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Walmart has agreed to acquire telemedicine provider MeMD which will expand the company’s healthcare efforts beyond its own employees. It’s pretty clear that Americans want something different in healthcare but it’s a very crowded space and the current healthcare system has some massive advantages. Walmart does, however, have over 4,000 pharmacies and buying an established player in the telemedicine space could accelerate its efforts.
May 10, 2021
Walmart has agreed to acquire telemedicine provider MeMD which will expand the company’s healthcare efforts beyond its own employees. It’s pretty clear that Americans want something different in healthcare, but it’s a very crowded space and the current healthcare system has some massive advantages. Walmart does, however, have over 4,000 pharmacies and buying an established player in the telemedicine space could accelerate its efforts.
Sam Bailey 0:15
Welcome to 7investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.
Dan Kline 0:25
Good afternoon 7investors and welcome to the Monday edition of 7investing Now. My name of course is Daniel Brooks Klein. I am the host of the program. I’m being joined today by Steve Symington. Steve yesterday was Mother’s Day. That means today that you can break out whatever the equivalent is of an advent calendar on the countdown to of course, the most disappointing holiday of the year, Father’s Day. Right now I can feel the grill tools being being packaged up. They might even just take the ones you got last year – put them back in a box with a ribbon. It is basically the opposite. Did you have a fun Mother’s Day? Did you and the family go anywhere?
Steve Symington 1:02
Yeah, we went and had a couple drinks at a local brewery and then had our our 13 year old watch her brothers, so that was nice. And then we all went out to dinner at a different brewery later. It was a good time.
Dan Kline 1:18
We did a family dinner as well. It’s been pretty rare to eat out. So to go someplace nice that had some basic procedures. We ate outside. You didn’t have to, but it just felt a little bit better. It was it was a very normal feeling evening and I finally broke tradition. Most years we did that like weird, you go out at like two o’clock. And then it’s like I had brunch at two o’clock. Like do I eat dinner tonight? Do I not? Like we just went for dinner. Likenwe went out at 5:30, we wanted there to still be light, you know, while we were dealing with sort of a crowded area. So it was enjoyable.
And then we came home and because I’m old Steve, I don’t watch Saturday Night Live on Saturday night. We watch Saturday Night Live the next day. The big draw last night was Elon Musk was the host. I wasn’t a big fan of that. I’m gonna be honest, I’m not a big fan of Elon’s histrionics, his manipulating Dogecoin, all the sort of games he plays. I understand there’s some some reasons he’s doing that, that maybe are out of his control. He talked about having Asperger’s a little bit on the show. My actual complaint was and I know you’ve only seen part of it.
My complaint was they didn’t protect him. In the past when they have non-actors on. They do things that don’t rely on that person’s ability to deliver a joke. He kind of did an unfunny monologue. They put him in skits where kind of the joke was, look it’s Elon Musk playing a character. You know, I’ll go back until like the Wayne Gretzky episode, one of the best ones ever. They didn’t do that to Wayne Gretzky, I did not think it was a good show. What were your thoughts, Steve?
Steve Symington 2:50
I think it was a good show for people who understood all of the the sort of swirling controversy around him and cryptocurrencies and Tesla, and just the way he acts in general. And I think it was one of those things where if you’re a fan of Elon Musk, you probably enjoyed it, because you knew all the jokes. And if you’re not a fan, or you’re unfamiliar, you were kind of like, yeah, I don’t know. And, you know, it was interesting, the whole sort of for the first time publicly, you know, saying I have Asperger’s Syndrome, or at least I’m the first person on the show to admit it.
Dan Kline 3:25
Which by the way is not true, because Dan Aykroyd, right?
Steve Symington 3:30
Yeah. So there was that and, you know, there are some other people like, wait a second, isn’t that kind of like Michael Jordan saying he likes gambling a little bit on the show? That was that was sort of something everybody kind of like said, well wait, I thought we kind of knew that.
But you know, it was it was interesting, though. There were some moments like “I’m reinventing electric vehicles. Did you really think I’d be this kind of chill, normal guy?”
Dan Kline 3:54
Yeah, I think we’ve learned that that in most cases, genius comes with oddity, Steve Jobs was was kind of an odd guy. A lot of people that have that level of genius. You know, it’s why generally, the best players don’t make the best coaches. They’re just operating on a different playing fields literally, than other people. So we’re gonna segue a little bit here. I could talk Saturday Night Live all night. It was really an interesting episode, but we’re not going to do that. We of course, would like your questions and comments. We know it’s a Monday after holiday, and probably a lot of people had a drink or two, probably not shuttling between breweries. That’s not possible most places. Though that is actually possible here in West Palm under normal circumstances, we have about a dozen breweries. But we are going to talk about Walmart’s sneaky play to become a player in the healthcare industry. Why do I say sneaky? Because Walmart has been providing some telehealth options to its 1.6 million employees for quite a while. Steve are there 1.6 million people in Montana?
Steve Symington 4:56
I’m pretty sure it’s closer to 1.1 million or so. But yeah, we only just past a million a few years ago.
Dan Kline 5:02
The state of Walmart is bigger than the state of Montana. That is important to say. But Walmart has bought MeMD, that’s a company that was founded in 2010. They deliver medical and mental health visits to about 5 million members worldwide. So adding the Walmart employees, and that’s a 6.6 million customer base, they have 30,000 clients. Steve, just broad picture view, is this one of those areas where there’s going to be so much competition, we have your Teladoc. We have the traditional health insurers, which are either using their own or some maybe are using Teladoc white label. And then there’s a whole bunch of other players, Amazon, Google, everybody wants to get into this. Is going to be a game with no winners, or could Walmart actually take this on?
Steve Symington 5:48
You know, part of it’s going to be an experience thing but that’s part of the worry about Teladoc right? And we’ve kind of voiced this before on live streams is saying, you know, it’s not really up to the patient’s. Like if a patient is presented with a telemedicine solution, they’re not going to say no, no, no, no, I want Walmart’s version. Like you know, get this Teladoc away from me. It’s going to be more about relationships and current enterprise customers, and basically kind of how far their feelers go in the industry. And so Walmart obviously has, you know, this scale. That’s the beautiful thing about their their movements and it takes someone large, someone like Amazon, and yeah, Teladoc is is one of those big players, I think there’s room for multiple winners as well. So that’s something that’s important to consider.
Dan Kline 6:33
So let me bring up the failing of Teladoc. I like Teladoc. But here’s the problem, Teladoc is a virtual network that obviously has partnerships in the real world. But there are limitations to what you can do with a virtual visit. You can’t take my blood pressure right now at a virtual visit. Now do I think that’s going to change where something like Teladoc and Apple Watch or whoever are partnering and you’re getting much better health diagnostics? Yes, but that’s not right now. I can go to a Walmart appointment. Now, if I’m a Walmart customer, I probably have some level of trust in Walmart. I know where the Walmart is. Do I think this would work better with target? Yes, but Target’s already partnered with CVS. So they’re probably not going to have a massive spin on this.
But if I go to the Walmart visit, and my symptoms present a certain way, that tele-doctor could in theory, ask my permission to send my records to a real doctor. That real doctor could be located in one of the 4700 Walmart pharmacies. Now, are there some problems with this? Yes, you’d ideally want a separate entrance, you don’t want a person who might have the bubonic plague to walk through a Walmart. Though I’d argue that’s like 20% of the Walmart customers anyway. You need to make it so there’s actual exam space.
But CVS has done this pretty quickly in spinning up its minute clinics where you can get a lot of health care in a CVS, I actually do think Walmart could do this. Steve, would you consider taking your kids to a Walmart for their pediatrician appointment, and you can go shopping while they’re getting an exam? I mean, I know some of your kids are young for that. But, you know, once your kids hit their teen years, and you don’t have to be in with them, could you combine those two things and it becomes really convenient?
Steve Symington 8:13
I mean, I could, I’m not sure I would. I think there’s sort of this sort of bias, like taking your kids to Walmart for a doctor’s visit. I don’t know, I think a lot of people are gonna hesitate because of, sort of the Walmart value. You know, and you touched on something interesting that was sort of unintentional – real doctor vs. virtual doctor. You know we’re talking in-person doctor, obviously they’re real doctors that they’re speaking to through this. But they will have that overcome and it feels a little bit like Walmart optical clinic or something like that. So, certainly that that’s an option for a lot of people.
Dan Kline 8:55
So that’s an important model to bring up because there have been optical stores in Target’s and Walmart and Costco. And even though I wear glasses and my glasses, well not these, since I got laser surgery, but my pre-laser eye surgery glasses were very expensive. I had a very high subscription prescription. And the one time I went to a low cost eyeglass place, I went to a Stanton Optical and it was disappointing. The glasses weren’t as nice, they didn’t fit as well. It felt like you were paying less, because you were getting less. That scared me away from that. I think that might scare me away from Walmart. But let me throw out something disruptive. We’re going to talk to SpaceX a little bit later. So feel free, get your questions in, whatever it is you’d like to talk about.
Steve Symington 9:35
Virgin Galactic, keep that in mind.
Dan Kline 9:37
We’re going to talk Virgin Galactic, not SpaceX. We’re gonna talk about space through Virgin Galactic. What if Walmart tried something different? Primary care as a service, meaning you pay so your family that has your basic bad healthcare that maybe pays for one well physical year and then you have a huge deductible? What if Walmart said for $49 a month, you can come in whenever you want, you know if you don’t feel well come in, we’ll cover that. Do you think that type of model, because insurance is broken, could that type of model disrupt the way insurance works?
Steve Symington 10:12
Yeah, most certainly. And you know, then you’re bringing up something that other companies are doing, like One Medical, for example, primary care as a service. There are local clinics actually here in town, that have a similar program where, rather than have sort of traditional insurance, even, they have – pay us this much every month and we’ll cover everything, up to, within reason, rather, that’s not going to cover like open heart surgery or something, right?
Dan Kline 10:41
And that is the problem with this is that you might find, what we would think of as concierge services for the rich. So if you’re wealthy, you might have health insurance, but on top of that, you may pay for some really nice private healthcare, you know, and better healthcare. This might be a more affordable option for that where you basically say, okay, you work retail, you work at someplace where your health insurance is maybe just ok. I know we have a $3,000 deductible, but the nonprofit my wife for works for gives us $750 a quarter in in an HSA. So that covers that deductible if we need to. But if you had that sort of typical $3000 individual, $6000 family deductible, and didn’t want to go to the doctor, when you think you might have strep throat, because you’re gonna have to pay for that whole appointment yourself. I actually think this kind of service could be disruptive.
And Walmart serves a notoriously underserved market. I don’t want to say that, you know, it’s not like all Walmart customers, they’re obviously too big a brand to have any sort of one customer profile, but very clearly Walmart is a value play. So, Steve, I don’t think we’re gonna find an answer here on this one. But why don’t you give some thoughts? This is a wild west of a space. I mean we read off Teladoc’s down about 47%, year to date, AmWell’s down 67%. And I think a lot of that is because when you have Amazon and Walmart sniffing around, people get a little bit worried, why don’t you close this out? Then we’ll take some questions and comments.
Steve Symington 12:10
Again, I think there’s room for multiple winners in the space. And I do appreciate the relative value of pure plays also. And I do think also that companies like Teladoc, and AmWell Health, their recent declines, they’re not only because of competitive concerns, we’ve seen a broader pullback that’s ongoing today, look at the market right now. And a lot of high growth, kind of hypergrowth tech stocks, and richly valued growth stocks, in particular, with big potential like teladoc that have been crushed, in part because of this sort of, it’s like a bear market within a bull market. It’s this weird thing we’ve kind of been seeing. So there’s part of that. And I think there’s multiple winners in this space. And also, I think if some of these remained depressed long enough, we’re gonna see a little bit of M&A probably happening with some some some of these big boys who could step out and say, do I acquire Teladoc? Do I suck in more of these. And that’s why, you know, you see, obviously Walmart, with MeMD acquiring them, I don’t know what the price was.
Dan Kline 13:13
Now there was no price disclosed. This is probably irrelevant for Walmart, this is a small transaction. This is kind of like we talked about this a lot when Apple buys some like app you’ve never heard of, and they really just want that functionality in the team. But this is Walmart firing a shot against the best. This is Walmart saying, okay, we have some infrastructure for our employees. Now we’re going to take this out to customers, that’s happening at the same time that Amazon is taking its employee program and bringing it to customers, Amazon’s using a hybrid model. And that’s what I think Walmart will do.
The Amazon doctor, on a tele-appointment, can send out a nurse to take your blood pressure, collect samples, whatever a nurse might do. So you’re getting this sort of comprehensive model. Look, nobody likes to go to the doctors for a physical. If I could do the talking part of my physical with the doctor and telehealth, and then a nurse came by for a few minutes and took my blood pressure and a couple other things. That’s how insurance worked for a lot of us. You know I’ve used Lemonade. Lemonade does not require a medical visit. And that was a big part of its appeal. Andrew Connelly, we’re going to take your question when we get to talking about Virgin Galactic in the next segment, because it’s a good one.
But I wanted to segue a little bit and take the question from Danielle, if you want to bring that up, Sam. Hi guys, do you have any thoughts on on Nano-X following the first FDA clearance and the stock keeps going down? So this is not a company I follow. I do know that this is a very, very speculative company. And I would not put a lot of thought into what it stock does based on any individual thing. This is a company that is likely to be very, very volatile. It still has a very long road to prove that it’s viable. There’s really high upside. There’s also a risk of zero. Steve, your thoughts here?
Steve Symington 15:04
Yeah, there’s a lot of work to be done, that FDA clearance is a big step forward. But there’s lots of work to be done. And that was another one of the stocks and Nano-X is the ticker that was sort of victim to this broader pullback in high growth, very speculative names. A very speculative name, lots of volatility yet to go both up and down I think for that one.
Dan Kline 15:26
When you’re buying a company, because of what you think it might do, you really have to tune out the stock price. You know, so we talk about this a lot with Maxx Chatsko and Dana Abramovitz as well. If you’re picking a biotech stock that has a three to five year to not just get approvals, but also to prove market viability. It’s not going to play out quickly. And this is one where, if you believe in it, if you’re even just taking a flyer on it, which is not something I recommend doing, you almost have to tune out for three years. And sure there could be some things that derail you faster than the path to success would be. But I wouldn’t put a lot of stock in quarterly earnings. And this is a good segue. Because Steve, you wanted to talk Virgin Galactic. This is one I have very mixed feelings about but they’re reporting tomorrow. Or tonight after the bell. And that is actually not particularly important in their story. Is that fair to say?
Steve Symington 16:21
Yeah, it’s not, and actually first, I would like to bring up the comment from Andrew Connelly, I think it’s important to make the distinction between Virgin Galactic and Virgin Orbit. He continues, I’m not sure there was a difference when I first – I knew there was a difference when I first looked into SPCE, which is the ticker for Virgin Galactic. And actually, I believe Virgin Orbit was before Virgin Galactic went public via SPAC, it was actually a spin out. So they used to be the same, but not for publicly traded investors who own the stock.
So yes, there is a distinction between the two. We are talking about Virgin Galactic right now ticker SPCE, they report after the bell. Recall, they were originally supposed to report on the fourth last week and they delayed that because of some new guidance that the SEC issued on accounting protocols for warrants issued by SPACs. So they had to do a little bit of restating with their financials. Really doesn’t change anything about their business. But the big thing that we really need to keep in mind is that – I mean, the stocks been smashed, after they’ve twice delayed their most recent test flights. They said that they were shooting to actually have a rocket powered test flight sometime this month back then when they delayed it. And that’s what people are going to be looking for right now.
People kind of know what to expect – what their cash burn, they have plenty of cash on hand after some capital raises and you know, going public in the first place. But that’s what people are looking for right now is confirmation of a test flight window for Virgin Galactic. And that is sort of going to be one of those near term catalysts for the stock because it will be the start of several rocket powered test flights that should culminate by the end of the summer, in bringing their founder Richard Branson to space in one of the test flights before they begin commercial rocket powered flights for their paying customers who’ve already reserved them. So that’s kind of where we stand right now. And that’s what we’ll be watching tonight with Virgin Galactic.
Dan Kline 18:12
So let me jump in with a couple of things. First of all, putting Richard Branson on the first flight is a terrible idea for anyone who’s ever seen a movie. Like this could go one of two ways. It’s triumphant, or he dies. You don’t want to do this, I understand. But I actually think all of this is a bit of sleight of hand. Steve, we’ve talked about this company before. Their business is largely not space tourism. I they’re doing a whole theater where they hired a former Disney executive and you don’t get him. You don’t just get on the plane, you have like four days of flight training. But basically it’s space camp with with an actual flight where you’re in a sub orbit for 17 minutes. You have a little bit of weightlessness, it’s pretty cool. But I would argue that their business isn’t $250,000 suborbital flights, it really is long distance travel. That’s something that’s going to take years to play out, is that a reasonable timeline?
Steve Symington 19:08
Yeah, but we’re in the early stages of basically getting, you know, they still need to get a couple approvals. So FCC approvals, or FAA approvals rather – Federal Aviation Administration approvals, they have two more out of I think 29 to finish and those should be achieved along with this test flight that they’re planning for May. It is a revenue generating test flight. They’re actually going to be revenue generating payloads for NASA on this in addition to the pilots, so. But the big thing is the FAA approvals that they will get with this next test flight, and then that’s sort of the hope for investors who’ve really been largely disappointed over the last year or so with these couple delays of test flights because of EMI impacts, electromagnetic interference that basically caused a computer to reboot right as the rocket was supposed to be igniting and a safety protocol was initiated and the plane landed, it just glided safely back down because they sort of aborted that rocket launch.
But basically, they’re putting safety above all, which I think should be encouraging. But yes, over the long term, you look at sort of hyper orbit travel. So you know, you’re talking about traveling from here to Paris in an hour or something, right. And that’s the idea is that they can disrupt over the long term, sort of this long distance long haul travel niche, but there is a market for people to pay 250 grand. And the price they want to bring down for these low orbit flights where you can actually see earth below you, righ?, It’s sort of this one of a kind experience as it stands, and hopefully, it should be commonplace, because they want to scale that to have multiple spaceports, 400 flights a year. So space tourism will be a significant revenue generator, but longer term, even bigger one is those intercontinental flights.
Dan Kline 20:55
Yeah, and look, there are people that will pay a million dollars to have lunch with Warren Buffett or something like that. That is a limited market, this company’s valuation is not going to be based on its ability to offer those flights, it’s going to be on its ability to get payloads into space, which is which is somewhat part of the Virgin Orbit mission. But obviously, they are using some of these ships to get things into space, there is also really that greater long term and I bring this up, because if this is a company you invest in, I understand that there are some bumps in the road, nobody wants to invest in the space company that like when the protocol kicks in, just overrides it, and they duct tape the propeller on or whatever, you know, you obviously don’t want that. You want safety to be the highest thing.
And whether this happens now or two years from now, even though there is some competition in this space with that with Jeff Bezos and Blue Origin, sort of putting a toe into the space tourism water. That’s not the goal of Blue Origin. This is really kind of a space that’s only gonna have a few people in it. It’s very, very expensive. It’s not like tomorrow, this is gonna work. You know, this isn’t frozen yogurt shops, you’re not gonna have a successful TCBY and then somebody opens a no-name brand down the street. This is a long range play. So safety is better. The timetable actually doesn’t matter at all. And don’t watch earnings today other than if you’re curious as to where that launch is gonna go. Steve, are they launching out of Florida right now? I know we have a lot of those here.
Steve Symington 22:22
Spaceport America, I think was Arizona, right? Yeah. So they actually had that as a mostly taxpayer funded arrangement. And they will build multiple spaceports. They have a couple other agreements in different countries to manage this. So I think it is important to note that in the near term, you know, they are looking at a market, assuming they ramp and it is simply space tourism, that’s a couple billion in revenue a year that can really provide them with much needed cash flow, in order to fund their further expansion efforts. The new space plane that they unveiled that they’re only just starting to test, and building multiple airplanes. So really early stages, very high potential, super high risk, and a heck of a lot of volatility. So definitely one of those names that is stressful to own. But high risk, potentially high reward, and I do have a stake for full disclosure. Yeah, New Mexico, Max Lucas reminded us by the way, desert in New Mexico, that where it was.
Dan Kline 23:22
I fully hope you get a complimentary Virgin cola on your $250,000 spaceflight, one of the Virgin brands also bought the high speed train that – I’m pointing outside because we’re used to live it was about a quarter mile away – about a mile and a half from here. But that is a train that gets you to Fort Lauderdale, or Miami, and eventually Orlando and the Disney properties in much faster times. And then you can do it. It’s also a pretty unpleasant ride. So it’s great to take the train, it’s expensive. Pre-pandemic, there was a model for it. You’re also going to see Virgin cruise lines kicked off this year. None of these companies are actually affiliated. But Richard Branson is an absolute genius. I saw him speak at a convention a few years ago. He’s a captivating guy. I prefer he not blow up in space.
I know he really wants to be on that flight, maybe go on the third flight. But yeah, he’s not asking my opinion. I do have a copy of his book signed by him. But I didn’t get that in person. It was just a stack of books for for people at the convention. That being said, Steve-
Steve Symington 24:18
One more thing, if we still have another minute on Virgin Galactic. There are a lot of people that I’ve seen talk about, you know, Branson’s stake, for example. They say, Oh, he sold all these shares, you know, and Ark is selling shares and Chamath is selling shares. It’s important to note that, you know, with the exception of Ark, which never had a very large position in the first place, Branson still owns I think it was like indirectly through his Virgin affiliates 56.8 million shares. It was only 10% of his stake that he sold down to help keep his other businesses alive. And Chamath also owns I think, almost 16, it’s like 15.6 or 15.8 million shares through the sort of SPAC vehicle that they brought this public so they still have significant stakes in the company. That’s another thing where I’m relatively unconcerned with the recent insider sales.
Dan Kline 25:04
So that’s also a point of nuance. You’re only going to get here on 7investing. If you read the headline on, I’m not going to pick on any particular news site, but Bloomberg, CNBC, CNN, whoever it is, and I’m, again, I’m not picking on any of them, anyone, your average news reporter, and I am a journalist by background. I’ve been this news reporter who didn’t get to focus on the nuances of the stock market, they are going to see founder sells stake, and that’s going to be reported that way: “Founder sells stake”. What you’re not going to get is the next level of analysis.
Why did the founder sell the stake? Because Richard Branson’s choice was – raise some cash personally, or lay people off at a bunch of other businesses I own, and as we’re seeing now with the restaurant industry, especially here in tourist-driven South Florida, once employees go, it is very difficult to get them back. So if he had trained workers at the airline, at the cruise line, you don’t want to lay off your cruise ship captain or your cruise director, as ridiculous as that sounds. There are not a lot of people ready to step into those positions, you know, when you’re in an industry that’s a constrained size, you know, pilots are hard to come by right now. Because people left the field and retired or aged out. So this is one of those things where did he want to sell those shares? No, probably not. Was it the right move as a human being to sell those shares? Yep. Absolutely.
Steve, we’re going to hit the homestretch here. So that was pointing out what we do at 7investing. And we do this all the time. So we have public facing content, and members only content. In our members only content, we aren’t giving you traditional earnings or takes. A couple of companies that I follow for 7investing report this week or next. And I’m not going to tell you “they beat earnings by this so the earnings per share were blabbity blah”. Robots can literally do that. There are robots writing those stories. I’m going to tell you, this is what happened. And this is what this means in relation to why I own this stock, or why I’ve recommended this stock or what this means for the industry. This is going to be a public facing piece. I’m actually working on sort of what’s the movie theater industry going to look like? Because we’ve seen people willing to come back to the theaters for some big blockbusters.
On the other hand, and I hate to pick on this movie, but we saw nobody talked about what a bomb Wonder Woman 1984 was because a ton of people watched it. If that had been released in theaters, it would have lost $200 million. Instead, it was released on HBO Max, and it was terrible. But we all went all right, it was free. I get HBO max anyway, like that has changed the world. So I’m going to give the perspective of someone who not only follows that industry, but also my previous place of living I chose because I could walk to a movie theater. And now if it’s not Avengers or Star Wars or whatever the ones called where Vin Diesel drives around and talks about family – Fast and the Furious – I won’t see that actually.
But it has to be that level of a movie to make me even consider a movie theater. So when you join 7investing, you don’t just get our picks. I know that’s the first thing a lot of people go to – I want to look at the scorecard. I want to look at the picks. Here’s the reality – you also get “why” . The “why did I make this pick”? And you can get that from our recommendations. You can get that from the formal video presentations. We record when we pitch each other on the stock you can see if someone has objections to the pick or what their questions might be, how they’re answered. So we think you should be a member. That is 7investing.com/subscribe. Steve, why don’t you throw out one other thing you think our members absolutely love.
Steve Symington 28:42
I mean, in addition to the recommendations, the deep dives we do where we talk about them. Advisor updates and such. Being able to contact us directly. We answer your questions – it’s not bots. I had someone this weekend say wait was any part of this response automated because if it was tell me how you did it like this is crazy. So we personally respond to every message we receive if you want to contact us if you’re a member just email us at email@example.com. That’s almost always me. But a couple of us have access to that email address. So we check it often. You can also find us on Twitter at @7investing. And that’s another place where we’re interacting with people regularly. So yeah, small enough that we can still do that.
Dan Kline 29:27
I will say for our members, questions on specific stocks are best handled in our members only live call. So we make that available to you after the fact. It’s live for members on the third Friday of every month we go 11 to 12:30. We actually push 7investing Now back a little bit because of that, we do a live show at 12:30. That’s where you can ask about specific stocks. If you have questions about our service. If you want to know about an industry trend if you would wish we would write about something or wonder if we have, you can ask us those questions. Of course we use Yext on 7investing. So if you type in to our search engine, I don’t know let me pick one we talked about publicly last week on 7investing Now if you type what’s up with the Peloton treadmill, there is a decent chance that Yext will return you the transcript for the 7investing Now we talked about that, or the article I created that goes with that.
So we are working really hard at 7investing to make our content discoverable. It’s a work in progress, sometimes sending us an email, and we can then send you a link. But we are a small team. We all like doing this, we challenge each other in a pleasant way. I will say it was a little bit quieter than normal this weekend, because it was Mother’s Day. But pretty much at all hours of every day, we’re asking questions about companies, we’re talking about things or posting photos of what we’re doing, because we don’t just spend all our time, you know, focused on investing. But this is actually a team of people that likes being around each other. And that comes out on this show. And I actually think it’s really important to our investing style. Because if you don’t like your co-worker, and they challenge your opinion on something, you can take that defensively. If Steve challenges my thoughts on something because he has a different thought that’s always taken as “oh, this other smart guy has a different thought”, you know, I’m sharing that perspective with you.
Because a lot of analysts, a lot of people who do what we do are in a competitive setting. We are not competing with each other, we might tease about our scorecards, but we fully understand that someone like Maxx Chatzco is making picks for a very long term, where sometimes like something I pick might be up, but it might be up for a really dumb reason and not the reason that’s in my thesis. So we’re really able to push each other to better layers of thought. And that’s where Daniel Kern’s comment comes in DanielKern79 it says and Sam, if you want to bring that up, “that’s super useful information about the the insider selling of SPCE. Thanks, you two”. Yeah, that’s what we do. Like, I probably listened to 10 times more earnings calls than I did when I was writing much more frequently, because I need to actually bring value. I need to do something that you can’t get for free. And that is what we do, like I am heading off to our other house. We’re closing on our condo, not closing I worry about the inspection on our condo Tuesday and I’m driving up for it because I bought a property I haven’t seen. I’m going to be listening to earnings calls during that instead of podcasts. That is not something that I particularly enjoy doing. But as time allows, that’s what’s going to be happening.
But Steve, we’re gonna hit the homestretch here. And this is one we were gonna do on the Friday show but I actually had internet issues. So we kind of ended the show early, it was a very fun show to do outside with wildlife crawling on me. And a lot of people at the resort wondering what the heck I was doing, sitting with a laptop talking loudly outside. But that being said, I was gonna ask everybody to give an example of a stock you decided to sell and why. We don’t issue sell recommendations all that often. But that doesn’t mean we never sell a stock. So Steve, what is a stock you have sold recently? And why did you sell it?
Steve Symington 32:54
Sold the recently might be a hard question, because I haven’t sold anything.
Dan Kline 32:58
Yeah, that’s true. What is a stock you have sold historically?
Steve Symington 33:02
Let’s go way back to the beginning. And I think this, this kind of demonstrates a couple of different different lessons. The first stock I ever owned was Marvel Entertainment. Right? And that’s the funny thing, I’ll look at my tax returns. And sometimes there’ll be no stocks that I sold. And it’s like, I’m an investor for a living. I’m not this person who does 40 trades a day. But let’s go back to Marvel Entertainment. First stock I ever owned, I sold it when Disney announced their acquisition. And it was like I woke up and it was up 38% or whatever that day. And I was like, ah, what’s going on? What happened? This is crazy. And I see Disney’s acquiring it. And I was annoyed because it was one of my favorite companies. And I did not want – this is what 2009 something like that? Or 2006 I don’t know .
Dan Kline 33:51
The Disney turnaround was not evident. Disney was a strong company in the theme park space, but even even there, that was before Universal Studios was pushing them. So Disney was largely neglecting its US parks and like rides would close and they would put in character meet and greets because they didn’t have – it was really Harry Potter at Universal and the acquisition of Marvel, which happened after the acquisition of Pixar. But Pixar was kind of just Disney buying something that was already distributing. Marvel was a massive deal but I don’t think we knew how big a deal that was at the time.
Steve Symington 34:28
And I knew it was a fantastic value. And and that’s why I was annoyed is because I wanted more out of it. And I was I didn’t want a 30% pop I wanted you know a 10 bagger and I see Disney acquired it for 4 billion and I was like ugh, and I sold it. Took my profits and moved on. And I should have done some research and said okay, you know Disney has Pixar they have Marvel. This could be the start of a longer term trend. This is obviously before Lucas Film they brought in and before Fox, the mammoth acquisition of course, and Disney+ and there’s so many different growth levers that Disney’s demonstrated and sort of this historically, really impressive acquisitive streak since then. And that’s one of those things where I think I learned not to underestimate the ability of large companies to continue to grow larger. And Disney has made some incredible returns. And I haven’t gone back and tracked to see what I did with that stake in Marvel since then, I’m sure it’s performed fine. But I would have been just as well off I think, if I would have just taken the cash portion of the deal put that to work and taken the stock in Disney and held on to it. So that’s something that I think we really need, you really need to examine when companies you own get acquired to determine whether you feel like selling and you should or not.
Dan Kline 35:42
This can actually be a very difficult choice because let’s go back to Disney at that time.Disney at that time was doing really well with Pixar movies, was having occasional hits with its own IP, the Princess movies, but it was not a movie powerhouse. When the first Iron Man movie came out. I grew up as an Iron Man fan, that was one of the comic books I read. So I was really excited to see it. It was good enough to earn a sequel. it did reasonably well at the box office. It was not until, I wouldn’t even say first Avengers, I would actually say Guardians of the Galaxy became a hit that you went, oh my god Disney could take any character in this, and with the right movie have a billion dollar film. And I wrote something. I get called about this to this day. But I wrote a piece for Motley Fool where I used to work and I basically said, Guardians of the Galaxy is going to make about 300 million domestic. I forget the number. And I used the comp of the Captain America movie or maybe the sequel.
And I basically said, this is what this movie did. This movie has the Disney credibility but nobody knows who the Guardians of the Galaxy are. And I got lambasted, I got probably 2000 Twitter pokes. Like, no, this is a great cinematic property, this is going to be a huge hit. And my analysis was actually technical. Like it wasn’t emotional. Like it was basically saying nobody, like regular people aren’t going to see this. It’s gonna be a big hit in the Disney comic book world. When that movie came out and was a billion dollar blockbuster. That was my month, basically answering. That articles actually been quoted in one of the more famous theme park sites, as somebody getting it wrong. So we’re not right every time. I stand by my analysis, I actually think it was correct.
And actually, Steve, I actually don’t think you made a mistake there. Like as much as I’m a big fan of Disney and a shareholder. Back then I don’t think Disney was clearly a buy, unless you were prescient, and you knew that not only were these going to be such big hits, that they sort of rebuild the movie division. But that they were actually going to be valuable property in the theme park world. Obviously, there’s some issues with that with their their deal with universal in Orlando, but you have Avengers campus that just opened at, or is just opening at Disneyland, you have a Guardians of the Galaxy roller coaster going in at Epcot. So I don’t think anyone could have seen it. And you probably put your money into something that, I don’t know the exact years, but the first few years of that deal you actually probably did better. Like it took a while for those to – you don’t make movies quickly. I’ll give you the last word on this one.
Steve Symington 38:20
Yeah, so it was funny. You mentioned in old article that our former employer, and actually, it reminded me of an article they wrote because it took me a few years to sort of start to understand what it really meant, and what they were doing. And I wrote an article called 26,000 reasons to love Disney. And it was about the individual characters, right? There’s 9000 characters in the Marvel Universe, there’s 17,000 unique characters in the Star Wars universe. A lot of people don’t know that. And it was sort of a, how long can Disney keep this up kind of thing making new movies? Well, indefinitely, really. And it took me a few years. But I guess with the information that I had, at the time, maybe I made the right decision. And I probably did just fine. But that’s an interesting kind of example of a stock that I’ve sold and why. and most often, it’s something like an acquisition or something has gone terribly wrong, which thankfully, hasn’t happened. But what about you? A stock that you decide to sell?
Dan Kline 39:11
Yeah, so there’s only one that I can think of in the past six years. I’ve talked about this before, so I won’t go on about it too much. But in the early days of the pandemic, I sold my WWE stock, and why did I do it? So it’s not a secret that I’m a pro wrestling fan. So I follow the ins and outs of that. I like the business side of it, frankly, more than I like the product and there were a number of sort of well known globally pro wrestlers in WWE that wanted, before the pandemic to be released by the company, that means let out of their contract, so they could go work elsewhere. And sometimes WWE would rather just keep you on the shelf and keep paying you then let you go to its competitors at the time. It had fledgling competitors. Now it has sort of stronger competitors with AEW on TNT, with that with New Japan paying decent money in Japan.
There are places for people to go and get work. And that’s often at a pay cut. But it can be more satisfying. And they said no to a lot of people who wanted to leave and just basically iced them out or use them badly to diminish their brand. There were also a few acts that they said, Hey, I know you’re making 300 grand a year as your as your guarantee. How about 750 and we’ll give you a five year contract? Well, a lot of those guys didn’t want to sign those contracts but responsibly had to and then the pandemic hit and the opportunity to work elsewhere went away. But WWE revenue did not go away. Television is the overwhelming largest source of their revenue and now their deal with NBC Peacock for their former network.
So they actually took away an expense that was touring, which sold merchandise but wasn’t generally a moneymaker on the ticket sales basis. And they put their show for the beginning of the pandemic, they were just doing it from their training center. Now they have the added expense that they’re doing it in arenas with one arena with like 1000s of monitors, and it’s actually a little more expensive. Not only did they let go a whole bunch of wrestlers who did not have the opportunity to go do like you know, indie shows in high school gyms or join, you know, lesser Federation’s on smaller contracts or go to Mexico or Japan. Basically, they said, hey sorry, you’re out of work, and probably no one’s gonna hire you. They also sent home a lot of their producers and writers and travel people that they weren’t going to need. And these are people making, you know, if they used to be famous, maybe they’re making 200 grand a year, if it’s like a secretary that books travel for executives, maybe that’s someone making 50 grand living in Stamford, Connecticut, which is an incredibly expensive place to live with not a lot of options nearby. I just thought it was reprehensible.
And it kind of took my thoughts about like, if this was such a great company, and I understand the business model is great. I had opportunities to interview there and I didn’t and this is when I was you know, not having a cool job like this, because I knew it wasn’t a great place to work. It has a reputation as being a 24/7 incredibly demanding place to work. If I was 22, I’d probably want to work there. This sort of said, wait a minute, this company is thinking about it’s stock above its employees. And I actually think you can do both. I think we saw with Southwest Airlines. Why do you protect those employees? It’s not purely out of generosity. It’s because right now, as we’re getting back to travel, you know, who can add locations? Who can ask pilots to do uncomfortable trips and itineraries, and maybe fly to places other than their home base? Southwest, because they built up that credibility, they treated people well. This to me was an absolute low blow to their employees. And I did not like it.
Other than that, the only times I would sell would be if I owned something that I bought at a very low price or small position, if it truly blew up. And the reason it blew up was one of two things. It played out my thesis and I no longer see the growth opportunity. Or it blew up to beyond my thesis for a dumb reason. I’ve talked about this a lot. If I own GameStop because I believe, you know, before this whole retail investor thing happened, if I believe that they had the balance sheet and they did to pivot their business to something else. And it could be a two or three times growth stock in a couple of years. And then it goes up 800%, well you sell because you only believed it was gonna go up 300% and you don’t you cannot make a case for what it actually did.
We don’t sell a lot. We appreciate all of you watching. We’re gonna stick with the wrestling terminology here and hit our finisher. I’m sure Steve there are people that don’t know what that term is. But a finisher is in pro wrestling. It’s like your big move that usually ends the match. Which CEO do you believe the latest company to the strongest stock gains in the next 12 months? Our audience overwhelmingly not overwhelmingly, but strongly thought it would be Elon Musk with about 40%. Tim Cook came in next with 23%. 31% said Satya Nadella and about 5.9% said Reed Hastings, co CEO of Netflix, there wasn’t enough room to put both CEOs there.
Steve, I’m actually going to argue if I had to bet, when you bet you have to consider the downside. So you have to consider, what of the pitcher for this baseball team I’m betting on tweaked his elbow last time and he comes out and he gets hurt or he’s not right, you have to consider that. I actually think Microsoft is the steadiest ship here. And the downside on Elon Musk is, while he didn’t do anything on Saturday Night Live that was crazy. He could do something that is not going to be beneficial to the company stock on -I’m being really careful with my words here, because I don’t want to imply any sort of mental health issues, but it is fair to say he is not always operating in the best interest of of his share price in terms of what he tweets and how he operates. So I actually think if all things are equal Tesla probably wins this. But if you’re making a bet and where do you have the strongest, you know, the best company with also the least chance of a big misstep I would say Microsoft but what are your thoughts here?
Steve Symington 45:01
Oh, this is a harder decision than I think I thought it would be. I would narrowly vote for Elon Musk. If only for the upside. I think there’s some really interesting upside in the global demand for their vehicles remain strong. There’s some factories coming online. And there’s some of the battery storage and the energy stuff could serve as incremental value opportunities, but also we’re looking at the chip shortage that is kind of restricting some production that I think could be really interesting is they kind of unleashed things so I would narrowly vote for Elon Musk and his company Tesla. I guess a close second is Nadella. I go Musk, Nadella, Cook, Hastings. I guess I’m gonna vote there.
Dan Kline 45:56
Microsoft could easily have been IBM, it could have been GE, it could have been one of these stumbling dinosaurs that never found its way. Steve Ballmer actually gets blamed too much because some of what Microsoft is doing in the cloud, some of it taking down its walls. And being on Android and being on Macs, I think actually does trace back to Ballmer, and I worked there.
And the scariest thing is when you’re on an email chain with balmar. And you absolutely know you’re on the chain, but you are not allowed to reply. Like there is zero chance because when we were launching what was then the Windows 8 finance news and sports apps, the only audience for the first three months were like a group of Microsoft executives. So you would see emails and you had to, no one had to tell you this, you just had to know like I was at the movies once in a very higher up was like the site crashed. I was in Bellevue, Washington at the time on campus where my team was, and it was a Saturday, I left the movie, went to the office, didn’t have access to get in the door had to like talk my way into like a cleaning guy and figured out how to get our tech team, which who were in India, probably asleep on the phone. Not that it mattered. There was no public audience. But you don’t want the bosses of the company to think no one cares when the product goes down.
I don’t think you can go wrong with any of these. 12 months is not the timetable we generally look at here, but I actually am pretty big believer and let’s have fun with Twitter polls. I am not a giant fan of people who answered the Twitter polls with like, what about so and so, I liked the discussion. But they limit you to four. I tried to pick four that go well together. Steve, this has been fun.
Steve Symington 47:37
Again, on Tesla, I’m pulling Tim Cook’s one more thing, right? Well, it’s not really Tim Cook’s one more thing, but you know what I mean? I would say I think maybe Tesla has the most upside over the next 12 months, potentially, it also probably has the most downside. And that’s one of those things. And it’s 7investing, we’re looking at time periods of three years at least. And that’s kind of what we’re viewing when we think that, so like you mentioned next 12 months, not ideal. But that’s also an important note that a lot of people are looking at, you know, I’m gonna buy this and it’s gonna go up in two months. That’s not how long term investing works. And you might be sorely disappointed, especially with the way the markets been treating a lot of stocks lately, you can find yourself way up or way down. near term volatility is pretty rough.
Dan Kline 48:30
We’ve talked about this a lot. It’s one of those things where what happens in the short term doesn’t matter. We talked about this on this show. When I look at an earnings report. I don’t know when Netflix reports, but let’s let’s assume – I don’t even know maybe they’ve already reported. When I go through the Netflix earnings transcript, which is something I will do, it’s a company I follow I’ll listen to that call. I’m not looking for what happened in the past quarter. I’m looking for what the long term trend is. So if Netflix says Yep, we’ve decided to invest more production in India, that means more to me, you know, what’s the color? Are they expecting to add 10 million subscribers there? Is it a higher subscription cost a lower subscription cost? Where’s this going to be in five years?
When you look at companies that are spending billions of dollars as Netflix does, it’s the roadmap that matters, not necessarily the short term results. But with that, we are running out of time. This was not the episode I expected it to be. And I appreciate it going in all sorts of exciting directions as my earbud falls out of my ear. But if you’d like to get in touch with us, we can be reached at firstname.lastname@example.org. That is usually Steve on the email. I don’t have access to it. So it’s never gonna be me. We all sort of do different things on the team. Or you can converse with us @7investing on Twitter. Always happy to talk about investing trends or give some perspective. Steve, we will be back on Wednesday. I don’t even know who’s on the show yet, we haven’t even planned that one out. But we will of course, be live Wednesday at noon. Steve Simonton for Sam Bailey. I am Dan Klein. Thank you for watching. See you Wednesday.
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