Let's take a look at Netflix (Ticker: NFLX).
Remember the times when everyone was scared of Netflix? Actually, there is still a big crowd out there that talks about Netflix doomsday. This past week, Netflix surpassed Disney in market cap, at least for a few hours. You could have sold Netflix when it was less than $100. You could have sold it when Disney announced it is going to introduce its own streaming services. You can still read the news that Netflix is an overpriced bubble ready to burst.
But, the reality is that Netflix is a very well-managed company in a rapidly growing market. Even the high amount of debt it carries is a well-thought driver of growth. It's not just the cash the company used to buy back its shares (unlike many others), and it is not the money it poured into real-estate. It's money the company has promised to the provider of its content in the future. And, the company has proved that more content means higher engagement. As far as Netflix goes, the ups and downs in the stock price are expected, but you can ignore the media and let this well-managed company do its thing.
We all do it. Not just for Netflix, but for every well-managed company that grows. Deep in the dark corners of our investing mind, we are all most likely articulating the reasons to sell our best-performing shares. Don't believe me?
Here are two more examples:
Apple-haters are many and everywhere...
It's not a technology-leader anymore... It's just a phone company... How can it continue to grow and sell a $1000-phone?
You could have sold Apple on any of such news headlines. But then Apple sells more Apple Watch than any other wearable device-maker. A well-managed company in a growing a market doesn't become a loser on the doomsday news.
Are you convinced yet? Maybe, one more example:
Who pays for overpriced coffee? Starbucks' share price is just stuck and doesn't move...
But then Starbucks establishes a global partnership with Nestle to distribute its products globally. And, it comes out that Starbucks is the number one mobile payment provider in the U.S.
The takeaway for us, the intelligent investors, is that counterintuitively, the hardest part of investing is not which company to invest in, but to have the discipline of not getting swayed by the market noise.
Stay away from the news! Stay smart!
First up is Shopify (Ticker: SHOP).
It all started when we were talking about Shopify and how the company has recovered from its significant price-fall that occurred as the result of Citron research incident. Citron is a research company famous for its now-and-then controversial claims about one of the more popular stocks. In late 2017, Citron claimed that Shopify is not a reliable business and operates more like a Ponzi scheme. Shopify share price fell as if it was hit by a lightning strike. However, the company has recovered from those dark days, and following its recent positive quarterly earnings, it is now continuing its climb towards the sky. Sure, the stock is expensive but so is every small and nifty company that is growing rapidly and claiming a big chunk of a significantly large market. Investing in Shopify is similar to venture capitalist type of investing where the risk is high, but the reward is high too. As long as the reasons to invest are well-understood and backed by facts and logic, it can be worthy for a risk-taker type of investor.
Next one is not too far from Shopify; it's Baozun! (Ticker: BZUN).
It's a Shopify-equivalent in China and our Facebook group members could not stop raving about it. Our community has argued that Baozun is much bigger and stronger than Shopify. While SHOP is focused on the software behind running an online commerce business by small and medium-sized companies, Baozun is serving the big and small alike. Some 150 global brands such as Nike and Microsoft are using the platform to enter the Chinese market and the company runs everything for them, from software to fulfillment of the orders. This is a company that can be potentially much larger than some of the big players, such as Alibaba, in the Chinese ecommerce market.
Next one is Aurora Cannabis (Ticker: ACB.TO).
When there is an acquisition, there is always excitement. This week, Aurora Cannabis announced its plan to acquire MedReleaf. This is a Canadian cannabis company. Aurora Cannabis seeks to be 'Amazon' of marijuana. The acquisition gives ACB access to four additional geographical markets. The current deal already makes it 'Canada's leading marijuana company'. As per its Founder and CEO Terry Booth, Aurora Cannabis has plans for further expansion through acquisitions. Have a look at the company's Stock Card to see a few pros and cons of investing in it.
This week, Stock Card Premium members received their exclusive investment pick of the week on Wednesday. We talked about a stock that benefits our hairy babies. You should consider joining us in the fun! Every Wednesday, we share the latest addition to our portfolios and share our detailed analysis with our Stock Card Premium members. Also, Stock Card Premium members have access to Stock Card investment ideas and three Stock Card requests per month to validate their own investment ideas.
Disney is on fire, investors are unimpressed.
Disney is no joke. It's a monster. One hit after another, Disney studios put blockbuster movies out and generate cash for the company. Soon and with the release of its subscription-based sports channel, the company will most likely get immortalized and cover up its Achilles' heel of ESPN. But, the stock market is not yet seeing it that way. Despite another great quarterly performance yet again, shares of Disney haven't budged. One can argue no other successful company can be bought at such an affordable price.
TripAdvisor did less bad than what was expected and got a 20% stock price jump!
Imagine you take a test at school and the teacher was expecting you to get an F. Instead, you got lucky and got the answers to two questions correct. Your teacher gets very impressed and adds your name as a candidate for the school valedictorian. Sounds absurd? Well, that's what happened with TripAdvisor this week. The company's sales grew 2% this quarter, while the analysts expected 3% decline, and tadaaaa, we have 20% jump in the stock price in one day!
Walmart won over Amazon in India, but the stock fell.
Everyone were unimpressed by Walmart taking the lead in India's ecommerce market and purchasing a majority stake in Flipkart - India's #1 ecommerce player. The share price of the company fell as the news broke. Walmart is, rightfully so, focusing on getting ahead of Amazon in a market where this kind of ecommerce hasn't yet got a strong foothold. Counterintuitively, the stock market punished Walmart for its victory. I bet you, had Amazon won the bid, shares of Walmart would have fallen again. Poor Walmart!
Let's wrap it up for today by celebrating the mothers' day! This week on our Intelligent Stock Market Investors Facebook Group we had an interesting conversation about picking up a stock as a mothers' day gift! Join the conversation and spread the joy by inviting your friends to our community. Forward this email to a friend or two.
Some will tell you Facebook will be the winner. A dating application within Facebook makes a lot of sense. It engages the younger population who are on the fence about staying active on Facebook. The company already knows a lot about the users which makes a dating app an instant success.
On the other hand, some others argue that people are already scared of sharing more about themselves with Facebook. And, no one in the dating age will just use one dating application. History tells us that all-purpose social media is not as effective and users will look for more niche and customized applications.
Which argument is correct?
What would an intelligent investor do in such a situation?
The reality is no one knows with certainty what will happen. At one point or another, on our path to becoming an intelligent investor, we need to accept that predicting the market is not possible yet. Future-telling based on past is not something we humans have mastered. Knowing that no one can predict the future, an intelligent investor looks into the data in the search of well-operated businesses in a growing market and uses the market fluctuations to pick up those shares at more affordable price ranges. In the case of Facebook vs. Match Group, you still need to come to the conclusion that regardless of price-fall, which company is better operated. Visit their respective Stock Cards to get to know these companies a bit better.
What else we've been talking about this week?
Warren Buffett and Elon Musk may get into a Candy competition! On Saturday's annual Berkshire shareholder meeting, Warren Buffet and his partner, Charlie Munger, took a jab at Elon Musk's point of view re the importance of "moats" (commonly known as competitive advantages that are hard to replicate by others). Warren admitted that some moats are more susceptible to fast erosion in the age of technology but joked about Elon Musk not being able to compete Berkshire in a candy business. In response, Elon Musk took it to Twitter and declared he is starting a Candy business. At this point, looking at Elon Musk's attention span and attitude to running his companies, one might question his dedication to create value for shareholders. Your reasons for holding onto your Tesla stock should not be about investing in well-run companies anymore, but rather just because you like Elon Musk and what he says and does. Let's just be honest with ourselves. If Tesla succeeds, it will only be a cherry on top of the cake.
Apple has purchased 100 Billion dollars worth of its own stock. Such action comes across as if Apple is running out of good ideas and cannot find a better way to use its cash. With that cash, except 47 companies, it could have bought every other company on earth. In the short-term, the move is going to make a great return for the current shareholders. At the same time, Apple still has a lot of cash left to allocate to its future growth initiatives. One can conclude that things are not as gloomy as the media makes it sound.
Let's wrap it up for today by welcoming several new Stock Card Free and Premium plan members. We sure hope you are as thrilled as we are, about joining our community. Spread the joy by forwarding this email to your friends.