Market Matters Ep. 12: How HIMS Could Benefit From FDA Changes

Welcome to Market Matters. I'm Marley Kaden. Each week, we are stripping away the noise to focus on the big picture economic themes driving the market. Today, we're tracking the critical crossroads of healthc care disruption, the expanding peptide market, and the high stakes fight over regulatory access. For years, traditional healthcare operated on friction, outdated distribution, and slow monopolies. But with the FDA considering easing restrictions on peptides, the market is at a seismic crossroads, balancing regulatory caution against massive gray market demand and positioning platforms like him and hers at the center of a domestic manufacturing shift. >> I do think that they are going to benefit greatly. I think that the revenue potential could be billions of dollars over the next 10 years. Joining us today is Raul Shaw, the founder of Doc Shaw Financial, a John's Hopkins economist and a former pro baseball player whose deep value healthcare research is a must-read for investors. Together, we'll dive into the hidden value of HIMS manufacturing moat, why United Health's margin squeeze is a buying opportunity, and where healthcare capital goes next. That conversation starts right now. Raul, you played professional baseball across multiple independent leagues after graduating from John's Hopkins with an economics degree. It's a fascinating journey. I mean, most pro aletes retire and then they have to think about how they want to completely reinvent themselves. How did you go from trying to hit a 95 mph fastball to valuing multi-billion dollar healthcare companies? >> Well, first I just want to say, you know, thanks so much for having me on, Marley. And this is now I think our second or third time being together. And it's a great question. You know, I have always been an investor. I bought my first stock when I was 19. And you know, it's just something that has really uh captivated me for a long time, you know. And when I look back at where do Financial started in 2023 with literally zero dollars in AUM, I thought I'd give you a quick recap. Since then, we've expanded from six clients to 52. We've got clients across the entire continental United States. Our stock portfolios have returned a staggering 42.3% annually since inception in 2023. That's more than all major three indices. And that doesn't even include all the tax-saving strategies that we use for clients. So, as far as I'm concerned, Doc Shot Financial is the gold standard in wealth management and everybody else can fight for second place. So, I just want to say thank you Mara for having me on and you know, I'm so excited to start this conversation with you. >> I am too. I I've been waiting to have it since our first conversation because I'm so fascinated uh by your focus in healthcare and I am curious too though why healthcare I mean when you directed your focus post baseball you were always an investor but when you launched Dshaw what made you specialize in healthcare because I mean you have really become a voice in this space and and a strong voice at that you could have picked anything you could have picked tech you could have picked consumer goods you could have stayed macro what was it drew you to the healthcare sector? >> Well, I try to go over where value is. So, I look at myself as a value investor. I use the same principles that Ben Graham, Warren Buffett, Charlie Margaret, Peter Lynch, all these great investors do. Value investing has never gone out of style and it never will. It'll be around for the next hundred years. So, I have sort of become a, you know, voice, I guess you could say, of healthcare only because two of the biggest stocks in our portfolios happen to be healthcare stocks. One is what we're going to talk about today, Hims and Hurst Health, and the other is United Health Group. Now, you know, I just look at companies on an individual level. There was a ton of value in these stocks. They were extremely mispriced and, you know, it just happened to be in the same industry. But I try to look at value and that's always been the fundamental premise all the way since I started when I was 19. And you know, you mentioned I was playing baseball all those years. I was also investing on the side. You know, I was a contributor to Seeking Alpha for many, many years. And so, I've really written and bought shares in companies across many different industries. As long as a company is mispriced by the market, I'm buying that. I'm going to gobble up shares and I'm going to keep doing that for the rest of my career. And Raul, one of the key things I noticed as I was going through previous commentary from you, previous interviews you've done, is this continued conversation about the difference between a stock's price and the intrinsic value of a company? What is it that you think people are missing specifically as they look at health care right now? And and some of these names, I mean, you mentioned United Health, one that was particularly battered for a long period of time. What's the disconnect here? And why are investors not properly valuing the actual value of the business over how the price action is going? >> You know, that's such a good question and I I've got the answer for you and for the audience. You know, markets are really just an experimentation in human psychology. You know, I get asked a question a lot. People will say, you know, if if all information is public, shouldn't the markets be priced efficiently? And the answer to that is no because it's not about the information. It's not about the quantity of the information being provided. It's about every market participant's interpretation of that information. So you and I, Marley, could look at the same company and we would come to completely different conclusions on what that business is worth because we have different perceptions of what the future is going to be. When I talk about price versus value, you know, that is the secret. Everybody wants a secret to making better stock returns. That's the secret. It's understanding that the price you pay for something is not inherently what it's worth. And the key to really good investing is buying stocks or buying businesses for less than what they're worth. I always use the example of a lemonade stand. And I'll keep it concise here. I'll shorten this example down. If you live in a neighborhood and you've got a kid selling lemonade every day, you could very quickly figure out what his lemonade stand is worth. If he's selling it for a dollar a day, he's operating 100 days of the summer. he's got, you know, maybe a thousand people that line up, you know, whatever the case is, you can figure out, "Hey, this guy's lemonade stand is worth $10,000." And if you walk up to him and you say, "Hey buddy, I want to buy your lemonade stand." And he tells you, "Sure, I'll sell it to you for a million bucks." You would just walk away, right? You would never buy that because you would never recoup your initial investment, right? The price you paid is significantly higher than the value of that lemonade stand. And the difference between those two is what we call risk. There is simply no way for that lemonade stand to scale for you to make money on that investment. But people do this in the stock market every day. They don't even look at the earnings. They don't check the balance sheet. They don't look at the cash flow statement. They do no research. They just look at the price and they buy the investment. Now, on the flip side, if you go back to that kid the next day, maybe he's having a really down day. He's sick of the job. He's like, "Hey, you know what? I'll sell it to you for a dollar." Well, that's that's a fantastic investment. You're going to make a ton of money because the business is worth a thousand bucks. You're buying it for a dollar. Even if you poisoned the next cup of lemonade, what difference would it make? You would recoup your entire investment before anybody even realized what happened. So, when you're buying stocks for less than what they're worth, you've got a very big margin of safety. And Warren Buffett called it the three most important words in investing. And he wasn't wrong. He was right. And so, when I look at a business, or when anybody should look at a business, they need to look at what is the business worth. And you do that by projecting out their cash flows in a conservative fashion and only buying that business if it is selling in the market for less than that price. And that takes a ton of discipline. And that's why most people don't make the stock returns that they want. >> Okay. So I have a hypothetical for you. Then if you were forced to only be able to look and make all of your investment decisions based on the financial statements that you could get your hands on. could not look at a st a single stock chart, price action, nothing, no access to that, just financial statements. How different would your portfolio look now? >> It would look the exact same. In fact, I would tell you it would look even better. First of all, looking at charts is what we in the biz call astrology but for men. Okay? So, there's a ton of people online who are looking at charts and drawing fancy pictures and doing all this stuff and it's just a waste of time. Okay? Charts aren't going to tell you anything. What you need to look is the financials of the company. So if I'm looking at company ABC, what's the first thing I'm going to do? I'm going to go look at the revenue. I'm going to make sure that the company is growing. Why is that so important in investing? Revenue is just a proxy for demand. It doesn't matter if you sell less things at a higher price or more things at a lower price. If your revenue is going up, that means that there is more demand for your products. That's the first thing. You have to have a company that's growing. Okay. Okay. The second thing is you need a company that actually produces a profit or is going to produce a lot of profit very quickly. Okay? If you just buy money losing companies every single year, you're never going to get good results. You have to buy actual earnings when you're investing in a business. So that's the income statement. If we move to the if we move to the balance sheet, there's only two things that matter. You look at the cash on the balance sheet and the debt on the balance sheet. Okay? Businesses are no different than people. If I walk up to my neighbor and he tells me he's got a million dollars in mortgage loan, he's got auto loans, he's got credit card debt, he's got a student loan, and he's got no money in the bank, do I look there? Do I sit there and think, gee, you know what? This guy's doing great. Yeah, of course not. Right? He's doing horrible, right? This guy's bankrupt. He's insolvent. Companies are the same thing. They're the same way. If you look at a business that's got a ton of debt and no cash, it's a ticking time bomb. But if the reverse side, you know, when I buy stocks for clients, you know, we own Ulta Beauty in in a lot of these client accounts. When I was talking about Alta a couple years ago, you own William Sonoma. We own that. These companies had a ton of cash. They had no debt and that's a very strong balance sheet. Then you go to the cash flow statement and there's one line item that matters the most and that's cash flow from operations. All that means is that the company is producing cash from the things that they sell. It just means that they're an efficient seller of their products and services and that they're not bleeding money, right? It's the cash they're putting in their pocket from the stuff that they're selling. That's it. If you if all you did was never looked at a chart, never looked at a stock price and just looked at those five things, the revenue going up, the earnings being there and going up, cash on the balance sheet, no debt and cash flow from operations, your investment portfolio is going to be better definitively than if you just go and look at charts and never look at the fundamentals in any business. But the problem is is that takes time, right? People don't want to do that. People want the shortcut. They want the secret. And so, you know, a lot of these people that sell charts are making a killing because, you know, a lot of guys like astrology. >> I [laughter] love I love this astrology equation. I'm also glad I'm not a chart master for Schwab Network because we'd probably have a very different conversation here. But let's get to the one the whole reason I wanted to talk to you that we've been waiting for here. The first conversation we had, you coined a term called hot peptide summer that I have said repeatedly on air. I've given you credit to because credit was due. Uh, but it's about this fascination of of this peptide boom. And I think a lot of the time too when we're talking about peptides, people don't realize there are lots of things we're familiar with that are peptides. Insulin. GLP-1s are a peptide here. But what we're specifically talking about are these gray area peptides, these tick- tock shock peptides. Hims and hers has a compounding pharmacy. But now there is a potential for easing regulation. The FDA's advisory committee is considering adding seven of the key peptides to its 503A compounding list. Now, as you look at this, and we've talked about this more briefly on my show, is the FDA choosing between approving safe drugs, or are they having to decide which harm is worse, these gray market risks and people buying them in perhaps unsafe settings versus unproven clinical data? >> Yeah, another fantastic question. Before we get into that, I just want to clarify as much as I would love to take credit for Hot Peptide Summer. I unfortunately did not come up with that. Actually, GQ came up with that. They put out uh you know, I don't know if it's a magazine title or or some story calling it hot peptide summer. So, I took it from GQ. Um, but you know, nevertheless, it apparently is hot peptide summer because as we're talking, the first peptide BPC 157 just got voted on yes by the PCAT committee. So, we'll get into that in in in just a second, I'm sure. But to your question, the FDA has a choice, right? Here's the dilemma at the end of the day, right? We've got seven peptides that are up for debate, and the debate is, do we legalize them? Now the real question here is if we legalize them at least there's pharmacy prescriptions, there's physician oversight, they can control the purity and the potency and it's made domestically. So there's so much control. But the risk though is that there's not a lot of clinical human clinical randomized double blind trials where you can point to efficacy and safety definitively. However, the flip side of that is if you don't legalize it, well, you don't ban the use of peptide. Everybody, so many people are using peptides. It's like, you know, a billion dollar industry already and they're just getting it from like bodeas in Brooklyn. Like, it's ridiculous. You know, I saw a picture the other day, some corner, some corner shop in Queens is selling, you know, peptides. It's like, you know, that's that's also unsafe, right? And so, you're the FDA, right? You care about American safety first and foremost, and they do a great job of that. Now the question is which evil do you pick? Do you let people just go and buy this stuff from the bodeas or do you legalize it and let them get it through a safer route? So that's the question and if you notice here if anyone watches the actual hearings that's the that's the whole conversation. Everybody on that PCAT committee is basically pointing to the fact that if you don't legalize it people are still going to use it but they're going to get it from these gray market sources and it's going to be dangerous definitively. So you should legalize it and let domestic reputable producers take control of the supply so that we know that you're getting safer peptides if you know people are going to use it. So that's the debate that's going on right now >> and okay so we've got a we've got a yes to one of the peptides at least one of the peptides here. The conversation still ongoing but the FDA this is a recommendation at the end of the day. A I mean career staff saying they're recommending against inclusion, but we also know on the flip of that that Department of Health and Human Services Secretary RFK Jr. has very publicly champion peptide access, including his own usage of peptides. How much administrative discretion does HHS leadership actually have here to override standard FDA conservatism and also the the vote that's happening today? I mean, how much of this really matters in the broader conversation? >> Yeah. So, let me just kind of break down the dynamics at play here because you hit the nail on the head, right? A vote yes today or whenever you're watching this in terms of all of the peptides being voted on. That doesn't mean that peptides are legal and HIMS and all these other compoundingies can just, you know, go out and start selling them on mass scales. The PCA committee advises the FDA. That's why they're there. That's the whole point of this conversation. The FDA stance as it is is, hey, no, we don't want to legalize these things, but we're willing to have this conversation and hear you guys out. So, the committee is voting yes or no on do we recommend that you legalize a particular peptide, and they're going to vote on each one. But then the FDA has to take that into consideration and then make their own decision. And the reality is is the FDA is conservative. They care about the American population. They want safety and efficacy. And so they default to always the status quo until proven otherwise. And if you get votes from the PCAT committee, yes, on these peptides, and I don't think, time will tell, but I don't think all seven are going to get voted on yes. Maybe I'm proven wrong, but if you get a vote yes, the odds of the FDA actually legalizing that peptide go up significantly. I would say they're they're the majority, I would say maybe 60 to 75% chance that the FDA will ultimately legalize that peptide if that PECAT committee today votes yes. Now, in Oh, sorry. Go ahead, Marlo. >> I I have follow-ups here. So, okay. So if we we get this FDA approval, I want to bring Hims into this conversation because it was another reason that I've been waiting to have you on the podcast to talk about this is that when we think about him and hers, we think about this teaalth marketing machine. You can kind of get anything you want there. I also think about all the lawsuits when it comes to the GLP1 copycats. But there is another component of the business that you first pointed out to me that I want to talk about and how it relates to this conversation. We're talking about the vote and the FDA approval in that they have this offshoot, the CS bio. It's their FDA registered peptide facility in California. As far as we look at, let's say we get approval for all of these peptides and then we get the FDA approval. What does that unlock for him and hers? How does that change how you are looking at the company on the whole? what unlocks a whole new windfall of revenue. I mean, you know, the peptide industry is huge and just for some context, Hims and Hers Health is my own personal largest stock position. I hold a lot of shares and it's the crown jewel of Doc Shaw Financials investment portfolios across all our accounts. It's the number one equity position. HIMS has an opportunity to capitalize by selling peptides better than any other tellahalth company because not only are they the top dog, okay, they're number one and there's nobody close, but also they are the only US teleahalth company or really tellah health company probably in the world that owns their own peptide manufacturing facility and it's also FDA registered. So, as soon as these FDA, as soon as these peptides are legalized, HIMS is just going to go and they're going to go to CSBI, which they own. They're fully vertically integrated, and they're going to ramp up the production, and they've got an amazing distribution channel. They've got distribution warehouses in Arizona and Ohio, and they can ship extremely fast, and they're going to start selling these peptides. Now, the CEO, Andrew Dutham, said that they don't want to be first, they want to be the best. I disagree, but who am I to disagree with him? he knows better. I do think that first mover advantage in this in this space is very important. That being said, you know, it's it's it's a different industry and so maybe he wants to just play it safe, make sure everything kind of sticks and the regulations are good. So, I get it. Um, but I do think that they are going to benefit greatly. I think that the revenue potential could be billions of dollars over the next 10 years. And even Barons had a report that came out I think a couple weeks ago that said that they believe HIMS could capture 40% of the entire US peptide market. 40%. So HIMS has better infrastructure set up than any other teleahalth company. They're fully vertically integrated. So the margins on thing on these peptides are going to be fat and it's going to be I think a wonderful thing for him shareholders if these peptides do get legalized and it's going to be a big revenue stream. >> All right. So then let's play the flip of this argument here. Let's say we only get a yes recommendation on one of the seven peptides. The others all get nos. The FDA decides to go no across the board. What happens for him? Do we see continued use of these gray market compounded peptides? Do they have to stop doing that altogether? Do we see the reverse regulation? Are we seeing more people? I would in my research for a conversation found someone who believed they were injecting a peptide with dragon's blood in it into their system. I there are so many things that I want to say to that person. Uh but where >> you caught me. You caught me. Yeah. [laughter] I >> It was you actually. It was on your Instagram. Yes. Please. Dragons aren't real. I don't want to shatter it for you, but there's no dragon's blood in your peptides. >> I did find out the hard way. Yeah. >> Yes. But um I I'm certain this person may in the long run find out in the hard way too. Uh but what's what's the alternative then? They have this plant. Is there any use for it if we get nos across the board or do they just keep operating in the gray? >> Yeah. So let's talk about the flip side like you said. Okay. FDA comes out and they says you know what no chance peptides are not going to get legalized. What happens? Okay. First of all that does create a shortterm you know turbulence in the stock price right? the market is forward-looking. If you price in peptides being legalized and they're not legalized, then you know the stock might might fall. But long-term, when I look at HIMS, I don't look at them as a peptide company. Now, I've said this many times before. You know, I was on uh Schwab for uh you know, we were talking about HIMS, I think earlier this year, and I use the analogy that when Amazon first came out, they looked at it as a Harry Potter bookstore. And when they weren't selling these books, you know, everyone didn't want to own Amazon, not realizing that Amazon had larger ambitions than just selling Harry Potter books. And when HIMS came out, you know, they were just a uh, you know, pill dispensing company. Yeah, they're a GLP-1 company, you know, oh, now they're maybe going to be a peptide company. The reality is is that they're building a healthcare healthc care platform. And if they don't utilize CS Bio, right, that peptide facility for peptides specifically, I actually think that facility is going to come in really good use because, you know, Trump wants to bring back domestic manufacturing of pharmaceutical APIs and you could use that facility, at least to my knowledge from my research, I think you could use CS Bio to produce APIs for pharma companies. So all these pharma companies that come out with their drugs, they need an active pharmaceutical ingredient rather than source them from China or some of these other countries. HIMS could do that domestically. So I think that that facility is going to get a lot of use down the line. And this is something by the way that nobody has talked about in the mainstream. So if you see him start manufacturing APIs in 5 10 years, you heard it here first. But I think that facility is going to get a lot of use. Um and if peptides aren't legalized, well, okay, you know what? They they'll find other things to sell. They're not only a peptide company. So, of course, there's risk, you know, in investing. There's always execution risk and regulatory risk, especially with a healthcare company, but I think if your time horizon is long enough, that risk is a lot less than if you're just trying to day trade the stock, in which case, you know, I I don't really speak to that audience. >> And you make a really interesting comparison that I want to dive into in HIMS more broadly, not just in the peptide space here. You say that HIMS has the potential to disrupt health care the way that Netflix disrupted Blockbuster. So, if we're looking at this comparison, where are we in that journey? Is Blockbuster still open? Are we starting to see some of them shutter? How far do you view us in this timeline? >> So, I'm going to give credit to a colleague here. There's a gentleman that I talk about with him a lot. He's a big shareholder. um very private guy so I'm not going to you know mention his name or anything. He gave me a wonderful analogy. He's got some years on me. He's a very wise person. He defines disruption really on four pillars. Okay. It's some combination of better, faster, cheaper and easier. Okay. And if we look at at at Netflix verse Blockbuster, the first things that Netflix really did was it was a lot easier at the end of the day because you didn't have to go all the way to Blockbuster. You could just basically get the DVD shipped to you. It was in a lot of ways, you know, less expensive, you know, over time, especially when streaming came along because you didn't really have a lot of, you know, you didn't have the best content, but you got a lot of content for the price of like one blockbuster movie. So, you know, you had that kind of value proposition there. And it was also faster because what took, you know, four trips really to Blockbuster, you could just get delivered right to your house. And the last pillar was better. That was when Netflix became the Netflix we know today with the original content. And that's really kind of when they built out their mo. When I look at him today, I think they've checkboxed three of those four. They've checkboxed faster. They've checkboxed easier. And they have checkboxed the last one which is cheaper. But they haven't check box better yet. And so that is the last phase. And that's generally the time when the market really starts to go, oh yeah, wow, they are really good. Right? That's when the market wakes up. So I think we're really early. you know, HIMS is not changing the health care landscape tomorrow, okay? But, you know, if you're a long-term shareholder, I think you're going to start to see changes in about 5 years. And then I think in about 10 years, it's going to really be solidified. And I'll leave you with one more um piece of I think wisdom. And this is from another guy. He's a peer of mine, a very successful investor. And he he pointed something out to me one time about Netflix. He said, you know, it's impossible to go back Right. At some point we had Blockbuster. At another point we had Netflix. And at some point it became impossible to ever go back. And I thought that was a wonderful way, such a brilliant insight on how to explain a moat and how to explain, you know, like a company that is not going to be dislodged. So when I look at him, we could go back. If HIMS got knocked out today, we would go back. We it would be fine. But there I think there's going to come a time where we can't go back and HIMS is and that's when the market's really going to wake up. >> So when the market really wakes up in 5 to 10 years, what are you looking at for the value of HIMS? I was just refreshing it. We're right about $34 right now. >> Yeah. So when I value a lot of these companies, it's so difficult when you're looking at HIMS because things change so fast, right? It's like, you know, one day peptides aren't legal, the next day they might be legal. And it's like all this this it's just like a roller coaster owning this stock. But every company over a long enough period of time is worth the summation of its future discounted cash flows. All that means it's a fancy way of saying a company is worth the cash it produces. I think him is actually going to make maybe about 3.3 to$3.5 billion in revenue this year. I think their growth is only going to continue at a double-digit pace for the foreseeable future as they add more products and services to the platform. And ultimately, as they continue to take scale, their margins being so wide at the gross level, I think that's going to translate to very high net income margins down the line. I think the stock today in its current form is worth over $100 a share. But if the company continues to execute, that price could go way higher, the fair value of that company. And the same is true in reverse. If they don't execute, right, the fair value could could fall significantly. Okay? There's always both sides to to a coin. But I think that as it stands today, the company is worth more than $100 a share. >> All right. So then let's talk about phase two and phase three and and what gets us into this higher valuation potential. GLP1s is a big part of the conversation when we're talking about hims and hers. It's where a lot of people got access to them. It's a lot of the headlines that they've made tied to the big pharma companies as we talk about them now. We talk about them for weight loss, but that is even on its own starting to transition into other conversations now about inflammation and cardiovascular health and sleep studies. Even I've been seeing people using GLP1s for increased sleep. As you look at that same time horizon that you were talking about this 5 to 10 years out for HIMS at that point are we even calling GLP1's weight loss medication anymore? >> Well, let me check my crystal ball. No, I don't know. I I wish I had the answer. I you know I don't know what the market is going to look like specifically in 10 years. But here's here's what I think u you know generally in broadbase here's how I think about it right now. Hims is selling all kinds of different products. It could be a GLP-1. It could be, you know, hair loss products, dermatology product, all different kinds of things. And they've also got labs. So, they do lab testing. What HIMS needs is data. Okay? If they're really going to separate themselves and be the future of healthcare, they need data. They need to collect so many blood samples from so many people that they can start feeding that into their AI algorithms which they're developing right now. You know, HIMS calls itself a tech company. I think that's more marketing than truth right now, but I think that they will be a tech company in the future. When they take all that data, they're going to be able to actually get better patient outcomes for the treatments that they provide on the platform. That's the better that I was talking about in in the value proposition earlier. That's the point where we don't go back because HIMS is going to have the data to know, hey, you know what? This dosage at these times with these additional ingredients mixed into the to the formula is what's best for you and is going to extend your life with less symptoms. When we get to that level of care, I think that is when you know the market like like I said wakes up. I do think that the future of this platform is going to be a combination of reactive care and pre uh and preventative care. Okay? So, it's not just going to be looking backward at what happened to me that went wrong, but it's going to be looking forward at how do I prevent anything else from going wrong. And it's going to be, I think, a very sticky platform. And if they can execute on what their mission is, as long as they can deliver better quality health care at a cheaper price, this company's got massive potential. >> Okay. So, if we look at that as it's eventually going to be both reactive and preventative. I'm going on because I need these drugs, but now I also want to have a subscriptionbased service for this preventative care. If we're still looking at this long-term, let's call it 10-year horizon. Does that then ultimately make insurers more profitable like United Health because we're seeing fewer sick related costs here or an overall healthier American if they are in this sticky ecosystem and invested in this preventative care. >> Yeah, I think that health care costs could fall. It depends on so many factors. I think there's a chance there is a future in which health care costs could fall if everybody is doing more preventative care because you know less people are getting sick. You know I was talking with my best friend he's a neurosurgeon. We're having a conversation about GLOPs and the obesity rate is falling so much and it's an interesting trade-off because obviously obesity or uh GOPs cost money. You got to pay to get them the cash pay. But on the flip side, if less people are obese and you have less cases of diabetes, that could be when you look at the math a net positive for the overall health care system. So you're always weighing the costs of a product or service with uh the benefit of it. And I do think that the more react or the the more longevity care that people invest in that the lower overall health care costs uh could be in the future. But it's such a complicated industry that um you know it's it's it's above my pay grade as I say. But I do think that that that could be a future. >> All right. So let's look at at United Health too because I know that you regularly talk about them and I just sort of moved us into in the insurer conversation here. United Health has a very different setup though than the more broad insurance. They were a name that got battered. They had some Medicare pressure. They had falling margins, but you continued to call this one a value play here. A as you look at this and for viewers and and listeners trying to determine how you made that call, how did you decide that this was not a broken business, but in fact perhaps was just a bad year or a bad series of time for this company? Yeah. So, United Healthcare is so easy, you know, I can explain this in two seconds. Basically, you have a situation where United Health Group had much higher cost than anticipated. Okay? More people got sick for whatever reason. There there, you know, uh, theories out there, but more people got sick. But in health insurance, you can't just jack up the premium to recapture your margins. Okay? You're locked into a contract. There's all kinds of government interventions and regulations. It's not like Chipotle, right? Like, if Chipotle has their suppliers increase the price of chicken, they're going to turn around and they're just going to raise the price of all the burritos and bowls that they sell, right? It's going to be like instant. There's no delay. But you can't do that with a health insurance company. So, all United Health Group had to do was repric their plans. But because you can't do that instantly, it takes like two or three years to be able to gradually jack up your premiums to make up for the fact that your costs went up. That was the whole thesis of United Health Group. I mean, l a middle school kid could have figured this out. So that's why I bought shares for myself and for clients at like, you know, the the I think by the time I bought it, it was probably upper 200s, 260s, 270, something like that. I don't know off the top of my head. Um and and that was it. That was United Health Group. It was just it was a very good business that was just selling at a cheap price. You know, it's it's like um I'll give you another example. Years ago, I bought stock uh in an oil uh company called uh Devon um Devon Energy. Okay, this was during COVID and and the price of oil was really low because nobody was a able to go anywhere. Nobody was driving. Okay, so all these oil stocks got crushed and I went and I bought a ton of Devon Energy for myself. I didn't have a firm at this time, but the thesis was equally as simple as United Health Group. It was just that, you know, when people start driving again, demand in economics is like a spigot. You can turn it off and on instantly, right? You can wake up one day, everybody starts driving, everybody needs gas just like that. But supply, you cannot just turn on like a spigot. It takes a lot of time to ramp up supply when demand just shoots up. So what happens? You have a you have an imbalance in price. You have very little supply for very large demand. So what happens to the price of oil? Has to shoot up very quickly. So when I realized that I just bought a ton of Devon, I made a lot of money doing this. And so sometimes investments are very easy and you don't need to over complicate them. And that was the case with United Health Group. And so as you look at United Health, I have all these conversations about AI, especially as a potential uh disruptor or even potential beneficiary in the health care sector, but we talked about it with HIMS and how they're harnessing AI and working on their own AI platform. When you look at the insurers, how are you viewing AI in that landscape? >> Well, I think as an investor, let's just say it's better than as a member. I think that as a member, the last thing you want is for an insurance company to process your claim with AI because more often than not is probably going to get rejected. So, I always keep that in mind. I have so much empathy for people who are going through the health care system because of how unnecessarily complicated it is. So, I just want to make that clear. Um, from a business standpoint, implementing AI is good. I mean, they're going to make more money from doing that, right? because they're going to probably deny more claims. They're also going to have a lot of cost getting cut. And when you're an insurance company and you know like United Health Group and you're making like so much money at the top line, even if AI improves your margins by like 1% that's like you know tens of millions of dollars that that get added to your bottom line. So it makes a very monumental difference um in terms of the business. And that's true for him. It's true for for any company, you know, it's just I think it's really going to expand the margins whether it's a health insurer or any other business. >> All right. And so this brings us to the part of the podcast that we call the sprint. It's basically a rapid fire round. You can say whatever you want as your answer. The first thing that comes to mind, it doesn't have to be in a full sentence format, but it certainly can if that's how you want it to be. Uh, and I I've got a little bit of everything here, though, so stay with me. Uh, if not healthcare, which sector would you have wanted to specialize in? >> Uh, retail. I think retail is a fun sector. It's super easy and you know, you're familiar with the products. You use them every day. >> All right. Least favorite sector. >> Oh, biotech. I hate that's like a graveyard of like, you know, just, you know, it the widowmaker. Absolute widowmaker. I would never touch a biotech stock. >> Biotech is almost adjacent to healthcare. Your least favorite sector is right next door. It's the neighbor. Okay. I love that. Um, most misunderstood healthc care company. >> Oh, got to be >> most underrated healthcare trend. >> Oh, good question. Um, I don't know. That's a good question. I think maybe just automation. I think people aren't uh really judging how much automation is going to take place in claim processing. >> Most overrated metric in healthcare investing. >> Oo. in healthcare investing. Um, most overrated metric. It's a that's a good question. Um, [sighs] I'll get can I can I uh give you the most overrated uh across the board? Is that okay? >> Absolutely. >> Price of sales. Okay. Doesn't matter. Okay. If I make There's an old joke, right? If I uh start selling quarters for nickels, I'll have the largest revenue business in the entire world that won't be worth anything. So don't look at price of sales. >> All right. Uh the healthcare trend that will dominate the next decade after GLP1s. >> Personalization. >> Personalization. I like that one. Uh biggest investing mistake you've ever made if you're willing to share it with us. >> Sure. Um I'll I'll share the the overall process. Um it's it's not not selling a stock when it's clear management doesn't have a grip on things. Um you know when you listen to earnings I I I can deal owning a stock that needs time to turn around you know a year or two perfectly fine. I don't mind. What I don't like is being misled to on earnings calls. So when I listen to an earnings call and I hear you know prediction for next quarter that doesn't come true. I see the same prediction that doesn't come through the next quarter and so on and so forth. Um, you have to get out of those stocks very quickly. >> All right. Now, I want to uh pivot to baseball here. Little known fact about Schwab Network. About half of us have a background in sports. So, if we have anybody who likes or has played sports, we always get sports in here. Uh, craziest minor league baseball promotion you saw during your playing days. >> Oh my god. We used to have this thing. I played for a uh team called the Southern Maryland Blue Crabs. They used to bring fans down to the uh to the this the playing surface and they would put them in these huge like bubble like uh costumes that are just like filled with air. They would line them. One would be at home, one would be at third base. This is on the sideline, right? Literally in between innings, okay? And they would have them sprint at each other and they would just boom and they would just go in opposite directions like this. And and and these guys, you know, that would bring fans down. Sometimes they were malicious. So they'd bring like like a like a big guy down and then they bring like a little guy down, you know, like two people who [laughter] are very different weight sizes and you know what do you think's going to happen? You know, you got one guy flying across the the stadium and the other guy standing there like he just won the, you know, WWE or something. I It was ridiculous. >> You got a pop fly on the little guy and my eight-year-old daughter absolutely loves uh those bubble suits. So I I have seen them in action and when you have tiny children, they they really do fly. Uh, best Clubhouse prank that you can tell us about. >> Oh man, I wish I could tell you the best prank ever. Uh, but that would get me kicked off Schwab permanently. But, um, I think the best Clubhouse prank, you know, um, I I used to really like, uh, to take people's phones and text the group chat like really silly stuff. So, like if somebody left their phone like next to me in the clubhouse, I would just pick up their phone and like send them a message and like, you know, something something silly like I don't know, like uh you know, hey guys, I think I'm going to quit and you know, start a uh Christian gospel banner or something. I don't know, just something kind of funny, you know, just just to make the guys laugh. And it was a good time. It's it's a harmless prank, too, which is really nice. >> A fellow potter stirer. I like it. Sometimes I like to stir the potter. I make the joke I drop the bomb and then I walk away and watch from the side just to see what happens. It's fun, right? Uh uh I got two more quick ones. Um where have analytics been more useful to you? In baseball or in investing? >> Uh definitely investing. I think baseball is is such a feel thing. You know, you want to go up and um you just want to make sure you play the game the right way and you're going to do great. I think in investing um you know, analytics really matter. I don't think it's that important. I don't think you need to go through and read every word of a 10K. Um, but uh knowing kind of what to look for um is is super important. You know, numbers don't lie, so uh you'll make better decisions with those analytics. >> All right, and I saved my favorite one for last. Uh which well-known CEO would make the best professional baseball player. >> Oh, that's a great question. Um man, who who would it be? Who's you know what? I'm going to go with my current favorite CEO, Bill McDermott. He's the CEO of Service Now. That's actually our third biggest position at the firm. I'm a huge fan. Um I know he's got I read his book. He's got a basketball background. So, um you know, I think he he'd be, you know, great in in baseball. Great great athlete. >> It translated for Jordan. Maybe it can translate for McDermott, too. Raul, really appreciate you joining us today. I've been looking forward to this conversation about peptides since and I'm still giving you credit for hot peptide summer GQ or not. You're still getting it from me every time. Uh but it's been great to have you on the podcast. Thank you so much for joining us. >> Thank you. Thanks again to Raul for being with us on this episode of Market Matters. A few things stick out to me from our chat. First, Raul saying that value investing will never go out of style or become irrelevant. Not now, not in a hundred years. He quoted Warren Buffett and the three most important words in investing, margin of safety, meaning that buying a stock or a business at a price significantly below its actual intrinsic value is how you should approach investing. He highlighted what you pay isn't the inherent value. It's what the market is interpreting its value as right now. He says as long as a company's mispriced by the market, he is going to continue gobbling up shares. I also like what he said about the four pillars of disruption. He calls them better, faster, cheaper, and easier. He says him and hers has checked three of those four boxes, but is still working on better, which he views about 5 years down the road, and once that happens, it will fully disrupt the healthcare space the way that Netflix did Blockbuster. And at that point, he says HIMS should be priced well north of $100 a share, but he also added that he thinks it's worth that. Now, I had a lot of uh takeaways I want to mention there, but I'm going to leave it there for now. I want to thank all of you for being with us today, too. This has been Market Matters. You can find us wherever you get your podcast. Please make sure to rate, review, and subscribe. I'm Marley Kaden. I hope you'll join us again next week.