4 Big Questions About the Reopening | 7investing
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4 Big Questions About the Reopening

June 2, 2021

America has started to emerge from the pandemic. The country has largely dropped capacity limits, mask requirements, and most COVID-19-related changes. We’re not quite at normal, but you can see how we’ll return to more or less where we were over the next few months. That does not mean everything will go back to exactly how it was. We’ll look at what work will look like in the post-pandemic world and examine three other big questions about what the “new normal” will look like.

Transcript

Sam Bailey

Welcome to 7Investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.

Dan Kline

Good afternoon seven investors and welcome to the Wednesday edition of 7Investing Now. My name of course, is Daniel Brooks Klein. I’m being joined today by Simon Erickson and Dana Abramovitz are both in Houston Texas. Is it like 110 degrees and people just Gladiator fighting over real estate like what is going on in Texas right now?

Simon Erickson  

That’s pretty accurate, Dan. I think that’s a succinctly a way to describe what’s going on but you know, what do we do when it starts getting hot in Houston? We find the water so I’m looking forward to go to the beach this weekend.

Dan Kline  

That and you find a barbecue. The one thing I haven’t been able to rectify about hot weather is how you’re supposed to grill outside. We had grill decks the near the pool at our other place and I would like grill for a second jump in the pool for a second. It did not work. Dana Abramovitz coming live from her bar studio. I know this is unrelated. We’re going to talk four big questions about the reopening. We’re going to talk about AMC, we’re going to talk about Uber. But Dana, I want to know what is bar? Is it a take on ballet and yoga? Like I’ve only seen pictures? How does it work?

Dana Abramovitz  

It’s still it’s kind of, um, so we use a ballet bar. And small movements, you know, designed to, you know, create a dancer like body but you need no dance experience. It is kind of like Pilates. I think Dan you’ve talked about doing Pilates before. So

Dan Kline

That went badly. I was not good at that. But sorry to interrupt there. Go ahead.

Dana Abramovitz  

No, no, it’s so it’s no small movements. It’s kind of like yoga. Every time we work on muscle, we stretch a muscle. And then like high intensity interval training. So we’ll do it really intensely for two minutes. They’ll stretch and then we work every single muscle in your body. You leave feeling stronger, more confident, more flexible, and just overall good.

Dan Kline  

I’m not sure I could be more confident about the show we have today. Apologies about the background noise. I know we have some new equipment on the way out to Dana where we’re struggling with a little bit of a background. But we will work on that. We’re going to talk four big questions about the reopening. We would like to take your questions, your comments. We’re going to start with Simon and then go to Dana. And then we’ll go to Dana and back to Simon on each question. I may weigh in. I may not it depends what is said. And of course, we would like you to weigh in 7Investors.

First question, Simon Erickson, do you think there will be permanent changes to what work looks like for white collar workers? Simon?

Simon Erickson

Yeah, McKinsey Global Institute kind of does a future work study every every year and this is kind of their bread and butter is is what is what is it gonna look like? And also what kind of job are you in? So my succinct answer for this one, Dan is what are what are you doing? You know, if it’s service economy, if it’s something like a hair salon, then it’s not going to have a huge impact. You certainly go in person to have your hair cut. But if you’re working in IT, and you’re doing coding for software, those workers are absolutely going remote. So I think that it totally depends. But we’re seeing pockets that you do not need to be in the office to get your job done.

Dan Kline  

Yes, getting a virtual haircut did not work out so well. I actually think this is being overplayed in the office space, I think you’re gonna see a lot of hybrid in the office, three days kind of situations. But I actually had had coffee with one of our members, I won’t share who yesterday I just in case he doesn’t want to share. But his wife was very insistent that her company wants her to go back three days a week in September. And she might actually look for another job like she does not want to go back.

Dana, I know this is weird for us to be asking three people who are white collar workers, but we don’t work in an office this question, but I think we’ve all worked in an office at various points. Do you think there will be big changes here?

Dana Abramovitz  

Yeah, it’s interesting. So I do have a lot of clients that that go into the office, and some of them have had to go back. Some of them actually continued through in the office during the pandemic. But some of them have been required to go back.

Dan Kline  

Yeah, it’s gonna be a very strange world. And we’re going to see things like Max Lucas tells us about in his comment here, Sam, if you want to share that, that’s, of course, Sam Bailey, our marketing director and the director of this program. “Can we talk about snow (NYSE: SNOW) moving their executives to Bozeman, Montana.” I didn’t know that happened. But I think you’re gonna see more companies look at alternative locations. We were talking before the show about how there’s two world class office buildings, almost done here in West Palm Beach. And they’re building what I would consider expensive condos to go with them, you know, $600,000, 1200 square foot, two bedroom. But if you’re moving from New York or San Francisco or London, that doesn’t seem so crazy, Simon, any comments on the Snowflake moving executive team, not the snowflake, Snowflake moving its executive team.

Simon Erickson  

It’s latest of many, right? I’m like we’ve seen it. We’ve seen palantir likes to work out of the middle of the woods, you know, where its CEO is not in the middle of the of the hustle and bustle. Dana I know you can comment on this because you lived in San Francisco for a little while. And it was such a need for so many years to be right there by the venture capitalists. Right there with access to funding, and everybody wanted to be in this, this really tight, close location, not that way anymore. You can kind of work from anywhere, I think that you’re gonna see a lot more of this in the future, in my opinion.

Dan Kline  

When I worked in San Francisco, I actually lived in the office, the one week, a month I was there, Dana, your thoughts?

Dana Abramovitz  

When I was I was gonna say that, you know, a lot of VCs are opening up offices where people are moving to as well. So I think that, you know, you’re gonna just kind of see that spread. I know, in Austin, there have been a lot of VCs, as Austin has grown.

Dan Kline  

Yeah, and you’re seeing the VC business, put in infrastructure that’s more remote, because if you’re funding a company that’s located in, you know, rural Utah, you’re not necessarily going to make them come to your New York, Austin, Silicon Valley, West Palm Beach, wherever it happens to be. I do think we are going to be somewhat tied to airports. And I don’t want to belabor that too much. But Simon, we’ve talked a lot about how excited we are to eventually all be able to get together. Really hard to do that if you live someplace that that’s, you know, a four hour drive to an airport.

So you know, we’re going to see some changes. But I don’t know that it’s going to be this seismic shift that people think it is. I’m going to throw one out next that I’m probably the right person to answer. But I’m going to let Dana start first. And Dana, if you have no thoughts on this on a trend, talk about your personal shopping and what’s happened during this. And question number two is has the pandemic made brick and mortar retail less important, Dana?

Dana Abramovitz  

So I’m the type of person that likes to touch stuff, right? So it’s, you know, I’ve never been really good at online shopping. To begin with, even with grocery stores, like I’d like to go to the grocery store, you know, smell things feel things. So, you know, for me, just being able to go to the brick and mortar store just feels more comfortable. But, you know, I think that a lot of people got used to, you know, ordering things online. And you know, just that that mindset has certainly shifted.

Dan Kline  

Simon Erickson, your thoughts? I know you you’ve been doing more online purchasing during the pandemic, I think we all have,

Simon Erickson  

It depends on whether you know what you’re looking for. If you know exactly what you’re looking for, and you do not need it right now. It’s not so hard to go on e commerce, type it in and have it delivered to you tomorrow. If you want the experience, like Dana just mentioned, or it’s an item that is expensive to ship, I think there’s certainly a place for that in retail as well – bricks and mortar retail as well.

Dan Kline  

We would love your questions and comments about the reopening about the market, whatever it is you’d like to talk about. You want to ask bar questions, we will take those as well. No, we were not going to do that.

But I actually think this is a trick question. If I worded the question as will there be less shopping in stores? I think the answer is yes. But I actually think brick and mortar is more important because brick and mortar when you look at it being well done your your Targets and your Walmart’s your Best Buys – they’re fulfilling digital and even same day orders from those stores. So you’re gonna see shifts, we’ve already seen it at Kohl’s where more of the store is devoted to order fulfillment, and less is devoted to frontline merchandise. So I think anybody predicting the death of stores is really, really wrong.

And I’m with Dana, I like to go into a store. I know we’re not supposed to touch stuff right now during a pandemic. But I really want to see something like like I bought shirts sight unseen, because I needed a solar covering tank top. So my arms didn’t have the weird white tan. And I didn’t like it when it arrived. And I just kind of putting up with it. Because I don’t want to deal with returning it, which I know is exceptionally lazy.

Simon Erickson  

Dan, can I follow up with the question? You’re really the the retail expert on our team. But I want to ask you, when you think about investments in retail, do you think about companies in terms of like bricks and mortar retail? Or digital retail? Or do you just think, Hey, this is a company like a Target or a Home Depot that’s doing both of those kinda at the same time.

Dan Kline

So I think you really have to understand what a company is trying to accomplish. And I’ll use an example of a company that as a shopper, I’m not a fan of as a investor, I would be and that’s TJX (NYSE: TJX). They might eventually be able to figure out a way to have like that that treasure hunt aspect as part of an app, but you’re gonna go to TJ Maxx or Marshall’s or home goods to go there. It’s entertainment. It’s fun. It doesn’t concern mean that they don’t have a big digital operation. I could say the same thing for Five Below or Ollie’s or, or, you know, I’m not a Ross fan.

I think there’s gonna be companies like saying Ulta beauty that need a brick and mortar presence. But once you have your your makeup color, you know, Dana, once you figure out what color lipstick works for me, then I’m going to be able to just buy that lipstick, no color lipstick works for me. But I actually do need makeup. I’m red and makeup would be good for this show. So I could go to an Ulta beauty, find out what makeup I’m supposed to use, learn how to use it, and then order it online. So I think it’s gonna be a really happy hybrid.

Sam, we will take ShaviRah (@ShahRavi1988)  comment as well, because it speaks to her to what we’re just talking about. “Some of us want that treasure hunt experience.” Yeah, I agree. For me, it’s not Marshall’s like I don’t want to go like I got a I got a clothing store if I know what I need, and I buy it. But I love going to say Books-A-Million and looking at that at the not the used books, but the discount books section, or just seeing like what ridiculous merchandise might be on the shelf. I think that is very, very important. Let’s hit question number three here. And we will start with Simon. Will the lessons learned from the pandemic bring any long term changes to healthcare?Probably should have started with Dana here, this is her area go Dana.

Simon Erickson  

Let’s go with Dana. I’d love to hear your perspective.

Dana Abramovitz  

So yes, I hope so. Right. So, you know, we’ve talked a little bit about telehealth and just held that was kind of poised to, to go and to the pandemic just made it possible, you know, just just more acceptable to move into that area. And so, yes, I think that that’s gonna, you know, just keep going in some way, you know, that there’s, there’s certainly pushback with reimbursement in some cases. But, I think that, you know, one of the things the pandemic did for all of us, in all different industries is just convenience. Right. So, you know, we talked about like working from home retail, healthcare, you know, it’s a consumer products, as well, right? You know, patients want that, that convenience. And so I think that that is going to be continued in that.

Dan Kline  

So Dana, let me throw out a follow up here. We’ve talked about like Apple Watch and other other technology and how it kind of fits in to the space. A sneaky good investment. I’m this isn’t a stock pick. There’s just a company I’ve covered before, that when you look at the balance sheet, it’s it’s actually surprising how good it is. Planet Fitness, (NYSE: PLNT) do you think that we now understand the role of just moving and that that’s maybe going to be actually integrated into our healthcare and maybe even like, I forgot the insurance company that Steve uses that actually monitors your driving? Would it be possible that maybe I get a discount if I can prove I workout three times a week and like my watch would be a way to do that. And certainly a gym membership would be a way to do that. Do you think like big health insurance will embrace that type of thinking?

Dana Abramovitz  

So they’ve they’ve already started doing that? They were doing that before the pandemic and I know that a lot of companies have, you know, created that benefits are provided more of that benefit to their employees post pandemic. So hopefully that all that’ll continue happening. But yeah, we certainly seen, you know, the benefit of exercise and wellness on your health. And you certainly insurers want that, right? So they’re paying less and so they encourage people to, to, you know, to work out and you know, devices like watches and Fitbits and all those things have been incentives. I know I work with a bunch of different insurers and employee wellness programs for my business to make sure that you we’re an option for their employees to come work out here.

Dan Kline  

We see some great comments and questions in the queue. We’ll take those at the end of the four questions or maybe pepper them in a little bit. Simon, I know you of course have taken up chain smoking during the no no That is that is a joke, of course. Do you see any healthcare you have? You have a child you you’re you’re married, there’s a lot of different health care going on in your house. I know that we’ve had a weird mix of telemedicine and in person medicine, my wife’s going for an in person, physical therapy thing today, kind of no way to do that remotely, do you think we’re gonna see some long term changes?

Simon Erickson  

I do. And actually, this is one of the things that I’m so excited to have Dana on our team. You know, Dana, obviously an innovator in the healthcare space. $4 trillion market. I mean, Danny, you’ve seen this from the academic and in the lab, but you’ve also seen it from consulting and working directly with businesses. They’re trying to figure this out. And like we said, at the end of the day, 40% of healthcare is correlated to your habits. We already know you should, you should drink less. You should smoke less. You should exercise more. I mean, these are things that are obvious that we’ve been kind of told since we were kids.

But now there’s kind of this development, which I think the pandemic accelerated Dan, to consumer facing healthcare. What is the what is the games that we can have where we get points for going outside and walking around? What is the data about my own personal genome that I can have access to so I know what kind of drugs I’ll react to differently. There’s a shift from this being in that manila folder behind the doctor’s office when you go into the hospital that has your electronic or your your paper health record, to being on an app that you can look at all the time. And this is the trend that I see that’s developing. And I think that COVID when people were not going out, and going in for appointments and checkups all the time, because we couldn’t, I think that really accelerated this, but it’s a really a much bigger picture than just COVID.

Dan Kline  

And this trend speaks to me. So you’re my boss, you’re all of our bosses. And we have a bunch of deadlines each month, and I am very deadline driven coming from the newspaper business. And I have it built into me finish things early, because you never know when there’s going to be a murder.

Simon Erickson

And I appreciate that Dan.

Dan Kline  

That’s not true in the finance world. But it’s true in a sense of well, like today I did my transcription for our amazing team calls. Just to give you an idea what this is, is when we pick our stock for the month, we do a video where all of us are most of us appear on the video and I do a presentation of my stock. And you guys ask me questions. And we then add a transcription of that. The transcription and the video are now appended to our written write up. So you get this amazing depth of detail. It’s not due until the eighth, maybe the sixth, I’m not sure it’s nothing for a few days. But I did it today. Because what happens if something big happens in the market and planning Friday’s show takes a lot more time.

That’s how I’m approaching my health with the Apple Watch. Like, I went out and took a walk this morning because I have to take a three hour drive this afternoon, I may not get in my exercise, and I don’t want to fail my other boss besides you and that is the Apple Watch. I think we’re seeing you can call it gamification. To me, it’s just accountability. Like if I know, I need to check off, you know, 22 exercise sessions a month. You know, I wish I could track more like I’m trying to only eat red meat once a week. And that would be a lot easier if I remembered what I’d eaten in any given week. And it would be nice. I know there are apps that can track that. But there are some I would love all of that to just be very easily integrated. Maybe just take a picture of dinner every night that comes up with the calorie count.

I think we’re getting to that world. And we accelerated that we talked a lot about acceleration with the streaming services that we’re seeing an acceleration in healthcare. I was always a telehealth guy like I, I’m a convenience person, but being able to mix the two and maybe have your regular annual physical go faster. That to me is really important. We got one more here and I’m going to start with Simon on this one. What’s an investing lesson you’ve learned from the past 15 months? And dear God, it’s been 15 months.

Simon Erickson  

Dan, this was what I thought a lot about you just sent out kind of these questions for us a little bit in advance. And I really wanted to come up with the best answer for this one. My answer that I think I’ve learned the most is how quickly a best, best best in class, cloud based software company can grow. I think that COVID showed us that if you’re building things cloud native, and you are a must have application in software, there is no limit to your growth rate, right. Zoom (NASDAQ: ZM) grew its full year sales 326% last year, over the whole year, that wasn’t just a spike in one quarter. That was a huge, huge. I mean, you’re quadrupling your sales, for a company like that we use Zoom for all the time. And now it’s embedded even on top of that, even as COVID is rolling off, they increase their fiscal year guidance for the next year at 42%. And so that’s not only here to stay, it’s actually increasing land and expand is working in SaaS software. That was my takeaway is that if you find the companies that are must haves for those businesses, they’re going to grow really, really quickly.

Dan Kline  

And my favorite is how you could frame that in a news article. Zoom sales to slow down by 300% in the next year, or Zoom sales only grow by 340%. Like that’s why we think long term because there is so much short term mindset where someone will literally say, Oh my god, you just won the Superbowl, but you’re probably not gonna win next year. And that’s that, that bothers me. I agree with that. Dana.

Simon Erickson  

And one more thing on my dad, just real quick, you know, this is why valuations have permanently changed in software. If you go back 10 or 15 years, 10 times revenue 10 times price to sales ratio was considered really, really expensive. Like even venture capitalists like Bill Gurley. Were saying, Wow, the 10x Club, you know, this is you you’ve made it, you’re selling it 10 times your sales now. And now we’re seeing companies like Zoom, selling it 30 or 40 times sales. And this is exactly what you hit that hockey stick that inflection point where you can grow yourself 300% in a year because the architecture, the infrastructure is in the background that can support that. You don’t have to go out and build your own data centers to handle the capacity and spend all this capex. Plan is permanently changing things. And that’s currently changed the way that we look at these companies as investors.

Dan Kline  

Speaking of outsize price to earnings, we are going to talk AMC, a company with excessive price and no earnings. I we’re going to talk that next but Dana, what investing lesson or have you learned an investing lesson in the last 15 months?

Dana Abramovitz  

Um, well, you know, so I am new to the team. And so, you know, I was thinking about other things, you know, but I think, you know, my whole thing is just  really understanding the fundamentals. And, and myself, so, right, I invested in my business, right. So that was, that was my big investment. And so just really understanding, you know, management, product market fit. And that’s just how I, you know, think about all investments that I look at.

Dan Kline

I’m gonna throw a quick one out there. But Simon, you wanted to chime in first?

Simon Erickson  

Oh, no, I just wanted to ask if we could ask our audience who’s watching this show? What’s the investing learning lesson that you’ve learned from COVID? I’d really love to hear some other perspectives to on how this has changed the way that you are thinking about the stock market and investing.

Dan Kline  

We’re happy to take those comments now. We will throw that out. Sam Bailey, if you want to share that question on our Twitter later today. Normally, I would do that, but I’m gonna be traveling later, I’m going to throw one up quickly. And I think it’s something we’ve always known, we just didn’t see it before the pandemic. And that is quality companies that are planning ahead, do well, no matter the situation. So I’ll throw a ridiculous one out there, McDonald’s (NYSE: MCD). McDonald’s invested in delivery. And I made fun of it because who wants a Big Mac delivered as a shelf, like of like four minutes. But their delivery numbers have been incredible. They weren’t planning for a pandemic. Target and Walmart and Best Buy weren’t building out their supply chain for a pandemic, they were building out their supply chain for whatever the new future might be. And it happened to benefit them.

So I liken it to an athlete. If you’re someone who works out really hard and trains for every situation, and practices for every scenario, you’re going to be ready what a scenario you didn’t practice for it comes up because you put the work in, I think we saw that CEOs that are really looking down the road and building for a reality that maybe doesn’t exist. And we’ve seen that with many of the big internet companies that they are going to do well, even if you have. Obviously there were points in the pandemic where McDonald’s sales weren’t great because their dining rooms were closed, you’re going to be well set up for the recovery. That’s actually been the driving theme of some of my picks in recent months. And we’re going to talk about our picks in a little bit. But Simon, Dana actually has to go teach a class and clean up her studio. So we are going to let her go and let her go with a hearty thank you, Dana. We know where we’re breaking up your day a little bit. You tend to work 7investing more in in nighttime and weird hours. But we thank you for doing the show.

Dana Abramovitz

Yeah. Thanks, guys for for letting me join you today. Thanks so much.

Let’s take a couple of questions and comments before we segue into our conversation on AMC. And you know, those cartoons where like the steam comes out the ear. That is how I feel about a AMC. We’re gonna take the first one from Nishan, now if you want to throw that up, Sam, physical stores are customer acquisition experiences for customers. So last expense for businesses and the sales will happen online. I think that can be true. I don’t think that’s necessarily true. I live four tenths of a mile from a Target. There’s an awful lot of people in there. I live about a mile from an outlet mall. There’s a lot of people at that outlet mall, which is partially a treasure hunt driven experience. Simon do you have any thoughts on this one?

Simon Erickson

Kind of like the Whole Foods model, you know, you want to be close for certain things and not just have them warehousing, you know, miles away. Like you even mentioned the Big Mac story from McDonald’s, you want some stuff as quickly as possible. I see a point of making some of those physical stores into quote unquote warehouses for for online sales as well.

Dan Kline  

Yeah, and most of them are doing that. What I’ll say is amazing is Nike (NYSE: NKE). Nikes ability to recognize that has a size 13 pair of Lebrons on a shelf in West Palm that somebody in Miami is trying to order and they should send them from West Palm what rather than from a central distribution facility is phenomenal. And that’s that type of investment I was just talking about.

We will take one last comment from our friend, Ravi Shah, and he says I love going to our local bookstore. Each time I go I buy at least three to four books. Yeah. Back in the early days of digital books, people predicted doom. That bookstores would go away. And here’s the reality bookstores have had to evolve. Books-A-Million, which is not a public companies don’t have access to the financials. But they sell a lot of things that aren’t books. Your local used bookstore is probably run by someone who’s very passionate about books, and is doing a really smart job in acquisition. I love physical books. And it’s worth noting out that we stopped at about 50/50, about half of books are digital, about half our physical, I actually read almost entirely digital on my phone. But my wife reads almost entirely physical. There is a fun experience. Like I’ll go to a bookstore, and I always make sure I at least buy like a coffee or something because I feel kind of guilty that a lot of times I’m just taking pictures of books to buy them someplace else. And you know, and we all know where that someplace else is. Simon Have you been to a bookstore in the last year?

Simon Erickson  

I’m the same way did I actually enjoy a physical book? I don’t like reading the Kindle tried that. And it just wasn’t the same as flipping the pages and having it right there on my nightstand at bed at bedtime. I’m, I’m also a fan of the physical book experience.

Dan Kline

I am it’s when we moved, I got rid of something like 11,000 books, I dramatically downsize my books. And now you know, they’re all in my phone. Once I learned my son wasn’t a reader, it didn’t seem valuable to keep it. We would love your questions and comments. We’d love to hear what you learned during the pandemic. I’m gonna guess that will be a topic we will revisit on Friday’s show with Matt Cochrane who will be back from vacation. Simon before we talk as we close out this opening segment on the reopening and move into talking about Uber. I want to talk a little bit about AMC (NYSE: AMC). So let me explain the business AMC is in and then you could talk about some of the stock market stuff. AMC is a movie theater company, it was a heavily struggling business before the pandemic coming out of the pandemic. Everyone points to Oh, wow, the box office was back this weekend. The big movie, it’s I’m blanking on…

Simon Erickson

Cruella, I think it was.

Dan Kline

Cruella was the second one. Cruella did about 30 million, and whatever the top one was, did about 65 million, which I’ll point out is week for Memorial Day weekend. And that shows you kind of the problem we have going forward. The landscape changed movies are gonna have a shorter theatrical window. Some of them like Cruella will also appear on Disney Plus for a 29 or $30 additional fee, and people with families will go out. I’m not gonna wait, that sounds great. So you’re seeing the reality has changed for movie theaters. And I think when you look at the business of AMC, they’re going to struggle to turn a profit. This is not reflected in its stock price. Simon, what is going on with AMC stock.

Simon Erickson  

It’s going meteoric Dan, stock is up 14 100%. I believe at last glance, maybe it’s even higher than that. Now it is day to day. There’s no telling what I think that AMC is up another 30%. Today, this has become the poster child of what we’re starting to refer to as meme stocks. I don’t even know if I like that expression. But that’s what’s catching on out there.That these are publicly traded companies that are thinly traded. There have been for years, kind of the the types of stocks that institutional investors wanted to short.

AMC didn’t have any catalysts, right. It wasn’t like next week, there was going to be 10 times as many people going to the movies as the previous week, they were kind of stuck as this marginal performer and a dying industry. And now that there was movies, you could watch anywhere through streaming and other options. You didn’t have to go to the movie theaters anymore. And so you would see AMC. I mean, just even six months ago, Dan, AMC’s stock was was 75% of its public float was shorted people 75% of the shares are out there were being sold short, because it was being manipulated by the markets and said, hey, it’s okay, we can juice our returns by shorting a company like this, there are no catalysts on the horizon.

And so to their credit, what happens is there’s a lot of retail investors, individual investors that kind of gathered together on platforms like Reddit, and said, Hey, do you see this, you see all the short interest in this? Ff we all go out and buy AMC stock, it’s going to shoot to the moon, and those people that are short going to have to cover because they can’t take the risk in those investments. All of that is very interesting in the short term, Dan, personally, as a long term investor, I’m concerned about the fundamental business of AMC. And I don’t think that I see anything right now. that justifies the completely out of touch valuation that that is not in any way in touch with its reality of its fundamentals.

Dan Kline  

The stocks up 1400%. This was a struggling business that will have to pivot to survive. I am not a fan of manipulation on either and I don’t like shorting I to me, and I understand technically why you do it, but shorting to me is betting against people and I don’t like to bet against people I don’t like to bet against people’s jobs. And on the other hand, the people on Reddit who are identifying that there are some people who are identifying it and taking advantage and making money and good for them. There are some people that are acting like they’re being altruistic, or they’re taking on the hedge funds that are actually manipulating the other people in the Reddit chain. They’re sending the stock spiking, and they’re selling 90% of their shares or 98% of their shares.

And they’re telling you in a “hodl”, you know, and all the ridiculous slang, we’re seeing, someone that gets left holding the bag. Companies eventually revert to what they’re worth. And AMC, you could argue isn’t worth much. So the best chance for AMC is that some coalition of companies that put out movies, wants to own the chain and operate it sort of like Hulu was operated, which would now be legal. I do think if you’re a movie company, you want there to be movie theaters. But let’s recognize what a successful movie is, is not something we’re going to be able to understand aside from blockbusters.

So when you look at, you know, Fast Nine, which I believe is the ninth movie in the Fast and the Furious chain, I’ve never met anyone who’s seen any of them. But that I’m kidding a little bit, but I don’t understand that one. That is going to be clearly a hit. You’ll see it make a billion dollars at the box office. You have no idea if the $60 million Netflix movie was a hit. You’ll get a sense of it if they make a sequel, if it’s a film that could have a sequel, but their metric isn’t dollars, its eyeballs and people who are coming in. Disney has this weird mixed metric now where like, if you subscribe to Disney Plus, there’s some value to that. But so there’s all sorts of complicated things here. Simon, AMC, GameStop. Any of these manipulated stocks, I’ll throw another one out Blackberry. Blackberry is a really good company, it’s really well run. They will probably never recover from not being a device company anymore in terms of how people view the stock. But Blackberry shouldn’t be moving 30 40% in a day, I would say any of these stocks run like hell do you disagree?

Simon Erickson

It’s, well, yes, I think I don’t want to get too preachy, you know, if you want to go in and invest kind of as a short term investor, like we’ve seen with Mudrick capital, an institutional investor actually getting in and out of AMC stock within a week. I mean, that’s totally fine. But I kind of liken this to go into the casinos and betting on the roulette wheel, right? Like you, no one wants to get stuck holding the bag, and everyone is kind of playing hot potato with this.

I do think that AMC is embracing this, they realize this is the catalyst that they needed for their stock to not be stuck in neutral for so many years. But Sam Bailey, let’s show the chart, I mean, I think this picture is worth 1000 words, this is the price to sales ratio of AMC stock. I mean, this is typically been less than one for years, and now it’s at 17. This is completely going the complete opposite direction, as the meme stocks and as, as individual investors are piling into something like this. I really don’t feel good about this. In the long term. There is nothing that to say that this fad passes and people could see a 70, 80% or greater loss of their capital permanently if you’re getting in at the wrong time.

Dan Kline  

I am all in favor of the people who want to take a small percentage of their portfolio and play some games. I would much rather those games be trying to identify hidden gem good companies or finding that penny stock in the rough that really has a chance to if something goes right become a real business. There are actually historical examples of that happening. There is no scenario where AMC will ever be worth close to what it’s worth. And there are some opportunities here: live concerts, sporting events, college classes, there are things you can do to make your movie theaters more viable.

But here’s the problem. I don’t think there’s enough of them, because you’re going to have all these 20 screen theaters, and you’re not going to have seven different movies to show on them. Because an awful lot of movies that went to theaters are just not going to theaters anymore. You’re not going to see $30 million ROM coms go to theaters you’re not going to see. You know your art and your prestige fair. Go to theaters. Sam Bailey The movie is A Quiet Place II. That is something I absolutely am afraid to see. Because I’ve seen the previews and there are really scary monsters in it. And I don’t like when bad things happen to people.

We are going to push our Uber discussion to next week. It is kind of timeless. We’ve we’ve got a lot going on here. So if you want to get in some questions and some comments, we will enter the homestretch in a second. But before we do that, Simon, yesterday was the first of the month. We don’t get to pick when the first of the month is which can sometimes be frustrating because, for example, putting our new pics out on April Fool’s Day was that was a little bit challenging, but our new pics come out. And this month, I am so excited. I say this every month because the diversity of our picks. And when we go to these calls, where we each pitch each other. Sometimes I’m hearing about companies maybe I know that name but I didn’t really know what they do the understanding I have the understanding our team brings. And if you’re a member of 7investing, you get access to these pics and how we do all of that is going to change soon I will throw this to you, Simon and let you explain all the fun things we have going on.

Simon Erickson  

Yeah, I say every month, I always love a recommendation every month, Dan, but this, this slate we have this month is incredible. This is probably in my opinion, the strongest companies that we’ve ever recommended in a month. And Sam, let’s go ahead and give a sneak peek. Let’s talk a little bit about what I’m talking about here. I think we have a graphic perhaps that shows kind of the industries that we’re looking at, like you mentioned Dan, it’s kind of a nice mix of the we’ve got large cap companies, we’ve got smaller companies, we’ve got healthcare companies, we’ve got tech companies. This is all represented this month, I’m really, really pretty stoked about the companies that we have on that we just released yesterday for our June top stock ideas.

Dan Kline  

I am very excited and guessing we’re having a problem with our graphic. But one of the joys of being a 7Investing subscriber and I mentioned I had coffee with one of our members yesterday, which if you’re in West Palm Beach, I’m happy to have coffee with you. If you’re a member, I don’t think there’s going to be a flood of people coming to visit. But he talked about how he is in the healthcare space. So he’s not particularly looking for he likes to see Dana and Maxx’s perspective. He considers himself a bit of a futurist. So he likes their long term view. But he doesn’t really need their investing help there.

But he doesn’t know anything about payments or retail or, or our software as a service or the cloud. And he’s devouring what we produce. You know, he’s a buying every stock. But what I love about what we do is you can look at us by style, you might say, hey, I want to be more conservative. And oh, Dan’s usually pretty conservative. Like, I’ll go with Dan, you could say I want to invest in things that really have a potential. And I know that high risk comes with high reward. So maybe I’m gonna go with Anirban’s stocks, or Steve’s or Simon’s, there is a smorgasbord and we give you all the information to figure out which ones you want. And right now, we do that for $17 a month, or $170 a year.

We realized and we had a lot of our members tell us what are you doing? Why are you not charging more. So we are going to listen. And if you join by July 7, you get to lock in what we will call our original pricing. You get to be an OG 7Investing member and you’ll have that pricing for life. But if you wait until July 8, Simon, correct me if I’m getting any of this wrong.

Simon Erickson  

That’s correct Dan.

Dan Kline  

You will pay $49 a month, it bothers me that it’s not $49.99. Because that’s just very natural to say, but it’s $49 a month, or $399 a year still a tremendous value. But you’ve only got about five weeks left. Simon, talk a little bit about our upcoming price increase.

Simon Erickson  

Yeah, that’s right. And to be clear, Dan, it’s not a price increase, because anyone who’s who’s currently a subscriber or who signs up, like you said by July 7, end of day is grandfathered in. We think that $17 a month or $170 a year I’ve said this multiple times might be biased, but it’s the best deal on the internet. I mean, to have seven stock recommendations from the team that we have in place that’s really kind of front running the market. Right, right. We’re not looking at what was a big deal five years ago, 10 years ago, we’re looking at where these industries are heading. We’ve got kind of a front row seat at the innovation that’s taking place.

Dan, you and I picked capital allocators. Both of our companies are mega cap companies that are so so good at using their profits to get bigger and better every single year. I’m a shareholder in both of our companies. And I had been for a while because I’m such a fan of the huge competitive advantages they have. But then we also like you’re mentioned about healthcare. Maxx and Dana, both recommended healthcare companies that are visionaries. Right, we talked about consumer healthcare just a minute ago. What are the changes taking shape in this 4 billion, $4 trillion excuse me, market? And how is that going to impact the companies who are the ones that are capitalizing on that?

And so both of those are really looking to the future, I really appreciate their perspective of this entire team of shaking it up with with pics that are that are kind of solid today that are producing tons of cash flows, allocating really, really well, maybe paying dividends that you like collecting every single quarter with also if you want to take a risk, you want to take a little bit more risk in your portfolio, look at Anirban’s pick this month, you know, put look at Maxx’s pick this month. Those are both really setting up an incredible future in my opinion. And I think an investor is going to be rewarded from both perspectives. There’s no right way to invest. Investing is so personal. We tried to cover the full gamut off of the full buffet of options for you every month.

Dan Kline  

And we’re gonna get to that graphic in a second. Sam Bailey has figured it out. But I just want to throw one thing out. So I picked a mega cap. But I didn’t pick and say hey, it’s a good company. They’ll keep being good. it’ll it’ll, it’ll pay a dividend. It’ll grow a little. I laid out the case of why I think this actually has the ability to still be a high growth company, despite its size. So you look at most Investing services and you’re getting a very shallow view, or at least most television and people out there picking stocks, you’re getting a very shallow view of why you should buy that stock. If you choose it. Now, you could open up our reports and just read the key takeaway and be done with it and go, Hey, I believe Simon I watched him on on these shows, I trust him, I’m gonna buy that stock. I was thinking about it anyway. But if you really want to know, you can read the 3000 words, Maxx wrote the I only read about 1500 words cuz I don’t have to establish all that much what my company is. You can watch the 30 minute video that we recorded where people ask me questions. There’s so much depth.

Sam Bailey, if you want to share that graphic, we will quickly go through all the benefits there. This is an overview of what our June 2021 recommendations look like. Simon?

Simon Erickson  

Yeah, thanks very much, Sam, if I could just walk through this a little bit kind of to talk about what we were mentioning earlier, you’ve got everything from very high risk, to low risk. Everything from healthcare, to retail to semiconductors and software, even insurance pick from Steve very high risk insurance pick. I mean, this is kind of the the mix. And we do this purposely Thanks very much, Sam, of kind of laying out the buffet saying, hey, what kind of investor Do you want to be? What kind of stock Do you want to invest in? We’re not just throwing tickers out there. We’re not just saying, Hey, good luck, you know, we did 20 minutes of research. And here’s 280 characters, you know, good luck.

We’re really digging deep into these companies. You see our research process. On eighth of the month, we actually publish our deep dive conversations of the team itself, we have a subscriber call where you can ask us questions directly, we follow up on the developments for each one of these companies for a company update. We’re really trying to make investing a long term journey that will compound wealth over long periods of time. Again, back to using the GameStop and AMC analogies, those go up and down at a whim and no one wants to get stuck holding the back the recommendations that we’re buying for 7Investing, we are buying and holding indefinitely, because we really believe that that’s the truest way to compound your wealth, and empower your future. You don’t want to be sleeping poorly at night, because you’re worried about what’s going to happen. You’re gonna say, Hey, I know we got this, I love this company, I’m gonna hold this for years.

Dan Kline  

I’ll also points out that, you know, some of my picks are retail. And if I’m picking a retail company, and for reasons that have nothing to do with its business, its stock goes up 1400%. That might be the rare time where I say, Hey, I’m going to sell this because my thesis does not expect this to go up 1400% over the next decade, I thought it was going to go up five 600% whatever it is, I’ve gotten more out of this.

Now there are plenty of tech stocks where if you would use the logic I just put out there, you’d be wrong. But you know, with some of these retail stocks, I could have made a bull case for GameStop. There, they had a pretty good balance sheet. They had some really smart people there, there might have been something they could pivot their business into that would have made sense and might have doubled or tripled their stock. It wouldn’t 100 times their stock. So you really need that perspective.

We’re gonna hit the homestretch in a second. But let’s share a comment from JJ Marshall. There’s still time. Those of you watching out there if you wanna get some questions or comments in. Hopefully, AMC can raise some funds by selling new shares to help itself out. So here’s the problem. It’s so volatile, you could rate you could decide you’re going to do it, and then it could drop 80% in the next day. So I hope they do that too.

I like going to movies. You know, I like some of the innovation. There’s an AMC across the street from where we used to live maybe about two miles from here. I like their innovation in carmel corn. They had a much improved popcorn experience. I know that sounds trivial, but food is a part of the movie going experience. I think movie theaters haven’t really figured out restaurants and bars and and I think they will you know, we have a dine in theater near us in Davenport, Florida, that people like going to that’s really a restaurant mixed with movies. I want to see AMC succeed that none of this is about AMC. It really is about, hey, if you walk into a casino and choose to play roulette, understand that roulette is a game of chance.

The stock market does not have to be a game of chance. It can be it can be closer to blackjack, where you know their numbers. When you know what’s going on. Your odds should be way better than blackjack, which of your counting cards gives you a slight advantage over the house. You can have the advantage as a long term investor.

Simon, I’m going to throw out our homestretch question. And then look, there’s a couple more comments coming in. But we’ll take those later. What’s something that’s a deal breaker on a stock for you, you share yours first, and then I’ll share mine second,

Simon Erickson  

Bad behavior in the management team. Dan, you know, if we’re looking long term, it really, really matters, how well they’re executing, right? If you’ve got a strategy and you go out, you tell your shareholders, hey, I’m the right guy to be leading this company are on the right woman to be running this company. You first of all, hopefully have a strategy. If you’re a CEO, you should have a long term plan in place, but they’re also how well are you actually actually executing on that. So if you see companies, or at least if I see companies that are continually missing their own internal guidance Or they put up a, you know, a slide a year later, two years later saying, hey, three out of the five things I said that I was gonna do I didn’t do, that’s a deal breaker for me, you have to have credibility as management.

And the second thing that’s also related to that, too, is completely excessive compensation. I hate to see when when CEOs come in, they go out and they make a ton of acquisitions, and they just juice the top line, because they’re getting paid on revenue growth. And then that goes out. And you know, they get a ton of options, they get a ton of stock, they get a huge compensation package from that. And then they leave in a couple of years. And we’re stuck as investors saying, Wait, where did that money go? I wanted to put that into the business rather than just into their pockets. I mean, that’s a no no, for me, too. So it kind of stems with management and leadership is is the biggest, biggest No, go for me as an investor.

Dan Kline  

So for me, the biggest one is, and this is this is a little bit of a two step process. It’s if a company has a strong and verified reputation for treating employees poorly. So there’s a lot of companies, we hear rumors, they don’t treat employees well, and it’s not necessarily across the board. So that’s part one, you have to have a verified reputation for treating people badly. And you’re quick to lay people off.

So I’ve given this example many times that I sold my WWE stock during the pandemic, because famously not a great place to work. There are enough former workers who talked about that publicly, that that I believe it. And two, they’ve had multiple layoffs during the pandemic. And some of them were just unforgivable, they were making money. Some of them are, they’re preparing probably for sale, and I understand the logic of making your balance sheets look as good as they can. But we’re still in a difficult time period.

I don’t like companies that don’t view people as assets. And when you’re also making big hires while you’re laying people off, and I understand that, you know, they have a new president. So when you have a new president, he’s gonna want his own lieutenants, or some vice presidents are gonna lose jobs, that that’s that’s not a layoff. When you’re letting go regular people, your people making, you know, 100 grand or less, at a time where you’re raking in profits, and you didn’t make a big, you know, six month effort to rehome people. That’s something that happens at the big tech companies, you know, if you work at a company like Microsoft, they will tell you, hey, this division you’re in is going away, like, you should start interviewing internally for other things. And if it’s something big, that’s happening, they’ll actually create HR resources for that.

I want to see companies do everything possible, because because maybe Simon, you know, you’ll decide, hey, I don’t need an analyst anymore. But I want someone who’s really a company pilot, and I’ll go, Okay, I can get a pilot license in a year. And that’s just a silly example. But in this day, and age companies should be valuing people. And this is going to be a theme of a show next week, we have a labor shortage. So I’m not so sure if you’re a company that has trained workers who know how to do what you do that you don’t want to put a pretty strong value on those workers. We’re gonna see a major spike in at least entry level wages, I think we’re seeing $15 be pretty much the norm. We’re seeing places like Taco Bell offer, you know, $600 incentives. And I say dismissively, because Taco Bell was a place that wasn’t doing that they were not a high wage payer. Now, they are. Chipotle, which famously, would say, we’re only going to pay entry level wages, but you can work your way up very quickly, is paying $15 an hour. So if I was a company, I wouldn’t be so quick to lay off. We’re going to take one last comment.

Simon Erickson  

Dan, boat captain, not plane pilot is actually the position we’re going to be hiring.

Dan Kline  

I’m more qualified to be a boat captain, I’ve spent significant right I guess I’ve spent significant time on a plane and being on a plane or on a boat probably doesn’t qualify you to pilot either one.

Simon Erickson  

The optimistic spin on this too, is that we actually are seeing a lot of companies that are that are putting their money where their mouth is now right like, like we’ve seen companies become public benefits corporations now where they’re actually being held accountable for doing things that are good for shareholders and good for their customers. Dan, I know that you just recently spoke with Barry Kirk, on our podcast, I think you also spoke with ACSI about the importance of customer loyalty and actually taking care of customers. I mean, things like this kind of we all we always call it ESG or conscious capitalism. I mean, things like this are more than just kind of speaking for the headlines. There’s actually metrics that are holding these companies accountable for. I think that’s pretty promising, when you think about business as a whole.

Dan Kline

Both of those conversations with David Vandenberg from the American Customer Satisfaction Index and with Barry Kirk, kind of boil down to companies need to see customer service, which is employee driven as a revenue producer, not as an expense as a retention tool. It’s something we do and I’ll toot our own horn a little bit something we do incredibly well here at 7Investing. I mean, I joked a little bit earlier saying hey, if you’re in town, I’ll have a cup of coffee with you. But the reality is, I will like and is that sustainable, like a Comcast do that? No, but could on a local level, Comcast have a breakfast with the regional VP where you can come and ask your questions. You know, can you do an internet town hall with the CEO? There are so many ways you can connect with your customers.

And I’ll go back to T Mobile, a company I’m not invested in because they have a very heavy capital expenditure. But a couple a company, I like a lot. John Legere last year, having a Sunday slow cooker thing on his Twitter, made him a human being. And that builds his connection with his audience. It made it feel like oh, like I’m eating the same thing this guy eats, and he’s the CEO of a company, you can do those sorts of things. So are we doing it on a small level by interacting with our members on say, a members call? Absolutely. Simon, I’ll give you the last word on this here.

Simon Erickson

Yeah, we prioritize this, Dan, I mean, we kind of consider NPS and customer satisfaction, the most important metric of all, and that’s why we actually have this subscriber call because 7Investing members said, Hey, we want to talk with you, in person live. And so we said, okay, we’re gonna put a process behind that it’s now the third Friday of every single month, we talked about our recommendations directly on a Zoom call. And we’re going to be doing some new stuff here. I maybe shouldn’t talk about it just yet. But within the next month, we’re gonna be doing some new things, which also came back from feedback from people that said, Hey, I love your service. I love 7investing, can you do this? We take all of that very seriously. And I think that the business world, the great companies out there are doing the same thing.

Dan Kline  

And at least once a month, we do a full 7Investing Now that’s driven by your Twitter questions and your live questions. We always integrate questions that we know when we do a show like today, it’s not necessarily going to engender a lot of questions, because we’re not talking as much about specific companies. And we appreciate you watching and these will be broken up into segments, and you’ll get to it, those of you not watching today will get to consume them all sorts of different ways. But everything we do is interactive. And everything we do is about our members. You know, we’re not just building a, you know, an investing service. We’re building an investing community.

Sam Bailey, let’s hit the top row up here and hit our finisher. This one was picked specifically with Simon in mind. Should cryptocurrency be regulated to ensure people pay their taxes on any gains? I will throw out that it’s more than taxes. It’s also crime. There’s cryptocurrency being used for crime? 70% said yes. 21% said no. And 8.2% are willing to go on the honor system. I’m not so sure that works. Simon, you are much more of an expert here than I am.

Simon Erickson  

Oh, goodness, Dan, I hate to say it if I’m the expert, we’re really in trouble. This is a good question for the IRS, right of how do you actually make sure you’re taxing. At the end of the day, any money that goes in and out of a bank account if you’re if you’re buying Bitcoin on Coinbase, or any other exchange out there, and there’s cash going in or out of your bank account, the IRS wants to know that. And if they want to audit that they can they can find that. And so years in the past, it was kind of the honor system, right? We’ve been in choice C, for several years ago, when they asked him your taxes were due Hey, did you make any money you want to self report for cryptocurrencies? During the best they could at least kind of hold hold people responsible for the tax bill that they had for that thing? Starting to start building that some processes on that? I think that it is I mean, it is kind of a capital gain so it should be taxable, at least by the IRS codes. But we still got a long way to go with the regulations and cryptocurrencies. Holy cow. This is probably a five or 10 year conversation, we started talking about that topic.

Dan Kline  

Yeah, I’d like to see in general automation with the capital gains tax. So like, if you go to sell out of a retirement account, and you’re not the right age, your brokerage will make you set aside or pay a tax penalty on that and that’s not a choice, you have to go through a lot of checkboxes. Now, if when I was selling a crypto, I had to pay a capital gain, and there was a place where I could enter, say losses on other sales, which I could do, or my broker would just know that because they Oh, well, you don’t have to pay that 10,000 because you lost your shirt on you know, fake coin or, or whatever it was. So I think there needs to be regulation, I want to see people pay their fair share. I don’t want that fair share to be what the IRS is considered the fair share.

I want to incentivize investing, whether that be in cryptocurrencies or in equities, or in real estate, or whatever it is. I think we do need to simplify, but and you guys can talk about this on our podcast with CryptoEQ. We’re gonna see a lot of regulation come to this space because we don’t want to have more Colonial pipelines where ransoms are being paid. We don’t want to create, you know, something that happens in other parts of the world where business leaders get kidnapped because you can use cryptocurrencies to pay those ransoms. So I do think we’re gonna see some changes. It’s going to take a very long time.

Simon Erickson, thank you for doing this. Dana Abramovitz was with us for much of the show. Sam Bailey was behind the glass. We talked. We skipped a whole segment we’re going to talk about Uber one day next week. If you’d like to get in touch with us that is very easy to do. It is info@7investing.com or you can reach out to us on Twitter. That is @7Investing. We will throw out some questions to you on Twitter later today. And of course, Sam, we for got this one? If you would like to subscribe, that is of course why we’re here. We would love for you to subscribe to our service. That is 7investing.com/subscribe. Thank you for watching the show. Thank you for telling our friends. We need you to be the 7Investing army and retweet get this out there tell people there is a different choice in the investing world. We will be back on Friday with Matt Cochrane and surprises. It will probably not just be Matt. Until then, thank you

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