Apple – Thanks For The Trillions

Apple is one good Nasdaq up day away from 2 trillion (about $475 for the stock). I think the stock has gone from 1 trillion to 2 trillion faster than it went from 1 billion to 2 billion.

It has been my largest stock holding for a very long time (Spotify has been back and forth with it lately), but I think I can find other investments that will double quicker than Apple going to $4 trillion and in a bet on myself will sell a bunch of my stock today and go to work on that.

I loved this chart today from Michael Santoli:

His snarky comment made me laugh – ‘People out there must think a 4-for-1 split means you buy one share and they give you three for free‘.

Here is an Apple monthly chart going back 20 years to the iPod and the first retail store:

A no brainer 400 bagger!

That trend looks pretty smooth zoomed out 20 years but there have been many 50 percent declines along the way.

Remind me to buy the next 30 percent drop please.

Do Public Markets Matter Like They Used To?

The new hip mantra is ‘public markets DON’T matter as much anymore‘ and a lot of the smart money has moved to the private markets- see Matt Levine’s great post.

The people that say this loudest are journalists, fintwit opinionados , underperforming hedge funds and billionaires.

The truth is OF COURSE public markets matter depending on where you sit.

My friend Barry’s Bloomberg piece went viral titled – why the markets don’t seem to care if the economy stinks is also excellent because he outlines just how bad certain parts of the economy are:

2020’s worst-performing industries YTD:

Dept stores -63%
Airlines -55%
Travel -51.%
Oil&Gas -51%
Resorts & Casinos -45%

These don’t matter to S&P500;

De-list the 30 weakest industries & it would barely shave 2% off the S&P 500.

We have massive GlobalMacro headwinds, and more importantly for those of us getting on with our daily lives, major MICRO tailwinds that have capital inflows, exciting careers and opportunities in both the public and private markets.

So yes, the public markets matter as much as ever. If you can’t participate, you should still learn how to read them so you can position yourself for the right careers.

The Apple, Nikola and Tik-Tok Show…

Apple is closing in on $2 trillion in market cap and now has the largest single S&P weight over last 40-years…

Nikola manufactures (I use this term loosely) electric vehicles in the Phoenix desert, did $36,000 in sales last quarter and has a $13 billion valuation.

In 45 days we will find out what TikTok is worth if Microsoft is allowed to buy it (and pays a finders fee to Fat Nixon of course). Based on Nikola’s valuation it is worth more than Apple!

Of the three companies dominating discussion on Stocktwits, TikTok is the most interesting to me because it is not even a public company. Microsoft has added nearly $50 billion in market cap since the idea was floated by Microsoft CEO Satya this weekend.

Eugene Wei has a FANTASTIC post on the coming of TikTok and it is worth a read to help you understand the battle for it.

Disruption Is Good! …Nasdaq 20,000…The Seeds Are Being Planted At An Accelerating Pace.

If I woke up from a 2020 Coma today and you showed me a chart of the Nasdaq I would have guessed that Apple cured cancer. It turns out Eastman Kodak was hired to cure COVID.

If I woke up from a Coma today and you showed me the headlines of 2020 and asked where the Nasdaq would be I would guess 4,000.

Here are the indexes this year (I substituted Nasdaq 100 for the Nasdaq which is 90 percent of what interests me day to day and now up 27 percent year to date):

This is why I love investing. You have to go beyond the headlines and noise and position for the future.

I was very confident we would see Nasdaq 10,000 the last 5 years, but the road to get here was not smooth.

The seeds for Nasdaq 20,000 and beyond are being planted at an accelerating pace post the COVID-19 outbreak. March was horrifying and the news does not seem to be getting any better. But, the bad news does not show up in the pitch decks I am getting the last few months.

The difficulties to be faced in hiring, training, motivating and executing in a COVID-19 world are now being thought through more clearly and there is data that is encouraging some incredible people to begin again.

I mentioned a couple weeks ago on this blog that the decks and pitches I was receiving were amazingly good the last couple of months and the quality is still improving.

It makes sense to me.

Great people with great careers at great companies that have great visions would rather start fresh than work inside even the best organizations that have to deal with the hiring, training, motivating and executing (at scale) of hundreds and thousands of people.

A great salesperson, recruiter, marketer etc will look much different in a zoom world than a face to face world. People are moving and the money is now moving quickly as well.

In 1987 the adage we traders and investors thought was cool was ‘Greed Is Good’.

I believe 2008 killed the coolness of ‘Greed Is Good’.

You may not like it, but 2009 was the beginning of ‘Disruption Is Good’.

COVID-19 only accelerated the importance of this new mantra to great founders, employees and investors.

Momentum Monday – Digital Dominance…This Week Semiconductors and 5G

Good Monday morning everyone.

As always here is this weeks Momentum Monday from Ivanhoff and I.

I walk through the Apple explosion to new highs and what that means for my stops and area where I would get defensive.

Google is the weakest of the FAANG stocks.

I shared some fresh ideas with Ivanhoff in the software and 5G sector which include $ESTC $SWKS $QRVO and $QCOM.

I hope you enjoy it.

I also wanted to enclose this longer, but excellent video on the semiconductor sector of an interview between Gavin Baker (ex Fidelity portfolio manager) and Rob Koyfman of Koyfin. Gavin does a historical look at the industry to put into context the explosion underway in the AI industry and how it will help the sector. It is worth a watch – here.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.  

SPAC SPAC SPAC SPAC SPAC

I think I have tipped you off that this post is about SPAC’s.

I have mentioned SPAC’s over the year on this blog, but it was February of this year that one finally caught my attention – the post was titled ‘A Little Froth Is Fun‘. I was referring to the Virgin Galactic SPAC ($SPCE).

Flash forward five months and there is a SPAC a day. The people wanted SPAC’s and oh boy they are about the be besieged. I read yesterday that we will soon have a SPAC ETF with the ticker $SPAK – naturally…

One person who was ahead of this curve was Chamath who orchestrated the Virgin Galactic SPAC.

Alex Danco has the backstory in his great weekly newsletter, this one titled ‘Spac Man Begins‘. The gist of the story:

Three years ago, Chamath sat us all down at a Social Capital all hands meeting and told us about this great new thing we were gonna do. It was called a SPAC.

A SPAC (“Special Purpose Acquisition Company”, or “blank check company”), he told us, was a new way we were going to help take big tech companies public. Going public is an important moment in a company’s life. It’s a transition from one state to another, it’s a stressful but monumental transition, and the current way we do it – the Initial Public Offering – stinks. Our SPAC, the thinking went, would create a new path for tech companies to go public that could compete with the IPO, and win.

It took a few years, but Chamath got this one really right. At the time, hardly anyone in Silicon Valley had ever heard of SPACs before. But now they’re having their moment, from Wall Street (Bill Ackman’s $4 billion SPAC for finding a “mature unicorn”, lol; David Ubben and Nikola stock making even Elon blush) to Sand Hill Road (Ribbit Capital just raised $600m for a fintech SPAC, and Chamath is doing two more, with more to follow I’m sure.)

SPACs aren’t new; they’ve just traditionally been a grimy, off-Broadway kind of financing. I have some fond memories of heading home to Canada and then talking to these 21 year old university students who were like, “SPACs? Oh yeah, we know what those are. I worked on one during my co-op semester, trying to take a fake mining company public.” (As an aside: did you know that Canada has a stock exchange specially for scams?)

Alex ends with this…

If Chamath can earn a reputation for pulling these things off, does he become as valuable as the investment banks’ IPO businesses? If we can repeatedly go directly to the retail public and sell these things, what happens if he lowers his 20% fee, to say, 10? Once you really have this process down, could a SPAC start to compete on cost? The conventional answer would say no: you’re still paying the blank check fee to go public, M&A fees for the deal itself, not to mention the promoter fee. But you’d be surprised where cost savings can get found in a new, hungry industry that hasn’t ossified into its Generally Accepted Margins.

SPACs today might just look like a rearrangement of banker fees into a different structure, with costs being disguised rather than saved. That’s fair. But there’s no way you can convince me that you can’t find some real economies of scale in taking the same blank check company public 20 times in a row. Get out of here. At some point, a bank will break ranks and get into the wholesale SPAC listing business. Then we’ll see what the margins actually look like.

Anyway, I can’t wait to see where this all goes, and I especially can’t wait for synthetic biology SPACs to hit the mainstream so we can have some companies that absolutely no one understands get taken public on the pure brand strength of a sponsor. We’re about to learn a whole lot about some questions no one ever thought to ask about only a few years ago! And also keep an eye out for those Canadian junior I-bankers. If you’re looking for targets, they are here to help.

I’ve asked many smart friends from the big banks, but my favorite answer is from my friend Doug Horlick who said the following:

‘Yes this is crazy fast, but it still feels early. SPAC focus will end up the same way as hedge funds. SPAC’s will get the best and brightest, and will also get the polar opposite that are hacks that want a short cut. Investors will get smoked not doing the homework necessary to differentiate.

The Wall of Worry…The Steaming Pile of Cronyism… and Apple

Happy Saturday everyone. I plan on doing very little today other than this post.

I saw this front page photo of the Washington Post and had to share it:

As I have been saying…this has been the greatest ‘wall of worry’ of my investing lifetime. Markets climb ‘wall of worries’.

As we worry, lose our tempers, and try to get on with our lives, the grift continues on page 10-50. Ben Hunt captures the lastest steaming pile of cronyism in his Eastman Kodak post titled ‘The Grifters‘. This grift begins…

On Tuesday afternoon, the White House announced that Kodak – a public company with less than $100 million in market cap, basically a pension fund with a famous brand name attached – would receive $765 million in “loans” from the US government to create a “pharmaceutical start-up” that over a period of 8 YEARS will start making pharmaceutical “supplies”. Whatever the hell that means.

This $765 million in non-recourse, non-secured loans for pharmaceutical supply production, given to this micro-cap company with zero experience or expertise in pharmaceutical supply production, comes from the International Development Finance Corporation (DFC), a $60 billion piggy bank established by the Trump administration in 2019 to replace the Overseas Private Investment Corporation (OPIC).

Yes, “international development” and “overseas investment”.

The DFC is an institution that, per its mission statement and Congressional charter via the 2018 Better Utilization of Investments Leading to Development (BUILD) Act, is “focused on promoting inclusive economic growth in the world’s least developed countries.”

I mean … I knew things were bad in Rochester, but I didn’t know they were that bad.

To dust off an old Epsilon Theory catchphrase:

They’re. Not. Even. Pretending. Anymore.

Finally, that boring Apple corporation is growing like gangbusters even though iPhone growth is gone. Here is the monthly stock price chart since Tim Cook took over for the late Steve Jobs:

In November 2018, Tim Cook said services was the future, not iPhones and the stock was hammered. I argued that it was a great time to buy the dip (I bought some of course). Have a The Meta game Tim played is complete. Apple surged 10 freaking percent yesterday to all-time highs adding $170 billion in value.

iPhone sales were up 1.6 percent for the year but services sales were up over 15 percent.

I have no idea what happens next, but most of Wall Street is rejiggering their growth numbers and price targets.

Apple also declared a 4-1 split which is an old 1999 trick used to juice a stock. My friend John Street Capital predicted last week they would and his post was an excellent read titled Invest in What You Know: What does democratization of equity investing mean for valuations & performance? The money shot:

It’s interesting to highlight the difference in activity amongst some of these popular names for those firms that enable fractional equity trading / put that front & center and those that don’t. When it’s a core part of the product offering trading volume in names such as AMZN, TSLA, and GOOGL tends to be higher as they view this as “less expensive.” However, when fractional equity investing isn’t enabled you see more activity in names like SNAP, UBER, TWTR, with “lower notional dollar requirements.” While there has been a plethora of academic research to suggest stock splits shouldn’t have an impact on price, real world results have varied based on a number of key criteria. We think companies like AMZN, GOOGL, and TSLA will shortly have bankers pitching them splits, as the next “leg” of price appreciation.

Have a great weekend.

Cannabis Commited: Get Ready For 2.0 – Todd Harrison Joins Me On ‘Panic With Friends’

Happy Friday everyone.

Today my friend Todd Harrison joins me on ‘Panic With Friends’ (episode 86) to discuss the cannabis sector. Todd is the founding Partner at CB1 Capital Management, LLC. Todd and I go way back. I was a big fan of his from the day he took over for Jim Cramer at The Street.com (for a week) while Jim took a rare holiday. Todd is a passionate writer and person. He recounts being down by the towers in 9/11 and the journey that led him to the Cannabis industry and the start of his current Cannabis hedge fund (full disclosure – I am an LP in his fund).

Todd is very optimistic on the US Cannabis companies, mostly for medical and health reasons and lists his favorite public companies in the episode.

You can listen to the episode here.

You can also listen on Spotify (please subscribe to get each episode as I don’t write about each one on the blog), or the Apple podcast app.

Todd also summarizes his current thoughts on the cannabis sector in these two posts:

Why The Cannabis Sector May Be Turning a New Leaf, and

Cannabis Committed: Get Ready For 2.0.

FAANGK – Eastman Kodak Joins FAANG Because Of The Government ‘Cash Cannon’ Game Show

The froth in the market continues around the edges.

Yesterday, there were 25,000 messages yesterday on the Kodak stream. The Tesla stream had our previous record of 20,000 messages on their last earnings day.

Why?

I read somewhere on the streams yesterday that overnight, Kodak was now larger than 60 percent of the Russell 2000.

Seems fair.

At this point, our leaders have turned the cash canon into a new daily game show.

I can only imagine that next up from Fat Nixon and crew is a SPAC for ‘Flint Michigan Bottled Water’.

In any other market, the silly stock specific moves from the lunatic federal policies would make me step aside and worry.

At the core of it all though is $5 trillion in revenue and 500 billion in cash from Apple, Google, Amazon and Facebook.

Yesterday they were in Washington while the froth party moved over to Eastman Kodak stream.

Today, who knows.

FAANG Goes To Congress (Without Netflix)…Should You Sell or Even Care? Maybe Just Buy More Gold….

My daughter Rachel sent me a text yesterday saying:

Facebook, Apple, Amazon and Google are going to congress tomorrow and we should sell some of their stock because the stocks will probably go down. It is for antitrust issues and Facebook is right now trying to steal Tik Tik creators to us the new Instagram Tik Tok.

Tik Tok is not going to roll over. They responded quickly with a $200 million fund for creators. Wowzers.

I sent her back Om’s post on the subject which rang most true to me declaring ‘Tech CEO’s In DC Is A Waste Of Time‘. The gist:

What do I think about the whole brouhaha? The short version (in case you want to skip reading the piece) — all sizzle no steak. In other words, you could (and should) avoid even thinking about it. You are not going to see the four chieftains say anything that damages their business or upsets the status quo. It is not going to impact the employees or the stocks of these companies. Hell, it is not even a photo-op: the whole non-drama is going to play out on Zoom.

But it will keep a lot of reporters, opinion writers, and television hosts busy. It will keep Twitter humming. It will allow politicians to score some points in the court of public opinion. And yes, it will allow politicians to get more money from lobbyists who represent these companies.

I love this part:

These four companies (along with other technology companies) are helping the stock markets stay flying high during this pandemic. Stock markets are often a bet on the future. What the markets are saying — the future is going to be shaped by technology.

As I have written about in the past, our relationship with technology is getting increasingly complicated. Weirdly, the pandemic has only exposed our need for these platforms.

Whatsapp is a crucial part of global communications. I was reminded of that this past month when I tried to manage my parents’ health situation without Whatsapp. Amazon has delivered necessary (and sometimes not so essential) items. YouTube brings me entertainment and edutainment. Apple is a platform that I use for pretty much everything – reading, writing, viewing, and creating.

Like I said — it is complicated.

I recommend reading the whole piece.

Not to be outdone, Jeff Bezos released his opening statement last night. As Web Smith points out…’it was masterful and Amazon is antitrust proof:

Tomorrow might be just another good day to buy more Gold…

Never missing an opportunity for sneaking in a grift t while we are looking in another direction, mostly bankrupt penny stock Eastman Kodak got $750 million or so from Fat Nixon to keep 300 employees working on COVID and generic drugs. The stock has popped from $2 to $14. I’m sure nobody inside the White House circle of grift made money on the stock with that surprise handout.

PS – I have done two Panic With Friends podcasts with Om if you want to hear some great deep takes on all things technology. You can listen here and here.