Jeffrey: Hey this is Jeffrey with another edition of Stock Smart, the weekend edition, for the first weekend in April, I’m here with a special guest tonight, my partner, Whitney Johnson. How you doing?
Whitney: Hey, thanks so much for having me, it’s great to be on the show.
Jeffrey: So what’s on your mind Whitney? And by the way, whatever happened to Oracle buying TikTok? I will tell you that people get these two companies confused and I want to make a great differentiation between these two companies. Oracle, IBM. One company is going down, and one company is going up. Which company is going up?
Jeffrey: Which company is going down?
Jeffrey: IBM has a great new partnership with Palantir
Jeffrey: I know we talked about this two years ago when IBM bought, when they bought Red Hat. So Red Hat controls and operates something called Linux
Whitney: Another great acquisition
Jeffrey: It was a great acquisition. And being an application builder, IBM software stinks for new development, there’s nothing. These two companies suffered from the same exact paralysis, so what happened to IBM is they became this gigantic mainframe company and didn’t do anything for small developers. They didn’t even understand what Apple was really saying when they original built those microprocessing computers. Even Oracle for that matter, because they had these gigantic software applications that nobody wanted to do and wanted to be a part of, they didn’t want to pay the licensing. That was the big inhibitor to being Oracle. So when new developers comes up the young developer who is like 20, he doesn’t want to deal with the licensing issues that Oracle puts in front of him, they want to develop in new flexible types of databases so they use things like MongoDB which is a stock that has boomed and gone absolutely ballistic in the last like 3 years but they don’t want to be involved in things like Oracle. Oracle is like, that’s your dad’s database
Whitney: It carries that stigma, it still does
Jeffrey: But they don’t have other products
Whitney: They need to innovate
Jeffrey: The products they tried to do, but they’re dead. And the reason they wanted to buy TikTok
Whitney: To be relevant again
Jeffrey: Let’s go back to a football term, can you get the football term
Jeffrey: No, that was a hail Mary, like that was a last desperation that they could maybe get in the game again, so they threw up a hail Mary, and they were using Trump to get in the way, but that thing is dead
Whitney: The deal is dead?
Jeffrey: Have you heard anything about it in 3 months?
Jeffrey: Right, since the presidency, the stock actually went way down
Whitney: We have some other headline news
Jeffrey: A lot of head line news. And that stock went down, and the only reason it went up in the last 3 weeks, is because Oracle has been doing buybacks. And IBM is a different stock and that’s actually really performed well in the past few weeks
Jeffrey: IBM is going up because that software is undervalued. So IBM software which they haven’t done anything in years, as a developer I used to remember when they had db2 which was a good database but didn’t really go anywhere, and that was the last thing I remember from IBM. Now IBM has this deal with Palantir and they’re going to be on the platforms of many servers, adding applications. They acquired 7 or 8 new companies Whitney.
Whitney: Yes, so the stock is interesting
Jeffrey: What’s the technical read on the chart
Whitney: IBM? It’s a tough one. It’s at 133, it really has not had any sort of break out on that, it reached about the same level in May of 2020 but
Jeffrey: But in a time when…
Whitney: It’s mostly in a down trend right now
Jeffrey: Do you think it’s mostly getting played now as a value stock? The dividend is appealing, the dividend I think is around 4%. The reason that IBM to me is a great stock is I think it’s totally undervalued and I think it’s one of those stocks that in the 2 or 3 years with Palantir, Palantir is probably one of the most aggressive things they have done, and they’ve done essentially a licensing deal where they’re going to have the Palantir apps, a lot of them have to do with security, and they’re going to have the Linux or the Red Hat software sitting on the desktops or the servers of many of these computers which gives them finally an entry into the development of new products and services and that’s where they make money, and the reason why Oracle is dying, is no one wants to be in that database anymore, it’s just the truth. And I don’t want to pay licensing fees to Oracle when I can have a more flexible open source software like either MySQL or MongoDB or one of the other software developers that are out there for databases, but I wouldn’t be in Oracle’s stock and the only reason it has gone up recently is because of buybacks. So what else is on your mind Whitney?
Whitney: The Chewy convenience reminds me of Instacart, and I can’t wait for Instacart to go public.
Jeffrey: Really, what’s your feeling on IPOs
Whitney: Generally not good initial investments when it goes public, because it generally rockets and then tanks and then that’s a lot of volatility unnecessarily.
Jeffrey: So IPOs are like the military, rockets and tanks?
Whitney: Rockets and tanks. Speaking of, I’ve seen a lot of military contracts coming through the news recently
Jeffrey: We’re mostly talking about those, are you interested in some of the infrastructure companies?
Whitney: Yes, I love PAVE, I love PAVE
Jeffrey: You love PAVE, why do you love PAVE?
Whitney: Oh my god, I love Pave
Jeffrey: What is Pave, tell me exactly what it is
Whitney: It’s an infrastructure ETF. Why I love Pave is that I know there are a lot of infrastructure bills being passed or proposed right now with the new administration so I really think that it’s a space that shouldn’t be ignored and should be included in a portfolio.
Jeffrey: Let me ask you a question.
Whitney: Ask away
Jeffrey: This is something I know about you, and I want to ask you personally. You wrote an article about Airbnb. Your take on Airbnb, I’m just curious what you feel about Airbnb right now as a stock and as an investment
Whitney: I think it’s overvalued. Extremely extremely overvalued
Jeffrey: Let me ask you though. So I travel, I know you like the travel. If I were to travel now, I don’t know if I would want to be in a hotel. I can’t imagine that and this was always my question when they first opened restaurants up after Covid and people started going to restaurants. I don’t know that I ever wanted to go to a restaurant where you have essentially 20 year olds maintaining the quality and the health and the care of the food service, now what was your question again.
Whitney: When was the last time you have been to a hotel?
Jeffrey: Hotel, you do tell.
Whitney: And a 20 year old was cleaning your room. I’ve never seen that
Jeffrey: I think you mixed my message, I didn’t say anything about a 20 year old cleaning my room. The point is, do you really believe that a worker in a hotel is cleaning the rooms is going to be able to maintain the quality to keep the issues from Covid being down?
Whitney: Why not?
Jeffrey: Because there are so many contaminants anyway. But I guess Covid doesn’t live on surfaces right?
Whitney: Well it does live on some surfaces for short periods of time
Jeffrey: So give me the technicals on Airbnb because I know you know a lot about the stock
Whitney: One thing that really bothers me in terms of that particular stock, is they don’t own any assets, they don’t own any tangible assets, of course they own contact information and intellectual property of course, but there’s no tangible asset owned but their valuations are based on them owning tangible assets and if you compare Airbnb to like hotel chains for instance, high end hotel chains those hotels have tangible assets, so their valuations can be substantiated. Airbnb’s
Jeffrey: But isn’t the beauty of Airbnb that they don’t have those tangible assets, because they become liabilities if they have massive debt, you know in terms of like a building, if you get interest rates moving again on some kind of building you own, that could be debt that isn’t an asset, that becomes a liability. What I always thought about the Airbnb system is that you essentially got to ride in someone else’s jetplane without owning the jet plane, that’s what they’re doing, essentially they’re on the fringe of all the ownership and they don’t have to take on any of the burden, which is kind of the brilliance of the internet.
Whitney: It’s convenient for them, and it’s a business model that works for them, but I’m speaking in terms of valuations and how the company should be valued, how the stock should be valued in terms of their assets, and it’s being valued higher than hotel chains that actually own tangible real estate and everybody knows for the long term, real estate is rarely a bad investment over long periods of time
Jeffrey: I also think that when, if I’m going to travel, I’m not a frugal traveller but I don’t want to get screwed in hotels, hotels will screw you with resort fees, where you have to pay $50 a day, if you go to Vegas, Vegas gets you in there cheap and they stick you with resort fees, we’ve done some travel different times to Vegas, right?
Jeffrey: We’d go somewhere like the MGM resorts, and you go in there and if you want to use the resort, it’s $50 a day sometimes, so you get the hotel for like $60-70 and the resort fee is $50 it’s a rip off. So let’s say you don’t want to eat the Starbucks, you want to have a breakfast. You can have a $100 breakfast for a very meagre, for a breakfast you don’t even want to eat. I don’t want to eat the breakfast of the day for $35, if I have my kids too, what I always thought was the biggest joke, if I took my kids to Disney or something, well let’s eat breakfast, would you want to go down for a $35 buffet per person, you spend $200 at a buffet, when really your kids want cereal and some juice and then you might want a bagel or a part of a bagel and coffee, or for you, a drink mix or something that you eat, my point is it’s simple, breakfast should be simple. I’m a firm believer, by the way this is my tip to you, don’t go out for breakfast, it’s a rip off. Breakfast is the biggest rip off.
Whitney: Are you giving me a tip?
Jeffrey: I’m giving the listeners a tip, you get the tip too.
Whitney: Well thank you
Jeffrey: And I would just say, don’t go out for breakfast, because it’s a rip off. Spend your money somewhere else. You can make eggs, believe me, I’ll give you a French toast recipe better than any place you go.
Whitney: What’s your secret ingredient
Jeffrey: in French toast? All of those things, by the way, it’s always vanilla. Even if you buy the crappy Mr. Butterworth’s pancake mix? If you throw your own vanilla in there, it just makes it 8000 times better, and spend good money, get the Madagascar vanilla. Every time you just put vanilla in something, it’s just wow. It’s a joke, people don’t even know. It’s like you put crack cocaine in it or something
Whitney: Secret ingredient
Jeffrey: It definitely does it. So I would say, to me, I like Airbnb, I know that we have difference in opinion in this. I like the stock, I like the service and I like the stock
Whitney: I like the service, but I don’t like the stock
Jeffrey: We agree to disagree on that. There was a big contract today that was awarded to Microsoft. 21 billion contract to Microsoft, stock popped, went up about 3%, 2.5% today. Microsoft to me, I like Microsoft stock, no dividend, 1% or less. But the stock is probably one of the most stable stocks really in technology. Whitney is making faces at me, so I don’t have a face for this
Whitney: I’m not sure your definition of stable
Jeffrey: Well, all I can say is, Microsoft of the stocks in technology. So what would you pit it against. Give me a stock that’s like Microsoft
Whitney: In terms of your idea of stability?
Jeffrey: Well it’s almost a 2 trillion dollar company. So how many companies are in that range, Amazon, Apple, Tesla, OK. So of those stocks that are in that kind of ethos right
Whitney: I’m going to say Apple
Jeffrey: I would take Microsoft. Which one would you rather have, Microsoft or Apple? This is it, which would you rather own?
Whitney: Let me make a face first
Jeffrey: That face by the way, that looked like 12 lemons, ding ding ding ding ding, 12 lemons for that face. So which would you rather own, Microsoft or Apple
Whitney: What does that mean, 12 lemons?
Jeffrey: Because your face puckered up, that’s what you did
Whitney: Are you saying my face is fat?
Jeffrey: No, you sucked on 12 lemons and you’re puckered up like… Next time by the way, I’m definitely giving Whitney the dictionary and the cue cards so she can understand her own faces because I don’t think she understands her own faces. But that was the face of 12 lemons
Whitney: OK, 12 lemons being consumed
Jeffrey: Yeah, and you made a massive pucker face. You definitely didn’t like that stock.
Whitney: I prefer Apple over Microsoft
Whitney: Yes really
Jeffrey: Now what do you like about Apple? Now do you think that Apple is really going to have an EV car?
Whitney: I think they’re going to, yes, I do. I think that they’re going to pair or piggyback on another company, actually Tesla and I think it’s Toyota are doing some sort of collaboration so I think Apple will probably do something similar.
Jeffrey: Yeah, there have been rumors, but you know, Apple doesn’t like anyone announcing anything pre to them
Whitney: For sure, they’re very secretive
Jeffrey: They like to close the door on it, very much like any of these tech companies. So when there was a rumor of Apple working with someone. We also invested in QuantumScape, QS, and I believe because QuantumScape is a Silicon Valley company and that would be something Apple would definitely for production in the US. QuantumScape with their single cell battery, which is pretty interesting technology actually, would be an interesting supplier for Apple and that stock has gone a good distance on that rumor and I’m not saying that’s true, but that technology plus location proximity to Apple, they could be a massive supplier for Apple so
Whitney: That would be an interesting partnership but just for disclosure purposes, we do have that stock in our clients’ accounts
Jeffrey: It is, and it’s being bludgeoned. So EV stocks by the way, and it’s been painful
Whitney: Think long term
Jeffrey: But those EV stocks, any EV stocks in the last 3 months has gotten down like 50%, almost all of them, if you look by the board, all these QuantumScape they’ve all gotten absolutely shelved.
Whitney: They have, and I think they probably got caught up in that tech sell off, but the flip side of it is with all the regulatory standards changing in the next 10+ years and states going completely electric for the long term
Jeffrey: I think it’s like anything, there’s a big accumulation of companies that want to get in and then there’s going to be kind of, so we’re getting the wash out, you know where everyone is running, it’s kind of like SPACs, there’s like the SPAC attacks, we had 100s of SPACs, this is going to be a record year for IPOs, and most of it has to do with SPACs, so I think with the EVs, the EV plays are getting overdone because we’re getting this big rush into the electric vehicles and people want to bring any kind of technology they can right now to the forefront, so we’re getting a wash out, then you get the shrinking up to the core because they’re not all going to make it.
Whitney: Right, and there will be acquisitions and mergers and all of that
Jeffrey: Like there always are. But Apple definitely is interesting because of that EV card. And that potential for Apple, because I think people want the interconnectedness in what Apple brings. We have clients and number one thing, I think any portfolio manager which Whitney and I are, we manage portfolios for our clients, we have about 125 or 130 clients,
Whitney: Closer to 145
Jeffrey: What’s the one stock that everybody wants in their portfolio
Whitney: Apple. Always Apple
Jeffrey: And so that,
Whitney: With explicit instructions, don’t sell my Apple
Jeffrey: And we have a client who actually has most of her wealth, has to do with owning Apple and she never looked at it, she was the classic investor who bought, probably had Apple when it was like $10 or something, and it split several times, and made her a lot of money, made her 100s of 1000s of dollars. If you have the original Apple stock and you had $100 you’d probably be worth 10-12 million because it split so many times and the value has gone up so much. So Apple is the one stock that I guess maybe for that argument, maybe this time
Whitney: No way
Jeffrey: Maybe this time
Whitney: I can’t believe it
Jeffrey: You’re right. It is ground-breaking. Hold on. I said it once, you heard it.
Whitney: Look at you, won’t even say it again
Jeffrey: Maybe this time, you’re right on Apple, they did actually do a big contract today with the Pentagon for $21 billion which moved the stock about 3%, sold off a little bit, people took some gains quickly, but it still went up 2% today, great stock, heading into earnings again, all the good tech stock earnings will be coming in about 3 weeks, 3 to 4 weeks
Whitney: And we will have a debate about that in the future
Jeffrey: We will, we’re not going to have it now
Whitney: I think we’ve covered a lot today
Jeffrey: I think it was a good podcast. I’ll tell you what, we’re going to sign off for now, but thanks for listening, keep the questions coming to Jeffrey@JeffreyKamys.com and I want to thank my partner and guest today on the show, Whitney Johnson for being a part of it.
Whitney: Thank you for having me, it was a blast and so many faces
Jeffrey: So many faces, the many faces of Whitney. And we’ll see you again next time on Stock Smart.
Market Rally, Fed Meeting, Inflation the CPI & May Buybacks