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...
Join 7investing Lead Advisors Simon Erickson and Luke Hallard for a recorded Twitter Spaces conversation from November 1st as the two discuss what big tech's earnings will mean for the market.
November 8, 2022 – By Samantha Bailey
This earnings season has been a terrifying time for Big Tech. Google (NASDAQ: GOOGL), NVIDIA (NASDAQ: NVDA), and Amazon (NASDAQ: AMZN) are all facing significant challenges, yet the market wants them to be more efficient.
What are these Big Tech executives to do? Some CEO and CFO’s are making difficult decisions about which growth programs to cut, while other companies, such as Meta (NASDAQ: META), are doubling down on their commitment to growth – specifically in their focus on the metaverse. Yet other companies that are more exposed to cyclical markets such as advertising, are completely overhauling and reorganizing, such as Snap (NYSE: SNAP).
All right all right. Good morning everyone and Happy Tuesday. Today is Tuesday, November 1, which if you are a member of 7investing, you know that the first of the month is a big day around here as we have released our new recommendations. We will be joined today by our lead advisors, Simon Erickson and Luke Hallard. Son, they are joining right now. So let me add Luke. Good morning – or not good morning. Good afternoon. I get confused with all the time zones here throughout our advisors. But good morning for me and good afternoon for you, right? Good morning, Simon Erickson. It’s good morning, actually for you. How are you today?
Simon Erickson 0:50
Halloween, which was ready. It pretty eventful. For those of us here in Texas. Oh man,
Sam Bailey 0:54
I am still recovering from more walking than I have done in a long time. So I might need to get on my my peloton because I am a little out of shape.
Simon Erickson 1:03
We were corralling small children dressed in Little Mermaid costumes that were running around the neighborhood. So we did a bit of an exercise.
Sam Bailey 1:12
We were Baby shark and mommy shark over here. And that song is now permanently stuck in my head. So I’m very grateful to chat with the two of you this morning and get that horrendous song out of my head and talk about something else other than Baby Shark.
Simon Erickson 1:25
Sam Bailey 1:26
So let’s get to it. So anyone on FitTwit knows that this is a huge week for earnings. It seems like every publicly traded company is reporting this week. Where would you fellas like to kick off today?
Luke Hallard 1:40
So there’s certainly a lot going on. Sam, I think we’ve got earnings for most of the big tech companies this month.
Sam Bailey 1:49
We certainly do. And seems like it’s a scary time for big tech in particular.
Simon Erickson 1:58
Just you just kind of see, you know, every time the CFO seems to take the podium or the microphone for the conference calls these days, it’s like you said it’s terrifying, right? Whether it’s in video, or Amazon or alphabet, or whoever it is, the market is kind of, you know, pushing everybody to be more efficient, right? We cash flow and efficiency are kind of the words of the day right now. And I think in a lot of instances, we’ll chat about a couple of them here. And Luke and I are both chat about a couple. But it’s interesting to see a lot of these companies that have been on the gogo growth accelerator for several years now, kind of having to step back and re retune their organizations. And everyone and I chatted about one of them a couple of weeks ago, and we talked about SNAP and you know, the current company of Snapchat, which has just been doing a lot of effort for years, you know, digital brand advertising the name of the game here, which is brand advertising, get your company in front of the younger generation threw away that was kind of short form video. And then they started doing other projects. And they started making hardware devices, they wanted to have a camera, they wanted to have games, and you know, they kind of were doing all these maybe non core projects that would potentially lead to growth and lead to cash flows. And of course, if you if you have followed the snap story, they have cut back on a lot of those. But Luke, I know that’s not always the case. I mean, that’s that’s one example of many, it’s kind of, you know, maybe some companies are really stepping off the salary, like snap, just mention, but in other instances, a lot of executives still have free rein to go for the growth out there.
Luke Hallard 3:24
Absolutely. Well, yeah, you know, you’re absolutely right, Simon, like I think for me, as a investor, at the moment free cash flow is king. If a company is generating, like real money, he can then make some discretionary decisions around to, you know, either perhaps give back to shareholders in the terms of, you know, stock buybacks or dividends or reinvest in future growth. You know, those companies, the ones I’m focusing on most closely, but I know I know, of all the big tech giants, one that as you say, isn’t doing that right now. Seems to be meta. Zuckerberg seems to be doubling down on his commitment to investing in the metaverse and I know we’ve got I don’t want to I don’t want to get too into that topic. We’ve got a special live stream coming up next week on the 10th of November to talk about the metaverse specifically, but that’s that’d be an interesting one. I think for us all to take a deeper look at
Simon Erickson 4:19
it is certainly going to be an interesting one for sure. Airbnb Luke, you said that was one that’s been on your radar for a little while. That
Luke Hallard 4:25
without one is Yeah, unfortunately, we’re a day early with our Twitter space. It’s one I’ve been watching Airbnb report their q3 earnings today after market close. q3 is a pretty important quarter for the company. Like as a vacation rentals company, the third quarter I mean, this is like the definition of a seasonal business. So this is really the quarter where they traditionally generate like the majority of their revenues. So Airbnb is part of my own portfolio. And my original thesis for buying it was really Play on the continuation of flexible working post the pandemic. And I’ll be totally honest, I’m starting to worry a little bit about that. I’m even quite close to home, my wife’s bank, a global bank, are pulling their employees back into the office. I can see companies like Google just about to sort of get there that huge investment, real estate, build a big building in London in Kings Cross that they’re just starting to reopen that they’re trying to pull people back into the office. So it kind of it’s a bit early to tell still, I mean, the pandemic’s behind us whether this tailwind is going to play out. But we’re going to see some interesting stuff, I think, in the numbers today. So last quarter, back in June, I was keeping a close eye on average daily rates, like the the average revenue that Airbnb for letting out a property for one night. And the market seemed to be expecting a decline. But actually, average daily rates increased by 7%. It’s kind of broadly inflationary. But what we are seeing in that market is quite interesting. There’s an There’s a website called Air DNA to really fantastic resource if you’re trying to look at companies like booking.com, and Expedia and Airbnb kind of tracks. Real rental data, you know, how many? How many nights have been booked? Or what rates what and DNA we’re reporting earlier this year, is that people are now typically booking larger, more luxurious properties. So that could potentially play into Airbnb favor, with some of their really sort of specialist inventory. You know,
Simon Erickson 6:41
Airbnb, I’m sorry, go ahead. I apologize.
Luke Hallard 6:44
I actually, I want to link that back to free cash flow, actually, because, you know, I talked at the opening about free cash flow being critical to right now, while the markets pretty tough. Well, Airbnb are becoming a bit of a free cash flow machine. So I think last quarter was the first time in the company’s history, they’ve generated real positive free cash flows in every quarter of the year. So they’re kind of overcoming that seasonality. So I’m really keen to see the numbers they share tonight. And then something they also did in the most recent quarter was announced a $2 billion share repurchase program. So keen to see how far they’ve executed on that when I recall.
Simon Erickson 7:27
Like one of the things I have to ask you about with Airbnb is it’s almost like you we have a different perspective. We’re on opposite sides of the pond, you’re over in the UK, we’re in the US, I know we’ve got a nearby Mahanti. In Australia, it seems like in the US at least, it’s almost that Airbnb has gotten given everyone on social media chuckle, it’s almost become a meme now about you know, you pay their $100 with $200 booking fee, and then there’s another $300 cleaning fee on top of it. You think there’s anything that affects the business? Or is this just something that social media likes to latch on to and have a laugh about?
Luke Hallard 7:57
It’s not pretty as an issue, I’m really surprised because because they don’t do this in Europe, and some of our subscribers told us, they don’t do this in Australia. So if I book a property, in fact, if I look at a US property, if I’m logged in, with a UK account, I’m pretty sure I’m still seeing, like the full price of the rent of the property to me, none of these hidden fees that you don’t get until the kind of final page of the booking. But it does seem that they do have this kind of price obscured when if you’re a US, Booker, so that’s a really odd design decision to make, particularly as they’re so design focused. So I think actually, some of the criticism is legitimate. It would seem to be an easy fix, though, you know, they’ve got this operating well in other markets. But I think as an investor, right, you have to look through some of that sentiment stuff. If you’re looking for a longer term stay, if you’re looking for something a bit more unique than a kind of cookie cutter Hotel. Well, Airbnb is the place to go to. And, and yeah, you know, I think we’re seeing this in the numbers and we’re hopefully going to see it with a record breaking q3 when they report today.
Simon Erickson 9:12
Read a lot of sense to me, Luke, I know that I’ve really enjoyed following your coverage at seven investing of Airbnb. We chat a little bit about meta there too. I think that one that’s on my radar for earnings this season is AMD. This is the chip maker, the chip designer that’s going to report after the bell here today. It this is an interesting one because they guided down they said that their revenue was going to fall short of their previous internal guidance here for the upcoming quarter. And and one of the reasons they said for it was one of the gaming, gaming and computing segments of the business. We’re both very light to people are not buying PCs that have AMD cards on them, and processes in them and the result is their channel partners are loaded up with inventory, right. And when you can’t move inventory, you can’t sell more and that’s kind of taken a toll on me. The upcoming quarters revenue. I think that that’s something we should pay attention to, you know, inventory builds are certainly something that can be cyclical, you want to see those get worked out over time. But bigger picture, Luke, I think AMD is an opportunity for people that are long term and patient investors. Because there’s a lot going on right now outside of just, you know, the gaming and the PC sales, we know we’re going into a recession, we know that it’s tight for consumer spending. But there’s some bigger things that are going through. And by the way, this is a similar story that we heard from both Intel and Micron about, you know, soft consumer spending for their, for their chips from memory and for processors to just recently. But if you look at you know, kind of the the dynamic that’s going out of their intel actually just cancelled its GPU that was going to be selling the art processor, graphics processing unit there was going to have compete against AMD and Nvidia. They’re pulling the product basically. And so you’ve got a two horse race, we know that GPUs are used as AI accelerators, you know, invidious has gotten a lot of prominence in recent years, AMD, in my opinion, is winning a lot of market share in the data center. This is where computing has to be perfect, the processing has to be efficient, you’re running very complex, sophisticated AI workloads. And these algorithms are being computed in parallel, which is perfect for a GPU like like AMD to start gaining share. And so when AMD said the instinct line that goes to the data center to get the Radeon GPUs for gaming, and now that it’s kind of a two horse race, again, I think that AMD is in a in a great position, then in the high performance side of this, you know, the whole goal of what AMD has been trying to do in the last couple of years has been acquire IP. If you look at just recently, Xilinx, some of the FPGAs I mean, these are these are basically you can use software to program the hardware, the the integrated circuit itself can configure itself to whatever you want it to do to, to process most efficiently. And I think that that’s kind of at the high end of where AMD is selling, you can sell FPGAs for $40,000 a pop if you wanted to. But the bigger picture of what AMD is trying to do is it’s trying to get in with the higher selling prices of the data center, the more sophisticated customers that really, really need to have more sophisticated computing than just a CPU, or, you know, a traditional Intel CPU in the servers that you’re using. And if a data center can can handle and that’s why you’ve seen epic and all the stuff that AMD has launched into the data center recently do so well, and just completely revitalize this company. And so I think that back to full circle, you’ve we’ve got earnings this afternoon. I don’t know what the stocks going to do. We’ve already seen them, preliminarily say, Hey, we’re going to come in short of our internal guidance. That’s why you saw AMD stock sell off a couple weeks ago. I think we might have some more short term headwinds, but long term competitive position, I think looks very strong for a company like this.
Luke Hallard 12:57
Yeah, I agree. And you know, you mentioned the two horse race. I guess I’m I’m more closely following the other horse in that race now that Intel’s dropped out. And that’s Nvidia. And really a very similar story for them as the one you told her AMD, they’re really suffering on their sort of gaming retail segment. But when you look at data center, the growth is incredible. And, you know, that’s become the biggest driver of growth and the most recent quarter in video don’t report until the middle of this month on the 16th. But I’m hoping to see a decent recovery in gaming revenues there. One thing I think is quite interesting. And if we if we try and dig under the covers and understand why both AMD and Nvidia have got all of this inventory sat on retailer shelves, and actually it’s to some extent ties back to what’s happening in the cryptocurrency world. And Ethereum has moved to proof of steak back in September. Well, that’s cause a lot of cryptocurrency miners. And you know, don’t forget, Ethereum has traditionally been the kind of second biggest cryptocurrency after Bitcoin that’s caused a lot of those Aetherium miners, well to move away from mining with graphics cards, because now Aetherium is all about proof of stake, which is a different kind of consensus protocol. So many of those miners some have flipped to mining other coins, but many of those miners are now just selling their mining rigs selling their hardware. And that means a whole bunch of pretty high end graphics cards coming onto the second market on websites like Newegg, and Airbnb, so really all that used inventory that’s kind of holding down retail prices, which has hit the top line for both Nvidia and AMD. I think that’s going to work its way through over the next couple of quarters, particularly now both companies are just about releasing their latest series of hardware. So that’s, I’m not too sure about AMD, but on the NVIDIA side, they’re 40 The series graphics cards more than twice as fast for the same power compared to the previous generation.
Simon Erickson 15:08
Sam will hand it back to you. But hopefully everybody kind of got a good taste of what we’re looking at here in earnings. You know, to recap, we talked about metal still all in on the metaverse, Airbnb, even long term thesis for Luke sounds like it’s still playing out even though some large global banks and other larger corporations are pulling people back into the office, at least on a full time basis. And then we chatted about the chip designers, we chatted about AMD and Nvidia, both seeing some short term pain but perhaps some long term gains, as you continue selling their their graphics processing units and other processes into the data center.
Sam Bailey 15:44
And any of the companies that we’ve discussed, if these are some investing recommendations, we will be sure to update our subscribers about earnings and what to be expected. And if you are not a southern investing subscriber, we are doing something for the very first time ever, where you can test out our service for only $1. So if you go to seven investing.com, in the top right hand corner, you’ll see try seven investing for $1. And that will give you a one week trial to our site where you can see all of our research all of our recommendations, and just see what we have to offer. So I mean, I can’t tell you what a phenomenal deal that is for just $1. So come and check it out. And it’s perfect timing, because we just released our new recommendations today. And you know, every every month Simon, you ask me what is my favorite recommendation on the scorecard. And I am going to have so much trouble this month deciding I, you know, I’ve worked in this space, and I never even heard of two of our recommendations, including loops this month. I didn’t even know this company existed. So I am so excited to read his report and dive into the trenches. But Luke, can you dive in a little bit more and tell us you know, obviously, you can’t name a company. But what intrigued you about this company this month?
Luke Hallard 17:01
Yeah, absolutely. They’re a super exciting company that operates in the telecom sector. And I suppose the the reason they’re not on your radar, Sam, is they’re a pretty international company. So they don’t really have any operations in the US at all, you probably wouldn’t have seen them. And one thing I have done this month is, so if you’re if you’re a US investor, and you want to buy a company that’s listed overseas, whether that’s on a small Exchange, or even one of the bigger exchanges, like like in Europe or in London, one of your options apart from buying directly on the foreign exchange is to buy something called an American Depository Receipt, an ADR. So if you take a look at my Twitter, if you’re interested in ADRs, I put I posted an article on that, and seven investing.com, just a few days ago. And that was in prep for my stock recommendation going live today. So that so that how US investors would would have a bit of background on why you shouldn’t be too afraid of ADRs and particularly, of trading on what’s called the Pink Sheets, which definitely summons up visions of boiler room trading on the Wolf of Wall Street. But it’s not all danger. There are some very robust companies listed on the OTC PINK market. But uh, well worth a look. And, and my recommendation for November, I would humbly say is one of those.
Simon Erickson 18:26
Sam, I wanted to chime in on a couple of the things you mentioned, which, which Thank you, by the way for even saying those at the beginning here about why we’re doing this dollar offer, right, like, you know, this is, like you said the first time, we’ve given people a chance to kind of see what’s behind the curtain at seven investing for a week for only a buck. And we’re not trying to just set the expectation that we’re giving our service away for $1. But we do want to make the bar as low as possible for getting people in the door and seeing what it is that seventh investing has to offer. I think that it’s just to be transparent and honest with everyone their stock picks are kind of a commodity out there. You can kind of look through Twitter and look through Reddit and probably in the next hour find 200 stock ideas that people are putting out there to the internet. But seven investing, I think one of the biggest things that we address is that you know, you have to before you put your hard earned money into any of them and actually put investing dollars behind any one of those pigs, you probably want to know a couple of things. First of all, you want to actually know who is making the recommendation, you know, what is their process look like? What kind of investor are they? Are they thinking about the same types of things that you might want to think about as an investor and you know, you want to know a little bit about more about who’s making the pig. And then secondly, you probably want to know, you know, what’s their track record with with recommendations in the past, you know, what have they recommended before? How have those turned out, you know, what can we learn about things like this. And then the third piece is kind of you know, you don’t just want to see a stock idea and disappear. You won’t actually want to follow through with it over time you want to ask questions you want to discover? Learn more about it if you’re actually going to put money into it. And I think all of those are really, truly the differentiators that seven investing has here, at least what from what I’ve seen that’s available out there. Not only are we publishing the reports on the first of the month, like we did just here this morning, like Luke was mentioning. But in addition to that, you know, we actually follow up, we have a subscriber call Sam, you mentioned, you know, yo, we always ask you what your favorite pick is, every month, we do that on the subscriber call on in middle of the month on the Fridays. And it’s a kind of a good opportunity to ask questions about the most recent picks and also follow up on previous ones. And then we’ve had an ongoing community forum as what we call our way to ask questions to the advisors on a 24/7 basis and chat with other investors. I say all of this, not just to be promotional, and put on my marketing hat, which I am trying to doing to be honest about that. But I think that truly though, instead of investing, the reason that we’re all on board with this, and we’re so excited about and passionate about what we’re doing is this is a long term journey. We say that because investing, compounding wealth happens over long periods of time. But you kind of have to get into the nitty gritty of what we’re talking about, to truly appreciate the pics and the context that goes into each one of them. I hope that you don’t mind me monopolizing for just a couple of minutes there to kind of describe our process and why we’re doing that dollar deal.
Sam Bailey 21:15
Well, and I think it’s important to mention because every you know, everyone’s every family is different, their story is different. Their financial needs are different. Like I was just talking to my dad about the pics this morning. And him and I have very different investing styles. I’m only 31 You know, I have a lot of time on my side, we can make riskier moves and you know, high risk, because we have all this we have time. My dad is 75 he’s retired, he is not willing to do that he’s looking for more dividend stocks and low risk stocks, because that’s the point in his life where he is. So you can drill down on the recommendations page, you can choose by risk level, you can choose by income stocks, so it’s a great opportunity to just try out the service for $1.
Simon Erickson 21:57
Yeah, that’s right. It’s like you said $1 to get in and kind of see everything we have. And if it’s not for you, that’s great, you know, $1 for a week is, in my opinion, one of the best deals on the internet, come check out seven investing.com Any one of our plans monthly plan or annual plan, dollar trial for that first week. Luke mentioned his his November pick, I wanted to say just a word or two about mine, you know, this is something you know, he mentioned about investing internationally. And I think that the theme that is this probably closest to mine right now is developing new markets. This is kind of a very important company that’s upstream of a lot of important things that are going to be happening in the next 10 years, when we think about that we talk in terms of customer pipeline are future business pipeline. And this is a company that’s got 10s of billions of dollars of future revenue lined up, because they’re putting in the hard work right now, to develop new opportunities. They’re putting the r&d work, they’re putting the marketing work to explore new opportunities with their customers as they’ve been rewarded with a with a very robust pipeline that is not showing up in the stock price today, in my opinion. And I think that one of the industries that is going to just go hand over fist embracing what they offer is the electric vehicle industry. This is something that you see kind of all the auto OEMs you know, the manufacturers of vehicles out there, they’re embracing EVs, they want to start figuring out the supply chains. And my November wreck is something that I’ve been looking at for quite quite a quite a bit now. And you know, quite a spell. I’ve been looking at this company, I think now right now. Oh my goodness, especially in the last week when you see what’s happened to stock in the last week. This is truly a long term gift for long term investors. So I’m pretty excited put on the scorecard here of November.
Luke Hallard 23:42
And Simon, not as we won’t just plug our own recommendations. I really liked our colleague Matt Cochrane was pick for this month. It’s a recommendation of his from about a year ago. But it one comment stuck with me when he gave his deep dive a couple of weeks ago, and we also had on the live video. And by the way, if you’ve not if you’re not a seven investing subscriber, like if you take the time to go watch some of the deep dive videos. For me, I think that some of the most valuable part of the proposition and for us as advisors to we really give each other like a real grilling, after we give a 1520 minute presentation, pretty deep presentation on our recommendations. But but the takeaway for me from from Matt’s recommendation, he described this company as being a hedge against an unstable world. And like, boy, are we living in an unstable world right now. So as I’m being as a call, I was waiting for our recommendations to go live there now published, but this is one I’ll be adding as my own portfolio later today.
Simon Erickson 24:44
It’s a fantastic one. Luke. I’m glad you mentioned that one. I’ll give a shout out to and a hat tip to Dana Abramovitz. Who’s another one of our advisors here this month. You know, we look at the data all the time we’re trying to refine our process every month, as we continually find what is our very best Stock pic right? What is the what is the best one stock in the market for this month? And we don’t again, you know it Sam, I know that you know this data too. But you know, Dana is out of her last 10 picks, she’s put on the seven investing scorecard. Nine of them are now outperforming the s&p 500. This is even in the volatility that we’re going through right now. And of course, Dan is not shying away from picking risky stocks, you know, she’s picking small cap healthcare companies a lot of the times. And several of those are actually outperforming we said that nine out of 10 are outperforming a couple of them are actually outperforming by more than 75% As of right now. So I’m pretty intrigued to buy the slow cat biotech company that she is added to the scorecard here in November as well, we got a good buffet of options for our investors to choose from.
Sam Bailey 25:45
We say every month that we have a buffet of options this month is a true buffet of options. There’sa low risk choice, there is very high risk,a value stock, growth stocks – there’s something for everyone this month, which is just very exciting. This is one of my favorite months that we’ve had in quite some time.
Luke Hallard 26:04
You know, Simon, I don’t know if you’re still operating this policy. But way back when the markets were a little more buoyant. If any recommendations at Pfizer, if any advisors recommendation doubled, made like 100% return, you’d buy that and buy advisor a case of beer? Well, no,
Simon Erickson 26:20
it’s not a true. That’s correctly.
Luke Hallard 26:23
Well, I’m not in line for the case of beer just yet. But I think Donna could have two cases of beer on the way pretty soon.
Simon Erickson 26:29
I’m looking at those two that you’re discussing. And I think one hit right at 98% versus the market that was the pick from just three months ago here. But man I’m gonna be shelling out some some cash for Dana as beer tab here in the next month or two, maybe the next day or two.
Sam Bailey 26:45
The race he’s going you might just have to buy her a brewery.
Simon Erickson 26:49
I’m looking for that I’m game for buying breweries. I’m happy to do that.
Sam Bailey 26:53
A 7investing brewery now. Now we’re talking
Simon Erickson 26:55
now we’re on to something.
Luke Hallard 26:57
I will just say Simon as well. Your own October picks looking pretty healthy. I took a look this morning. Seems like it’s up 19% Just in its first month, volatile times. But that’s a nice start straight out of the gate. Yeah.
Simon Erickson 27:10
And we’re speaking in a little bit of a mystery here today. Apologies. We are not actually able to reveal the recommendations publicly. But we are going to chat about them on our subscriber call. If you take Sam up on that offer seven investing.com in the top right, because see join today for $1. You can get in on the subscriber calls and you know, actually actively discuss each of these recommendations with us. I know that Luke and I have been very active this morning on our community forum talking with our subscribers about our most recent picks.
Sam Bailey 27:38
Fantastic. All right, and let’s wrap this up with the final topic, which I never thought we would actually be able to discuss because I never thought it was ever going to happen. Oh, good Lord, it is closed. Elon has officially purchased Twitter for $44 billion. What do you think? It’s here it happened? Can you believe it?
Luke Hallard 27:59
It’s been a wild story, hey, I think he’s, he’s fired the board of directors, he got rid of his CFO, CEO and several other key leadership members on day one, like the guy’s making changes immediately, which I guess, no surprise to anyone who’s been following Elon story.
Simon Erickson 28:17
It’s such an interesting one. I mean, you know, Elon, this this to me. So it feels a lot if if anyone remembers what happened at Yahoo. A couple years ago, right? They brought in Marissa Meyer to kind of clean up Yahoo and Yahoo had so many problems, it was losing relevance in search to Google, it was losing advertising revenue to, to Facebook, you know, and kind of had all these problems. And they brought up Marissa, who was very high profile, you know, see, I think she was a Google employee like 19 or 20. Very early in the very respected in Silicon Valley and kind of she came in and she said, you know, hey, Yahoo needs a turnaround. We’re going to focus on on people and products, and then we’re gonna get traffic and we’re getting revenue. And so it was kind of this high profit profile revamp. That ultimately did not work out for Yahoo. Right. I ended up selling to Verizon five years later. It’s a situationally. I think this is a similar situation with Twitter today. Twitter, we know has got a lot of issues in its business model. We know that kind of there’s a lot of things that need to be changed, and there was not a whole lot of certainty on how Twitter was going to address that. Jack Dorsey has been frustrated about this for years. And he’s kind of out of the picture, but he did, you know, kind of give his Nagi Ilan is somebody that is a critical thinker that can fix a lot of Twitter’s problems. And I bring this up because I don’t think Elon and Marissa I think that’s where the similarity ends. You seen Elon come in right out of the gate fires Twitter’s CEO fires or CFO, you know, brings in all their engineers and says this exactly what needs to get fixed. There’s a long term turnaround plan here and probably if anyone can pull it off, I think Elon Musk might just be the guy to do it.
Luke Hallard 29:58
Yeah, for sure. And you know, there’s there’s Right wisdom in trying to solve this problem by taking the company private, like if I don’t know the extent to which Twitter has the bot problem that was kind of alleged by Elon during those those wranglings over the last month or two. But, but if there is like a significant volume of fake followers, fake subscribers and bots on Twitter, well, that’s material to the valuation. And so you can kind of understand even though, you know, ethically, it’s not the right play, you can understand why the board of directors of a public company will have been a bit reticent to kind of maybe acknowledge and then address those problems head on, because they could, you know, they could literally have that monthly active users on the platform by kicking a load of the fakes off. But that’s the right thing to do for the health of the platform and long term. So, you know, I think there’s wisdom in in taking the company private, try and reset, fix that problem. And then maybe one day relaunch as a public company.
Simon Erickson 31:04
You definitely needs to bring legitimacy back to Twitter, like you mentioned about the boss. There’s a lot of debate right now about some of the controversial personalities and whether they’re going to be allowed back on Twitter, Elon says, yes. You know, Elon is a very objective guy, he just wants information to be out there. And make sure that it’s not just automated and being generated by someone who’s working the system, like a bot might do. And so he’s trying to hit Like you say, get rid of those. I think that also he’s doing a pretty concerted effort on getting more money out of Twitter’s power users, right, everybody, for them, for the most part, people are using Twitter for free right now. Except for the advertisers. And Twitter, you know, whether it’s the blue checkmark for legitimacy, whether it’s you know, there’s there’s going to be a subscription plan that they offer you on is trying to get more money out of the people that are using Twitter the most. And I’ve seen some analysis right now, you know, this is kind of considered walking down the demand curve. Twitter has got hundreds of millions of users, they’ve got, you know, billions of hours being spent on this platform. But for the most part, it’s still been a giant question mark on how they’re actually going to make any money outside of advertising on this. So I think that, you know, the last couple of next couple of years, we’re gonna see the revamping of Twitter, I wouldn’t be surprised to see this back in the public markets around 2025. is Elon and acts as policies and spins it back up for public investors again,
Luke Hallard 32:21
yes, I said, I suppose the thing on as a I’ve been a Twitter shareholder for kind of the best part of the last decade. And when, when all of this noise kicked off, I figured it was just just too complex. So I exited my position at a, you know, a small annual return. But I suppose right now, I’m mostly focused on Twitter as a user, you know, I’m, I’m a contributor to fin twit. And I’ve got some, I’ve got some really great dialogue going with my followers and in DMS as well. If I am slightly concerned, you know, there is there’s an outcome here, we’re really on kind of kills the platform is, for me, this is the only place where really high quality, sensible conversation is taking place. Like if you look over at Facebook, and you look at tick tock on Instagram, they’re not really there’s not really a serious financial conversation going on there. If you look at link platforms like LinkedIn, you know, it’s more kind of self promotional. Twitter seems to be there’s obviously a subset of folks on Twitter, but there seems to be a genuine community, really trying to share information and due diligence and just improve their understanding of the world. And I’m worried that that could get broken by some of the actions that Elon is proposing. But I don’t think it will, I think his his open letter to advertisers, maybe yesterday or the day before, was that kind of reassured me when I saw that, he acknowledges that. He does want to make it kind of an open platform, not to sort of silence any opinions. But at the same time, he acknowledges he can’t turn it into a hellscape for advertisers. So if I if I look at say Twitter, blue, or whatever kind of subscription model they’re proposing, I can see that some of that will work. And if I’m getting certain other capabilities as part of being a paid Twitter user, that’s probably something I do.
Simon Erickson 34:18
There was one last thing I wanted to ask you about Luke, which is a point that you brought up in our prep for the spaces here today, and that is that you mentioned the Jack Dorsey has kind of announced that he’s gonna launch blue sky global, blue sky social, which is a decentralized social network. Obviously, Dorsey knows a thing or two about social networks. And it’s kind of an evangelist for cryptocurrencies and a lot of the blockchain infrastructure, any thoughts about this Luke or what Jack is up to out there?
Luke Hallard 34:46
So I think he’s in beta with it. I just signed up for the beta the other day. I personally, I really like the idea of a decentralized social network, like you started to, to touch on some of the numbers just now Simon Unless you if you look at, if you look at kind of monthly active users versus revenue, you can kind of wave your hands a little bit. And you can figure out that meta, and around $40 per user in 2021. And Twitter around about half that 20 $25 per user, will those revenues are going to the companies today. If you’ve built a truly decentralized social network, once the protocols out there, then actually those revenues, that incentive is potentially available to the user. I kind of like the idea of not just the privacy, but being able to monetize my own engagement with social networks, even if that isn’t dollars in the bank, you know, maybe that’s kind of genuine discounts and benefits and things at a kind of E commerce stores that I shop out regularly. So I think this is this is an interesting direction of travel. And Jack has done it before. So with Twitter, so, you know, he’s certainly got the connections and the experience to make blue sky social, a success. So it’ll be interesting to see what happens there.
Simon Erickson 36:08
Absolutely, quite a lot going on. You know, we chatted about some earnings that we’re following out there, we chatted about our November recommendations. And we chatted about what’s going on on Twitter and Elon Musk right now busy, busy week, busy month for investors. And we wanted to kind of wrap up some of those stories here together, Sam, I might hand it back to you to close things out. Like I said, a lot going on, we’re pretty excited about what lies ahead for ourselves, and also for seven investing, for sure.
Sam Bailey 36:33
So thank you both for joining us today. And thank you everyone for listening in. And just to reiterate one more time. I know we had to be, you know a little sneaky and a little quiet about some of the companies we discussed in the middle of the segment. But if you want to learn more about those companies, you can try us out for just $1 That’s a one week trial for only $1 that gives you access to the entire site, access to our Discord and our subscriber calls. So please head to head on over to seven investing.com. And in that top right hand corner, you will see try seven investing for $1 and get started and we would love to have you would love to talk about the November recommendations that just dropped today. So Luke Simon, thank you so much for joining us today. And I hope you all have a wonderful Tuesday and we will all talk soon. Take care!
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