Stock Market Investing Mistakes to Avoid
May 3, 2021
There are a lot of new people investing in the stock market. That’s great, but many new investors don’t really know what they’re doing. That’s true of most investors when they start (us too) but it’s possible to let mistakes we’ve made help keep you from making the same ones. On this episode, we’ll look at a number of investing no-nos and mistakes that are very common and even taught or encouraged by some seemingly credible sources of information.
Sam Bailey 0:13
Welcome to 7investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.
Dan Kline 0:24
Good afternoon 7investors and welcome to the Monday edition of 7Investing Now, Steve, can you see the bags out of my eyes? I should introduce myself first. I am of course, Daniel Brooks Kline. Joining me is Steve Symington , so excited to get to the show. But Steve, can you see the bags under my eyes?
Steve Symington 0:40
I can’t. But I know why you’re tired. Tell us.
Dan Kline 0:43
So as many of you know, we’ve talked about the real estate market, we’ve talked about my own experiences in the real estate market. So we went under contract to sell our condo in West Palm. And that’s great. And that allowed us to buy the vacation property we’d like to buy in the Orlando area, let’s call it the greater Disney World area. The problem is units where we want to go are getting put on the market and selling same day. But they’re not getting bid up incredibly. So there’s like a narrow window of you being a good buyer. We’re in theory, a good buyer because we’re more or less a cash buyer because we’ll be closing our condo in a couple weeks. So we’re a contingent cash buyer.
So we saw a property Sunday morning that we want it put an offer in by 8am and then had about 17 revisions to it between 8am and 6pm took our price tag up a little bit at the last minute raised it a couple grand more still paying less than I think it’s worth. Didn’t find out we got it until after nine o’clock at night. I my wife was like two thirds asleep. I had to walk up and you know and get her to sign some paperwork was how ridiculous it was. But very excited. For those of you who who have been following this. I appreciate all the kind Twitter messages and nice people saying things on Facebook. But Steve, we’re going to talk the stock market. I know I know that seems strange, we usually would talk the NFL Draft or or what movies we did this weekend. But before we get to that, what did you and the kids do this weekend?
Steve Symington 2:09
We went and visited family in Billings about five and a half hours, kind of central Montana. So it was great. We got to just hang out and see some cousins and everybody’s vaccinated at this point. So it’s great, we get to see some folks that that we wouldn’t normally see,
Dan Kline 2:28
I did something similar. I actually went through most of this drama at my cousin Hillary’s house. I haven’t seen my aunts and uncles, my cousins in I don’t know, 13, 14 months ago. My mother is in town, so a family get together a very exciting weekend. But we’re going to talk the stock market. As we go, we would like your questions and comments. Later on, we’re going to talk a little bit about two fallen internet giants. That would be Yahoo and AOL, we’ve got mail, we’re going to be talking about their latest really, really sad sale. And then we’ve got Anirban Mahanti who’s going to talk Tesla earnings out taped an interview with Anirban over in Australia last week, we wanted to get his opinion.
But Steve, a lot of people have entered the stock market. And that’s great. But there’s also a lot of risk involved. And here’s the problem. The success of the market recently call it the bull market call it the boom, whatever you want to call it. It’s created this this artificial thing that stocks always go up. Even when we see like a good stock didn’t like 2%. I’ll let you jump in Steve, give a little rant here. And then we’ll get to our questions and comments.
Steve Symington 3:36
And that’s that’s the challenge is that people have learned, especially in recent months, and especially in a lot of your high growth. sort of very volatile, a lot of really richly priced tech stocks, for example, have gotten hit hard. In recent months and a lot of them are down 40, 50, 60, 70%, even from their highs. So people have learned the hard way, stocks don’t always go up. So we have a lot of people chasing returns. So they say, Oh, yeah, this stock is climbing and it’ll only continue to climb. And sometimes that happens with great names. You add, you kind of average up. But there there are other times when the premiums just aren’t warranted. But it remains to be seen you know how long this sort of correction will endure. But yeah, stocks don’t only go up and and that’s a hard lesson to learn and losing money hurts a lot more than making it feels good. So that’s the challenge.
Dan Kline 4:29
This is why we take a long term investing mindset. When we say long term, what do we mean? We use the term hold for a minimum of three to five years. The reality is we hold as long as our thesis holds up until we get to a life moment where it’s time to sell. So Steve talks about this a lot selling some Tesla to pay for the downpayment in his house and it feels like it’s bad because Tesla’s gone up since then, but Steve bought a house like that’s important. That’s one of the reasons you invest.
I’m a big fan of and I’ll apply this to my real estate sale. The second I close on both properties, I will stop looking at prices on those properties until which point I’m thinking about selling the one I own. So sure if I if I decide, hey, we’re gonna upgrade or maybe we want to buy another one, then I’ll look but where I’m selling here in West Palm Beach, I’m going to try to avoid ever seeing it again, because I don’t want to feel great that it dipped or bad that that it went up. But let’s share some facts here American households have increased up to putting 41% of their total financial assets into stocks. That’s kind of a bonkers number, isn’t it? Because that’s like, the rest is cash more or less? Right?
Steve Symington 5:38
Yeah, it is. I mean, actually, I don’t think it’s, it’s too bonkers. But I do worry about the people’s understanding of the risk of doing so like, I would say more of my net worth is in stock holdings, you know, so we’re kind of driving that number up. But we also do this for a living. So it’s one of those things where you kind of worried that people may or may not really understand the risks of what they’ve purchased. And, and they’re buying stocks, kind of hoping they’ll go up, but they don’t fully understand the thesis, or the risks. And we’ll touch on some of that shortly. But yeah, it’s it’s kind of kind of tough to digest.
Dan Kline 6:13
Yeah. So this is an unprecedented market. And as of March 95.9% of the 3000 stocks in the Wilshire 5000. I don’t know why there are 3000 stocks in the Wilshire 5000. But, but there are 95.9, almost 96% are up. That is not typical. In general in the market, you are going to get your best returns from your best stocks, and most other stocks are going to languish. You’re having a lot of sort of artificial rise. That’s why at 7Investing, we kind of recommend using our stock picks, because we’re not just picking things that some guy in the street thinks are going to go up or Oh, I know, airlines going to be recovery play. They’ll they’ll go up and they probably will. But when things go up for the wrong reason, that’s not sustainable.
You want to look at a company with a business fundamentals, the visit fundamentals that’s a new a new food product, the business fundamentals are solid, a little change in programming. Note that interview with Anirban Mahanti. We’re gonna release it on our social media channels. Later this afternoon, we had a bit of a password snafu, we’ll probably tack that on after the Wednesday show and play it on our social media and our YouTube later today. Hard to hard to get the password while we are on air. But Steve, let’s go through our mistakes. And then we will take all sorts of questions. If you have them. We might cover everything, so you may not have them. Mistake number one, worrying about small moves by good companies. We get asked this every day Apple move 3% should I sell? Steve, what’s our advice there?
Steve Symington 7:51
Stay put, I mean, so often, the best course of action is to do nothing. You know, I’ve gotten reports from our people looking at our recommendations. They said, Oh, I bought it two weeks ago. It’s up 10% should I sell now? No we’re buying these again with multi year timeframes. I’ve also gotten emails, Oh, my gosh, I bought this literally. And they’ve said it’s fallen 1.5% What should I do? Nothing. This is how stocks work. This isn’t a savings bond. This isn’t your money market account. This isn’t something that you get point 1% deposits in your account.
You know, every year it’s stocks are volatile, and volatility is par for the course, don’t worry about little moves. And I would say I’d actually extend that to say Don’t worry about even larger moves. Sometimes you get post earnings pops or drops or, you know, the stock will be up or down 5, 6,7, 8, 9% in a single day on no news. And this happens sometimes. In those cases, you know, keep an eye on it kind of a side eye on it and look and just make sure that that thesis hasn’t changed. If it hasn’t touches continue to hold, let it play out for years. And that’s when gains become much more predictable.
Dan Kline 9:01
And it’s okay to look at the news. So as people who are professionals, we are making stock picks. I often have CNN, CNBC, whatever it is Bloomberg up in the background, and I will look so let’s say something goes down 20%. Microsoft is my biggest holding, let’s say Microsoft drops by 20%. I will look to make sure nothing happened to the CEO. Or let’s give another example. I get a Starbucks I have a pretty big position in Starbucks fell. I would be I would look and go Okay, was there a food poisoning scandal? Well, that passes quickly. Was there one of those incidents where like something social, social justice, happened to near one of the restaurants and one side likes it the other doesn’t those things pass? Or if Starbucks announced that the price of coffee has gone up by 50% Well, that might impact their business and change my thesis.
So it doesn’t happen often. But it can happen but even then. So let’s say a company changes its CEO. Amazon is, is famously in the midst of changing its CEO, I will argue that Amazon changed its CEO years ago and they’re really just shifting up the titles now. But let’s say you really thought that Jeff Bezos not having the title of CEO would be really disastrous for Amazon, even then I would say let it play out six months, because I didn’t particularly like when Kevin Johnson became CEO of Starbucks, he’s a, he’s an operator, he’s not a coffee guy. Like he’s, he’s very much a tech guy. And he turned out to absolutely be the perfect boss, you know, for what they needed now, who knew that they would need to operate perfectly in a pandemic, but those things still would have benefited the company. He followed a different blueprint than my original thesis, but his blueprint played out, so we’re not going to tell you to sell very often.
But, Steve, I’m going to skip around on our list a little bit here. We are also not going to tell you to buy bad companies. So here’s the mistake people make. They don’t buy good companies, they buy tickers, they buy things that they can tell a short term thesis is going – GameStop is a great example of this. If you could have said before all the hype GameStop would double because you believe they can pivot their business. That’s a plausible thesis, you’re gonna say GameStop can 85x, there was no argument you could make for that. So people buying into that craze are basically buying into a guess they’re buying into, you know, to it to a spin on the roulette wheel. But, Steve, I’ll let you take over here.
Steve Symington 11:25
Yeah, actually, there’s a comment from @bonojzk. The second comment, he says, if a stock down 20% if a stock is down, 20% should I double down and let it recover by itself? I’d say that depends. Again, as we mentioned earlier, I mean, we don’t – there are no hard and fast rules. And you know, we don’t I don’t use limit orders, you know, where or limit sells or trailing stop losses or anything crazy thing like that to to limit myself, but I also don’t say, Oh, my gosh, the stock is down 20%. I’m gonna double down now.
You can’t say you just you can’t use hard rules like that. I would say again, it depends. Look at what caused it to drop 20%. Is there any news? Did you like the stock of the previous valuation? Is the thesis broken? Or does it remain intact, but I would say just be patient most of the time. And that also plays to how I actually tend to buy stocks in the first place. When I buy something, I usually buy it in thirds or quarters. So if it falls, I have a little extra cash to take advantage of continued decline if it rises, at least I’m partially participating. But yeah, it depends. I’ll say.
Dan Kline 12:35
Steve, I’ll go back to our very own recommendations. This is the third of the month, our new pics came out on the first of the month, which is Saturday. But oftentimes, when I look at our picks, I might know I’m going to buy more of my pick, I’m going to buy some of Maxx’s and maybe I’m going to buy yours or Matt’s or Simon’s or whoever, it doesn’t matter, maybe it’s Dana’s, it doesn’t matter, I’m going to buy some. Now if I know I’m going to buy some, but I was planning on buying it next week when the money transfers into my account. If I see the stock drop 20% I will absolutely transfer that money sooner and buy it. It’s like if you walk into a mall, and you know in a few weeks, you need a new suit and you see cents or 50% off.
So there are no hard and fast rules. But certainly you can use price fluctuation as a way to benefit you. You know if you know if we get a free delivery coupon from Grubhub, we might order food instead of pick it up on a on a weeknight, you know, so definitely factor in basic economics. But you mentioned something that I think is an absolute danger. And we’re absolutely happy to take your questions and comments, see a few others in the queue. Anything on investing, we’ll talk about some specific stocks if you want.
But that being said, Stop Loss orders. Stop Loss orders to me are a nightmare. So you own a good company. That company has some mild bad news that – You own Chipotle. And they have another three people get e coli, and the stock drops by 30%. And you get sold out of it. But then that afternoon, you read a report that says Oh, it actually wasn’t ecoli. Those people had been on a roller coaster beforehand, and they just threw up because they didn’t feel well or, or they had COVID and they didn’t have it from the restaurant. They they had it or the market recognizes that three people getting e coli in a restaurant that uses fresh food is not that big a deal. And all of a sudden the next morning, it’s recovered 28% of that 30% you sold out. You can’t necessarily buy back in at the price you paid. So if you believe in a company, you don’t want to put automatic triggers that get you out of that company.
But Steve, something terrifying is happening in the market. So why don’t you explain a little bit after I throw out this mistake what margin is and why it’s essentially a terrible idea. So we are at a record right now for people using margin to buy stocks that is borrowing money to buy stocks. I will also assume we are at a record for people doing Things like home equity lines of credit to buy stocks, we do not ever recommend this, this is a massive mistake. Steve why don’t you explain what it is and why
Steve Symington 15:08
Yes. So when you are buying a margin, it’s essentially, your broker will lend you money you don’t have in order to buy stocks. So you’re basically leveraging against the money that you do have. And I think the statistic was something like, retail investors had $814 billion in margin that they’re trading on. So you actually pay them interest. It’s essentially a loan to buy these stocks. But the other problem that you run into is if your portfolio declines by a certain amount, you can have what’s called a margin call, and they’ll say, hey, by the way, we want you to repay that money right now. And you’re going to have to sell other stocks to cover that loan and repay everything. But it’s a huge risk, because stocks are hugely volatile, and to borrow money to buy things that you don’t have on and I guess you could extend that also to people taking out loans against their home, or things like that, that. It’s massively risky. And you can find yourself in a lot of trouble really quickly paying, trying to pay back money that you don’t have.
Dan Kline 16:15
Yeah, and the problem is, people fall in the trap of if the average return on the stock market is 9% on an annual basis, and I could borrow money at 4%, or three and a half percent, or whatever it is on your home, that seems like well, I’ll just make 6%. But here’s the problem. That’s like saying, if I count cards, I’m gonna win 51% of the time playing blackjack, the problem is, I don’t know which 51%. So you could have a bad luck of market, you can have years where the overall Return of the market is bad. You can have years where you return your picks aren’t great. And over a 30 year career, that won’t matter.
But over those two years, the reason I am so vehemently against taking you know, loans against your house to do anything, but certainly to buy something risky. It’s one thing if you take a home equity loan to redo your kitchen and increases the value of your house, but you live in your home. If things go wrong, and you can’t afford to pay back your added home debt, you know what they do, they take your home and then you live in your car. That is a problem. I am a big believer in security.
Part of why we bought the property I was talking about at the top of the program is we will own it outright, you can’t actually live there full time. But if if we decided, hey, one year, my wife wants to take six months off, you can live there six months a year, we could live there at almost no cost, it’s a relatively you know, cost us five or $600 a month to live there. So she could not work or if things went terrible and one of us was out of work or whatever it is, right we have that six months security blanket of Okay, we got a place to live, you know where we can, we can figure things out, we can get back on our feet. Don’t take chances with your house.
You don’t put your kids you know, my son’s 17 we’re going to take some money from our complicated property slipping around and put that into a college fund. Now he’s not going to go to college for about three years. So some if he goes at all, and he may just take classes, he may, you know, get a degree over 10 year who knows we’re going to put money into the market. But most of the money we would need for year one, if he wants to go full time to a state school will not be in the market. And if he does decide to do that, as we get three years out from the date of when we’d start paying that we will at the right time, make those sales and put it into very, very conservative. When I say very conservative, whenever the best bank account rate I could find which is probably going to be like you know, around less than 1%. Because you don’t want to have the market crash or even just go down 20% like Hey, sorry, you can’t go to college this year. Like that can be a problem.
Let me answer one from our own Matt Cochrane. Matt, that does not include the primary residence that is just cash assets. So it’s not your total holdings. It’s the common ones. This is a number we were talking about before we’re about 43% of people’s net worth aside from their house is in the market, that’s instead of being in bank accounts. And instead of being in CDs, or bonds, or whatever else it might be. Some of that is passively invested. Some of that is in mutual funds. Some of that is in ETFs.
What I would be careful with is the emergency fund. I have a one year emergency fund, a lot of people have a six month emergency fund. You really need to look at your life and go okay, if I lost my job if my spouse and I both lost our jobs, how long could we get by? And if that number isn’t six months, and remember, you might spend less money if you’re out of work. So you can you can adjust some things down like your cost of commute or eating out or whatever it is. If you don’t have that you probably need to get there before you start investing in the stock market. Now you might be okay with three months if you’re younger, or if you do something that’s you know, easily replaceable. If you’re a you know, a programmer and a high demand field, maybe you don’t need six months. But for most people six months is a good number. Steve, why don’t you take whichever comments you would like to
Steve Symington 19:58
Sure. There’s a comment from @112terrasse could have mispronounced that the issue seems to be holding on to stocks for years and then that narrative never materialized. And he continues at some point, you need to give up and move your money to a better company or stock. And that’s a good point. But that’s exactly why we buy and hold for years. And it for those of you who are actual 7Investing subscribers who pay for our service, we do have a what to watch, or what we’re watching section, essentially, with metrics that you should be keeping an eye on to see if the thesis is playing out. And if that thesis has material materially changed, or you no longer believe that they’re capable of delivering on that, sure, you could sell it and put your money to work elsewhere.
But there are other cases where the thesis really playing out takes years and years, you know, I offered Nvidia as an example, and that was the stock that I sold, you know, several 100 shares to help pay for our downpayment on our house five years ago. And the funny thing was, I still hang on to some of that position. But if you look at their charts, you know, the the thesis really playing out, you know, it languished for several years before it really took off the way I thought it could. And and then you have sort of that hockey stick chart that happens when everything actually starts to materialize. So patience is paramount when it comes to investing in the stock market. And, yes, you have to stay put.
Dan Kline 21:26
There are times where you look at where your money is invested, and you decide there are better opportunities. And I’ll give a good example. When blackberry moved away from making devices and changed into a software company, right? When TiVo largely switched, it became a patent company, they sell some great devices, actually, but they’re not really a device company. So yeah, both of those two companies changed from public facing ventures, to ventures that you don’t really see. And I didn’t hold either one.
But I liked both companies and could have purchased either one at some point, I likely would have pivoted away, because in those scenarios, the public was never going to view those companies as really successful behind the scenes companies, they’re always going to ask when you’re putting out a phone, is there going to be a new phone is there going to be a new TiVo device, and look, there is a new TiVo device, I own it, it’s $49, it works better than a Roku, it actually is partnered with Roku. It has some really cool features, and nobody bought it. It’s not successful. And it’s irrelevant to the success of that company, which has over a billion dollars a year in patent revenue, and it’s just combined with another company.
So in some cases, you do have to look at I’ll call it anti momentum. We’re just like, it doesn’t matter what a company does. It doesn’t matter how great its numbers are, how much of a turnaround story it is. It’s no longer interesting to the media, and it just kind of never going to get attention that can make smaller stocks a lot more volatile. Sandy. David, we’re going to take your question at the end of the show, because it’s company specific. If you have more investing questions, we got a few more minutes here, Steve, I’m going to throw out another mistake. And that is not understanding the risk profile of what you’re buying.
Steve Symington 23:02
Yeah. So that’s, that’s maybe one of the biggest mistakes that people run into. And then all of a sudden, they’re caught completely off guard, by a risk that they didn’t even know existed. And that, you know, the stock is down huge. And that’s also a reason why, you know, we include a section in our reports on on the primary risks, that companies are facing key risks. And and this is a big issue, you know, you run into, you know, is this company paying its its executives way too much in stock based compensation, maybe, but sometimes they you know, that may or may not be a bad thing, in some cases.
Is this company, you know, some have have some unforeseen competitive risks that we don’t understand? Does it have a massive amount of debt coming up, that we need to know about that they’ll basically default and go bankrupt? Does it have unfavorable contract terms? Lots of different things we look at. But you know, we also rank, you know, risk from low to very high, and to determine really, what kind of potential reward because that you could incur, because often, you know, higher risk companies do come with higher potential rewards. You need to really understand all of the risks that face your company is part of building a comprehensive thesis.
Dan Kline 24:19
And I will point out that my pick this month, our picks came out May 1, if you’d like to see what our picks are, you of course, have to join 7investing, we will tell you how to do that in a few seconds. But my pick is very risky. It’s not very risky, because it’s not a great company. It is very risky because if something happened, there are a couple of triggers that could force the company to strategically use a bankruptcy. If they did that they’d likely continue to be a company, but shareholders usually get wiped out to zero in that situation.
So we saw all those people trading JC Penney and Hertz during the bankruptcy period, and of course when the bankruptcy period and they get boom wiped out. There are bad ideas that people follow and look a really good company that if you look at our Maxx Chatsko’s picks, lots of picks in the biomed space, and some of those companies, I own all of them every one since I since I joined, I bought made a small bet on each one. Those companies run the risk of not getting an approval, or it works in a well in early testing and then in stage three testing, you find out it causes blindness, or your ears fall off or, or whatever it might be. So, but those companies if they hit Look, if I bought the company that’s gonna figure out how to cure specific types of cancer well, that’s gonna make up for three that fail. So we explain that risk to you.
So if you subscribe, you go to 7Investing.com/subscribe, not only do you get our picks with each pick, you could just read the summary, you can just read the takeaway and go Okay, hey, I like this company. Anyway, Steve picked it, I’m gonna buy some. You could read the entire report. That report tells you the competitive marketplace tells you what the leadership’s like shows you what the vision is, explains why it’s hard. But my top pick that month, and not another month.
We also record a video we’re doing one today, they come out the eighth. Each one of us I always say 15 minutes, but none of us has ever gone shorter than 30 minutes. We present a slide deck on our pick and then we get questions from the team and I got some pointed questions from the team not on the fundamentals of my pick. But why did I pick it now? Why didn’t I pick it two months ago, or two months from now where there might be less risk? You know, and those questions you get the answers to you don’t have to watch the whole call. You could read the transcript. I’m going through the my transcripts. Right now that’s what I was doing before the show.
But it’s an incredibly valuable membership.$17 a month or $170 a year that gets you 12 months for the price of 10. We’ll throw it up one more time and then we’ll move on here. 7investing.com/subscribe and of course if you have any questions about joining before you do before you you know I was about to say write the check but nobody writes a check before you put in your credit card info. You can message us at email@example.com or hit either one of us up privately on Twitter. We are more than happy our Twitter handles are right on screen in front of you. I am @worstideas7 and that is the number seven. Steve is @7investingsteve the capitalizations don’t matter. We are always happy to hear from you.
But Steve, I woke up this morning to you it filled in the dock and for what we’re watching. We were going to talk about Verizon, potentially selling AOL and Yahoo. And in the time between you putting that there and me going to the dock the sale actually happened and it’s a pretty sad sale. Do you want to you want to go through how far the mighty have fallen?
Steve Symington 27:55
Yeah so it’s funny because yesterday I was like a browser might sell its its media businesses. And this was it was previously known as Oath. And Verizon Oath that was like their their media centric and mostly it was comprised of AOL and Yahoo, which Verizon bought for, like four and a half billion dollars each in 2015. And I think 2017 respectively. So they’ve spent almost $9 billion on these, it’s actually selling off these properties to Apollo Global for 5 billion. It’s going to retain a 10% stake in the business. rebranded. It was rebranded as I think horizon media services. And now it’s just going to be Yahoo. Because AOL I you know, I mean, how many people said, like, knew that Verizon owned AOL and Yahoo in the first place? That’s just, yeah.
Dan Kline 28:47
I I did only because a good friend of mine works there. And I always worry about, you know, cuts and layoffs and things like that. To give you some perspective, there was a point where AOL bought Time Warner. AOL was once arguably the biggest media brand in the world. It was the internet for most people. You had to have the AOL if you wanted an easy to use email address. Previously, if you had Compuserve, which was an early rival, your email address would be like a phone number, like 64389@compuserve – awful.
AOL could have been so much more, but they use a walled silo approach. And once the internet became non walled people went well wait a minute, like, I don’t want to have to go to AOL to get you know certain things. Our former employer, they laughed at them when they left AOL to go out on the internet. You know, people like Bill Simmons, the Boston sports guy who started who’s no longer goes by Boston sports guy, but you know, Bill Simmons of the ringer of Grantland fame, was an AOL columnist and you know, in started behind the wall there, and obviously you were only going to go so far. Yahoo was the dominant search engine. But Steve, both of these companies still have audience both of these, there’s a reason Yahoo exists. I don’t even know if Yahoo is still bigger than Bing it might be. Do you think they’re doing this for an IPO? Like, this? Isn’t theory and advertising play?
Steve Symington 30:13
No, yeah, I think the goal was for for AOL and Yahoo to sort of these media properties to collectively rival like your Facebook’s in your Google’s in the online advertising world. And, you know, they still have 10s of millions of email addresses, they still cater to, you know, sort of an ecosystem of peripheral products surrounding them, and I just, I don’t see them becoming anything huge. I mean, price that they’re selling this for, I think Verizon is going to get four and a quarter billion dollars or something like that, along with their 10% stake in the company. And they’re sort of washing their hands on it, I think for good reason. And you know, they’re gonna focus on it in the internet provider business. And that’s, that’s much better for them and their obviously their wireless assets and everything. But yeah, I don’t have high hopes.
Dan Kline 31:05
They did try at Yahoo they made so far, they continued some investments that Yahoo was making as a standalone company. For a while they were paying Katie Couric, you know, six $7 million a year to anchor programming for them that never seem to amount to much. Yahoo Finance is still very powerful. I think it’s actually kind of god awful, like, like they’ve made it. So you can’t directly click on articles, you always have to go to a it’s really difficult business model. And it’s faded in importance, I won’t, I won’t share any proprietary information. But we’ve both had articles that that were in the Yahoo world. And that used to mean Oh my God, I can get 3 million pageviews. And that became very much an anomaly in the last couple of years, rather than something that happened a few times a month, or even more often.
So all of these properties are fading. But they are all sort of revivable, I would have much preferred to see Yahoo go to Red Ventures, or somebody in the content space. Red Ventures owsn Bankrate and CNET and other things that they really could have aggregated it with. This, to me seems like a hedge fund value play where they cut, cut, cut and cut, and just figure out how to make money with the absolute core services.
But I’m going to bring something else up here. See, as this sort of boom was happening, it became if you have the pipe, you should also control some content. AT&T went out and bought Time Warner Comcast already owns NBC Universal. I feel like NBC Universal is so big, that they’re almost separate companies that operate kind of under the same corporate leadership. I’ve never felt right about AT&T owning Time Warner Time Warner is a is a bunch of cable stations. It’s CNN, you know, it’s TBS, it’s TNT. Do you think AT&T should sell these companies? It’s not their core business.
Steve Symington 32:52
I think maybe they sort of like Verizon has been doing kind of chop up things that they don’t necessarily need. I think it was actually a year or two ago, that fries actually sold Huffington Post as part of that was acquired as part of all that too. Alright, but if memory serves, AT&T acquired Time Warner for what was it was like 85 billion or something crazy. Like that was the Fox acquisition initially, right?
Dan Kline 33:17
That that number sounds right. And I think they would have to sell it off piecemeal. The reason I don’t think they should own it, is they thought owning this content would drive people to AT&T’s other businesses to its phone, internet business. And it doesn’t, because they can’t say hey, Comedy Central or MTV are now exclusive to AT&T customers. From a streaming product point of view. They don’t really have they don’t even have a Paramount Plus, let alone a Disney Plus. So I look at this and I say like, wow, like, wouldn’t Disney really want TNT and TBS? I don’t know if antitrust would allow that because it would give them a really strong place. But maybe a fledgling company.
You know, one I talked about a lot is not liking. If all of a sudden Fubo owned TNT and TBS and that would be you know, they’d have to borrow more money than they’re worth to do that. But what if, what if Caesars bought TNT. I mean, there are all sorts of companies in the sports world that could buy these that could that could piecemeal take these properties. Obviously, there is value to CNN, there is value to MTV, which is very, very cheap programming. That still pulls a good audience. I would like to see them kind of break this apart.
You know, would it be crazy for Netflix to have a cable preview channel where they gave you you know, that you know, snippets of content and use things. AT&T is doing that with their audience channel, you know, using I mean, they you know, I said they don’t have a Disney plus they do have HBO max. The problem with HBO Max is the vast majority of the subscribers are people who get it on a linear cable basis, and you get it for free as a streaming basis. So because they they’re not going to like make it exclusive to streaming, it’s not a big driver to have AT&T.
Steve, let me ask you the last question on this. And then we’ll take a couple of questions that are sitting in the queue here. Do you think Yahoo can make a comeback? Or is Google just so dominant that the only people who are using Yahoo just don’t know Google exists or forgot to change their default?
Steve Symington 35:21
I feel like this is people hanging on because they still like their Yahoo email address, or you know, Yahoo finance or something like, which is still a decent syndication avenue for financial news and stuff. I don’t see massive comeback, I see it just treading water. You know, and that’s Yeah, that’s that’s exactly kind of where I see the I really don’t have high hopes for for these properties. And they can prove me wrong. But yeah, to each his own, I guess.
Dan Kline 35:51
As consumers, I’d argue that we should probably all use Yahoo, because it’s never good to let one company dominate a market. You know, there’s only if you live in a market that only has one airline flying out of its airport, you are very, very limited when it comes to price and your ability, you know, to get other places. The same is true with search engines. No one’s going a DuckDuckGo, you know. So, you know, I would argue you probably should use Yahoo at least 10% of the time, but you’re not going to and there’s not going to be a comeback. We appreciate so many of you watching, we’re going to take Sandeep David’s question, Steve, I’ll let you read it because you can see better than I can.
Steve Symington 36:26
Yep. Yes. Do you think Splunk is losing the race to Elastic and Datadog when it comes to the competitive field of big data analytics and IT operations? No, I wouldn’t say it’s losing the race. But I know there’s some folks out there on fintwit, we’ve seen some assertions based on LinkedIn posts that Splunk might be having some churn issues. I think that remains to be seen honestly, of course, every company’s going to have some competitive losses when you have a lot of money up for grabs, and a lot of well funded competitors rising trying to fight for the same pie. And this was actually an issue of Splunk a couple of quarters ago, and actually in its most recent quarterly results, it had some delayed deals that it actually closed, and said that it wasn’t seeing a lot of the issues that it was seeing before as far as competitive losses. That could change when Splunk you know, releases quarterly results next, so we’ll see. But I based on their most recent results, I don’t see any huge losses. From Splunk versus Elastic versus Datadog. They’re all great companies and they’re they’re very interesting from an investment standpoint, but I haven’t lost hope in Splunk yet.
Dan Kline 37:37
We’re gonna take one last comment from @bonojzk. I can’t quite see it there yet. Is Coinbase the new AOL? I am not even sure how you would compare the two. So AOL used to be where your email was, it would have like a news aggregator would have like you’d go into AOL games and play bingo. You would go to the AOL finance board and you’d see you know, some of the early pioneers in that space. You go to a wall sports and you’d see you know, the sports pages aggregated and some columnists.
What Coinbase is and it’s really interesting product I signed up for Coinbase. And, and but but a very, very small crypto piece, not even an investment really, I wanted to see how it worked. But what they’re doing is they’re making it very easy to buy cryptocurrency they’re also not selling every cryptocurrency so they’re not gonna sell ones that you know, like when Taco Bell comes out with a cryptocurrency and it’s more a joke than it is a real thing. So they’re giving you the education, they’re giving you a safe platform. Steve, do you own any any crypto?
Steve Symington 38:41
I don’t have any crypto right now. But that’s only a byproduct of being having my hands full with a regular equities markets. So I would consider, you know, slowly building a position as a diversified portfolio, but it’s easier than ever. And that’s something that Coinbase is kind of catering to. And I think, to the comparison, like a positive, like how could that be comparable? I think maybe only in the sense that someone’s thinking okay, Coinbase feels like it’s on top of the world right now. Right and and could potentially be this big bust a few years from now, and I don’t see that happening.
Dan Kline 39:15
No, right now. If you’re going to buy crypto, you’re probably going to Coinbase that is going to change very quickly. All the stock trading platforms will offer crypto, but I would argue that being first to market that once you have an account, it’s not a big deal to have multiple accounts now and you might want to be this specific place. 7Investing is partnered with our friends at CryptoEQ, these guys rate the different cryptocurrencies and steam you and Simon Erickson do a monthly podcast with them. When is that coming up?
Steve Symington 39:46
That should be in the next couple of weeks here. Actually, I usually wait for the invite to come and say yes, I’ll be there. But I look forward to it every single month or every single month. It’s a fantastic conversation where they tackle the crypto side of things from an investment standpoint. We talked about crypto from an equity perspective and a really nice, nice conversation every month.
Dan Kline 40:05
I’d like to learn a lot more maybe have one of those guys on on 7investing Now. I’d like to learn a lot more about the environmental part of crypto. I know, early crypto mining was very, very energy intensive. And I see that pushback a lot. And then I see a lot of people pushing back and saying, no, that’s not the case anymore. So there’s a lot about the technical aspect of crypto. I don’t own it, except for this tiny little piece that I bought just to see how the process works on on Coinbase. I don’t own it, because I don’t understand it. And I don’t understand something I can’t put my fingers on.
If you look at my stock portfolio, the vast majority of stocks I own are companies I use. And if it all of a sudden became that it was really easy to use crypto, you know, to buy your latte, maybe I would do it. But I’m also afraid of like, well, I just you know what, if 10 years ago, I used a Bitcoin to buy my latte and now it’s like worth $53,000. Like, like that, to me would be very variable. I promise 7Investors we will keep up on this. We will have some guests will certainly that podcast is for members only. There’s another great reason to join 7Investing. Steve, I’ll give you the last word on crypto here.
Steve Symington 41:08
Yeah, again, I think you run into the same argument is buying great stocks and then paying for things with a life event like me selling 275 shares of Nvidia for $21 a share when it’s above 600. Now, you know, so now that little five $6,000 position that I dropped would be worth closer to 150. And And hey, it happens. But you know, it’s
Dan Kline 41:29
I will point out that your house has also gone up in value significantly.
Steve Symington 41:32
It has it has so yes, I guess depending I suppose that latte drink five years ago isn’t going to be worth a heck of a lot more. If you are.
Dan Kline 41:41
I go I go back to Homer Simpson waiting till November 1 to sell his pumpkin futures like you know, you got to sell those before Halloween. Sam Bailey, thank you for producing the show. It is now time to hit our finisher. Which company had the best quarter overwhelmingly people said Apple and Apple had the best quarter I think two quarters in a row. I could say Apple had the best quarters it ever had. So I could see that argument. A lot of people said Facebook. Facebook had a great quarter to Steve. Not a lot of people said McDonald’s and a small amount said Tesla.
I’m gonna go contrarian here. McDonald’s had the best quarter. Here’s why. All of the conditions were great for Apple. Apple is coming in a supercycle with 5g forcing people to buy a new iPhone to have access to that network. People are stuck at home, they’re looking for things to do. They’re looking for new computers. Kids are doing school at home, they need new iPads. That’s a great condition for Apple. Tesla is a little harder to explain. But McDonald’s with dining rooms closed at many of its locations are operating in limited capacity for part of the quarter. With people getting delivery and drive through. Drive thru is fine if you eat it right away. I don’t know who would get McDonald’s delivered. Their same store sales rose by double digits. I think when you put everything into context, you know, I’m not a big McDonald’s eater. I don’t go to McDonald’s. I don’t own it, because I don’t want to own something I don’t like. But that said this is an incredibly well executed company.
Steve Symington 43:08
Yeah, it really is. I mean, that was an exceptional quarter. By any measure. I mean, unless you, I guess count the fact that that Apple over the course of a couple days generated as much revenue as McDonald’s generated the entire quarter. But the I guess, from a purely financial sense, looking at like the cash generation ability of Apple and its current state, maybe not its future potential, because it’s part of this kind of supercycle who knows where it’s going to go from here. But goodness sakes, I think I probably would have voted Apple here. But I see the argument for for McDonald’s. Facebook’s quarter was fantastic. On the heels of a decent rebound in advertising spend Tesla’s quarter was encouraging. I wouldn’t say the blowout that a lot of people had hoped for. And we’ve touched on that a little bit in recent days.
Dan Kline 43:54
So let’s use this to tie back to investing mistakes. It is a mistake to buy any of these companies based on this quarter. If you buy Apple because they had a great quarter recognize that Apple is probably not going to have as great a quarter a year from now. A year from now they are probably going to be running on the sales of an incrementally better, not a revolutionary better. 5g is a major change. The phones may not look that different. But being able to access those networks. You might see at McDonald’s, you might sort of see same store sales drop year over year next year, because we can all go to nicer restaurants in the world feels more normal. And we’re not as driven to comfort food
What do you do as a long term investor? You don’t look at year over year numbers. You look at the trends. So if you say okay, they were they were up 13% this year, and next year, they’re flat. Well, they equaled being up 13% over the previous year, they’ve come out of the pandemic with a bigger sales boost. Now that’s not the story with Tesla. Tesla has to continue to grow. But if Tesla sells 300,000 cars one quarter and 600,000 the next the important numbers 900,000 cars sold over two quarters.
We look at longer trends, we don’t we follow the quarterly numbers because it’s our job and because we own some of these stocks and we’re interested, and certainly we’d want to see if Apple came up with these great numbers, but their service line which they’ve pledged to grow exponentially was down 8% or only grew 2%. That might be you know, call it a yellow flag or a yellowish red flag. So you know, that could happen, But don’t get too hung up in any of these numbers.
I’m gonna be back on 7Investing Now. Wednesday I’m going to I’m going to guess, Maxx Chatsko, maybe Dana Abramovitz. Maybe Simon Erikson not entirely sure. Steve, thank you for doing this. Sam Bailey thank you for being here. If you would like to get in touch with us you can email us at firstname.lastname@example.org. That is usually Steve asked him for his his favorite recipe on the grill. Ask him questions about our site about joining about your membership.
You’re having problems like I learned the other day that when we send out the picks to members, you won’t necessarily get them the second we send them because it takes a while for it to get to everybody. I got mine at like, I don’t know noon somewhere around there. So some people I sent them to Steve to ask that question. Hey, why didn’t I get my picks? The answer is they haven’t come out yet. You know so if you want to talk to us if you want to interact with us if you want to promote us we always appreciate people sharing links to 7Investing Now people sharing their affiliate subscriber codes. If you do that, tag us @7Investing, that’s our Twitter. If you share your affiliate code, we will reshare it that individually and that will get your friends a discount on signing up for 7Investing and it will get you a free month. You do that 12 of your friends sign up you get a free year. 15 your friends sign up you got like four plus free years it can grow. We appreciate everyone out there doing that. I will be back on Wednesday. Thank you for watching.
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