Super Bowl of Stocks – AMD, ETSY, TSLA, NVDA – What’s a SPAC?

Podcast Transcript

Good day and welcome to another edition of Stock Smart with Jeffrey Kamys. This is the February 3^rd, 2021 edition and we’re going to start right off with the Super Bowl of stocks and it’s definitely of the moment because we’re heading into the Super Bowl weekend. So let’s talk about what the Super Bowl of stocks would be. So let’s look at the stocks of last year. So the four stocks that would be in my semi-finals would be Tesla, TSLA, AMD, which is AMD, Etsy, ETSY, and Nvidia. Now Tesla for sure, it won the Superbowl last year. It was up 743%. Next would have been Etsy, which is up 302% off the Covid mask business, incredible, Nvidia 122% and then AMD which was up 100% last year.

[00:00:53]
So the winner of the Super Bowl based on last year’s numbers the 2020 numbers would definitely have been Tesla. But how are those companies going to do and will they make the Super Bowl in 2021? That’s the real question. That’s what investors want to know. So let’s take a look at it a little bit. You know Tesla, it’s moved so much. It’s hard to see that it could do what it’s done in the last year. It just doesn’t seem likely. But it’s still a great company, analysts continue to lift price targets on it. It’s been raised up to around 900 now for most people. It’s growing its service business.

[00:01:26]
So besides it’s got two ways to make money or a double flywheel if you will. So not only does it have the vehicle part but it’s also got the service side to the business which I would love by the way if they are really coming out with it, I put up my email into the Tesla site for a solar roof. I would love it. I think my house might catch on fire, but I would love a Tesla solar roof if they’re really working and ready. I do believe Tesla is going to continue to grow and it’s got such a momentum crowd around it that It’s going to always be one of those stocks that you know, that people just fight for. Next up.

[00:02:06]
Let’s take a look at Etsy. Etsy is a really interesting story for 2021. So in 2020 Etsy was dropping in business in March, they saw a decline because of Covid, so Etsy shifted its entire business and they started really promoting these, the Covid masks, which were handmade custom so that you don’t have to wear one of the blue masks or the traditional really ugly masks that everybody else is wearing, and Etsy saw huge growth, selling nearly a 133 million in masks last year.

[00:02:41]
And so, you really have to applaud a management team like that because of how they quickly shifted when they saw a different opportunity and they knew that their business was hurting and that takes a lot of flexibility to do. Do I think it’s going to go up 302%. I mean, it’s a very popular site. It’s very unique. I do think it’s a good stock but I don’t, I would doubt it would be up 302% again next year. Next let’s look at Nvidia, now Nvidia has grown greatly because of the growth in things like cryptocurrency. Nvidia was the chip, if you look back a couple years ago when Nvidia stock was blowing up around 400 and then it got shaved in half.

[00:03:26]
It was because the crypto boom was in full effect and Nvidia grew because of that because their processors were needed to create the crypto. And so Nvidia grew because of that and they continue to grow because of that. There’s a lack in chips right now all over for all this production because everything in your house everything you use, has a chip in it and do I think being invested in some kind of chip.

[00:03:52]
I think that’s a smart strategy for any investor whether you want to just take the SMH which is an ETF that covers a lot of the chip companies or you want to be invested in a company like AMD. AMD did purchase a company called Xilinx which is also a manufacturer of if you look at AMD and Xilinx over the last like four months, the deal really is going to be about stock. So AMD and Xilinx, they move in direct correlation, if you take a look at it, when AMD is up X, Xilinx is up X, so take a look at that. We really like AMD. The semi-custom market is really interesting to me. Custom chips, they’re making the chips for both the Sony PS5, the new unit and the Xbox series X.

[00:04:33]
The PS5 sales are expected to be over 200 million. The series X, the Xbox product, is still newer and supplies are, there are shortages. I would definitely be in AMD. AMD is a great stock. So as the gaming industry continues to grow, users buy, you know, both the Xbox series X, and the new Sony PlayStation game we believe that’s going to be a big factor in the growth of AMD and that is going to be our Super Bowl winner for the next year. So you heard it here. That’s the Super Bowl winner, that’s our pick for 2021 – AMD.

STOCK WATCH

So stock that someone asked me about – Blackberry and I was like, seriously the phone that people had back in the day to play Brick Breaker and I never had one myself. I never liked the small keypad.

[00:05:30]
My fingers are too big but I would say this, if you like Blackberry, go out for dinner with your friends when you can go safely from Covid and look around the table and see how many people have Blackberries and I think the answer is going to be like nobody. And it’s staying alive basically because some businesses are still locked into their technology and their servers, but the business is in decline over the last 4 years, 23% it’s down in its core business. It was part of the short squeeze at Wall Street Bets and so it was heavily shorted and it did bump, if you’re in it now at 11 or 12 where it’s at right now, it’s a stock that’s probably going to go back to 6, that’s where the support is. So I wouldn’t stay in it. It’s dying business, not a growing one. Everyone is using iPhones or various versions, so I would not be in the Blackberry. So that is not a stock I want and I would get rid of it.

THE AVERAGE INVESTOR

So lets go into the Q&A section where I have a question from Christine. And again, thanks for the questions.

[00:06:34]
You can send your questions to Jeffrey@JeffreyKamys.com. Getting 15-20, 25 questions a day and I’m going to try to go through as many as I can but here’s another question because this is so relevant to what’s going on with our stock market right now: What is a SPAC. Definition of a SPAC is a special purpose acquisition company. It’s essentially a shell company that’s set up by investors and the sole purpose is to raise money through an IPO, the SPAC then goes out and looks to purchase another company and they have up to 2 years to do that. Generally a SPAC will go public on the market or on the exchange at about $10 per share. Now if you buy the SPAC you have no idea what company the SPAC may choose to buy.

[00:07:25]
So your money goes in an interest-bearing account and then the owners of the SPAC or the sponsors have two years to purchase the company and so what’s key in this, if you’re going to invest in these, I wouldn’t invest in these, but what’s key in a SPAC, is that you know, how this works. So you need to know the management team and if it’s a management team that’s had success with other areas or industries you like, that may be a reason to get into a SPAC. But if you don’t know who the management team is and you just see the ticker on the bottom of the board, then you’re making a mistake.

[00:08:05]
So if you know the management team and you believe that they’re going to have success in this SPAC when they buy a company then you know, have at it. So what happens is they go they have two years, they raise money through essentially going public, the SPAC takes that money and then goes and looks for a company that may want to, you know, have an IPO but they may not be ready and they don’t want to go through the process. So the SPAC is essentially a way for a public company to go public but through the SPAC, they’re also called blank check companies. And again, you have no idea when you invest in it what they’re going to be buying. There’s a lot of people who want to get in.

[00:08:48]
These, the market is generating a lot of SPACs, it’s like the most popular thing if you watch CNBC or one of the one of the stock shows, SPACs are all over the place, you know, I would tell you if there’s no company purchased in 2 years and that rarely happens, you get your money back because the SPAC essentially has 2 years to purchase a company, but then they’re also incentivized to go buy a company and there’s not the due diligence that a SPAC does compared to like if a company has to go public like through the SEC. It’s not even close. Because you’re essentially relying on the SPAC board members or the SPAC sponsors to decide if this company is a good company or not.

[00:09:25]
So it’s a buyer beware situation. Advisory firm Renaissance Capital found that the average returns from SPAC mergers between 2015 and 2020. By the way, it’s not a new idea. It’s just becoming in vogue right now, but those investing in the SPAC mergers fell style short of the average market return for investors from just a regular IPO. So it’s proven over the last 5 years or so that the SPAC, investing in the SPAC is not as good as finding a company yourself and investing in it as an IPO. So that’ll wrap it up for today. Have a great Wednesday. This is Jeffrey Kamys as signing off for Stock Smart, February 3rd, 2021 edition.