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“Free Guy” has had a solid two-week run at the global box office and it was released only in theaters. Does this show that the traditional movie release model can still work? In addition, we’ll look at Boeing making an investment in Virgin Orbit, and the impact of rising fast food wages. And, to close the show, Dan Kline and Steve Symington will be talking about your stock market regrets on "7investing Now” live at noon eastern.
August 23, 2021
“Free Guy” has had a solid two-week run at the global box office and it was released only in theaters. Does this show that the traditional movie release model can still work? In addition, we’ll look at Boeing making an investment in Virgin Orbit, and the impact of rising fast food wages. And, to close the show, Dan Kline and Steve Symington will be talking about your stock market regrets on “7investing Now” live at noon eastern.
Sam Bailey: Welcome to 7investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.
Dan Kline: Good afternoon. Good morning. Good evening. depends where you’re watching. Welcome to the Monday edition of 7investing Now. my name, of course, is Daniel Brooks Kline. I’m the host of the program. I’m being joined today by Steve Symington, who just told me that it is in the 50’s in Montana. I won’t be visiting to see you, Steve until May or June. That is that is all I could say on that.
So here’s what we’re going to talk about today, we’re doing a bit of a news grab bag. We’re going to touch on the movie industry. We’re going to talk about Virgin Orbit (NASDAQ: VORB) that is the spin off company from Virgin Galactic (NYSE: SPCE), not the chewing gum company that’s just Orbit. And we are going to talk fast food wages. Later in the show we’re going to talk about your investing mistakes. Because it’s kind of an open show. We would just love your questions and comments, whatever you want to ask us about. It can be what we’re talking about can be other things. Say hello, tell us what’s going on. We would love to hear from you.
But let’s hit it right now running. Okay, so first topic here is Disney’s (NYSE: DIS) Free Guy. This is a movie they inherited when they bought 20th Century Fox, has made $112 million in box office, and it only dropped by 34% domestically week over week. That’s actually really good. Is this non-franchise non-sequel film a sign that the movie business is back? It’s back, baby. Steve is that’s true?
Steve Symington: I wouldn’t say back, back. But I think the one advantage that this one has is that it was a theater only release, right? It wasn’t one that Disney decided to do a release like they did with Black Widow which saw really, really steep plunge in its second weekend. And I don’t know if that’s just a sign of its staying power. Because a 34% drop is not bad actually, when you when you look at that, like often you see 50-60%.
Dan Kline: Yes. 60% is actually common for a blockbuster.
Steve Symington: I mean, 50% is alright, that’s not bad. And when you’re getting mid 60%’s and 70%’s, that’s when they’re this might not have legs at the box office. And so you know that that’s a sign that this could have some staying power, or it could be a sign that maybe it’s the only thing anyone wanted to see. And they did do a really decent job marketing this one. And even my kids asked can we go see Free Guy? I’m like yeah, I really want to go see it. I haven’t seen it yet. But we’ll be one of those people who who picks it up in the following days. And, and yeah, I’m excited about that, and, maybe the state of the movie industry overall.
Dan Kline: So I’m going to argue the opposite direction. One, the drop is good. And usually when a movie has good word of mouth, it will do well in weeks after. And this movie has good word of mouth. I didn’t check the Rotten Tomatoes, but but it’s a good rating. The problem is $112 million globally is a terrible number for a blockbuster. When we look at where Black Widow is now. Black Widow between the Disney+ money and remember, Disney keeps all of that money on Disney+, so I forget the number, let’s say it’s 150 million directly on Disney+, they keep almost all of that. Whereas the theatrical release, it’s somewhere between 70% goes to Disney towards the beginning and that number goes down.
So that movie is at about $500 billion dollars. But it’s probably the equivalent of like $550-600 million when you look at the different strategy. That movie will probably get to the equivalent of like in the mid six hundreds. That’s very respectable for a kind of second tier Marvel release. Free Guys is going to struggle to get to $250 million. It doesn’t make money at $250 million. We don’t know what that movie cost, but between the advertising between the. This is going to be a movie that’s going to take years to make money which is typical, a lot of these like secondary. But like this is being heralded as people going to the movies, these are not big numbers, they almost certainly cost themselves money by not releasing it on Disney+ same time.
But is it possible Steve, maybe with smaller budgets? Like we saw the first Knives Out movie was a relatively small budget movie, opened small and stayed in theaters for like 25 weeks and sort of legged out a bunch of money? Is it possible that well reviewed movies at a certain budget might make sense as theatrical only releases?
Steve Symington: That might make sense just to just to stay back that way, and the I wouldn’t expect it to be able to. A movie like this I don’t think is expected to perform as well as even Black Widow it’s like a second tier Marvel marvel movie rather. Because it just doesn’t have kind of the you know 22-plus film storey building to its advantage or the big Marvel name. But I think this might just might well prove to have legs in the theaters, and then they can they’ll throw it on Disney+ later and use that as retention tool there. It’s not something where, we’ll have $125 million alone from Disney+ in Premiere access, because it’s just not doing that.
But I think they kind of understand well what they’re trying to accomplish with this. And yeah, I was poking around I can’t quite see. Usually, they’ll give you, at least like marketing, production budget, and generally, kind of rule of thumb used to be that, if you doubled your gross box office receipts of your production budget, then you were pretty happy with that. And anything else was kind of gravy on top of that at the theatres anyway.
Dan Kline: That’s always been a kind of faulty number, because that’s a number that makes you break even if you do well in some things that don’t exist anymore, like your HBO window and your free TV window, sales and all those other things. There’s no way a Free Guy cost less than $250 million to make and market. So for that to make money, it needs to be well above where it is, it’s a success for the times we’re in, it won’t be a big money loser. It’s well regarded, so it might be a franchise potential and the type of things that can build and then the second one, it gets to new sales, of the first one that’s absolutely possible.
I wanted to point this out only and we’d love your questions and comments. I wanted to point this out only because, dear god, don’t go out and buy shares of like movie theater companies. Because, don’t double down on popcorn. Like the movie business as we know it is dead. And I think it’s really important to say that. There are going to be theatrical blockbusters, they’re going to be films like Black Widow, where you could watch it at home, but you want to see it in a theater. But Steve, you have a few kids, once you get to $30 on Disney+, that’s cheaper than going to the theater, right, for your family, if everyone goes?
Steve Symington: Yeah, it is, but for certain titles, I I’d prefer to sit in a theater and experience that, and then to see my six year old walk in and be wow, look up. Even though he’s been to movies before, but every single time it’s there there is something to be said for that experience versus paying $30 bucks to watch a movie at home that I wait for. But we’ve done it a couple times, with Premiere access movies, and we’re sitting there on a rainy day and we just don’t feel like going out. It kind of makes sense for us sometimes. But I think there’s a place for the movie business but maybe not an investable place.
Dan Kline: I fully agree. I think there’s going to remain movie theaters that we have way too many screens. And there’s going to be events there’s going to be a boxing and wrestling pay per views. There’s going to be concerts, there’s going to be things like. I live in Florida, which is has a lot of expat New Yorkers and Bostonian’s so there might be like Red Sox Yankee games, like shown in theaters, but you also have to change that infrastructure.
My son and I have talked about going to the September 5, the AEW All Out show and watching it, which is a pro wrestling group, and watching it in a theater. The problem is that theater still has theater snacks and theater food, it doesn’t really have the equivalent of like watching a UFC fight in like a Buffalo Wild Wings where like the food is, I mean, the food is good by Buffalo Wild Wings standards. But certainly it’s better than like a movie theater hotdog. So like there’s a lot that needs to be done, in order to make that happen. So I do think there will be a place for theaters, but not an investable place.
We’ve got a lot to cover here. We’re gonna do three topics at the top of the show here. The next one we’re going to talk about is Virgin Orbit. I sort of approach this from the angle that Boeing (NYSE: BA) is part of the investment group in this. But I think, Steve, let’s set the stage. What is Virgin Orbit? And sort of what is the SPAC look like, give us a little bit of an overview here?
Steve Symington: Yeah, so this one’s definitely piqued my interest. And for those of you who have watched the live stream before, you might recall we actually talked about the potential Virgin Orbit SPAC back in April when news first kind of broke that they were in talks with a SPAC merger vehicle called NextGen Acquisition Corp. that trades under the ticker (NASDAQ: NGCA). And today, we have that news is confirmed. So Virgin Orbit will be going public via SPAC, SPAC is an acronym for “special purpose acquisition company”. And we’ve done a couple podcasts on SPAC’s specifically, say that 10 times fast, and to help you kind of better understand the whole purpose of them, but it’s basically an alternate way to go public relative to traditional IPO.
So essentially, these are blank check companies that have been formed with the sole purpose of finding a company to merge with, to to bring a previously privately held company public. It’s kind of a lower cost way to have to go through a lot of the hoops that you need to with traditional IPO. So Virgin Orbit will be merging with NextGen Acquisition Corp. to trades under the ticker NGCA. And eventually will have its own ticker once the merger is complete, but we don’t have a timeline yet.
But right now it’s gonna value Virgin Orbit at about $3.2 billion. It will include a PIPE as well, which is a “private investment in public equity”. That’s another acronym that goes with SPAC’s, and part of that PIPE. They’ve dedicated, they’ve already collected $100 million in dedicated PIPE investments, including investments from Boeing. And that’s no coincidence because Virgin Orbit, they take kind of a different approach to launching.
Now, if you’re not familiar with what they do, they focus on launch solutions for small satellites and light payloads to get things into orbit. It used to be prohibitively expensive to do something like that. But Virgin Orbit can launch satellites and other small payloads up to 500 kilograms into orbit for anybody. And rather than using an upright rocket model, like some of the other competitors do. Virgin Orbit, does it in a similar fashion to Virgin Galactic, in that it attaches a rocket launcher to the bottom of a modified Boeing 747. There’s the connection with Boeing. The Boeing 747 takes about 45,000 feet drops the rocket rocket then launches to space from there.
And it’s important to keep in mind this isn’t the same company as Virgin Galactic, it is a sister company. Virgin Orbit was actually a spinoff from Virgin Galactic back in 2017. So not the same company. They are kind of affiliated, they use similar technologies. And they believe it’s a more efficient way to launch payloads into space. So definitely an interesting, interesting space pun intended.
Dan Kline: So let’s set the table a little bit here, you’ve got Virgin Galactic on one side that’s doing space tourism. And eventually, let’s call it super fast, not interstellar travel, New York to Australia in 45 minutes, or whatever it’s gonna be. So that’s the travel and tourism part. This is launching payloads into space, which is a more competitive area, but it’s also a more monetizable area. So this is a company that has a little bit more in the way of actual finances. Right, Steve?
Steve Symington: Yeah, it’s a little bit farther ahead in terms of actual revenue generation. I think last quarter we saw Virgin Galactic generate $781 thousand in revenue from like a single flight that carried a NASA payload. But they haven’t started collecting actual, being able to recognize actual revenue from paying customers yet. Virgin Orbit expects about $15 million in revenue this year. And they’re targeting revenue of about $2.6 billion by 2026. Now take that with a grain of salt. They’re basically saying, we hope to be positive on an EBITDA basis, that’s earnings before interest, taxes, depreciation, amortization, by 2024, is what they’re looking for to be basically profitable on EBITDA basis by then. They have a couple $100 million in actual contracts already. And they say that they’re pursuing opportunities worth about $2.3 billion.
So it depends on how much of that they can actually secure. It is a competitive space. But as far as, there’s kind of a lower ask, when it comes to not putting in not having to, obviously they’re going to do things as safely as possible. But it’s a little bit different dynamic when you’re dropping payloads, small payloads into orbit than when you’re dropping people.
Dan Kline: Yeah. If things don’t go well with the payload, you don’t have to tell the payloads wife that it’s not coming home. Like that’s, really, really important here. But these two companies, it’s important to note are tied together on a technology basis, they’re using the same rocket ship technology more or less. And look, I think if you own one, you probably need to own the other. And I think it’s also fair to say that there are a lot of SPAC’s out there that are very speculative that we know nothing about the business. And that’s not really true here. Look, a lot of things could go wrong. But arguably, this is a more mature company where some of the de-risking events have already happened. We know they can make these launches. So that’s absolutely something. Steve, anything else you want to add on Virgin Orbit before we move on to fast food wages?
Steve Symington: Yeah, and I guess to that end,
Did I lose you there for a minute?
Dan Kline: I am having some technical issues with Steve. I don’t know if that is me, or that is Steve. So I am going to pretend that it is Steve. If Sam Bailey, our producer could weigh in, in the private chat, that would be appreciated. So I’m going to set up. So Steve, if you can do whatever you can to fiddle with your connection, that would be appreciated.
We’re going to talk about fast food wages, and I can go a little heavy on the conversation here. Also 7investing nation, you have been super quiet. We’ve had a very strange flow of comments in the last few shows where they all pile in at the end. But please feel free to say hello, feel free to add a comment. But here’s what’s happening in fast food wages. Fast food wages are up by 10% in the second quarter, compared with a year ago. Restaurants have been raising wages, because there are no workers, my 17 year old has been working at Wendy’s (NASDAQ: WEN) and they’re paying him like I don’t know, like close to $11 an hour. He has no skills. He’s never worked anywhere before. He’s really good at it, but absolutely wasn’t coming in with a lot of experience. This is the largest quarterly jump in years. For comparison, hourly limited service employees saw wages rise 4.1%. So like your Target (NYSE: TGT) worker, your Publix worker, only 4.1%. Steve, this is good for workers. But is it good for consumers?
Steve Symington: I mean, I don’t think it’s a terrible thing for consumers. And maybe you can disagree, but I’d be willing to pay a little bit more for my food if I knew it meant the person serving to me was making a more livable wage. But I’m not sure how it actually applies, on a broader basis, are there repercussions to seeing wages climb? Because, I’ve definitely experienced some of the kind of annoyances with going to, trying to go to a Taco Bell (NYSE: YUM) and saying, sorry, we closed four hours earlier than usual because we don’t have any workers. Like literally signs like that put up on the drive thru and I’m salty.
Dan Kline: It’s actually a massive problem here in Orlando. I’m in, at the moment, in Davenport, Florida, right on the outskirts of Kissimmee and Orlando, which is the tourism capital of the US. I mean, maybe Vegas would argue, but there’s a lot of tourism here. There are nice sit down restaurants that are just like closing Monday and Tuesday. There are fast food, places that are closing their dining room, not for COVID reasons, for we can’t staff it, we’re going to be drive through a delivery only. There’s a real labor shortage. And let me give you some of the numbers.
The July unemployment rate for eating and drinking establishments was 8.4%. That’s up from 5.9% just two years ago. Restaurant are opening, full service restaurants are operating with 6.2 fewer employees in the kitchen, and 2.8 fewer in the front of house. That’s going to lead to bad service, which is going to make you not want to pay those higher prices. I fully agree with Steve, when I say that nobody notices if their meal at McDonald’s (NYSE: MCD) went from $5.79 to $6.23. I absolutely think that’s true. But Steve, how do we solve this problem? Because wages alone clearly aren’t getting it done?
Steve Symington: Yeah, and I guess that’s one of those things, where you’re also gonna see that there’s, there’s a kind of delayed effect, from increasing wages is going to solve it all at once. Do you find ways, some of the bigger chains might find ways to, to be able to cope with having fewer people? Do you automate something, do you have systems, kind of more bakery systems or like robotics automation. I’ve seen those restaurants where you’ve got a robot bartender or robots that can cook burgers or something like that. But that’s something that, seems like it would be prohibitive for all but the largest chains who could actually afford such kind of extravagant streamlined efficiency measures.
Dan Kline: Even McDonald’s had to fight with its franchisees to put in their “restaurant of the future concept”. That concept does not cost anywhere near what automating Big Mac making would cost. So I think what you’re going to see is closer to what McDonald’s did, where you automate as much of the order taking as you can. You automate things like inventory that you can do with sort of off the shelf technology, you are probably not going to move to full on automated Big Mac making. Now, can you automate the fry machine, maybe you can, because it’s a pretty or at least parts of it. Because it’s pretty simple. You’re seeing things like your non-Starbucks (NASDAQ: SBUX), places that make espresso drinks. It works like a Keurig, like you push a button that says cappuccino and that’s what you’re getting. I do think you’re gonna see more of that.
But Steve, I’ve told my robot bartender story on air. I paid big money in Vegas to go to a robot bar and the bartender over poured my gin and tonic and probably all the gin went away and it was just a big sticky tonic. Our friend Matt Frankel was with me and he got some drink that was so sickly sweet it was undrinkable. And you know what, you can’t complain to a robot. So I’m actually really curious. In February, I’m going to be on a cruise ship with our very own Maxx Chatsko that has a robot bar, and I am looking forward to going to the robot bar to see if that’s improved.
But Steve, isn’t some of this about making restaurant jobs more tolerable. When I ran the toy store, we did not pay high wages, but I made damn sure it was a fun place to work. Do you want to take a guess at what the average turnover rate is in the restaurant business?
Steve Symington: High to very high?
Dan Kline: Over 100%.
When your turnover rate is over 100% you’re endlessly training people, there’s a real expense to that. So I know like where my son is working doesn’t have like automated scheduling doesn’t have the ability to, to trade shifts, or do something, like your Targets of the world, your Walmarts (NYSE: WMT) of the world are really moving into being like sort of worker friendly. Where it’s okay, you’re a student, you can only work after four o’clock, here’s how you log into available shifts. Here’s how, your kid’s sick for the day, there’s a way for you to swap shifts to do stuff. I actually think we’re gonna need to see a lot more investment there.
And the good news is, that’s not expensive to go out and license a third party app that helps you do things like working with schedules. That’s going to be a pretty big improvement for the restaurant industry. The other thing I think we’re not talking about, because it tends to be political, is that there’s all these people that are not working, and forget why some of them aren’t working. Some of the people not working are not working because of childcare because their daycares didn’t reopen. I actually do think the opening of school is going to change that. A lot of kids, most kids are going back to school across the country. And that frees up caregiver time that that morning shift at Wendy’s can now be the mom who wasn’t able to work. But Steve, this probably isn’t going to solve the whole problem.
Steve Symington: No, I’m not convinced it will. And I think it’s a multi-tiered problem that’s going to take some creativity and maybe an industry wide response. That’s somewhat coordinated to fix. And it’s not going to be an easy fix. But I guess we’re outside of that, and we can watch it happen. But hopefully,
Dan Kline: I’m really excited by it. Because I think it’s the Starbucks’s of the world that have worked. It’s not just wages, Starbucks is not a $15 minimum wage, guaranteed it is a lot of places, but it isn’t everywhere. But the college benefit, the tips, the flexibility of scheduling. I had a friend who, who worked at Starbucks, she’s now at Wawa. But she, she was a manager and she had a child and her husband’s a contractor. So they let her work like really early mornings when her husband was still home, you need to be that level of dynamic. And I think you’re gonna see your Starbucks and your Wawa’s, which are leaders, and they’re gonna set the tone and then your Target’s and Walmart’s and people like that are gonna do it. And then eventually, it’s going to have to trickle down.
But there are going to be some losers, there are going to be some some fast food chains that just can’t get workers and I’ve often joked, you know about the difference in quality between Starbucks and Dunkin Donuts workers. But it’s noticeable because Starbucks has national standards, because they’re not franchised. And Dunkin Donuts very much depends on your franchise owner.
We appreciate that a lot of you are watching, we are not getting a lot of comments, but we’re going to take a comment from Max Lucas, hopefully this opens the floodgates, “In September, I will be asking for a 10% raise because of inflation. And I can be fairly certain I will get that because there are so many job openings. This just does continue to perpetuate inflation”. Yep, there’s going to be some price increase because of wage increases. And technically, price increases have actually wiped out the benefit of wage increases. But that’s a very, very squishy number. Because if you didn’t have to buy a car or a house, your increase has generally been better.
So if you have like a locked into a lease, or if you’ve owned a property for longer than the pandemic, and you got to raise things are generally going to be good. Wages are a tough thing to talk about, because we always talk about them on like a national basis. And the reality is $15 in Orlando, Florida is a lot better than $15 in West Palm Beach, Florida.
So that’s really important to think about that, like you can live certain places. I’m gonna guess Montana has places that are not overly expensive to live, they may also not be all that close to jobs. So all of this is very personal. And yeah, a lot of people are going to be able to go to their boss and demand a raise. But be careful what you wish for. Because the reality is if you like your job, and you go in and demand a raise, and they say well we’ll give you a 6% you kinda have to leave. That’s, that’s not a great scenario.
We are going to talk about your investing mistakes. Steve, I do think your internet has improved so that is fabulous. We of course would like to take your questions and comments.
We have something special and new at 7investing today. Sam Bailey, if you would like to share that graphic, I would be happy to talk about it. We can share how to download it a little bit later, it is at www.7investing.com. I’ve got from our very own Simon Erickson that we have a new SFR (special free report). And it’s by our own Anirban Mahanti. And it is on Zero Trust. That is now live on our site. If you’re a member that is free for you to access. Steve, you played with this this morning? How do you access it as a member?
Steve Symington: Yeah, if you just go to www.7investing.com/free-special-report. Or if you just go to www.7investing.com and you go to our research filter, you can just click on the the research link at the top and you’ll see it right there. But we have a special reports filter there that you can find it pretty easy to find. But yeah, go to www.7investing.com/research, you’ll see it right at the front as well.
Dan Kline: And if you’re not a member and not logged into our website, it will be right on the homepage. And all you have to give us is an email. Now do we spam you with email? Do we four times a day, I’m looking at you Musician’s Friend, send endless email to you, we do not.
You’ll get some emails, you’ll get some useful stuff, you have the ability to opt out. But we would love to have you as a member. And the goal of these special reports or at least one of the goals is to just show the depth of research we do. Look, Anirban is brilliant. Like he knows a lot of stuff. So if you have the chance to read something that he put his time and research into, I would highly recommend. I know i’m going to do it tomorrow afternoon, we’re busy the rest of the day today. But tomorrow afternoon, I’m going to sit down and read that free report.
If you are not a member, we are getting close to the first of the month. That is when our new picks come out for $49 a month or $399 a year. So you know the price of what is that like 40 cups of coffee like it is not a lot, you can become a member of 7investing. And to do that you go to www.7investing.com/subscribe.
We’re going to segue into what we’re to our homestretch here in a second. And that is your stock market regrets. But before we do that, we’re going to take a comment from Scott [unknown name]. Because I think it’s a good one that Steve can share some insight on. Steve, why don’t you read it? Because I’ve been talking for too long.
Steve Symington: Scott says, “I try to work on my ‘mental game’ for stocks, but it seems like the emotions of the volatility can sometimes affect me. I try not to look at the prices too often. But do you have any other advice on how to keep your emotions in check and or how to trust your research that you don’t get out unnecessarily”? We have a framework at 7investing, we call it 7investing principles. That kind of, they do they frame how we think about making our stock recommendations. And I think first and foremost is to think long term. But also make sure you form a comprehensive thesis for why you own what you own, because it will help you when it comes to preventing making emotional decisions about your stock. You can check and see if your thesis remains intact. And it’s easy to determine whether to sell or whether to continue to hang on or to add to position.
But yeah, I think you also hit on something good, is not looking at prices too often. Because when you’ve got someone you know you there’s a lot of platforms out there where you can hop on and you can have a watch list of tickers. And you can, you can watch comments stream in, by the second, about what the stock is doing, oh my god, it fell by a dime, like come on, that’s not how long term wealth is created. And the think long term, don’t check your portfolio, every hour. And just try and buy it and keep track of significant catalysts or events or announcements as you go. And just make sure your thesis remains intact after you’ve formed it.
Dan Kline: So I did a Twitter Spaces today with our friend Wolf, we’ve all done some of these. And there were some guys on that were traders. They were technical traders, and they were not your typical day traders. They know what they’re doing. And they basically talked about, all the risks involved and sort of why it’s good for them and not necessarily, and they were very complimentary on the long term investing approach. And they asked me, do I trade my own stocks that I hold long term? Meaning okay, I own something that’s Microsoft (NASDAQ: MSFT), my biggest holding I own Microsoft, I see that it’s up 40% on the six month period, do I sell some to lock in some profits? And I said, No, I don’t because historically, that’s a mistake.
If you look at all the tech stocks that have been long term high flying, there’s actually no reason. Now of course, if you own say IBM (NYSE: IBM) In the 90’s, there becomes a point where your thesis breaks, and you no longer believe in the in the future of IBM. Now, there are some times where you can look at stock price. So let’s say you’ve held companies for a lot of years, and your kid’s about to go to college or you’re about to buy a house. Well, you might want to sell stocks, that you have the lowest conviction and that are in your portfolio. You might want to trim some of your winners because percentage wise there large. That’s a very personal, very emotional decision. Because I know we’ve talked about this a lot, Steve kicks himself, for shares he sold to buy his house and I pointed out many times, but you own your house, and that’s really important.
Now if you sold shares of Amazon (NASDAQ: AMZN) in 2010, to buy a bunch of candy, that’s dumb. If you sold shares of Amazon, to send your kid to college, that’s reasonable. And that’s really a personal decision. Maybe for you, the thing you’re selling for is because you’ve always wanted a Ferrari (NYSE:RACE). If that’s gonna bring you joy, that’s different than me buying a Ferrari, who would just be I don’t even know how to drive a stick, so that would be really, really dumb.
So we we just disconnect, when I was on this show, everyone was talking about, the trades they’re gonna make today. And what are you looking at this week? I don’t look at things this week. I’m a little more tuned into the market right now. Because there are some buying opportunities because of irrational COVID movements. And I don’t mean that there’s anything irrational about COVID. I mean, someone might go, Oh, my God, we’ve slowed down a little bit more, sell my Disney stock, and Disney goes down, 20%, that hasn’t happened, but it could.
So I’m keeping an eye on some of my favorite companies that are in the travel and entertainment space, that maybe will have some moves that just make them more attractive, and I’ll add to positions. I think there are some things like that.
We’re gonna hit the homestretch here and talk stock market regrets Ravi Shah, we will take your question towards the end of the show, we will take any other questions people want to ask, towards the end of the show.
This is going to be sort of a quick hit segment, we’ve just got a whole bunch of things you shared on Twitter. And Sam, if you could share the tweet that I put out there that went went pretty viral. “What’s your biggest financial risk or stock market regret”?
Mine is not buying Amazon many years ago when it first became an important part of my shopping life. And then we have a few others that sort of agreed with me on this if we want to show them in pretty rapid fire here, Sam. Mine was buying in 2000 and selling it, that’s in reference to Amazon. “So much Amazon, shopped there at their opening in Germany in April 1998. Thought it was freaking genius never bought it”.
I believe there was one more after that, if you want to share it, Sam, my biggest regret is buying Amazon convertibles in 2001, that is 20 years ago, not converting them selling the bonds, doubling my money and missing the next 6,000,000%. I probably could have retired on that $5,000.
Now that is not typical. But that is kind of typical. Like if you own a good company, you should hold on to it. In my case, my stock investing structure is often looking at things that are part of my life, researching them, and then buying them. The problem is when I first became enamored with Amazon, I wasn’t really an investor, I was I was much younger, and that wasn’t the world I was in. And then sort of when it came time, when I started doing this, I do I own Amazon indirectly in my 401k I have exposure to it. But it always just seemed to be like too expensive. Now, in the past couple of years, when fractional shares became an option, I need to buy Amazon. I just opened a Stockpile account for my son and 30% of his earnings, every paycheck are going into that account, and it is very likely that he will buy some fractional Amazon.
So look, if you’ve made a mistake, correct it. I had a conversation with someone today who who saw me on the Spaces. He said, oh, all those tech companies you mentioned are so expensive. And I said yeah, you would have said that 10 years ago as well. And you’d feel really dumb about it. Steve, you want to weigh in here?
Steve Symington: Yeah. Actually, one of my my biggest regret maybe is in line with what Chooch shared. If you can share that one, by Chooch, he says “not starting much earlier time is your biggest ally and I’m running short”. I wouldn’t necessarily say I’m running short at this point, but definitely shorter than I was. And I’d wish I’d started investing, when my kids have started investing, right? I’ve got an 11 year old and a 13 year old and a six year old. He’s not really he didn’t know anything yet.
But you know those early years can do a lot for you. And you know you don’t have to start investing when you’re 11. That was when Warren Buffett bought his first stock by the way, he was 11 years old. And his dad was a stockbroker back then. But, even when you’re a teenager, just a teenager. I think that’s not too early to get started investing. Investing should not be an intimidating thing. And it always kind of felt that way for me. When I was younger, until I started getting more into it, I kind of cut my teeth as an investor a few years before the 2008-2009 craziness in that crash. And I got to experience that, and learn a lot of lessons, with not a lot to lose. So that’s one silver lining, I guess. But I do wish I’d started much earlier.
Dan Kline: As a parent, I also thought it was pretty important when my son wanted to work, I made it very clear that he was going to have a bank account that that I had access to. So I can see what he’s buying and what he’s spending. And that every time he got paid, that 30%, and I’m going to give them a little bit of a match, I’m going to put like 5% in so he, he can feel like he’s making money, even if the stocks he buys take a little bit of time. But he’s 17, he’s going to live with me for at least, probably three or four more years, if he works that whole time. And he’ll probably start some college and take some classes during that as well.
But I don’t think he’s gonna go to traditional college, when he starts working full time, and making whatever, call it $15 an hour and clears I don’t know, $500 or $600 a week, not a lot of money, but his expenses are zero, because he lives with me. So if he puts away 50%, all of a sudden, he’s going to be 21 and have a meaningful amount of money invested. And that can be a down payment on a house, that can be Oh my God, I really want to go, work for the Peace Corps for a year and see, other countries. Or I want to, go take a bad job, but so I can go travel around the world, or whatever it is, he’s gonna have some financial wherewithal to do that. But also understand, oh, my God, I only put this much money in, and it got me to here.
Because the one, my probably biggest regret, really, is that nobody told me when I was making no money, just put 2% away, just it was harder to automatically do that. I mean, I used to get a physical paycheck, my first probably like 15 years working. But now when I put money, like I have automatic money transferred into my brokerage account, I’m automatic money rounded up into my Acorns account, which is actually a Roth IRA. So it’s tax beneficial. Like there’s a lot of things you can do that make it not painful. And I get it when I was making $28,000 a year, taking 2% out of that felt more painful, but oh boy, I wish I had done that because it piles up really quickly.
Let’s go to 307$fool. I have no idea how you pronounce that one. I stopped investing in individual companies for a little over a decade. I missed out on some absolute monsters, including Monster (NASDAQ: MNST).
Yeah, we are big believers in investing in individual stocks. But you have to do your homework. If you’re not a member of a service, like 7investing, we recommend 7investing. It is a lot of work. And there are people who just invest in ETFs, or mutual funds or whatever it might be. That might work for them. For us, though, Steve, that is not how we do it.
Steve Symington: Yeah, we we like to focus on individual companies. And he mentioned Monster. It’s interesting. That was actually one of the 100 baggers that Chris Mayer focused on in his book 100 Baggers. And the the fun part about it is, I’ve seen some of the best investors in the world, say if you’re right 50% of the time, you’re doing pretty darn good. Right?
And people don’t think that way. They think 50% of the test is an F right? Like no, your winners will significantly outpace your losers and only a few really big winners can make your portfolio and drive your returns. So it doesn’t take much but it takes time to realize that. A lot of people want to get into like get rich quick, right? And they want this money fast. But it takes years to get those really big winners. I’m not talking about, a two bagger or a four bagger even, I’m talking about 10, 15, 20, 30 baggers, and that’s that’s when it gets really fun.
Dan Kline: He mentioned Monster and I also think it’s important to, it’s fine to use a company like Monster as a data point when you’re researching other beverage companies. But I think we saw a lot of people get behind Celsius (NASDAQ: CELH) which is a another publicly traded energy drink company. And there are only things, you can make a case for Celsius I don’t but but but but you can make a case for it. But your case can’t be it’s an energy drink and so was Monster. You have to look at how it’s being accepted in the market. And I would argue that Celsius has done really well in like the gym and exercise world. It has not done well in the grocery store world. It flamed out really quickly in Publix here in Florida and that’s anecdotal, but you have to dig into what their reorders are like.
Monster was a, and Red Bull, were very much like pop culture phenomenons and they’re not necessarily duplicatable. We may not need the next Monster because we have Monster. I know, I drink red bull and I did try Celsius. I don’t I think a lot of any of these things anymore, and I prefer Red Bull. So I think there’s gonna be a lot of sort of false equivalencies when people are analyzing stocks, you have to be careful with that. Just because Tesla (NASDAQ: TSLA) is a great stock doesn’t mean that all electric vehicle stock. So we all saw that we saw a lot of that happen.
I want to take a few more of your tweets here. And then we’ve got a couple of questions. Ravi and Stock Investor, we will get to those. And feel free to add your questions, ask us whatever you like, we will try our best to get to it.
So Paul [unknown name], and again, I apologize for reading this from a little bit far away. So, “waiting till 40 to move from residential property investments to having a blend of both by both”, I assume he means equities and stocks. Yeah. Look, I always when I was younger, took the belief that well, I own a house, and I’m building equity in my house. And that’s an investment. But of course, I’ve been through two boom periods in the real estate world, one pre-2008 crash, and one now. Where the property I’m sitting in where I’m doing this show is worth $60,000 more than I paid for it three months ago, it might be worth $75,000. More that’s where like the starting asking prices are, and they’re selling in a day. That is, of course, the equivalent of like picking a stock that, goes up astronomically quickly. But that’s not typical.
So I am a believer that you largely should own real estate, because we all need a place to sleep. And in my case, at the moment, I don’t own my principal residence that we are looking at, and probably will will change that soon. But I do fully own my secondary residence. And I do consider that a good investment. But owning stocks is the best way for the average person to get rich slowly to make money over the long term. Steve, I know you agree with me. So I’ll let you weigh in here as well.
Steve Symington: Yep, no, I can just say I definitely agree. The stock market is undeniably the greatest wealth generating vehicle we have available to us. And I would say that, you’d have some people say, oh, crypto. And there’s other ways to do that. But there, there are more ways to invest now, then there were more vehicles to put money to work for everyday investors. So there’s that. But the stock market is a fantastic wealth generation tool. And it’s silly not to take advantage of it.
Dan Kline: If you understand crypto and want to invest in it, more power to you, or if you’re listening to our friends at Crypto EQ, and using their expertise and making investments, I think that’s great. But I think for the most part, and we talked a lot about this on the Space I did this morning, I believe in understanding what I own. Now, can I explain every aspect of some of like the tech company infrastructure? No, of course not. But I generally can make a case for why I own it, what it does, what the thesis is. Do I understand the nuance of like the Starbucks relationship with coffee growers, or every in and out of their Nestle (SWX: NESN) deal? No, but I understand selling coffee and what retail looks like and how restaurants operate.
So for me, I actually do think it is important to have that kind of touchstone. And I think most people have a core competency in some areas of investing where, hey, I am a customer of video games. I understand what the good video game makers are. And when 7investing comes out and says hey, I like this video game stock. I can go, oh, hey, yeah, I agree. Like I buy their games every year. Like I spend a lot of money on, my son buys like outfits for his characters, skins I think they’re called. That is a ridiculous purchase, in my opinion but it works like it’s it, it is a thing. So I think there’s all sorts of expertise here.
We’re gonna take the last two on our list here. Before we get to some of your questions and comments here. So Sam, if you want to go to a [unknown name], and he says “Selling Google at $165 thinking I made a killing by the way I got in at $90 back in 2005 right after its IPO”. And the next one after this is very similar as well. Rick [unknown name] says “selling any stock ever, over the past 30 years, I’ve lost 100 times more by taking protective profits early on as compared to all of those that stayed flat or went to zero”. Yeah, we’ve actually seen this that selling is almost always a bad idea. Steve, I’ll let you comment, then. I’ll finish up a little bit here.
Steve Symington: Right, and a lot of people ask why have we haven’t issued a sell recommendation so far. We launched 7investing in March of 2020. So about a year and a half ago now.
Dan Kline: Or in pandemic time. 30 years ago?
Steve Symington: Right at the end of an 11 year bull market and right in the middle of a horrible stock market crash, start or a pandemic. Good time to launch a stock picking service. Right? And we didn’t plan it that way. But it turned out that way. And you know that that’s, selling, if you look back at it, a lot of your decisions, there’s bound to be several sell decisions, several sells that you’re going to regret later on. And almost without exception if you’ve done research on a stock and determined that it’s a promising long term investment and you sell to take those protective profits. It ends up coming back to bite you later on. And and that’s tough, people say, No, you never went broke taking a profit. But it’s a lot harder to get rich that way as well.
So, that’s not to say you should never take take profits, sell when you need the money, and you shouldn’t put the money in the stock market that you’re going to need for a few years anyway. So that’s, kind of, that’s a tricky thing is determining when to sell. But we sell when the thesis is broken. Maybe when it’s acquired, and we’re not interested in holding shares of, if it’s a stock and cash deal, or you’re gonna get shares of the company that’s acquiring it, maybe we’re not interested in owning those. But yeah, there’s a lot of reasons to sell. And taking some profits off the table should be very seldom one of those because I’m looking at the very long term stories of stocks that I’m recommending, and I don’t mind near term pullbacks or profits,
Dan Kline: There are a couple of exceptions to that. One is pretty unique to my space in retail, I’ll talk about that in a second. The other one is, if you can’t sleep at night, because something you own has grown so much that it’s 50%, 60% of your portfolio, and you would just feel better selling part of your position, go ahead and do that. Because you don’t want your portfolio to impact your mental health. You don’t want to have, one stock be down 10% in the day, and all of a sudden, like your net worth is materially impacted and you feel bad about it.
Now, obviously, we have days where everything’s down, and we have those big drops, that’s happened a handful of times during the pandemic, but that is a lot different than being tied to one company because we know your really great companies, your Chipotle’s (NYSE: CMG) is your Microsoft’s have fallen by 50%. If you have so much.
The second scenario, and again, this is largely a retail scenario. If your company everything finishes on your thesis, and you go Okay, like I believed in I don’t know, Target, and they’ve expanded to all the countries they’re gonna expand to, they’ve opened all the stores there, their growth is really slowed. You might look at it and go, there’s a better place to put my money. In tech, that is almost never been true. Like I mean, now there are companies that have lost their way certainly. There are companies like Apple (NASDAQ: AAPL) that lost their way than found their way. There was someone in the the Twitter (NYSE: TWTR) feed here that talked about regretting not buying Apple when when Bill Gates invested money. And I just said, Well, at that point, Apple could have gone either direction, like there is no Apple could absolutely be IBM or be Atari like that could have happened.
So it’s one of those scenarios where, this is very personal, but we almost never are telling you to sell. Because the stocks we’re recommending, we believe in for the very long term. And sure, is there a point where some of these stocks like might just become mature companies that are great businesses and no longer great investments, but then they tend to pay dividends. And they tend to do things that make them good investments for different reasons. Oh, and by the way, you’re older. So those dividends, might be more beneficial to your taxes and your benefits.
We appreciate so many of you participating in this that, that Twitter post had something like 35,000 people look at it and like hundreds of people interact with it, which is always fun and exciting, especially when it’s on a Sunday afternoon, and I’m driving for three hours and I see that things start to blow up as I am driving through rainstorms.
But I want to take a couple of your questions and comments here. This show has gone way longer than I expected it to go. Ravi Shah says, a question for Dan and Steve, “What’s the biggest numbers of holdings in your portfolio? I’m getting close to 50, lots of 7investing picks”. Steve, I’ll let you go here.
Steve Symington: Yeah, I think I currently have about 40 in my portfolio. And that numbers actually increased quite a bit since we launched 7investing because I wanted to better diversify, I kind of had a more focused portfolio when we started. And too many good ideas and a lot of places to put money to work. But that’ll climb I think over time. But I know, some other members of the team have 80 to 90, some have fewer. So it’s all a matter of personal preference. And if you look at our frequently asked questions under the “Why 7investing?” drop down on the www.7investing.com site, you’ll see one article on allocation. And we do talk about you know how we think about building and allocating a portfolio in there as well. So,
Dan Kline: So I have two baskets in my portfolio. I have the stocks I have researched and own, which are largely picks that I have made for 7investing or picks that other people have made that I’m very, very familiar with. So that’s one part of my portfolio, the part that I actively manage and think about to add to those positions. And then I have the other part of my portfolio, which is pretty much every Maxx Chatsko pick to diversify into an area I don’t cover. And I usually buy at least one if not two or three of the other picks because I attend our live pitches, which you get to see as a member on video on the eighth of the month. I read our our write ups on our picks, so I can go okay, I don’t know, a Virgin Galactic a great example of a stock Steve has talked about very publicly as owning, and because of Steve’s knowledge about it, I bought some shares.
Now, is my stake in that significant? No, it is not, but Virgin Galactic is a stock that could absolutely be 100 bagger or a zero. So, so owning 20-30 companies like that, where I don’t do active research, I do more than the average person because I host this show. But I think that’s okay.
So Ravi, if you want to have one portfolio where it’s like the bulk of your money, and it’s the ones you feel best about. And then you want to have others where you’re just really intrigued by what we picked. I think that’s probably going to be a winning strategy can’t give you specific advice, but that’s what I do.
So for me, I don’t feel any need to even remember what the ticker stands for, for some of the ones Maxx has picked. Because I know my timeline, that’s five years. So in five years, I’ll take Maxx out to dinner and we’ll go look at that portfolio. And we’ll see how it’s doing. So I really think it’s okay to take a lot of small bites at the apple. As long as you’re putting money into the stuff you really feel strongest about.
Stock Investor says, can we expect more Dan Kline / 7investing collaboration with the FinTwit Morning Brew, I assume that’s the name of the show I was on this morning. I had a really good time. I don’t say no to almost anyone who asked me to be on something. I will be on your 11 year olds podcast, if it’s a thrill for them, because I think it’s really important to be encouraging of people who are broadcasting. This was a really nice audience and a really good Space. I know we’ve all done Spaces, we do our very own Market Focus Spaces. Tuesday, Wednesday, and Thursday, live at four o’clock with different members of the team. So I am a big fan of, sort of doing whatever is necessary out there. And yeah, anybody wants to have me on? I am happy to come on.
Nick asked. “How about that Bill Ackman guy”?, so I don’t know Bill Ackman all that well. I will just say that I avoid doing anything based on financial celebrities. I don’t care what Cathy Wood is buying. I don’t care what Warren Buffett is buying. By the time you know what they’re doing. They’ve done it. And I either believe in those companies or I don’t. Bill Ackman tends to be a little more reactionary and more of like a CNBC guy. I really think it’s important to tune out the noise and focus on people like us. And I don’t want to toot our own horns. There are other people out there who do this, that are really focused on the long term, and they’re not Oh, my God, what’s the market doing today? Steve?
Steve Symington: Yeah, Bill Ackman is interesting. He’s the Pershing Square capital guy. He actually just abandoned that massive SPAC, it was like a $4 billion SPAC that he abandoned after being sued by shareholders. And I think he was trying to, he was trying to take Topps public?
Dan Kline: He tried to take Topps public and they lost their deal with Major League Baseball. So what does Topps have if it doesn’t have baseball cards.
Steve Symington: So yeah, Ackman makes some interesting plays and some very public plays. But I think, he also has his own interests kind of at heart and Pershing Square investors obviously. Yeah, he’s an interesting personality and he’s made a lot of money for himself, but maybe not necessarily for other people.
Dan Kline: It’s really important to remember that what we do at 7investing, we have our membership’s interest at heart. And we obviously, you know that we’re making a pick and we disclose whether we own that pick or whether we own any of the other pics that are being made that month. But our goal is for the stock to do well in the long term. If you are, and I’m not saying Bill Ackman does this, but if you were any of these CNBC world celebrities, you might go on and be, Oh, I’m really huge into Twitter, like they’re to buy Twitter stock, it’s great. With the idea that the stocks going to go up and they’re going to sell out. They’re not going to tell you when they’re going to do that. And that’s really really important
If I am a money manager there is if I if I am buying as a stockbroker, buying stocks for my clients, short term movements can be important. They’re not important for us at 7investing that is really important for you to remember. Said that word important way too many times.
Sam Bailey, let’s, uh, let’s hop up on the top rope. Let’s hit our finisher. I’m not sure what our finish would actually be. “Which company do you think mistreats its customers the most”. This was inspired by how often Comcast has called me to return their equipment. Because I no longer have Comcast. I’m going to rush right to that at the same speed Comcast did with fixing every problem I’ve ever had with them.
Comcast (NASDAQ: CMCSA) was slightly the winner here. Facebook (NASDAQ: FB) came in second. A lot of people argued that the customer for Facebook is the advertiser, and the advertiser is very happy. I can see that point. Verizon (NYSE: VZ) came in third. I’ve actually had some pretty terrible customer experiences with Verizon, I would rate them right up there with Comcast. And a lot of people weighed in with Wells Fargo (NYSE: WFC). With Wells Fargo, it was much more about their fake account scandal. I’m actually a Wells Fargo customer and would argue that their local branch customer service is great. So that if you didn’t actually have a bad experience with them creating a fake account, obviously, that’s a terrible experience that their actual boots on the ground experience is pretty good. Steve, you have any thoughts on this one?
Steve Symington: Yeah, maybe in terms of like sheer volume of just customer service. And if anyone has listened to you on our show, would probably vote for Comcast listening to that, but I would have voted for Wells Fargo here. That fake account scandal was terrible. Making making checking accounts to fulfill quotas. Oh my gosh, or savings accounts. I can’t remember exactly what it was. But I remember I used to have a Wells Fargo checking account when I came to college. And they instituted like a minimum account policy, like balance policy of $1,500 or something back then. And I went in there and realize that, over the last year they’d taken out a couple $100 from a savings account. And I was like come on, like this is crazy. But yeah, so no, it’s uh, that was not surprising to me when that came out as a former Wells Fargo customer.
Dan Kline: I actually think it’s very rare when corporate culture and local culture aren’t at the same. And again, I’ve only been a Wells Fargo customer in Florida. So I don’t know if it’s like a southern Florida thing. And other Wells Fargo branches are not friendly. But like everyone who works the Wells Fargo treats you like they’re an aunt or an uncle. I’ve actually had really good experiences.
Now that being said, corporate has done some really terrible things. Whereas at Comcast and Verizon, not treating customers well, is kind of baked into how they do it. And at Facebook, I kind of agree like we’re not the customer, like we’re actually, we’re actually the product. So that can be a little bit tricky.
We’re not going to solve this all in one show. So we’ll be back Wednesday, how do you get in touch with us if you’d like to get in touch with us? That is firstname.lastname@example.org. That is the number “7” investing. But in this case, if you write out the word it would also get to us. If you follow us on Twitter, that is @7investing the number, if you type the word it will not work.
We love to interact with you on Twitter. If you’re a member, share your referral codes and tag us. If you have a question you’d like answered on this show, please, tag us we will try to get to it. If you have a topic you want us to talk about. Probably don’t ask us, you know to research some obscure stock and do a segment on it. But if you’re really curious about something, we are always happy to do it.
We will close out with this last comment from our friend Max Lucas, and then we will call it a day, “When I started working in banking. I learned that a lot of practices Wells Fargo did were unfortunately just typical of most banks. That’s how the employees hit lofty growth targets”. Yeah, Max works in that industry. So we are not going to fault an industry as a whole. But I think it’s fair to say with some of the digital disruption that’s happened in banking, there are obviously some monopolistic old-school practices that are not super customer friendly, that we’re seeing broken. And we’ve seen this, Steve and I have probably talked about 15 different apps and stocks and companies that do that. I’ve made Zell and Venmo and PayPal payments and those are things, I guess Zell is tied to the bank, but they’re all sort of things that didn’t exist that were created by the inefficiencies of the banking market.
We’ve gone almost an hour. We’re gonna let you go home. We will be back Wednesday at at noon, live Eastern. We’ll be back tomorrow with Spaces at four o’clock on Twitter until then, Sam Bailey behind the glass. Thank you. Steve Symington. I’m Dan Kline. We will see you Wednesday.
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