar moat. I mean, they have their growing number of service centers that are very strategically located in certain areas. And as this service center network grows and gets larger and larger, it just improves their products more and more over time. And also not only does it improve service, but it improves the economics of the business.

[00:47:58] Kyle Grieve: I think that’s part of the reason why we’re seeing their operating ratio come down and their return on invested capital go up. It’s just the economics of the business just continue to get better. And I think a big reason for that is this expansion in their service centers. The final reason I think that these two businesses are similar as their willingness to improve the businesses using technological innovation and boring industries, right? So one of Copart’s really big advantages was it was one of the first businesses in the industry that to use computers. And the reason was very similar. ODFL did the same thing, which is just to decrease the cost of paper by digitizing their records.

[00:48:32] Kyle Grieve: So I think in Junk to Gold, Will Shantz was saying that they had something like 8, 000 pages of paper that they had to rummage through to get information and they just digitized it and there you go, you get rid of 8, 000 pages of paper and you increase your ability to find information probably a lot quicker, right?

[00:48:45] Kyle Grieve: And so there’s going to be tons and tons of cost savings there. So now just looking at ODFL, I think I’ve done kind of a good job already of talking about some of the processes that David Congdon came up with. So one of the bigger ones that I didn’t discuss in too much detail was the dockyard management system.

[00:49:00] Kyle Grieve: So it’s quite simple. Basically, it was a barcode on each package that swiped when the shipment comes in, and then basically it would just tell the people, the dock workers working. At the service centers where to put things, and it doesn’t sound like a big deal, but obviously part of the reason why the Old Dominion is so good is that, you know, they get their packages where they need to go in a very short period of time.

[00:49:20] Kyle Grieve: And so this was one of their kind of first big things into using technology. And then they did basically did the exact same model as Copart where they transitioned from paper to digital record keeping, which obviously has its own efficiencies. Just, there was an interesting thing I read in the book here.

[00:49:34] Kyle Grieve: So Chip Overbey, who in 2010 was the senior VP of marketing. He said that they were investing in technology at that time that might not actually show an impact today, but we’ll have a big impact in five, 10 years. So I just think that was really interesting that they are continuing to look forward with their ability to use technology and whether or not it has an impact today.

[00:49:54] Kyle Grieve: It doesn’t matter as long as it’s going to have an impact down the road. So I think both Old Dominion and Copart have a lot of similarities in the strengths of their businesses. And I think that’s probably why both of them have had incredible advances in their stock prices over the last decade. So I just want to also point out here that we recently had Chris Mayer on the TIP Mastermind community for a Q&A, and he actually brought this up independently that both Old Dominion Freight Line and Copart have a lot of these similarities that I just discussed.

[00:50:21] Clay Finck: Yeah, I’m really glad you mentioned Copart there. Eagle Point Capital, they put together a write up that I thought was a really good one to highlight here. So the article is titled The Direction of the Moat, and it discusses not only moats, but how moats change over time. So I think part of the reason someone like Nick Sleep was such a brilliant investor and just a brilliant for selecting Berkshire, Amazon, Costco for his portfolio was because these businesses were designed in such a way that with the passage of time, their moats would only get stronger and stronger.

[00:50:53] Clay Finck: And it reminds me of the saying that time is a friend of a wonderful business and the enemy of a poor business. And Buffett has talked in previous Berkshire meetings about how he wants to find companies where their moats are widening each year. And note that he didn’t say that he wants profits to increase each year.

[00:51:10] Clay Finck: He cares much more about what’s happening with the moat because that in turn will lead to the success or the failure of the business over the long term. Buffett wrote in his 1986 shareholder letter that the difference between Geico’s costs and those of its competitors is the kind of moat that protects a valuable and much sought after business castle.

[00:51:30] Clay Finck: No one understands this moat around the castle concept better than Bill Snyder. Chairman of Geico. He continually widens the moat by driving down the cost still more, thereby defending and strengthening the economic franchise. So Buffett would compare the expense ratio of Geico to its competitors to gauge whether that moat is widening or narrowing.

[00:51:51] Clay Finck: I think this is perfect because I think we can do the exact same thing for Old Dominion when we look at their operating ratio, which over time just keeps going lower. When you can find businesses with widening moats, it also, I think, really helps us hang on to it when things get tough, whether it’s a slowdown in the economy or the stock market has a rough year.

[00:52:10] Clay Finck: In the case of Old Dominion, for example, we know that the trucking industry isn’t going to be going anywhere. So Eagle Point Capital, they made the claim that Stocks with widening moats are really tricky to find, but they ended up using Old Dominion as an example. They wrote that Old Dominion operates a hard to replicate network of LTL freight terminals, which allow it to offer better service than its rivals.

[00:52:33] Clay Finck: Its higher returns on equity and higher profits allow it to invest more than its rivals, widening its moat. So that was one mental model. I thought I’d share with the audience here with regards to whether remote is widening or narrowing over time. So I look at Old Dominion, I see their return on capital increasing over time.

[00:52:50] Clay Finck: They’ve continued to expand their service networks. I think their moats getting stronger and stronger with the passage of time. And over the past 10 years, they commonly mentioned how much they’ve invested into their service network. So over the past decade, they’ve invested 2 billion. And they’ve clearly shown that they’re able to achieve higher returns than their competitors on those types of investments.

[00:53:11] Clay Finck: I wanted to touch on capital allocation here and then let Kyle cover the management and the incentives, what he found on that front. In 2023, Old Dominion earned 1. 5 billion in operating earnings. Roughly half of that is deployed into CapEx. So their CapEx, it typically includes things like buying land, building new service centers, expanding their existing service centers, and then expanding their fleet as well as investing in new technology.

[00:53:39] Clay Finck: So just on the technology front alone, they announced plans to invest 75 million on that front. And a lot of their competitors just aren’t going to have the capital to invest that amount. And especially in something like technology that has a very long payoff. It’s not like you’re getting a big return in year one or year two, like you refer to earlier from that comment from 2010.

[00:53:59] Clay Finck: So with the remainder of their cash flows, they generally are either repurchasing shares or paying out a relatively small dividend. And when I was reviewing the data on FinChat, one thing that really stuck out to me Is their share repurchases significantly ramped up in 2022. And that’s just not because they had more capital because the share price got hammered.

[00:54:20] Clay Finck: So ideally you want to see businesses that see opportunities and they’re opportunistic on when those great opportunities come. Especially when you can deploy capital at really high rates of return. So typically, I think when you look at a lot of companies today, when it comes to share buybacks, they’re just buying back shares every year.

[00:54:38] Clay Finck: They aren’t really looking at the share price. And when I see a company like Old Dominion more than double their share repurchase program, when the stock price goes down significantly, I don’t know if it went down 30, 40%, something like that from the high that just really tells me that they understand capital allocation really well.

[00:54:55] Clay Finck: And that’s what I want as a shareholder. And a great business, you want great capital allocators running the company and finding where they can best put that capital to work. So when I look at growth opportunities and how the company is going to continue to grow in the future, I would say the first thing is I think they’re going to continue to see increased market share growth.

[00:55:14] Clay Finck: So essentially stealing share from competitors. So management expects continued consolidation in the industry, whether that be weaker players shutting down or weaker players, just losing business to the stronger players that offer better service in their annual report. They stated, I quote, we believe consolidation in our industry will continue due to increased customer demand for transportation providers that can offer both regional and national service.

[00:55:38] Clay Finck: As well as other complementary value added services. So another critical piece I wanted to mention here is Old Dominion is a non union player. They showed this great chart in their investor presentation that showed essentially how non union players have continued to steal share from the union players.

[00:55:54] Clay Finck: And it makes sense if Old Dominion is a better place to work, they provide a better quality service. It’s sort of a byproduct of being a non union player, generally attracting some of that business in the industry. And they also broke down each region in the U. S. and showed that in every single region, they’re continuing to gain share over time, which is also, you know, it’s not just one region that’s just sort of dominating.

[00:56:15] Clay Finck: They’re very well diversified and have shown the strength of their business across the whole country. So the LTL market overall, it’s growing at around 5%. It’s grown at that rate over the past 20 years. So that helps generate some organic growth just through higher volumes. And then one key part Sri Viswanathan actually mentioned to me is that e commerce is becoming a really important part of this business and it’s helped driving some of that growth.

[00:56:40] Clay Finck: So e commerce relies on LTL shipping. And it’s growing much faster than traditional retail segments. And then they’ve also shown some pricing power as well. So generally Old Dominions, increasing prices 5 percent range each year. And when I was chatting with Sri, he actually owns Old Dominion in his fund.

[00:56:58] Clay Finck: And I was asking him about their growth prospects. And he agreed that much of their growth is going to come from market share gains, as well as new investments in service centers. He also mentioned and talked about how there’s a lot of inefficiencies in the truckload industry. It’s been a constant problem for them.

[00:57:14] Clay Finck: I think it’s not as good working conditions. A lot of these truckers in the truckload industry are traveling like great distances, whereas it’s much better working conditions in the LTL industry. And there’s not as much driver turnover and such. There’s high touch points. And then he also highlighted some of the cultural aspects of truckloading.

[00:57:31] Clay Finck: They treat their employees. Well, they have a really good driver training program. And when the industry has a drawdown, they aren’t letting their drivers go. Usually they’re finding somewhere within the business for them to go, whether it’s at the service centers or whatnot. And then there’s not much to comment on the balance sheet.

[00:57:47] Clay Finck: It’s a really good balance sheet. They’re able to make these sort of sacrifices. For example, in 2022, when the share price is down, they have the cash to redeploy it when that opportunity arises. And that helps differentiate them over the long term as well.

[00:58:01] Kyle Grieve: Yeah, Clay. So I really liked your point there about the widening moat.

[00:58:04] Kyle Grieve: And I think that’s also another similarity between Old Dominion and Copart. They both, I think have widening moats there that are just continuing to get wider and wider over a period of time. So I wanted to move this conversation and talk a little bit more about management as well here. So the current CEO is Kevin Freeman and he took over as CEO in 2023.

[00:58:23] Kyle Grieve: So he hasn’t been CEO for a very long period of time, but As I mentioned earlier, he’s been with Old Dominion for a long time and he, you know, he’s not some sort of hired gun who’s just coming in here to make a quick buck. So Old Dominion has always been led from within, which I think is great. And I think it really shows you that, you know, even if you are with a company, you have this ability to move up as well.

[00:58:42] Kyle Grieve: So Kevin Freeman has had multiple roles with Old Dominion since he started working with them back in 1992. I looked at his profile on ODFL’s website and, you know, he’s been focused on a couple different areas such as developing operational and sales plans, leadership in the LTL industry, customer relations, and business strategy.

[00:59:00] Kyle Grieve: So, you know, he’s had a pretty wide range of duties with Old Dominion throughout the years. Since he’s a newer executive, it’s definitely a little bit harder to evaluate what he’s done with the business and in such a short time. And then also like Clay also alluded to, I think the, the LTL industry right now is going through a bit of a lull period.

[00:59:16] Kyle Grieve: So you can’t expect him to crush it right now. It probably, you know, it’s going to need to probably go through a full cycle, I think, as to give them a more fair assessment. So we’ll see how that goes over a period of time. But given the tenure he’s been with Old Dominion, I feel he probably has a very good idea of how the business works and probably how he can continue growing it.

[00:59:34] Kyle Grieve: So my assumption is he’s going to be a good fit for the job, but I mean, only time is going to be able to tell us how he does. I wanted to move here and look at compensation packages here for CEO, but other named executive officers in the business. So the CEO has a salary of 784, 000 which you could make the argument seems high, but if you look at some of their competitors, I looked at XPO and SIA and they’re pretty similar.

[01:00:00] Kyle Grieve: They’re both the CEOs of those business are making a little bit more, but it’s not much more. It’s still, you know, less than a million dollars, but very high six figures. And then just all the other named executives on their C suite team are making between five to 600, 000. They have a couple primary award plans to help incentivize their managers to grow the business.

[01:00:19] Kyle Grieve: And so, you know, they give stock awards and non equity incentive plan compensation that, which these two areas actually make up the bulk of the overall compensation. So even though I said his salary, what he’s actually making in terms of his total compensation is actually much higher. Let’s look at stock awards first.

[01:00:35] Kyle Grieve: These are just you know, restricted stock awards, these are tied to operating ratios. So management basically must maintain or meet the minimum thresholds and operating ratios. These are eligible for up to 150 percent base salary as these restricted share awards. So, you know, as long as they’re operating ratio is staying, I think, in their threshold area there, then they’re eligible to receive these.

[01:00:56] Kyle Grieve: And they’ve been doing a very good job of getting these. Basically, I looked at over the past three years at their proxy and it showed that they all were given this record, this award. So they’ve clearly been meeting those restrictions that they need in order to get that bonus. If you look at their operating ratio in 2020, it was 77. 4 percent and in 2022, that’s dropped to 70. 6%. So they’re doing a good job on that end. The next portion of their award system is this non equity incentive plan, which is basically a cash incentive that’s paid out on a monthly basis. That’s kind of a pool based on pre-tax income as a percentage of revenue.

[01:01:30] Kyle Grieve: So factors that basically affect this area are pre-tax income, annual pre-tax income growth and operating ratio. So essentially the threshold that they have to pass is 2%. So. If let’s say revenue is a hundred billion dollars, this is, and I’m just using simple numbers. We’ll say revenue is a hundred billion dollars.

[01:01:46] Kyle Grieve: They have to have 2 billion of pre tax income in order for them to access this award. So this just kind of does a good job of keeping their operation ratio where it needs to be. And then obviously if that pre tax income continues to grow in size, also that also incentivizes them. So it’s a decent system they have here.

[01:02:01] Kyle Grieve: And then each executive gets a participation factor. So it ranges between 0. 18 to 0. 6 percent. So basically they have this big bundle of operating income and then the executives get a percentage of that and they can make up to 10 times their base salary. So it ends up being quite a bit. I think the CEO last year made about 9 million in overall compensation.

[01:02:22] Kyle Grieve: Then when we look at insider ownership, according to the 2024 proxy statement, insiders, which include executive officers and board members own about 9. 9 percent of the business. So it’s pretty good. It’s not insanely high, but I’m happy with that. I think that that’s a pretty good alignment. The CEO, Kevin Freeman, we obviously, we should probably take a look at his shareholdings as well because he’s now leading the business.

[01:02:43] Kyle Grieve: So he owns about 64, 000 shares. Market value that I looked at as of a couple days ago was about 12 and a half million dollars. So I wanted to take a look at, okay, well, obviously that’s not a giant number, but if we can find a management where the bulk of their money is invested in the shares of the business, I still think that that does a pretty good job of aligning the values of both management and shareholders.

[01:03:03] Kyle Grieve: So it was kind of hard to find his net worth. According to a website called Benzinga, almost his entire net worth, liquid net worth is in Old Dominion Freightline shares. So obviously that’s great to hear. That means that he’s hopefully well aligned with owners of their shares. Even though Kevin Freeman’s ownership isn’t very high, he’s been building this since he’s been kind of in that upper management level and he’s been building it up over quite a long period of time.

[01:03:25] Kyle Grieve: So it’s nice to see that he’s building his position, letting it grow rather than just selling off options for a profit every month. So my overall thoughts on management incentives is that it’s hard to assess Kevin Freeman. You know, he’s only been CEO for a year now. I think he was dealt a pretty good hand as you know, Old Dominion is already a pretty good business.

[01:03:42] Kyle Grieve: Obviously he’s coming here in a downturn. So like I already said earlier, I think you need to wait for kind of a full cycle. And I think, especially with a business like Old Dominion, you got to wait for, you know, a down cycle and up cycle and probably back to a down cycle to really get an idea of how good his management is going to be.

[01:03:57] Kyle Grieve: Let’s look at former management, just kind of from an overall business perspective here. So Greg Gant was the CEO here from 2018 to 2023. So as I’ve gone over here before, I really like Buffett’s rule of one, where you basically look at the amount of money that was retained by the business and reinvested, and then see how much market cap value the business did over that time.

[01:04:15] Kyle Grieve: If we look at the time period of 2018 to 2023, when Greg Gant was CEO, they retained 1. 3 billion in retained earnings while he was a CEO. And over that time, the market cap has gone from 12 billion to 36 billion, an increase of 24 billion. So according to Buffett’s rule of one, which is you want to create at least 1 market value for each dollar retained, he’s obviously did an incredible job.

[01:04:37] Kyle Grieve: So I didn’t get a chance to investigate too much while I retired. I think he fully retired out of the business. So I guess that’s why he left, but he clearly was doing a really, really good job before he left. There was one kind of, I guess you’d call it a yellow flag here that I found when looking at their proxy here.

[01:04:51] Kyle Grieve: And this was actually, so the former CEO, he was awarded 5. 7 million in restricted stock awards. When no other named executive was making more than 1. 1 million from that bonus. So I talked briefly with Sri about this and he said that he retired. I think they want to give him this farewell gift. And, you know, instead of having it vest over multiple years, I just gave it to him all at once.

[01:05:13] Kyle Grieve: But I just thought that’s worth bringing up here. And then the other kind of red flag here that Sri also brought up was that their pre tax income has gone down, I think between 2023 and 2024. And overall compensation has actually gone up. So you kind of have to figure that out for yourself if you think that’s right or not.

[01:05:30] Kyle Grieve: I mean, I prefer to see that compensation probably go down if the fundamentals of the business are not as good as normal. So you got to make that decision for yourself. So my overall thoughts are management seems quite good, competent, again, hard to assess Kevin Freeman. I don’t think he’s been a detractor from the business at this point.

[01:05:47] Kyle Grieve: I mean, they’re clearly still doing well. Compensation package, not the best I’ve seen. Yeah. And then the other point here I wanted to point out is a lot of the compensation is based around operating ratios. So I think that’s why they talk about it a lot. It seems like it’s probably smart that it is based around that because as Clay already pointed out, you know, their revenue doesn’t grow very fast.

[01:06:05] Kyle Grieve: It’s growing mid to high single digits, but their profits are growing at mid teens. So I think that they’ve been doing a pretty good job of incentivizing their management to do kind of the right thing and continue growing the business. It would be nice to obviously see kind of a denominator in their number to see, you know, obviously they’re deploying money.

[01:06:23] Kyle Grieve: They’re not really on a wire as Clay said, he didn’t see anything over the last 10 years major. And I didn’t come across anything. So I don’t know if maybe having a denominator and doing capital efficiency for their competition makes as much sense as a serial acquirer, but it’s nice to know, right?

[01:06:36] Kyle Grieve: Because you want to know that the business is continuing to invest money in itself and wanting to earn a really good profit over the I would say overall, I’m kind of lukewarm. On their compensation package is not the best I’ve seen, but it’s not the worst.

[01:06:49] Clay Finck: Yeah. Thank you for your comments on management compensation incentives.

[01:06:54] Clay Finck: All super helpful. There’s a lot to look at in terms of management and incentives, so it’s nice to get someone else’s take on that. I wanted to jump here to cover valuation. So one of the reasons I wanted to cover Old Dominion on the show is because the stock dropped, and I thought the valuation was getting to an interesting level.

[01:07:12] Clay Finck: I mentioned it to our mastermind community in mid June. The stock was trading at 170. They reported earnings yesterday, and the stock just jumped over 200. So not quite as interesting as it was. And that’s one of the troubles with researching stocks. It takes time to really get to know a business. It’s nice to sort of have companies that you look at, you put it on a watch list and sort of wait for those opportunities.

[01:07:33] Clay Finck: So I’ll share my thoughts on evaluation and that you can tweak the assumptions however you’d like and make your own assessment of the business. So one of the great things though, even with the stock price increasing is that high quality businesses, their intrinsic values tend to continue to increase over time, especially over multiple a year periods.

[01:07:50] Clay Finck: And the stock, because of that generally just also continues to hit new highs. So that’s what we’ve historically seen with Old Dominion, their intrinsic value continuing to go up and then the stock price continuing to hit new highs. I had talked earlier about the capital allocation for Old Dominion in 2024.

[01:08:07] Clay Finck: They plan to reinvest roughly half their cash flows, and that’s really good to see with a company with a return on invested capital of 25 to 30%. So when we look at the multiple, I tend to look at the enterprise value over the EBIT, which is earnings before interest and taxes instead of the PE. I feel like it paints a little bit more accurate of a picture.

[01:08:27] Clay Finck: For the company’s earnings and operations. So that multiple today is roughly around 25. This is roughly the same multiple of the S&P 500. But I would argue that Old Dominion is a higher quality company than your average company in the S&P 500. I thought the best way to share my thoughts on valuation here would be to look at what John Huber shared on the show when considering what really drives the return of a stock.

[01:08:52] Clay Finck: So he shared what he calls the three sources of shareholder returns. The first is earnings growth. The second is the change in your multiple. And then the third is your capital returns, which is either share repurchases or dividends. So when I apply this framework to Old Dominion, I think earnings growth of 10 percent is quite reasonable over a business cycle, at least.

[01:09:14] Clay Finck: So the business has some cyclicality to it. So it’s important to remember that. The results from year to year are going to bounce around. So some years it might be zero. Some years it might be 20 percent over time. I think 10 percent is quite reasonable. And then you may see a bit of multiple contraction, but I wouldn’t say today’s price is egregious by any means.

[01:09:32] Clay Finck: And then if we look at capital returns, I would say that the dividends and share repurchases are going to bump up your returns as a shareholder by anywhere, 2 to 3 percent range, maybe more if they’re able to opportunistically buy back a lot of shares. And then when we add all of these together, I get an expected return anywhere in the low to mid teens.

[01:09:51] Clay Finck: One of the things I also find interesting about Old Dominion is I think the long term risk is relatively low. The business is quite solid. The competitive position is really strong and you don’t have to worry about excessive debt or them going under during a recession or going bankrupt. Like some of the competitors, I would keep an eye on the execution of their growth.

[01:10:10] Clay Finck: If they’re continuing to expand the number of their service centers, it’s something they’ve done well for multiple decades. So I wouldn’t see that as a huge concern. Chris Mayer joined the Q and A for the mastermind community, as you mentioned earlier, and someone asked him, what are some of the risks around Old Dominion?

[01:10:26] Clay Finck: And he mentioned they’ll need to keep the culture in place. He definitely sees that as 1 of their competitive advantages is the strong culture, family culture they have, which is something that’s really hard to measure. That’s the problem, right? It’s something that’s not going to go away overnight. And it’s something that would slowly degrade over time.

[01:10:43] Clay Finck: I thought that was worth mentioning. And then the other risks that Chris mentioned is that if the company were to become unionized. So that’s another part of the cultural aspect of the business and ensuring that yeah, they are having to deal with all these unions. Chris also mentions the external forces.

[01:11:01] Clay Finck: So, over the years, Old Dominion has really feasted on weaker competitors. And now, I think they’re facing some stiffer competition. Are taking it much more seriously. So, XPO and SIA, and then FedEx is actually looking to spin out their LTL division as well. So, These bigger competitors are also benefiting from consolidation within the industry and Old Dominion’s growth might not be as good over the next decade as it was in the previous, but I think they’re still pretty well positioned.

[01:11:29] Clay Finck: So I’ll give you a chance to comment on valuation if you’d like.

[01:11:33] Kyle Grieve: Yeah. So Clay, I think you really nailed it there that the risks are relatively low. With a business like this, I mean, you know, outside of what you were just talking about, you know, if you just think about the younger generation, you know, I don’t think people are going to be going to Harvard and then wanting to disrupt the trucking industry.

[01:11:48] Kyle Grieve: I mean, maybe I’m wrong. Maybe it’ll happen, but it just seems like if you were to give someone a couple billion dollars to compete with Old Dominion Freight Line, I still think it would be very, very, very difficult. Who knows what will happen in the future. I mean, capitalism is brutal. The industry is brutal, but.

[01:12:01] Kyle Grieve: It seems like right now, they seem to be in a pretty safe place, at least for a short period of time, especially given the fact that they have such a nice balance sheet as well. As for the evaluation point you just made there, I don’t really have many gripes with your assumptions. I think they seem very reasonable and maybe, maybe a bit conservative.

[01:12:17] Kyle Grieve: It’s also worth noting that as their operating ratio decreases, their margins are going to continue going up, which it seems like they’re continuing to do now. So there may be a chance that management can eke out some extra percentage points on their profits over time. But I think that 10 percent number sounds pretty good.

[01:12:32] Kyle Grieve: And then I saw there that you liked using EV to EBIT ratio, which I think is a very smart move. So I used FinChat to look at the range that they’ve had over the last decade, and it’s been between nine at a low and 33 at a high. So I agree with you that I’m not going to expect much multiple expansion here over the coming years as part of the valuation.

[01:12:50] Kyle Grieve: If you think that growth is going to slow down, then you may actually want to bring that EBIT ratio down as part of your valuation. Just, you know, maybe the market’s going to start giving it a lower number, but that’s kind of up to you. But I think given the quality of the business, the base case for the EBIT being somewhere around the current number is probably pretty fair.

[01:13:10] Kyle Grieve: And then lastly, you know, you talked about returns there for dividends and buybacks don’t really have anything that I think that that’ll be a pretty good contributor if they have more and more cash can really hammer away at buybacks, especially if the share price goes down, then you could see even better returns.

[01:13:24] Kyle Grieve: So, yeah, I agree with you. Low mid teams seems very reasonable going into the future here.

[01:13:28] Clay Finck: And like we’ve mentioned plenty of times on the show, none of the stocks we discuss here are intended to be a buy or sell recommendation. We’ve just found that people really like these types of discussions and hearing our thoughts on companies we find interesting.

[01:13:40] Clay Finck: So please do your own research. Before we close out the episode, Kyle, I also wanted to talk a little bit about our TIP Mastermind community. Recently, we had some really fun calls. I’d like to mention a couple of Q& As we had. We had one with John Huber, another one with Chris Mayer. Definitely appreciated both of those and we’ve had some members share some interesting stock ideas with the community too.

[01:14:02] Clay Finck: So for those who aren’t familiar, the TIP mastermind community, it’s a community that we put together that is tailored for portfolio managers, high net worth individuals and entrepreneurs. We have just over 100 high quality members who are there to network with others, share stock ideas, and get feedback on ideas as well.

[01:14:21] Clay Finck: And then we also have two live events each year, one in Omaha in May, the other in New York city in October. And there’s actually another meetup in London that Stig’s hosting that I’ll be mentioning here shortly. So it’s really just fun to chat about some of these bigger names on the show that are oftentimes more well known and easier to cover in a podcast format.

[01:14:41] Clay Finck: I think I think we can find a lot of information on someone like Old Dominion, but I think some of the best investments are those in which nobody’s talking about them. The community thankfully makes room for both of these. Both the well known names and maybe the lesser known, maybe smaller companies, because you can chat with all these members that are looking at companies you would even think to find or even look at.

[01:15:03] Clay Finck: It’s also much more difficult to talk about some of the things in a podcast format. Maybe it’s too small, maybe it’s a little bit too niche for anyone to really care. For example, one member here in a couple of weeks is going to be sharing his whole portfolio on a zoom call with the whole group and just sharing everything he owns and some of the thesis behind some of his holdings.

[01:15:20] Clay Finck: And that helps stimulate a lot of ideas with people and get people thinking about how they’re managing their portfolios as well. Especially when someone’s so thoughtful is just sharing everything, sharing their thoughts on it all. And yeah, this member manages his portfolio full time. So he’s thought plenty about the 25 or so holdings he has.

[01:15:38] Clay Finck: So one thing that makes me really excited about the community and sort of where it’s heading is just some of the amazing members we’ve had joined the group. So recently we had one member from London who has extensive experience in the investment industry, just a great track record, graduated from Oxford and really just knows investing inside and out and big fan of the show.

[01:15:58] Clay Finck: Another recent member manages. Billions of dollars in the real estate sector, and it’s deeply passionate about value investing. And then since I own constellation software in my portfolio, I was happy to have one member join who was previously a portfolio CEO at constellation. So it’s just cool to have the opportunity of someone that sort of has an inside scoop on how the business runs, what their DNA is.

[01:16:19] Clay Finck: So just some really interesting people we’ve been able to attract, but despite a lot of people having vastly different backgrounds, we all have this common. Thread of being value investors and being really interested in that. And the common debate in the group I’ve seen recently is sort of these high quality compounders trading at high valuations versus these cheaper companies trading at a PE of five and buying back all their shares.

[01:16:44] Clay Finck: I know you’ve been interested in one of these names, and it’s easy to fall into a crowd, but it’s also cool we have this community of people where some people are at both camps, some people are in one camp, some people are in the other, and it’s just fun to learn interesting viewpoints and perspectives and how people think about current opportunities in the market.

[01:17:02] Clay Finck: Yeah, I’m not sure if you have anything to follow up on that.

[01:17:05] Kyle Grieve: Yeah, no, Clay, I completely agree. I mean, it really feels as the community’s grown, we’ve really brought in people with a very wide range of skills and life experiences into the community. So, like you said, we have hedge fund managers, we got analysts from Wall Street firms and, you know, plenty of members who’ve successfully exited their businesses.

[01:17:23] Kyle Grieve: And maybe they’re just retired now, taking care of their own portfolio. And we have medical professionals and entrepreneurs, and it’s really cool just to see such a wide diversity of different expertises in different areas. And, and also the other thing that’s cool is that, you know, if you want to learn about a specific industry, we have all these people who’ve been working in these industries for a long period of time, and they’re always open to talk about it and help you and help educate you and help increase your circle of competence.

[01:17:45] Kyle Grieve: So I really get a lot out of that part. And then, you know, one trait that I really admire about the community is the continued focus on personal growth, right? I mean, obviously it is investing focus, but we’re there not only to get better investing, but to learn more about just the world around us and to make higher quality decisions and improve our decision making.

[01:18:02] Kyle Grieve: So we talk a lot about all that kind of stuff as well. And you know, we’re all in this investing game together and talking about maybe common issues that people have encountered and how we dealt with them. And it can be really, really helpful and therapeutic to share wins and losses with people who are like minded.

[01:18:16] Kyle Grieve: So, yeah, I mean, the community’s had a very positive impact for me, just in terms of the quality of my thinking, and I really appreciate the community and they say you’re the product of the five people you spend all this time with, and the community allows you to spend some time around some really, really high quality people who can help you learn more.

[01:18:31] Kyle Grieve: So, you know, like Clay, I come from the quality camp of investing, but with the wide array of investors we have, we’re finding that we really do get a whole slew of different ideas. Yes, there’s tons of quality ideas, but, you know, we have a whole section on, you know, special situations, for instance, and we regularly get some interesting ideas there.

[01:18:47] Kyle Grieve: And so lately there’s definitely been some interest here with cheaper business that have insanely high cashflow yields that can sustain themselves for literally decades. So I’ve heavily been researching a play in the energy industry that I’m very, very excited about. The cool thing about that is that there’s other members in the group that are also researching the same business, so we can kind of team up and do some very, very in depth research and due diligence because we can team up and do the Scuttlebutt together.

[01:19:14] Kyle Grieve: You know, it allows your research process just get that much better. And so on the same business I referenced above, there’s one member who’s actually has a history as a lawyer. And so he’s been scouring the internet, looking for a contract between that business and one of their customers just to get more insights.

[01:19:28] Kyle Grieve: So that’s just a cool little addition that I probably wouldn’t have any access to without the community. So one additional format that we’re using here for some of our group calls, I I’m really excited about is the bull bear position. So Stig and I actually got a chance to jump on a call and I got to be the bear for Evolution AB, which is a business that Clay and I covered on this segment before.

[01:19:47] Kyle Grieve: And so the reason I just love this format is that I’m an Evolution AB bull. I mean, I, it’s one of my big positions here, but being a bear just really helps me focus my attention on maybe some of the things that I was missing and getting my brain out of that echo chamber of confirmation bias, where, you know, you’re talking with all the other people who are also bulls and they’re all just.

[01:20:05] Kyle Grieve: Telling you the same thing that the company is good and you know, X, Y, Z. And these are things that you probably already know, and maybe you enjoy hearing it from other people, but a lot of times it also just kind of acts as a handicap because you want to look at the other side. So I felt like this bull bear was so good because it got me really thinking about some of the potential downsides and maybe some of the things that I’m concerned about with the business.

[01:20:23] Kyle Grieve: So I’m going to be doing another bull bear chat here with a community member in October on a very popular serial acquirer, and I’m very excited about that chat.

[01:20:31] Clay Finck: Yeah, there’s a lot of exciting things happening. So in relation to surrounding yourself sort of with like minded people, I think one thing I wanted to mention that sort of stuck out to me is a number of members have aspirations to start their own fund, or they recently just got into the industry themselves.

[01:20:47] Clay Finck: Maybe they sort of feel siloed in that. They manage their fund and they’re kind of a one man shop, but they just really enjoy having that opportunity to surround themselves with people like them. And I think they also just find value in kind of walking along this journey of people that are going through the same struggles you have.

[01:21:04] Clay Finck: Maybe they’re a little bit further and they can help you with some of the things you’re going through. So I think that is really helpful to a lot of members. And so Kyle alluded to the bull bear chat. So I’ll mention that we host a zoom call at least once a week doing a ton of different things. So yesterday Kyle and I hosted a social hour.

[01:21:23] Clay Finck: We do stock presentations. Kyle is actually going to be presenting one of the stocks he added to his portfolio, which I absolutely can’t wait for. And then we do things like the Q and A’s with the podcast guests and. I’m going to look ahead here and just share a few of the things we’re doing with the community.

[01:21:38] Clay Finck: So just by happenstance, we’re doing a member spotlight with that member from London. I mentioned it’s happening a day after this episode is going to be released. So it’s 10 a. m. Eastern on August 16th. So his investment returns have been quite impressive over the past decade. So I’m really looking forward to that.

[01:21:54] Clay Finck: Stig is hosting an in person lunch and dinner in London. That’s on Sunday, August 18th. We have a professional investor in the group who’s pitching a stock on August 29th. We have another member spotlight with a professional investor on September 12th. A lot of these spotlights we do, they just kind of share their investing journey, their investing style, maybe some of their holdings, and then members can just ask them questions on the call.

[01:22:19] Clay Finck: And then Sri Viswanathan, who’s been a guest on the show. He’ll be joining the group for a Q and a on September 18th. We’re also going to be discussing Hermes, which we’re going to be recording an episode on. And then Toby Carlisle, a fan favorite of TIP is also joining us in August. So we have a lot of exciting things coming up.

[01:22:36] Clay Finck: And I also wanted to mention that we’re looking to onboard five more members within the next month. We’re capping the group at one 50. So if you’re interested, I would encourage you to apply to join. We’re pretty stringent on who we allow in the group because we want to keep the discussions really high quality and sure we’re chatting with good people on zoom, meeting great people in person and whatnot.

[01:22:56] Clay Finck: So to join our wait list, you can go to theinvestorspodcast.com/mastermind. And then you’ll hear from me shortly after regarding more details from the group after you enter your email there. And then you’re also welcome to just shoot me an email at clay@theinvestorspodcast.Com and I can send you everything you need to apply for the community.

[01:23:14] Clay Finck: So, with that, I think we’ll close out the discussion there. Kyle, as always, thanks so much for joining me and looking forward to what we find for next quarter.

[01:23:23] Kyle Grieve: My pleasure.

[01:23:25] Outro: Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.