Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
In this month’s 7investing Team Podcast, our advisors share how we've improved the most as investors and how it's impacted our returns. Our team also plays a game of "Bullish or Bearish", including a new take this time around!
November 24, 2020 – By Simon Erickson
November is an opportunity to self-reflect on everything we’re thankful for. It’s also a reminder that things constantly change. Our lifelong journey continually marches forward, bringing new challenges and new opportunities every year.
The same can be said for investing. It’s a marathon, not a sprint, that can also be continually improved. We’re always striving to be better investors and hone our stock-picking acumen.
In this month’s 7investing Team Podcast, our advisors each share how we’ve improved the most as an investor in recent years.
We also play a crowd-favorite game of “bullish or bearish” with an “over/under” twist! Simon spots each advisor up with a question, and they must predict whether the actual outcome will be greater or less than what he proposes.
Publicly-traded companies mentioned in this podcast include Amazon, Apple, Bluebird Bio, CloudFlre, CRISPR Therapeutics, CrowdStrike, Editas Therapeutics, Elastic, Intellia Therapeutics, Microsoft, Okta, and The Trade Desk. 7investing’s advisors may have positions in the companies that were mentioned.
00:00 – Introduction: Investing styles and how we’ve improved as investors
01:15 – Manisha Samy
2:42 – Maxx Chatsko
5:10 – Dan Kline
8:50 – Matt Cochrane
11:55 – Austin Lieberman
16:11 – Steve Symington
18:32 – Simon Erickson
21:52 – The over/under game: Segments include SPACs, the largest S&P companies, SpaceX IPOs, E-commerce, CRISPR IP rights, COVID vaccines, fast-growing tech companies, and the New Orleans Saints [who Simon will remain a loyal fan of].
Simon Erickson 00:00
Hello, and welcome to our 7investing podcast. My name is Simon Erickson and at 7investing our mission is to empower you to invest in your future. We do that by providing our seven favorite stock market opportunities for just $49 per month. And I am joined tonight by my fellow advisors who are actually in charge of making those seven monthly recommendations. Team, how are you guys doing on this lovely Tuesday evening?
7investing Team 00:24
Simon Erickson 00:26
Fantastic. Well, one thing that we’re very excited about right now is that we’ve expanded our team significantly in recent months. And so in the first segment of today’s podcast, we’ll be describing each of our investing styles. And I’ll ask a follow up question to each of our advisors to to describe how they have each improved the most as an investor in recent years. Investing we know is a marathon and there’s no set finish line. We are always improving, and so we want to hear a little bit about how people are expanding their capabilities as investors. And then the second segment of the show, I’ll be asking a fun question to each of our advisors that’s related to topics that we’ve discussed on our recent podcast, livestreams and updates. And so I’d like to start with Manisha Samy. Manisha, you are actually the newest advisor to the 7investing team. You just joined this month here in November. So welcome! And can you tell us a little bit about the types of companies that you’d like to invest in?
Manisha Samy 01:23
Sure! Thank you for the warm welcome. So I generally like to focus on genomic. So immunotherapy, gene therapies, gene editing, and also technologies that enable the genomic revolution. I like to look at platform technologies that can cut across a number of different therapeutics and diagnostic companies.
Simon Erickson 01:43
That’s perfect. Manisha, you know, as an investor, how would you say that what’s something that you really improved upon in recent years?
Manisha Samy 01:50
I think the biggest thing I improved upon is not getting tied down to a company that I really like. Especially when you have new companies and training the public markets, I think it’s very important to be able to say, “you know what this technology is no longer relevant,” being able to sell out and then buy into a different company where the technology might be better because it’s cheaper, faster, or even better. I think that’s the biggest way. An example would be for example, while on the therapeutic side, you have Bluebird Bio Gene Therapy. Love the CEO, I still love the management there. But then you have CRISPR Therapeutics, and they’re also going out there’s some indication for sickle cell disease and it just was no longer relevant.
Simon Erickson 02:34
That’s perfect. Well, Manisha, we’re looking forward to seeing your upcoming stock recommendations. Your first pick will be coming out on December 1, again, genomics and kind of keeping an open mind two different technologies. Our second most recent advisor is Maxx Chatsko. Similar backgrounds in a lot of ways to Manisha. Maxx, how would you describe your investing style?
Maxx Chatsko 02:52
I think Dan joined after me. But uh, we’ll go we’ll go in sequence.
Simon Erickson 02:57
Right third, third most recent, my apologies. That’s right.
Maxx Chatsko 03:00
We’ve been been adding new advisors left and right here, we can’t stop.
Dan Kline 03:05
Now, yeah, actually we have stopped. We are at seven.
Maxx Chatsko 03:08
That’s right. We’re not eight investing.
Maxx Chatsko 03:11
No, I’m pretty excited to have Manisha on the team as well. I think we’re gonna be a pretty good duo here covering this space. Something I’ve improved on a lot as an investor recently. you know, when I started off, I think just being an engineer, maybe you can relate Simon, you follow innovation, and you kind of geek out and nerd out on it. And it’s pretty exciting. But I think I was a little too naive earlier in my investing career, about how difficult it can be to commercialize some of these innovative technologies. So I learned that the hard way, the the best technology doesn’t always lead to a great business. So that’s really influenced my investing approach and my investing style. So what I do now is I take a bottom up approach. So I kind of layer my research into three different layers. So first, I dig into a technology or technology platform through the science, I try to understand it from a technical perspective. So I’ll you know, read the scientific literature, talk to independent scientists or engineers in the field and when we’re not in a pandemic, I like to tour labs and facilities as well. Then I follow that up by looking into the differences between specific companies in an area, right? So CRISPR is one area, for instance. But there’s a lot of different ways that it can work, some don’t work very well. So I’m trying to understand each company each approach how they differ. So I’ll read mass information. So things like digital publications or industry publications, and I also include company reports, so press releases, and investor presentations. And then finally, I’ll do the actual company research when I find a company or two that I really like. So I’ll read through the SEC filings, make sure it’s a good sound business, look at all the financials. So I kind of layer these on top of one another and It’s definitely helped me to avoid some big painful losers, since I’ve done that, so.
Simon Erickson 05:06
Well, that’s great, Maxx. Looking forward to seeing your recommendations as well, again kind of following biotechnology, bridging the gap between technology and the journals, and actually the recommendations themselves, Dan Kline, let’s come to you next, thank you, first of all, for helping me keep my chronology in place. And when everyone joined the team, you’re a recent addition, as an advisor to our team as well tell us a little bit about the investing that you’d like to do.
Dan Kline 05:27
Yeah so my investing style is probably more conservative than anyone else here. I tend to invest in companies that I know really well. So think about the things you use in your everyday life. But I’ll also go out and explore a company. So if there’s something I cover retail, which is not something a lot of people cover. if there’s a store, I hear good things about, I’ll go out and visit the store, I’ll order something online, I’ll put the store through its paces. And I’m a big research guy, I’ll read earnings call transcripts. The other thing I try to do is be open to ideas that are sort of at the edge of what I cover. So you know, if you cover retail, well, maybe you look at a you know, a real estate REIT, maybe you look at something in the technology that powers retail, and I’m trying to be a little bit broader in what I consider. But in general, I’m going to pick stocks that are not going to go 10,000 in one day, you know, they’re not going to go from $100 to $10,000. But they’re probably the ones that you’re going to look at and go, “okay, that’s a bedrock, that’s a piece of my portfolio that’s going to go slowly up over time.” And now, that being said, my personal portfolio, you know, includes some things that that have exploded over time. So, you know, I base it in a foundation, and sometimes, you know, companies grow and change and you get pleasantly surprised.
Simon Erickson 06:45
Perfect Dan. A little bit more conservative, but really a thorough understanding of those industries, especially retail like you said. What’s something you think you’ve improved recently as an investor?
Dan Kline 06:54
So one of the things and I’ll go back the last couple of years. I’ve been very lucky that all of my friends, including the six of you, not all of my friends, but the vast majority of my friends are people who do this for a living in some fashion or other. So you know, the people at other places we’ve worked. So we have these inside baseball conversations, and I’ve tried to be really open to “okay, I don’t invest in this area. But this friend of mine really does. Let’s learn why they do that.” And, you know, none of us are making picks based on you know, the pure the charts, or we think the scope, they’re all based on the fundamentals of the company, the management. So, you know, I’ve been doing something where I buy some shares of Maxx’s pick every month, I’m going to do that for a year. And I’m doing that because I’ve learned about myself as an investor, that I’m a little too cautious that I missed out on things that I knew were going to do well. So committing to spending, you know, a small amount of money on Maxx’s pick each month, just sort of brightens and broadens my portfolio. Some of the things I own personally, are things you guys have suggested that were on my watch list, but I just couldn’t pull the trigger. So as an investor, I’m trying to be a little more open than I am as someone making a stock pick because as you know, when we make our pick, it’s our highest conviction pick each month. It’s gonna be awfully hard for me for something that I heard about from you to be my highest conviction pick until I’ve studied it for quite a bit of time.
Simon Erickson 08:17
Maxx Chatsko 08:17
Dan, sorry to disappoint. I think I have the lowest risk pick in December, so…
Dan Kline 08:24
Maybe I will buy Manisha’s pick
Maxx Chatsko 08:25
Simon Erickson 08:27
Great points in expanding the circle of competence, like you said in soliciting the opinions of others. For everyone listening, you know, we are very excited, of course, to have Maxx and Dan and Manisha join our team. On the last time we did kind of an investing review like this, we were four advisors. Now, we’re seven advisors coming up with seven individual recommendations each month. So it’s really exciting to have full strength for our team here. Matt Cochrane, let’s go to you next, you know, one of the original founders here with 7investing. Tell me remind me if you would a little bit about your investing process.
Matt Cochrane 09:01
Sure thing, Simon. Well, I guess the space I’m most familiar with is like financial services, or financial technology, which could be short or short into FinTech. But really what I’m looking for is, it’s just like, you know, you remember, I remember like stocks represent ownership in a business and good businesses are eventually ultimately built upon the ability to generate profits. And if companies want to earn profits for a long time, they have to have a sustainable competitive advantage. And that’s what’s often referred to as an economic moat. And if you just picture a castle from medieval times in a moat that surrounded it, it would protect it from like invading armies or, you know, other other lands that were trying to take over their land. And so, examples of economic moats that could be anything from a from patents that grant exclusive intellectual property rights to brands that consumers love and repeatedly buy from or just high switching costs because a just a system is in place or platform is in place that is just very costly and time consuming to switch away to a competitive product. And these are the things that allow companies to charge higher prices and generate greater profits over time. And so these competitive advantages, they tend to shield companies and their stock prices from competitive threats. And that’s the primary thing I look for when investing.
Simon Erickson 10:18
Well, Matt, I’ve known you for a long time, I’ve heard you talk about the depth and the breadth of these moats, you know, that are filled with crocodiles. And you know, you know, I’ve had lots of conversations about those. But I’m curious to find out, how do you think you’ve improved the most as an investor recently? And what does that due to?
Matt Cochrane 10:35
I don’t know recently. I’ll say, when I started, I was just looking for like, I was trying to find like the magic formula, or the magic number that could like that, that would that was the the key to success, the secret to success in investing. And like, when I started, it was something as simple as like a dividend yield, and I would just look for companies with the highest dividend yield. And then I like evolved from that to like, well, it has to be a good valuation. So I just started looking for companies with the lowest PE ratios as if like, no one else was doing this. So as I’ve evolved over time, and that’s, that that kind of metric evolved over time like it, you know, for SaaS companies, when I first was starting to understand SaaS companies, I thought it was the rule of 40. You know, there’s just different metrics over time that I would try to latch on to believing that this was the secret to success.
Matt Cochrane 11:21
And I think the thing I’ve learned is like, you know, investing is a very dynamic game for like a dynamic practice. You know, it’s constantly changing. And there’s no single one metric that’ll determine your success or failure. And to just look at a company from a more holistic approach. Look at the industry and look at its competitors, and eventually, does it have an economic moat tend to generate profits? And can it protect those profits and grow those profits over time.
Simon Erickson 11:49
Sounds great, Matt. Sounds like a shift from being more quantitative to being more qualitative. Austin Lieberman, let’s go with you. Now Austin, how would you describe your investing style?
Austin Lieberman 12:00
Yeah, hey, Simon. And Matt, I can’t wait to have “Al the Alligator” make another reappearance in some of your marketing videos. [laughs] And our original subscribers and listeners may have heard of Al. If you haven’t, then just get excited, because I think Matt will bring Al back. Yeah, awesome. They were in. I’m one of the, you know, the old schoolers here. I’m one of the old old ones here.
Austin Lieberman 12:27
And I invest almost exclusively in founder led companies. So those are companies that are still run by the people who founded the company. And there’s always exceptions, but in general, I think founders have big visions, they run the company with a long term mindset, and they have a substantial amount of their net worth tied up in the company. So that’s some of the reasons that I like investing in founder led companies. Personally, I have a background in business and technology consulting. And I was able to see some of the enterprise wide digital transformation projects that were going on in 2017 and 2018. And it was, it was crazy to me, but some of the largest and most successful companies that we know of today are still running on infrastructure that’s 10, or maybe even 20 years old. And so with that, I was exposed to enterprise software companies. A lot of these companies offer subscription service models for different things that are critical to running large scale businesses. And those models were great because customers can basically pay for what they need, they can add or change their service when they want to, and upgrade or downgrade. And these companies are known as software as a service or SaaS stocks. So a lot of my recommendations are in enterprise software, and SaaS stocks. In terms of traits that I look for I look for some that are intangible. I don’t use any types of screens or anything like that. I like to look for intangible traits, because screens can’t really find those. And there’s a lot of people out there screening. So founder led is one of them, the culture at a company diversity on the leadership team, customers who are fanatics about the product. And even a lot of companies today have huge, huge communities of customers that that are just raving fans. And then some tangible metrics. Again, I don’t use screens, but I do look at some tangible metrics. These are things like revenue growth rate, I generally like things that are growing faster than 40%. year over year, gross margin, generally above 70%, sales and marketing as a percentage of revenue. I like to see that trending down because as software companies find product market fit, they should be able to spend less on sales and marketing and still have great revenue. Like you see, I’m working towards profitability. I don’t care if they’re profitable or not. Right now, I just like to see that trending in the right direction. And then a big thing is dollar based net expansion rate. What that means is, if it’s over 100%, that means that customers are spending more in following years than they did the previous. So say it’s 130%. That means that on average customers are spending 30% more in following years than they did say this year. And generally, I look for companies that are between 1 billion and 50 billion in market cap. And just a few examples of companies that that kind of fit these traits, The Trade Desk, Okta, and Twilio. And so Simon that’s, that’s the kind of stuff I look at. And those are, you know, the types of companies that you’ll see me recommend for 7investing.
Simon Erickson 15:20
Founder led companies, enterprise software, that sounds great, awesome. What’s one thing that you’ve done that you think that you’ve improved as an investor recently?
Austin Lieberman 15:27
Yeah, always a work in progress. But I think what I’m getting better at is not falling in love with the story of a stock or if something drops big because the business is struggling, you know, hoping to buy and hope that turns around as different than a temporary sell off those happen. But if the business starts to struggle, I tend to stay away. So I try to invest in companies that are winning companies, that that are trending in the right direction, have great fundamentals. Because as we’ve seen with the Amazons, and Netflix’s of the world, if you find the right companies, those trends can tend to continue compounding and getting better over time.
Simon Erickson 16:08
Great points Austin, not following the story of stocks.
Simon Erickson 16:11
And then Steve Symington, let’s come to you, too. How would you describe yourself as an investor?
Steve Symington 16:16
Oh, I, well, I specialize in technology and artificial intelligence, in part because that’s where my background is as software engineer, who worked with neural networks and machine learning back in the day, a long time ago. But I’m open to any business in any industry that I can adequately understand. So rather than bottom up model, like Maxx was saying he follows, I generally follow a top down approach to finding investment candidates first, taking a macro view of broader industries. I’m looking for tail events that are truly disruptive to the way that we do things, then I narrow them down to the companies that are poised to benefit most over the long term. You know, whether by taking market share from competitors or building their own niche organically, I also enjoy finding companies that are following proven models for consistently creating shareholder value. Now those of you who are 7investing subscribers will know which of my recommendations so far I’m referring to, to that end. But I’m also equally unafraid to find businesses that are beaten down for what I’ve used unjustifiable reasons or to buy winners that I believe will keep on winning, you know, too many times when I was younger, I passed on stocks that continuously looked overpriced based on traditional valuation metrics, and ended up being incredible values as they kept winning over the long term.
Simon Erickson 17:39
Sounds great top down approach, Steve. How do you think you’ve improved as an investor recently?
Steve Symington 17:45
I’d say that one of the ways I’ve improved most in recent years is I’ve become fairly impervious to volatility. I’ve kind of accepted that it’s a feature not a bug when it comes to investing in stocks. And again, you know, so many times, you’ll see a stock soar or plunge. And in both cases, you’re tempted to either take profits or cut your losses. But I think it’s more important to reexamine those stocks and determine whether it presents an opportunity or whether it’s the start of a much longer term trend. And more often than not with great businesses, especially when they rise, it’s the beginning of a longer term trend. And they end up you know, really delivering returns that are kind of beyond your wildest dreams in those cases and it’s fantastic to watch.
Simon Erickson 18:32
Yeah, fantastic. Thank you, Steve. And then I’ll bring us home for the end of this first segment, just describing myself. I am a self proclaimed growth style investor Also a self proclaimed “science nerd”, which puts me in good company and this team here [laughs], that goes out and looks for developing trends.
Simon Erickson 18:47
You know, I spent the decade of my 20s going out into direct sales calls, spent the next decade for the most part of it kind of going to industry conferences and seeing which way the wind was blowing. Seeing which trends were developing out there; seeing which way technology was heading. And so I’m a really big fan of companies that spend a lot of money on R&D and yet have expanding operating margins because they have leverage built into the business itself.
Simon Erickson 19:10
And so I think that one of the ways that I’ve improved as an investor recently has really been drawing the lines between those, those developing trends that are taking place out there, and an individual company’s performance. And I believe it’s really not until you get in the nitty gritty of looking at a company’s unit economics to find the really good investment opportunities,. Things like comparing the lifetime value versus customer acquisition costs. You know, how does that matter? And how do you quantify something like that? Assessing operating leverage to see how something that a company builds up front is going to lead to rising margins over times like this. These are things that are really important to investors, and they’re things that are taking place out there in the markets that these companies compete in. But it’s still up to the company themselves to take advantage of that. And not all companies are created equal, even if they are in the same market. This is something that influenced my current month’s pick. And it’s also played a key role in my upcoming December recommendation as well.
Simon Erickson 20:04
And so great. So there’s the investing styles of our 7 lead advisors.
Dan Kline 20:08
One more for you, Simon. I want to know what you’ve learned from other people. But I also want to know how you put this team together, we are all very different. But we all do sort of overlap. So kind of a two part question.
Simon Erickson 20:23
That’s a perfect question, Dan. And, you know, it goes back to the ethos of 7investing, being a collection of different styles that represents all parts of the market. As you just heard from our seven descriptions, we’re all very different. And what we’re looking at out there, whether it’s retail, whether it’s genomics, whether it’s tying between technology and businesses, whether it’s founder led companies, whether it’s competitive moats, or whether it’s a top down approach looking at the trends that are taking place out there, we’re all looking at different things. And I wanted to make sure that our team of advisors was representing different corners of the market.
Dan Kline 21:01
And then, you know, the last part here, what have you learned? I mean, you’ve been doing this as long as anyone here. But I’m guessing there is still a few things left to learn
Simon Erickson 21:10
Quite a few. It’s a marathon. There is no finish line for investing. You get to keep improving, no matter what the experience level, age, or what you look at in the market is.
Simon Erickson 21:19
I think that probably the thing that I’ve learned the most is just respecting people that are on stage that are a ton smarter than I am talking about their life’s work as a PhD, post doctorate, whatever it is. Those are the things that are moving the bar out there. And then it takes really smart business leaders to figure out how can you harness this technology, this innovation, whatever it is, and capture profits out of it. And how do you make those profits turn into shareholder returns as well. I’ve gotten a great respect for that in recent years, to say the least.
Simon Erickson 21:52
Well, and now to do our second segment here, this one’s going to be a lot of fun, because no one in the team knows what question I’m going to spring on them here. But it’s going to be a combination of kind of some games we’ve played in the past on this podcast. Combining our “bullish or bearish” game where I asked a question and the advisor says if they are bullish thumbs up, we expect that trend to continue, or that’s going to be a positive. Bearish, thumbs down. But then I’m also going to throw another twist to this of an “over and under”. Where I’m going to set the bar at a certain level. And you can tell me if the question is going to result in over or under the bar that I set. This is probably influenced by me watching too much football lately; probably combined with you Dan taking a recent trip to the casino and those betting odds. But just to have some fun with it. We’ve had a lot of livestreams and podcasts and content recently. I want to capture some of those insights here on the team.
Simon Erickson 22:44
And so Steve, I’m going to start with you on this one. You’re going to be my first victim…I mean first advisor to go on this. According to SPAC Insider, which SPAC stands for a special purpose acquisition company, there were 182 new SPACs that have been launched already in 2020. That’s a number that’s triple from the 59 that were launched in 2019. Steve, is this a long term trend or a fad? And so my question is, in three years, is the number of SPACs launched in 2023 higher or lower than 192?
Steve Symington 23:20
Oh, goodness higher. I think it’s an intriguing way to bring a company public, you know. These businesses, it’s a great way to raise money, and then find acquisition candidates. You basically bring them public that way. But it’s a low cost way. And it’s an attractive way to not only raise capital but to acquire/team up with other investors often and acquire businesses and bring them public. So I think this could be the start of a longer term trend and I’ll lean higher.
Simon Erickson 23:54
Taking the over on the on the over under.
Steve Symington 23:56
Taking the over!
Simon Erickson 23:57
You got it. Okay. Matt Cochrane, I’m coming to you next. We talked a lot about the S&P 500. The 500 largest market caps in American stock exchanges. But let’s talk about the S&P 3. Because the three largest companies out there are Apple, Amazon, and Microsoft. Apple today has got about a 2 trillion market cap, Amazon and Microsoft are both at around 1.6 trillion. These are huge companies, Matt.
Simon Erickson 24:24
But three years from now, which one of those three companies has the largest market cap?
Matt Cochrane 24:28
Wow, um, that’s a hard one. But I would go with Microsoft. I just think the spaces they’re moving into. It’s like Satya Nadella, the Microsoft CEO talks all the time about how IT spending by companies and corporations around the world is expected to double over the next few years. And I think Microsoft is probably the biggest beneficiary of that, although there will certainly be many beneficiaries of that. But like with their cloud infrastructure, you know, Office 365, Teams, Windows, you know none of that stuff is going away. They’re developing a bigger space in the video game market, you know, they have a chance to capture like, augmented reality with their HoloLens. So I just think they’re in a lot of the right places. So I would take Microsoft.
Simon Erickson 25:19
Microsoft. Good call on that one, Matt.
Simon Erickson 25:21
Austin, let me come to you for the next one here. Matt mentioned cloud, let’s look even higher than the clouds. Because we have a lot of companies that are shooting for the moon. Some of the companies that you followed are actually doing just that. Elon Musk tweeted just a couple of months ago that he believes SpaceX would probably IPO the Starlink segment of his business, which is the satellite internet division, several years in the future, because “he wants revenue to be smoother and more predictable for shareholders.” But he did say “you can hold me to this.”
Simon Erickson 25:52
So two part question for you on this one, Austin. Is first of all, does SpaceX IPO Starlink three years from now-so by the end of 2023? And two, if they do do that, are you buying shares?
Austin Lieberman 26:08
No, Simon, they’re not going to IPO because they’re going to be a SPAC and they’re going to be part of Steve’s answer to where he thinks there’s more SPACs. [laughs] Steve, actually, there’s going to be less because this is ridiculous. But anyways. Yes. I’m very interested in in SpaceX and Starlink. It’ll depend on on the market cap and you know, all that stuff. But that is a company I would love to invest in. They’re going to SPAC. I’m calling it.
Simon Erickson 26:41
Yeah. I like it. Steve, keep an eye on that, because that’ll count to your tally also
Steve Symington 26:44
Simon Erickson 26:45
That’s right. Yeah. Dan Kline, coming to you. And other over/under question here. The second quarter United States figures reported that e commerce reported for accounted for 16% of all retail in the US. This is rising very quickly, because that number was only 10% of retail the year prior. I know you follow retail; you just mentioned a little while ago here, Dan. Over/under on e commerce accounting for 25% of US total retail sales by the end of 2021 next year?
Dan Kline 27:17
Oh yeah, zero chance of that. So at the close of 2019, it was actually 13.4%. During the height of the pandemic – remember, we couldn’t get toilet paper. We’re all buying anything we could from anywhere. It was about 20%. Now, some of its going to get squishy. What’s curbside pickup? Is that is that digital? Is that like… so there’s going to be more technology involved in how you shop. But people like going to stores. There’s a reason I went to the grocery store tonight. I was going to cook and I wanted to look at what I was going to cook. Like I think that’s really important. And it doesn’t mean I don’t use grocery delivery, I absolutely do what I did more during the pandemic. I think people vastly overstate how big the internet is going to get. Some shopping is just fun. Some shopping is you know, is do I want to go try on a coat? Or do I want to order the coat, have it show up and not fit, and have to mail it back? That’s not fun. So it’ll be more, the number will climb.
Dan Kline 28:13
If you said 25% by 2025. Maybe. And I think it might top out. You know, everyone thought that that online books, that digital books, were going to kill physical books, and an actually maxed out at about 50/50 it’s been pretty steady. Some people just like what they like, and it’s not a generational thing. Well, people talk about falling mall traffic. Mall traffic was actually like near its highest levels ever in 2019 people just bought less. So we’re not going away from shopping. The Internet will pick up but it’s not going to be nearly as big as people think it is.
Simon Erickson 28:47
Love it, Dan, and I love your recommendation from this previous month, which was actually a brick and mortar retailer. We won’t reveal the name of the company. But one that people probably didn’t have on the radar before you recommended in this previous month.
Dan Kline 29:00
I think half the team had never heard of it before.
Simon Erickson 29:03
Manisha I’ll come to you next another over/under question. You previously wrote a white paper on the foundational IP rights of CRISPR, where academic institutions are licensing out their technology for commercial applications now. And by my count, there are three pure play, publicly traded CRISPR companies today right now.
Simon Erickson 29:24
Over/under of there being – of course, this field is happening very quickly Manisha – but the over/under of there being ten publicly traded CRISPR companies three years from now?
Manisha Samy 29:37
I’d say over. So there are a lot of applications for CRISPR. So the three publicly traded companies using CRISPR right now, they’re working on therapeutics. So you have CRISPR, Editas, Intellia Medicine. But there’s this entire other field. So diagnostics for example, Mammoth BioSciences and there’s a number of others. Alego. All these use CRISPR technology to some extent. Now whether they have exclusive IP rights, that’s a complete different question, it still goes back to either the Broad or UC Berkeley. But companies using CRISPR, that will definitely tick up. There’s also a number, a whole slew of companies in the private world that are still trying to find new nucleases. So nuclease is being kind of the cutting function of CRISPR. So whether, you know, you could have DNA or RNA. So I think it’s an easy tool. It’s cheap. People in high school are using CRISPR technology to edit DNA. That’s how easy it is. If you look at something called biohackers, for example, you can actually go on to Amazon and buy biohacking kits and use CRISPR and change the DNA of bees, or actually make glow in the dark beer. So that’s something for all those who enjoy the nice cold beers.
Manisha Samy 30:57
But it just there’s so many applications, and we’ll only see that tick up. And you know, if you look from 2012, when it was first invented or discovered, up until 2020, you’ve seen an exponential growth in applications. So it’s only a matter of time until we see more IPOs that use CRISPR technology.
Simon Erickson 31:15
That’s fantastic Manisha. I’m very excited about those new companies that are using CRISPR. I’m also very terrified about those high school biohackers that are using it. We’re keeping an eye on both of those groups.
Simon Erickson 31:24
And Maxx Chatsko, I’ll come to you on this one. Another over/under. You posted earlier this week about the requirements for cold chain storage for the COVID vaccines that are coming out. Some of them need to be kept at 80 degrees below Celsius, which could be challenging for distribution across the country. But we also know that there could be multiple vaccines that are approved. It’s not just one vaccine we’re banking on. There could be multiple winners from this. And so my over/under for you, Maxx is over/under there being six approved SARS Covid-2 vaccines that are publicly available in the United States by the end of 2021?
Maxx Chatsko 32:04
Six? I’d say, man, that’s a good question. I’d say under six by the end of 2021. But I bet it’s over six in the long run because there’s some that are in development that are just going to be slower. Like where I live for instance, in Pittsburgh, UPMC is working on a patch that can be stored at room temperature and you just put the patch on and it administers the vaccine through micro needles. So you know, they don’t have billions of dollars to spend on it so it’ll be a little slower to develop but you know, that could be available in 2022 or be used in developing countries. So.. But over/under in the US…under six by the end of next year, but we’ll still have a lot, so Dan can get to his casinos. [laughs]
Simon Erickson 32:51
Thanks very much, Maxx. And we did get some input from our resident COVID vaccine expert on the number for the over/under that I spotted you up for. To make it interesting, even more so.
Matt Cochrane 33:02
Alright Simon, I’ve got one for you, Simon.
Austin Lieberman 33:05
I’m gonna ask him one too, but you go first. (team laughs)
Simon Erickson 33:07
Uh oh, I called this upon myself.
Matt Cochrane 33:10
The New Orleans Saints are in first place, but Drew Brees is out as a starting quarterback now with an injury. Are you bullish or bearish on them on the idea of them winning the NFC South now?
Simon Erickson 33:22
Yes, the Buccaneers are really falling off the wagon Matt. So it’s going to be I think the Saints division to win. I’m also confident Jameis Winston, a heck of a quarterback in multiple aspects. Not quite Drew Brees, but I’m confident with him to lead the team.
Daniel Kline 33:35
Did you see the Bucs game? Wait, hold on!
Austin Lieberman 33:40
All right. Simon already got one answer wrong. [laughs] He’s about to get a second one wrong.
Simon Erickson 33:44
I’ve got to cheer for the Saints. No matter what happens. You guys know that.
Dan Kline 33:50
I was just going to pile on. They had one bad game, the Buccaneers. They looked really, really good this week. But Simon, how can you not get behind the coach-less Houston Texans? Like you live in Houston.
Simon Erickson 34:03
You know, I grew up in New Orleans as a kid Dan. I met the Saints at sports bars because my dad brought me out to meet them. And so I’ve been a lifelong Saints fan that’s been loyal. Plus, it’s challenging to cheer for the Texans at times. Even though I live in Houston.
Dan Kline 34:17
I can understand that. Austin, your question here.
Austin Lieberman 34:20
Alright let’s bring it back. I will focus us team, alright? Don’t worry. Simon, you’ve been on Twitter, talking about customer acquisition costs. And you quoted Beth Kindig, one of her tweets. You retweeted her tweet, who we’re all a fan of – we love her work. And she’s been a guest on the podcast. In a tweet that you retweeted, she actually shared a chart of companies with lifetime value and customer acquisition costs. There’s a lot of great companies on here. But I want to focus on four of them. Okta, Zscaler, CloudFlare, and Elastic. I’m putting you on the spot here. Which one is going to have the largest market cap out of those companies? We’ll say three years from now.
Simon Erickson 35:07
Austin Lieberman 35:09
Okta, which is 28 billion right now. Zscaler, 18 billion, CloudFlare’s 20. And then Elastic is only eight. So maybe that’s a stretch, but who’s gonna have the largest market cap in three years?
Simon Erickson 35:25
I’m going with Okta on this one. Even, you know, 28 billion is a nice head start over the rest of them right there. I think they hold on to that for at least the next three years.
Simon Erickson 35:33
Like you said, Austin, people are throwing money at the security vendors out there right now. Very little acquisition costs for these companies, because CIOs are putting that at the top of the list. I think Single Sign On, Okta’s bread and butter, it’s the building block of anything that’s in the cloud right now continues to hold for the next three years. So I’ll go with Okta out of that question. And yes, Matt, I think the Saints still win the NFC South even with the Bucs showing some promise.
Matt Cochrane 35:58
I mean, the Bucs are coming for them.
Simon Erickson 36:00
I know that’s your team Matt. We’ve got to have this conversation continue. [Matt winces.] Oh, that’s right, that’s Austin. Matt’s the lifelong Dolphins fan.
Austin Lieberman 36:12
Matt’s brave for admitting that he’s a he’s a Dolphins fan.
Matt Cochrane 36:16
6 and 3! 6 and 3.
Simon Erickson 36:18
Fair enough. Our next podcast will be all about our allegiances in the NFL.
Simon Erickson 36:22
You know this is been a fun one as we kind of described our investing processes. Again, we’ve got seven advisors on the team. We’re coming up with seven unique stock recommendations every single month. If you’d like to go take a look at them for for this month at 7investing.com/subscribe. And we have our new picks coming out on December 1 which will also include Manisha’s very first recommendation here with 7investing. Thank you team for joining me this evening and we’ll look forward to our future team podcasts every single month. For the rest of my team, I’m Simon Erickson. We are 7investing and we are here to empower you to invest in your future. Thanks for tuning in.
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