Uncover The New Kings Of Tech

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Uncover The New Kings Of Tech
Uncover The New Kings Of Tech

The following text is a transcript for our readers who would like to follow along:

Daniel Snyder

And why not go ahead and get started, shall we? So, there’s only one word or many for the stock market this year, and that is ugly in probably every synonym that goes along with it. We are officially in a bear market across all major indexes with only a handful of sectors managing to stay green so far this year. Technology stocks have come under considerable pressure and with the Feds set to raise rates, once again, tomorrow, there may not be much relief anytime soon for many of them, especially now, as we see the market going, are we going to 75, is 50 over, are we doing a 100 more QT? We’ll find out, right? Now, despite all the talk about inflation and an impeding recession, there’s a story most are unaware of, it’s about a catalyst, fueled by an increase in enterprise spending that could make a small cohort of tech companies, the most valuable ones in the world over the next three to seven years.

That’s why we’ve asked both Beth Kendig and Knox Ridley from Tech Insider Network to join us for today’s webinar. Beth has been on the front lines of Silicon Valley for over a decade, and is one of the most well respected analysts in the industry. She has provided her competitive and product analysis for many of the top conferences, and is often called on by major media outlets, all the ones that you know, for her insights, Knox has been in the markets for over 15 years, and is an experienced growth investor, doing battle both during bull and bear markets, because there’s always money to be made somewhere, right. Beth is going to spend some time today to talk about what’s going on in tech stocks right now, along with unpacking the upcoming shift in enterprise spending. She is also going to give the names of two stocks that she believes are prime to take advantage of this massive shift. And she’s going to provide access for a report she’s prepared for everyone watching today’s special webinar. And we are so thankful that you have joined us today for this.

Then, Knox is going to talk about a strategy being used to reduce risk without missing the opportunity to get in on these stocks. ‘Cause remember, risk management is usually key to staying in this market. So, quick housekeeping, please keep in mind that Beth and Knox will take your questions at the end of the webinar. So as they come to you throughout today’s webinar, drop them in the chat box, and we’ll have our team members grab those for us to go through at the end, when we get into the Q&A.

Now, before I introduce both Beth and Knox, let’s do a quick poll and see what our audience joining us today thinks. And that question for you today is how long do you believe tech stocks are going to be under pressure from these market conditions? The answers could be less than 3 months, 3 to 6 months, 6 to 12 months, and over 12 months. Obviously, it looks like a lot of it’s gonna be dictated by rates amongst other things, oil supplies, maybe volatility coming out of the market with liquidity. We’re going to find out, right? But as I see right now, we’re going to give you guys a second to respond. We’re getting the majority of you saying 6 to 12 months right now, that’s about 42% of everyone joining us today, is saying that tech stocks are going to be under pressure for the next 6 to 12 months, less than 10% of you think the next 3 months, so that’s a little concerning. It’s a good thing that you guys tuned in today because tech is definitely a sector that we all care about, especially knowing about the FANG stocks leading up to this moment in time. We’re always looking for the next big tech sector, sorry, tech stocks, which usually come with great margins as well, right? So, it’s great for us as investors. All right, we’re gonna go ahead and end this poll, give you a quick rundown. 8% of you said less than 3 months, 30% of you said 3 to 6 months, 41% say 6 to 12 months, and 20% of you say 12 months or longer. And that means you’re probably worrying about a bear market for the foreseeable future, right? Now, that’s enough from me. Let’s go ahead and introduce Beth and Knox into the conversation. Come on Beth and Knox, join me here. There you are. How are you guys?

Knox Ridley

How are you?

Daniel Snyder

Doing all right. And you heard the results of the poll. So, I’m going to go ahead. I’m going to step away and let you guys take it from here.

Beth Kindig

Great, I’m going to go ahead and present a few slides for everyone today. So, I’m going share my screen. Thank you Daniel, for that introduction. I’m going to go ahead and turn my video off, and I’ll pop back on at the end for the Q&A.

Cool, so let’s talk about the new kings of tech. One thing I’d like to note, is as Daniel pointed out, tech is the world’s most valuable industry. It’s the only industry that can produce the powerful winners that we know as the FANGs. Tech does not only put one company in the top five, tech claims all of the top five companies in the world and not even the most recent selloff can change that.

I’m going to name one company by the end of this webinar that I think has the potential to be in the top five. And the second stock I’m going to name has the potential and has already demonstrated, outsize and consistent growth, and I believe will overcome any economic backdrop.

Also, as Daniel pointed out, we equal weight opportunity and risk management. So, Knox really is on the call today to discuss how he navigates volatility in tech stocks, because obviously that’s the second half of the equation. So, make sure to stick around and hear what Knox has to say about how he has navigated risk.

Really quickly, I’ll just touch on my background, which Daniel did a great job on. I was trained in 2011 to 2020 in Silicon Valley. I presented in front of the largest technology audiences, Black Hat Advertising Week in New York, Android Developers Conference, things like that, very technical conferences. I was trained to analyze companies and products for tech experts to make large investment decisions. So, which cyber security vendor will you use? Which data management platform will you use? That is a very valuable decision to be making. These are eight figure, often, eight figure contracts. So, this has a natural affinity to going over to the public markets, where I now help stock investors choose between the competitive landscape on what will be the winning products in tech. My team continues to be featured in the press as Daniel had said. We are not only featured once, we are featured on an ongoing basis, I’ve probably had over 30 Tier One appearances since writing for the public markets in 2018. We also offer independent audits. So, we have an independent auditing firm and our results have blown away institutional competitors across four audit periods. Cumulative returns of 141% by the end of 2021 in the very tough year of 2021. Arc was negative 30, we were positive 11%. We beat Morgan Stanley as well that year. Certainly, past performance is no guarantee of future performance, but it doesn’t hurt to help illustrate how our risk management has shown up in our portfolio.

Okay, so this is the list of the world’s most valuable companies. And what I want to point out is a couple of things. One is to choose one company would be incredible for your portfolio. To choose all five would defy odds. I’m going to name one today. And I believe that the customers on our research site have a firm grasp of what the other five will be or the other four in this case, since I’m telling you one of them today. Please note that every 10 years, this list changes. So, there’s ample opportunity for investors today to find the winners of 2030. That list is going to change. I’d also like to point out that what puts a company in this list is not if you’ve heard of the name before. You were well aware, Apple designed beautiful hardware products. You were well aware that Microsoft had enterprise software. Amazon, you were probably buying your books on Amazon, but did you know that AWS was going to power every startup and every business moving forward? Did you know that Microsoft had the catalyst of a hybrid computing strategy, which combines on-premise servers with cloud computing to narrow the gap with AWS? Were you aware that Apple; it was not the iPhone, but rather the developer ecosystem that created such a defensible moat that nobody could ever shake it? You were already using Google’s search engine, but did you know that by putting an operating system in everybody’s pocket, that there would be hockey stick trajectory growth for that search engine? You were probably already on Facebook, but did you know there was a catalyst called third party data that once Facebook realized how to collect it across mobile, it would create such a defensible moat that it would be called a walled garden? So again, it’s not a matter of if you’ve heard these names, you’ve heard lots of tech names, they’re household brands. They are used every day. The difference is can you identify the catalyst?

Change is already underway, and I think we need to note that. We’ve already seen two FANGS falter. And what I’d also like to point out is if you had followed us in 2018, we had predicted Facebook would be the one to falter. At the time, it was very contrarian to come out with a bear call on Facebook. It was the Wall Street darling in 2018. I connected the dots and said, “Hey, this company is collecting third party data. That won’t last forever.” Because where people can often get it wrong is they focus on the cash flow, but what was the catalyst that created that cash flow? And no, it was not a social media newsfeed. It was the fact that they were collecting third party data across 10 different device signals on mobile. So if you cut off that catalyst, will you still… The company that you know today. We had predicted in 2018, that would happen and fast forward three years later, it has happened with Apple cutting off third party data. If you had also followed us in 2018, you would’ve been very clear that Microsoft’s hybrid cloud computing strategy would have what it takes to narrow the gap with AWS. Hybrid computing, cloud computing strategy is combining on-premise servers with cloud, which Microsoft has an advantage because they already worked so much with on-premise servers. So, we identified that catalyst. And had you known of us in 2018, you would’ve known which FANG would’ve produced 0% returns, avoided it, and found the FANG that emerged with almost 200% returns, even with the current selloff.

So hopefully at this juncture, I’ve made it clear that it is the catalyst that creates the top five most valuable companies list. It is not the product. It is not the management team. It is not whether you’ve heard the brand. You should know the brand. You should know the brands that are going to become the top five. But the question is out of the 50 tech brands, you know, who will it be? And that’s the key that we’re discussing today.

So in order to do that, we need to look back at the last 10 years, and really identify what that catalyst was. What was the size of the market? What was the size of that total addressable market? And then we can talk about the catalyst for the next 10 years, using that as our foundation.

Okay, so the famous Steve Jobs keynote, most people would say it was the iPhone, I would argue it was not the iPhone. It was the developer ecosystem that created the catalyst for the last 10 years. The difference between Google and Yahoo is that Google identified this catalyst and they quickly bought up Android and YouTube. And they started things like Google Maps. And so that strengthened their data collection. And they have a very clean user interface on mobile for their search engine. They identified that catalyst and they went full speed ahead. Facebook identified this catalyst and became a native mobile application. They were no longer a web application. They went full speed ahead on that catalyst. And that is why Facebook is who it is today. They then began to collect third party data across the device. Apple created a unshakeable defensible moat because developers only wanted to learn two operating systems and of course, wanting programming languages for those operating systems. So, that by the time that Windows came around, Microsoft, they were shut out because developers were the ones that shut Windows out with a 4 billion serviceable addressable market. That is how many people own a smartphone today. Clearly there is enough room for more hardware. Clearly there is enough room for more operating systems. It was the developers who said, “No, we’re done. We’re no longer going to learn anymore.” So, it was the developers who were technically the catalyst. And had you known that, you would’ve been able to identify three of the world’s most valuable companies. Before I move into the next catalyst for the next 10 years, I’d like you to take note of how big this market was. It was 1.5 trillion, if you add in the hardware and the software. The total addressable market is 7 billion people. The serviceable addressable market about 4 billion people. So, that is what created three of the things over the past 10 years.

The next catalyst, however, is going to be four times bigger. Not only will we have a $1.5 trillion mobile economy, this is going to be a 15 trillion market. The reason I say four times bigger is because it’ll be split between hardware and software.

So, obviously if we can have three of the world’s most valuable companies come from a $1.5 trillion market, we can certainly have AIML drive the next wave of the world’s most valuable companies with a 15 trillion market. How do we get to that total addressable market of 7 billion? Well, not only will AI and ML be driving the accelerated computing, the training and the inference around automation for every human on earth using all software, but it will also be powering over 100 billion machine to machine connections. So that is in a nutshell, what automation is. There will be 100 billion connections that will be automated through artificial intelligence and machine learning. So, we have a massive addressable market.

Also, consider that the FANGs did not budge GDP, quite like AI will. AI is set to double GDP in the United States by 2035, also many European countries and Japan. And it will do this by increasing worker productivity by 35%. That is a massive move that technology has not ever seen before. Some people say it will have the effects of electricity. The point being, we don’t need to know if it’ll have the effects of electricity, what we need to know is how much bigger will AI be than the mobile economy that gave us three FANGs. It’ll be large enough to give us the next top five is my point.

There are two things that will catch investors off guard and that they will not be prepared for, in my opinion. The first one is that enterprises are going to drive forward the gains over the next 10 years, it will not be consumer. Investors have gotten too comfortable with consumer. They get to use their iPhone. They get to use Google search. They are on Facebook. They’re making their investment decisions based on the products that they use, and they are going to entirely miss the next move in technology because they will come from companies that consumers do not use. It’ll be enterprises that drive forth the next major trend. The other thing that I think will catch investors off guard is how well the SaaS model has treated or recurring revenue has treated cloud investors. It has treated cloud investors very well. They will not want to give that up for the consumption model. However, data hungry machine learning companies are moving more towards the consumption model, which is usage based. As a savvy tech investor. I like the consumption model. It will introduce slightly more volatility, but the upside is completely uncapped. So, with Knox’s help in navigating that volatility, I know that I can participate in the upside, while limiting the downside as much as possible. Keep in mind that machine learning alone has a CAGR far beyond mobile. Mobile’s CAGR was 24% during the period that the iPhone was launched through 2019, which would’ve been the saturation level. Machine learnings is 38%. And AI acceleration ships are around 45%. So every which way we look, this trend is bigger than the previous trend.

Okay, so I’m going to go over two companies. Like I said, one, I believe will be in the top five. And the other, I think will produce massive gains because it will be able to weather any economic backdrop, no matter what macro is, this company will keep pushing forward. So, the first one that I believe will be in the top five is AMD. I call AMD the dark horse. Dark horse means an unsuspected competitor that emerges out of nowhere to take over the lead. If you are paying very close attention to this company, the competitive prowess of Lisa Su is technically second to Steve Jobs, but in other ways, it actually surpasses Steve Jobs. In her first seven years, her returns at AMD were around 1700% compared to Steve Jobs at 230%. But if we look a little bit deeper, something very important happened because AMD’s data center penetration, this is actually a typo, it was 2%. It did move to 4%. We entered the position at 4% data center penetration with a very clear research note to our customers as to why AMD was going to hit double digits eventually in the next couple years, which relies on the Zen 2 architecture that Lisa Su had launched in around 2018, 2019. That Zen 2 architecture completely changed the game. It was a multi module chip and it increased computing power, and also increased power efficiency, essentially. So, this company is headed towards 18% penetration. So, clearly something very important is going on here. And we have a one hour long webinar on AMD alone among other research behind our paywall. But, what I also want to say is that this isn’t about CPU penetration in the data center, it’s about the strong foundation that is being laid for AI acceleration, especially with the Xylinx acquisition. Keep an eye out for an upcoming software layer that will allow developers to tap more into AI acceleration, especially around chips called FPGAs. These chips had incredible acceleration power, but they are not currently programmable by software developers. Lisa Su is going to change that. She is going to be quite the force over the next 5 to 10 years. So, how do we know that? Because we have a very large, massive catalyst coming down the way, and she is sitting right there, ready to handle, you know, the workloads that are required for AI.

The second company, like I said, is perfectly suited to overcome, no matter, to overcome, to continue, I should say, it’s growth trajectory, no matter what is going on in the economic backdrop. Datadog is especially interesting because it sits downstream from AWS Azure and Google Cloud. Hey, if the world’s most powerful companies are going to tell me that cloud IaaS is where the investment should be right now, because they’re putting all of their capital there, who am I to argue with that? And Datadog, the reason why Datadog is participating in this growth is because of the trend towards something called multi-cloud. Multi-cloud means that you don’t want to be locked into one vendor. Enterprises don’t want to stay completely under the AWS umbrella or Azure or Google Cloud. So they’re mixing best of breed across all three or two, and they’re mixing other environments as well, such as on-prem. So what they are then moving onto are platforms that are agnostic. So, they don’t want to get locked into an observability and monitoring platform that is specific to one cloud environment. In this way, they have flexibility. So, Datadog is actually downstream from these three products as a pure play and as agnostic and as a best of breed. So, you don’t have to know too much to see in this picture. If you look on the left with traditional deployments and you move over to the right, things are getting much more complex. AI/ML will grow the number of applications, databases, containers, servers, et cetera, that will require observability and monitoring. So, this is only going to grow in size and complexity. Datadog is there to observe and monitor those applications and environments.

In addition, the one thing that we have been very clear on with our research members and we go into this in depth behind our paywall is that standardization is something to look for in every cloud stock you own today. What that does in this case with Datadog is it is becoming the industry standard. It combines over 13 products into one interface. The reason why that’s important is that cloud migrations will continue, but companies and enterprises will also be looking to drive down costs. In terms of the strong, only the strong surviving, through no matter what the economic backdrop is, it’s a company like Datadog that serves all of these markets and does so while driving down costs that we think is the winning ticket.

So, I do want to emphasize there’s much more behind our paywall. There’s one other company that I feel very confident, very high conviction will be in the top five by 2030, that was not named today. And it is not a FANG today. We also have another company behind our paywall that nobody is talking about. This company will dominate the big data machine learning trend. This is a $200 billion trend. This is a $1 billion current revenue company. I will go ahead and use the word monopoly. This company is going to have a monopoly, a defensible moat, similar to Apple and its developer moat around machine learning. The evidence is already there. It’s a matter of understanding the catalyst and understanding the technology that drives the product. Third, we are very good. Knox is one of the best in the market on safely participating in the $10 trillion Web3 market. He has a excellent, excellent track record of trimming at the top and layering back in at the bottom with tech stocks and even Bitcoin and other crypto assets. So, he is very, very good at trimming large percentages at the top and adding those large percentages back in at the bottom. The numbers behind our paywall, they get allocations for each position. So how much, what is our allocation for AMD today? What if supply chains ease and we need to lower that allocation for a year and then double down in another year? We do that. We are actively managed and people see every entry we make, and we adjust our allocations according to the various factors we are tracking. So, you get every entry, exit, trim, add. It’s a wealth of information. We also discuss the two things that we believe currently have very large catalysts that will hold these FANGs steady for the next 10 years for the long haul. So with that, I’m going to pass it over to Knox Ridley. And I thank you for your time.

Knox Ridley

Thanks, Beth. Knox Ridley here, portfolio manager at the I/O fund. And I’m going talk briefly about, you know, how we manage risk in an all tech portfolio. And, you know, we forgo the safety and protection of diversification. So, we have to be somewhat creative in how we manage risk. And I don’t think you can talk about high data plays like tech, even with the long term time horizon, without talking about managing risk in this area. And so I’m going to go over a few general ways that we do this, probably the most unique and effective way is that we have an automated hedge signal. It’s taken about eight months to develop. We released the beta version in April just before the recent drop and it’s remained hedged ever since. And you know, the idea behind this hedge is that it is an automated signal. It’s based off the NASDAQ-100. So it has a multitude of uses, simply just, you know, showing members that there’s a high probability of risk ahead. But, we developed this signal with one of our members who actually is a robotics engineer with a specialty in machine learning. And our goal was we want a hedge signal that is going to have early entries, early exits, with minimal whipsaws. You know, we don’t want a lot of noise, which is kind of the holy grail of a hedge. Most of them, you have a lot great protection in big drawdowns, or you have a lot of whipsaws along the way or it’s the opposite. And how he developed this, you know, met this feed, was we use more than just price action. There’s eight data points we use within this hedge, including that dark pool volume, for example. We’re looking at things like the slope rate of change and velocity amongst various moving averages. So, it’s rather complex.

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And then you’re looking at right now is how the signal, the signals we would’ve had between 2018 to right now. And as you can see, the red is hedge, the green is unhedged, blue is actually signaling a bear market, and it has more than met the goal that we’re looking for. And if you go to the next slide, Beth, these are the stats. Beth, click on the next slide. Yeah, there you go. The data points go back to 2003. And so we can get, you know, it’s a rules based systems. We can get 19 years worth of results going through various periods of volatility. And in the middle is the actual results of this technique. And what we like about it is you see number of trades at 40. That’s two signals per year. And the percentage of profitable of signals of hedging signals is 67.5%, which is quite phenomenal. We really think that this signal, which is proprietary to our service can be used in such a multitude of ways, and is a huge, huge value add. I mean, one thing that we’re taking around the idea of doing is doing a simple, long short strategy based off of this, just because of how effective it is. So, this is one piece of information that you signal within our service, and go on to the next slide, Beth.

The other way that we manage risk is, you know, you have to have some kind of a macro awareness if you’re a tech investor. And the reason why that is, is, you know, a lot of these companies, you think about like Amazon and Google and Facebook before they became FANGs, before they had major cash flows and were very profitable. They were not profitable companies. They had high revenue growth, and they had a path to profitability. But in essence, when you’re buying a company like this, that is not profitable, but has high growth and has a path to profitability, you’re buying a claim on future cash flows, you know, so they operate like a long duration asset. So, they’re very sensitive to inflation. They’re very sensitive to macro forces. And one of the ways that we actually will monitor the environment is a few ways, but we subscribe to this grid model in terms of managing portfolio balances. And this is nothing new. This was developed by Ray Dalio and perfected with Bridgewater Capital. And it’s been filtering into the retail space more and more. But, the idea is that the market moves in four grids based off inflation and growth. If you look at the top two grids, these are the two risk on grids. This is where tech does phenomenal. In the top left grid, low inflation, high economic growth. This was your late 2020, early 2021. In this grid, we see high beta, small cap growth, just doing phenomenal. And then we move into the next risk on grid to the right, that’s high inflation and high economic growth. This was most of 2021. This is the grid where mega cap growth does better than say your high growth, your high beta stocks. And so, we would use this information to shift our focus amongst our portfolio based off of our high quality positions. And once you move into your risk off grids, which is really where we are right now, and have been since October of 2021, this is where you want to be cautious. This is where you raise cash. You know, this is where you adhere to your hedges quite well. And it’s also a period where you want to start looking to accumulate as a long-term investor. So we use this information as well. Go onto the next slide, Beth.

The other thing that we do is we use technical analysis, and we do this to identify accumulation zones and distribution zones. We’re looking for good risk reward entries, ultimately as long-term investors. And this is a real time snapshot of how we did this within Nvidia. In late November, early December, we actually reduced our position. We cut our position by about 30%. A lot of our members thought we were crazy, cutting it around in the high three hundreds. And we’ve been accumulating rather aggressively, sub 200, mostly around the 160, 150 range. And once again, we’re being looked at as crazy. So I always find that as a contrarian investor, whenever people think your decisions are crazy, that you’re probably doing the right thing. And so this is how we’re managing this risk, but, you know, are we catching a falling knife? Sure. You know, our hands may get bloody, but we’re not trading these positions. We’re trying to accumulate for long-term positions. So, we don’t really care if we get in a little bit too early. What we do know is that accumulating Nvidia probably around the 150 range, as a long-term investor, is a lot better than doing it at a 300 range. And we think is kind of how we’ll manage our portfolios in an active manner. So, you get to see us do this in real time. We actually have webinars weekly talking about why we’re doing what we’re doing and what we plan to do. So, this is another way that we do that, and go on to the next slide, Beth.

And finally, when it comes to managing risk in tech, you have to expect volatility. It’s a highly rewarding and highly volatile asset, you know, just a sector within the markets. And what I’m showing you here is a NASDAQ-100, going back to 2010, and look at the max draw down per year compared to the annual returns. If you go down to the bottom, the total returns since 2010 from the NASDAQ-100 is about 536%, phenomenal. However, the average annual drawdown since 2010 is close to a cyclical bear market about 17.3%. And keep in mind you would’ve had to hold through all these ongoing negative news cycles like Brexit and Grexit, and downgrading, the U.S. debt and China trade wars and global pandemics. I mean, it seems a large feat to buy and hold such a volatile asset class through such high negativity on an ongoing basis in terms of volatility and negative news cycles. So one thing that you do get from us is, you know, what you own, but you know why you own it. Til those stories change. Whenever we see these periods of volatility, we tend to get excited, and we tend to start building our quality positions for the long haul.

So anyway, that’s just a general overview of how we’re managing risk within our service. And just to sum it up, you know, I mean, we consider ourselves a pretty high caliber research site. Not only are you getting institutional level, fundamental, deep dives on all of these companies and the micro trends that they’re involved in, but you’re getting technical analysis as well on a almost a daily basis of broad markets, as well as the individual stocks. You know, we get our returns audited from a very large accounting firm in San Francisco. And, you know, this takes about three months to do, and we do it twice a year. So, you get to actually see what we’re doing and why we’re doing it and how we’re doing it. And you get to communicate with us on the forum, so, anyway, that sums it up for me.

Daniel Snyder

Great guys, thank you so much for that presentation. Now, before Beth and Knox get into your questions. I just wanted to touch on a question I saw come from Diane in the chat, actually. She was asking about the valuation F-grade, which you’ll see from the quant system on Seeking Alpha, which some of you might as well see as well. So just remember Diane, that that’s based off of the metrics underlying the company and with growth companies that they’re talking about, they might have a higher valuation metric like that because they’re reinvesting their capital compared to other companies within information technology sector. So, just wanted to answer that for you real quick.

And, I also wanted to follow up and let everyone know that right now you can gain access to all the research from Beth and her team at Tech Insider Network for a special discount of 52% off. My colleague is going to drop that link in the chat. So, go ahead and check out everything being offered right now. Well, actually, let’s say after the Q&A, so as we get into the Q&A, please send over all of those questions. Just a reminder as well, the two stocks we talked about today was Advanced Micro Devices, ticker AMD, and Datadog, that ticker is DDOG, if you wanted to look at those stocks, and remember there was another stock, but that’s saved for the service. So as we get into the first question, it came from, oh, I’m sorry, I’m not sure who it came from, but they ask you, “Even if the two companies you have mentioned are down 42% and 47% year-to-date, right, in regards to the overall scheme of things, do you think they’re still overvalued right now? Or is this the perfect buying opportunity?”

Beth Kindig

That’s a great question. Actually, we think that they’re probably undervalued because of the addressable market that these companies are centered in. Because the problem with some of these valuations is they’ll look at the current year, and when you’re up against some of your comparables, they don’t have as high of a growth rate the following year on the top line or the bottom line or the following year after that. We don’t zoom way out to like, you know, a five year valuation, of course, but looking one to two years in advance, you’ll see, or forward, I should say, you’ll see that these higher growth rates start to catch up and then just keep in mind that financial analysts can’t really model too much with semiconductors, for example. Semiconductors don’t have annual recurring revenue, like they might with software. So software, the modeling for next year, you know, let’s just say 2023 is very accurate compared to semiconductors. Semiconductors you have to continually get back on these earnings calls and see what they’re saying, you know, each quarter, but certainly each fiscal year, and really figure out are they accelerating or are they decelerating? So, there’s really no way for any financial analysts to model that too far in advance. So, we are using the very… I will also add this, that automotive is coming. I didn’t even get to touch on that. We have so many segments that are about to come, and hit some of these companies that are not even factored into the current growth rates.

And then if you look at Datadog. Datadog actually is very cash efficient. So, there’s a lot of nuances to Datadog that is very different than if you take companies that are spending, you know, have a lot of cash burn, and you put ’em all into a cloud software valuation, and you say, “Hey, why is Datadog more than the others?” Well, there’s a lot going on there as to why Datadog would demand a higher valuation. So with that said, I’ll pass it over to Knox because he has ways of offsetting, again, risk management, to make sure that our tech positions are protected as much as possible.

Knox Ridley

Yeah, one thing I would say to that and just to kind of reiterate what Beth was saying is I’ve owned Apple, Google, Facebook, and Amazon between 2009 and 2014. And I sold them all way too early. And the reason why I sold them too early was I didn’t really understand the tech behind them. You know, I was in the, the financial planning world, and valuations and valuation financial metrics were kind of considered overweighted understanding the product and the micro trend involved in that. It wasn’t until I really met Beth and understood this world that I saw that some of these growth companies, they weren’t these higher valuations because of the things that Beth talked about. And that was true for Amazon. I mean, really all the way up until like what 2018, 2019, you know, and once it’s sort of showing those positive value metrics, that’s whenever, you know, a lot of investors started piling in, but you know, our goal is we’re trying to identify these companies before they become that popular, before they become that big. And so they’re going to have these higher valuations in terms of what their total addressable market is, as well as the product and how they fit within inside of that. You know, so…

Beth Kindig

I would also add that out of, you know, since we started the service in 2019, I don’t know how many entries we’ve had. I want to say a minimum of 200, ’cause we will layer in more and more tranches of those 200. I can only think of one where we bought at a stretched valuation at the top, basically. So, our record of not buying at the top is very, very strong. And the other thing I would say is that you can look back at some of our analysis during last year, and we were preparing people for this back bubble. We were preparing people for the IPO bubble, which I believe actually has greatly affected the markets today due to how many companies were just simply offloaded onto the public markets and caused stretch valuations, but that’s a whole another topic, but we actually have a really strong track records of saying don’t buy at high valuations, so…

Daniel Snyder

Yeah, that’s a great point. So, obviously supply and demand bit right based off of the IPO market. But, we had another question come in. I wanted to get to, people are wondering, are these stock entries or are these derivatives, like, you know, option contracts.

Knox Ridley

All stocks, you know, we try to keep it as vanilla as possible.

Beth Kindig

Many of our customers use the information though in other ways.

Knox Ridley

Yeah, I mean, one thing that do is, with the technical analysis, I do, I do very, very high probability support and resistance zones, which I know is some of our… We have option traders on our site that will, that use our site specifically for those specific levels. So, we’ll do time analysis on stocks and broad markets and we’ll do price analysis, which, you know, when it comes to options is really valuable information. So, we provide that kind of high level analysis with the technical analysis for all of our positions.

Daniel Snyder

Amazing. All right. We have this other question that came through says, “Would you be able to comment on Intel’s position in comparison to AMD?” Maybe broaden it up a little bit, just AMD versus their competitors in general?

Beth Kindig

Yeah, I think it was 2019. Let’s see. Nope, it was COVID. It was so March of 2020, we started to cover how AMD was likely to leap frog. Well, the Rome series was already very strong, but we were saying watch very specifically because if Intel doesn’t deliver, AMD’s going to be catapulting more than a year ahead of Intel, and that happened. Now, that we’re in like the Milan series and we’re headed to Genoa, they are a minimum one year ahead of Intel. Now, I come from the tech industry. And what I can tell you is that companies like Intel and Microsoft, they have huge marketing budgets. So as an investor, you’ve got to wade through really just an arsenal of PR. And AMD’s not spending that. So, I want to caution people on understanding the difference between true product excellence and then PR. And listen, I don’t have anything against Intel. I’m really flexible. If Intel started to show me something really impressive, and we’re able to catch up to AMD in any way, shape or form, but Intel’s not even on the seven nanometer right now. And by the time they are, AMD will be on a five nanometer. So, AMD’s moving fast. They’re not going to let go of that one year head start they have. And that one year head start began in July of 2020. You should maybe think of going back and looking at that because that’s when Intel really stumbled. And I don’t believe they’ve caught up since.

Daniel Snyder

Yeah. That’s amazing. Thank you for sharing that. We also had a question. I don’t know if you guys, if this might be too specific, but, “What are your thoughts about ASML?” Which I believe is the company that creates the equipment that makes the chips for companies like AMD.

Beth Kindig

Yeah, we talk a lot about semis. We’ve actually been covering semis really since the day we launched the site, but I would say any other further comments on semis, I’ll leave for the paywall.

Daniel Snyder

Perfect. All right. And maybe this one’s more for you, Knox. What is your max drawdown in main hedging technique?

Knox Ridley

I think we had those stats on there. I think the max drawdown was max loss was about 8.6% in 2011. The max gain was 85% in the 2008 bear market. We developed a bear market signal. So, whenever the NASDAQ-100 goes down 20%, we found out that the eight data points we used, they don’t really work as effectively. And so we created kind of a single signal that will filter out the noise and filter out the bear market rallies. These very fierce bear market rallies. And so, yeah, we wanted something that was going to be appropriate for all, excuse me, for all volatile situations. But, those are the stats right there.

Daniel Snyder

Amazing. Thank you. And we’re getting a lot of questions coming in, in regards to how the semiconductor industry might get hit by anything happening in China and Taiwan. I think people are a little fearful with that, with you saying AMD, obviously. So, do you have any thoughts on that specific potential geopolitical event?

Beth Kindig

Yeah, their back orders are really strong and a lot of analysts have been discussing that on the earnings call, which is why are you building up so much inventory, et cetera. So, what I think we’re dealing with is, I would look for experienced management teams. They’ve been dealing with like things, such as the China trade war. They got through supply chains being shut down during COVID. I mean, there’s a certain amount of excellence that comes from moving from cyclical to secular, which is really what’s occurring for semiconductors. So, what I would say is I don’t remember ever covering semis and there not being a concern along those lines. There’s always a concern along those lines. And you know, that’s why we use allocations as well. So, Knox’s charts alongside my fundamentals can usually tell, like, this stuff is starting to get a little bit weaker or whatnot. And we have taken some of our leading positions and trimmed them and then added back in when they were renewing and strength, and we protect our largest allocations. We watch them very, very closely. So, we are always using many, many different signals and indicators, if that makes sense and Knox might want to add more.

Knox Ridley

Yeah, I mean, a lot of the times, you know, price to action proceeds fundamental shifts in the stock. And so by monitoring that new technical analysis can be quite beneficial. I mean, we did that with Teladoc in 2021, we sold our position for a gain, I mean really close to the top, and everyone thought we were crazy, but it was just very anyone that does basic technical analysis could see that the weakness was really building within that company. And so it just seemed very obvious to us to log our gains. It wasn’t like a super high conviction stock, so we were willing to do that. But, that’s just one example, we have quite a few, we’ve done that.

Daniel Snyder

Amazing, that’s what we all need, right, is the track record to know that these, you know, Beth and Knox are here to help us protect the portfolio even before the turn comes, right? When times are good, and everybody says that the times are going to keep on rolling, the bull market’s going to continue, need people like Beth and Knox. Here’s another question for you. “Will the expected upcoming recession and economic slow down, not derail or change the near term projection for these companies?” A lot of fears around the recession. What are your thoughts?

Beth Kindig

Yeah, that’s why I really wanted to focus on the catalyst is because I think, like I said, these are always names you’ve heard. Most people know about 50 tech companies. I’m just guessing. And you know, we’re looking for the top five and these are brands that you’ve heard, these are, but ultimately it’s the catalyst. And the reason why you’ve got to be really firm on the catalyst is ’cause there’s a hundred reasons to fold your hand. The goal is how do you hold it, and know with pure conviction that this is a good quality stock, no matter what the economic backdrop might be. And because if you had identified the mobile developer ecosystem, you would not have, you know, completely turned your back on tech in the great financial crisis. You would’ve probably been building those positions. And certainly by 2010 you would’ve said, I’m definitely not gonna miss out. But what happens is that the sentiment starts to change people’s minds. And so now how many people have owned a great tech stock and closed it too soon. That’s probably a bigger battle than finding a great tech stock. Yeah. So I mean like, so I guess what I’m trying to say is once you know the catalyst and you know it very clearly, as a team, Knox and I and Royston, we make sure that people know how to navigate volatility. And so that’s what we do on a daily basis.

Knox Ridley

And one thing I would like to add to that, I mean, most people will hear the, you know, just to kind of give a backdrop right now, investor sentiment, by many metrics is worse than late 2008, 2009. And as bad as this macro environment is, it’s just not that yet. Maybe it will turn into that, but it’s just not that yet. Consumer sentiment is the worst on recorded history. So, sentiment is really in the gutters right now. But, what I do want to say is if you look back at companies, like for example, during the great financial crisis, I was investing during that. I mean, that was a horrifying experience. I mean, we saw a genuine run on money markets. You know, we hadn’t seen a run on banks like that since the turn of the century. So, it was a really terrifying moment, and most people don’t realize this, but companies like Salesforce, which is a 5 billion market cap, and Amazon, which is just an online book retailer at the time, I believe, they reclaimed their all time highs from 2007 in less than two years. And the reason why that is, is because they were leading companies within their early stages of very powerful micro trends, and then you compare that to a stock like Cisco or Qualcomm at the peak of 1999, and they never reclaimed their all-time highs. And the reason why that is, is because they were not in the middle of very powerful micro trends within the tech sector. So, I think understanding what you own and why you own it is key, and having the proper time horizon is also also key. You know, I mean, everybody talks about having a three to five year time horizon until they see their portfolio go down, you know, in volatile times like this. But you know, these are the times that we believe companies that we own that are very involved in powerful micro trends will recover faster than others. And we want to be accumulating down these zones right here.

Daniel Snyder

Yeah. That’s great point. Thank you so much, Beth and Knox, we’re going go ahead and wrap it up there today. We appreciate all of your insights. I mean, we’re talking about the $15 trillion market, right? We’re talking about machine learning. We’re talking about AI. We’re talking about machine learning, going to cars. You were mentioning Qualcomm. We did an interview with their CFO a little while ago when they were talking about that’s where they’re moving as well. There’s so much opportunity right now. And I just wanted to remind everybody that it was AMD and Datadog that we talked about today, the two stocks that Beth did share, and don’t forget, you can get a 52% discount on their service right now. We’ll send out a replay with this, as well as the link. Thank you so much, Beth. Thank you so much, Knox, and everyone have a great day.