March Madness, Blink (BLNK), McDonalds (MCD) and when to sell a winning stock

Podcast Transcript

Hey, this is Jeffrey with another edition of Stock Smart, March 22^nd, 2021 edition. Hope you’re doing well. Let’s talk about March Madness, it happened this weekend, first round is over. And it’s March sadness if you liked Illinois who destroyed my bracket, losing to Loyola of Chicago, but if you love it, you love Loyola of Chicago who advances now to the Sweet 16. Let’s look at the 12-5 where we predicted that there would be at least one upset and what happened. In the 12-5 we had Villanova Northrop and Villanova took care of business there, 10 point win, we had Oregon State and Tennessee and there he is ding ding ding Oregon State the 12 seed beating Tennessee 70-56. Then we had Georgetown Colorado. Colorado taking care of business winning easily over Georgetown and in a nail-biter, we had the 12-seed UCSB losing by one to Creighton.

[00:00:54]
So the 5-seed Creighton goes on to the next round and is in the sweet 16, but Creighton wins by a eyelash, 63-62.

So I want to tell you a little bit of a story. Three years ago my son bought a stock on his Robinhood account.

And I guess this is a story about buying stocks, leaving them, forgetting about them. My son bought a stock on his Robinhood account. I don’t think he knew what the company did, and that was March 2019, so about two years ago. He bought Blink, BLNK, and Blink charging essentially what they do is they put together a crate or set up charging stations, bought it for about $3.

[00:01:36]
He bought five shares not a great amount of wealth, but he bought five shares and he lost the Robinhood account for like 2 years because he tried to actually get on Robinhood again recently and he couldn’t find the account and they were like, hey, you know you already have an account with us? Here’s the login information, he didn’t know how to access it. So he just bought the BLNK and it sat in his account and now it’s trading at 37, 39 today up 4%. Just not paying attention to it. That’s the thing about investing, start when you’re young, put a little bit of money in it each month, pick good companies you really like, things you love. Warren Buffet always says about working, he says do something you love, you never feel like you’re working.

[00:02:16]
So investing do the same thing and invest in the things you really love, products you use, you know, if you like to go to McDonald’s invest at McDonald’s, if you buy Apple products invest in Apple, so I just saw an interview on CNBC with the CEO of Blink, their data is a little flawed. So what they do is they create these charging stations, but a majority of their charging stations are in people’s homes. So when you read the data, you really have to drill down and see what they’re talking about, the majority of their stations, charging, 70-80% are in people’s homes and what they intend to do, that’s a one-time purchase if they put a charging station in your home it’s a one-time sale for them. And that’s it. Their real business model is recurring revenue and only 20-25% of their business model really had charging stations.

[00:03:00]
Where they get recurring Revenue, so they’re essentially what do they charge for, fuel? They’re just like a gas station. So you go you bring your car there and you charge it, they’re in places like McDonald’s and Burger Kings which is smart for them. They don’t have to buy the land. They just simply cut and partner with McDonald’s and they get in there but take a look at it if you really like the stock, they sell electricity and that’s what Blink does

So the VIX is down slightly.

[00:03:23]
I say it’s more neutral than down, but it’s down slightly and we’re still a little bit overbought on the S&P 500 Oscillator, so the existing 10-year note is down slightly, only three basis points hardly a retracement or any move, keep an eye on it, looking at 2% by the summer, there is one key note from investors and that’s inflation because inflation is coming. So it’s time to sell bonds and treasury notes and bonds have really sold off really hard lately, especially on the longer end of the curve and the price of the continuous 30-year treasury bonds has dropped more than 8% below.

[00:03:58]
It’s hundred-day average, now that is way oversold, but it doesn’t mean that it’s not going to get worse, just saw company on CNBC today, Flexport. Flexport is involved in shipping from port to port, so seaport to seaport and he said, the CEO of that company said that their customers meaning the shipping companies have seen their prices go. So to take a shipping a crate or whatever you would from one port to one port a year ago, that cost has gone up three times, three times as much to go from port to port and this has to do with people, a lot of probably purchasing when Covid was going on, so great amount of imports right now, lot of purchasing and it’s also inflation and speaking with the CEO, speaking with customers saying that we’re going to have to pass this cost down the line.

[00:04:46]
So again shipping, getting the goods is costing more, that’s going to go down the line to you eventually as a consumer and that is real inflation, let’s look in another area where there is inflation, home inventories. Home inventories are down over the last like 30%, seasonal, that could be part of it. But home inventories down, interest rates are rising and more than likely a lot of people have already refinanced their home, because now it’s going to happen, the same home they could have bought a year ago is going to be you know, 50 basis points or a half percent higher, if not more because of rising interest rate, now new home building is still rising, but it’s likely to start to trend sideways as building costs continue to rise.

[00:05:31]
If you look at the price of lumber, which has doubled which was something like 350-400 a pallet, it’s 800, doubled in less than a year. So new homes will get increased material costs, labor costs are going to go up and you’re going to get higher interest rates, it’s like a triple killing. So it’s not going to be a great idea right now to buy a new home either. So you’re going to see that trend sideways in the future because again this inflation.

STOCK WATCH

So we’re going to take a look at a stock. Look at the marketing language as we like to do. See if you get this company, I don’t think you’re going to know what company this is right off the bat. We engage in the operation and franchising of restaurants it operates to the following segments, US International operated markets, and International Developmental licensed markets and corporate the US segments focus its operations in the United States.

[00:06:19]
You have any idea what that is? I bet you don’t. It’s McDonald’s. Did you think that we were going to say something like we invented the Big Mac or the quarter pounder? Not at all, if you know anything about the business side of the company, what it really is, is a real estate company. There’s a great movie on Netflix.

[00:06:35]
Now the Founder with Michael Keaton, talks about Ray Kroc and how McDonald’s kind of started and how he bought it from McDonald Brothers, wasn’t making any money in franchising and then took the company and turned it into a real estate company. So what McDonald’s does is essentially they buy the land that its operators operate on, and the franchisee, the person that owns the McDonald’s has to pay them rent, now that’s pretty damn smart because if anything goes wrong with the franchise they just say hey, you know, they collect the rent, they’re like hey, we don’t want you here, they evict them, they get rid of them. They have a lot of control in this kind of operation and it’s genius because real estate, they’re not making any more of it, right? So the land is really where the value is. So McDonald’s.

[00:07:15]
Yeah, they make Quarter Pounders and Big Macs but right early on, Ray Kroc they figured out that the real money was going to be made owning the land and having the franchisors rent the land from them, was a brilliant franchise plan. So I want to tell you a story too about McDonald’s and why I like this stock right now so McDonald’s is trending up today. It’s up about 1.59%, you have to be a little bit careful with the stock, the chart’s great. It’s definitely in a breakout pattern heading in the right direction, but it’s getting a little bit over bought, but it is trying to take out its 52-week high of 231. And I think it’ll do that in the next few days or next two weeks, but you know who goes to McDonald’s and the reason the stock is doing so well.

[00:07:55]
It’s older people, they go and they’ll get their coffee and have their breakfast at McDonald’s and sit and socialize with people in their neighborhood. That hasn’t changed that’s been going on forever, my grandmother, this is kind of a funny story, her sister used to go to McDonald’s with her husband. They would go and get the coffee and maybe a danish or whatever they had at McDonald’s, probably a breakfast. They go and they get their coffee and their breakfast, socialize and it was part of the routine. Now, my grandmother came from the Depression era, so everything was saved, bread was taken home from restaurants. You know, that was what it was. It was just the norm. So my grandmother’s sister Mary, when she would go to McDonalds, she would keep her sugar packets.

[00:08:35]
And I remember my grandmother’s sister would bring them over, my grandma would stay with us in our house, in a condo like in the basement and they would come from Florida in the summer and stay with us and help my mom with the five kids. So my grandmother would have this big gigantic bag like a Target bag or a plastic bag of the sugar packets and she said hey, why don’t you help me open these sugar packets up and they would, I would take the sugar packets and I would pour them in the jar, in the five gallon jar and she was saving the sugar. So you have these old people stealing sugar from McDonald’s but no, that’s not the story. The whole point is once they open up they’re going to do more and more business.

[00:09:12]

Because people want to go in there and sit and they want to have their coffee at McDonald’s. It’s a place for people to go. Community place for people to gather and that’s what McDonald’s always was. Stock is a little bit overbought as I said, but it looks like another 5% before you have to worry about levels of overbought that it is

THE AVERAGE INVESTOR

So I have a question from Rita, so Rita said I made a massive gain on plug power. I purchased it about $8 back in June. I made nearly 5x, when should I sell? This again is an alternative energy type of company, but here’s what I would say, if you look at the stock now, it sits around 38. It’s in a bad pattern. It’s totally oversold right now.

[00:09:52]
Generally what I would say if you’re in a stock and you buy a stock and it doubles, smartest thing to do is cut the position cut it in half and ride for free, so if you buy a stock at 8, buy a hundred shares. Goes up to 16, you doubled your money. Cut it back to your initial investment, and let the rest ride for free, take your money put it somewhere else, diversify your portfolio. That’s what I normally say, in this case with plug which is an alternative fuel or energy company. I would say what you want to do here, it’s so oversold. Since it’s so oversold, probably want to wait a few days, maybe another week and watch it bump. It’s going to bump because it always bumps off the level of oversold.

[00:10:31]
It’s at like 20 on the RSI, the relative strength indicator and its at a place where it generally has bumped in the past. So I’d watch for the bump, maybe get that bump up another to 2, 3, 4% and then cut your position in half take your money off the table and invest in something else. That’s the smartest way to do it here, by the way, plug power focuses on alternative energy technology. They focus on the design development and commercialization of hydrogen and fuel cell systems, so alternative energy for the future, so her, thanks for listening, another great show. We will see you again next time on Stock Smart.