March Madness, Facebook (FB) a Value Stock and Can I be a Millionaire?

Podcast Transcript

Hey this is Jeffrey with another edition of Stock Smart, March 18^th, 2021 edition. Hope you’re doing well. Update on the Fed, Fed says no rate hikes until 2024, from chairman Jerome Powell. Bond market doesn’t agree as the net selling continues and the 10-year note up about 8-9 basis points today to 1.74 which is a 13-month high. So guess what? March Madness is here, starts today, started yesterday actually, playing games. Today it gets going. I’m going to give you my final four because we did talk about this early in the week. My final four was Virginia, Michigan, Ohio State, Illinois.

[00:00:37]
That’s my home state and Illinois being my final pick, so let’s look at the president’s picks because we just, this just came in, Barack Obama posted his picks and he’s picking in his final four, Gonzaga, Michigan, Baylor in Illinois with Gonzaga and Illinois meeting in the final with Gonzaga winning, Barrack come on, you lived in Illinois, what’s going on? Anyway, he picked Gonzaga for his Champs. Very good team Gonzaga. I want to talk a little bit about another sports story that I read. This is a big area of my life. It was for many years. I had the fantasy sports business for several years, which was wildly successful. I had no clue when I was in my young twenties.

[00:01:17]
I started this thing just because it was fun and it turned into a great business for me, a way for me to stay home and work and then be there with my kids when they were growing up, heard a story from this guy Michael Brockers and I have to tell you Michael Brockers doesn’t know squat. He’s a guy who played with the Rams and now he just got traded to the Lions and he made some comments about the Rams’ then-quarterback who was being traded to the Lions at that point as well named Jared Goff and he said about Goff he said I just think Stafford is a level up. He said it in my heart I deeply just understanding what Stafford brings, it’s a level up over Goff and he says he added I feel like watching over his career seeing the comebacks seeing so much of the numbers that he’s had.

[00:01:57]
We’re just expecting he will do better when he comes to the Rams. Nonsense. I was in this business for a long time, what you always know, the teams that make the playoffs have quarterbacks that can win games. In the NFL, you’re judged as a quarterback by winning games. One of the guys who is the most underrated. I mean, he wasn’t underrated really but he was underrated in his accomplishments because he didn’t win a Superbowl, it was Dan Marino. The Dolphins team stunk some of the times but they always made the playoffs against those great teams they lost first round a lot of times but they made the playoffs because of Dan Marino, and Jared Goff by the way has made the playoffs a bunch of times with the Rams, I think it was second or third year.

[00:02:36]
He was in the Super Bowl and he was way over and above his game at that point. I mean you can tell he was lost in that game when they lost to the Patriots and Belichick just made him look silly. But Stafford doesn’t win. This guy Brockers doesn’t know what he’s talking about I can tell you NFL quarterbacks win games. That’s what they’re paid to do, not put up numbers. Stafford puts up great numbers, doesn’t win games. Hasn’t. Being a Packers fan, I used to love it when the Lions would come to town and the Packers would play the Lions, they’d dominate them. Stafford would throw some interception or something to keep playing the game, he’s not a clutch player, he hasn’t been and you look at that and you look at playoff appearances. That’s what quarterbacks should be judged on.

[00:03:15]
So anyway, Brockers, sorry to break this to you, but you don’t know what you’re talking about. You just don’t know what you’re talking about and I’ll tell you the same crazy things going on in Seattle. We have the most clutch quarterback that I can’t remember guys, clutch is Russell Wilson who has won so many games for that team, coming back and they’re trying to get rid of Russell Wilson. What is going on in Seattle? That is absolutely nuts.

Let’s get into some stock stuff. Amazon getting into the home mobile health care business. So guess what Teladoc, be careful here because Amazon’s coming to town and they’re getting ready to take your business away. So Amazon, let’s look back, when Amazon got in the pharmacy business. They were going after CVS and Walgreens.

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Well CVS’ stock which used to be a hundred or so range, it’s half now, it’s never recovered. So you get Amazon coming into the mobile healthcare space, going after Teladoc. I don’t think that’s a great idea to be you know, in business, I wouldn’t be investing in Teladoc now, I’d be freaked out. So Amazon going into the space with all their money with all their connections all the products they have. All the ties in the medical industry that they already have, that they’ve been building they were very active with Covid, lots of money, billions of dollars they invested trying to get Covid vaccines and Covid testings and they had a large test site that they put in place. So Amazon, very involved in the medical industry, but I would say stock of Teledoc hit a high, a 52-week high about 308.

[00:04:34]
It’s now down to 185, this Amazon story getting into mobile healthcare? I wouldn’t be an investor in Teladoc heading in the future. VIX is up about 4% 5% today, volatility. We are overbought on the S&P 500 oscillator, which means that we are going to see a wind-down a little bit and when we get the winddown it will be a bit safer place to buy stocks again. So not only are we getting the 10-year note freak out move out of growth stocks as NASDAQ gets hit again today, but we’re also overbought

STOCK WATCH

So let’s look at a stock here, let’s do the marketing language. There wasn’t a lot of money on this company because if I started reading all the marketing language it would giveaway what company it is and what they do, but here’s the first line. We are focused on building products that enable people to connect and share through mobile devices, personal computers and other surfaces.

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Well, it’s the Facebook which it was originally called, the Facebook, so Facebook, looking at Facebook, this is an undervalued stock or a value stock at least for the Fang stocks. It’s a value stock in that group. So let’s take a look at the other Fang type stocks and their price-earnings ratio. Facebook 27, it’s low, 27 for this type of company, low. Amazon comparatively 74 price-earnings ratio, Google 36, was low, was even lower, it’s made a nice move in the last six months and really was kind of undervalued as well and it’s because of the secret of nature of Google. They don’t tell people what products they’re working on.

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It’s hard to differentiate the numbers in their balance sheets because they hide a lot of what they’re doing and what they’re working on, but Google finally made a move and caught up a little bit, Netflix 86, just completely insane to me when I look at Netflix. For number one reason is that in Netflix they grow a lot again and was a Covid stock if you will a little bit but Netflix again more competition coming in the marketplace and also subscription businesses, the ones that are entertainment type businesses that people were buying and adding during Covid, they’re going to go away because people only have a certain amount of money to spend on entertainment dollars and they’re going to have to shave somewhere. I don’t know if you shave Amazon Prime, because there’s so many other benefits with the home delivery business.

[00:06:43]
Netflix, you might shave, I’m kind of bored of Netflix. I don’t watch it as much as I watch other ones. I generally, I have you know, FuboTV, which I like, I also have Amazon Prime and I have HBO Max. I don’t know if I like Netflix that much, I’m having a harder time than ever and a lot of this has to do with they haven’t been filming many things because of Covid but it doesn’t seem like they have the quality program or a lot of new programming now, I’m sure people disagree with me. If you’re watching certain things on there and you really love the programming great, but at 86 price-to earnings, it seems pretty high. Apple 33 PE, was always considered just a hardware company. So had a lower rating finally kind of broke out, it’s got a huge differentiation promise.

[00:07:25]
Imagine if Apple does get into the EV Space, Electric Vehicle space, Nvidia 77, very high. Let’s look at Facebook, little Facebook with a 27. The Facebook. It’s really just the hated stock, people hate it. I don’t know if you get like these socially conscious investment advisors who say well we can’t be in Facebook because they do this and this they had a big impact on the election, you know, you know when Trump was elected and there was all that nonsense about Russia, lot of fake postings, so Facebook is hated. This would be my argument if they called it Instagram the stock would be more valuable and that’s a company they own along with WhatsApp, they generate cash on cash on cashm it’s an advertising business.

[00:08:05]
That’s what they do, hit a 52-week high of about 304, now sits in the 280s, but is still undervalued,  283 today. Still undervalued, if it had traded in the range with the other price-earnings ratios as these other companies that are Fang stocks it would be 360-370-380, maybe higher. So you know here we’re going to still get a little bit of the unrest with the growth stocks and the tech stocks. What I would do is maybe take a small position in Facebook right now. We’re about three, four weeks away from bank earnings, it’s going to set the start April, mid-April, you’re going to get JP Morgan, Goldman Sachs around April 14th, and then you’ll start getting people, they’re going to be disappointed with the bank numbers, but they’re overdone. I’ll tell you as much money that’s gone into the financials because they’re considered value stocks.

[00:08:54]
They’re overdone. Those numbers are probably going to disappoint because the yieilds quite aren’t there yet, because the Fed’s funds rate hasn’t really changed, it’s the yields in the financials aren’t going to be there. They are value stocks though. Their price of book ratios were way, I mean these things were cheap, Goldman Sachs, these companies were very cheap. So there’s a reason they moved up the cyclical rotation here, but Facebook is still undervalued. It is a value stock as far as the Fangs go. Its advertising business is the best, I can tell you know this if you look up something on your Google browser, research it and then five minutes later you go on Facebook. There’s going to be an ad for it. Whatever it is, shoes, hats, cars. It doesn’t matter, Facebook will have some retargeting going.

[00:09:37]
It’s going to hit you smack in the face within a minute of you launching your Facebook. They’re great at it. They do it on Instagram, and on Facebook. This company is just a hated company. That’s a value stock, and again if they called it Instagram, I think it would do better.

THE AVERAGE INVESTOR

So I got a question from Jane. Hey thanks for the questions, keep them coming at Jeffrey@JeffreyKamys.com. Appreciate the feedback. Jane says, I’m only twenty-five, I make under $80000 a year. Can I become a millionaire investing in stocks. Jane, yes, you can, it’s pretty easy. It’s not even that complicated really. So, for where your wealth is and what you’re making salary-wise you’d probably be in the place where you would maybe consider a 401K Roth. Or Roth IRA, you know, it depends on the salary limitations.

[00:10:23]
There’s a few differentiations in these specific products, but that’s a good place to start and the benefit of the Roth of course is that you’re taxed now and then not taxed later. So at 25, you have years to go, as an investor your time horizon as we call it in the industry is great. So take advantage of it and get the benefits of compounding your wealth, I have a perfect example of this. So I would get a Roth IRA or Roth 401k. Roth 401k it’ll give you a little bit higher limitation. So if you make more money as you grow in your career, you’ll be able to pull way more because the limitation is, you know higher, we also have matching because it’ll be tied to a company potentially, different requirements so talk to your advisor about that, get some information to see which Roth would be good for you.

[00:11:09]
The key thing would be start right now. Let me give you an example. I looked this up, it was on moneyunder30.com said I looked up and have a great example that fits you perfectly, so we’re going to say Jane saved a thousand per month from the time she was twenty-five until she turned thirty-five. Just a thousand per month for 10 years. And then you stopped saving but left your money in the investment account, right? Which you could do pretty easily and let’s say it accrues at 7% annually until you retire at 65. You’re going to have when you retire at 65, about a million and a half and that’s you putting in, what did you put in, you put a thousand per month for 10 years. do the quick math on that’s, twelve thousand a year times 10, a hundred twenty thousand, easy math.

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So you put a hundred twenty thousand in and then when you’re 65, you didn’t put any more in you just left it. You probably had it in an index fund, you had the SPY, maybe you had the Russell 2000 IWM, or maybe you had the triple Q’s which are the NASDAQ stocks, the high-growth stocks. Maybe you had a combination of all three, you left it in there, you returned about 7% which is not difficult to do, you return 7% over a long time period that you left it in, untouched. You didn’t even build or add anything into it after 10 years.

[00:12:21]
You have a million-five so yes, you can become a millionaire, take advantage of it now, young people out there, do it now, it’s time to invest to put a little bit in, put what you can afford, a thousand might be a lot when you’re 25, maybe you can start with 500 and maybe you can keep going in your time horizon, you can keep adding to it. You’ll have even more money, name of this game really is compounding overtime and really ignore it. You don’t even want to look at it everyday, put it out there, putting a little thing, put it in there and put it in there. Let it grow, don’t be a day trader, just be an investor long term. The stock market doesn’t fail over a 100 years, it just returns anywhere from 7 to 10 %, you’ll be fine, Jane thank you for the question. Thank you guys for listening and will see you again next time on Stock Smart.