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Derek Pilecki

lines on the record: 54
first: 2025-10-03
most recent: 2025-10-03
sittings or episodes: 1
sources: podcast

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“Yeah, if you would come to Gatorcapital.com and sign up for our newsletter, or you can send me an email, derek at gatorcapital.com. I'd be happy to send you our investor letters. I won't spam you. Send out four letters a year with one stock idea in each letter and just something that I'm doing in the portfolio or some insight that I think I have that hopefully will be additive to your investment process. But I appreciate you having me on the show again. You're super generous with your time and your questions. I appreciate you, Clay.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“A lot of times there's deleveraging. Like one of the things that means private equity so profitable or have high returns is the use of leverage. And we've talked about leverage a few times, but this is another example of is a company with leverage and this is almost like a publicly traded LBL. The leverage isn't as high as what private equity uses. It's only three and a half times. It's not five or six times, but three and a half times there's plenty of leverage to get leveraged returns from the stock as investors will discount the stock while it runs with high leverage, but then as the leverage gets paid down, they get a little bit of growth and the debt gets paid down. The deleverages naturally, and then investors will be more comfortable putting a higher valuation on the company.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Makes the transaction was low enough that it was accretive to earnings growth. But there aren't that many tender offers out there. Like there's a handful each year, but it's a good source of ideas because companies don't tend to buy back that much stock unless they think the stock's undervalued. That's not always the case. Like not all Tender offers work as far as building the stock, but a lot of times they do. In fact, I think I first learned about tender offers when general dynamics in the early 90s did a tender offer and Buffett bought the stock because of the tender offer. He thought that was such a strong signal that general dynamics stock was cheap when they announced the tender offer he bought the stock.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I think to buy back that much of the stock in one swoop, the management had to be super confident that they weren't overpaying. And I think that was a pretty strong signal that they thought in that range of $150 to $170, they were getting a good deal of buying in those shares. Buying back that much stock helps EPS growth because you have fewer shares.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“The stock was $170 and management wanted to buy back a bunch of stock. And so instead of going to a broker firm and buying shares every day in the market, they said, okay, we're going to make a tender offer. They make a filing with the SEC and they say, okay, a month from now, we're going to buy 10% of the company this many shares and we're going to buy it somewhere in the price between 150 and $170. And investors can go to their broker and say, I'd be willing to tender my shares at $160 or $150 or $170. And they look at what price is the clearing price of to buy all 10% of the company shares in this situation. It was $154. So relatively hit the low end of the range. So investors, shareholders were willing to give up their shares at relatively low price. So it just shows that management and the shareholders had different views of the value of the company, right? And so, but it.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I mean, it's a $4 billion market cap company. It's not at the largest company. People don't talk about it, right? I mean, the stock hasn't done anything. It's flat for seven years. There's a lot of investor apathy about it. And so I think the tender offer for me was really what sparked taking another look of like, okay, that's a special situation type event of buying back that much in stock and really kind of putting the handcuffs on themselves. Like you can't do anything with your cash except pay down debt at that point. And so that's a real stake in the ground. So I think that's the catalyst. And there's a lot of people don't respond to events like tender offers that are clear signals that there's value there.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Back 10% of the shares at 154. So it's up from that. The stock's trading around 170, 175 right now. It's still eight times EPA. I think we just need some more time. I think management is also doing a good thing of reinvesting a little bit in the business. They've started spending some more marketing dollars in the Heal Card business and have also hired some salespeople in the other two businesses. I think revenue growth is going to accelerate here. Not in a huge fashion, but I think at the margin it's going to be positive. And I just think the valuations too low like a year ago, the stock was at $240. Like we could easily get back there with no problem.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Than half of that 20% is servicing online travel agents and both Expedia and Booking.com have brought some business in-house. And so that's been a little bit of struggle, but the stock has not done anything for eight years. And so the valuation has come way in. It's trading for eight times EPA. They did a tender offer at $154 a share earlier this year. They've publicly stated they're not making any more acquisitions because they're going to focus their free cash flow and paying down this debt that they took out to buy back shares. The CEO bought some shares. There's been an activist involved for about three years. And so I feel like the activist is watching management and the management is aware of the activists. So they're not going to do anything that is non-shareholder friendly. And I think valuations come back up. And so it was weird, like the close attender at the end of March. And then with Liberation Day, the stock traded through the tender price. And so it traded down to $120 a share, which was kind of crazy to me given that the company just”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“So Wax is a financial technology company. They issue fuel cards. So they have three businesses, 50% of the businesses fuel cards. You own a fleet of trucks with your service business. You give all your drivers a WEX fuel card. They have to type in a password and the car mileage or the truck mileage when they get gas and just reduces waste or shrinkage on your part as owning a small company fleet. They're not filling up their personal car with the gas guard. And they give you a lot of data of how to evaluate your drivers. And so that's been a good business. They've used some of the cash from that business. They bought two other businesses. They have a health savings account business, which is high multiple business that provides low cost deposits. They actually have a bank where the low cost deposits from the health savings accounts fund the receivables from the fuel card business. So there's nice integration there. And then they have a corporate payments business, which has had some struggles. The corporate payments is about 20% of the business.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I do own a few shares in the mutual fund that I manage, but I don't own it in the hedge fund. Unfortunately, it just was a little bit too disciplined on the price I was willing to pay and it ran away from me. I was looking at it December of 23 after I bought Robin Hood, and it's been a phenomenal stock. And it's a great business. I've been a customer too. I use it as a prime broker. They've been super helpful in helping me with my business. I think they keep costs low. I think the fixed cost nature of their platform gives them a lot of operating leverage. I think it's a conservative balance sheet. I think their credit ratings higher than Morgan Stanley's. And so I think that's super interesting as far as a safe place to custody assets. I think it's very efficient and it's a great business.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I think that's well put. There's another stack that I have that has a lot of operating leverage and a lot of financial leverage is anywhere real estate. And this is the old real G and Caldwell Banker. And they run it as a fixed cost business. Is way down from where it was a few years ago when the housing market was booming, and I think people are just coming around to the fact of like, okay, you have financial leverage on top of operating leverage. And the EPAD done numbers could explode here if we get back to 5 million units of existing home sales. I agree with you. Operian leverage is a lot of times underlooked as a potential upside.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“My three bucks estimate for 2026 had some pretty bullish assumptions about customer growth and training activity. And so I'm not saying $3 is the base case, but I'm just saying like, okay, well, what are other people seeing? Like, what's the potential upside? And just being comfortable, like, okay, ignore where the stock's been, where could it go, and what are people looking at it, people who are buying the stock at these highs, what are they thinking and just being comfortable with momentum and stocks that are moving higher probably continue to move higher. That's an uncomfortable position for a value investor, right? Just letting stocks go up. But that's what you have to do to keep your returns intact.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Short selling in the coming days. And then this goes back to I held on to the stock for a long time. I started hedging it late last year and through this year. And I'm almost completely out of position. I still have a tag end piece if it becomes a meme stock and I'll benefit a little bit. But you could argue it already has become a meme stock to some extent. But it's just avoiding that value investor mistake of selling too early. Hit my price target. I'm out. market can take stocks a lot higher than you think. And then also like the stock got up to, I think it was like $30 late last year. I think earnings estimates were about $1.50 and I looked at the models and I could get this $3 in 2026. And so I was like, okay, the stock's way up at 30 bucks, but I can see in two years it can earn three bucks, 10 times earnings that even though it's made a big move, there's still a lot of upside here. So like.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“A couple weeks after I bought the stock, the SEC approved the Bitcoin ETF, so the crypto market started taking off, right? And so Robin Hood's one of the few ways to participate in the crypto market without owning Bitcoin directly. And so they got some benefit from there. And then their product innovations, they had customer growth accelerate. Customer deposits went from like 18% of assets to 40% of assets during 2024 it was. And so that really got growth going and they continued to introduce new products and activity ramped up and then crypto trading exploded after the election. They've continued to introduce new products. And some of the products are a little bit shocking that until the fall of 24, you couldn't open up a joint account with your spouse. Each had to have individual accounts. So Southern products were not rocket science. They're just getting around to all the things you need to offer as a brokerage firm, but they introduced futures trading. I think they're just introducing.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“They reported to the Q3 23 earnings, and there were two environmental reasons why they missed the quarter. And I just thought they were temporary and it traded down to the $8 where I bought it. And they still had that $8 a sharing cash. So just being flexible and understanding the business. Also, like technically, it had built a big base. I covered in March of 22. And from March of 22 to November of 23, the stock kind of was flattish and it had built that long base. So I gotta fortunate that it took off soon after I bought it and I was just good timing, good luck. You know, they had built that base. Didn't think there was much downside and had to kind of tread water, put in its, marked its time to make a move higher.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I think the response to the environment, like there was a lot of speculation, the speculation. Like there was a lot of junkie companies coming public and a lot of inflated valuations and just a speculative frenzy in 2021. And so shorting Robinhood, like I thought the valuation compared to where they were in their business was high. And they were losing a ton of money and the valuation was high. And I thought the speculative bubble was going to recede. And so it was an easy way for me to participate in the downside there. And I knew they had $8 a share in cash and I sorted it from 25 down to 10. And then at 10, with $8 a share in cash, I was like, the short's done. But I continue to follow the company. I like brokerage businesses. And I was impressed with the changes they were making to the business. They put up a couple of profitable quarters by reducing costs, introducing some new products. I really like their product roadmap for introducing new products. I was like, they could accelerate customer growth with all these new products. And then I just got an opportunity.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“And I think it's like 30 or 40 percent names that I kind of think of like enduring. I'm going to hold them for a long time. And then, you know, 60 or 70 percent, it's like their first sale at the right price. And keep that turnover of the portfolio, move it on to the next cheap stock or cheap sector within financials going. Yeah, I think that's probably the mix. Before I started my fund, I worked at GSAM. And the PM that I worked for was a guy named Herbellers. And he used to preach, like, if you ever own a stock in a great company, never sell it. And so very much a Charlie Munger investment style. So I do keep some of my portfolio and stocks that I'm like, I just want to own the stock for a long time.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Average to below average industry where returns are going down. So I'm just aware of that. Like I'm not a permeable and bangs. There's times to own them. I think right now is the time to own them, but it's not always the case.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“At all. So the competitive intensity is increasing in banking. Online banks are, I guess, the real threats to profitability of banking. Like they're paying higher rates. They're easy to do business with. There's ways that they give you credit on your deposits faster than the legacy banks. The online banks are just going to take share. So it's another way to increase the competitive intensity of banking. And when I say increased competitive intensity, that means margins going down, returns going down. I think the long-term trajectory for banking is lower returns. That's why banks aren't the greatest thing. Like, I run a financials fund, but I would never just say, hey, let's go invest in the KRE together for the next 20 years. Like, that's not a great strategy. Like, there's some banks that are well run. We can invest in them. We can invest in banks when they're cheap. We can't just invest in the average bank for the next 20 years. It's not software. It's not semiconductors.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I mean, you're right, like branch traffic has declined every year since 2010. So, like, less people are going to branches. Like, even though the Big Banks are opening branches, they're in new geographies. Like, I think if you look at DC, I think JP Morgan has about 20, 25 branches across the whole city of DC, some Virginia, Maryland, D.C. And I would guess 20 years ago, if they entered DC, they'd probably have to have 80 branches. And so now you don't need to go to a branch within two miles because you only go to the branch a few times a year like you'll you could drive 10 miles to drive through the JPMorgan branch because you only do it twice a year so you can cover more geographies with fewer and so that increases the the competitive intensity of the of the industry like we used to have interstate branching laws where jp morgan couldn't just enter virginia when those interstate branchian laws went down banks could enter new geographies without buying banks or without you know or just letting them go into any”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Share. Some of that's from Wells Fargo. Wells Fargo's had this asset cap, so they couldn't grow, but they're also taking the big banks, the big two are taking share from the small mid-cap banks. If we don't have more consolidation, it's just we're going to get consolidation through organic growth of JPMorgan and B of A. And so we need the Midcap banks to get together to have real competitors, those companies.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Banks have higher valuations than the big banks. But there's definitely economies of scale and banking. So we really need more M&A. We still have 4,000 banks in the country. Like when I first got in the business, we had 13,000 banks. We're down to 4,000. We're the only economy in the world that has many financial institutions. Canada has a dozen or five large ones, but a dozen at most banks. And so we'll see more consolidation. Chp Morgan is a remarkable company. Like they're the biggest bank and they're taking market share. So they entered Boston, Philadelphia, and DC without buying any banks in those cities. They just started opening branches and they're just taking share. I think they even opened a branch in North Dakota. So now they have a branch in all 50 states. Their tech platform, their tech, they can spend more money and they have the best apps and they're just taking share. They're easy to do business with. And so BFA is taking.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I think regional banks are interesting because the valuations are so much lower than the big banks. So normally the big banks are the cheapest and followed by mid-caps and then small caps are the most expensive due to M&A potential, better growth prospects. But right now we're inverted. The big banks are the most expensive mid-caps are in the middle and the small banks are the cheapest. And so I think that gets fixed with the change in the slip of the yield curve. I think a super yield curve will make the smaller banks more profitable because they have a higher percentage of the revenue from spread income where the big banks have more fee income. And so I think that increase in spread income, there's not a cost associated with it. So like if their margins expand, they don't pay their people more. They may pay the executives bigger bonuses. But like for the most part, most of that revenue drops to the bottom line and it'll have a bigger effect on the small banks. And then I also expect the valuation differentials to go back to normal where the smaller”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“About how the regulators act during the previous administration. I think that a lot of those behind the scenes pressures get lifted with the current administration. So I think the banks reacted favorably, that they can focus more on business. You're right about loan growth. Like loan growth with higher rates has been lackluster. And hopefully that's one of the things that we'll see going forward is accelerated loan growth. But when loan rates went up, borrowers are just like, I'm used to paying 5%. Now you're asking me to pay 8%. I just don't want the loan. And plus a lot of borrowers had liquidity from the COVID boom. And so they just used their own internal liquidity rather than borrowing high rates from the banks. But you're right. The loan growth has been not that exciting. But the capital rules and the potential deregulation have helped the big banks.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“So the Big Bang's got a huge gift from Silicon Valley and First Republic failing. There was a flight to quality and the biggest banks because of the regulatory position that they're too big to fail. And so like the people, depositors are moving deposits and accounts to the big banks. So they've had this tailwind of the low cost deposit growth, which is a big win. And then there was a little bit of watering down of the Basel III capital rules. So like there was a set of capital standards that were proposed for the big banks that were onerous and the stocks were priced because like that capital rule was going to get implemented. And then it got reduced. And so the banks rallied when that capital rule got reduced. And then they also had the benefit of a dent of last year. I think they responded well to incoming Republican administration thinking that there'll be a deregulatory environment and more M&A. And so I think some of the stories I hear from bankers.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“And levered up to do it. And so they've stopped making acquisitions to pay down the debt. So hopefully that works out for them.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I've made money investing in highly leveraged companies. It's not super easy. I guess I'm comfortable investing in a stock and not being guaranteed I'm going to make money. Like I feel like I have a higher tolerance to own losers than other managers maybe. So I don't know how things are going to turn out and leverage losing control of leverage or having an adverse outcome due to leverage is certainly a way to lose money. And I just, I've been comfortable with that risk reward of the upside that the leverage presents versus the potential downside. But they don't all work out and they can quickly unravel. But it also keeps management focused. And so when they have high leverage, they tend not to do dumb things because they know their margin of safety is low. So I don't recommend that for everyone, but like that can be a benefit of investing in companies with higher leverage. An example right now is some of the fintech companies. Like they've bought back.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Shorting's hard. I think shorting's been an iterative improvement over the years. And so like trying to respect momentum is, you know, when shorts are going against me as a value investor, you want a short expensive stocks, but those can also be stocks that have momentum. It's trying to find a mix of stocks that are just non-good values and stocks that have headwinds against them. And so just trying to constantly improve. I think the short environment's been hard for the most of the history of the fund that a lot of the bad financial companies got wiped out during the financial crisis. And so any company that survived a financial crisis had some staying power, right? And so there weren't a ton of shorts there. But during the spac craze of 2021, there was a lot of new financial companies that came public, a lot of mortgage companies, some fintechs that came public that were bad values. And so that improved the opportunity.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“That's super interesting to me. Like for a long time, New England, people were leaving New England, and now it's hard to find a home in New England. And so I don't know how that gets resolved. I don't know if there's going to be a lot of building in New England or how that gets resolved. But I think some of those COVID boom markets will continue to trend a little bit lower. Hopefully they'll get saved by lower rates and they'll be more activity, but it's hard to tell how things will move. But I think that there's likelihood prices are lower. Maybe they don't go as low with lower rates.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“I think 30 year mortgages are around six and a quarter today. And so I think if we get a little bit steeper yield curve, like the short end keeps going down, I think people could potentially switch into five one arms. And I think 5-1 arms will get down to below five and a half, maybe five percent. And I think that'll improve some activity. I think we have a lot of regional differences, like you mentioned, Austin and LA. I think any of the COVID boom markets, you know, Central Florida, Nashville, Boise, Phoenix all boomed during COVID. And I think they're all pulling back here. So I think the inventories are increasing, I think prices at the margin are down a tick. I think they'll continue to tick lower because there's a lot of supply and a lot of people have to move back to work in the office. They can't remote in to work anymore. So, you know, and then we see New England, the inventory in New England is almost non-existent as far as homes. And so it's.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Like, I really don't think there's a problem at the moment. Like, I know that people are worried about private credit or some sectors like that, but I really don't think that inflation is going to rocket be just because they cut rates two times the rest of the year.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“At colleges have exploded, like compared to teachers. We have so much technological improvements, but we teach the same number of college kids. Like the big elite colleges emit the same number of students in 2025 as they did in 1990. That's crazy. We can deliver education so cheaply now. Why do we have capacity constraints on that? So, and prices would just come down if we could just use online teaching to educate more people. Higher rates are not going to fix those inflation problems. I think there's also huge deflationary forces in the economy. Like the internet is still deflationary. Globalization, you know, globalization is maybe having a little bit of pullback with the tariffs and the immigration changes, but internet is still huge deflationary force. And I think AI is going to be a huge deflationary force in the economy. So I think rates should be lower. Like, I don't think it's going to create too much speculation. Maybe there'll be a little speculation, but the IPO market's been dead for four years.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“None of them can get solved by higher rates. When I think about it, it's housing, college education, and healthcare. Like higher rates is not going to make healthcare prices go down or the growth of healthcare prices go down. Neither is it going to affect college education. And the housing, like with the land use regulations and the NIMBISM and the zoning practices and how long it takes to get things entitled, higher rates aren't going to fix those problems. In fact, it makes them worse. Like had a slowdown in apartment construction. So how does that get lower housing prices if we're not going to build apartments? And so I think there's a disconnect here between rates and inflation and what's really going to change inflation. If we want to get inflation down, the Fed can't fix those problems. How do we fix those problems? Like hospital administration staff in healthcare has exploded compared to the number of doctors. Like why is there so much more bureaucracy on healthcare? College education and same thing administrators.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Interest rates are restrictive at this level. Like, I think there's a way of a buy for kided economy. We have the AI, non-interest rate-related sectors. There's humming along just fine. And then we have interest rate-related sectors like whether it's housing or autos that are struggling, right? And so existing home sales were bouncing here just below 4 million units a year, whereas in 2021, I think five and a half million existing homes were sold. And also real estate development has really struggled. with higher rates, developers just haven't wanted to borrow an 80% rates to build new apartments or build new warehouses or whatever we have. So the construction economy is lower. And so I think we really need rate cuts to help the interest rate sensitive parts of the economy. I'm frustrated with the conversation around inflation. I think there are three big parts of the economy that are driving persistent inflation.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Last year, I've owned Barclays for about six years last year it worked. I looked around at other European banks and started buying the French banks early this year. And, you know, the French banks. I had for two of this timing, but the BNP was trading for 60% a tangible book and Society General was trading for 35% a tangible book. And the CEO was 50 years old and had been in place for two years. So again, as CEO's catalyst change, they've both worked this year. And I think there's more to go on European banks. So those are the three areas I've been most focused on recently.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Bit of steeper yield curve with a few more rate cuts, which it looks like we're going to have. And I think banks can make more money. And then the multiples can also go up. We also have deregulation coming. Bank mergers are getting approved faster. I think there's going to be more M&A activity. I think another area that's super interesting is we've talked about with PayPal is fintech. So fintech names are, you know, they used to be growth names in 2021. They've fallen out of favor. Everybody hates fintech. Evaluations are super compelling. They're cheaper than the big banks. So a lot of single digit PEs in FinTech, whether it's WEX or PayPal or global payments. And so they convert a large majority of their net income to free cash flow. I just don't think it's sustainable that the valuation stay down here. The third area I would say is I've started investing more in European banks. European banks have been terrible for 15 years, 15, 16, 17 years. So finally.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Think small mid cap banks are still an opportunity. And they became an opportunity after the Silicon Valley First Republic implosions. And they've done okay. I think there's more to go. They're still cheap relative to their history. I think they're still the headwind of the yield curve. And with the yield curve, I think about really what benefits the banks is the spread between the overnight rate and the five-year treasury. So right now that's inverted, the five years like 368 and the one month treasury is like 408. So it's a 40 basis point inversion. If that was steeper, I think that banks would make more money. Their margins would be wider. We go back to seven years ago, you know, 2018, that spread was 80 basis points. And so the overnight rate was 80 basis points below the five-year rate. And now we're 40 basis points inverted. So like that 120 basis points swing is a big inversion, big headwind for the regional banks. We get a little”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Be optimistic. And I try, you know, I use a little bit of leverage in my portfolio. I try to invest in some companies that are not the highest quality. I'm trying to be long-term optimistic and that good things happen to the ones that are optimistic. Those two things, like how would you get 50% a year if you managed a million dollars and being long-term optimistic? Those are two things that I've taken away from Buffett that I don't hear a lot of other people talking about.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“At one EO meeting, I don't remember if it was definitely in the early 2000s. I don't know if it was 2001 or 2002, but he said something along the lines of if he had to change anything in his career, he would have been more optimistic and taken more risk, which is pretty amazing for him to say because he's known as a permeable. Like he's super optimistic about America and the economy and his long stocks in a leveraged way, right? So like for him to say, I should have taken even more risk. I don't hear people talk about that, but like that changed how I think about the economy. Like I think there's a lot of people who are talented in this country and around the world that are acting in their own economic interests. And that creates value for them and for the economy and for the stock market. And so I think it's better to be a permable than a perma bear, right? It's optimism makes you more money. And so I try to remember that. I mean, being bearish sounds sophisticated and like you've figured something out. The timing of that is so hard. And so like it's better.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Buffalo Partnership. He uses leverage at Berkshire. It's just float leverage. It's not debt leverage. You know, thinking about those things like how could you do that? And so like in the early days of my hedge fund when I was trying to put points on the board, like I turned over the portfolio sum. I'm just not afraid of trading when there's opportunities and kind of just harkening back to that buffet quote of like turnover can generate returns. And so I think a lot of investors just think, oh, you have to be buying hold and you get wetted to these positions. Sometimes you see a lot of opportunities. You're not stuck in your existing positions. You can turn over your portfolio and that will actually generate higher returns. Now there are certain environments where with trending markets or things that are not moving a whole lot turnover is not helpful. But in markets that are moving and opportunities present themselves and turnover is not bad. So I think the other thing that struck me that Buffett said that I don't hear a lot of people talk about it.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Six hours. And so I guess that was also the meeting where he said if I had a million dollars, I guarantee I can make 50% a year. That was, you know, it's a shocking statement, right? And it's easy to dismiss it of like arrogance. I took that comment and thought about it. Like, what would cause him to say that? How would he do that? Looking back early in the Buffet partnerships, I know that he had much higher turnover than he does now, right? I mean, he's due to size. He's buying high quality companies and owning them for decades, right? When he ran much smaller sums, he was turning over his portfolio. And you can either make a lot on a stock or you can make a little bit on a lot of trades. And I think if he had a million dollars, he'd make a lot of smaller trades. And I don't mean smaller like 10 or 20%. And like he'd buy things and they'd be up 40 or 50% and he'd just cycle of the portfolio. And then he'd also use leverage. He used leverage in the early days.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Buffett has been super important to my investing careers. I read Roger Lowenstein's In the Making of American Capitalists, which was really the first Buffett biography that came out in 1995. The internet really was just getting started then. So there wasn't as much information about Buffett as there is now. And so that was really eye-opening to understand his career and his investing. And so I really appreciated that. And then when I went to business school at the University of Chicago, one of my classmates, Dan Kaslowski, who used to run the Janice Contrarian Fund, he took us all to the Berkshire Hathway meeting. So I went to the May 2000 Berkshire meeting and it was right at the peak of the internet bubble. So it was super interesting. Like at the time Buffett was 69, it was so surprised to me. He was so energetic, so jovial and thoughtful about his answers. And I just thought it was a huge gift that you have this billionaire super investor who's sitting on stage answering all questions.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Your emotions affect your decision making, so you just have to. Try to ignore that I'm dealing with people's money. Like, I don't want to put too much more pressure on myself. I'm already down, just let's do the smartest long-term thing we can. And Trish trying to manage those emotions”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Not be dogmatic about imposing those numbers. Like, I think the catalyst was he gave a delay, like a 90 day delay. And so that pushed out the tariffs from April to July. And so the market rallied there. But when we got that indication, I covered a lot of my regional bank shorts. Like I'm long, a bunch of regional banks. I'm short, some others. ones that I think don't have a strong a management have higher valuations may have done an acquisition that I don't love. So I'm just generally short in a bunch of regional banks. But some of them got down to eight times earnings and as much as I might not like the management or some deal they did at eight times earnings with them being down a lot in recent days. I covered a bunch of regional bank shorts. And so that benefited me. They ripped higher after the delay and or the pause and the tariffs. Those are super stressful times. It's where you make the performance. You can make a lot of performance by being smart, but you can also mess things up and”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Wouldn't say I was relatively active. Like when things are moving, I try to be judicious about how I act, but I, you know, I'm not afraid to, if I see opportunities to move stock. So, you know, in the two days after Liberation Day, the KRE, the regional bank index, ETF was down like 13 or 14% two days. And I think that's the playbook that macro investors have of recession risk goes higher, sell regional banks. And I have a fundamentally different view. Like this is not 2006, 2007 as far as what the credit books look like at regional banks, the capital and liquidity is so much better than it was then. I don't think in the next recession banks are going to fail. I mean, there might be a few banks that fail, but I just don't think it's going to be the whole industry goes down. It was a little scary because I was like, okay, what is he doing with these tariffs? Like, is he really trying just to crash the economy? And, you know, clearly in the following week, it was clear that he didn't want to crash the economy and he was going to.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. So, I mean, I thought the bass had been formed last year. Like I bought it maybe April, May last year. We had the CEO change. It had based for a couple years, hadn't gone anywhere. It wasn't really making new lows. And so, and then the stock started working late last year and then kind of had to step back this year with the fourth quarter wasn't that good. They've had a couple of okay quarters since then. A little bit of deceleration in the business. Like they have one business that's growing that's relatively low margin. So it's driving the overall company's margins lower. People don't love when margins are declining. So I'm not adding to the position here. Like it's still around where I bought it. It's not making new lows. So you could say, okay, it's still the space is still forming, but I need more evidence. It probably will be a better buy to buy it at 90 after we've got some confirmation of good news or good things happening. It might be less risky to buy it higher and let the market tell you that they fixed.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“And so we're just not going to cut off our returns. And so that goes back, it's the same thing of Peter Lynch of you don't want to cut your flowers and water your weeds. It's the, you know, all those sayings kind of get to the same thing. You have to let the winners run. And so I think that's something that I fly pretty well. And, you know, I do it from a risk management standpoint. Like if I buy a stock and it goes against me, I don't automatically buy it. I just think, okay, the market's telling me something. It's not that I will never buy a stock that's down, but I just am very disciplined about saying, no, I have some edge to buy a stock that's gone against me. And that's kept me out of like dumping a lot of good money after bad.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Like I look at charts. We all look at charts. I think the most dangerous is a fundamental analyst who claims they don't look at charts. And then first thing somebody does when they mention ticker is they pull up a chart. Like we all do it, right? And so by default, you're doing technical analysis when you pull up the chart. I learned this from one of the PMs early in my career. I worked for Clover Capital and Mike Jones, who ran Clover Capital. They had a great fundamental analysis. And then when growth and value went different directions in the late 90s, they reevaluated their investment process and they said, yeah, we're classic value investors. We buy too early and we sell too early. If we like a stock, we're going to wait until we see some kind of base in the chart before we start buying the position. And on the exits, we're not going to just sell long things, hit our price target. We're going to wait. We might sell a little bit at the price target, but then if the chart looks good, we're going to let momentum run and maybe the market will walk way beyond our expectations.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that's a great question. I've been really shocked by the performance of growth versus value over the last few years and the MAG-7 are such good cash flow businesses and have such big moats. Like they've really driven the growth stocks and to the detriment of value stocks, right? And so the quality of the businesses have been just so phenomenal. I mean, I think some value investors forget or sometimes don't apply momentum as a factor that drives returns. Really the ideal thing is value plus momentum drives returns. You have to have some kind of the stock has to be moving. And so like I think the classic value investor heir is by too early, sell too early, right? Like something looks cheap. We can all pull up a chart and see, oh, that chart looks ugly. But value investors like, oh, I don't care about technical analysis. It's cheap. I'm going to buy it. Whereas I'm more just aware of technicals, a thing in the market. Like I don't buy.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT
“In Q4, reporting Q4 earnings this year, so the stock's unchanged since I bought it. Maybe it's up a tick, but it's certainly not a double. So sometimes it works, sometimes it doesn't. And then a name like Robin Hood, which we'll talk about in a little bit, like that happened a lot quicker and in a greater size. So that rule prevents.”
2025-10-03 · We Study Billionaires · TIP758: Current Market Conditions & Investment Opportunities w/ Derek Pilecki · IDENTIFIED FROM THE TRANSCRIPT