Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
Even in the middle of market volatility, investors should stay the course and think longer-term. "The Market" host Nathan Worden shares four investment ideas to consider.
February 16, 2022 – By Simon Erickson
It’s been a volatile few months for the stock markets. But long-term investing will endure.
The ups and the downs have some investors feeling queasy. Whether it be rising inflation, the Fed considering interest rate hikes, or geopolitical instability, there is no shortage of headlines that might make you believe now is the time to sell everything and head for the hills.
But the stock market is also incredibly resilient, and broader-market selloffs can be incredible opportunities to start building long-term positions. When stocks go on sale, it’s great to have a watchlist ready. One of our very own 7investing principles is that time is on your side and is the ally of the long-term investor.
One of our affiliate partners, Nathan Worden, is similarly interested in empowering others to be long-term investors. He hosts a monthly “Market Game“, where contestants pitch ideas to one another with a long-term investing perspective. We’ve had a lot of fun attending his March Madness inspired presentations before. And we even recently found ourselves competing in one of them!
In this episode of our podcast, Nathan chats with 7investing CEO Simon Erickson about his investing style and how he would like to use his Market Game to empower and inspire others. He then runs through four of its most memorable pitches — including Constellation Brands (NYSE: STZ), Moody’s (NYSE: MCO), Vonage (Nasdaq: VG), and Ethereum — and explains why these might be great long-term investments.
Publicly-traded companies and cryptocurrencies mentioned in this podcast include Constellation Brands, Moody’s, Vonage, and Ethereum. 7investing’s advisors or its guests may have positions in the companies mentioned.
Simon Erickson 00:00
Okay, hello everyone and welcome to today’s edition of our 7investing podcast on 7investing in founder and CEO Simon Erickson, we always chat on this show about how it’s our mission to empower you to invest in your future, our long term investors, and we’re unfazed by anything that’s happening in the short term. But my goodness, it’s feeling like that’s harder and harder everyday. Right now, we’ve got so much market volatility out there, we’re seeing a sell off in tech stocks, there’s a lot of red ink in our portfolios, it kind of challenges your conviction to be a long term investor. And so we’re gonna do a little bit different of a podcast. Today, we’re going to bring in one of our partners, Nathan Warden is the host of the market game. He’s also a long term investor that kind of shares a lot of the same principles that we do here at 7investing. Nathan, I’m really excited to do this a little different than our traditional podcast. But thanks very much for joining us here this afternoon.
Nathan Worden 00:52
Super excited to be here, really excited to chat. Thanks for having me on.
Simon Erickson 00:55
Neither one of these are really excited to talk with you about is you’re also empowering others out there, you’re gonna talk about a couple individual stock ideas, a cryptocurrency idea later on the program here. But let’s just kind of start with your perspective. I just described you as a long term investor, but give me a little bit of background about how you got to investing in the stock market and how you think of yourself as an investor.
Nathan Worden 01:17
Sure thing, so I used to be a wedding photographer. And back in 2013, I was living a very frugal lifestyle, shooting weddings, and then also working as a resident director at Chapman University. And in that line of work, you get your housing paid for because you live in the residence hall of 601st year students. And so when one has low bills and overhead and and relatively higher income, you end up making having some some money to do what you want with and so, I know that I’ve been in a really blessed position to have that type of situation, I wanted to make sure that I didn’t waste it. And that’s when I started looking for ways to put my money to work for me. And that’s how I kind of found myself in investing. And as you mentioned, at the top of the call the the recent market, volatility, a lot of investors are seeing their portfolios take a huge dive in the last couple months to a year. And from my perspective, from when I started investing in 2013, the first thing that I did is I anchored my portfolio just in the overall broad market. And I’ve never sold that initial first position. And looking out close to now a decade, I think it’s so important to have that perspective. And that lived experience of leaving your money in the market in certain positions that you have a lot of conviction in, because over time, human ingenuity and humans trying to solve problems around other humans tends to create value for all of us. And that’s I really believe in that from an investing perspective.
Simon Erickson 02:53
That conviction is so important. And I think one of the most common questions I get is people that are just concerned, this thing is just going to fall farther, if I put my money to work right now might lose another 10 20%. And I’m scared as an investor right there. But a lot of that kind of washes out. If you think about it with a long term mindset, you don’t get so worried about those 10 or 20%. blips, it’s gonna really always be hard to catch the bottom. But if you really kind of focused on years instead of months, it takes a little bit of that away. What kind of investor Are you Nathan? Are you a value investor? Are you a coastal investor, you’re not thinking about it that way. Hey, types of stocks that you tend to look for?
Nathan Worden 03:26
Yeah, I tend to be more growth and mid to smaller cap growth. And mostly that because I do enjoy the idea that these newer smart companies are making the world a better place and they’re trying something audacious. They’re trying to solve a problem make the world better in some way, shape, or form. They’ve got a lot of challenges to overcome. But if they succeed, it’s it’s really special and really interesting. And so I always anchor my portfolio and something more like, like the s&p 500. But then with a large portion of my time and my funds, I am looking for those opportunities that are our higher growth because they’re trying to do something pretty interesting.
Simon Erickson 04:09
Well, let’s double click on the thing that we mentioned earlier about us both empowering others empowering other investors. One of the things I loved about what you’re doing out there and led me to want to have you partner with 7investing as you’re the host of the market game. Tell us a little bit about what this is and how you’re using it to help other people become better investors.
Nathan Worden 04:28
Yeah, so the market game is a bracket style investing competition, that I started because I just wanted to be around other smarter smart investors, hopefully smarter than myself by a lot. And the idea was that there’s so many different avenues for people to have fun while competing in a friendly manner, whether it’s going and playing basketball in a local league, or trivia or just really anything and I didn’t see and I’m sure there are idea dinners and there are a lot of different ways to engage in investing, but didn’t really see like a March Madness style bracket live pitching game out there. And so I thought I’d start it. And so we’ve actually been doing it for a little over a year now. And it’s basically just it started by me reaching out to people on Twitter and saying like, Hey, do you want to give a pitch live on a company that you like, there’s going to be four to six other pictures, also giving their their ideas, their stock, investing ideas, and then we’re going to chat about them. And we’re going to try and poke holes in each other’s thesis. And then we’re going to vote and decide what we think is the best one. And through that process, it’s so important to like there’s 6000 publicly traded companies, and not just knowing the the investment thesis for a specific stock that you’re looking at, but comparing that up against one to three other different ideas right next to each other, and to have a different person, each arguing why they like theirs, and maybe why they like it more than yours, is like a really stimulating and interesting exercise to think about investing in. So that’s the idea with, with investing, and I with the market game. And I think that if you look at things like CrossFit, or the NBA, a lot of times people really enjoy playing, but also watching. And so the market game is one where you can kind of have a little bit of both, you might be an individual investor yourself. But if you attend the market game, you can hear a pitch and also ask a question. And so you can recognize talent, and go out and maybe give a pitch yourself and also interact. And there’s this shared culture and shared thing that we all enjoy doing. We can connect with each other over it, get better at it together. And watch our favorite team and root on our favorite pitcher. So there’s all this kind of fun dynamics to it. I love doing it. And we’re actually having one tomorrow, we have it every single month. And so definitely would want to invite anyone who wants to come and watch this show up.
Simon Erickson 06:52
And how can we find out about that either? What is your Twitter handle? How can we learn more about this?
Nathan Worden 06:56
My terminal is Nathan Warden, just Warden spelled W o r d e n. And I think I’ve got the signup link pinned in my bio. So if you want to register for the next game, or the whole set, we’ve got one going every month for this year, you can find the registration through Yeah, my Twitter bio.
Simon Erickson 07:13
These are a lot of fun. I’ve been to two of them, they are very fast paced, it might might be one of the most densely packed hours you spend for the month. And they’re also fun to write it makes perfect sense that a basketball player like Nathan would have a March Madness style bracket for stock pitching her. I really encourage everybody to check these out. But for the purposes of this podcast here, Nathan, we are speaking to individual investors, they want to know, what are some of the best stocks that I can go out there and learn about right now. And so I’m going to be using you as the conduit from previous pitches that you’ve heard on your market came, you brought four of them here to discuss on our podcast for this afternoon. The first was a company I believe it came from kind of scan when she was pitching or the person was pitching Constellation Brands. Tell me a little bit about this sort of what did you think about the pitch? And what do you think about the investment opportunity here?
Nathan Worden 08:00
Yeah, so first off about the pitch. One thing I really appreciate is this pitch was done, I think, April last year, lots of people pitching SPACs and high growth. And Kyla comes on and pitches Constellation Brands, which is a leader in the alcohol beverage space. So right off the bat, this was not one that people I think were primed to like and I don’t believe it won the game, but it is the one that has performed the best over the next year, which is pretty awesome. So Constellation Brands, they’re primarily a beer company with about 70% of revenue coming from beer, beer is a pretty elastic good, which means they don’t have a ton of pricing power. And so a lot of people don’t like that and they pass right off the bat. But Constellation Brands is switching to a higher premium and higher margin products, they’re looking to get into more like premium tequila and kind of branding and marketing themselves as a higher premium brand, which allows them to charge higher prices. So kinda pitch this in April, April 9 of 2021. And that was the day they announced earnings on that day, they’re pretty beat up in the market, but since then they’re up about 7% which is I mean seven doesn’t sound like a lot but that’s like 20 or 30% above a lot of the other pitches. So I love it when people bring off the wall ideas or ideas their counter to what other people are really interested in at the moment.
Simon Erickson 09:25
It’s not a sexy pitch right? It’s beer and wine and liquor and things like that, but it’s a staple, consumer discretionary or consumer staple really I guess you could call it that because it’s so embedded on me like doing such good brand marketing. It seems like one that’s natural fit for a long term investor like like you are Nathan.
Nathan Worden 09:44
Yeah, totally. Exactly. It’s also kind of funny that Constellation Brands they invested in canopy Canopy Growth, which is the cannabis company. Canopy Growth is down 82% Since I think since the in the last year Which is funny is that Constellation Brands can still be up 7% After investing pretty heavily in that company. So it kind of just goes to show you that having a diversified portfolio, you’re making some bets on some larger growth that could or could not work out. And as long as you’ve got that anchor, either in your personal portfolio or your business has the anchor in the revenue, provides a lot of stability.
Simon Erickson 10:24
Perfect. And just finally, one last thing. What was it that Kyla really liked about the investment opportunity? Was there anything that stood out that she said, Is it branding? Is it marketing? Is it just a staple product? But what was it that really won a lot of people over that listened to their pitch during that time?
Nathan Worden 10:38
Yeah, the one thing was that because they’re now a lower right now, they’re mostly beer, but they’re moving to premium brand stuff, that transition. People aren’t really watching that, that once they transition in the process, that transitioning, that’s gonna allow them to charge higher prices. And if you are looking at that right now, that might end up being a good investment.
Simon Erickson 11:03
Bourbon, okay, Nathan Well, Constellation Brands, s tz for anybody who wants to follow along a pitch from last April. Another one you said was a gentleman, Chris cyfle was pitching Moody’s on the on the market. Tell me about this.
Nathan Worden 11:15
Yeah, so really respect Chris. He does a great job of this his fundamental research and being very process oriented and having a really grounded approach. His pitch for Moody’s was essentially they’re an oligopoly. If you want to do anything in the credit space, you need to get no credit services from a company like Moody’s, I think there’s only two others. And essentially, it was a play on the fact that if you want to invest in a monopoly, you might as well invest in a monopoly that has regulation, regulation enforced monopoly.
Simon Erickson 11:52
Makes a lot of sense to me. Oh, hey, are you still there? Can we can we still hear you? Yeah,
Nathan Worden 11:56
I can see your hearing. Perfect. Yeah.
Simon Erickson 11:59
Okay, so So oligopoly obviously s&p Fitch and Moody’s are kind of like the three players that do credit ratings and all the debt and all that stuff like that. Sounds like Chris. Chris really pitched it pretty good, though. I know. He’s a very thorough investor, I’m sure that came through and the pitch that he had for the market came.
Nathan Worden 12:13
Yeah, so this is, this is a really funny point. One thing I’ve noticed over doing the market games for the past year is that just because you’re well spoken or can communicate really well doesn’t necessarily mean that your pitch will will, will do really well. However, when I come across people who can both communicate and give a really good thesis, that’s pretty special. And Chris does that really well.
Simon Erickson 12:38
Perfect. Okay. MCO for anybody who wants to follow Moody’s. The third one we have is from guar have Kotak pitching Vantage, what was it what was it that stood out for you for this company?
Nathan Worden 12:49
Yeah, so Gaurav, this one I really liked because it was kind of a diamond in the rough sort of idea. So most people think of Vonage is the funny ads and consumer phone service. But there’s also a faster growing hidden gem of a business under the cash cow that most people are aware of in Vonage. So by Vonage has three businesses but all of them, they linked to the same tech stack which provides a differentiated advantage. And the part that people don’t mostly don’t see is their C pass business, that communication platform as a service. So that communication API is kind of a lot like what Twilio does, and so that is a 600 million revenue business. It doesn’t it’s not growing as fast as Twilio so a lot of times people just go I want the best breed I want Twilio. But the main point is actually that they’re not even most people aren’t even considering the seapass business advantage. And also, Vonage was recently announced that Erickson is going to be acquiring them. So the cool thing about this pitch and one thing that I really love about the market game is that individual people will will find these 10 diamonds in the rough and bring them up and then later on a company like Erickson also notices that goes and acquires Vonage so right now I think they’re trading at a price that reflects what the offer price was Gorod in his pitch mentioned that he felt like there could be an acquisition but he doesn’t invest for that, but it’s good to know the catalysts and he ended up being right about that which it’s really cool to see when people make a prediction and then get it right because it’s hard.
Simon Erickson 14:30
Especially when it’s under under followed right and when the financial media is not catching on to those things that like good analysts will catch on to the expose on the pitch and then of course getting an acquisition offer that doesn’t hurt at all. Fantastic. Okay, bondage. Okay, so VG for anybody want to follow that one? Made in the fourth one is not a stock it is not an equity at all. It’s a cryptocurrency David Hoffman pitch a theory of tell me about this one.
Nathan Worden 14:52
Yeah. So David Hoffman, he heads up the bank list podcast and so he’s very much into the cryptocurrency space and it’s there is his favorite asset. The thing that I found really interesting about his Aetherium pitch is that he didn’t mention the the dynamic of the merge and the proof of stake, the situation where Ethereum is currently a proof of work, Blockchain. And sometime this year, they’re they’re going to be moving to a proof of stake system. So the way that the blockchain is validating their blocks, it’s currently like Bitcoin, where there takes a lot of energy and a lot of electricity to validate. But they’re moving to a proof of stake system where they don’t have to use that energy and the overall, yeah, it’ll be a much more efficient way to to validate the blockchain. So anyway, the thing that I appreciate about David’s pitches that he he talked more about how decentralized finance is like money, Legos, now you can add the different components and reorganize them to make new financial products that couldn’t have existed before. So the pitch is very much more on a utility sense, that defy is like the bones of the Ethereum ecosystem. And Ethereum ETH, the asset is like blood circulating and bringing nutrients to the different parts of the ecosystem. So he was also mentioning that competition is good for the consumer. And each of the D centralized applications that are being built on the blockchain are competing to become more capital efficient. And the more that they can upgrade their own software and be more capital efficient with the asset that of Aetherium, the more Aetherium can be used for and therefore if you hold Aetherium, it rises in utility, and therefore value. So lots of lots of a, I guess I’d say noise in the cryptocurrency space. And it was just it was fun to hear a utility based argument for why Aetherium would be raising in value. It’s amazing.
Simon Erickson 16:58
There’s so much being done on Ethereum, right? I were just chatting about Metaverse earlier today, and NFTs are built upon a theory, which is a zillion different applications in this new web. 3.0 is becoming known now, worldwide. And Ethereum is certainly with the smart contracts and other utility, like you mentioned, becoming a crowd favorite out there. Okay, so Ethereum is eth if you wanted to invite invest in a cryptocurrency token, I want to enter Okay, so for pixie or Constellation Brands, Moody’s avantage, and a theorem, are you allowed to pick a favorite? Do you have one of these four that you would personally invest in right now?
Nathan Worden 17:29
Yeah, so I actually did personally invest in Moody’s recently. For me, it is a pretty high valuation at the moment. But I do like that optic oligopoly pitch. And so I do hold. Actually, I think I hold all four of these a lot of times at the market game, I’ll personally invest in what people are pitching in, sometimes small positions. But if I like to pitch or invest in all four of these I liked and so I do own parts of all four.
Simon Erickson 17:56
It’s really cool. It opens your eyes to a lot of things and a lot of places that you weren’t necessarily looking before, a lot of these companies are not in the headlines of the financial media, any final thoughts, Nathan’s kind of closing out? It’s kind of a wonky time for the market, a lot of volatility out there, people are worried about tech stocks, any perspective you can give to our long term investing audience here today.
Nathan Worden 18:14
Yeah, so this is, you didn’t ask me to do this. But I did want to take a moment and just kind of talk about how much respect I have for 7investing. So one thing that I really believe in strongly that’s it’s super hard to do is posting transparency and results. And I do that myself personally, to hold myself accountable. And I really recommend that everyone does that for their own personal portfolio. because you learn so much by holding yourself accountable. And by looking at where you’ve been. And by looking at where you’ve been, you also are able to zoom out, right? So that ability to zoom out, you can’t have unless you do a good job of tracking. And tracking isn’t fun when you underperform the market. But everyone underperforms the market at some point, right? We all get to say we’re right, depending on the timeframe, and we all are wrong, depending on the time frame. And so for investors who are looking at their portfolios in the last year and are down or not being the market, I’m one of them. Many people are it really helps to to zoom out. And I really respect that 7investing does that that you guys post your you do recommendations and you post results. And that helps create a conversation about what’s actually going on and allows us to to get better or understand that things maybe really aren’t that bad or spot opportunities when when the rest of the market is leaving an area and we can can jump in. Another thing I really like is that the depth of the research that you all do, and the the webinars and the reports you put out and the questions that you answer, I think really strongly that engaging in this type of discussion around stocks and investing and digging deep into a company that you like, is good for yourself as just a habit. And what I see you all doing is encouraging people to do that themselves and engage with other smart people who are really thinking very thoughtfully about these different opportunities. And I just think that that makes the world a better place. So I wanted to say thanks for doing that and keep on doing it
Simon Erickson 20:31
I really appreciate it. Thank you for the kind words about 7investing, it certainly is in our DNA to think long term, that means you’ve got to stick it out there for years. We’re not too concerned about what’s going on in the next month or two. It certainly has been a tough couple of months for growth style investors like myself, but we know it’s gonna come back around. And we look at five year periods or longer stock market tends to, to revert back to allowing those great companies to outperform. Nathan, I really appreciate you being on the show today. Thanks for joining me on the 7investing podcast.
Nathan Worden 21:01
It was a blast. Thanks for having me on. Catch you next time.
Simon Erickson 21:04
And everybody check out the market game. Ethan’s doing some really fun stuff. It’s not only opening your eyes to a bunch of different investment opportunities, but it’s also getting you to think about things you might not necessarily have thought about before. I wanted to feature some of his innovative, excellent work that’s empowering others here on our podcast today. So I appreciate everybody for tuning in.
Simon Erickson 21:22
That’s it for this episode of our 7investing podcast. We are here to empower you to invest in your future. We are 7investing.
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