The 7investing Team Takes Your Questions! | 7investing
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The 7investing Team Takes Your Questions!

April 16, 2021

It’s the third Friday of the month and that means that the 7investing team will be on a special 12:30 p.m, eastern edition of 7investing Now answering your investing questions. We’ll answers questions you shared on Twitter and ones you ask live on the show. In addition, the whole team will share one investing rule they never violate.

 

Transcript

Sam Bailey  

Welcome to 7investing now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.

 

Dan Kline  

Good afternoon 7investors and welcome to the Friday. The specially timed Friday edition of 7investing Now my name of course is Daniel Brooks Klein and joining me today is a big part of the 7investing team. We’re letting Anirban sleep in. Dana Abramovitz had to leave us but I have Simon Erickson, Matt Cochrane, Maxx Chatsko and Steve Symington joining me on the call. Let’s go around the room. Steve Symington, what are you drinking this morning?

 

Steve Symington  

I’m I’m drinking black coffee. So just standard choice for a Friday morning.

 

Dan Kline  

Maxx Chatsko. You are usually the most interesting beverage pick here on the program. What did you go with today?

 

Maxx Chatsk  

Straight honey, Dan.

 

Dan Kline  

That is not true. That is our eighth advisor Winnie the Pooh. Not on the show today. I of course am going with way too much water for a day where we did a 10am call just for new members, an 11am call for all our members, which was an absolute blast. If you are not a member of 7investing. You missed out today. Simon it’s a long day. Have you have you ever stopped your coffee? What’s going on this morning?

 

Simon Erickson  

Not yet. I’m just like Steve drinking it straight. But there’s quite a few refills throughout this day Dan.

 

Dan Kline  

And Matt Cochrane, Did you at least there was some cream and sugar What is going on? Who’s drinking black coffee? What is going on?

 

Matt Cochrane  

What’s in my coffee mug is no one else’s business. Sparkling water.

 

Dan Kline  

We are going to be taking your questions today we’ve got a whole bunch of them from Twitter, we’ve got a whole bunch of them that we don’t have a whole bunch of them, we’d love to see a whole bunch of them that we will take live. So wherever you’re watching this, feel free to shoot any investing questions you’d like us to answer. Sam Bailey, our producer behind the glass is going to be in charge of putting up the questions we had from Twitter. Sam, if you want to hit us with Sha Robbie’s question.

 

Question for each if you were to start investing today, what would be your approach? Why don’t we do this in reverse age order. I’m the oldest, but I’ve probably not the one who’s been investing the longest. And I know that in my early investing days, I didn’t necessarily have a thesis. I didn’t have a reason for buying the stock. Or I had a really thin thesis thesis such as like, I like this product like now I know the value of research. And I’ll point out you don’t have to do that research. We could do that research for you. That is likely why you are a member of 7investing. Matt Cochrane.

 

Matt Cochrane  

Yeah, so actually, I just wrote a piece for our members, like I just wrote an advisor update on this question. But basically, look, I would look to be adding a little bit of money into the market each month. And with that money, I would try to put it into like the like, basically categories companies into three categories for my portfolio, and they’re very loose categories. But like I have some that are just like, basically just some that are more conservative, where I’m worried about like not very little downside risk, some of the middle, which I believe are just like good growth and good valuations. And then some of the more riskier companies which offer a very high risk, high reward profile.

 

And I just tried to diversify into those types of companies every month. So one month, I might really like a high flying type of SaaS stock that the valuation type of the growth rate is higher, and I might buy that. But then the next company, or the next month, when I add a company to my portfolio would be probably a more conservative company to try to balance it out. And I just, that’s how I manage my portfolio. That’s how I would do it. If I starting off today,

 

Dan Kline  

Simon, I think you’re next in age reverse order, I probably should have asked everybody their ages at some point offline. Before going in reverse age order. I’m always very conscious of like which order I go in and not favoring anybody. But Simon, what would you do differently?

 

Simon Erickson  

Well, Dan, you called yourself out first, by putting yourself first in the line of the reverse stage order, I think. You know, the two things that I would do is first of all, go to your Investor Relations page of a company you’re interested in. Read the investor presentation. Get the feel for how the company thinks about itself and what it is pitching itself as to other investors, rather than just seeing tickers and saying Oh, the stock is up five or 10% on a given day, actually trying to understand the business and what they do and also how the business presents itself through an investor presentation.

 

And the second thing I would do on top of that is go look at the definitive proxy statement. So if you look at sec.gov you can look at the annual report or the definitive proxy, the Def 14A statement and then search within that for executive compensation. Why do I say that? Because well, that’s how executives are getting paid and that’s probably one of the largest. That’s at the top of the priority list, so to speak of what the company is actually going to be doing. And so is it just revenue growth and just earnings growth? Or is it something like they want to look at profitability and cash flows. That can tell you a lot about the business, even just looking at those two things.

 

Dan Kline  

And it’s a real big challenge, because when an executive is being paid largely an option, or that’s a big piece of it, they have real short term incentive to grow the stock price, which is actually not what’s best for business. So that can sometimes be a challenge. Steve Symington you’re up next.

 

Steve Symington  

Oh, if I was to start investing today, what would be my approach. I think I would continue to focus on the long term, you know, in that’s, I’m 38 right now. But I’ve still got a good couple of decades, before I have to even think about retiring. And I’m not convinced I’ll ever retire, right? This is what I love to do. And I love to keep my brain working. But I think I would just do exactly what I’m doing now. And that’s to find and purchase shares of great businesses that I think are going to succeed over the course of the next couple of decades. And, and that’s, I think, something that will lead to life changing wealth. So really just maintaining a long term focus and buying, buying great businesses that I trust will create value for shareholders.

 

Dan Kline  

And the youngest member of our team, Maxx Chatsko.

 

Steve Symington  

All good advice from my colleagues, I would just add, if you’re starting to invest today, in this market, I would invest in quote, like safer companies, I think you invested in tickers or some of these, like social media companies, momentum, stocks, you know, YOLO, all those things, you might get discouraged, right? A lot of individuals have come to investing in the last year, this has been one of the easiest years ever to be an investor, everything goes up all the time, it’s great.

 

Maxx Chatsko  

But if you invest in some of these tickers, you just read about on Twitter, you don’t have a thesis, you’re not in it for the long haul and later on, you’re down 60 80%, you might get discouraged and not become an investor, you know, to or you might not remain an investor, I should say, like two years from now, three years from now. So you want to build up, you know, your acumen and really understood what you’re getting into. But you know, so pick some safer stocks, be careful what you’re getting into, especially in this market, there are a lot of elevated valuations out there. So don’t get discouraged. And if you are maybe maybe you didn’t have a thesis, maybe you’re, you know, I don’t understand the companies you’re investing in. So all good things.

 

Dan Kline  

And remember, we’re in this for the long term. So the short term noise is often not that important. We’re gonna bounce back and forth between questions we got on Twitter, and questions you’re asking live in the chat. We really appreciate you doing that. If you want to bring up Keith’s comments, we’ll try to take these in order. Sam, appreciate that. Keith wants to know, for high conviction tickers, do you consider investing in LEAPs? I don’t, because I didn’t know what a leap was until I saw that question. Simon, you want to take that one I believe?

 

Simon Erickson  

Yeah, we take that one. This is this is an options related question from Keith a LEAP is a long term equity anticipation..I’m losing the letters. I forget what it stands for now. But it’s a long term call option. It’s typically longer than a year a year and a half in duration. And so this kind of locks you into a certain price, that you could buy the shares that if they are above that price, you have the option to buy them in an exchange, you just pay for the premium up front, you don’t buy the shares out front, you buy the option to purchase them at a later time.

 

And so a lot of people that play options like the leverage of putting less capital upfront, but still maintaining the upside, if a company goes up. If it falls below that price, then you’re you’re not on the hook for buying anything, you’re just out for the premium up front. Now, we don’t do that at 7investing, we don’t do any options. We are long term buy and hold investors. But the appeal for something like this would be upside with limited capital. But again, I stress this every time we talk about options is don’t jump into the deep end too quickly on these. Make sure you understand the risks that are inherent with with things like this, because if done incorrectly, they can light a lot of money on fire very, very quickly.

 

Dan Kline  

Simon, thank you for that. We’re going to take a question from “Chooch” next if you want to pull that one up. The more companies you own, the closer you come to just being an S&P 500 index fund, and your gains reverting to the mean of the market in general. Big gains require a concentrated portfolio. A stock 10 timing doesn’t matter if it’s 2% of your portfolio. Discuss. I sort of disagree, Maxx Chatsko. You wanted to weigh in here?

 

Steve Symington  

So I actually have a more concentrated portfolio and that’s a personal decision, right? You can have dozens of stocks your portfolio not maybe as I get older, I’ll have more and more companies in there. But I do kind of agree with that a little bit. Now if a stock is 2% of your portfolio and a 10x is mean it’s still a very large part of your portfolio. So, you know, I don’t necessarily there’s different ways to do it, I guess. And we just wrote about this as well. Matt, you wanted to weigh in?

 

Dan Kline  

Matt, feel free to jump in.

 

Matt Cochrane  

Yeah, absolutely. So what I guess what I would say is, it’s like, it just really depends on the individual investor. You should really know yourself. Like, for instance, I know I’m like if I didn’t allow myself to have a larger portfolio with more positions. And if I was just going to run a concentrated portfolio, I would not be as risky, or I would be much more risk averse that I am now, I would invest in more conservative companies, and allowing myself to take smaller positions in riskier companies has worked out very well, for me. A stock 10 timing if it’s 1% of your portfolio does still move the needle for your portfolio, I will take that if the trade off is knowing myself and knowing that I wouldn’t invest in that company otherwise, I’m very happy making that trade off.

 

The other thing I would say is like many of the best stocks over the long term, are very volatile. And it’s easier for me to handle that volatility, knowing it’s just a 2,3,4,5% position. If every stock in my portfolio was a 10% position, I don’t know how I’d stomach a 50% drawdown which happens in great stocks. So know yourself and if having a little less than a concentrated portfolio, allowing yourself to invest in more positions, helps you like psychologically hack yourself, I think that’s a good strategy to do. Just know yourself, and what works best for you. Some people can run concentrated portfolios, and that’s great for them. It’s not great for me.

 

Dan Kline  

And you can have a very small position in say, Amazon from the point you know, they went public, and you could be a millionaire now. So you know, we say 10 timing, but what if it 100 times what if it you know what if it even more than that, that does happen. I don’t have a particularly concentrated portfolio. I buy the stocks that I like, and then I also buy the stocks that Maxx likes and some of the other stocks, the team picks and I make relatively small bets in them. But as they get rerecommended, I buy a little bit more. If someone makes a recommendation, or as I start to learn them, they might move into the personal basket. It’s really up to you.

 

Damon with a bunch of numbers says Hello, everyone. Happy Friday, I closed my Dogecoin position. Would love to hear about Chainlink. I do not have a Dogecoin position. We do a wonderful podcast with our friends at CryptoEQ. That being said, I still don’t understand blockchain no matter how many times it’s explained to me. So I’m very, very aware of it. Even though I do trust the CryptoEQ guys who wanted to feel this one. I think it was Steve.

 

Steve Symington  

Yeah. So actually, we did talk about Chainlink. If you go to 7investing.com, kind of near the top of the page, right into the recent insights and interviews, you’ll see our podcast with CryptoEQ that we just released, actually. And if you go in there around the 21 minute mark, we talked about Chainlink a fair bit. So I think Spencer Randall takes dedicates a little time to Chainlink and I think it’s probably best to hear it from his mouth because he understands that a lot better than we can speak to here. But check out 7investing.com, look at the crypto IQ interview. 21 minute mark is about where we talked about Chainlink.

 

Dan Kline  

And of course, to see that you have to be a member our podcast with CryptoEQ is for members only. If you would like to become a member that is very easy to do. You don’t have to pay us in Dogecoin. You don’t have to pay us in Bitcoin, you can go to 7investing.com/subscribe, sign up really easily to be a member. And of course, you get our seven highest conviction stock picks each month. But you also get amazing things like our podcast with CryptoEQ, there’s nothing out there like that. And because it’s remembers only we can talk about it in much more detail than we can on a live show like this.

 

We appreciate so many of you watching. We’re gonna get to as many questions and comments as we can. I’m going to take one more from the live comments before bouncing back to the Twitter. Aiweiss18 says what’s the best investment option for a 21 year old kid in college. I’m going to start with this. I have a 17 year old son and we talk about investing. You might even see him walk by that’s why I’m pointing over there because he is in the room. But that being said, we talk about investing and why you know a company he goes to like so we’re going to Universal Studios tomorrow. I’ll talk about why I don’t think Comcast which is their parent company is a great investment. Because I think they have on a legacy businesses that are going to struggle, but I do think Disney is a wonderful investment.

 

And when he starts working, which will probably be this summer, half of the money he takes in is going to get invested and we’re going to invest in companies he likes. So when you’re 21 the key is invest. It’s really important. If you start early, you don’t have to save as much money. $1,000 invested at 21 is way better, even if you only equal the market and get about a 9% return. At some point in your 50s, you’re just rolling downhill in terms of how much money that turns into. So I would say and anyone else is welcome to jump in. I’ll let Maxx Chatsko, who is the closest to 21 jump in next.

 

I would say start with companies you’re familiar with. Don’t feel like you have to chase the latest new tech stock or, or something. Now, if those are areas that interest you, I met with a 17 year old and he asked me about I want to say lithium mining. And I had no idea but he really done his homework. And I have no idea if the company he was talking about was a good company or a bad company, but he did the work. Maxx Chatsko, your thoughts about investing at 21.

 

Steve Symington  

So I started investing when I was 19. So I was still in college. And one thing I would say is like like Dan just said, I mean pick things you’re kind of familiar with. It’s very easy, especially as like a 19 or 20 year old kid, 21 year old, you get a little cocky, you get a little sure of yourself, you know. I did all this research, this is a slam dunk. You’re gonna take your lumps and that’s okay. But don’t get discouraged. If you don’t you don’t have a lot of money when you’re 21 you’re not supposed to right? So you’re not it seems like futile, right? Like you’re Oh, I only have this much money invest every month or every so many months. That’s okay that you’re right on track and you have a huge advantage if you start early, and you’re supposed to make mistakes and you’re gonna learn and you’re gonna refine your process over time. So starting early even though you make a lot of mistakes is a great advantage.

 

Dan Kline  

We are going to get to a ton of your questions and comments. We’re going to take one next from David Strauss. This came to us on Twitter. Sam if you have that one. The Sam I’m referring to of course is our Director of Marketing Sam Bailey who is behind the glass here. I almost never sell but let’s say I needed to sell a stock. I’ve held shares both long term and short term depending on when I bought. If I were to sell what I get taxed or at long term or short term gains, which shares get sold off first. Thanks in advance Steve Symington. You wanted to answer this one

 

Steve Symington  

So it depends on your brokerage but the default is generally for it’s like a FIFO method right. First in first out so you you generally if you sell and you don’t specify a lot that you want to get rid of, you’re going to sell the shares that you own longer than the other ones. Some brokerages I don’t know in correct me if I’m wrong, but you may be able to choose a short term lot or a long term lot and pay you know sell from that. But I know like Etrade for example, you can drop down and say sell this position. But it really depends on your brokerage. Consult there take a look. But, you know, keep in mind, generally if you’re going to sell long term capital gains is for stocks you’ve owned for more than a year, you’ll pay a significantly lower tax rate generally 15% is what most people pay. Some people in the lower income tax brackets pay nothing. Some of the upper income tax brackets will pay 20.

 

But short term capital gains tax rates for any stocks, even in less than a year are going to be stocks that are they will tax you at your regular income tax bracket. So keep that in mind when you’re taking profits every time you sell and you realize gains it is a taxable event. And that’s something that you should definitely keep in mind put that money aside if possible, rather than continuing to trade it and potentially risking it and leaving yourself on the hook for a hefty tax bill at the end of the year.

 

Dan Kline  

This is also something you should discuss with a financial advisor with the CPA because there are some strategies like harvesting losses at the end of the year where if you have a stock that’s down but you still want to own it that you literally could and it’s a long term hold you could sell it, use those losses to offset some of your taxes and then buy it back. There is a waiting period on that. So you want to get proper advice. None of us are CPAs none of us are tax attorneys. Though I’m sure some of us are probably working on that knowing this group.

 

We are going to take a comment from Mike Fee next because it’s a really smart one. This is a question we get asked all the time. Mike says new investors if you’re signing up for a brokerage account, consider Schwab TD Ameritrade, Fidelity etc avoid Robinhood which offers no competitive advantages. Limit stocks you can buy your they don’t sell over the counter stocks, and that’s been plagued with outages and PR issues. I think the biggest issue with Robinhood is actually their customer service issues. They have been very difficult to deal with to get a hold of an actual person. I’m not in favor of any one platform we use Stockpile for buying our 7investing stocks but I am a big fan of buy something that allows for fractional shares.

 

I believe Schwab is the one that advertises you can buy slices that are $5 Well, if you’re an investor and you have $10 a month to put in by a $5 slice of a really good company and you can feel good about it. That is a great way to get kids investing if you have a you know a parental account that you’re investing for an under 18 year old or for college kids. You might work a part time job, be able to put $50 a month, and you can still buy shares of amazing, amazing companies. We are going to take Andrew Holder’s question next, if you want to pull that up, Sam Bailey. I accidentally skipped out of order. My apologies for that. Maxx Chatsko, Dana Abramovitz. Dana is not here at the moment. Have either of you looked into psychedelics in terms of mental health treatment? Or is this still too early to even consider? Maxx, I had no idea that this was a thing. Have you looked into this?

 

Maxx Chatsko  

I looked into it Dan. So I’m actually very bullish on overall psychedelics, or some of these natural compounds in mental health. They seem to have very good attributes. So there’s a couple companies that are publicly traded, I think the one a lot of people talk about Compass Pathways. I’m not necessarily, you know, giving, I’m neutral on that. I think it’s it is early, right, we still need to generate and collect robust clinical data proving that these compounds work. And also something to keep in mind the complexity of biology, right?

 

So when you take a natural product, like you say, you take magic mushrooms or your microdose, there’s a lot of other compounds in that including the active ingredient. We’re not sure if those have an effect on amplifying the the benefits of the active ingredient. When we’re just isolating that and putting that in a pill. Maybe it’s not as active or potent? Or maybe there’s some safety concerns, like we don’t know. So we have to wait for the clinical data. But I do think over time, these are going to be how we treat things like depression and different mental health disorders, and they have durable treatment advantages. It seems like they have very lasting effects. So very optimistic. But in general, I’m not invested in this space right now. It is very early.

 

Dan Kline  

This is something we will keep an eye on. I’m volunteering Maxx as the youngest of us as a test subject. If, if any of the psychedelic companies out there just send them to Maxx. He’ll, try them write a little clinical study. That’s not how clinical studies work. And we are teasing. Of course, no 7investing lead advisors will be harmed in the making of this program.

 

Maxx Chatsko  

The FDA has entered the chat Dan.

 

Dan Kline  

We have a great question from Vijay came to us on Twitter. He wants to know what free cash flow means. It’s such a basic question, but it’s one that that reminds us, we didn’t all come to this knowing all of these terms. We recognize that sometimes this world can get a little inside baseball, where we’re talking about things we try a lot on 7investing now to sort of do a reset, there are people out there watching. Look, my mom is watching. She is not a big investor in individual stocks probably doesn’t think a lot about free cash flow. So we are trying to educate to make everyone better investor Simon Erickson. You wanted to take this one?

 

Simon Erickson  

Yeah, I love this question. And first of all, Dan, Steve and I are going to be actually recording a podcast, it’s dedicated specifically to financial statements. So if you kind of are a little unsure about what some terminology means, or, you know, what numbers do you look for? or Why do all of this? Why does all this matter? We’re going to actually be dedicating an entire podcast just to education of financial statements, which I’m kind of looking forward to. Steve and I are, of course, gonna throw some humor in that too. So it’s not completely dry for the whole time.

 

To answer this question of free cash flow, a lot of times companies look at earnings, or investors look at earnings per share of a company, probably the most followed metric of all, at least for quarterly financial reports. But that doesn’t tell the whole story, right? Net income, the earnings of the numerator of that can be manipulated. Companies could be paying a lot of stock out, which is not a cash charge, that is something that works against your net income. It could be depreciating a whole lot of machinery, which is working against your net income, but it’s not working to get your cash balance. And so one metric that investors tend to look at is operating cash flow, and then free cash flow.

 

So the operating cash flow kind of starts with net income, and then makes adjustments to the cash flow statement to take out all of those non cash charges. So it’s actually how much cash is the company depositing in the bank, each and every quarter. And then even one step farther than that is if you take out the the capital expenditures required for your business, right? You’re making acquisitions of companies, or you’re buying machinery for your plants. Maybe you’re acquiring buildings that you need for your operations. If you take out those capital expenditures, what’s left after that is your free cash flow per share. And so really, one thing that we tend to look at is we don’t just look at earnings per share, we look at free cash flow per share, because that’s what’s left over after you pay all of your operating and your capital bills. That’s kind of on the table that you can share with your investors, which is what we really care about.

 

Dan Kline  

We are going to come to Matt Cochrane for a dad joke in about 30 seconds. So Matt, you have about 30 seconds to come up with a joke. But before we do that, I want to remind everybody what we’re doing later today. So at about two o’clock the 7investing team comes together and we are presenting our picks for next month. This is of course a recorded call it gets released on the eighth of the month. So we each do about a 15,20 minute presentation on our stock and then everybody else can ask questions. So Dana can ask Maxx questions, Maxx can ask Dana questions for the rest of them. All of us could ask questions is usually how it goes.

 

And it is a really valuable deep dive into the deep thinking we put into our stock picks each month. So if you are a member and I will bring it up one more time 7investing.com/subscribe. On the first of the month, you get access to our pics, on the eighth of the month, you get access to these deep dive calls. There were a couple of questions that Simon wanted to take on, on on cryptocurrencies. We will get to that in a second. But Matt Cochrane putting you on the spot. Do you have a dad joke?

 

Matt Cochrane  

Not really, Dan. Like what I would say though, is like I’m a father of four children. And you know when they were little or especially but still today, like I have to spend a lot of time resources and money on just childproofing in my house. But no matter what I do, they keep getting back in so…

 

Dan Kline  

Oh boy, oh boy. David Strauss says: Sorry, I’m late to the stream. Simon, do you feel like the validity of Bitcoin gets impacted when coins that are literally based on a joke like Doge get pumped by the likes of Elon and others? Tune out what Elon Musk is saying he’s trolling you. Elon Musk manipulates things for his own gain. And sometimes just to show how important Elon Musk is. Simon Erickson, I have no idea if this is the question you wanted to take. So feel free to segue into any of the other crypto questions we have in the queue.

 

Simon Erickson  

Well I had to answer this one because David asked me specifically. So I said, Of course I’ve got to give an answer. This is exactly how sometimes the short term trading works, right. Like David, do you remember a couple of years ago, when Long Island Iced Tea renamed its company named to Long Blockchain. Maxx, I know you’re nodding your head, you remember this story. And the value of the stock went up something like three times in value in a single day, just because everyone thought they were developing a blockchain.

 

By the way, they were not developing a blockchain, it was still a beverage company that changed in no way whatsoever, just the name of the company. And that that was something that is short term noise, right? If you’re investing for two or three years, you don’t care about if it goes up three times in value, and it comes right back down in 24 hours. Dan we talked about the cannabis space a lot. Remember Tilray? I mean, I think it went up three times value in a month or a couple of weeks there for a little while.

 

Dan Kline  

You don’t want to buy momentum stocks. You want to buy stocks, or cryptocurrencies  based on the fundamentals. Part of the reason I’ve talked about not investing in cryptocurrencies is I don’t understand what the fundamentals are and it’s been explained to me by some really smart people. So if I looked at a Tilray, I’d look at their business and their business, most people would argue, isn’t that good. But there’s a lot of people in the cannabis space.

 

We see this in the betting space as well. Wow. So many people are gonna buy cannabis? Well, yes. But it’s also going to become a commodity. So if you’re going to bet on a cannabis company, yes, the pun is intended there. You need to find one that has marketable differences that actually has some reason, a brand, a product and expertise. You know, look, coffee is a commodity as well. But Starbucks turned it into a brand and it’s possible in cannabis. It’s likely possible in sports betting. It’s not super duper likely.

 

I’m going to take a related question from StockInvestor. He says, What do you think of Fubo TV CEO David Candler, talking about his company stock on Twitter? I didn’t see these comments. I’m not a big fan of CEOs talking about their company stock outside of SEC documents, or maybe very well informed interviews. So yes, they could comment on their stock on a CNBC interview where the reporter has a producer who’s done the homework. Fubo to me is a giant bear trap just like we were talking about. Everyone goes they’ll do great because sports betting is gonna be everything. Here’s the reality. The only proprietary sports they have is they just bid on some like minor soccer game like qualifying competition. They sell the same product as YouTube TV, they sell roughly the same product as Sling TV, they have a little bit more in terms of live local channels, but they’re also a lot more money.

 

There’s nothing differentiated about the product and everyone will have sports betting. I cannot bring this up enough. Just because they run a commercial saying how great they are in sports doesn’t mean that they are great in sports. This is a commodity product. Cable Television repackaged. Everybody. ESPN is gonna have direct sports betting in the next few years. This is not something you should get overly excited about. Let’s take a question from Financial Dilettante. This is actually one that a lot of us have been debating internally. Sam Bailey, if you want to pull that up, will you ever pull a pass recommendation Would you come to that decision and communicate? It’s easy to imagine a biotech, for example, not playing out the way we hope. Simon, I’m gonna let you lead this discussion.

 

Simon Erickson  

Yeah, thanks, Dan. I mean, this is something we talk about a lot. You know, right now, the way that we have things set up is, is yes, we can sell a position, that’s a previous 7investing recommendation. If we do not believe in the company any more, and there’s a thesis breaker that just everything hits the fan, we want out, we wish we will issue a sell recommendation via email to our subscribers. But our current process is the other way, we haven’t done that yet. We have yet to have that happened. But we reserve the the option to do that if we wanted to.

 

But we also right now have the process of we’re going to keep it on the scorecard and let it ride so that our scorecard performance reflects all of the good picks, and all of the bad picks that we’ve made. So if you go to 7investing.com/recommendations, you can see that overall consolidated performance. That includes our hey, we were wrong on this one. But you know, we’re kind of evolving as an organization to we’re trying to we’re starting to talk about should that really still reflect if we do make a sell recommendation? Should it be recorded in the end the performance? We haven’t gotten a correct answer a complete answer for that yet. I think we’re still evolving on how we think about that. But I do want to point out that right now we take selling very seriously. Dan, we’re not trying to get in and out within a couple of months run to in price targets, and we’re saying, Oh, it’s overvalued, now over our price target. If we ever sell a 7investing recommendation and make an alert that we are selling, it’s going to be for something really, really bad happening. And at the end of the day, we’re still buy and hold investors, every one of our recommendations, we’re not thinking about a short term, we think about long term.

 

Dan Kline  

And we talked about this on the members call as well. A decade from now, we may also look at some of these companies and go wow, Maxx said this was gonna happen. It took seven years, but it happened. And now three years in this is a mature company, that’s become a really good business, but it’s no longer a growth investment. And that might be a time where we decide to sell. I gave the example of Starbucks. Starbucks gets to maturity and China, their partnership with Nestle pays off in their their x percentage of grocery sales, they add premium, and that grows by 20%. And maybe by then whoever their CEO is, then that might take a decade might say, Wow, we’re just minting money that but we don’t really need to grow.

 

Or frankly, some companies get big enough that anything they do to grow – Dollar General just announced a new store concept, they’re going to roll out a few hundred of them. A few hundred new dollar generals doesn’t move the needle. They’d have to roll out, you know, a few thousand of them for it to be a deal maker. So there might be things where it just it’s game over because everything we said would happen would happen has happened. But that said that’s probably going to take a decade at the earliest on any of these companies.

 

Silvertrap asks, has 7investing sold a single stock since its inception? The answer is no. Personally, I’ve only sold one stock in the past six years. I’ve talked about this a lot I sold out of WWE because I haven’t liked how they’ve treated people during the pandemic where they’re laying off workers not high paid workers when they’re making more money than they did pre pandemic. Has anybody else you know made a sale other than for like trimming or, or reasons where something grew so big you felt uncomfortable with it. Raise your hand if you’ve made a sale. Simon, what have you sold and why.

 

Simon Erickson  

I’ve got to pay you guys Dan, I had to I had to trim some some positions so I can pay for 7investing. I guess that’s a little outside of this discussion, but still true.

 

Dan Kline  

It is, you know, as a startup company, we appreciate that. Obviously, we started from zero. There are no outside investors in 7investing. This is a bootstrap operation. And we are happy and proud that so many of you have decided to join us on this journey. We’re going to take just a couple more questions. We’re going to take one from our very own Brock Briggs and then we’re going to close out with what’s one investing rule. You never violate Sam, if you want to bring up Brock’s question, that would be great.

 

What kind of distinguishing factor should we be looking for in new sectors like say sports betting seems like a lot of people getting into the space, but difficult to tell what will set them apart. Is a basket appropriate this early? So I just gave a little bit of my thoughts. And I’ll let Matt weigh in here. Anybody who wants to weigh in. I don’t think sports betting is going to have a lot of winners. Now, you could argue that the Penn Barstool deal – that Barstool sports speaks to a certain audience and that’s going to be a differentiator. I do think that’s true and that Penn will likely be a winner. I’m not sure they’re going to be a winner on, you know, mobile apps and all the other things but I do think there will be an audience that goes to those casinos that’s looking for that brand.

 

I really think the winners in sports betting are going to be Caesars and MGM. I don’t think you can invalidate how big a mailing list they have and the fact that I Go to Caesars because I want to earn loyalty points. Loyalty points when you don’t own a casino are meaningless. I could care less about getting a T shirt. I want to get a comped room, I want to get a free dinner at a steakhouse. Those are meaningful ways to drive business. So Caesars is one of a group that just partnered with the NFL. If I could bet in my state, which I can’t yet in Florida, but if I could when that’s allowed, I would use the Caesars app because it would translate into real rewards. I don’t see how Fubo, I don’t see how Disney I don’t see how anybody competes with that. Matt, do you have any thoughts on sports betting? I know it runs adjacent to some companies you follow?

 

Matt Cochrane  

Not too much. Actually, I think you you kind of have what I would say like I think it’s very hard to differentiate between any of these. The only one really might be Penn because I think Dave Portnoy is a social media marketing genius. And he does like, like that customer acquisition cost, just because he’s so good at that. There’s gonna be lower for Penn and maybe some of the other names. But I really don’t know I haven’t studied the space much I don’t want to offer too much of an opinion. That’s just my thoughts from as an outside observer.

 

Dan Kline  

I won’t speak too much about David Portnoy, who grew up in my hometown, is friends with my brother. I know the family. But there is good with bad here and I liken it to Elon Musk. Elon Musk could say things that manipulate his stock up. Or he could say something that blows everything up. It is always possible that David Portnoy does something where they have to distance themselves from him. He does not shy away from controversy. It’s been great for their brand. But as you get into a world that’s a little more grown up in the in the casino space, there are definitely some risks to worry about there. We’re going to move to one last question, and I will go around the room and I am not entirely sure if I sent a finisher graphics to Sam Bailey. So say I’ve let me know in the chat if we’ve done that. But guys, what’s one investing rule you never violate? I’ll start with Maxx on this one.

 

Steve Symington  

So I always develop a thesis and I will never just buy a stock like I’m interested in this. I’ll just see how it goes. As my team here knows it, anyone who’s seen the team calls I I go hard in the paint on my research process. So that’s one of my biggest value adds I think so. I never violate that rule. Always develop a thesis.

 

Dan Kline  

Matt Cochranc? Sorry, I’m having a conversation in the back I as I said before, I forgot to send our closing graphic. Sam Bailey is doing hero’s work and finding it for us. Matt Cochrane, what is you know, I know you have a don’t invest on an empty stomach rule. But other than that, what rule do you never violate when investing?

 

Matt Cochrane  

I have a don’t do anything on an empty stomach rule. Sounds like I guess like all I would just say I keep I keep things simple. I only go long. I never short stocks, I never do options. Um, I don’t use margin, though I’m not like, vehemently opposed against like, some margin, I guess. But I just keep it simple. I only go long, and only on stocks like, that I want to own as companies, you know, for the long term. But that won’t always work out of course, but  you know, investing hard enough, you know, you don’t need to make it harder by trying to – those things can use returns, but they can also use the downside to, like, keep it simple, longer only.

 

Dan Kline  

I’ll go to me, and then I’ll go to assignment. And then I’ll go to Steve, I will say, I never invest in companies I’m not proud to own. now I have friends that look at it, like I will invest in companies that will make me the most money and then I’ll use that money to support things I like. But if I analyze and some company that sells you know, tobacco to children in the third world, is going to be a huge winner. I look at it go like Yeah, but like, I don’t want to tell anybody I own tobacco for kids or like whatever, whatever horrible company it is. I think they’re it’s a weird line because I do own companies, you know, that have some human rights violations issues. Apple is a company that, there have been concerns Nike, I don’t own Nike, but Nike there have been concerns. That said, if it’s really an awful one, I am very hesitant to do it. Simon Erickson. What is one investing rule you will never violate?

 

Simon Erickson  

Well Maxx has the best to answer so I have to be a photocopy machine and take his which is have a thesis. I mean that is probably the most important investing rule of all, in my opinion. I put a slight additional explanation to that, that a lot of times when you’re looking at kind of growth, style investing, and companies that have the majority of their revenue or cash flows are in the future, you don’t always really, really know how things are going to go right. It’s not steady state, you don’t have a 50% operating margin you can bank on. So it’s a little harder. But I think that a good growth style investor will still combine that with looking at something operational, developing a thesis, knowing what this company has to do to achieve in order to reward shareholders.

 

And that’s more than just revenue growth. And that’s not just you know, go out and develop a blockchain and change the name of your company to do that. I mean, good growth style and investing should say, Hey, we want to, if it’s a software company want to get more subscribers, we want to expand to more services over time. If it’s biotech, or maybe there’s milestones that they’re trying to achieve through clinical trials. Things like this, you want to watch and then if it’s showing well, and you see companies hitting the high points and doing what it say it’s gonna do, those are perfectly good signs rather than just kind of being swayed by earnings per share and revenue growth and the stuff that hits the top of the financial media headlines.

 

Dan Kline  

Steve Symington said, you can close out this topic, what is one rule you never violate when investing? One rule you should also never violate is never leave your picnic basket outside. I know you have bears in the backyard there. So be careful with that one. But Steve, what’s one investing rule you never violate?

 

Steve Symington  

I always think long term like I never I will take advantage of short term challenges to buy a business that has a good long term story. But I everything I buy needs to have a compelling long term thesis. And that’s the big key for me is that I’m not buying a stock because you know, and sometimes I’ll have near term catalysts, and I’ll lay those out and say this could move the stock in the next several months. But it’s not crucial to my long term thesis. And that’s what I’m looking for. And I tweeted something out the other day that said, you know, 10% move is nothing. And we’ve had people email us and say, Hey, this, your stock that you recommended last month is up 10%. Should I sell it?

 

Absolutely not. Like we’re looking for multi year investments. And, you know, we’re talking about businesses that can create life changing wealth, you know. 10% is indeed nothing I’m looking for multi baggers, that that actually change, you know, kind of the way that you do things and can change your financial situation for the better. But that requires patience, and it requires long term thinking. So always long term, is how I focused.

 

Dan Kline  

We appreciate your questions in comments. We see lots of them in their ZL, Dave Walker, Silvertrap, D, feel free to share those with us @7investing on Twitter. If we ignore your question, it’s sometimes because we’re just out of time, which is basically the case here today. Sometimes it’s because that’s not a stock were comfortable talking about on the fly, we might want to do a little bit more research. And sometimes, of course, they’re just not stocks we’re following. So we’re gonna pass but we love each and every one of you.

 

We know you have other entertainment choices. We know that right now, you could be watching episode five of Falcon and Winter Soldier or I don’t know, Price is Right? I’m not even sure what is on at this time As the World Turns. I am not entirely sure. Wendy Williams, it could be any of those things. And you have chosen to watch 7investing Now. We appreciate that. And with that, let’s send Steve up on the top rope. Let’s hit our finisher Sam Bailey, thank you for finding the graphic. This is a question I actually asked internally. I’m let Simon Erickson have the first answer. Is Coinbase worth 100 billion? About 60% of you said no. 28% said eventually 12.6% said yes. I have no idea. But Simon Erickson. I know this is one you’ve been following?

 

Simon Erickson  

Well, this is a question that takes 30 minutes to answer unfortunately and Steve and I did spend about 30 minutes answering it on our recent call with CryptoEQ that we have behind the paywall. If anyone’s interested in looking at that. I think that the kind of the 20 second takeaway is that crypto is evolving. Cryptocurrencies are evolving to not just being stores of value, but being used for transactions. And Coinbase is a cryptocurrency exchange where you can buy and sell Bitcoin, just like you would buy and sell Apple stock today, kind of like a Schwab or a brokerage. But it’s also kind of like, like a PayPal, you know, where you can actually do transactions and we think about that, like it’s crazy today, Dan, we we say how the heck am I gonna use a Bitcoin to actually buy something now, that’s never going to happen.

 

That is going to happen. That is definitely on the horizon. And you’re going to start seeing this kind of evolve just the way the digital payments have evolved over the past decade. And so the real question to me I would answer Yes, in my personal opinion, I think that Coinbase is worth 100 billion dollars, because it’s not only aware of the fact that people are more and more interested in purchasing Bitcoin as an alternative to cash or gold as a store of value, but also using this as a much more lower friction way of making transactions. I think that Coinbase is really aware of both of those opportunities, I would probably say yes, personally,

 

Dan Kline  

That brings us to the end of this edition of 7investing Now. If you have questions for us if we didn’t answer your question, I know Maxx wants to answer D’s question. But we have three more hours of recording to do for the pitches today. So I’m not gonna let the show go that long. You can hit us up @7investing that is at the number 7investing. Sorry, Sam, I did it in a different order than what I normally do. I apologize @7Investing on Twitter. Or if you have a question about our service about your membership you’re thinking about becoming a member you want to know. You know, Matt’s fried chicken recipe, whatever it is. That is info@7investing.com I don’t know if Matt has a fried chicken recipe I just sort of feel like he probably does.

 

Matt Cochrane  

I absolutely do. I go to Popeye’s recipe.

 

Simon Erickson  

Good choice.

 

Dan Kline  

We live in the south, there’s got to be better fried chicken available than Popeyes. That being said, we’ve come to the end of the show. We’ll be back Monday at the regular time. Enjoy your weekend. See you Monday.

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