Pabrai Wagons ETF Shareholder Call Replay - June 10, 2026

Good afternoon and welcome to the Pabrai Wagons ETF shareholder call. I always

look forward to these. Before I begin, Aiden Townsend, our manager of investor relations, has a few disclosures that he needs to share with all of you. Aiden.

Thank you, Mohnish. Good afternoon and welcome to the Pabrai Wagons ETF investor call.

Before we begin the Q&A, let us start with the usual disclosures. Investing

involves risk, including the potential loss of principal.

The fund is non-diversified, meaning it may focus its assets in fewer individual holdings than a diversified fund.

Therefore, the fund is more exposed to individual stock volatility than a diversified fund.

The fund may invest in small and medium capitalization companies, which involve additional risks such as limited liquidity and greater volatility than larger capitalization companies. The

fund is new with limited operating history, and there can be no assurance that the fund will grow to or maintain an economically viable size.

Past performance does not guarantee future results. Opinions expressed are

future results. Opinions expressed are subject to change and are not intended to be forecasts of future events, a guarantee of future results, nor investment advice.

Fund total holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security.

Exchange-traded funds, ETFs for short, are bought and sold through exchange trading at market price and not NAV, and are not individually redeemed from the fund.

Shares may trade at a premium or discount to their NAV in the secondary market.

Brokerage commissions will reduce returns.

Now, I'd like to hand the call back over to our portfolio manager, Mohnish Pabrai.

Thank you, Aiden, and thank you, everyone, for taking the time to join our call. We got a lot of questions that

our call. We got a lot of questions that came in. I would guess over 100, maybe

came in. I would guess over 100, maybe 125 questions that came in, which obviously we can't go through all of them. And there's also a Q&A window in

them. And there's also a Q&A window in which you can add your questions. I

don't know if I'll be able to get to those. I have selected about 25

those. I have selected about 25 questions to go through and I've typically tried to pick one question related to one holding, which I'll go through before I take a second question,

and then there are also kind of fund-related questions as well. And I

have to say that we have a very engaged, intelligent shareholder base, and I was very impressed with a number of the questions and the depth of the understanding of some of the portfolio positions. So, that's wonderful. So, I

positions. So, that's wonderful. So, I

really enjoyed actually going through the questions and such. So, our first question is, you hold roughly twice as much Warrior as Alpha. Given Alpha

favors buybacks while Warrior is leaning towards dividends, why the larger Warrior waiting? Which management team

Warrior waiting? Which management team treats shareholders more like partners?

And does the tax inefficiency of dividends change the compounding math?

If forced to keep one, which would you choose? In the last 3 years of investing

choose? In the last 3 years of investing in thermal and metallurgical coal and studying a number of the different players, what I've found is that these

companies have very specific advantages and disadvantages, and we can't just say one is better than the other based on whether one is doing buybacks or not.

That's that is a factor. But, just to give you some differences between Warrior and Alpha, I think both are exceptional businesses, both are run by very good management teams, both are very shareholder-oriented, and both are

very focused on returning capital to shareholders. So, I think that's

shareholders. So, I think that's commonality between them. Warrior does

longwall mining, whereas Alpha does room and pillar mining with continuous miners. Without kind of getting into the

miners. Without kind of getting into the kind of technical details, you can ask God Google about that, but longwall mining is significantly cheaper than room and pillar mining. You need

relatively large mines to run longwall mines, but if you're able to run those, then the mining cost can be less. When

you're mining coal, because coal is a very bulky commodity, the logistics of transporting coal become very meaningful. So, the first how it's

meaningful. So, the first how it's mined, you know, between longwall mining or surface mining or room and pillar mining, that's one equation. The second

piece of the puzzle is how the coal gets to the surface, you know, whether it's coming up through buckets or through a slope. Then the next piece is the

slope. Then the next piece is the transport infrastructure, whether there's trucking involved or whether there's rail transport. And then

how far you are from a port.

So, just to give you one difference, so Warrior has a significant cost advantage on pure mining costs. It's sitting sits in the bottom quartile of the global

cost curve, and they may just be a very small handful of mines that actually have a lower cost curve in terms of exported metallurgical coal than Warrior. Those are They're very

Warrior. Those are They're very efficient mines. Warrior also has the

efficient mines. Warrior also has the ability to get its mine to the port of Mobile either through rail or through barge. And that is a very big deal,

barge. And that is a very big deal, because the railroads typically have monopoly access to the mines, and they act as if they own the mine. So, for

example, in the case of Alpha, they don't have a barge option. They also

don't have a second railroad option.

They are dependent on a single railroad to get their coal to the port, and the railroad does not charge them a fixed amount per ton. The railroad takes a

percentage of the top line revenue that Alpha generates. In the case of Warrior,

Alpha generates. In the case of Warrior, because they have the barge and also because they're closer to the port and also because congestion in Alabama is less than on the Eastern Seaboard,

Warrior, for example, will have a cost of kind of $15 to $30 a ton to get their coal from the mine to the port and Alpha's costs will really be at the low

end about 25 or $30 and go all the way up to about $60 a ton. So, when we look at these businesses, one of the dominant factors for me is where are they on the

cost curve of the coal when it hits the water. Once it hits the water, it's very

water. Once it hits the water, it's very similar. And on that, Warrior wins quite

similar. And on that, Warrior wins quite significantly. And it wins enough

significantly. And it wins enough significantly that if they were only going to be able to do dividends, I would still rate them higher than Alpha.

Warrior also had a restriction till April 19th of this year where, because of their NOLs, they could not easily buy back stock. But besides that

back stock. But besides that restriction, Warrior's management has a stronger preference towards dividends, but they will get to buy backs. I think

currently Warrior wants the cash balances in their business to become a little higher. And when they have maybe

little higher. And when they have maybe it might take them another quarter or two, but once they have the little higher balance, then I think their dividends may go up and buy backs may

enter the picture as well. Going to the next question, with Noble and Transocean together near 17% of the fund and offshore drilling historically capital

intensive with poor return on assets, how do you frame the exit? Is this a durable compounder or a Ben Graham style mispriced bet you intend to exit once

the gap to replacement value closes? So,

just couple of clarifications there. As

I look at the portfolio currently, we have three bets in the offshore drilling space, Transocean, Noble, and Valaris.

And they, in combination, are over 19% of the funds, so almost a fifth of the assets. I don't know whether we are

assets. I don't know whether we are going to cover Micron over here or not, but you know, there's been some chatter about my holding in Micron in the past.

And you know, people seem to be very distressed about me exiting Micron. It's

a very, very high capex, capital intensive business, which has delivered exceptional returns. Berkshire owns

exceptional returns. Berkshire owns Flight Safety, which is also a very capital intensive business, which also delivers spectacular returns. So, we

cannot just make a statement that if a business has capital intensity, it is automatically not such a great business.

Even though Burlington Northern is a capital intensive business. We did not buy these businesses at their their, you know, replacement cost or even their

tangible book values in terms of where they're at. We bought these businesses

they're at. We bought these businesses at well below what the value of those assets would be. And these businesses very much have the ability to generate

exceptional returns from our entry price, which is what we're really care about. Whenever we're talking about, you

about. Whenever we're talking about, you know, returns that we generate. So, for

example, there's another investment in our fund, Wesco, which when we originally invested in the private funds, we invested at less than 3% of liquidation value. And obviously, if

liquidation value. And obviously, if you're going to buy even business that generates low returns on capital at 3% of liquidation value, you're going to generate very high returns on the

capital we've invested. I like the risk-reward ratio with the offshore drillers. I think that they have

drillers. I think that they have superior returns on our invested capital. We are not intending to exit

capital. We are not intending to exit these businesses anytime soon. There is

a thesis in the industry that the last drill ship be built by humans has already been built. And if that is true and humans are still drilling for oil, you know, 30, 40, 50 years from now,

these are going to turn out to be truly exceptional businesses for a very long time. We do view the businesses

time. We do view the businesses favorably in terms of our ability to hold it for a long time and generate good returns. Going to the next

good returns. Going to the next question, how do you value Constellation given its premium multiple, a PE above 40 before the recent drop, and its very

different organic versus acquisition driven growth rates. So, I think that when you look at Constellation, looking at its PE would not be the correct way

to look at the business. They have a lot of non-cash goodwill charges, etc. that are running through P&L and such, which really distorts the true economics of the business. Better off looking at the

the business. Better off looking at the free cash flow generation of the company. And when I looked at the the

company. And when I looked at the the free cash flow multiple we were playing in buying into Constellation was extremely attractive. It's nowhere near

extremely attractive. It's nowhere near 40 times, even 20 times for that matter.

And the second is that Constellation, I think the way to look at it is that if this was a business, if you looked at just the organic growth of the business, just ignoring the acquisitions for a for

a minute, the business has organically, historically grown about 3% a year. We

have no reason to believe that it would organic- -ally grow less than 2 or 3% a year. So, what is a business that is

year. So, what is a business that is going to grow cash flows, you know, 2 3 4% a year, what kind of multiple should that business trade at? And I would

argue that, of course it depends on interest rates, but at current interest rates, probably something like 10 times cash flow might be too low, and maybe 15 or 17 times cash flow might be a tad

high. So, somewhere in the middle of

high. So, somewhere in the middle of that if they had just this organic growth. But they have this second

growth. But they have this second engine, which is they are able to take the cash they generate, and after the tweaks they're able to make to the

acquired businesses, they're effectively buying these businesses at four or five times cash flow, maybe even less. And

so, that is reinvestment rate of your cash flow that 20 to 25%, which is wonderful. When you put it together with

wonderful. When you put it together with their organic stable businesses and adding to it these inorganic growth engines. It makes it a very good

engines. It makes it a very good business, and so that's why we like it.

Next question, what does the short-term and long-term outlook for Ross look like? And given how little public

like? And given how little public information is available, can you offer a deeper health check on the business?

My friend Nick Sleep and his partner Case Lakaria Zack Nick and Zack, the way they invested was that they'd come into the office and they'd sit and read annual reports. And they'd read annual

annual reports. And they'd read annual report till something hit them over the head with a 2x4. And when they saw something exceptional, they would go deeper and so on. And they ended up with company like Amazon and Costco and

Berkshire, etc. in their portfolio. A

company like Ross would never show up in that portfolio because that annual report would just be gibberish from their point of view. And that is unfortunate, and we tried to talk to Ross management several times that, you

know, maybe an investor deck might be interesting and maybe a little more disclosures in terms of if our positions are reversed. And I haven't really

are reversed. And I haven't really found them to take that input and do anything with it. And I'm also reluctant

to push them. So, it's just been a kind of a light nudge, and the light nudge is mostly ignored. But the way I look at it

mostly ignored. But the way I look at it is that these guys are exceptional operators. They've built a lot of value

operators. They've built a lot of value in the past. They're going to build a lot of value in the future. And if we have have to live with a situation where the public information and the way the

business is described and the disclosures to the investors stays in the way it's been in the past, then such is life. I'm still perfectly fine with

is life. I'm still perfectly fine with that. I think way I look at Ross is that

that. I think way I look at Ross is that the father-son team that run the business naturally are exceptional

allocators of capital. They are really not interested in opportunities to deploy capital where they are not getting you know 20 or 30% annual return

or higher in dollars or euros. When they

go in sometimes they'll make some investments where the return might be 15% or something and they are not very happy about that but they do it every so often. So they have built a tremendous

often. So they have built a tremendous amount of value given where we what we paid for the business and even what we paid for it in the Bagans fund, it would be a great investment I think if you

were paying full value, you know, full book value for it and we are but when we're not we're able to get in below that. So we're very happy with that

that. So we're very happy with that position and one thing I should just stress with all these companies I'm talking about is you're mostly going to get the bull case from me and it is

highly unlikely, probably zero probability, that all these companies are going to do what I'm telling you is the future. I'm sure some of these are

the future. I'm sure some of these are not going to work out. I'm sure some of these are going to end up being losers but I would say that even with a healthy error rate we should end up with a decent return. So I don't think you

decent return. So I don't think you should treat it as the gospel truth that all these companies are going to do extremely well. The nature of capitalism

extremely well. The nature of capitalism is creative destruction. There's a lot of competition. Any of these businesses

of competition. Any of these businesses can go south. There are a lot of reasons in how and why they can go south. So you

should just keep that in mind which is one of the reasons we have a portfolio and we don't have a single bet. You

established a 5% stake in GMAT in late 2024 and a much lower price then average up to a 20% ownership stake

after a multi-bagger run. What was the logic of quadrupling the position after such a large increase? Was the thesis verified or did the underlying real

estate value grow even faster than the stock? So first some of the facts in the

stock? So first some of the facts in the question are wrong. We started buying GMAT about 11 months ago, maybe 10 or 11

months ago in 2025, not in 2024. And

based on our last disclosures across all the entities I manage, we have a stake of over 25% not over 20%. The situation

with G Mart is interesting and it's also a situation which I struggled with a few times as we were building our position.

So, when we started buying G Mart, market cap at that time was about $70 million 70 or 80 billion dollars at that time. Just the real estate which is not

time. Just the real estate which is not used in the grocery business in their stores was about 70 million. So, you had a business that could generate maybe you

know 10 to 15 million pre-tax excluding the real estate with plans to grow that business a lot. So, how you value that 10 to 15 million is a big question. I

mean, if you were to value it on the basis of little to no growth in the future, you might say that G Mart may be fully valued at something like 200 million market cap. But, if you were to

say that, you know, they have aspirations to have at some point maybe it might take them 10 or 20 years to have 80 stores in Turkey and maybe even have some stores in Germany and so on

and we don't know whether they can do that or not. If we had a crystal ball which told us that the probabilities are high that they can do that, then even buying at the current 300 odd million

market cap or less than 300 million. I

haven't checked exactly where it is right now, would be a great investment.

And so, when we look at businesses like Walmart, if you look at business like See's Candy, based on what transpired after the purchase or after the IPO, one

could have bought Walmart at 200 times trailing earnings and done extremely well after the IPO. And Warren Buffett paid 25 million for See's Candy, he could have paid 200 million and done

really well. But, that's dependent on

really well. But, that's dependent on having a crystal the about the future.

So, I think the way I look at GMAT is that GMAT has elements of a venture bet in it in the sense that it's embryonic.

It only has two stores. They have

aspirations to get a lot bigger, but they're also in a very difficult and competitive industry. I have met the

competitive industry. I have met the founder CEO. I think the DNA of the

founder CEO. I think the DNA of the company's exceptional. I think what

company's exceptional. I think what they've done with the two stores is exceptional. I think they have better

exceptional. I think they have better than average shot at at least some scaling. So, will GMAT have more than

scaling. So, will GMAT have more than four stores in a couple of years? I

think the odds are very high on that. If

they get to four to six stores in the next two or three years, you have a very different company. You might have a

different company. You might have a company that's making 20 30 million in cash flow, and now you have some growth trajectory you've seen, and that would justify a significantly higher multiple.

So, we don't know kind of where GMAT's going to grow. I think that I felt at times that not increasing the position, looking at where they might grow would be a cardinal sin. At the same time, we

may find out in the future that we bought something fully priced, maybe even overpriced. We don't know. But,

even overpriced. We don't know. But,

currently, as I speak to you, I like that bet, and I'd like to keep that bet for a while. There are no guarantees, you know, just the way it is. It's a

different bet than a lot of other bets, but we like that. The next question is on Tab Airports. The stock is down 30% in US dollars over two years. Has the

business been impaired by the Iran Middle East conflict, and given how much of the portfolio sits near the conflict zone, does a prolonged conflict permanently damage the operating

leverage thesis? Tab is a great

leverage thesis? Tab is a great business. We try not to take cues about

business. We try not to take cues about the business from the stock price.

Sometimes that can be a good thing every once in a while, but we look at we try to look at the underlying business. The

headwinds Tab faces don't have much to do with the Iran conflict, though I would just say that if the Iran conflict ended tomorrow and the Ukraine war ended tomorrow, TAB would get some tailwinds,

which would be great. But, the headwinds they face are unrelated. So, the first headwind they face is that a number of the airlines in the airports that they

operate have issues with Pratt & Whitney engines. So, Pratt & Whitney has had an

engines. So, Pratt & Whitney has had an engine issue. There's a number of

engine issue. There's a number of grounded planes and they haven't been able to get these planes fixed at a better rate. Problem is being worked on,

better rate. Problem is being worked on, but basically, effectively, they've got number of airlines which are not able to apply their fleets completely. So, it's

affecting a lot of traffic at the Almaty Airport. That's one issue. The second

Airport. That's one issue. The second

issue is that Boeing has had a very hard time with production and Boeing is just now starting to get its production kind of act together and there's a massive

backlog. So, a large number of airlines,

backlog. So, a large number of airlines, I would say airlines around the world, are facing shortages of planes. They're not able to get the planes they want. And this is a big issue because at a number of the

airports that TAB that TAB operates, a number of low-cost carriers have emerged and these low-cost carriers are trying to grow very fast and they they do have the ability to grow, but they don't have

the airplanes. So, this is another big

the airplanes. So, this is another big headwind that TAB is facing. And the

third headwind that TAB faces is that when they took over the Almaty Airport, per passenger fees were extremely low, especially the international per passenger fees were

like, you know, less than 20% or even 15% of where they supposed to be.

Recently, the government basically came to TAB and said that they want to move the fuel business away from TAB and take it over eventually. There was

always a plan for the government to take it over, but the government wants to accelerate that and in lieu of that, the government is helping them work with the airlines to increase the passenger fees

quite significantly. So, I think that

quite significantly. So, I think that when I look at TAB in the next maybe two or three years, all these issues should be behind them. We should have, you know, all the airlines will be getting the planes they want, and they should be

cranking hopefully these conflicts.

Clearly, the conflicts have affected them. Some of these conflicts go away,

them. Some of these conflicts go away, and then the tailwinds of having very strong passenger demand at the same time Turkey's economy might be doing even better in the next two or three years.

So, we think that in general they've got some positive things that might come out in the next few years. Obviously, oil

prices being high is another headwind that they face currently. But, we remain bullish on TAB. We think it's a good business. Going to the next question,

business. Going to the next question, given your long experience with Turkish businesses, how do you assess Kaspi's strategy and likelihood of success in Turkey? Yeah, that's a great business. I

Turkey? Yeah, that's a great business. I

don't know how long my experience in Turkish businesses is. I'm a distant observer. Won't call myself an expert.

observer. Won't call myself an expert.

But, I would say this that Turkey is a very non-digital economy, very different from the way Kazakhstan right now is, and very different from what from what

WeChat has been able to do in China. And

Kaspi has had just incredible execution.

I would say almost miraculous execution in Kazakhstan. And they are planning to

in Kazakhstan. And they are planning to repeat the playbook in Turkey. I think

they have a decent shot. You know, it's a different geography, different people, different nuances. But, it's also a very

different nuances. But, it's also a very good management team. WeChat themselves

recently took a stake in Kaspi, which means that they must like what Kaspi's doing as well. So, it remains to be seen. But, the way we looked at it is

seen. But, the way we looked at it is that we didn't think that we would lose money on the bet if the Turkish bet didn't work at all. We were buying into the business, the Kazakh business, at a

very low multiple. It was discounted even based on just the pure Kazakh business. Company is very shareholder

business. Company is very shareholder friendly. They've reinstated a dividend.

friendly. They've reinstated a dividend.

They're pumping out of lot of dividends.

I think the dividend yield now is around 10% and I think that we've got to kind of a moon shot kind of with Turkey and we'll see how that works. So, in some ways this is similar to G Met in the

sense that you're paying for the base business, you maybe paying at a discount to the base business and we've got a an upside if the Turkish bet works and that's we like that type of situation.

Edelweiss spin-off and value unlock thesis has been in [snorts] place since inception with little visual progress and no announced holdco IPOs. How do you

weigh the resulting opportunity cost and does the thesis hold? Edelweiss

historically has spun out one business, Nuvo Mama, and Nuvo Mama's market cap now exceeds the market cap of Edelweiss

and it was embryonic inside Edelweiss and I think that scenario might play out a few times. They are planning to do an IPO of their E AAA business in the next

few months. There's also been some

few months. There's also been some negative news where they had two co-CEOs of the E AAA business and one of them left recently. I don't know why he left

left recently. I don't know why he left and the rumor is that he's going to do something competitive. I met both

something competitive. I met both co-CEOs. I'm not a big fan of co-CEO

co-CEOs. I'm not a big fan of co-CEO situations, but I met both of them I think maybe last year. I think I met them both and if I were to make an assessment based on a brief meeting, I

thought the guy who quit was a stronger of the two leaders. That guy quitting is not good news. He's good he was very solid operator. I liked him a lot.

solid operator. I liked him a lot.

Second guy I couldn't tell as much, but I felt the first guy was was better. But

so, there is some murkiness there with Edelweiss. So, we will see how things

Edelweiss. So, we will see how things turn out, but beyond E AAA, they have four or five other businesses that should IPO in the next four or five years. For now, the thesis remains

years. For now, the thesis remains intact. We will see how it plays out.

intact. We will see how it plays out.

You and Lilou did deep work on Micron, and you owned it in the hedge fund. Why

not own it in the ETF as the AI data center built out lit the rocket? And do

you regret selling earlier than ideal, potentially forgoing a 10x? I had

completely exited Micron before the mutual fund or the ETF even was started.

So, we the mutual fund started in September 2023, and by that time we had fully exited Micron. And while I have regrets about exiting businesses like

Ferrari and Goldman Sachs and BYD and so on, I do not have regrets about decision to exit Micron because I don't think we could have I think it would have been

almost impossible to have kept it till today based on what was going on. And I

think we had pretty justified reason to exit at the time we did. So, I think what is happening with Micron is kind of a set of outlier events that have taken place, which have driven the stock.

Obviously, if we owned it today, we would keep the position because they've got some tailwinds for a while, but we're not inclined to buy it at current valuations, etc. But, I wanted to just

explain that Micron was front and center large bet. It was our largest US bet for

large bet. It was our largest US bet for 6 years. We kept that bet from 2017 to

6 years. We kept that bet from 2017 to 2023, 6 years. We kept it through the pandemic. And in 6 years of owning

pandemic. And in 6 years of owning Micron, basically all we got out of it was a double. So, it was okay, 12 14% return or something over that period,

but it wasn't what we thought we might get when we had originally invested. And

a very key part of the thesis for investing in Micron was that it was an oligopoly with three rational players,

Samsung, SK Hynix, and Micron. At that

time in 2017, 2018, I met with all three of the companies. In fact, in Seoul, in Korea, had multiple meetings with the senior guys at SK Hynix and the

semiconductor guys at Samsung. As well

as I met Sanjay briefly and had number of interactions with their CFO, etc. Over that period. So, at that time in

2017, 2018, 2019, it was very clear that this was an oligopoly where it was almost impossible then and even today for a fourth player to enter the memory

business. I think that the odds of that

business. I think that the odds of that happening is almost zero. It's very The barriers to entry are extremely high.

And these three players, if you have, for example, let's say American Airlines and United Airlines. And let's say they have 80% market share flying between

Chicago and New York. It is illegal for them to sit in a room and collude and set prices on what the New York-Chicago airfare should be. But what they do do

is that if American raises or lowers the fare even slightly, United is going to watch that and react almost immediately to that. So, there is a very immediate

to that. So, there is a very immediate reaction to anything that one player does. And in the memory business, it was

does. And in the memory business, it was very important So, the history of the memory business that it had been a terrible business. It had been a

terrible business. It had been a terrible business for decades. Most of

the players went bankrupt, did not earn its cost of capital, just a bloodbath.

And the reason it was a bloodbath is that the players would go for market share. They would want to grow. And the

share. They would want to grow. And the

way you go for market share is you drop your prices. And the Because the moment

your prices. And the Because the moment you drop your prices, the customers will switch vendors. And then, of course,

switch vendors. And then, of course, it's a race to the bottom because the second person's going to drop their prices well. What we came away with in

prices well. What we came away with in the research in 2017 to 2019 and beyond was that these three companies were not colluding. They're not sitting in a room

colluding. They're not sitting in a room setting prices. But, they were content

setting prices. But, they were content with the market shares that they had and none of them had any plans kind of muscle the other out of the equation,

etc. So, Samsung was 800-lb gorilla with more than, you know, 50% market share and the other two were about equal, about 25% each and they were going to kind of stay there. And I discussed the

Micron situation with Charlie Munger about how stable these oligopolies are.

And Charlie brought up that Warren had studied Coke and Pepsi bottlers in almost every geography around the world.

And he said that and what Warren found is that in 95% or 97% of cases, both bottlers made great money and it was a

great business. But, there were like 3

great business. But, there were like 3 to 5% of geographies where because of the personalities involved, one or the other bottler decided that they wanted

more market share and they became more aggressive with the promotions. And the

other person, of course, is going to react like American and United is going to react and it became a race to the bottom. And so, these 3 to 5% of Coke

bottom. And so, these 3 to 5% of Coke and Pepsi bottlers made no money. Can

you just imagine that to having franchise where you're the only guy bottling Coke and you're still not making money. And so, it's very

making money. And so, it's very important in oligopolies that the players are rational. And we saw a lot of evidence that there was rationality.

But, then what happened in 2023 is Samsung changed tactics and decided it wanted more market share and wanted more

growth and they became more aggressive.

And basically, immediately the other two players reacted as well and the profits disappeared. So, we're looking at a

disappeared. So, we're looking at a situation in 2023 where cash flow has gone and we had held the stock for 6 years. We had a double. There was a

years. We had a double. There was a concern whether this would lead to a secular decline because if they continued down this path, that's not a good situation. So, it was murky enough

good situation. So, it was murky enough for us to say, let's you know, ring the register, take our situation and move on because core assumption has changed.

Now, what has happened since then with especially in the last couple of years is that, you know, the whole AI and all of that taking off has meant that there

is simply not enough chip capacity around. And all three companies are

around. And all three companies are trying to increase capacity as aggressively and as fast as they can, but no matter how fast they're going, they're still going to have difficulty

meeting the demand. The demand is that intense. So, they've got tailwinds for a

intense. So, they've got tailwinds for a long time. And because they cannot meet

long time. And because they cannot meet the demand, they have raised prices very dramatically. I mean, Micron is not

dramatically. I mean, Micron is not trading at a high multiple because they raised prices so much. I feel that the spending that's taking place with the Googles and Metas of the world, a lot of

it is going to the pickaxe makers, the Microns of the world who are making supernormal profits. So, when Google

supernormal profits. So, when Google raises 80 billion of capital to invest in data centers, they are not getting what that 80 billion would have bought them 5 years ago. They may be getting 20, 30 billion or less of what they were

able to get a few years back because the prices have gone up so much. So, I think it's become much harder for these scalers in terms of what they're doing.

But from our point of view and from my point of view, with all the data I had available in 2023 and everything that I was looking at, I just felt that doing anything else at that point was actually

going to be gambling. No regrets on selling Micron and no plans to buy it at this point. You've identified many great

this point. You've identified many great opportunities early, but exited too soon. Indian businesses in the late

soon. Indian businesses in the late 1990s, Fiat Chrysler, Silicon Valley Banks, Moutai, Micron. How can

shareholders be confident those lessons are reflected in the early sell decisions on today's high conviction positions? I think that's a fantastic

positions? I think that's a fantastic question. At least the Micron portion of

question. At least the Micron portion of it I've already addressed. And I would say this that for the longest time I had overdosed on Graham and underdosed on

Munger and that started to change with Nick Sleep's influence around the 2017-2018 time frame. And the change I made at

time frame. And the change I made at that time was that not to sell a business when it approaches its perceived intrinsic value, not to even

sell it when it exceeds its intrinsic value and maybe consider selling it if it gets to egregiously beyond intrinsic value. And because we don't really know

value. And because we don't really know what intrinsic value is, we can be off on that. And also great businesses are

on that. And also great businesses are very rare. So, when we own a business

very rare. So, when we own a business like Goldman Sachs or we own a business like Ferrari, we really need to own that almost forever. So, we do have companies

almost forever. So, we do have companies in the portfolio that we do like a lot.

Many of these businesses I think that if they continue to grow their moat and such, then we will give them a lot of rope and we'll want to hold on to them.

So, hopefully that'll be the case going forward. And I think that's been the

forward. And I think that's been the case for the most part in the way I've been running money for at least eight to nine years and certainly for the entire period that the Wagons ETF and Wagons

Fund has been around. How do you reconcile a Circle the Wagons long-term compounding philosophy with a large allocation to inherently cyclical

commodity dependent businesses like Metcoal and Ausdrill Drilling? And what

gives you conviction they can deliver compounding light outcomes over time?

So, people like to use short-form descriptions of businesses like cyclical commodity business. So, if I look at a

commodity business. So, if I look at a business like Aramco, Saudi Aramco, some people would call it a cyclical commodity business. I would call it a

commodity business. I would call it a business with one of the widest, deepest moats of perhaps any business on the

planet. So, Saudi Aramco used to have

planet. So, Saudi Aramco used to have cost of producing a barrel of oil that used to be a couple of dollars a barrel.

Even now with all the inflation and everything, their cost of production is around $10 $12 a barrel. And they can produce 10 or 15 million barrels a day for a long time with some very

long-lived reserves. So, if I own an oil

long-lived reserves. So, if I own an oil field where my cost of production is even $15 a barrel, pretty much never going to lose money in that business.

Yes, the cash flows are going to fluctuate, but if I depending on what I paid for that business, I mean, what I'm saying is at a $100 stock price and a

[snorts] $80 $90 per barrel, you know, margin, you're almost producing a billion a day, more than a billion a day in cash flow, three or 400 billion a

year. None of the multi-trillion market

year. None of the multi-trillion market cap companies produce three or 400 billion a year in cash flow, none of them. And they've been doing it for

them. And they've been doing it for several decades in the past and they'll be doing it for several decades in the future. When I look at a cyclical

future. When I look at a cyclical commodity business, if it is the low cost producer, they're almost always going to make money and that's a great business. So, that's why I said right at

business. So, that's why I said right at the beginning that Warrior, in my opinion, is a better business than Alpha because Warrior will be making money while Alpha is losing money. Met coal

prices go really low. We think Warrior has a moat. We think Transocean has a moat. We don't think these are commodity

moat. We don't think these are commodity businesses that are flavor of the day, if you will. But they need to be bought at the right time at the right price.

The portfolio has few classic wide moat consumer brands or scale advantages franchises. Is that a deliberate choice

franchises. Is that a deliberate choice valuations or preference of special situations and cyclicals or simply nothing in that category clears your hurdle and what role if any do

compounder style moat businesses play?

Well, the way I look at it is that if the guys at Constellation and the guys at Raisers are going to generate 20 plus

percent return on equity for a long time. I like that business. Business

time. I like that business. Business

like Cospi they built that business in Turkey. That's going to be a very high

Turkey. That's going to be a very high return on invested capital. We like that business. So we kind of get there in a

business. So we kind of get there in a different way because I think I'm not able to pay up. So I think we've got a number of very good companies that have

the ability to have scale advantages and do well over the long term. So they're

not names on the tip of your tongues but I think we think we'll do pretty well with them. A core principle of yours is

with them. A core principle of yours is letting winners run yet ETF diversification rules seem to cap how large any single position can grow.

Doesn't that impose a hard ceiling that forces trimming and how do you reconcile the philosophy with the structure? In

general, the ETFs and mutual funds have a lot of rules and laws about being diversified but also in general they do not require trimming purely because of

market movement. So what I'm saying is

market movement. So what I'm saying is that if we had a 5% position at cost and it went up 10x, we are not required to trim that position. We can keep that

position. We hope to keep our winners.

position. We hope to keep our winners.

We are not going to trim them because I don't think any regulations are going to require us to trim them because we're not buying into them if you will. Okay?

If you had to pick the top two management teams or individuals across the the portfolio, who would they be?

Well, that's a very difficult question.

I actually enjoyed that question. Kind

of a fun question because I don't never thought about that. The first one is easy there we Constellation. I think

Constellation just has the most kick-ass DNA, business culture, and all of that.

I think just very shareholder oriented, etc. And also very disciplined on return of capital and you know, maintaining generating high ROEs and all that. The

second one was more challenging for me to figure out, but I would say if you put a gun to my head, I would say something like Minerals just based on the track record. It would

be a good number two in terms of the quality of the people and what they've done. Next question, will you be

done. Next question, will you be attending any value investing conference in Europe where shareholders could meet you in person? Well, I don't know whether this is easy or not, but I'll be

at the Pareto Energy Conference in Oslo, in Norway, on the 16th of September. I'm

looking forward to that because that's when I'm going to meet all the CEOs of all the offshore drilling companies in one day in one place, which is very efficient. Going back to another met

efficient. Going back to another met coal question. The historic spread

coal question. The historic spread between the Australian PLV and the US East Coast low wall has persisted for a few months now. The contrast is even

more significant for High Vol A and High Vol B, which is core to Alpha's revenue.

What is your view of the persistent historical spread between US and Australian met coal prices? Is it an issue of human biases from Platt or market equilibrium to be expected? Well,

that's a great question. It's also I don't know whether I can answer it in the five minutes we have left, but I'll give it a shot. So, the East Coast low

wall is similar coal to Australian PLV.

Australian PLV typically goes to Asia, and East Coast low wall going to Asia would basically have a longer freight run and would be more expensive. So,

generally speaking, those two indices should have a delta which is equal to the freight Delta based on the distance

between Australia and Asian destination and the East Coast and the Asian destination freight Delta. Because

basically these companies like Alpha and even Warrior can sell into those markets. I'm not not Warrior so much

markets. I'm not not Warrior so much because they don't have that much low all they have some. But Alpha can take its low wall coal and convince those buyers to buy from them at a discount

which is equal to all maybe 5% off on the freight Delta. The high wall A high wall B situation currently is a little bit more complicated because those indices do not always reflect the grade

of coal.

So for example Warrior's coal has more moisture. It has about 5% more moisture.

moisture. It has about 5% more moisture.

It has about 5% more ash than the Central App high wall.

But it has better cooking properties than the Central wall. So basically

there are some nuances and one other things that when you're running a blast furnace that you're able to do is you can put more high wall A in the mix and high wall A currently has a lower price

but it's going to take the efficiency of the furnace down which may not matter if you're not running at full capacity. So

in a situation where a furnace is not running at full capacity they can actually change the mix and in that case there would be more demand for high wall A etc. There are

also we hear that there are new blast furnaces coming online in India which are designed to use more high wall A which is a cheaper option. So I think

the general view is that high wall A got over supplied because Warrior bought so much coal into the market and the market is still digesting that and hopefully in

the next year or 18 months these spreads will get to be a little bit more rational. Next question which is

rational. Next question which is probably going to be the The question.

Will Wagon pay dividend or distributions and what happens to the dividends the fund receives from its holdings? Is the

treatment at the managers discretion or mandated by the ETF structure? To get

the tax treatment of a regulated investment company, Wagon is required to issue a dividend a distribution each year in December and that distribution includes nearly all of this ordinary

income, dividend income as well as net realized gains. We try our best to

realized gains. We try our best to reduce capital gains where possible through tax loss harvesting if we can.

We also get efficiencies from in-kind redemptions if we have them. Many

shareholders choose to reinvest their distributions automatically in shares of the ETFs. This is something you need to

the ETFs. This is something you need to specify with your broker. Although we

have distributions in December when we receive dividends throughout the year from our businesses, we do reinvest them where we can. How do you compare Transocean and Noble in light of the Valaris acquisition and what does the

combined entity look like? Expected

dilution, synergies, EPS, etc. Actually, they and we're at 4:00, I'll just finish this and then end it. But basically,

it's a really good deal because Transocean is levered and Valaris is not levered and bringing them together Transocean has a better management team, which is the team that's going to run this. And so actually, it's a big

this. And so actually, it's a big win-win. I'm a big proponent of the

win-win. I'm a big proponent of the merger and we own both and we hope that deal goes through. There's no

indications that they're not going through this, not much of a spread. And

so with that, we're at 4:00 and I'm sorry I couldn't get to so many more of your questions, but thank you for joining us and I'll see you in a few months and thanks for being investors in the Wagons fund. Talk to you soon.