This episode of Millennial Investing features a re-shared conversation with Trey Lockerbie, co-founder and CEO of Better Booch kombucha and co-host of "We Study Billionaires." The host, Clay Fink, and Trey discuss how his investment strategy has evolved, his entrepreneurial journey, and macro-economic insights.
Trey's investment strategy has rapidly evolved, moving away from purely quantitative screening to a more diversified approach encompassing Berkshire Hathaway, index funds, and individual "alpha attempts." He now builds his individual stock watchlists from conversations on his show, prioritizing companies within his "circle of competence," particularly in the food and beverage sector, an industry he deeply understands. He proudly cites his successful early investment in UNFI, a Whole Foods distributor, which significantly appreciated after he identified it as undervalued. Trey maintains a 10% allocation limit for individual stocks, aiming for a 15% return, a target he defined by first understanding his long-term financial needs, inspired by Morgan Housel's "enough is enough" philosophy. He admits that knowing when to sell is challenging, often relying on intuition after years of pattern recognition.
Regarding Tesla, Trey expresses a long-term bullish outlook. He views Tesla not just as a car company but as a conglomerate of "12 different startups," vertically integrated and focused on a sustainable future. He acknowledges Elon Musk's "selling the dream" approach as a necessary entrepreneurial tactic to finance ambitious ventures, finding the current price range (around $700-$800) fair for a long-term hold.
The conversation delves into the macro landscape, where Trey actively seeks diverse opinions to stress-test his own frameworks. Influenced by experts like Josh Yeung, he's allocated to hard assets, especially oil, driven by the belief that a lack of investment in production capacity will push prices higher. He also holds gold and silver, though he notes their underperformance, as part of an "all-weather" portfolio. Trey holds a strong thesis that inflation will persist, largely due to rising oil and natural gas prices (major CPI components) and potential food supply chain issues stemming from the conflict in Ukraine. He believes the Federal Reserve, focused on its dual mandate of low unemployment and stable prices, will continue raising rates, potentially overdoing it before something in the economy breaks. He points to the Taylor Rule, which suggests current interest rates should be significantly higher (8%+) given inflation, and argues that the unprecedented debt levels (120% debt-to-GDP) limit the Fed's ability to raise rates much beyond 2% without triggering a "financial accelerator" effect, leading to market turmoil.
On Bitcoin, Trey considers it an "incredible store of value asset" and uses it as a "store of value savings account," dollar-cost averaging weekly. While acknowledging its potential as a medium of exchange, he primarily views it as a long-term holding, akin to "Manhattan real estate," which he plans to pass down to future generations. He envisions a future where Bitcoin and the US dollar can coexist, with Bitcoin serving as an "exit ramp" for savings, pristine collateral, and a mechanism for a more abundant, less consumption-driven society. He admits his perspective is biased by living in the US but acknowledges its profound utility for those in high-inflation economies.
Trey shares his entrepreneurial journey with Better Booch, a kombucha company. He vividly recounts the early days of "bootstrapping," from hand-filling water jugs at a grocery store to unstacking pallets of bottles into his minivan. He describes the "chasm between startup mode and at scale," a challenging phase where businesses are "too big to be small and too small to be big." Better Booch has raised $10 million to scale its operations, allowing it to expand into major retailers like Target, Costco, Walmart, Sprouts, and Whole Foods. He emphasizes the importance of truly loving one's product to sustain motivation through the inherent anxieties and sleepless nights of entrepreneurship. Trey explains that securing shelf space at retailers like Costco is a multi-year process involving brokers, building a compelling sales story, and proving "dollars per linear square foot" performance against competitors.
Finally, Trey reflects on Warren Buffett's maxim that being an investor makes him a better businessman, and vice versa. He realized that as CEO, his primary role is capital allocation, influencing every decision from hiring to plant investments. He also adopted Buffett's philosophy of treating shareholders like partners, aiming to provide good returns and maintain accountability. He values simplicity in deals and believes in Buffett's adage, "you can't make a good deal with a bad person," underscoring the importance of reputation and "compounding goodwill" in business relationships.