Is Facebook a monopoly? The Federal Trade Commission (FTC) thinks so and it has filed a new complaint against the company after a federal judge rejected an earlier filing. The new suit alleges that Facebook “used anticompetitive acquisitions of Instagram and WhatsApp to further its monopoly power and that it also unfairly blocked rivals from accessing its application programming interface (API).” What will happen? Most of the 7investing team joins 7investing Now to discuss and, we’ll also take a look at how we describe our investing styles.

Transcript

Samantha 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 edition of 7investing Now my name of course is Daniel Brooks Kline. I’m the host of the program. I’m gonna be joined today by Simon Erickson, Matt Cochrane and Maxx Chatsko. And Steve Symington has popped up, we may see Dana Abramovitz. We may even see Anirban Mahanti at some point on the program, we’re going to talk about the latest Federal Trade Commission lawsuit against Facebook (NASDAQ: FB). This could have some pretty serious ramifications for the company. It might have big ramifications across all of the major tech companies.

And I think it’s fair to say there is some fraught and peril with this based on who is attempting to bring this lawsuit. We’re going to talk about all of that. We’re also going to talk about your investing style. Simon asked you to have one word to describe your investing style, and a lot of you answered so we’re going to share a lot of your Twitter posts. We’re going to talk about our own investing style.

But we usually start these 1230 shows with something a little bit looser and a little bit silly. Dana, welcome to the program. We are going to talk about our dream travel destinations. I know during the pandemic, my hobby has been booking trips that probably weren’t going to happen. I probably had like 200 canceled trips, it’s probably closer to 30, but it was a lot of them. So I will start with Matt Cochrane. Matt, I know we sort of live in Paradise, but where would your dream travel destination be and please share along in the comments anybody who’s watching the show where your dream travel location would be?

Matt Cochrane: I actually want to see more of the American West. So everything from the Rocky Mountain National Park to the Grand Tetons, to Glacier National Park to Yellowstone to Yosemite, those are places I’ve never been. And I feel like you know, I’ve done an okay amount of traveling. It’s hard to travel with a lot of kids, but that’s something I would love to see more of.

Dan Kline:  Yeah, getting to meet Yosemite Sam is absolutely awesome. Simon, your thoughts on where you’d like to travel?

Simon Erickson:  I vote from Missoula, Montana. Dan, I want to go vacation in Steve’s backyard.

Dan Kline  Yeah, that that would be the first person to ever answer Missoula, Montana, Steve, I will let you go next.

Steve Symington:  There is a book called The River Runs Through It about Missoula. So I don’t know about that first person thing, but no, I don’t know. I’ve never been to Europe, but I would love to go to Scotland and go on a scotch tasting tour. That’d be fantastic.

Dan Kline:  Yeah, Steve’s pick is right where mine is. I would like to go back to Ireland and visit Scotland. Ireland was the most friendly place I’ve ever been. If you’re an American, and you make it clear, you’re not a jerk. People are unbelievably nice to you. And I’d like to get to go back. Dana. I know you don’t have a lot of time to travel. But where would you like to go if you were able to travel? We are having some technical difficulties. Dana, are you there? Why don’t we switch over to Matt? Okay, there we go.

We had Dana for a second then we lost Dana. We will try her later. And there we go. Let’s try one more time.

Dana Abramovitz:  I’ll be quick continental Europe because I haven’t been before.

Dan Kline:  I am very excited to go to Europe to go see my brother over in England at some point this year. Maxx Chatsko I know your dream trip is coming up in February with me where we’ll be visiting. I’m not even sure where we’ll be visiting. But we’ll be at a six day cruise going throughout I want to say the Caribbean but I don’t even know but aside from that, what is your dream destination?

Maxx Chatsko:  I’ve always wanted to thru hike the Appalachian Trail so you start in Georgia you walk all the way up to Maine takes about four or five months and always has a huge commitment in terms of time. So maybe one day you know when we’re all Rolling in here 70 investing I could take off six months and go like the Appalachian Trail.

Dan Kline:  Why don’t you electric scooter it it would be that much faster.

Maxx Chatsko:  There are people who like run it. I forget what it’s called, like trail marathons and they do it in like days. It’s kind of insane. It’s like 2000 miles.

Dan Kline:  Andrew M says Hey 7Investing crew. Good morning. From Cali. Yeah. Good morning to you. We appreciate everybody watching. I always say good afternoon, but it’s really it’s morning for some of you. It’s evening for some of you we have people all over the world watching this program. Fabtech2012 says Vienna yes high on my list of places to go. And Gregory Spears says Mars. I do think that might be possible in in perhaps our children’s lifetime, but probably not something we’re going to get anytime soon.

But let’s move into what is happening with Facebook and the Federal Trade Commission. So this is a refiling of a lawsuit that was tossed out of federal court, but they weren’t given a chance. So they filed an antitrust complaint against Facebook. This happened yesterday. Facebook has until October 4 to respond to the amended complaint. And basically, it maintains the core arguments of the original.

This includes allegations that Facebook used anti competitive acquisitions of Instagram and WhatsApp to further its monopoly power. And then it also unfairly blocked rivals from accessing its application program interface. That’s API for those of you who are not super into the technical world. And it’s basically saying that Facebook failed in innovation, so it bought companies and stifled them as a way to to compete. These are really serious allegations. Matt Cochrane, what’s your 10,000 foot takeaway here?

Matt Cochrane:  Basically, this is a like you said, this is a refiling of the complaint that was earlier thrown out. Um, look, there’s a lot of things here. But the main takeaway that Facebook’s unlawful, like the suit alleges that Facebook sought to suppress competition by buying up rivals, which includes like WhatsApp, and Instagram. Look, these are acquisitions that the FTC approved almost a decade ago. And to now go back and use, like 2020 hindsight vision and say, not only were they acquisitions approved by the FTC, almost a decade ago, but like, for most of that time, since then, like the, like, most people were like, Wow, I can’t believe Facebook paid all that money. For those acquisitions.

WhatsApp doesn’t make money, like it paid almost, you know, paid over $20 billion for WhatsApp, Whatsapp has earned almost nothing since that time, and Instagram, like, you know, they paid a billion dollars for Instagram. And for years, people like, oh, Facebook vastly overpaid for these acquisitions, the FTC approved the deals. And now to go back a decade later, and just say like, these were actually anti competitive moves. I think that’s like, you’re really using the benefit of hindsight.

And if you did that, you’d go through a number of companies with acquisitions that they made years ago that were approved at the time, and I’ll say like, Oh, no, these are these are actually like, anti-competitive moves, and we need to unwind them, like, are you going to go back to, you know, Microsoft buying MS DOS and say, Well, no, Microsoft needs to spin off windows that was an anti competitive, anti competitive move?

Well, I guess where does it end? Like the way I see it, like, what, how far back? Can the FTC go and say like these moves that were approved, at the time by all the regulatory agencies overseeing them are now we’re now going to unwind them? Because we have the benefit of hindsight.

I know there’s more, there’s more to being a monopoly than just to say you’re though you’re the only one out here. But the suit also alleges that like Tik Tok is not real competition to Facebook, that Snapchat is not real competition to Facebook. I mean, that’s indistinct. And I think that’s, I think that’s kind of ridiculous, just because they’re not exactly the same. They are social media sites that share many, many similar characteristics. The suit was started out in June it was dismissed, didn’t even go to trial. I think there’s a decent shot that happens again, but we’ll, we’ll have to see.

Obviously, if it’s not dismissed, this is gonna be a years long thing. where it won’t be resolved for years. But I do. Look, Lina Khan is a new chairwoman of the FTC. She has written several papers when she was at Columbia University, there are law University there. She has a very aggressive take on anti-competitive move the monopoly powers. So I think you’re gonna see a lot of these lawsuits in the coming years. And we’ll see how they go. But the fact that it was dismissed in June, I guess we’ll have to see. It’s the only way to put it. But I do think it’s a little ridiculous that they can go back this far.

Dan Kline:  I want to jump in and point out that just because you buy something doesn’t mean it’s going to be successful. Twitter bought vine was it Yahoo, who bought Tumblr, we have, we’ve seen all sorts of sites, buy things that look like they’d be good deals, and they don’t actually work out. So Facebook has to get some credit for the fact that WhatsApp and Instagram have built huge audiences.

Matt Cochrane:  They’ve shown phenomenal vision and execution on both of these acquisitions. Phenomenal. And now you’re and now we’re going to punish them for that vision in the execution.

Dan Kline:  Yeah, I want to bring Maxx in here. Because when we think monopoly besides picturing the guy with the monocle in the game, we think only player in the space. We think, you know, if AT&T buys Verizon and T Mobile, they are then a monopoly. But that’s not really the definition of Monopoly being used here. Maxx, you commented on this on slack. Why don’t you weigh in on sort of how we’re sort of looking at monopoly a little differently than the FTC is?

Maxx Chatsko:  Yeah, I think Matt kind of hit on the head a little bit there. And this is his area not mine, I just am a millennial who likes to complain a lot. But I think a lot of people take like to, like they they, like you said, the board game definition of Monopoly to mean, you know, you have a 90% share, there’s no other platforms that could possibly do what you do. And that’s not really like the legal definition of monopoly, a lot of it really leans on anti competitive behavior. So that’s the argument, the FTC will have to make it just at a higher.

And so in this argument, as again, Matt touched on, you know, they really had an a more a much narrower definition of what Facebook, you know, is doing and why it might be a monopoly in its own little area. And that’s like mapping user behavior to then how it sells ads, maybe even influencing human behavior and user behavior as well. And I know Simon talked about this recently to Simon?

Simon Erickson:  Yeah, absolutely. I think that’s the key is right. This is going after Facebook, I mean, the the specific claim, and the allegation is that this is specifically for the use of social graphs to map user connections, features that are made for the users to interact with personal contacts, rather than broadcasting information. So the FTC doesn’t like that Facebook can, Matt can go post about battlebots, an event that he’s really excited about.

And if I like that, it’s gonna say, Oh, hey, I saw that you liked Matt status about battle bots. And then Facebook can now send me personalized advertisements about that similar, like, if we’re in a bus driving down the highway, and we see a billboard about battlebots. And Matt says, hey, that’s pretty awesome. And then three other people in the bus chime and say, Hey, I like that, too.

Facebook just has too much of a monopoly power over user interactions, because it’s got billions of users. I mean, that’s the the crux of this. I think that it’s gonna be a tough sell to push anything through to try to regulate that. I agree with a lot of what Matt said, but again, it’s something we shouldn’t take lightly. Because we know that Mark Zuckerberg is so visionary in his acquisitions, right? He does things like this several years ahead of anyone else talking about it.

He’s been criticized for spending billions of dollars, whether it’s on WhatsApp, or on Oculus or anything else, and then later on, they try to come back and regulate when it starts does catching on. I think it’s gonna be a tough sell. But it would be very restrictive to what Facebook does today if it goes through.

Dan Kline:  It’s very tricky if we start penalizing companies for being successful. So Spotify bought what is now called Green Room, it was called clubhouse, that locker room it’s been a lot of different things. And if they can build that into a platform by leveraging the other assets they own well, they were smart to buy it before Disney bought it or other things. So I think this retroactive part of it is a little bit tricky.

I wanted to share a funny comment from Max Lucas, perhaps to open the floodgates on people comment again, Sam, if you want to bring that one up. He says not to be pedantic but unfortunately, dad, Mr. monopoly does not have a monocle common misconception that, that I did not know that that is a great one, the worst thing you can hear as a parent, the worst mundane thing you could hear is, Hey, would you like to play Monopoly? There’s nothing fun about monopoly.

But Simon, I wanted to talk about all of these behaviors Facebook is being accused of maybe not the ad targeting, but the buying smaller companies just to just to stifle them or make the technology go away? Couldn’t you argue that Apple and Microsoft do the same thing? How often does Apple buy a 40 or 50 person company, and then roll that like one tiny aspect of what they’re doing into a feature on another Apple device and thereby kill the competitor? This is pretty common. And it feels like there’s a whole range of startups that are created for exactly that purpose is they want to get on the radar of these big companies and be purchased. I know I threw a lot out there, Simon, but feel free to jump in Steve, jump in if you want to as well.

Simon Erickson:  Oh, go ahead, Steve. My only comment is I don’t take 20 seconds to say this is the new normal for Facebook. I mean, you’re gonna see bills come through all the time and people gunning for him. Matt and I have talked about this for years, I thought that there was too much regulatory scrutiny for Facebook. What was it Matt three years ago, and I’ve been proven wrong as the stock continues to climb. I no longer and so bearish about that argument. I don’t think it’s going to be an issue. I just think it’s continually something that Facebook’s gonna have to address every year.

Dan Kline:  It’s been something that Microsoft has had to address on a global level. If you remember, Microsoft has faced a ton of scrutiny for how it bundles its own apps. And for even things like you know, making, you know, being the default search engine when you log in. This is not new for tech companies. Steve happy to give you some thoughts here.

Steve Symington:  Yeah, and I think back to when was it it was like early 2018 when Zuckerberg was being grilled by Congress and just kind of made them all look silly with this responses you know and and I think it was Lindsey Graham that was that was grilling him and said you don’t think you have a monopoly? And I think he responded I’m paraphrasing sure doesn’t feel like it. And I think that speaks a lot to sort of the the the focus of the complaint is is interesting because it kind of assumes that  Facebook’s command of user data is going to give advertisers no other choice. And maybe I’m wrong there.

But I’m not convinced that it will, it might mean their ads are more effective in their ability to actually use our data to better target things. And maybe that’s what they’re upset about. But it is frustrating too, because, you know, Simon spoke earlier about kind of this after the fact how companies are often criticized, like Facebook, oh, he paid way too much for that.

And they criticize how much they spend for it. And then it turns out to be a fantastic deal. 10 years later, and they go, Wow, they didn’t pay nearly enough for that. And, and part of that’s their vision. And, and as Matt was saying, and their execution, to be able to leverage that platform to improve their own. And it’s punishing them for the success of their execution. So it’s kind of a slippery slope, and how do you walk it? But, you know, to prevent these companies from becoming all powerful? Is that their concern? Go ahead, Matt.

Dan Kline:  I want to talk about – Matt, I’ll jump to you in a second – but I don’t want to leave the advertising question alone. Because I think it’s important to consider who’s doing the regulation here. I’ve talked about on social media, that we had the FCC sort of bungle radio and television regulation for 30 years, and really, you know, not understand the subtleties and how content is being delivered. I think one of the issues we have here is that you have a federal trade commission that doesn’t understand what say Roku is doing, or what or what Viacom is doing in the targeted local advertising space.

So you could argue that as a small business owner, and Dana, you can weigh in here that Facebook is a place you should be for advertising. But you could also argue that if Roku catches up, or if Pluto which is Viacom own catches up, they should be able to deliver that micro targeting and be viable competitors. Look, local radio remains a viable competitor in many markets for Facebook advertising. Dana, you have a small business, would you like to weigh in here?

Dana Abramovitz:  Yeah, no, it’s all really good points. And as a business owner, I use Facebook, just because that’s where my clients are. And no, like, if you want to advertise your business, and hopefully you guys can hear me in the internet’s not horrible. If you want to advertise your business, you want to do it, you know, where your demographic is. And you know, my people are on Facebook, I mean, some on Instagram, Facebook owns Instagram, as well. But you know, hands down, Facebook’s the place where my users are. So that’s where we advertise.

Dan Kline:  And when I used to run the toy store, we advertised on social media, which was younger in those days. But if we wanted to advertise, say, our model section, we might advertise on the History Channel. If we wanted to advertise our gaming section, maybe we would go to sci fi or back then there was g4. So you could there really are other choices, Matt, I stepped on you a little bit there. So why don’t you weigh in and Dana, if you want to mute, there’s a little bit of a feedback from you.

Matt Cochrane: Oh no worries, I’m actually going to change the topic a little bit. We were talking about acquisitions that other companies have made. And like, you know, sometimes these acquisitions are shut down, which is like, a lot of times people use it like that as de facto evidence that maybe like they just bought that this to squash the competition? Well, a lot of times these acquisitions to the smaller acquisitions, if you will, like Apple, Microsoft Facebook, Alphabet, take your pick there.They’re made to get those developers like.

MasterCard CEO said, like, yeah, we acquired this company. And it’s nice what they do, but the real thing was they have like a, they have 50 mobile payments, like engineers on their team, you know how hard it is to go hire 50 mobile payment engineers out on the open market, it was easier for them to make the acquisition. And a lot of times when you know, talent is scarce, like acquisitions are made for talent like that. So I don’t think, you know, just because a large a big tech company buys something and then shuts down the service doesn’t necessarily mean they were just doing it for anti competitive behavior.

Dan Kline:  Yeah, so we’re gonna start wrapping this topic up here, because we are trying to not do an hour long show today. And there is an unbelievable amount we’re going to cover here, this is going to be something that comes up, there are political winds on both sides of the aisle to regulate big technology. Traditionally, our government doesn’t get a lot done, because there’s obviously a very close divide. But you might have some action taken here for different reasons. So Simon, I’d like to hear the long term take. But I’d also like to hear should I be worried if I’m Apple? If I’m Amazon, there appears to be not a lot of understanding and a lot of desire to heavily regulate here.

Simon Erickson:  I agree. I agree. Dan. You know, we obviously want consumer protections out there. We don’t want companies to be recklessly using our data in a way that steps on our privacy, but on the other hand, as Investors in this space assuming that all investors are complying with regulations that are out there, you want to have companies try to be monopolies. Right? We call those competitive advantages.

I mean, it’s funny when you get to be large, and you’re a multitrillion dollar company, you try to convince everybody that you’re not a monopoly anymore. No, no, no, we’re not doing anything. That’s that’s monopolistic out there. And I think the investing takeaway from all this is, at least in my opinion, if you’re looking at Facebook, and you’re following the news, but if you’re a long term investor, the question is, is Facebook going to get broken up?

Or is this going to be an operating expense? Where Mark Zuckerberg is going to have to be subpoenaed to court to talk about you know, what they do? And and kind of this is just continuing to gnaw away at an operating expense line items? Or is Facebook really monopolistic? And we’re gonna get broken up? I don’t think that it is. Personally, I’ll speak for myself on this team. But I think we’ve seen this. A lot of times, this is not Facebook’s first rodeo getting congressional subpoenas. I think that this is going to be just kind of a barrier to entry for others. You got to comply with regulations. And Facebook’s going to have to continue to fight these every year.

Dan Kline:  Well, Simon, let me ask one follow up question before we move on here. Is it actually bad for shareholders? If Facebook was forced to like spin off WhatsApp, wouldn’t that just create another company that you would own a piece of that probably has the heft to this, this isn’t having to spin off like Facebook dating or something that didn’t work? This would be a really major spin off. And we’ve seen, you know, eBay spins off PayPal and PayPal is by far the more successful company. Couldn’t that happen in this case?

Simon Erickson:  Yeah. I mean, if it’s free markets, and you spin it off separately, that’s a great win for shareholders, I think the question for me is, is if the regulator’s allowed the data to go back and forth between those companies, a lot of the critiques of Amazon and Facebook, too, is like, oh, they’re, they’re too powerful. You know, Amazon’s got web services, and then they got the marketplace, and they got to the divisions, can you share all of those user interactions between all the different groups, that would be the thing that would make it less valuable to split them off? But if you still maintain that, of course, you’re gonna unlock more value doing it that way?

Dan Kline:  I think this is a very slippery slope, because you could make this argument. Certainly for Amazon, certainly for Apple, you could argue that Disney has a monopoly on all the best content. You know, it gets really, really tricky. Matt, I’ll give you the last word before we move on here.

Matt Cochrane:  No, I think we I think we covered the bases pretty well, to be honest, I don’t think it’s catastrophic. At the end of the day, if Facebook is spun off for shareholders, I do think it’s not ideal, though, also, like, you know, and a lot of it would come into the details like, what exactly are they spinning off? What are going to be the separate companies, but also the thing is to it’s like, the thing that keeps coming to mind is like, what, what is this going to solve?

If we’re worried about user privacy, like his Instagram is a separate entity, then Facebook to set solve user privacy, and I don’t see how it really does. Like user data will still be out there and only be used by two separate companies. I don’t know if that’s necessarily better for privacy. I think a lot of times, a lot of people don’t like certain companies as they want to see them punished. But I don’t know if that makes these cases, right.

And I don’t really understand exactly what this would solve. There’s lots of competition out there for people’s eyeballs, and their attentions. And if you want to make a super narrow definition on what exactly Facebook is, and argue that these Tik Toks and Snapchat aren’t competitors. Like, I guess like, You’re one, you’re using the benefit of hindsight, and two, like I really don’t understand what it what it solves at the end of the day, if you’re worried about user privacy and things like that,

Dan Kline:  You have to check out Maxx’s Tik Tok – no, that’s not a thing. You’re watching 7investing Now we’re going to talk investing styles in a second before we do that. It feels weird for me to say this, but we are approaching the first of the month. On the first of the month, we release our seven highest conviction stocks. Simon, we each pick one stock, how does that work? What do we do for our members? What does it cost? What do you get give people the lowdown on what being a 7Investing member means?

Simon Erickson:  It’s always one of my favorite parts of the month, Dan, because you get to see what everyone else on the team is looking at. Right? It’s it’s a lot of the times not obvious companies. I mean, sometimes it is large tech companies that we’re interested in. Other times, it’s companies that several of us on the on our own team had never heard of before. But then you start really getting into the nitty gritty of what is the investing thesis. Why is it we’re so interested in this? What should we be following along as an investor with companies like this to determine if they’re still earning their keep in our portfolio.

And so what we do with 7investing is we pull all of those ideas together, each advisor brings their best idea to the table every month. We publish those reports on the first of the month. And then one week later, we actually publish behind the scenes our conversations of why we’re so interested in those companies to so it’s a pretty unique proposal that we have here at 7Investing, Dan $49 a month 390 $9 a year, I think that that’s a service that quickly pays for itself, depending on how actively you’re trading in the stock market.

Dan Kline:  And you get access to as much or as little data as you want. So if you want to read the whole report, and watch the entire video, you can do that. If you like the company already have thoughts and just want to know about valuation or management, you can skip to those sections, and we talk about our highest conviction report, a company this is really hard to do.

I put it out to you, Simon, you gave us an assignment a few months back. And I just assumed that one company I really like would have been a pick at some point. But it actually hasn’t been even though I think we would all say it’s a good company. That’s because we’re picking our highest conviction pick every month. So sometimes you I have one this company’s been my second for a while like so probably eventually we’ll make it on the scorecard. But you are getting top tier incredibly well vetted picks, if you would like to become a member, please go to 7investing.com/subscribe.

As we said, $49 a month or the incredible value of $399 a year, you have been quiet out there 7Investing nation, we would love to hear more from you. You can ask us some general questions if you like. But we’re going to pivot now. And we’re going to talk about what one word best describes your investing style. Simon, this was your question on Twitter. So I’ll let you go first. What one word would it be?

Simon Erickson:  Yeah. And just to kind of set the table for this, Dan, I always really liked to put out these polls, you know, because investing is such a personal thing, right? There’s no absolute right way to invest, or there’s not one absolute best word to describe yourself as an investor, we’re looking for different things out there. And the interesting part is, is I think it’s important to know thyself, right to know that investing is personal, know what kind of investor you want to be. And then actually find companies that will align with that mentality.

If you’re super risk averse, and you don’t like to see the volatility of companies shooting up and down, maybe you don’t want to go after these to be small cap biotech companies that you’re going to have to get used to volatility as part of the name of the game. On the other hand, if you’re investing for 20 years, and you’re putting a small amount in every month, maybe you want to find really, really small cap companies like those small cap power caps that I just mentioned.

So I think it’s important to not only know thyself, but also look for the companies that match your definition of what type of investor you are, and then kind of figure out how are the companies operating? are they putting all their money back into r&d? Because they’re in growth mode right now? Are they sharing all of their cash flows out as dividends? Because they’re a mature part of the industry right now?

I mean, this will kind of align with not only the kind of companies you picked, but how your returns are being generated in your portfolio. Investing is incredibly personal, Dan, I think there’s no right answer, like I said, but again, that’s kind of the key though. So we have here with 7Investing, and why we have different types of companies every single month.

Dan Kline:  Matt Cochrane I will let you go next. What is the one word that best describes your investing style?

Matt Cochrane:  Moats! I look for economic moats and companies, right, I want companies with, with competitive advantages. And the thing I like about that is it can take me across industries, though, like I obviously have a special interest in financial services and FinTech and things like that. I’d like learning about all types of companies and all types of businesses, all types of all types of industries.

And I love that like just looking for moats in companies competitive advantages can take me across all these different areas. I can learn about different companies. I love doing that. It’s fun for me, I geek out on it and but that’s what I look for. I look for a company with like some kind of advantage in its business model, or like its its its area of expertise.

Dan Kline:  This is just Matt bragging that he lives in a castle. That is why he likes moats. Simon, I wasn’t going to call you on this but you did not give me one word you You gave a very good answer. But there was no one word and you’re the boss. So I wasn’t gonna call you on it. But you pointed it out in our private chat.

Simon Erickson:  Innovative, innovative, Dan. That would be the word I describe myself as an investor shaking up the status quo and doing something that isn’t isn’t vastly appreciated by a lot of the media that headlines out there yet.

Dan Kline:  Steve, I’ll throw it to you. Caffeinated is not an option.

Steve Symington:  Always caffeinated. I’ll cheat a little bit because I was tempted to say disruptive because that’s the kind of companies that I tend to look for I look for companies that can either disrupt or create new industries themselves or fundamentally change the way we do things, but I’d say more than anything patient is how I function right?

I buy companies with multi year timeframes and that’s the way we all invest but sometimes it takes a long time for the thesis to really play out in earnest and for kind of your life changing gains to happen. And, and and i think patient describes it well, like you look at the best tech stocks out there. You know, I bought Nvidia back in like 2012. And, you know, for example, but it took me it was only just a few years ago when it really, really skyrocketed. And it’s one of those things where you tend to just sell for an easy, double or triple or quadruple or whatever. But for the biggest gains you have to be patient.

Dan Kline:  And when we say we’re long term investors, it’s because we’re actually long term investors. And one of the challenges about what we do is obviously, you kind of want to take, you know, look at the scorecard and consider what the score is. And the reality is, you’re still in the first inning or the first quarter. So we are all long term buy and hold investors. Maxx Chatsko, what is your single word here to describe your investing style?

Maxx Chatsko:  I came up with early, it’s kind of similar to Steve’s, I guess, just from a different angle, we’ve covered different parts of the market. I think a lot of people are very interested, a lot of investors very interested in owning tomorrow’s best stocks, tomorrow’s best companies, but very few tend to have the patience to see through.

A lot of the trendiest companies now the ones that are really taking off, as Steve said, even in biotech, drug development, synthetic biology, those did nothing three years ago for a very long time. And now they’re kind of taking off. So if you can identify those companies early, with good rigorous research and frameworks, and then stick to it accumulate over time, and build a position that you’re comfortable with, eventually, that does pay off in the long run. So we say buy and hold a lot in investing, I kind of change it up a little bit to accumulate and wait. I think those are two better verbs.

Dan Kline:  So we’re gonna go through some of the ones you shared with us on Twitter, but we’re gonna start with mine. And of course, we would love your questions and comments. Sam Bailey, if you want to share mine, I said experiential. What does that mean? I like to invest in companies I can put my hands on, I can visit. I start with is this part of my everyday life, it’s not every company I invest in. But a lot of companies I invest in started with, wow, this is something I like. And it’s important to me. So maybe it’s actually a good investment.

Now, not every company I like, is a good investment backup was a publicly traded company. For example, I would not have been a Dunkin Donuts investor, though I was a regular Dunkin Donuts customer. Maybe not that regular, I’m actually more of a Starbucks guy. But that being said, just because you like something doesn’t mean it’s investable. But that is a reasonable place to start, I’m going to throw out pics from our audience from the from our Twitter universe. And then each of us can weigh in with a few words, just just just one person per thing. I’ll start with Simon, let’s throw up our friend, Ganga Hassan, who I was actually emailing with this morning. And he says, stakeholder Simon that touches on one of our 7Investing principles.

Simon Erickson:  So perfect, you get a great idea. I mean, you’re an owner in the business, the decisions that managers make on what their company is doing with your capital will directly influence your returns. I love that one.

Dan Kline:  Len, we will comment on your question later, Robbie shots has all or nothing for Maxx. Yeah, with Maxx’s picks, you have to have long term conviction because they don’t play out quickly. Max, there’s no express drug approval, right? You can’t just like think of it on a Monday and have it in market and Friday. Hey, like this is going to take years for many of your companies.

Maxx Chatsko:  Yeah, the realities of drug development do slow you down, right? So it’s over an eight year period there, I’d only be like a handful of days that really actually matter. And that’s not really necessarily true. But you know, I also I choose like companies that I only invest in terms of like technology platforms, right. So even if they one failure, two failures, or five failures, in the long run, if they execute well enough and they have enough successes, then that’s fine. It should add value to shareholders over time, but so important that you know, we have this like idea that drug development can be binary. And I guess that’s not really how I approach it necessarily.

Dan Kline:  We’ll take the next one from Super Mario investor, MD, who I hope is actually a doctor. I know he’s a Magic the Gathering fan. We chatted about that on Twitter and he says optimistic. Matt Cochrane you know, I am a unbelievably optimistic person I have a a very things are gonna work out is optimism. How you fare? How do you view optimism in the market?

Matt Cochrane:  Yeah, there’s a great anecdote out there. I forget who said it. But like pessimists sound, smart, optimists make money. It’s good to remember that, like, the US stock market over time, is faced, like a lot of crises and challenges and depressions and wars and things like that. And yet, for the long term shareholders, they’ve always come out ahead. So it’s definitely good to be optimistic in the market. It’s hard to invest in hold for the long term if you’re not.

Dan Kline:  I’m gonna have two in a row that I’m gonna throw to Steve here. Our friend Brad Freeman at stock market nerd says slow and then Brian says methodical, pretty much the same words there, Steve. But your thoughts here?

Steve Symington:  Yeah, I like those words and, you know, slow and methodical, I think that speaks to the idea. And one of the the ways that I approach investing is I’ll find a company that I like at a valuation that I like. But I’ll also I also won’t buy it all at once. You know, if I’ve got money that I want to put to work I’ll, I’ll open a position over the course of several months or several quarters. And and I mean, there’s stocks I’ve owned for more than a decade that I add to gradually every once in a while. And yeah, slow and methodical might not be as exciting as some of the day traders out there. But it works. And that’s that’s how you really generate wealth over the long term.

Dan Kline:  So I’m going to take the next one because I don’t think it would be fair to throw it to Maxx without giving him time to think about it. But Thunderdome capital says artisanal. I think this is a really interesting word, because we really are curating and picking a portfolio of things that’s very unique to us. So I don’t know if that you know, completely matches the definition of the word machismo, but I really like the spirit there. But we will give an easier one to Maxx Chatsko. This comes from MS and he says long term that is of course, the foundation, followed by plant saying unproductive and growth chaser saying long term lazy. Yeah, that’s the nice thing about being long term, you do kind of get to be lazy, or you don’t have to aggressively follow everything every day. Maxx, your thoughts here?

Maxx Chatsko:  Yeah, I agree. It’s kind of like what Matt was saying, right? You know, it’s, it’s simple, but it’s not easy, right? Being a long term investor, it’s really easy to let your emotions get the best of you or maybe pay too much attention to noise. So as you get more experienced as an investor, you kind of learn to tune those out, to tune into the signals, and not let your emotions get the best of you. So a lot of it is kind of being lazy. I guess it’s a funny way to put it.

Dan Kline:  We’ve got four more here. So we’re gonna go once more around the horn, we appreciate so many of you weighing in. We will get to your questions and comments. We got a great one from Len that we will get to at the end of the programming.

But three says and Simon, I’m plan this coming to you. He says 7Investing, we are honored if that’s the word you’re using to describe your investing style. But Simon, that’s kind of the point of what we do. Right?

Simon Erickson:  I love that answer the most. Thank you. Sorry, I just kind of did piggyback on that. I guess you know it because 7Investingis so diversified, we try to make it easy. On our site on 7Investing.com/recommendations. You’ll see at the top, we have filters, right? So if you are saying you’re a long term investor, or you’re a optimistic investor or a Ura, you know, all the different things that were mentioned here today, you can find kind of investments that align with those, I think the next step is to say, Okay, what kind of investor am I and then when you’re putting money to work, make sure that that aligns with, with what you’re expecting what your risk tolerance is, what markets you want to get into. I’m trying to make it super easy to see all of our picks. So So thanks for the shout out. I really glad that you liked the service.

Dan Kline:  I love seeing on Twitter when someone is a fan of one of our investing styles. And that’s kind of why we do and I talk a lot about movie reviews that you knew if you liked what say Roger Ebert liked that you would sort of use his picks more.

So if you look at what I’m picking. And that’s more comfortable for you than let’s say Maxx’s picking. Or maybe it’s a couple of us. We have something for everyone. We have three more, we’re going to go through them quickly here. Durham Dempster says selective. Matt, we are absolutely selective your quick thoughts here?

Matt Cochrane:  Yes, absolutely. We believe we can beat the index. And at the end of the day, you know, like subscribers, that’s why they subscribe to us that we can, over the long term like our performance will beat the index. And by being selective, like by picking out winners and ignoring losers, we can outperform and have better returns on our portfolio to help us better accomplish our financial goals, whether that’s retirement or college savings, or travel, giving to charities, whatever your financial goals are, by being selective with our stock picking, we hope you can better achieve them.

Dan Kline:  Plus, Matt’s gonna pay for dinner next week. Security Sherpa says opportunistic. Steve, your thoughts here?

Oh, Steve is either doing a mime or perhaps.

Steve Symington:  Of course, you know, opportunistic. And that’s the idea of our seven top stock ideas that we release every single month as well as our most intriguing ideas chosen from all of our past recommendations every single month and our subscriber call, which we just discussed this morning with our members.

We’re opportunistic about the stocks that we choose, we tell you which stocks we like in any given in any given month in any given week. And we talk about it on a continuous basis. So obviously opportunistic, yes, of course.

Dan Kline:  I will also say security Sherpa sounds like a low grade x men. That is a great that is a great superpower. We can picture Maxx Chatsko you’re gonna get the last one here because it fits your style. The word is and this is from Jay mapes. It is risky. A lot of your pics are risky and I own just about all of them.

Maxx Chatsko:  Yeah You know, I think with high risk comes high reward, right? That’s something I came up with. Many people don’t know that, that that’s my phrase. But yeah, and it’s important to there’s different kinds of risks, right? There’s the risks of drug development, obviously, there’s also valuation risks. I’ve tried to avoid those with my recommendations here, and so forth. And then there’s just execution risk from the competitive landscape, regulatory risks and so forth. So important to note those, there’s different types of risks. But yes, I tend to invest in some riskier companies.

Dan Kline:  Maxx was also the first person to say with great power comes great responsibility that often gets credited to spider man’s uncle, but in fact, it was Max, we are going to take some of your questions and comments. I’m going to turn this one to Simon Len razor says, Do you ever recommend closing a position? We talked about this in the members call, but it’s a really important question to answer here?

Simon Erickson:  Yeah. Would you mind Sam if you also put up fabtech 2012 comment there about most people saying that they are buy and hold investors, but in reality, they are more like swing traders. The reason that I wanted to couple this with Lin’s question is yes, Lin, we do have a process that we can recommend a company that we’ve, that we’ve that we’ve made, we made a recommendation, and we can recommend selling it, we have a process in place to do that. We have not done it yet.

But the reason that I want to couple that with what fab tech said is that to re emphasize that we are approaching each one of these picks as a long term recommendation. And that’s hard to say. But if we were ever going to recommend to sell, it would have to be a thesis breaker for the company. We would never sell based on valuation of a company being above its price target in the short term. Or we would never sell if we just said all the some short term headwinds that we think are going to be a problem for six months or something like that.

We’re putting our feet to the fire and saying, Hey, we’re picking every one of these companies we’re putting on the scorecard for everybody to see, you can transparently see every one of our performances from every one of our picks, and we have yet to sell anything. I mean, if there’s any better definition of long term buy and hold investor, I would love to see it. Because every time we go into this, we’re considering indefinite timeframe, we’re gonna hold indefinitely for all of these.

And so I think that to answer the question of do you ever recommend closing a position? We have not yet, we’ve seen things we don’t like about previous recommendations, and we call those out in our company updates that we provide to subscribers continually.

But if we were ever going to sell it would have to be basically us throwing in the towel and saying we don’t see any way for this company to come back because we are considering the long term in every one of these picks.

Dan Kline:  And Simon, let me ask a follow up here. I know in my portfolio, I’ve been very open and in the past eight years, I’ve only sold one stock I sold out of WWE stock, I actually think is going to financially perform well. I just sort of didn’t feel comfortable owning it the way they’ve treated people during the pandemic. Have you done enough to be specific on the stocks? But how often are you selling in your portfolio I’m going to assume it’s very occasionally right?

Simon Erickson:  Occasionally lately because 7Investing needs some capital Dan. So that’s been my primary reason for selling it at least from a personal level. But again, investing is personal, right? There’s nothing wrong with selling companies if you want to buy a new house, or take a vacation or you know, give some money to charity, there’s nothing wrong with taking money off the table, we just say that the long term investing gains are the greatest when you do buy and hold and then let it be personally for you.

I would say for me personally if I was ever going to sell just because it’s something I didn’t like it would be excessive risk taking by a company that doesn’t know what they’re getting into and it’s completely outside of their core competency or just really bad behavior by management team those would be two really, really big red flags.

Dan Kline:  I’m so glad you went there because one of the reasons it’s okay to sell is when it is time to do something that you invested for in the first place I know that I’m looking at at some point in the next year buying a new principal residence and if we do that, then it might make sense to sell some investments to pay for that because you know what you do in your house? You live there that’s a really that’s not me, you know, you know, buying a balloon ride around the world or something that’s transit and vapor though if that’s your dream, you can buy the balloon ride around the world if that’s why you were investing.

I want to get to just a couple more comments our friend Daniel current and it just occurred to me in my head how often I say our friends so we appreciate that so many of you are just part of the 7Investing community and interact with us both on this show and on our social media and in the members call. I feel like I know a lot of you and that’s really great. Oh snap the whole crew is on man. I’ve missed watching you guys live we appreciate the support.

We also know that you have lives and you can’t always watch the show live. So we appreciate you watching it on all the various channels in 7investing.com/livestream. It’s on our YouTube, it’s on our Twitter. It’s on our LinkedIn as of as of last week, which is a really exciting one. Thank you Sam Bailey for that.

And one last comment. I will first Martha Berry West. Thank you for the thumbs up. I see her on Facebook a lot as well. And Rahul Gauti asks, do we need to be cautious about stocks with low trading volumes? Maxx Chatsko I’m gonna let you, you didn’t have to raise your hand. I was gonna go to you on this one anyway.

Maxx Chatsko:  Yeah, I mean, I’ve recommended a couple of companies and own more with low trading volumes. Yeah, being cautious. You have to understand that that can be a risk, right? It can add to the volatility in either direction, right? If some minimally good news comes out, that can lead to like a very big pop. And similarly, if some really mediocre news, it’s not really that big of a deal in the grand context comes out, that can lead to a much bigger drop as well. So something to be mindful of cautious of sure. But yeah, so it is a risk. Yes.

Dan Kline:  We are running towards the end of the program. We appreciate so many of you participating. So many of you watching. Please tell your friends this is a this is an awfully fun show to do. And we love having you be a part of it. But Sam Bailey, I’m gonna climb up to the top row. Let’s hit our finisher here. Is the stock market in a bubble? This was a This was inspired by Maxx Chatsko 23% said yes. 50% said no. 25.8% said maybe I’m gonna go around the room quickly. Let everyone weigh in Simon, I don’t think it’s a bubble. How about you?

Simon Erickson:  I would vote no for this question, personally.

Dan Kline:  Matt Cochrane?

Matt Cochrane:  Is the whole stock market in a bubble. No, I think are there individual stocks that are definitely probably priced higher than they should be right now? Yes.

Dan Kline:  Steve Symington your thoughts here?

Steve Symington:  I don’t think so. And I’ve written about this in my last several advisor updates. I think, like Matt said, you know, there are individual stocks that are overpriced, but I think we’re in a, an interesting stock pickers market, where we can opportunistically choose attractive stocks at any given moment, but I don’t think the broader market is in a bubble.

I think maybe we’ve seen a little bit of consolidation. And in some previous outperformers, that might pave the way for broader rally higher, I don’t know if it’s going to be as furious as people got used to in 2020-2021 when growth investing, you know, felt easy after the march crash, but I think we I think we go steadily higher from here.

Dan Kline:  We have been living in a nine fast nine furious world. We’re gonna pick a couple more comments after Maxx Chatsko gets the last word on this. Well, we got a couple more good ones that I want to sneak in before we close the show.

Maxx Chatsko:  Is the market in a bubble? I think the answer is 100% yes. And it’s not just due to prices and valuation. I talked about this before. And this isn’t kind of delicate topic. So it requires more of an explanation. I won’t get into all that here. But other factors that we see in bubbles that define bubbles, or human psychology narratives, and also widespread speculation, I think if you have the checklist of the 100 or so things from historical bubbles, a lot of the boxes get checked right now, that doesn’t mean it’s going to necessarily pop or deflate instantly.

Sometimes it takes two years to deflate, right? A lot of people talk about the.com bubble, it actually took three years for that to deflate. So that didn’t pop, it just was like a slow and steady decline and valuations kind of settled out eventually. So now, this still means you should be a long term investor. Right? This is part of the process. But I do think we are in a bubble right now.

Dan Kline: We’re gonna throw this next one to Simon is from fabok 2012. I apologize if I’m not correct in getting that.

Simon Erickson:  Can I actually jump in on the last comment there? This is a great point too that, it’s always contextual, right? It’s like, you know, every year is different. And there’s more things you have to keep an eye on. I think that interestingly, we now have a new way, a new a new asset that people can invest in, but it was always like, Okay, are you gonna stocks? Are you in bonds? You know, it’s kind of this, you know, what are you gonna put your money into? What are you pulling it out of based on interest rates based on everything that the Fed had control over?

Now, there’s completely free market out there for cryptocurrencies, which is not being as regulated and not being as controlled as bonds and securities were out there. And this is having a huge impact on how people are allocating their money. Steve, you and I talked a lot about this, about how crypto is now making its way into retirement accounts into 401k plans into things that will tie trillions of dollars of American wealth in them.

That is no doubt influencing the macro picture in a way that we’ve never gotten used to before. I just want to add that bit of context to that it is a little bit different these days.

Dan Kline:  Absolutely. And if you if you want more about this Maxx, and I actually did a spaces and if you’re a member, at some point later today, we will send out an email with a link to that space, where we talked about the stock market crash of Tuesday, and I think most of that has been recovered today being Friday at least it was pretty close last I looked.

We’re gonna take a while actually, we should answer the question I threw out for Mr. 2012 assignment. Is there a minimum small cap for an investing pick? I think he means for one of the stocks we pick or do we have a rule on that? I actually don’t know that answer.

Simon Erickson:  So when we launched 7Investing last March in 2020, we did say that the company had to be a minimum market cap of $500 million. But we’ve actually amended and relaxed that rule to now include, you can pick a smaller cap company than that, as long as there’s no risk of it being wiped out and going to zero.

If you see competitive advantages, or recurring revenue, or something that’s going to keep this company afloat, it’s okay for any market cap, we just basically say, if we’re going from micro cap world, which is really, really small, there’s got to be some protections that you’re not going to see a company lose 100% of its value.

Dan Kline:  And I think it’s fair to say that we’re also very responsible with our picks. So we’re gonna do the due diligence. And if we see that gem that’s out there, you know, there’ll be a lot of talk about it, Simon will certainly make sure we vet it, we will all ask each other questions in our call. But it is nice to know the actual rule.

We’ll let Daniel Delgado close it out, because I think this is an important investing point. What about a great company doing well, but experience a couple bad earnings? Is it time to sell? I would say no. And I think we’ve seen this a ton the past year that because of the pandemic because of specific circumstances, some great companies, your Walt Disney’s of the world have had some really lousy quarters for very explainable reason. So on its own, I don’t think that’s true, Matt, you’ve been quiet for a while. Why don’t you weigh in on this and have the last word on the Friday show here?

Matt Cochrane: Well, it’s really hard to answer a question like that. Why did it have a bad few quarters? It’s like something you’d really have to ask. So it’s hard to answer that, by and large, no. But like, again, it really depends, like, why had a bad few quarters? It’s really important to have an investment thesis for any investment. And like, if that thesis is broken, it might be time to sell.

That being said, like, a lot of times, any company great companies will always experienced like slight downturns of business or like, where they miss expectations and things like that. So that’s what we’re talking about with like, bad quarters. Like they know it’s not time to sell. So it just really depends. Like, what we’re what exactly we’re talking about.

Dan Kline:  We appreciate all of the interaction. This is a busy day for us. We did our our new members call, our member call, we have all sorts of stuff going on. And we appreciate you being along for the ride. If you would like to get in touch with us. You can reach us at info@7Investing.com. That is usually Steve in answering. Sometimes it could be any of us. But that’s questions about your membership questions about the service. Maybe you want to be a member and you have some questions.

You can also interact with us on social media. We are @7Investing. Feel free to tag any of us I’ve been pulled into all sorts of conversations. I’m probably on Twitter, as much as anyone. Feel free to involve us in your conversations or throw out your travel questions or whatever it might be. I’m speaking for me here but we all you know generally are online. So tag us share your referral codes and tag 7Investing if you’re a member, you know what I’m talking about there. We’re going to do this again on Monday.

That’s how it works the week edge then the week starts again. We’re gonna do this Monday, Wednesday, Friday at noon next week and the 12:30 show is a once a month special thing for Simon Erickson for Dana Abramovitz, who was with us for most of the show for Matt Cochrane, for Steve Symington, Maxx Chatsko and most importantly for Sam Bailey behind the scenes. Thank you and we will see you on Monday.