In this week's Stansberry Investor Hour, Dan welcomes Bryan Beach back to the show. Bryan is the editor of Stansberry Venture Value and a senior analyst on Stansberry's Investment Advisory.

Bryan kicks things off by discussing the idea of passive investing and how it has changed the way the market is valuated. He says that folks are relentlessly buying the biggest stocks every time they invest in their retirement funds, and they don't even know it. This "irrational indifference" could result in such a high level of volatility that it leads to mass liquidation of stocks. Bryan then talks about Software as a Service ("SaaS") and why artificial intelligence ("AI") isn't going to kill the companies that focus on it...

There are two reasons why I don't think AI will kill some of these big companies. One, they're building out the data centers that they hope are going to facilitate for everyone else. And two, it's not like Microsoft and Oracle and Intuit coders aren't going to be using AI themselves. They're going to be using AI to code their stuff... I'm not saying that we know who the winners are going to be and who the losers are going to be, but the incumbents are not hosed.

Next, Bryan does a deep dive into Salesforce (CRM) and its business model. Investors thought that AI was going to undermine the company and similar businesses because it offers better efficiency and can be cheaper. However, its software is so embedded in its customers' operations that they don't want to leave it, even if they aren't in love with it. Bryan says that "sticky" companies with models like that are ones you want to look at...

If [folks using a product that has AI tools] want to stop using it, they can just stop. Or if AI comes out with a new product, there's absolutely no pain to try the different product. You can just switch like that... Some of the concerns around AI are valid... [However], there are some companies that are more entrenched with their customers than others... Don't make assumptions.

Finally, Bryan shares the market sectors he's most interested in right now. He says investors should keep an eye on the conflict in the Middle East. This has created multiple energy investment opportunities in North America, especially in Canada. But in general, it pays to frequently brush up on what's going on in the world to see what new opportunities could arise. And contrary to what you might think, investing isn't an "either/or" matter. If you're focused on long-term investing, you can take advantage of volatility and make options trades...

[I come] from long-term investing, value investing... and you see really smart [option] traders... and people seem to think it's either/or. [They think] if you're into the kinds of things that [I] write about, then you wouldn't be into options trading. And I don't think it has to be either/or... Chart volatility is real. It happens, and you can make money figuring out what's going to happen. Ben Graham... would tell us, "It's meaningless for long-term [investing]," and he's right. It is meaningless for long-term investing, but that doesn't mean you can't trade around it and make a little money on it.

Click on the image below to watch the video interview with Bryan right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

Bryan Beach is a former "Big Four" auditor and a certified public accountant who holds bachelor's and master's degrees in business and accounting, respectively. He spent six years in public accounting and then a number of years as a controller and director of publicly held software companies. He also ran his accounting consulting practice. Bryan's ability to sift through company filings – finding opportunities and red flags – is his specialty. His unique experience in creating and auditing financial reports allows him to see what most investors miss.

Bryan is the editor of Stansberry Venture Value, an advisory service focused on small-cap value investing. He's also a senior analyst and contributor to our flagship product, Stansberry's Investment Advisory.

Dan Ferris:                 Well, get ready for some extreme volatility in the world. That's what we're going to talk about in part. We're going to talk about many things today, but we're going to talk about passive investing, mega-cap gigantic stocks, the potential for the stock market to go to zero – not kidding. It's a real paper, an academic paper. We're going to talk about that with our guest Bryan Beach. And while I'm thinking about it, there is a great webinar with Jonathan Rose on May 28. You can sign up for it at volatilityprofit.com. volatilityprofit.com. If there's one thing you want to know, it's how to handle volatility, because as we're going to talk about with Bryan Beach today, you're going to see some of it, I believe, in the next few years in the stock market.

                                    And it could start at any time as far as I'm concerned. I'm not going to pretend to know the schedule. It could start tomorrow, next month, next week, next year, next three or four years. But I think it's coming. So, let's get into that. And we'll talk about specific stocks and a lot of other stuff with Byran. He's my good friend. I've known him for years. So, let's do it. Let's talk with Bryan Beach. Let's do it right now.

                                    Bryan, welcome back to the show. Always a pleasure to talk with you.

Bryan Beach:              Yeah, Dan, it feels like I was just here, but I guess it's just because I ran into you at a conference last week. I wasn't on your show. But it was good catching up and glad to be here.

Dan Ferris:                 Yes, yes, we did attend a little meeting. I thought there were a lot of great ideas there. I heard some things that blew me away. And some things – everybody wants to talk about AI, so that's not unusual, but I felt like I heard things that just I never expected to hear. I mean, I just – it was pretty amazing. Anyway.

Bryan Beach:              Yeah, what grabbed your attention like that?

Dan Ferris:                 Well, it was the thing that Josh Baylin was talking about, about augmented humans, like the last pure human has been born. And I just thought, "Wow." And it's one thing to say that, but it's another to have the whole thing spelled out with a timeline. He had – he must have had 40 or 50 ticker symbols on that one slide, too, about companies that would benefit from it and those that would be just fine no matter what happens.

Bryan Beach:              Yes, daughter is the last real human. She was born in 2025 or something. That was a little bit of an interesting shtick or a way to put it. But yeah, that was a showstopper for sure. Yeah, especially for guys like you and me from the value investing background, reading 10-Ks and punching up numbers into spreadsheets. It's interesting to hear kind of visionary investor types, how their brain works, watch their method. And that's why I love these conferences. You learn from a lot of different kind of people.

Dan Ferris:                 Yep, you get all the – just everybody we work with all together and all their ideas. It's just really exciting. But I want to talk about an idea that you have spoken and written about. I've actually spoken and written about it quite a bit, too. And I don't want to spend a lot of time because we spent a lot of time last time you were on the show, but it's an interesting topic, and it is the topic of passive investing, the relentless passive bid.

Bryan Beach:              Right.

Dan Ferris:                 I found it interesting – did you see a paper by Mike Green and Hari Krishnan and a couple – one or two other people that said at some point starting in about four or five years, they expect the market could go to zero, actually, that the volatility could be so great that the S&P 500 would actually go to zero. Did you see that?

Bryan Beach:              I saw the paper and I saw your article on it. I'm not a mathematician. When I rolled my sleeves up and tried to understand the paper, I just kind of had to trust them. I don't follow the Greek letters and math. That's – I might have understood that at one point. But it is something I've been writing about a lot. I actually was at a – I went to a presentation that Michael Green gave when – the last time I was in Baltimore, he was there. And the slide deck, I think, was three or four years old. He's clearly done this talk a lot. But it was about what I've been talking about. And I think I got the idea from hearing him on a podcast.

                                    But if you're new to the game or you didn't tune in last time I was on here, I'll just give a quick rehash. The idea is passive investing through 401(k)s has probably permanently changed the way the market is valued. People, without thinking about it or saving for retirement, which is a good thing – whether they understand the stock market or not, they're saving for retirement. And most of those dollars are going into an S&P 500 Index fund, which is a passive fund in that there aren't decisions made based on the kind of things you and I do, rolling up your sleeves and sharpening your pencil and figuring out what's undervalued. You put – if you put $100 in, it's a weighted average and $35 of those dollars are going to the very biggest stocks in the market. And it's causing a real valuation dislocation.

                                    And when [John] Bogle started doing this, started Vanguard – that was the first passive investor fund, the first S&P 500 Index, it was a small part of the market. And what's happened now, as guys like all of us are saving for retirement, every paycheck, or most of us, we're all just throwing money at these passive investing funds. And it's really causing some changes to how stocks are being valued, particularly at the top end of the market.

                                    And I've talked about this as it relates to Apple. There's something like – I think I wrote it down – 90 million investors investing in 401(k)s. On average, they're putting probably $10 or $12 per pay period into Apple, just Apple. And that – it used to be Apple has good news, the stock goes up, or you're enthusiastic about Apple's prospects and the stock goes up. If Apple has bad news, the stock goes down. And there's still some of that. But you can see the flood of when they talk about relentless bid, this relentless buying of stocks is really obscuring the valuations at the top end of the market. And I pick on you sometimes and other people who put these 20-year valuation charts in there and I'm like, "Yeah, the market is a lot more expensive than it was in 1991 or 1981 or 2001 because there's some different dynamics in play here." There's a huge $600 billion a year of 401(k) investments passively flowing into the market.

                                    What you were talking about is Green – Green's presentation did a masterful job just showing this relentless bid in action and showing exactly how it causes these big stocks to be – I won't say overvalued but just richly valued, more valued than they've ever been. I don't fully understand his point about the Rubicon getting crossed and then the market going to zero from that. And so, I'm sure he's got a point there. That's an important part of the story.

                                    But when I talk to people – I've given a presentation on this and I talk to people – my dental hygienist didn't realize she was investing in the stock market. She's like, "Yeah, what do you do?" We're waiting for the dentist to come back after she cleaned my – "Oh, I write about stocks." She's like "I'm not in the stock market." It turns out she was investing in a 401(k) and she didn't realize that was the stock market. She – it's not irrational exuberance. It's irrational indifference. She didn't even know she's buying Apple every single pay period. So, if you don't realize you're buying Apple or the stock market, I don't fully understand what's going to cause you to just liquidate all of a sudden.

                                    So, I – Michael Green's kind of – it loses me a little bit. I think it has to – there's just – we're creating a volatile bomb, is kind of the way he put it, and something's going to happen in four or five years. We're not exactly sure what. The volatility is going to just amplify to the point where the dental hygienist doesn't have to pull her money out of the market. Something's going to trip things and there's going to be a huge drawdown. So, a longwinded answer, but yeah, I've been following this for a while. And we did talk about it a bit last time I was on here. Fascinating topic.

Dan Ferris:                 Yep. My interpretation of that phenomenon of going to zero is that eventually, if passive becomes this huge part of the market, then the part that's not passive, it becomes very, very small. And I thought the point might be that big flows in and out of that could really make things volatile, similar to the way that – it's kind of a stock-versus-flow issue, but similar to the way that if a billion-dollar company only has a $50 million float or something, big money going in and out of that float – and I know it's stock versus flow. OK, I get it. I read economics books. But just – it's analogous is all I'm saying to that.

Bryan Beach:              Yeah, that's a great point. I see that down in the microcap world where I spend most of my time. If a company has no float and then there's a little bit of good news – it might even be just the CEO bought some shares in the open market. A little bit of extra demand sends it up – a little bit of extra selling sends it down on no news. So, yeah, it's kind of – this is just kind of that in a trillion-dollar version of that or multitrillion-dollar version of that. It makes sense conceptually, yet I wasn't scared enough to completely reconfigure my own 401(k). But maybe that's coming. Got to brush up on the Greek letter math.

                                    But yeah, that's a fascinating thing to watch. And it's a fascinating thing to watch at the top end of the market because a lot of the people who write about stocks for a living, maybe not doing exactly kind of newsletter, but people are writing headlines or the AI bots that are writing headlines in financial – they don't seem to get it. And if Apple is up 5% this month, they'll try to find a reason for that. Or if Tesla or one of these other huge companies are up, they'll be like, "Oh, investors are excited about Apple's product." I'm like "I'm pretty –" Apple, the last two years, there hasn't been that much good news for Apple. And I just –

Dan Ferris:                 That's right. With Apple. Are they though? I don't know.

Bryan Beach:              I don't think that's what's happening. And it used to be – I talk about Ben Graham and Mr. Market and there's just – sometimes he's irrationally exuberant, to borrow a phrase that wasn't Ben Graham's, and sometimes he's overly pessimistic. And this is just indifference, irrational indifference in a way that we haven't really, really seen for these – and it all gets focused on the seven or eight or 10 biggest companies. So, I'm interested in it – Michael Green talks about it more from a macro point of view, but I think it's been interesting to watch it from kind of the biggest stocks in the market, which is a little bit ironic because I'm paid to write about small-cap stocks. But I do think about the valuation at the top end as well.

Dan Ferris:                 I know. So – and that's funny because the other thing that I think we should talk about is you make a really great point about [Software as a Servive ("SaaS")] and AI and their – and how investors had expectations of how they would influence the biggest companies like Microsoft and other large – all those big Mag Seven companies. At some point, from some perspective, they're all pretty much like software companies, so everybody thinks AI is going to disrupt them. So...

Bryan Beach:              Yeah. I was talking to – I was on another podcast about this and, again, we were talking about Microsoft. So, on your show I use Apple as my example. On this show I talk – or, on other shows I've used Microsoft. Microsoft's interesting. If you go back, software as a service – this is my background. Before I was writing about newsletters, I was a controller at a public software company. SaaS was – it was not a guaranteed success. There were people, including the company I worked for, that fought the idea. They liked the perpetual license model more as opposed to selling a subscription and then folks loading the software through the internet onto their – the alternative to that, of course, was – you remember when you used to load CDs onto your computer? Or, the corporate version of that is you bought a server and you loaded the software onto the server and that server served all your computers' hardware throughout the building or whatever.

                                    SaaS was not a guaranteed success. And there was people who pushed back on that. But once it caught fire, the – Mr. Market seemed to think that anyone who was in the old business was hosed, including Microsoft and companies like really – Intuit was caught in that. Adobe was very early on switching to SaaS. But the market had to switch between – the stock market decided "OK, these guys are going to be winners and these incumbents are going to be losers."

                                    But then what happened, companies like Microsoft and then Amazon and even Oracle – Oracle was another one that people kind of assumed was going to fall away. And as a controller at a big accounting department, we used Oracle, and it was not something that was going to go away as far as I was concerned. We didn't really love it as a software, but it was just so ingrained. Anyway, these companies, they – Dan, they went out and they built the data centers that facilitated the SaaS revolution for other companies. So, Amazon Web Services, that's just an enormous server farm that other software companies are using to host their software. And Microsoft did the same thing, not quite as successfully as Amazon Web Services, but they have their own version of that. And not only did SaaS not kill Microsoft – and again, we're talking about 15 years ago now, that's the SaaS revolution – Microsoft, because it had so much money, was able to build some of the data centers that facilitated SaaS for everyone else.

                                    So, what we're seeing now is the exact same thing with AI, which is not exactly – so, what's happening? Watch this carefully, Dan. AI is supposedly killing Microsoft every – OK, they've got Copilot. They've got something – but that's – all of these big software companies have come down. And they do still come down, even with the relentless bid, to mix topics. They're still coming down or riding flat for a couple years. It's really – Oracle's come way down. A lot of these software companies. Intuit's come way down. Salesforce.com's come way down. And what you're seeing is they're all trying to follow the Amazon playbook, the Microsoft playbook from the SaaS revolution. They're building – they're the ones spending tens of billions of dollars, hundreds of billions of dollars building the data centers that's going to facilitate AI.

                                    So, I don't think – there's two reasons I don't think AI is going to kill some of these huge companies. First of all is what I'm talking about. They're building out the data centers that are probably going to – that they hope to facilitate it for everyone else. That was the – that's what happened 15 years ago with SaaS. The other thing is just that it's not like Microsoft and Oracle and Intuit coders are not going to be using AI themselves. They've got – they're going to be using AI to code their stuff. They're going to be building AI products themselves. There's an analogy I used with – in another podcast with Matt Weinschenk, and I can't remember where I got this idea. I'm stealing it from somebody, but if there was a magic pill that made you and me 50% better at basketball, we would take it and we would be way better at basketball than we used to be, but that pill is also available to LeBron James and everyone else in the NBA. Like –

Dan Ferris:                 And Microsoft is LeBron James.

Bryan Beach:              Yeah. It's not like I'm going to all of a sudden become an NBA All-Star. Everyone's got access to that pill. And so, this idea that AI is going to come in and the people at Oracle or Microsoft or Salesforce.com are going to be just like, "Oh, golly, what do we do? We're still coding with black screens with green font on it" – no, they're using it as well. I'm not saying that we know who the winners are going to be and who the losers are going to be. But I am saying that the incumbents are not hosed just automatically.

                                    And I think that there's been – for value guys, Dan, look carefully. There's been some – a lot of these pretty good companies are down 30%, 40% heading into the year. You can just pull up – I'll just list three: Salesforce, Intuit – I think that – well, there's a lot – Oracle. Oracle. All of them have come into this year – and I think Mr. Market's like, "I'm not sure who's going to win and who's going to lose, but I'm just going to kind of sell everybody and sort it out as earnings come through in 2026." It's a very interesting fishing pond for value investors. There's going to be winners and losers.

Dan Ferris:                 So, I'm just grabbing a chart in Bloomberg of Salesforce. It says the high price was December 4, 2024, just on a two-year chart. Down 51% to date since then. Salesforce down 51% has generally been a pretty good bet. I'm just saying. Right?

Bryan Beach:              Let's talk some more about Salesforce. And I've been running my mouth the whole time. I'm interested to hear your thoughts too, because we were at a conference, like I said, last week. Somebody made a comment in passing about the AI winners and losers. The idea was that Salesforce was going to be a loser. The reason was they make too much money and that's where – those are the companies that get disrupted the first. Easiest. The companies that make – historically. And the idea is that people are going to start building these customer data Salesforce kind of products internally with AI and they're going to replace – we won't even need Salesforce anymore. So, I actually –

Dan Ferris:                 I'll tell you something, Bryan.

Bryan Beach:              Yeah?

Dan Ferris:                 I'm going to use – I've always wanted to own a Ferrari, and I'm finally going to be able to use Claude or ChatGPT to build my own, is what I'm going to do.

Bryan Beach:              Right. Right. So –

Dan Ferris:                 Yeah.

Bryan Beach:              So, I went to – listen to this. So, I went – this is interesting. I didn't know what was going to happen here. I ran into the guys who run sales organizations for the biggest publishing companies in the world, including guys we work with. They're all on Salesforce.com. So, I just – I went to them. I'm like, "Am I missing –" maybe they're right. I don't know. Maybe the – don't know. So, I asked them – and I'm going to read you some of this feedback. They are not – they would not get rid of Salesforce in a million years. There's two guys on this thread, and that's – to summarize it:

                                    It's sticky because companies don't just use Salesforce. They build huge parts of their sales and marketing efforts around it over years and years and years. By the time you consider leaving, Salesforce is usually embedded into workflows, reporting, salesman compensation, forecasting, customer history, integrations, automations, compliance, making it impossible to live without.

                                    And I said, "Do you even like the product?" That was my next question. "Are you just stuck with it?" He's like "There are parts I love and parts I wish that were better. But overall, it's the best option out there, in my opinion."

                                    And this happened with – in my old world, too, with software. When you're embedded with the software and they've got all of your data integrated, it is a multiyear process to integrate. And can AI make that more efficient? I'm sure it probably can, but these guys have lived through it. They're like, "We're not going to mess with that." So, he just said – I asked him about that. I'm like, "What's it like to switch?" And he said, "We just did a revamping of our Salesforce workflow –" so, within Salesforce – "and it took over a year." It is painful to switch some of these things.

                                    And he did say there's a – Salesforce has this thing around Einstein. That's their AI bot. His – and I've read a lot about Einstein from Salesforce's point of view. I've heard what management says about it. This was interesting feedback. "So far, it's been just OK." So, he doesn't love it. "They can improve on the implementation of it. It'll make it even more sticky. Right now it's been up to the user to train the model, but if they can do that for us or we can just iterate, more people will adopt."

                                    So, that's always what I like to do, too. When I hear management talking about how transformative Einstein is, which is the new Salesforce AI bot, and then talk to someone who – this guy runs an organization with probably a couple dozen sales people, and he's like "Yeah, it's fine. It's cool. It's a neat trick." But you talk about, "Hey, what would you do if they raised the price 10% next year?" They're like "I'm not even going to look at their invoice before I approve it. I'm going to sign that approval without thinking about it."

                                    This is turning into a huge bullish Salesforce.com, but this is what I'm talking about. AI is great. I'm starting to use it on research. I'm starting to use it to help me word tricky passages. I'm sure you're figuring out ways to use it in your day-to-day [life]. I'm not anti-AI. I just – I think that the people that work at these big companies are smart enough to figure out how to use it for their jobs as well. And when I think about AI winners and losers in software, you've got to think about how integrated they are into the day-to-day lives of these – of their users.

Dan Ferris:                 Yep, and I want my listeners to know Bryan just did a great job of describing – with some real on-the-ground scuttlebutt information – the competitive advantage of switching costs. It just costs too much. It takes too much and costs too much. It costs too much dollars and time and corporate resources. And why bother because what you have works just great.

Bryan Beach:              Yeah. Yeah. And again, he doesn't love Salesforce. He's like, "Yeah, it's fine. And nothing we could try is worth the pain of switching." Let's think about another – have you come across in your value-investing circles – I keep coming across Duolingo as a – as something people are pitching.

Dan Ferris:                 Somebody just mentioned – yeah, yeah, somebody did just mention this.

Bryan Beach:              So, I have – two of my kids are using Duolingo just to play around and try and learn Spanish. I don't know. But Duolingo is kind of cool because they do – I see you it pulling up. Tell me how much they're down. And so – but their version of stickiness, Dan, is to send you alerts to try and get you to stay on your streak. They're like, "Hey, you've got a streak of 212 days" or a hundred – and actually, a lot of social media stuff – Snapchat does that. I don't understand it but it seems to work. "You have snapped Dan for 194 straight days. Snap him again." And I won't – they don't even send each other messages. They just said, "Hey."

                                    So, that's Duolingo's version of stickiness. I don't know if it's working or not. I don't think my kids speak Spanish at this point, but if they want to stop using it, they can just stop. Or if AI comes out with a new product, there's absolutely no pain to try that different product. You can switch like that. And Duolingo might be the best thing there is for learning a new language. Maybe it is. Maybe it isn't. But I know it's not sticky. Its users can try a new version or try a new AI product for a week with no cost at all. And they're certainly not using it day to day for their livelihoods.

                                    So, I think that some of the – I think that's a good example. Some of the concerns around AI are valid. I think there's companies that are more – of course we talk about moats, competitive moats. There's just companies that are more entrenched with their customer base than others. And as you're out there, listeners or people who are just reading or thinking about investing, just think about how hard is it for their customer to switch? Such a simple question. And you know what? The guy that was presenting for us last week who was telling us that Salesforce can just be done away with, a smart guy. I read his stuff. I know he knows what he's doing. But don't make assumptions either.

                                    So, I called the guys I knew that that run sales departments, and I'm sure you're out there, you've got a golf partner or a friend of a friend or your brother-in-law that's in sales. Ask them what they think of Salesforce. Ask your kids what they think of Duolingo or someone in education. It's not hard to get a little bit more boots on the ground, the scuttlebutt, as you call it. I think that that's a key part of investing, even if you're somebody who loves spreadsheets like I do. And I'm not knocking the guy who maybe he's going to end up being right about Salesforce. I don't know.

Dan Ferris:                 Right. Right. We're not knocking anything. It's just working it out. You got to work it out for yourself. You can't just take somebody else's word. And it doesn't surprise me that this is something that you do because I've generally thought the smaller the company, the more you'd better get the scuttlebutt, because you're not – are you really going to find out something from somebody that's going to tank Microsoft? I don't think you are. But you could find that out from a company with a $100 million market cap.

Bryan Beach:              The problem with those guys, Dan, is if you talk to executives, what I've learned – you don't get to be CEO of any company without being a good sales guy. They know what I want to hear. They know what – they know how – they're sales guys. Most people running public companies know how to promote themselves, know how to promote their products, know how to promote their company. So, you've got to go, if you can, independently as well when you do that. Sorry, I cut you off. You looked like you were getting ready to drop an insightful nugget on us.

Dan Ferris:                 I was – no, I was just going to tell you that you asked about Duolingo. That one's down 79% since last – over the past year, almost exactly to the day. So –

Bryan Beach:              Yeah, and maybe that's too much. I don't know. I haven't looked at it.

Dan Ferris:                 Yeah, I don't know, either.

Bryan Beach:              I haven't looked at it at all. I do know that there's some value vultures circling Duolingo, and at a certain point it's cheap enough. But I do know this. Salesforce is down 50%. Duolingo's down 79%. I feel like Salesforce is way, way stickier. And they're doing some stuff. They're trying to build AI data centers. They're trying to do – they're spending some money that maybe they don't – in five years, it'll look like maybe they shouldn't have spent. So, Mr. Market's not dumb. He's just kind of handicapping the odds. And I think 50% is too steep of a drawdown for a company like Salesforce. Eighty percent for Duolingo? That might be just about right, or it might be too much. I don't know. I'd have to look at it. Let us know what you think in the comments. Hear that? I'm boosting your YouTube engagement, Dan. So, you're welcome.

Dan Ferris:                 Yes, you are. Well, look, last time when – Salesforce was down, like, 58% in '21, '22, that bear market, and then up to its next peak, it was, like, 180% or so. So, who knows? This – Salesforce could be getting to make a killer run here and –

Bryan Beach:              I don't know if I –

Dan Ferris:                 If you look at a stock like Amazon as the classic example, multiple, multiple, multiple huge drawdowns on the way to a 2,000- bagger or something crazy – so...

Bryan Beach:              Yeah, I always use Microsoft as my – I'm sorry, I always use Amazon as my example when one of my microcap picks is down 70% again and I have to try and salvage the egg on my face and I'm just like, "No, it just happens. It's just something that happens."

Dan Ferris:                 That's right.

Bryan Beach:              It does happen. I don't know that it happens often, but yeah, for the first something I've written – there's a chart I use, a table I use for Amazon all the time – not all the time, but whenever I'm writing about this. I think every year for the first 15 years of its existence, there was a 50% drawdown on average every year. There was always good news and bad news. Amazon wasn't really making money. It took them a long time to really make money. And of course, there have been books written about this. We don't need to get into that. But just a – that's a fascinating case study.

                                    Salesforce is another one. It's – I'm pulling up the chart now myself. It was 280 last May, 180 right now. So, something to look at. If you like picking up scraps of companies that have fallen, I'd take a look at this one.

Dan Ferris:                 All right. Is there anything – so, this is a mega-cap big company. Is there anything in your – I know you have subscribers to think about, but is there anything in your small-cap universe that you feel comfortable sharing a ticker symbol and a story?

Bryan Beach:              Well, it's May 19, 2026 right now.

Dan Ferris:                 As we speak.

Bryan Beach:              And I'm watching what's happening in Iran every day, the Strait of Hormuz. And of course, it's hard to not get into political stuff when you're talking about what's going on over there. I do think that's a complicated issue. I think that our media outlets don't necessarily get into all the nuance. It's one of those things where it's black or white, you're for it or you're against it, but I think there's way more nuance there.

                                    But as an investor – I always think it's gauche to kind of talk about this, but we have been getting – we have been buying and recommending a lot of North American small-cap energy and energy-adjacent businesses as the – really, since 2022. We started calling them energy conflict hedges when Russia invaded Ukraine the first time, and then amping it up as the conflicts have escalated in the Middle East. When the world needs energy, North America is kind of the default safe spot. And we have been up – from Canada – and not just North America. We recommended a company – and not just energy companies. We recommended a company that had exposure to the UK helicopters that would ferry people to and from the offshore places in the North Sea. It's a company called Bristow. We got out of it.

                                    I can't remember if I grabbed a quick gainer or something happened with it. I recommended that a couple years ago. But I actually had to – I said I make no apologies, but it was kind of one of those "I make no apologies" apologies because my readers have been hearing about the same story every month, and I'm like, "Listen, this is a big deal, what's happening." And so, we've been recommending – there's a lot of small-cap opportunities in Canada that are focused on energy production, and down in Texas, of course.

                                    And then the energy-adjacent companies, you use the term "picks and shovels," but more service companies that are serving these companies and – "Hey, how do you get rid of your wastewater and stuff like that?" We've probably recommended seven over the years, energy conflict hedges, and I'm still in three of them. If they shoot up, I might take some gains, or if they collapsed – look, volatility is a real deal in the microcap world –

Dan Ferris:                 It is.

Bryan Beach:              – I will cut – I've cut losses on some; I've locked in gains on some. But I like to have three or four of those. And I'm sure my readers are tired of hearing this story, but with the Strait of Hormuz closed – you can track this even in Bloomberg – the tankers going – they're all coming here now. They're all coming to the West Coast of Canada or to the Gulf of Mexico to get their oil. So, that's been a huge – that's been a really big part of our story.

                                    Usually, when you have me on here I'm talking about software just because that's my background, but I'm a generalist, kind of like you. I'll write about whatever. And I saw you were writing about the Strait of Hormuz the other day. It' just – it's a hot topic and –

Dan Ferris:                 You can't avoid it.

Bryan Beach:              – you can't avoid it. And if something happens and the strait opens and there's peace all over the world and – some of these stocks that that I'm recommending, Texas Energy, they're going to go down when Texas Oil, [West Texas Intermediate oil prices go from $100 a barrel to – if they went from $100 to $60, my hedge – the hedge – my hedges are going to tank at that point. But the rest of my portfolio – it'd be a good thing probably for mankind. It'd be a good thing for the rest of my portfolio. So, we've been loading up on little energy companies here and there. And that's been a theme really – especially since February, but really heading into last year. And it was a big theme in 2022 and 2023 when the Eastern European war conflict started. I don't know, are you guys doing anything with your portfolios specifically about that conflict? Or are you just –?

Dan Ferris:                 Oh, I sure am. I sure am.

Bryan Beach:              Yeah.

Dan Ferris:                 And actually, in Extreme Value, we did recommend one big important chemical company for the oil industry. And I'm doing another chemical company in the upcoming issue of – the May issue that will be out in a few days of The Ferris Report. And I've recommended – I recommended two refining stocks in December. I didn't know there was going to be a war on, but hey. And I recommended two independents. And I have had ExxonMobil and Chevron in the portfolio for, what, three or four years here, three and a half years. So, yeah. But I want to know – our listeners to know something. Bryan mentioned the volatility around small caps. And we're talking about the volatility that can occur depending on what they announce about the war. And we have a great seminar coming up, a webinar, in fact, that you can sign up for at volatilityprofit.com with a guy named Jonathan Rose, who was on the show recently. A very smart trader.

Bryan Beach:              Yeah, smart guy.

Dan Ferris:                 A pit trader. Yeah. He's great, isn't he?

Bryan Beach:              Yeah.

Dan Ferris:                 So, yeah, volatilityprofit.com.

Bryan Beach:              I like when I listen to –

Dan Ferris:                 I like to seem – go ahead.

Bryan Beach:              Well – I keep cutting you off. Sorry, Dan.

Dan Ferris:                 That's all right.

Bryan Beach:              On my last – actually, what's funny is you and I come from similar backgrounds, long-term investing, value investing, and then you see a really smart trader like Jonathan or like Greg Diamond and people seem to think it's either/or, and if you're into the kind of things we write about, then you wouldn't be into options trading. And I think that it doesn't have to be either/or. Right?

Dan Ferris:                 No.

Bryan Beach:              I learn a lot from reading about what Greg's been writing. I'm not as familiar with Jonathan. I look forward to kind of listening into what he has to say on his seminar. But chart volatility is real. It happens. And you can make money figuring out what's going to happen. If Ben Graham were alive, he would tell us, "Oh, it's meaningless for long term –" and he's right, it is meaningless for long term. But that doesn't mean you can't trade around it and make a little money on it. And so –

Dan Ferris:                 And you see volatility in options pricing as well as – that's a great place for a trader to trade volatility because volatility is a huge part of options pricing. So, it doesn't surprise me at all a guy like Jonathan does what he does the way he does it. Yeah.

Bryan Beach:              What we're talking about, and this is definitely the case down with microcaps and small caps, but I'm sure – oil trades around the clock. And so, if the market opens and oil is down, went from $103 to $98 overnight, the little companies in my portfolio might be down 10% based on that. And again, that's amplified. I don't think that happens in kind of the big companies with active options. But with all the uncertainty in the war, with all the uncertainty everywhere, volatility, short-term volatility is something I'm going to be paying more attention to, maybe for my personal account. I don't – I'm not paid to figure out how to do these trades for my readers, but I'm encouraging them to – if there's an itch you've got for learning about how to how to profit off that, that's a very real thing. I was talking to a guy the other day, he thought it was one or the other. Like, "No, I'm a long-term guy." I'm like, "That's fine," but it's still possible to make money doing that. That doesn't mean it's all voodoo.

Dan Ferris:                 It is. Yeah, my favorite thing to do in the world is a two-week trade. I might – it's like a second job for me to sell put spreads on a particular large index option ETF. And we're not – I don't want to talk my own book because that's – we have rules in our company about that, but my favorite trade is to sell these spreads on a regular basis every – every other Friday I'm doing this. And it's like a second job that pays thousands and thousands of dollars a month. And –

Bryan Beach:              Wow. Can I write you a check? Are you going to run a fund? That sounds like...

Dan Ferris:                 Yeah, I feel like I could do that. I could just run that fund.

Bryan Beach:              Well, it is a second job, though. You can't – it's not a "set it and forget it" kind of thing. You've got to be paying attention.

Dan Ferris:                 No.

Bryan Beach:              And if you're not paying attention, you're going to get fleeced and realize that a naked put you sold got put to you. And –

Dan Ferris:                 I've got spreads – you're right. Same thing. When you see the sold, the short put half of that spread, like the markets down whatever, 1%, and that thing is like "Whoa," it's way down, it's down 50% just like that, yeah, you've got to watch. You've got to know when – what you're looking for and when the real signal is to get out and you've got to make all those decisions ahead of time. Just like – we keep talking about Jonathan, but – or Greg Diamond or any of these guys, they always know when to get out before they get in.

Bryan Beach:              Yeah. And what they're looking for.

Dan Ferris:                 You're right. You've got to do that work. Yep. Well, I didn't think we'd get onto this topic.

Bryan Beach:              Uh oh.

Dan Ferris:                 You see? We never know where – I never know where I'm going with you, which I like.

Bryan Beach:              Value investing. Software. But yeah, it turns out we're both wannabe options traders at heart. So... I'm not good enough at paying attention to find those kind of trades myself. You've got to watch all day. So – not all day, but that's what I've used Greg for in the past, and I'm looking – saw Jonathan on your podcast, and I'm looking forward to see what he says.

Dan Ferris:                 Yeah, volatilityprofit.com. All right. Where are we here? We may we may – it may be time to ask our final question. I think it is. You've answered it before. If you forgot it – it works better if you didn't remember the question, I think. And it's the same for every guest no matter what the topic, even if it's a nonfinancial topic, same final question. If you've already said the answer, feel free to repeat it.

Bryan Beach:              OK.

Dan Ferris:                 So, the question is this. If you could leave our listeners today with just one thought, one takeaway for our listeners, what would you like it to be?

Bryan Beach:              Yeah, this month, it's definitely the thing we've just covered. I mean, I'm watching the Middle East very closely, partly because of some friends and – serving in the military, some friends with family trapped in Iran. I mean it's a – I think the next couple of months, our grandkids are going to be reading about them – about it in history books. And I doubt anyone listening or watching was like, "Oh, I hadn't thought of that" or "I hadn't thought to look at what's happening in the war."

                                    But I do think that – again, it seems rude to say it or go – I do think there's money to be made if you're watching the right kinds of companies, defense companies and some of these North American energy and energy-adjacent businesses. But pay attention to what's happening over there. I probably overdo it, but it's the first thing I look at in the morning, is what news is coming out over there. And I really – I'm going to be using that news to shape my portfolio, certainly for the rest of 2026 at least. And again, I doubt that's super insightful. I'm sure everyone listening's already kind of paying attention, but it's a big deal for mankind and it's probably a big deal for your portfolio.

Dan Ferris:                 Well said. And I agree with every word of it. And I, too – in The Ferris Report, I'm focused on that trade because I see 10 or more different ways that this could work out in 10 or more different industries. I mean, everything: clothing and household appliances and tires and autos and just all kinds of stuff. So, I agree with you. I think it is something to watch. And every morning, I too look at Middle East news, S&P 500 futures, oil prices. Every single morning. So, that's a great takeaway. I'm glad you said that. At least you're confirming my bias anyway, and I appreciate that.

Bryan Beach:              Yeah, we think a lot about a lot of things – or, we think the same about a lot of things, so I guess that's another one. Yeah.

Dan Ferris:                 Yeah. All right, Byran. Listen, it's always a pleasure to talk to you. Thanks for making time for us. And I look forward to talking to you again real soon.

Bryan Beach:              Hey, thanks for having me back on. Happy to be here.

Dan Ferris:                 It's always good fun to talk with my friend and colleague Bryan Beach. Obviously a very smart guy with a lot of great ideas. What I want to do is tell you that, of course, you heard me agree with him in his final message to you about paying attention to what's happening in the war in Iran and the Strait of Hormuz and oil and so forth. And I said the first thing I do every day is look at news from the Middle East, the price of oil, and what has – what are the S&P 500 futures doing?

                                    And I believe in my heart of hearts that this is going to be an enormous trade. I think it's – you've probably seen it described as the biggest oil market disruption in history. I think it's more than just an oil market disruption. I think it's a global manufacturing reset. So, for example, one of the latest things that I've written about, it's not quite published as I'm speaking to you, but it will be out by the time you are hearing these words is about certain chemicals that are produced in Europe and Asia and on the Gulf Coast of the United States, and the inputs for Europe and Asia are getting a lot more expensive because of what's happening in the Gulf, but the inputs are cheaper in the Gulf of Mexico coast of the United States.

                                    So, what do you think is going to happen? Well, the world is going to buy a lot less of these chemicals from Europe and Asia and it's going to buy a lot more of them from the United States. And there are a few companies that are particularly well positioned to exploit that. And if you looked at the companies and you looked at their balance sheets and their results of the last few years, you'd go, "Uh, this looks terrible," which is great, because the best way to buy any commodity producer is on a contrarian basis.

                                    So, I'll just leave it at that and tell you that that's – and this is just one company. And so, this is – we are talking to you in May of 2026, so I've got seven more months of 2026 and it wouldn't surprise me at all if I wound up with seven more stock picks, maybe even two a month or something, based entirely upon what is happening in the Strait of Hormuz and in the oil fields in Iraq – or, sorry, Iran. Thousands of oil fields have shut down. Millions of barrels a day of production.

                                    What people don't realize is the longer they're shut down, the more likelihood that more of them will never be restarted, because an oil well is not a kitchen faucet. You don't just turn it on and turn it off. And when you have to turn it off in a big fat emergency because you're getting the daylights bombed out of you by the U.S. and Israel, it's worse. You turn an oil well off fast enough, you get a shock wave at the speed of sound, I guess, or the speed of light, just really fast, straight back down the borehole, and it can fracture the cement casing and fracture the rock and mess everything up and it costs a lot of money to fix it.

                                    And even if you shut them – if you shut them down quickly but you don't get all that violent reaction, the chemistry keeps going. And over there in the Middle East they have these sort of layered reservoirs and they use a lot of water and gas to keep the pressure in the reservoir to keep pumping the oil. And once you turn the thing off, this delicate balance of pressure goes out and the layers of the reservoirs can migrate to other places and the water can seep in and just kind of ruin the well. So...

                                    And there's other things, too. It's like when you stop mixing salad dressing in a blender, it starts to separate. Same thing with oil down in those wells. Only, the stuff that separates is really waxy paraffin and stuff called asphaltene, which is like a mucky tar substance. And that kind of gums up the works and it'll cost you whatever, $10,000 or $20,000 a well and it could cost you millions of dollars in rig workovers and all kinds of stuff. So, some of the stuff can be turned back on in days and weeks. OK, let's get that clear. But I think a lot of it is going to be lost for good. A chunk of it. Somebody – I heard somebody say there's 10,000 oil well shut in and 3,000 of them aren't coming back. I'll accept that as a general ballpark, whether it's 8,000 or 9,000 or 10,000 or 12,000 and whether it's 1,000 or 2,000 or 3,000 or 5,000, whatever it is. Many thousands are shut down. A few thousand maybe aren't coming back is the point.

                                    So, yeah, and that's going to have longer-term consequences, and all those other inputs that come through the Strait, the ammonia and the sulfur and the naphtha-refined products, all of it is going to trickle down through the global economy. So, there's a huge trade here in my opinion and it's much longer term than what the market seems to be discounting.

                                    I want you also to remember volatilityprofit.com. Jonathan Rose is going to put on probably an absolute master class. The guy's a genius trader and you can sign up for it at volatilityprofit.com because let's face it, everybody nowadays needs to learn how to handle volatility because I think we're going to see quite a bit more of it. All right. Well, man, that's another great interview in my opinion. In my humble opinion, we just did another great interview and that's another episode of the Stansberry Investor Hour. Hope you liked it as much as we did. Hit subscribe, hit like, and by all means please sign up for our free daily email

Announcer:                 Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.

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