Peloton has built a devoted audience and it clearly stands as the premier player in connected fitness. But, at over $1,800 for its entry-level model and $40 a month for classes, it’s an expensive proposition for some people. Sam’s Club is now selling a copycat bike from Echelon for $799 with six months of free classes. Will that impact Peloton? We’ll also be joined by Alan Soclof of the Cruising Altitude newsletter to talk about millennials and investing.

Transcript

Samantha Bailey  0:12

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  0:23

Good afternoon Seven-investors and welcome to the Friday. That’s right. It is Friday. It is March. We’re approaching summer, vaccines are getting better. It is a beautiful day. You’re watching 7investing now. My name is Daniel Brooks Kline. I’m being joined today by Manisha Samy, Manisha Welcome. It’s been a while. How are you doing?

Manisha Samy  0:42

Doing well, getting ready for spring excited about that.

Dan Kline  0:47

I feel like we knew this was coming. And we’ve talked vaccines on a lot of shows. But without being political to see the President of the United States. I don’t care who that President is, say everyone will be eligible for a vaccine by May 1 was just a bright thing to see like a Manisha as a as a I don’t want to say a scientist but as a person in that space. Does that make you feel good about your community? Like I know, like when something great happens in the journalism world, I’m proud of all journalists, I feel like maybe you’d feel that way about science.

Manisha Samy  1:19

It shows us how quickly we can one identify what the pathogen or the virus says. Then having that scientific knowledge base essentially go out create therapeutics go through the rigorous clinical trial process. And then the most difficult thing ever is distribution. And we saw that, you know, in terms of Okay, well, how do we go about it, but may 1, that’s a really quick turnaround of this is something that’s been approved by the FDA, and now everyone is getting it.

Dan Kline  1:49

I see the mass vaccination sites scaling up I volunteered twice at a max vaccination site, and I saw just how efficient it was and how it could be scaled. So here’s what I would say to anyone who’s excited about this. Look for volunteer opportunities. Not you won’t necessarily get vaccinated, but they’re going to need volunteers to make these things work, that we’re pushing our nurses, our doctors, our medical students kind of you know, to the edge in terms of doing this. So if you can volunteer and direct traffic or observe people in the 15 or 30 minutes after their shot, there is some great work to be done. But that’s not our top story today.

Our top story today is we’re gonna talk about peloton and peloton competitors. I’ll explain why we’re gonna do that in a second. Then we’re gonna do a what we’re watching Manisha has a great topic to talk about. And then the last segment of the show, Alan Soclof, one of our affiliates of the cruising altitude newsletter. He’s a millennial. He’s gonna join us to talk about millennials and investing.

So it’s a jam packed show but Manisha, you know, I’m an active guy on Twitter. And I throw a lot out there on Twitter and yesterday, I just threw out a link no judgments made about how Sam’s Club was selling an $800 Peloton, competitor. And I basically said if this is a decent bike, it’s made by Echelon Echelon product looked decent enough. Why would you buy 1$.900 worth of peloton and I got eviscerated. Now I understand the status symbol argument.

I understand the social argument but we’re going to go through a lot of this and we’re going to base our conversation off a lot of your tweets. But before we get there, Manisha Are you a eloton, person a gym person? I’m a personal trainer and a gym person. What’s sort of your normal world workout habit?

Manisha Samy  3:29

I am just like you I usually have a personal trainer obviously not during COVID world and I like going to the gym and then just yoga classes.

Dan Kline  3:39

Yeah that I like being in the gym. It may not look like it but I’ve been a two or three day a week personal trainer person for the past 18 months the pandemic hurt that but I will say had we not move to a complex where the gym is like 30 yards from my house. It hasn’t been open the whole time. We’ve lived here but it opens in a week or so they were doing a renovation. I probably would have bought a Peloton and when I say would have bought a Peloton I mean I would have bought a connected fitness exercise bike I don’t know if that necessarily would have been a Peloton I’m not a big status guy but I will say for all of you who got mad at me on Twitter, I am bullish on Peloton I see the market opportunity in Peloton I am not an investor in Peloton but I am not against the idea of investing in peloton so don’t think I’m a peloton hater as we’re doing this, but let’s get to the first questions we’re getting.

We got a lot of people who made some version of this argument. This one’s from Matthew Joseph if you want to share the tweet, Sam Bailey, it has nothing to do with the boat the bike the mon is the classes they’re just outstanding. People don’t care what the bike costs. It’s also growing at such a rate it’s having a network effect and everyone wants to be a friend on Peloton I get that Manisha Let me ask you have you ever taken a loton class?

Manisha Samy  4:56

I have I’m so not from home. I went to their brick and mortar kind of peloton class in New York. And it was it was actually a very unique experience because he had the people kind of around you in class on peloton bikes, but then the instructor would call out to people, you know, live, I know oh, this so and so is from, you know, North Carolina and they’re joining and this is their, you know, 1000 class. So that’s kind of interesting to see, kind of from the brick and mortar point of view.

Dan Kline  5:26

So I look at it and I see, I actually think this is an area where I’m gonna push back. I’ve been to lots of gyms I travel a lot and we’ll go take a yoga class or whatever class with the trainers. I think good trainers who can lead a class and be energetic. I don’t want to say a dime a dozen, but are not particularly difficult to replicate. I know some of the people get so mad about this. I know some of the peloton trainers do build a loyal audience. I know the fact that you can socially interact with your with your friends, a little bit matters. But I’m a grown person. I don’t need to go to a class and have someone recognize me or shout me out.

I’ve seen classmates of mine people I respect literally be nervous on Twitter about whether they’re going to get called out during their 100th ride. I don’t find this that necessary. That said, it does matter to a lot of people. I’d be shocked if you took an Echelon class or a Nordic Track class or a mixed class or whatever it is, if it was really super inferior I know a lot of people felt their Soul Cycle classes were were something completely unique but I don’t see this as a differentiator.

It is a marketing differentiator people clearly believe it but I don’t know that it’s actually true we of course would like your questions and comments wherever you’re watching this if you want to question and comment on Peloton on connected fitness anything in that space? We are happy to take those questions as we go but Preston shared yesterday on on Twitter. eloton has become such a brand name it’s a status symbol and has that edge to it reminds me of when people were getting the iPhone in the early days it turns heads and people like that. Also I do hear the bike is next level to competitors Manisha you’ve been on one I’ve seen them in person at the mall. I’ve never been on one. Does it feel that different from the average exercise bike at the gym?

Manisha Samy  7:08

I think there is a bit of a difference. And then you know if I’m looking at specific companies, so you know there’s still cycle there’s peloton and then in New York, there’s also flywheel. I would say if I think Flywheel and Peloton they’re more neck and neck, pretty, you know, they’re good. I think part of it is what are exactly are they tracking as you’re cycling? like where are the buttons. So if you’re exhausted, there’s there’s some of that but really not too much. I kind of agree with the whole status symbol aspect that’s a lower and building a community. I think I’m a competitive person. And if I know like the person next to me or online is just doing a bit better, that pushes me a bit harder.

Dan Kline  7:51

So I have heard from some Peloton owners that the the bike is superior. I’ve also heard some complaints about the seat but you can swap out the seat. It’s a traditional bike seat, which can be painful for some people. So let me ask you the general question because people draw the apple comparison a lot. I am on a MacBook doing this show I

I’ve always felt the Mac Book was necessary to my work because I I’m a writer, I’m a creative person, I find it much easier to do things like edit video on a Mac ook. I don’t think I own a Mac as a status symbol. But you could argue that I buy a new iPhone every year as sort of a status symbol. Other than that, I mean, you could tell by the fact that I dress the same every day not really a status symbol kind of guy. Have you made a purchase? based on just I really need to own that brand name.

Manisha Samy  8:38

You know? No, I don’t think so. I mean, I have everything Apple but that’s purely because of the connectedness and it’s easy if I had information on my phone, I’m easily connected to my laptop. Um, I can’t say I have though I think I do tend to buy something if, if the marketing is well done. So for me, I wouldn’t have even known that Sam’s Club was releasing a competitor bike if you had not mentioned it, for me in my mind, if I were to get a bike at home, the only name that pops into my mind is Peloton.

Dan Kline  9:14

See, I am a let’s call it. I have a purchasing method. There’s a little personal finance lesson if I’m going to make a big time purchase. I am doing my homework before I bought my recent used car. I went out and I got the Consumer Reports used car edition and I read every single thing there could be read. I read about all the potential problems that could go wrong with the different use brands. If I was going to buy something as expensive as a bike, I would try to find impartial sources The challenge is finding impartial sources beyond you know for electronics you can use seen that for a lot of things.

You can use Consumer Reports, a lot of cases you’re reading reviews, where they’re linking to for sale sites, and they might be getting a better commission from some places than others. So you do have to be careful. I do think though, there’s a mindset that a lot of people have They want to have the hot brand and that Peloton is the hot brand. They also survived the backlash of being the sort of like rich good looking white people brand and that you know we had that whole controversy it was last Christmas.

It was two Christmases ago where a very fit woman got a peloton and then like you know, showed how in shape she was getting when of course she was in shape in the first place. We saw them get through that and the power of the brand. All the jokes about you have to be overlooking some beautiful vista you know to place it in your house and buy a peloton. I do think they’ve become sort of an approachable luxury brands like Apple but srimathi asks, an important aspect to remember is that the service revenue isn’t tied to the hardware. I personally went with a cheaper competitor bike Bowflex, but I’m a happy monthly subscriber to peloton for the classes. I think this is an important point. You can buy a cheaper bike and still use the peloton app. It’s not as integrated. Some of the features don’t work, but I could see the logic of doing that. And then we’re gonna move to a really important point from my friend Sam metiria. Sam is actually probably my my longest colleague in the financial space we go back to before I was at The Motley Fool.

I think you’re looking at the price wrong. peloton isn’t an 18 $100 bike versus a $700 bike. It’s a $60 a month plus subscription cost Echelon subscription is the same price. I do think the Android Android iPhone comparison is accurate. I thought wrongly that people would buy the $400 phone over the $1,000 phone. The reason I was wrong because it’s not $1,000 phone it’s $30 a month. It’s the same logic car dealers use. You know with a what monthly payment can you afford? Manisha? I think this is a good point? How many times do we buy something where we don’t really think about the total cost? Like I know, when you buy a house? You don’t really think of it as $325,000 you think of it as $1,300 a month or whatever the number is. Is this something? Do you think that this leads a lot of people to buy a eloton?

Manisha Samy  12:03

I think so, if I was thinking about total costs, and just oh, this is all in paying for a month, I’m thinking I spend you know, how many, you know, 10s of dollars, am I or like probably $40 a week on just Starbucks. So then this is nothing, or then Spotify and Netflix combo combined. Okay, well, that’s essentially or, you know, add on another subscription service. So that makes it seem cheaper.

Dan Kline  12:28

I think it does. It’s also something though, that I’ve personally taken an inventory of, because I know I had bought five or six different things on, you know, let’s call them installment plans, you know, 0% interest, you’re paying $60 a month, whatever it is, like, we just got the new Xbox, and it’s whatever it is 2999 a month for two years, and you get game pass. And I feel like I’ve saved the money in the fact that I’m not buying my son a new $60 game every month.

But we really went through and looked at our subscriptions to figure out like, okay, we have a subscription to this is someone in the house using it. And I’ve actually paid for a couple of things upfront fully, because it’s like, if you keep buying things at 20 3040 $50 a month, and then all of a sudden you have like 15 of them, that becomes a meaningful amount of money. Now, of course, many of these things are 0%, if you pay them at once, like when I got my laser eye surgery, we financed it because we have an HSA. And it’s a little complicated because they don’t take payment directly from the HSA. So we have to do a really complicated reimbursement tax form kind of thing. But that being said, I’m making payments big enough.

So I will pay it off while at 0% interest, why give the company the money for that period of time when I can, you know, finance it and pay it off through my wife’s office funded HSA. So really it’s no cost to me, but I do think you need to be careful we got one more Twitter comment here and then we’re going to go to some of your questions and comments. Mark that’s at the mark cook asked Daniel Would you rather have Lululemon or Gap, a MacBook or a Dell, a Porsche or a Toyota being chained by celebrity trainers or average people they’re only celebrity trainers because they have an audience on peloton it’s not like peloton went out and got you know, Tony little or the I can’t even think who would be a celebrity trainer these days but you know when they’re not actual celebrities they’re peloton world celebrities. They’re kind of like the MTV VJ of the peloton, you know of the peloton world.

But let me ask Manisha the question because there are areas where I’m snobby I will go to stop Starbucks over a lesser coffee place also go to a nicer coffee place over a Starbucks. I will buy Apple products over Dell products. But I’ll absolutely shop at the Gap. I don’t even know where I shop. I just buy like wherever has like black shirts cheap. I will definitely I drive a 2014 Toyota that I just bought. It’s actually older than my previous car. So is there a little bit of a snob factor in that I bought a Prius like Yeah, maybe. But I don’t know. I think this is different for everyone Manisha your thoughts here.

Manisha Samy  15:00

I absolutely agree with you. It’s a very personal it’s a very personal opinion. For me, I would go for a celebrity trainer over kind of the average crunch gym trainer because I would think, okay, they know what they’re doing. If they have extra certificates, if they have a background in nutrition, for example, I’m thinking okay, well, they know what they’re talking about, even though technically, that’s probably not true. It’s just, they’re celebrities. Um, I think for other things like coffee, you know, as long as it gives me caffeine and I’m awake. That’s fine, though. I wouldn’t want anything super disgusting, of course. But as long as it’s coffee, and it’s drinkable. When it comes to cars I eat. It depends on if

Dan Kline  15:44

you live in cities, cars are pretty irrelevant in your world,

Manisha Samy  15:48

right? So it’s like, it’s like, you just don’t want to have a nice car because the likelihood of it just being trashed is quite high.

Dan Kline  15:56

That we’re going to go to some of your comments over the next five minutes or so then we’re going to move to what we’re watching. We’re going to be talking about microbiome companies in recent research. When I say we, I mean Manisha much more than me.

Steven Heinz says leadership matters. That’s true with orchestras, companies and countries I think that’s a comment that Peloton has good leadership. I would argue that they do the recent purchase they made the the company’s escaping me but they bought a company that makes bikes that are sold in gyms that will up their capacity. I do think that’s important. But I don’t think that necessarily means that the competitors in the space don’t have good leadership like this is a market where they’re going to be multiple winners, like NordicTrack has been a longtime player in the exercise space.

I wouldn’t count them out. I wouldn’t count out Bowflex in the exercise space like they’ve simply been here they know how to make equipment they already have those sort of methods of selling it the wholesale channels the the gym source stores that track that that stock that kind of equipment, so I don’t think this is a winner take all space.

This one is from Zipcar if you want to bring that up Sam Bailey Peloton I think for the next two quarters will will show great growth because of backorders Peloton is a luxury brand at it will mature soon and will stay consistent similar to Ferrari stock. So you’re right about the next two quarters but I don’t worry about the next two quarters like the next quarters are just catching up with pandemic demand. I actually think and many should jump in if you want here.

I think there are whole markets that Peloton has not hit. I think the fact that they just bought a company that has all the relationships with gyms there is no reason gyms wouldn’t want to buy durable connected fitness bikes but I don’t know what’s in and I’m pointing over here because it’s literally over there. I don’t know what’s in the new gym in my building, but I would guess there might be some connected equipment. I think it community gyms, which is a massive thing here in Florida hotel gyms.

Imagine if you go to a hotel that has three peloton zz in it. I think that’s a massive market that has been stymied a bit by you know, the pandemic like hotel gyms are a dicey proposition as it is right now. I was in one a few weeks ago and there were occupancy rules, you basically had to clean your own machine I wore a mask while I was working out which was not particularly fun. Now that being said, I was on a treadmill facing no one with one other person in the gym. And he was really loudly lifting weights that weren’t that heavy. Nisha, would you consider as you know if you move someplace with the building having a peloton or connected rower or something like that be a selling point for you?

Manisha Samy  18:28

Not at all, I wouldn’t think twice about the personal preference. I know for a fact that you know I have friends and you know parents or friends who would absolutely love that and that would be CAR-T hearing. I know there are a lot of luxury buildings in New York. They’re installing Peloton bikes just for incentivizing people to join especially now that everyone has left New York because of COVID.

Dan Kline  18:53

David Strauss says we’re gonna go to a few more of your comments and then move on to talking about microbiome, something I did not know existed until I met Manisha and Maxx. David says, I’m so cheap and old school but I just go outside and ride my bike, I great value fresh air, I totally get that. Now, that being said, it’s hard to ride a bike outside and if you live in a city if you don’t live someplace where there’s open, idle, I don’t pay attention well enough to ride a bike outside. I also know that riding a bike outside has unexpected hills and other things. There’s a lot more control inside. I take an outside walk every day that I don’t go to the trainer. I am a big believer in getting outside. Manisha, is it possible to get outside where you are right now? You’re more downtown than I am.

Manisha Samy  19:38

It’s possible, though. My problem with riding a bike outside would be that I don’t know how to ride a bike which is on me. So that would be kind of impossible. But yeah, I mean, I I do see people riding their bike outside. But there are some very hilly areas and then I think about people who live in San Francisco, I would never want to ride a bike in San Francisco with kind of this The pills that they have there

Dan Kline  20:03

Joey K says Dell for the win I love mine. Yeah, we we own at least two Dell computers in this house. for creative pursuits Macs are better I am probably going to fire up one of our Dells as a secondary computer we use a piece of software to do our transcripts. That doesn’t work particularly well on a Mac it has a Mac glitches so I’m not anti Dell. I’ve been a PC person on and off my entire life. That said we appreciate so many of you taking part in the peloton conversation.

Manisha, we are going to move to the microbiome conversation then we’re going to talk to to Alan Soclof about millennial investing. But before we do that, we both work at 7investing. We are lead advisors at 7investing, what does that mean? Every month on the first of the month, whether it’s January 1 or April 1, I feel a little weird that we’re going to do this on April 1, but we put out our new picks. Those are the highest the highest conviction stock recommendations we have this month.

So I might on the show talk about 10 stocks that I like my pick, which I won’t talk about on this show is going to be the one I think is my absolute best buy right now. So if you’re a member for $49 a month or $399 a year you get access to those pics right on the first of the month. You also a little bit later get access to our team calls where we we pitch those pics to other people.

So Manisha might pitch her pics, and Maxx might fire back with all sorts of knowledge. And the rest of us might ask dumb questions about you know the finances because we don’t know as much. I might pitch a retail company or an entertainment company that everybody can ask questions about. So those are available to members. We also do a new members call on the third Friday of every month. We also do a call for our existing subscribers when they can ask about any of our passports. We’re adding tons of new stuff to the web’s to the website every day. That is just for members. So if you’d like to become a member of seven investing, and why wouldn’t you?

It is 7investing.com/subscribe. Once you become a member, you get a referral code. Why is that important? Well, if you go out on Twitter or Facebook or your MySpace page or stand on a street corner with one of those spinny signs with your referral code, every person that signs up not only did they get a deal they get they get their first month for only $10 they will get a you will get a free month so if you get 20 friends to sign up, that’s 20 free months so I can’t say enough how much I like the service how proud I am to be part of this service.

And our own Simon Erickson says seven investing should certainly fund this endeavor including the training wheels. I missed the beginning of this is someone suggesting we get training wheels so I so I learned Simon shares surprised that Manisha doesn’t know how to ride a bike, but he should, if you would like my 17 year old also doesn’t know how to ride a bike. If you want to come visit, we could teach you that. I also used to teach swimming. So if anyone doesn’t know how to swim, I can also teach people how to swim.

Manisha Samy  23:03

Alright, so that’s two things that you’re teaching me, Dan.

Dan Kline  23:05

We also have, I’m actually broadcasting from my guest bedroom right now. So we actually have a guest suite on our first floor that in one corner has a broadcast studio. And the other half of the room has a bed and a bathroom, which is very far away very private. So I expect many of the seven investing team to come visit me in the next few months. But let’s move on to what we’re watching at Manisha you wanted to talk about microbiome companies and recent research. And then this is your question. You wrote this in? What is the microbiome? And why do we care?

Manisha Samy  23:36

Yeah, so it’s kind of surprising when we don’t think about kind of the bacteria and the viruses that are all over our body. And what’s fascinating to me when I first started doing microbiome research is that we’re really not human. If you look at the number of cells that we have in our bodies that are non human, it’s more than 1.3 times the number of human cells, bacterial genes, the number of genes that basically produce different types of metabolites, it’s 130 times more than that of the number of genes that our human cells code for. And the reason why we care is that these metabolites that bacteria releases, it affects our health status. So anything from you know, how we metabolize our food that we eat, or recently, there’s something that we talk about, where it’s the gut brain access.

So we realize that there is a cross talk between the microbiome so the bacterial composition in our gut, our love our skin, and our neuro endocrine, neuro endocrine system. So that influences things like whether or not we have Alzheimer’s, Parkinson’s, and other mental disease. So there’s a huge body of research and it’s growing over time of how the microbiome affects different disease and health states in 2016, The White House along with private stakeholders announced the national microbiome collective. So people like or sorry, Foundation, such as the Bill and Melinda Gates Foundation, the Parker Institute, the White ouse itself, they have donated millions of dollars, hundreds of millions of dollars towards this research, to not only develop applications for health care, but also food production and environmental protection.

Dan Kline  25:27

So let me jump in here. I had never thought of the fact of all the terrible things that could go wrong with me, because I’m apparently not what I thought I was until I met you in Maxx. So, so that part is, but from a practical point of view, are there microbiome products out there right now?

Manisha Samy  25:44

Yes, and the most simple and Congress way that we treat C. difficile, for example, is using fecal matter transplant, basically, you take the poop from someone and insert it into someone else. Because that should change. You

Dan Kline  25:59

have a doctor do, you have a doctor do that. Don’t do that on your own.

Manisha Samy  26:05

But I mean, the thinking is that there’s, you know, there’s good bacteria, there’s bad bacteria and you know, adopters able to see, okay, well, you know, this strain of bacteria, or you know, this XYZ strains, it together, they produce some sort of toxins in your body, and that’s bad. But if you have another strain of bacteria, it can help, you know, get to a healthy state, for your gut, long skin, etc. And that’s the premise. And there are a number of ways that you can change the composition of your microbiome. And there are various ways and now there are dozens of companies, both private and public that are working on applications.

Dan Kline  26:44

So is this sort of an extension of like, you know, when I was your age, I don’t think anybody talked about probiotics, and nobody thought talked about, like, you know, what’s in your gut, and that there’s good bacteria and bad bacteria? Is that sort of an extension of the like, Hey, you should eat this yogurt, kind of, you know, kind of logic.

Manisha Samy  27:01

I kind of I think probiotics is more of a shotgun approach. There’s no clinical studies, really, if that is useful. What these therapeutics companies are doing is it’s very direct. And actually, this week, I think this is really interesting. So this is, at least from my knowledge, one of the oldest microbiome based companies, that’s public series therapeutics, so ticker MCRB, there, they have four programs in the in clinical trials based on changing the composition of the microbiome.

And so their lead program is for C. difficile, or recurrent C. difficile. But they also have one that’s very interesting. Since in Phase One study, well was in phase one studies called cr 401. And this was to help metastatic melanoma patients. So that’s also interesting that the microbiome can also help determine the treatment effect of cancer patients. So originally, this drug was supposed to help patients respond to checkpoint inhibitors. In early preclinical studies, they found that while using series therapeutics, microbiome drug patients who would not have responded to checkpoint inhibitors, so metastatic so these are stage three stage four melanoma patients. Now we’re responding to treatment. I don’t know why. But it just happens to be that it was working, but they discontinued a few days ago, which was a huge Well, you would think it’s a huge flattened out. And I’m still not sure how to view kind of their rationale for it.

They had enrolled 10 patients, they’re saying it’s because of COVID. And enrollment was slow. So this was in conjunction with MD Anderson sent Cancer Center and the Parker Institute. what they were saying is that their earlier stage pipeline is progressing so quickly, so preclinical stage research, that by the time they enrolled patients into this study and went into clinical trials and debt validation, that it would be disintermediated by their earlier stage program. So that’s also very promising that you know that the research here is picking up speed.

Dan Kline  29:24

So as much as I’mterrified from some of the things I’ve learned from Manisha, I also feel hopeful like, there’s a part of me that says like, okay, go work out, don’t die for five more years. And like, no matter what you get, there’ll be like three amazing treatments. I know that timeline is is aggressive, but it feels like if you’re like a regular person who doesn’t follow all this stuff, that like science is kind of stuck and like we haven’t, and then when you bring on amnesia, you bring out a Maxx Chatsko you learn that there’s all these amazing things like who knew that there were, you know, treatments for cancers and Alzheimer’s, all sorts of other things that are possible.

So that makes me feel hopeful. Above the world. Joey k points out that there is a South Park episode on the microbiome. I’m I’m not a South Park guy. Well, I’m sort of missed it age wise, but I will go check that out. We appreciate that comment, Joey. Before we bring on Alan Soclof to talk about millennial investing, Manisha, how early are we in this? There’s only a handful of publicly traded companies. Right?

Manisha Samy  30:22

Right. Definitely only a handful. But I think if I if you look at the private sector, there’s just so many I mean, there’s even a CRISPR based microbiome company called sniper biome, which I kind of love the name calling it sniper. And I think we’re getting there. I mean, we’re doing phase three trials, are we waiting for a series of potential approval for their lead candidate? And I think as the body of research continues to grow is only going to continue to accelerate so I think we’re getting there.

Dan Kline  30:53

We learned something every episode we thank you for watching. This is seven investing. Now Manisha is gonna, you know fade in the background. She’s gonna get a sip some seltzer, whatever it is. And we’re gonna welcome Alan Soclof to the program. Alan is an affiliate of 7investing. He is the creator of the cruising altitude newsletter. He’s been on this show before. In a pre taped interview, this is the first live guest we’ve ever done. That isn’t part of the 7investing team. So Alan, welcome to seven investing now.So an Thank you. And it’s an honor to be the first live guest thank you for believing in me.

So we’re going to talk millennial investing. And I couldn’t figure out a way to ask these questions without coming off like a clueless dad asking his kid about Snapchat like, so I apologize that some of these might be pretty basic or even mildly insulting. That’s not the intention. I do feel like when I’m talking with my son about like, I don’t know, some rapper who died who is apparently a giant deal, but I’ve never heard of them. And I will point out that all of the things being said about millennials, maybe not all of them, but a lot of them were said about my generation about Generation X.

So these really are kind of like rolling tropes. So I’m not sure you’re that different at this point in your life than we were. But when I was your age, I don’t think I knew what the stock market was. I mean, I knew it is a vague concept. There were like giant sections in the newspaper. I don’t know if you know what a newspaper is. But there was like giant sections with stock tables, because that’s how you would follow your stock that eventually shrunk to like five or six or maybe just like local stocks, and then it disappeared altogether. But to people your age, people in their 20s people college age, do they broadly know about the stock market now?

Alan Soclof  32:34

I think they definitely do. Do they know a lot about the stock market? Not necessarily but do they know the new retail stock that is taken off due to Wall Street betters? Yes, they do. But I think the big reason that it has become so mainstream is two reasons. One, Robin Hood, of course, with no commission training has made it much more accessible to the younger investor. And also social media on Instagram is just packed with different stock meme accounts, informational accounts that have hundreds of 1000s of followers. So the stock market is becoming.

Dan Kline  33:14

So I don’t want to be scolding of our millennial or millennial fans out there. But I will point out be really wary of taking stock market advice or anybody’s social media account, mine included, check stock market, people try to infer stock market advice from from what I post but generally I’m more discussion based than really I’m not giving tips on on Twitter. But that being said, Do you think most of your generation has kind of the wrong view of the stock market, they see it as like a casino a get rich quick thing.

Alan Soclof  33:46

So I think at the beginning 100% Yes, but now let’s say March of last year, which is already a year ago, which is crazy. Um, a lot of people got in thinking this is a get rich quick mechanism or gain. But as time has gone on, and people have either lost a lot of money or either gotten bored with it, I think they’re starting to look at it through more critical lens that this is something that I can make a serious amount of money. And so I really think that the perspective and approach has definitely changed.

Dan Kline  34:20

So this is a popular show 7investing is popular, but we have probably a tiny percentage of the audience of say, Dave Portnoy over at Barstool sports full disclosure, grew up with the Portnoy’s David, my brother, our friends, I don’t generally comment about them. This is not meant to be positive or negative. But do you think someone that famous publicly daytrading has created sort of a very false expectation and maybe led some people to be afraid of investing when really they should just learn how to be a long term investor? I hope I worded that correctly so I don’t get flooded on

Alan Soclof  34:55

it. Okay, you did. Okay. I’ll help I’ll help smooth things out a little bit, but I think that a lot of people see it more as entertainment than advice, especially because Dave loses a lot of money. I don’t remember the last time you heard Dave say he made a lot of money day trading. So I think in many ways people are like, maybe I shouldn’t be doing this. But I do think I’ll flip it that if someone with his popularity, could make a long term investing, call and find that, that it can really change the sentiment for millennials and Gen Z years. And if you think they should just be talking about Penn national gaming all that since over the past. What is it up? I mean, it was down to four or $5 a share, and now it’s at $130. Almost like I think Dave should be talking about that all day. So he was said to me right now, but

Dan Kline  35:53

and you could argue that that’s a fundamentals based valuation that the barstool association with Penn look, that is not a brand targeted at me, but but I love some of their content. You know, some some of what they do is stuff we’ve shamelessly borrowed, you know, in terms of, you know, the Mount Rushmore is and that kind of stuff, our formats we’ve used at different points. That being said, it’s not just Dave, I think Mark Cuban is guilty of this, too.

There was a lot of cheerleading for the the GameStop, AMC kind of retail manipulations. And Mark Cuban went out and ask people, hey, who do you follow for investing advice, and I will say, those of us at seven investing came up quite a bit. Because I do think it’s fine. If you want to take 5% of your portfolio as fun money and treat it like a dumb night at the casino. I think that’s great. If you’re young, you’re probably not going to win. But just like there’s the rush of, you know, we all have that gambling story of the night things went well. You know, and that’s fun, and it’s probably worth the losses. But I would I do love to see someone like Mark Cuban amplifying good voices.

And those aren’t just us. But you know, we’ve talked about this a lot, you and I, personally, all of us in the 7investing team, buy good companies and hold them for a long time. That’s not super excited. That’s not buying like a $30 million biotech stock that’s trading for two cents that might literally not even be a company, and then hoping it goes to $1.50. So you can get rich, I have lectured up there. So let’s get back to you as a younger investor. What are your goals? Like why are you investing? It’s probably not retirement, right. Like that’s a really long ways away for you.

Alan Soclof  37:25

Me personally, retirement, my kids go to college. Okay. I think that there are two things I really think about when it comes to investing at my age one is building good habits. Because I don’t have that much money I’m investing. But really trying to set my investing career off in the right direction, I think is very valuable. And also compounding growth. That’s the biggest lesson that I’m trying to take away that I have some positions in companies that I thought, not much money, but then you look a year to three years later. And if you choose Well, those positions become a lot bigger. So definitely not my kids going to college. I’m focused on me in college right now. But trying to learn and keep an open mind.

Dan Kline  38:20

We’re going to take a question in a minute from our own Simon Erickson, at least part of it because we’re great minds think alike. Some of what he’s asking is what I just asked. But as we do that, as we you know, you start investing, do you feel like because you’re so early in the game, you can be riskier than maybe if you did have actual kids and we’re saving money for their college for their college education.

Alan Soclof  38:41

I think ironically, it’s riskier, but less risky. At the same time. I know when I first came on, we talked about Viacom, CBS a little bit of a casual 65% since we did that show, but but having the patience to invest in a Viacom,CBS, let’s say I think is a big advantage. A lot of people are looking I think in the long run that the company will be more valuable than it is today. And I think that’s a benefit for myself that I don’t need to try and generate some income here and come there. So I think in some ways, you can be a little bit more risky. Or another example is in NBK, or Fastly, more growth oriented companies that are doing a lot of cash for additional stock issuances. But then if you give these guys 5-10 years, I think we’re going to be looking at some powerhouses and their respective industries.

Dan Kline  39:44

It’s an interesting answer because I do think like if I was in my 20s, I probably would be much looser with my money than I am now. Because even all those things you talked, you know, we talked about retirement kids college. I have a 17 year old when I was your age. concept of having a 17 year old did not factor into anything I was doing. Maybe I would have thought a little bit about buying a house or some of my personal needs. But let’s pull up Simon Erickson Simon is of course our founder, our CEO. He says Welcome to the show out. Alan, I’m going to keep the first part of the question, because we just kind of answered that. But how do millennials feel about the recent events with GameStop? Is it something your friends were talking about?

Alan Soclof  40:25

100% I think two things that I wanted to point out that we discussed before the show that stops it’s always been kind of a social endeavor, in many ways to burnouts are really becoming social, my friends and I, everyday are talking about Do you see what GameStop Did you see, what Nokia did is what Viacom did. In one of my friends, we we have anointed him as the technical analyst for GameStop, he had zero knowledge about the stock market. And I know he’s not watching right now. So I can say this is zero knowledge about the stock market and technical analysis. But we’re like, Jacob, you see what game stops doing and he pulls out his phone and predicts what what it’s going to do next. And other one of my friends plays the GameStop game a little bit. So it is something that is social. And also, another thing I wanted to add is the communal component that millennials and Gen Z ers are really creating a community around investing, whether it’s Wall Street, that’s or maybe more of a fundamentally sound approach. But GameStop is something that people love talking about. So yeah, it’s not Yeah.

Dan Kline  41:43

Here’s the thing. And I hate to talk about this, we’re going to talk about this in the finisher a little bit, but GameStop is fundamentally not a strong company. And there is a turnaround argument for GameStop. But the fact that they’re, they’re hindering it on a digital turnaround, when you can buy games directly on your console, I think is fundamentally a bad idea.

So if you wanted to socially be excited about Penn national where you can make a strong bull case for if you wanted to be really excited about you know, restaurant brands international because your friends like the Popeye’s chicken sandwich, or whatever it is, or, or you’re big into Starbucks, or whatever it is, or even as much as the valuations are ridiculous. If you truly believe AMC, the movie theater company, which has shored up its finances is going to make a pivot to education and events and something else. Like, I think there has to be a fundamental case for a company to be worth it not, hey, I think a mob of people are going to buy it like you’re trading, you know, God, I’ll say Beanie Babies again, I know you don’t know what those are.

They’re little collectible stuffed animals. I don’t remember when I’m trying to think like, Pokemon cards would be a good example. There are points and Magic the Gathering cards, there are points when some of those cards are worth hundreds or 1000s of dollars. But there’s in most cases, no underlying reason that they’re worth hundreds of 1000s of dollars, or 1000s of dollars. That’s where GameStop is like if you want to tell me, Penn Ntional goes up, you know, it becomes a 10 bagger because the power of linking to the barstool brand. Look, I think there’s a lot of deals to be made with casinos linking to brands and that’s the first major one to fall. One last question here out. What are people my age and I’m 47 getting wrong about people your age?

Alan Soclof  43:30

I think we’re pretty smart. I think a lot of people say that. We don’t really know what we’re doing with our money. We’re being reckless, stupid. Yes, definitely true. But I think there’s a greater there’s a mindfulness at the same time of what we’re doing isn’t the smartest thing in the world and probably shouldn’t be done in the long run. But at the same time, we’re 22, 23, 24 years old, and we don’t have that much money we’re playing within and watch out older generations, I think it’s quite clear that my age group has shown hedge funds that we’re not messing around.

Dan Kline  44:07

I will say as someone who has primarily younger friends, it is always good to be tied into multiple generations. I i think that you know, this sort of, you know, idea that any one age is smarter than other ages, there’s all sorts of different wisdom in it. That’s a real bad mentality out. Before we get to the finish. We’re gonna ask you to stick around here for the finisher. How can people find the cruising altitude newsletter?

Alan Soclof  44:31

Yes, there’s a couple different ways you could find us. One is on twitter at ca 30k. Great job, Sam. putting it out there. Thank you great production. And then also you can call you can check out the newsletter at cruising altitude dot substack COMM And that is where you can subscribe.

Dan Kline  44:54

That moves us to our finisher, Alan thank you for being here. We’re going to do more and more of this. We’re going to bring different voices onto the show. We’re going to add interviews like as the world is opening up a little bit, we might even do some in person things where a vaccinated host interviews a vaccinated person or a distant masked person. So we’re very excited about that. But Sam Bailey if you want to bring up our finish it that would be great. Which of these companies has the best chance at a turnaround? AMC won the voting at 34.2% GameStop came in second at 26.4%. Party City 13.6%, Macy’s 25.6%. I have a clear thought here. But Alan, is there one here on this list that you think could I think could actually turn around?

Alan Soclof  45:40

100%? Yes, if they played right, in my eyes, that is GameStop I think GameStop should become a apparel company. I think if they focus on being a brand of the people on the brand, Association people love GameStop more than they did in 2008. And I think they can do it if they totally pivot and get away from being a gaming company.

Dan Kline  46:09

Is that long term viable so back when I was in high school, Benetton, which I think still exists as a company, but I might not be right. A Benetton shirt, and it said Benetton or a swatch watch swatch watch still exists, but you had to have at least one but probably five or six swatch watches. That wasn’t sustainable. Because when kind of the or even Vineyard Vines recently, Vineyard Vines was like a brand people would pay triple for and then it kind of went away. Like I think GameStop should capitalize in the short term by selling some merchandise. I don’t know that the long term answer, answer Manisha I know this isn’t your space. But is there one in this list that jumps out to you as a turnaround possibility?

Manisha Samy  46:51

Yeah, um, yeah, again, not my expertise. But I would just say Macy’s, I’m sure that it was hit during COVID. No one’s going to the stores. And I know, I think there’s this thinking out there and it makes sense. A lot of people are going to buy things online. It’s easy. There’s Amazon. Yeah. If you want to buy a bottle of perfume, just go to Amazon. It’s there. But I think when it comes to clothing, it’s still nice to go into a store and try something on before you buy it. And I think that is an important, you know, factor. I know I’m I hate shopping online, because nothing ever fits correctly. And then I have to like go to the FedEx or UPS and return it. And that’s an extra step, which I hate doing. So I I mean, I like the in person experience, I would say Macy’s,

Dan Kline  47:43

I do think there’s a place for Macy’s. I don’t think it’s particularly investable, I think they’ll be a business for all those reasons. I also think they’ve fallen pretty far behind on store within a store concepts. We just saw that Nordstrom has made a couple of deals for that. Like, I’d like to see a very heavy presence. There are a lot of brands out there that were opening, you know, stores that don’t want to now so untuckit and Warby Parker and third love Casper mattress, there is a Casper mattress store near me, I think we’re seeing those deals happen.

I do think Macy’s has been a little bit left behind. Maybe even some of your brands that are pulling out of retail like Nike might be willing to go into a Macy’s because it’s an upscale store. But I actually think the answer here is Party City. And I know that sounds crazy. But if you’re throwing a kid’s birthday party, you want to go to Party City to buy your Teenage Mutant Ninja Turtles plates or, or whatever it is. And obviously, this is a terrible time for parties like, like COVID to stop that seasonally Party City does the pop up Halloween stores, they I’ve never understood why the pop up Halloween store doesn’t then become a pop up Christmas store, a pop up Valentine store, and then a pop up Mother’s Day store.

Like it feels like you could just rotate those concepts. But I do think that party city’s troubles are much more of the times than any of the others of these GameStop I think maybe it could be a viable concern. I don’t think it’s a good investment. AMC i think is going to end up owned by Disney and Netflix and some consortium of people that want there to be movies. Macy’s, you know, I again, I think it’ll exist, there’ll be a smaller footprint, because I agree i’m not buying a suit online. I’m not buying a dress shirt online, unless I own exactly the same dress shirt, and I’m buying another one.

But with that we have reached the end of the Friday edition of 7investing Now. If you’d like to get in touch with us, it is really easy to do. I remember back in the days where you’d have to send a self addressed stamped envelope to whoever you wanted to get in touch with. And then they might send you like a picture back or something but no, you don’t have to do that. You can reach out to us at info@7investing.com. That’s our email address. It’s usually Steve Symington, who answers those that’s for questions about the service questions about Oh hey, when does 7 nvesting Now air that is of course, Monday, Wednesday, Friday. At noon, though a week from Friday, we’re actually going to be at 12:30. Because we’re going to push back half an hour, because we’re doing our members call, which we always get to the members call and some of us have to drop off to go to 7investing Now. So instead, we are going to actually keep everybody on the members call, and then immediately segue into 7investing now.

And of course, this whole show started with my viral tweet yesterday. So how do you follow us on Twitter, we are @7investing that is the at symbol, the number seven investing, and when I was in college, I didn’t have an email address like that is how I didn’t have a cell phone. And I had a phone card that I use that was my dad’s so I could like call home that I get questions if I had too many calls that were on there that like weren’t to my parents like so. The world has changed dramatically, but thank you for doing this. Of course.

Alan Soclof  50:53

Thank you. This was awesome.

Dan Kline  50:54

Manisha Samy, thank you for doing this. We will be back on Monday.