The pandemic has made the stock market even more volatile than usual. You have days like Tuesday where most stocks were deeply in the red for much of the day before many staged an afternoon rally. That can be hard to watch as an investor, but if you’re a long-term investor, these kind of moves should not change your mindset, That’s easier said than done for many people, but we’re here at 7investing to help you know what to do when the market makes big moves.

Transcript:

Samantha Bailey  0:14

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  0:24

Good afternoon 7investors, and welcome to the Wednesday edition of  7investing Now. My name, of course is Daniel Brooks Kline, sorry, I just made my computer jump a little bit. I’m being joined today by Steve Symington, Steve, yesterday, it was one of those days in the market that I don’t want to say we live for. But one of our goals is to hold people’s hands while this kind of stuff is going on. This is going to be our top story. So we’ll get to it in a second. But like, do you even if you didn’t do this for a living? Would a day like this even bother you in the slightest?

Steve Symington  0:56

I mean, maybe if I didn’t do it for a living, but it shouldn’t, you know, if you don’t, it doesn’t bother me at all. And, you know, I posted a couple times is anyone else excited for this and, you know, I felt a lot a lot panic and anxious and in my Twitter feed, just watching it. But really, this, this isn’t a big deal. And you know, watching your portfolio drop 5, 6, 7 percent in Yes, that’s abnormal. But it is at the same time normal, this kind of stuff happens. And it shouldn’t be bothersome. Take a deep breath, focus on the long term, and you’ll be just fine.

Dan Kline  1:31

It also creates investing opportunity. So wherever you are, wherever you’re watching this, we would like your questions and comments that can be about market volatility that will try to answer whatever questions you have for us. If you just want to say hello, say hello, theoretically, wherever you are, they will pop up, we learned that that’s not entirely true. Because if I start a watch party, the comments in that watch party did not come through. But for the most part, we will get your comments. But our top story today is how do you deal with a volatile market and why we’re not worried about a stock market crash. So let’s talk about what happened Tuesday, Tuesday morning, most portfolios show to see a red I opened up my portfolio and it looked like a bloodbath. I think I had one stock up. And I don’t want to say it was like maybe like Royal Caribbean, like it was something that like maybe shouldn’t be up. We’ll talk about that a little bit later. This, of course, can scare investors, it brings I saw a lot of people on Facebook and Twitter, I cashed everything out, I’m just going to sit in the side, Steve, I’m gonna throw one at you that we didn’t plan for. So a lot of people take the logic of well, I’ll cash out and I’ll buy back in at a lower price. That’s a bad idea. That seems like a good idea on the surface, tell people why this is not a great idea.

Steve Symington  2:40

You’re you’re chasing returns. And I mean it, often it ends up being the reverse of what you hope. And you end up selling when stocks are down and buying when they’re higher, because you think the trends are going to continue. And too often that doesn’t happen. And this is opportunity for people who have some cash on hand. Sure. But if you’re fully invested, it is often the worst thing to sell. Right as stocks plunged really with no justifying underlying reason. For for that move for the business, really, I think the key is to focus on on whether your thesis is still intact, and then consider selling, if something materially changed with the actual business, not just the stock price. That’s that’s how you need to think about it.

Dan Kline  3:27

Yeah, and I think people forget that these are businesses. So there’s a stock in my portfolio yesterday, that was down 10% in the middle of the day. And when I looked at the end of the day to see where it was, I was pretty shocked that it finished up 10%. But here’s the reality, this particular company, if you wanted to say it had any news recently, it had very positive news. But the reality it didn’t really have a lot of news, the news was just a story, a news article in a prominent place that sort of reiterated some things from the earnings call. But so nothing happened.

Dan Kline  4:02

So why on earth? Now if yesterday, we learned that COVID-19 is now turned into COVID 20, and it’s resistant to all vaccines, and we’re back at square one, well, then you might want to rethink your you know, your positions and travel stocks or, you know, whether you should you know, buy more dominoes or whatever it is, but these short term moves, and we’re seeing a lot of volatility based on what’s happening in the moment, you know, there’ll be a good report on how many people have been vaccinated, and someone will say, gee, it looks like we’ll be closer to normal in April. And then Dr. Fauci will come out and say, Well, maybe it’s more like June, and things will be very volatile. That didn’t change the business of any of the companies you most likely own. Steve is yesterday kind of a textbook example of short term volatility and why you don’t use something like a stop loss order.

Steve Symington  4:54

Yes. So the funny thing was, I had been receiving questions all week at our info at seven investment. dot com email inbox. And you know, DMS, everything people asking me do you guys use stop losses? And I I said repeatedly No, I don’t use stop losses. And this is one of those things that that can be very dangerous actually add somebody yesterday retweet something and say this is dangerous advice, you know, you stop losses people. And I’m like well actually, several of my stocks I would have been stopped out of my position if I had a stoploss order in place.

Steve Symington  5:26

And there was no one stock I actually talked about earlier this week lemonade that was down, I think 17 or 18%. In the morning, if you had a 15% stop loss, you would have been stopped out of your shares, sold them, and then it rebounded nearly into the green at one point. And it’s silly, because you end up losing positions in businesses you otherwise wouldn’t have sold. And this is, you know, volatility, like I said on Twitter yesterday is a feature not a bug of our markets. And yeah, it was sort of this textbook example of short term volatility, when nothing’s really happening with the business and more really concerns about inflation and those sorts of things. But there are ways to handle that, but stop losses and, and limit orders and stuff like that aren’t the thing.

Dan Kline  6:09

So let’s talk a little bit about stop losses. I don’t use stop losses, because if there is a company I own, I don’t care if it goes down 90% unless the reason it went down 90% is that it turns out that the CEO was actually you know, a Labradoodle dressed in a suit and they’ve been fooling us all along unless there’s some fundamental problem. If I like the company’s prospects, I believe that thesis will play out some of the biotech stocks that that Maxx and Manisha recommend, they might have wild 50 60% swings. But it’s, it’s also important to remember that there are points where Microsoft has been down 50% off, its 52, week high. So if you sold then there’s no guarantee you can get back in at a better price. And that’s what you’re risking. So you should only be selling stocks. When your story on that stock changes. Steve, we have some comments from our very own Matt Cochrane, would you like to share them with our audience?

Steve Symington  7:03

Sure. And since the bottom is only declared, in retrospect, those who wait for it almost always go away empty handed, said a wise investor said that not sure who neither am I. But yes, that’s, that’s so very true. It’s just, you know, you can say, Oh, I should have bought at the bottom, but almost nobody knows when. And the people who did call it correctly are almost always just lucky in that sense, or, you know, sort of the broken clock analogy. Right twice a day, you know, calling the bottom calling the bottom, you heard it here first.

Steve Symington  7:33

Well, not really. And it’s virtually impossible to determine where those bottoms are. Just, you know, the the way we do it here at seven investing is just to continuously buy businesses at what we deem attractive valuations at the time, month after month, continue building your portfolio that way, don’t worry about trying to time tops and bottoms and trading in and out, buy them, hold them, add to them as you see fit. And your results will eventually really reflect your patience and long term view of things.

Dan Kline  8:06

Steve, thank you for that there’s a line, Matt Cochrane, thank you for watching, we would love your questions and comments, we will get to them, either in this segment or later in the show. But Steve, a lot of people are worried about inflation and that prices are going to dramatically increase because there’s going to be a surge of demand after the the pandemic and I don’t think that’s going to be true, because I don’t think there’s going to be one magic day where everything is normal. I think it’s going to depend where you live. And you know, I’ve been vaccinated, but my wife hasn’t, and you haven’t. And, you know, as more of our team gets vaccinated, maybe we’ll be able to meet someplace. So I do think this is going to be a staggered restart. But But what do you answer to people that say, you know, oh, my God, I’m worried about inflation and price hikes, and sort of all that.

Steve Symington  8:49

Um, I kind of go back to some some clips we had from an interview I did with Chris Mayer, the author of 100 baggers a few months ago. And, you know, we’re talking about how when you zoom out to businesses that generally performed really well. Most of the time, things like inflation, or what the feds doing, or what this quarters jobs number was, or, you know, what, who’s in the White House, for example, most of the time, that doesn’t matter, to really great businesses over periods of years. These are we look for businesses that will perform well, no matter who’s in office, or what policy policies are doing or what GDP is or what inflation is. And most of the time, you can put that aside. And, you know, it’s gonna be one of those concerns where, you know, we have other concerns about reopening trade and pivoting away from high tech growth stocks and just buy shares of good businesses along the way. Most of the rest is just noise in the near term, and it creates opportunity, like you said earlier,

Dan Kline  9:54

And people who actually are long term investors overthink things on a short term basis. You know, people talk a lot about, oh, well, the economy is open. So we can just get rid of our, you know, tech stocks. It’s like Apple’s zoom, Shopify, Microsoft, those are all good, you know, Salesforce, those are all going to be important companies post pandemic, like, you’re not all of a sudden going to smash your iPhone because it’s easier to go out to dinner like, and like, yeah, we might use some technology less. But I can’t think of one piece of technology that I’ve used during the pandemic, that I’m not going to use after the pandemic. Well, I have more in person meetings. Yeah, I hope so. Will I travel more than I zoom to talk to people? Yeah, absolutely. But it is definitely one of those situations where, you know, I am not expecting some major pivot, I do think there will be this crazy periods where it’s like, all the tech stocks are down, and all the airlines are up, airlines didn’t magically become a good business, because the economy is going to be going to reopen.

Dan Kline  10:57

And I know you can make a case for Alaska Airlines, I can make a case for Southwest. But I can almost always make a better case for company for businesses that aren’t so capital intensive, and so dependent on things like fuel prices and other outside factors. There’s generally better places to put your money. But Steve, what do you say to the person who just on a day like yesterday, they look at their portfolio, and they feel bad like, like, I tell them don’t look at your portfolio as often, which I know is a Cavalier answer. But if you’re a long term investor, you have to take a long term view, but how do you handle it? Maybe someone in your family who bought stocks, because they’re their subscriber, and they see a pretty bad day?

Steve Symington  11:37

Take a deep breath and realize we’re focusing on the long term, you know, you’re gonna have days like this. And, you know, I think one of the things that’s, that’s a little troubling, as someone who tries to sort of offer education and in a right mindset for these kinds of things, is that people are so willing to accept those rabid updates, and unwilling to accept that sometimes stocks fall as well. And, you know, they they don’t always go up contrary to what you know, some of the Wall Street Bets folks might tell you, you know, and we need to be able to accept both sides of the coin, stocks go up, stocks go down over time, shares of great businesses will trend higher. And and that’s kind of what we need to look for is is those businesses that will that will trend higher and you know, you need to be able to endure both up and down days in terms of volatility, especially in today’s market.

Dan Kline  12:31

So we’re you’re watching  investing. Now, we’ve got a couple more questions on market volatility, a couple that come from you one that that I’m going to sort of paraphrase from Twitter, then we’re going to talk about Virgin Galactic some other upcoming earnings, we’re gonna move from there to talk about NFL rights and sort of the line in the sand and what that’s going to mean for a whole lot of publicly traded companies that hold NFL rights. So, Steve, do you feel any different about any stock you own based on yesterday?

Steve Symington  13:00

No, not really. I don’t, I don’t feel different. What about you.

Dan Kline  13:05

So I have two that I own, I own very small pieces of Royal Caribbean and Carnival Cruise Lines. These are actually stocks I own almost because I like the industry. And I do believe in the long term that they will dig out of the massive amounts of debts, you know, you’re talking eight 910 billion dollars of added debt on their balance sheet. But these were highly profitable companies beforehand. And given the vaccine trend, the vaccination trend, I would put my money on, they make it back into operating before they have to restructure under Chapter 11. So I that I feel better about that yesterday, because you’re starting to see some of the vaccine ramp up today, I feel a little better with it looking very likely that the Johnson and Johnson vaccine gets vaccinated, that gets approved and more people will get vaccinated. Because I do think a vaccination is going to be a requirement to get it accrues. So I feel better about those companies having a customer base, having an ability to keep their crew shape to not open for a week and then get shut down again, still very, very risky businesses, because they’ve taken on a ton of debt.

Dan Kline  14:13

Do you worry about a market crash? Steve, it’s it’s not something you know, I worry about it from a we’re a business that’s judged by our stock picks. And if there’s something that cuts the market in half, that’s not gonna feel great for our business. Sure. Personally, I don’t worry about it in the least.

Steve Symington  14:27

No, I actually cross my fingers that we might get a market crash here and there. If you are a net buyer. And if you’re a long term investor, you should celebrate, you know, any sort of chances to buy shares of businesses you’d like at lower prices and market crashes are more common than you think I’ll have to dig up an old tweet and retweet it but retweet it but I think, you know, we get, you know, pull backs of what was it 10% a couple times a year from their highs 20% once Every like three to five, you know, we get a 30% pullback every 10 to 15 years or whatever that’s happened more often, in the last 10 to 15 years, it’s been kind of crazy. But these these big, huge draw downs are more common than you would think.

Steve Symington  15:17

And, and, you know, days are becoming more volatile, I still remember days a decade ago when they’re talking about how the Dow move to record 500 points or something, and I’m like, Oh, that’s just sort of par for the course anymore. And it just, you know, it happens and volatility is is a thing and, and it’s just part of being an investor in equities. And that’s just kind of how we need to think about it.

Dan Kline  15:40

And one of the things we do at  7investing is, we give you pics that largely you don’t have to worry about, there’s obviously some high risk picks from time to time. But if you don’t want to be a high risk investor, we identify the companies that you basically don’t have to worry about look, and you know, if you own and I’ll just throw out some very stable stocks, if you own Microsoft, Costco, Walmart. And for some reason, their prices get cut in half. And it’s not because they did something terrible, they’re going to recover. And as a long term investor, you don’t have to worry about that. I think a lot of people try too hard.

Dan Kline  16:11

And Steve, that brings us to the thread we were in on Twitter earlier, or someone asked us about a stock and I looked it up, and it was a penny stock trading at point 0012. So a less than a penny stock not. And I looked up the company, and the website was fairly crummy and didn’t really explain what they did. And there was no Investor Relations. So kind of what I would tell people is one, unless you’re in that space, and truly have some insight and knowledge as to why this company has the special sauce, that’s not going to work. Even if they have a good idea that becomes a good business, it is probably not a good investment. And when you don’t have there’s no Investor Relations page for this company, when you can’t look at the financials, how they spend their money, you’re guessing and sure there are times and I don’t play roulette. There are times you walk in, you put your money down on something and it hits somebody wins the lottery, but that doesn’t make the lottery or roulette, good investment. Steve, your thoughts on penny stocks.

Steve Symington  17:11

Yeah, they’re they all too often end up being risky and turn out very badly for investors. And I mean, we’re often you know, and we’re not talking about businesses, like we have to be clear, you know, we don’t just have big large cap, you know, big tech, like big stable companies on 7investing scorecard. We have some businesses in the, you know, $200 million range. As far as market capitalizations go very small. We have a lot of small growth stocks out there. But when we’re talking about penny stocks, we’re talking about like micro caps that are like $2 million market caps. Like, for perspective, I worked as a software engineer for a company right out of college that was started by one of my professors, and we were acquired by a $400 million business acquired us for something like 11 or $12 million dollars.

Steve Symington  18:00

We were a 19 person office working in Missoula, Montana, you know, they got acquired for that some and we, you know, we’re we’re small potatoes. And I mean, we’re talking about businesses with two to $5 million market caps that are traded on, you know, some over the counter, or OTC over the counter, some OTC exchange or something, it’s it’s it’s risky, and they’re tiny, and most often, they turn out badly for shareholders. So we end there, they’re prone to manipulation as well. So that’s part of the reason that we, as people with with relatively large followings don’t responsibly comment on companies like that, because they tend to move when people talk about them, and it’s irresponsible to be fair,

Dan Kline  18:45

and I understand the appeal, you know, oh my god, I can buy 100,000 shares. But the analogy I always give is, you know, you go to your your burgers or Einstein brothers, and they sell day-old bagels, and it’s like half price, and it’s a great deal. So like, you know, if you’re going to eat those bagels in the next day or two, you could probably toast them up, they’re going to be fine. But if they’re selling you month old bagels, it doesn’t matter if they’re only 1% of the cost, because there’s no value to a month old bagel and in most cases with these penny stocks, there’s no value there and they’re public in a way that has no scrutiny.

Dan Kline  19:15

It’s really it’s not always a scam. It’s sometimes just a way to raise money. But if you’re a $2 million market cap, your end game might be a company that does $3 million of business a year and pays everybody salary like, you know, you’re not going to put that on your website. your website’s always going to have some, you know, to reinvigorate communications across the globe, but it’s like, yeah, that’s not what this company we’ve never heard of is going to do. So I think it’s really important to do your due diligence, know what you’re talking about. And someone asked us on Twitter, can you think of a legitimate penny stock that made a comeback, and the only one we could both think of was Sirius XM. And the reason for that is Sirius XM before they were were Sirius XM they were just serious at the time was a viable business. That was very expensive to run, you could see how they could succeed if they got the money they needed. But at the time, it looked likely that they might not. So bankruptcy was an option so that they traded as low as I want to say four cents. And I’ve talked about this before I bought some and was thrilled when I sold it at $1. Had I been a long term investor, it got up much higher, not much higher, but like I think it was at $6 or $7.

Steve Symington  20:24

You know, I that was the big thing to keep in mind. There was that was a business that was literally within hours of bankruptcy before john Malone, of DirecTV fame swooped in, I think with a $500 million loan to stave off bankruptcy. That’s why it was down there. It wasn’t, you know, these companies that started small and got big, and I’m sure there’s examples out there of little tiny micro caps that became, you know, big, big, regular exchanges, trading on a major exchange, etc. But by and large, the vast, vast majority turned out badly.

Dan Kline  20:59

And it’s also worth noting that Sirius at the time had millions of paying subscribers who liked the product, it just cost billions of dollars to put satellites in the air. That is the problem. We have room for your questions and comments. We’re going to take one now from our ex supply chain guru. Thanks for sharing what are your thoughts on the higher bond yield narrative that is out there legitimate or overblown? Somewhere in between? appreciate your insights. Steve, I don’t trade bonds. So this one’s All

Steve Symington  21:24

Right. So I don’t trade bonds either. But I know what’s going on here. And part of this is is sort of indirectly related to the inflation trading and higher interest rates. Now, the thing is, when interest rates are low, and kept low by the Federal Reserve, it makes fixed income investments like bonds unattractive. So it has the byproduct of essentially moving money over into equities, because they are a much more attractive option to actually put your money to work. And so the narrative is that is bond yields climb, if interest rates rise and bond yields kind of follow suit, that’s we’re gonna have sort of this inflow out of equities, stocks and into bonds. Yes, legitimate to an extent. But you know, from the comments, we’ve heard from the Federal Reserve keeping interest rates relatively low, you know, and they will climb and there, there might be some some outflows with from institutional investors from conservative equities into bonds. But I don’t think this is something that we need to panic about and expect that stocks are going to crash because bond yields are climbing. And it’s it’s a thing, but it’s nothing that I think we need to lose any sleep over as stock pickers. I think that’s the the key is that we’re trying to find shares of businesses that we like and are promising and, and have chances of outsized returns relative to bonds. Otherwise, hey, buy all the bonds you want and make a 1% or whatever.

Dan Kline  23:00

It’s a big part of our message at  7investing. And I look at it as our job is to help everybody be an individual stock investor to give people the tools that match up with the fact that trades are free on most platforms now that it’s really easy to buy stocks, but to not only give you the tools to buy them, but to hold your hand so you can hold them. So when you see a really good company go down by 40%, which happens that you understand, okay. Hey, Steve Simonton, that subscriber call answered to me Yep, this happened here’s why. They’re there sometimes out sighs news stories on very minor things that can cause pretty big movements and stocks. So that’s what we do for our members. And all of you are watching today. And we appreciate it very much. Some of you are members and some of you are not if you’re a member, of course, you get access to our seven highest conviction stock picks each month. That’s great. That’s a big part of the service.

Dan Kline  23:54

But the other part of the service is you get private access to us in a new subscriber call in a member call and all sorts of reports and write ups that we do, some of which are free, but for them for a lot of them are just for members. And that gives you our our sort of deepest, darkest insight on Hey, this stock I recommended six months ago that’s been kind of crazy. Do I think it can go up another 300%? Do I know is it still worth it to get in? Steve if people want to subscribe? How do they do it? Do they just send you an AI cash or Bitcoin or, or you know mcdonaldland coupons like you know how many subscribers seven invest?

Steve Symington  24:28

Go to  seveninvesting.com/subscribe, take a look what we offer. There’s two options a monthly for 17 bucks a month or annual $399 a year. And you’d basically save a couple months if you go with the annual rate and pretty straightforward. And you can see all of our past recommendations and our current ones. We have some new ones coming out on March 1 as well. And we just held a call where we talked about the stocks that we like the most that are on our scorecard as well. So we offer that as kind of a supplementary perk to our members now. So and it’s

Dan Kline  24:59

it’s so unbelieving diverse. So if you look out on LinkedIn right now, the seven investing account shared an article I wrote, that was how I use the seven investing picks. And like everybody knows I cover retail, I cover tech. So I’m a pretty conservative investor. So I actually buy Maxx Chatsko and Manisha Samy picked a small amount each month. And they are by far, in most cases, the most volatile things in my portfolio. But I know that that’s a counterbalance to my personal style, where I really have to understand a company to be willing to buy something.

Dan Kline  25:30

I will also say that there is not one of you who at some point, I haven’t bought a pick after the first of the month, because I saw your presentation. And you turned me on to a company I hadn’t thought of. So we talked a lot about having an investing thesis, we create the investing thesis, which if you’re a seasoned investor that just might backup what you’re doing. If you’re not that gives you the conviction to buy the stocks we’re recommending. But Steve, for while we’re watching, you had a hard time picking something Why don’t you explain? It’s

Steve Symington  26:01

There is so much to watch right now. And to be honest, it was difficult to nail down a single one thing I’m watching. We have this trend, you know of larger and more companies buying Bitcoin For example, we had a podcast on that with our partners at crypto EQ recently, we have concerns of a rising inflation and bond yields like we just talked about. There’s this pivot away from high growth names toward reopening plays and value stocks like that’s the scary thing that people are wondering like, Oh my gosh, could value stocks have their day in the sun. But I guess if I had to nail down one thing I’m watching it’s it’s so easy to forget amid all this craziness that we’re still in the thick of earnings season. And not any or not just any earnings season. This is the fourth quarter earnings season we get a lot of annual reports a lot of information coming out. So today and tomorrow in particular some of the busiest days of earnings season we’re gonna see a lot of numbers and a lot of wild swings when it comes to people responding to earnings reports. So we’re gonna get earnings from Nvidia Lowe’s reported this morning, TJC companies Redfin is coming tomorrow, I believe,

Steve Symington  27:04

But one ticker in that I’m really interested in, in a stock I own personally, s Virgin Galactic, they’re actually releasing tomorrow. And, you know, for perspective, Virgin Galactic shares actually rally pretty hard. Last month in anticipation of its sort of rescheduled test flight, which was kind of this serve as a do over for December failed test flight where a rocket engine failed to ignite because of safety mechanism being triggered. In that sense, it was sort of a success, but they didn’t make it to space like they wanted to they had a rescheduled flight with a test window that was supposed to start to Saturday, two Saturdays ago, that was on February 13. And kind of on the eve of that window, that Friday, they said, we’re gonna allow more time for technical checks, we’re keeping our eyes out for a new flight window, and the stock pulled back really hard to levels not seen since like three and a half weeks ago. So

Dan Kline  28:02

let me jump in here. Yeah, normally, when we look at earnings for mature business, so Lowe’s reported, and you look at the numbers, did their sales go up? What are they forecasting, there’s actually Lowe’s actually said they expect there might be a slowdown and some of the Do It Yourself stuff as the economy opens up, I think we’re heading into a really weird year of having to explain your comps next year, because margins will be up, but sales will be down. But Virgin Galactic doesn’t really have a business yet to their earnings report matter, or is it really just the information they give on when the next test flight is gonna be?

Steve Symington  28:34

So it’s less about, you know, and when you say to be clear, like when Dan says they don’t have a business, you know, he means they’re not generating revenue actively, you know, they’re taking, you know, they’ve taken reservations for these $250,000 flights into space. And sort of the long term goal for this company is, is to really, to not only allow these sort of flights into space for well to do people, but over the longer term allow for, you know, kind of low orbit flights that that speed things up, you know, you could fly around the world a lot faster when you’re doing it with a rocket ship. And, you know, so there’s, there’s this long distance fast travel thing, they’re looking at changing kind of the way things work in that sense.

Steve Symington  29:18

But yeah, you’re right. When quarterly earnings are released, tomorrow, there won’t be earnings. And that’s, I you know, we’re looking more at what they say about their test flights, potential follow up flights and eventually putting their founder Richard Branson into space as sort of a you know, this is our last big flight before we start opening it up to the public. They want to make sure they have everything buttoned up and ready. And I’m very curious tomorrow, whether we get some news on their revised test flight schedule, and that could serve as a catalyst for the stock. However, overvalued. People might argue that it is, I think it will probably end up being a much larger business over the long term and it’s going to be a while next couple days. I think for Virgin Galactic shareholder,

Dan Kline  30:01

I gotta be honest, Steve, I like Richard Branson. I’ve seen him speak, he’s incredibly engaging, he seems like a really nice guy. I don’t want them to send him to space, because we’re famous enough that there’s gonna be a movie about his life. That’s the end of a movie…

Dan Kline  30:18

You know, I just think he should go on like the 100th flight, not not like the first flight it, it just seems like a bad idea. I mean, basically, any time in school, they gathered us around to watch a space shuttle launch, and then something bad is gonna happen. So, yeah, I think you need to be really careful. But I have, I’m gonna go back to something you talked about earlier. But before I do that, I want to just say with earnings for the next like, two years, there’s going to be a lot more nuance to earnings than there previously has been.

Dan Kline  30:47

Because the pandemic, look, the pandemic has been really good for a lot of companies. So if Domino’s Pizza which has had, you know, crazy, like 20%, you know, gains, next year goes back to reporting two and 3%, you know, quarter over quarter year over year sales gains, you have to or even some drops, if those are drops when you were up 22% in the previous year, because people were stuck in their house, you have to put that in perspective. And I don’t think you know, I hate dissing the news media, but I don’t think the financial media has the ability to put that in perspective,

Steve Symington  31:19

Right? Yeah, there’s gonna be a lot of headlines that feel misleading. And investors will need to keep this in mind, there’s going to be a lot of executives saying, hey, comps are weird. I’m paraphrasing what they’re gonna say. But say last year was weird. I think most people will understand that and it will kind of as the world sort of gets back to normal. And I think that’s part of the the promise of this is there’s a light at the end of the tunnel now. But as the world gets back to normal, I look forward to seeing which businesses thrive in which businesses, stories were accelerated by the pandemic, or at least reaffirmed

Dan Kline  31:55

plenty of room for your questions and comments. You have been quiet today. So we would love to hear more of you weigh in. That’s sometimes technical, but I have seen some so who knows. But Steve, we’ve talked a little bit about Tesla and Bitcoin in the beginning, you know, I’m not a particularly big fan of Elon Musk, I think he he’s a showman who tries to manipulate markets. I don’t trust him. But even if he’s honestly buying Bitcoin, because he thinks it’s a good investment for Tesla’s capital. Do you think he’s tied the price of Tesla to the price of bitcoin? I it, it feels to me that it’s a pretty big factor. Now.

Steve Symington  32:30

I saw people make that argument. And it seems disingenuous to me, because I think we’re talking about an investment for Tesla that was something like 1.5%. You know, it’s of its funds, and like, 8% of its cash balance, it was just silly to make that argument that Tesla’s tied to the price of bitcoin, like if they had their entire balance sheet in Bitcoin. Yeah, maybe. But it seems silly that if the price of bitcoin goes from 58,000 to 49,000, that Tesla, which had what was it a $700 billion market cap, you know, should should swing that wildly, because they made a one and a half billion dollar investment, that’s just

Dan Kline  33:13

$700 billion market cap, but how much cash on hand do they have? I’m gonna guess it’s under $10 billion. That’s a guess. So they are putting a decent amount of their available cash into bitcoin. So that does, and again, I try to not be too critical of Tesla, because I know they are doing a lot of great things. That does worry me a little bit and we’re seeing other companies do it. So it’s one we’ll keep an eye on.

Steve Symington  33:36

Yeah. So $14.5 billion in cash on hand. I think at the end of the third quarter,

Dan Kline  33:40

About 10% is in Bitcoin

Steve Symington  33:42

About eight to 10% of their cash balance in Bitcoin. You know, the big one, you know, considering their capital expenditures, I think they can comfortably do that. In my opinion,

Dan Kline  33:54

bringing back the classics with big whoop Andrew Carnegie says, to be fair, the space shuttle made 133 successful flights compared to the two all being horrifying, of course, failures. I Yes. I’m glad you brought that up. But Steve, you’re too young to remember this. But when the challenger blew up, that they were sending a teacher to space, a woman named Christa McAuliffe. So they had every student in the country watching that launch. And ever since then, I believed in kind of the idea Don’t tempt fate like that. Like, like, if you’re pretty sure you’re gonna win. Don’t tell all your friends to watch like this.

Steve Symington  34:30

This is one of those things where I think companies today and you know, it’s not like watching a rocket landed by SpaceX, for example, that they expect to blow up because they’re learning how to land it again. You know, we’re talking about a vehicle that drops down from another from another plane and then goes into low orbit from there with the rocket attached to it. Yes, but I think the technology and the engineering is much more solid as it pertains to itself. ability to withstand the necessary stresses of actually doing something like this. But

Dan Kline  35:06

We’re we’re heading into the homestretch here and it’s it’s Mickey Mouse against the NFL, Disney. Disney has shot back. So, Steve, you know, you’re a football fan. No team there in Montana, but I’m sure you have a team you root for. So the NFL wants 100% price increase from its networking partners. And Disney, which owns ESPN has basically said no. And part of that is one ESPN broadcast Monday Night Football. Monday Night Football is not the signature package. It used to be it’s generally kind of a crummy package. And Disney is coming back and saying, you know, hey, look, we paid $1.9 billion for that last time per year, we’re not going to pay 3.8 we might pay you some more. But we want digital rights, because they are eyeing having a digital version of ESPN. So they’re going to need to get rights to have a standalone streaming ESPN service. And hey, we want a doubleheader. We want multiple games, if you’re only gonna give us crummy games, or mostly crummy games. We want games. Steve, do you think Disney has leveraged here? Like you only need one other player to want the package for Disney to be out?

Steve Symington  36:18

Yeah. I’d say yes. And no. I mean, when you look at that, I guess for perspective, when you look at the NFL asking for 100% price increase from a contract that it’s signed in 2011. You know, that’s eight and a half percent compound annual growth to get to 100% gain from there. So do the economic support, then? I don’t know. I think there’s no,

Dan Kline  36:41

Here’s the thing they don’t. So although NFL games are one of the last things people watch in real time, the ratings for Sunday nights and Monday nights, while a bit down this year, because there’s been some fantastic fatigue fatigue. They were up last year after being down two years ago. But they’re down this year, largely because it’s not the same. There’s no fans, it’s a little bit weird. We’re all preoccupied. The Superbowl turned out to be a blowout. So the numbers weren’t particularly great. But that being said, if you look at the pure games, you probably if your Disney cannot make $3.8 billion back in ad revenue and streaming revenue, or whatever it is, but you have to think of the bigger picture. And this is where it gets really squishy.

Dan Kline  37:25

If you’re Disney and you use the fact that 13 to 20 million people are tuning in for Monday Night Football, to sell Disney plus subscriptions, or to get people to watch a new show about wacky neighbors who somehow ended up living next to each other, you know, on ABC, and that becomes a hit. Well, there are ways to make the money back and there’s always been another player. The challenge here is you already have NBC, CBS, Fox, ABC, that is all the broadcast networks. So does Disney do they negotiate with an Amazon do they do what did you know the the DirecTV Sunday ticket package is also going to come up and that could go to the cable companies that could go to you know, you know, a streamer who wants to spend a you know, a couple billion dollars, you know, fubu fubo can get $2 billion to buy that that that would be an accelerator for their business would also be a giant money loser do not do that. If but Steve, do you think we’re that there’s a rabbit and a tat that the NFL has, where it can? where it has another player work and forced Disney to come to the table?

Steve Symington  38:28

Yeah, no. Maybe they could, you know, my guess is they probably strike a deal somewhere in between what they paid in 2011, and what the NFL is asking for, but they could certainly sort of split the rights with somebody else and reduce the cost to that. But I I wouldn’t be surprised if someone else comes in and tries to upsell them for that. Because it is sort of coveted content for a platform that can say, you know, they can use that like Disney hoax to, you know, to sell Disney plus subscriptions or something. But we’ll see how it plays out. I’m not

Dan Kline  39:05

I don’t know, I I actually think the NFL is largely going to get what it wants. So it was 1.1 billion for Fox Fox has the NFC package, which is generally considered a little bit better, about a billion dollars for CBS, which is the AFC package and 960 million for Sunday Night Football on NBC. All of those are going to double I think that makes sense. Sunday Night Football, maybe more than doubles, because that’s maybe the most valuable real estate in sports right now on a consistent basis from a ratings point of view. So it’s one of those things where I do think they’re going to get their money, but I think Disney is going to get everything at once for more money than they’re paying, but not 100% increase.

Dan Kline  39:51

But you might see somebody else also get digital rights to those games. Disney’s concession might have to be that Amazon can also broadcast those games or who knows what it is? There might be something there.

Dan Kline  40:05

We’re gonna go to our finisher in a minute. But we’ve got a question from Tirth P, when your long term portfolio is plummeting, like yesterday, what goes on in your mind? Do you sell at or nothing this one we caught we covered at the beginning of the show. But for people who are joining late, we do nothing we might add, if we have some money sitting on the side, we don’t care about what happens in a day, unless what happened is something that fundamentally changes our thesis. So I’ll give you a ridiculous example, then I’ll let Steve jump in. If it came out yesterday, that coffee is much more of a risk to your heart than we thought it was. That might change my long term thesis on Starbucks, if that became medical mantra that if you drink two cups of coffee a day, you’re 80% more likely to have a heart attack, that’s I’m picking something silly. Please don’t report that or aggregate that anywhere.

Dan Kline  40:55

But if that happened, then you might go “Starbucks makes a lot of money selling multiple cups of coffee. This is pretty bad for their business, I no longer believe in it.” That’s a very extreme example, if if Satya Nadella was eaten by a dragon yesterday, I might question my stake in Microsoft now, I wouldn’t make any decisions until we saw who took over. But no, I don’t worry about sort of short term market volatility. Steve, your thoughts there?

Steve Symington  41:22

You know, and we got another question from Geek of Games in general, do you add to stocks you already own on dips or buy new stocks? You know, I can use this to add to turrets question as well. Good name by the way, the It all depends on the stocks that I’m watching. You know, I try and do both. If there’s a stock that has been crushed. unjustifiably, I’ll add to my position. But there are no shortage of new opportunities all the time, which is how we come up with seven stock ideas every single month for investors that we just, we continuously add to our portfolios, we buy them with real money for our scorecard for tracking every month. And, you know, it’s just by month after month, I’m really not changing anything, anything I’m doing because the market is falling on one day. And like you said, Really nothing different, if we were going to buy before will buy now and just continuously do that over time. And you’ll participate in both the markets gains and its losses. But

Dan Kline  42:24

The one thing I’ll say is I may accelerate a buy. So I put money into my account every couple of weeks and I and I tend to spend it immediately. If I look and see that what I was planning to buy, say next Monday is down 20% I may move that transfer up to move money into my account to if that stock stays down 20% by the time there’s money in my account, I might buy it sooner, but that’s really just moving around what I was already going to do.

Dan Kline  42:48

Occasionally if there’s something I really believe in, I may actually just like transfer some more money into my account to buy a little bit of that stock. The other thing I’ll say about portfolios people ask us all the time how many stocks Should I own and I now group my portfolio in two ways. I have one bag of stocks that’s the stocks that I’ve recommended that I believe in that I own because I’m taking a risk and that’s my dad does the due diligence, Dan watches the stocks I do my homework, I may get help from all of you at seven investing but those are my stocks that I have another basket that like I don’t even necessarily remember what the names of the companies are. These are stocks that Maxx and Manisha picked Steve picked it really all of you where I might not have considered owning that stock but you made such a compelling case that I’m outsourcing it’s your job to track those stocks and and tell me if something big has changed and that’s one of the best things you know as much as I am a worker here at seven investing. I’m also a member and I get to take advantage of all we have to offer.

Dan Kline  43:50

We thank you for the good questions. probably time to sneak one or two more in but if we will look after we hit our finisher Sam Bailey if you want to bring up the graphic. Which of these companies have the best chance of a major turnaround Macy’s which was actually surprisingly profitable this quarter on on much drop sales. But 8.8% of you believe in Macy’s Carnival Cruise Line, about half of you believe that they’re going to have a major turnaround AMC. A quarter of you believe AMC your raw zero possibility. AMC unless they fully change what they were going to do. We are simply not going to go to the movies. In the level we used to the big movie companies have seen the value of not putting everything out in a traditional theatrical release. AMC was a bad business before the pandemic. It’s a terrible business after the pandemic, even if tomorrow everything goes back to normal. They’re going to struggle. Cole’s 14.4% of you Steve, do you have a favorite on this list?

Steve Symington  44:50

Ah, my favorite here I think was carnival. As far as kind of turnaround stocks go. There is an argument to be made that AMC might Reach sort of a steady or state where its share price. it’s higher than it is today. But I’m not buying it as a long term business. Macy’s and Kohl’s and I’m sort of I’m met on them. Carnival, though I think you can make the case that that we’ll see a turnaround there. ,

Dan Kline  45:16

So Macy’s, it’s encouraging that they were profitable, but they were profitable on a significant drop in sales. And you can only cut your way to profitability for so long. So what Macy’s has to show me next is okay, you’ve closed a bunch of stores, you’ve saved a bunch of money. How are you going to grow your digital? How are you going to make your existing stores work? Are there new formats, you’re going to roll out? At some point you have to be a growth company or you’re not investable?

Dan Kline  45:40

Kohl’s to me is the most disappointing here because they have the most obvious art audience there’s no reason Kohl’s shouldn’t do as well as target does in apparel and Kohl’s has boring tired clothes whereas Target has done a really good job with owned and operating brands not just enclosed across its whole portfolio you go in and buy goods and gather I forget that the name of the brand for the bath products but it’s packaged nicely it’s very intriguing. You walk by and like the yoga stuff and okay it’s not Lululemon but it looks like it’s high quality. The displays are great. You walk into Kohl’s and it feels the same as Kohl’s did 10 years ago. You know their deal with Amazon. There’s a lot of questions about whether they’re there. They’re making any money on that and look, I’ve talked about it before I would like to see a bigger Kohl’s Amazon deal. I’d like to see the Amazon owned and operated lines be sold in Kohl’s that would immediately be good for Amazon. It would immediately refresh the Kohl’s brands. I think Macy’s has a chance I think Kohl’s has a chance I do not think AMC has a chance to get a chance to be an operating concern. Maybe a chance to be a growth company in any way.

Dan Kline  46:45

Carnival Cruise Lines was a great business before the pandemic it could be a great business after I like Royal Caribbean a little more Carnival because I want to say the share price is cheaper has been had more people buying it. That’s not a great reason to buy a stock. You want to look at the clientele. The clientele and Royal Caribbean are a little bit higher end than the clientele on Carnival sounds like they could spend more money they could you know, upgrade more. I think there’s cases for both but on this list, I think he got it right. Seven investors with picking Carnival Cruise Lines. Steve, we’ve done this for about 45 minutes. It is time to go. So what do people do if they have questions for us?

Dan Kline  47:27

One last question is up. Steve, you want to share this one? You can read this one out loud, we got interrupted don’t don’t share the part that may give away a pic. But if you want to share the second half of that.

Steve Symington  47:40

But he said Dan, had I did you get interested in investing in improve along the way? What is the most important thing when buying real stocks that have no cash flow, or short history?

Dan Kline  47:51

So for me, I got involved in this sort of back door, I got hired for a job at Microsoft, where I wasn’t told what the job was. And it took because it was secret windows eight was still a secret. And I was the launch editor of what’s now the msn money app, which was great for many years is now terrible because it’s AI driven and not people driven. But I every day picked the stories that went into that to that app and my boss for much of that time a gentleman named Vic Bondi who’s a bit of a music legend as well, Vic would call me every morning like really excited about the market and the stocks and what was going on. And I just became very infectious. So I started reading like the Wall Street Journal every day and watching eight hours a day of Bloomberg, and slowly and slowly learned, and then went to work as a writer at The Motley Fool, which Steve does as well, it’s not a name, we say out loud a lot. But it’s, it’s something that’s part of our history.

Dan Kline  48:46

And when I was there, I was exposed to all these amazing investors. You know, people like Dan Caplinger, and Mack Frankel and who very slowly taught me to go from being a journalist who wrote about businesses to understanding the fundamentals of the companies. And it was one of those things where I started to go, Oh, wait a minute, I know a lot about retail like, I could look at two retailers that both look like they’re doing great. And I can analyze why one is doing better than the others because I’ve worked in that space, I understand supply chain and logic. So for me, it was all about how my sort of journalism and observational skills kind of matched to what everyone else was doing. And I felt as I got into this and started to really consider myself you know, a stock picker and I’ll credit my foot my friend Emily Flippen for being the person who kept for months telling me No, you can pick stocks like you you know how to do this. And it just slowly grew from the deep knowledge we built up these companies have six eight years of reading their and their annual reports and their their quarterly earnings call. Steve, how did you get involved in this? Oh, man.

Steve Symington  49:51

Yeah, I started investing just before the the financial crisis of 2006-2007 right. in there. And yeah, it was, I just realized slowly that I liked being an investor more than I liked being a software engineer. And I was blessed with the opportunity to be able to do that professionally full time. And it was it was a whole lot of fun to be able to research constantly. And it’s, it’s, I think it’s it’s nice to have the luxury to do nothing but research stocks all day, and to kind of hone your mental, your mental aspects of it, because it really it is. It’s more about your attitude and your patience, and having a long term mentality, I think is the key to actually investing well. But yeah, it’s it’s something that kind of started with with 401k accounts and being able to actually trade individual stocks and, and learning learning the ropes through the course of that last financial crisis, which was kind of bonkers. So that was fun.

Dan Kline  51:02

And I’ll give a peek behind the curtains of  7investing, because it’s one of the things I like the most, we only each have to pick one stock a month. So we get to pour an enormous amount of time and research into what stock we like. So that’s that that is by design. That is how our CEO, Simon Erickson set up the company. But the other thing we have is we have each other. So when I have an idea, or fundamentally, you know, like, I got asked today a question by Simon about sort of trust in the media and that I gave a pretty long answer to that I, I have a good perspective on I worked at the Boston Globe. So I can tell you sort of like you know, the part of the example I give is a lot of people think that like an editor like like in Spider Man, you know, J Jonah, Jameson sits in like assigned stories, and 99 times out of 100 reporters generate stories like it’s, it’s sort of fundamentally one of the movie things. That’s not knowledge that necessarily any of you would have had that might not be helpful from an investing point of view.

Dan Kline  51:59

But there’s so many things where I might look at something, okay, this makes sense to me. But Maxx has a totally different perspective on it. Or Matt as a as a parent who has multiple kids, or Steve, who has multiple kids might have a totally different view of the cost of going to Disney World than I do. So these aren’t always like stock things that we’ve learned over the years. Some of it’s just human things. And all of that different perspective. And analysis has made us all better stock analysts. And that’s not just internal, we have lots of friends who, who we spend time with that do this professionally, or do this on the side as well. But we really get to take the time to figure this out. So I’ve only been professionally picking stocks since I’ve been here that said, I’ve written I don’t know, 10,000 articles that had analysis that could lead you to buy or not buy a stock and I I stand behind every one of those. So we’ll take one more question. We were gonna end here. But if you ask good questions, we’ll stay all day.

Steve Symington  52:55

I’d love to take this next one. Yeah, go ahead. From our friend, Gerald Marshall, hi, Gerald. Do stocks you recommend to ever become not a good stock to own down the road? Yes, sometimes it hasn’t happened yet. We’re still a young company, we were launched. Just under a year ago. Actually, I can’t believe it’s been a year already how fantastic. But we will tell seven investing subscribers if something changes with our buy thesis for any given stock. So I guess that’s it’s very important, even though it hasn’t happened. In the hopefully rare event that something happens to negatively. irreparably damage our confidence, really dismantling our buy thesis for any given stock, we will alert subscribers to the news. And, you know, we hate to be wrong, of course. But we’ll admit it if something happens, but we perform so many hours of research, as Dan mentioned earlier into the stuff that we recommend each month. Hopefully this should be very rare. And, you know, if if a sell arises, you know, I’ve been wrong over the course of the last 15 years before. Usually, it’s something that nobody saw coming, you know, be it fraud or, you know, just some strange, you know, dismantling seldom Is it something where your thesis is just slowly disappears. So I guess that’s it happens to the best of us.

Dan Kline  54:20

There is theoretically one other time we issue a sell and this probably won’t happen in the next five years. But if you own a company, and it plays out its thesis, it becomes a mature company, and it’s no longer in growth mode. It’s just in profit generation mode. That might not be a good stock to own. So I always talk about Starbucks because it’s an easy one to envision. But if Starbucks maxes out in China, maxes out in grocery stores with its Nestle deal, builds out its premium brand, and is this giant behemoth that sure they might dabble in like, well, what if we own the burger chain like, but like nothing is going to be a clear growth driver that might have And 20 years from now. And we might say, Hey, we love this company. But when we bought it, it was at 40. Now it’s at 132,000, split adjusted, we’ve made our money, we just don’t believe the story is still there. So all of this is going to be very, very rare because we buy companies we want to be owners of. And that’s something we can’t say enough. Steve, I’ll give you the last word before I close out the show,

Steve Symington  55:23

Mark, what happens sometimes, as a case of acquisitions, we have had  7investing recommendations get acquired already in our first year. And, you know, in some cases, we’ll choose to hang on, like in the case that actually that happened, where we decided, you know, what we’re gonna hang on and essentially own shares of the business that acquired them, because we believe it’s compelling business as well. But in some cases, we’ll see companies get acquired and the premium is just so immense and the you know, whether it’s a stock and cash deal or whatever, sometimes that’s another case where we might recommend a sell. But hey, it happens, unfortunately, to the the best businesses more often than you think. And that’s maybe one of the most annoying reasons to sell for me, is when I’m like, dang it. I wish I was hoping for a 10 bagger out of this and I’m settling for 100% gain or whatever. I guess it’s not a terrible problem to have. But you hate it when businesses get taken off your hands by suitors.

Dan Kline  56:20

Yeah, and sometimes weird things happen. You know, like, if jack in the box buys fastly, you might not want to own jack in the box fastly like, like, I’m teasing a little bit. I picked the silliest combination. I could just add, that does sometimes happen.

Dan Kline  56:33

Steve, we reached the end of the show. So how do we get some of these questions? Of course, we get a lot of them from you live, we also get a lot of them. On our Twitter, our Twitter is @7investing. And if you look at our Twitter, our personal Twitter’s our team Twitter, we’re all pretty active. So in general, we don’t share opinions on individual stocks. We do that for our members. We don’t generally do that on Twitter, but your investing questions, your discussions like anything you want to talk about, you want to ask me about who the Patriots are going to sign a quarterback. I’m happy to talk about that. So that is at seven investing on Twitter is our team account. But we all take a look at it.

Dan Kline  57:11

And if you have questions for us how our service works, you know, quick questions that might be stopping you from joining, you’re a member and you have a question. That’s info@7investing.com. It’s usually Steve doing that. And sometimes he’ll throw things out to all of us. We’ve gotten some great, provocative questions if there’s guests you think we should have on or things like that, share that on Twitter, if there’s questions that you know, you know, geez, I have the service and I can’t find this or I’m thinking about becoming a member. But Geez, I’m worried about this happening. That’s for the email. But either way, talk to us, we’re here. We’d like to be there. We appreciate you watching. We appreciate how many great questions we have. We’re gonna be back on Friday. We’re gonna talk a lot of earnings on Friday. And Steve, let me tease it now. The third Friday in March. All six of us are going to be together we’re gonna do a special two minute special time. 12:30 we’re gonna do a blowout show for everybody. With all of us. We might even ask Sam Bailey to sit in because we’re gonna do a loose fun show. I’m teasing it a month early. But I’m so excited. I felt like it was worth bringing up for Steve Symington, Dan Kline, we’ll see you Friday.