Mallika: Hello, everyone. Thank you so much for joining me today. Today I'm very lucky to have Daniel Gladiś, who runs the Vltava Fund. I follow Daniel quite a lot on social media, and recently he's been talking about Project Zimbabwe, which makes me laugh. Daniel, what is Project Zimbabwe?
Daniel: Oh, it's a phrase that I used to get people attention to what they can expect in the world. You may remember that several months ago I wrote in one of our letters to investors that we have gone through an ideological revolution in terms of how people think about monetary and fiscal policies and, very likely, we are in for many years of, money printing.
And, this will probably bring a large currency abasements, you know, in most of the large countries, and Project Zimbabwe is just a nice phrase to get people’s attention. No, of course I don't expect to have hyperinflation like Zimbabwe and to lose pretty much a hundred percent of the currency value, but, you know, things would probably speed up in next few years. And I think people should be aware of that.
Mallika: Okay. Investors are currently having a very good time with the markets being up this year, despite the pandemic. Do you think it's time to be fearful when others are greedy, to paraphrase Warren Buffett?
Daniel: It’s hard to say when people are greedy. The markets were very greedy during summer (July and August). The characteristics of the market have changed at the beginning of September somewhat. In a way the former leaders, the tech companies, are no longer leading the market. So, despite the fact that the market was up like 10% in November, it's now more broad based.? So I think it's less greed, but certainly if you take a look at one stock after another, you find many where greed is probably manifesting itself in a big way.
So I think its always time to be fearful when others are greedy. But I think it always makes sense to look for good investments because they are always available.
Mallika: Okay. So how are you approaching valuation of public companies in this current environment?
Daniel: We're doing things the same as always. I think the most difficult thing is to stay sane, remain sane. Because when every week I get an issue of Value Line which you know covers most of the large US companies. And when I goes through it page by page, very often I find a company whose valuation doesn't make sense at all.
And there's quite a lot of them. But on the other hand, there are still companies which are totally forgotten and are very good businesses. So I think investing always remains the same and it is to buy something that has price load and its value. And you just shouldn't give up your usual standards in terms of what value actually is.
Mallika: You also recently wrote a piece about Airbnb upcoming IPO. Could you say something to someone who's actually bothering to read the prospectors versus just listening to their friends?
Daniel: It's not very often that a company that is so well known and used by people like Airbnb has an IPO. So I was looking very much forward to reading the prospectus and to see how the business looks in numbers. I have to say I was quite disappointed, for three reasons. Number one, it's not startup really - it's more than 12 years old. I would expect that by now they should be showing some signs of profitability. They lost 670 million last year on 4.8 billion of revenues, which is quite a lot.
Even worse than that, all the main cost items, were actually worse in terms of percentage of sales, which is the opposite of what you want to see. That was surprising to me. Secondly, they're still quite dependent on Alphabet, on Google algorithms and, it's quite a sensitive subject because Google is not only their counterparty which is trying to maximize it’s profit. It's also a competitor because they have their own services like Google Travel etc. I think this could be a problem for Airbnb. Third there's a lot of stock based compensation. This will have to be recognized at the time of IPO. It's more than $3 billion, which also means that, the historic profitability (or non profitabilit) is actually worse than it looks
These costs were not recognized and they would have to be probably present in a big way in the future as well, because you know, loss-making businesses probably have to continue paying people in stock. so I think the picture is even worse. I'm sure the IPO will find buyers, because all the loss-making companies did so in the last couple of years. I think people should be careful and I recommended reading the prospectus because it's quite interesting reading.
Mallika: Thanks very much, Daniel. I hope to talk to you about all these things next year. Thanks.
Daniel: Thank you, Mallika.