The playlist. I’ve got it. You want it.
I am talking about the playbook that younger investors like and buy on good and bad days. They love to come in when stocks are down and start their buying irrespective of the news background.
These buyers don’t care that there’s no stimulus. They don’t care about how there might be so many vaccines coming that scientists are taking about a vaccine glut by the end of January, courtesy of the fact that there is so much Covid everywhere that it doesn’t take long for those with the placebo to get it and those with the real deal to be safe.
Frankly I don’t know what the heck they care about except buying up stocks they like that they think can go much much higher irrespective of the usual parameters that the old fogies sniff at.
Remember, I am breaking the orthodoxy here because there has to be a certain point where we say, “You know what? Their ideas are more important to making money than the typical ideas you hear from fund managers and strategists. They are investing a different way than the classically trained investors and their methods are working. We just need to be the ones to adjust not them.”
You know why?
Tesla (TSLA) . That’s why.
The stock of Tesla, which is up 655% this year, has changed everything we know about investing. Tesla is a $600 billion company, bigger than all but a handful of capitalizations, and yet it plans to make only 500,000 cars this year. I could use any number of analogies why the stock doesn’t belong at this valuation, bigger than Ford (F) , bigger than GM (GM) , bigger than Toyota (TM) , but you know what? They don’t think like that. They think that Elon Musk is a genius and they want to be with him as he conquers whatever he tries to do.
They can’t measure that genius so they just buy the stock. Given that performance, who is to say they are wrong?
You may say that the stock is up on nothing and you couldn’t be more wrong. Today Elon Musk announced that the company is going to sell $5 billion worth of stock over time. In other words it will be a continual offering, the third he’s done like this. What happens? The stock takes a dip and then jumps back on a phenomenal amount of trading and actually finishes up. That’s impossible to fathom for anyone older than 30.
Now the conventional investor says that Musk is diluting his shareholders once again, making his shares worth less than they were. But the younger investor says that Musk is getting even more money so he can fulfill his and your dreams. If the Berlin plant is a success than maybe he will build one in Italy, home of Ferrari (RACE) and Lamborghini. Or perhaps he can put one up in Detroit, to show up the old guard. Maybe he takes the solar divisions to new heights and builds that giant solar field in northwest Colorado that could power the whole country. Don’t laugh. When Musk suggested this idea at a dinner party I went to years ago, I criticized him for the impossible nature of the project given the nation’s existing grid. That’s why he looked at me and said there was a 50% chance that I was just a simulation and not a real person.
Who knows, if he raises enough money and gets to work on his plan maybe I am just a simulation?
What matters is he’s got the money, raised as it should be, in stock, not debt, and these younger investors just lap it up. The fact that he can offer $5 billion in stock, admittedly, not all at once, but it doesn’t hurt the price is just insanely bullish.
Ah, but I promised you some more of the younger investors faves, the ones that if we were to use Fantasy Football terminology, don’t seem to have any ceiling, so here we go.
First is Roku (ROKU) . I can’t tell whether they like Roku so much because they had cable and it is a rebellion stock or because they see that it is rapidly turning out to be how they watch television and they watch a lot of television, mostly Netflix (NFLX) . The stock’s only up 128% this year, yes, only – but there seems to be an affinity these younger people have between what they like and what they buy and they love using Roku.
The newer buyers also love to buy things, not in the mall, but on Etsy (ETSY) or with companies fueled by Shopify (SHOP) . They like to buy them using PayPal (PYPL) . These are all viewed as extensions of the new capitalism, one with a human face. I do not know how high these stocks can go because they are now divorced from traditional fundamentals and have become some sort of ethos, a belief, that can allow you to participate in the success of the whole craft chain.
These stocks actually remind me of both Netflix and Amazon (AMZN) , two stocks that represented embraced alternatives to movie going and mall shopping. Again, like Tesla, like Roku, they are rebellion stocks. The new investors love rebellion. A missed quarter here, a shortfall there, a forecast cut, these don’t mean anything to these investors because they don’t buy into the whole Wall Street spread sheet, prediction, whisper price target, or estimate boost nonsense. They think that the older investor is so trapped in that Wall Street gibberish that they can’t ever make any money. They laugh at the whole pretense.
Here’s a weird one. They love cybersecurity. Okta (OKTA) , Zscaler (ZS) , Palo Alto Networks (PANW) , CrowdStrike (CRWD) . This one’s harder to figure out. Do they know hackers? Do they see it where they work? The are particularly addicted to Okta, with a stock up 118%, odd given that it is like a passport to a digitized enterprise, hardly a rebel there. But they can’t help themselves. The category just intrigues them.
They were and remain in love with Zoom (ZM) , but there were enough institutional investors in Zoom, who thought about things like gross margin degradation that the sellers overwhelmed the younger cohort. But they seemed to have found a new home in RingCentral (RNG) , another company that does voice and video. A rebel to a rebel?
There are a couple of new ones they can’t get enough of. They love Virgin Galactic (SPCE) because they love space and the prospects of space. Science fiction come true? Jules Verne complex. And their latest fasciation is with Snowflake (SNOW) . Now I struggle to figure out if they know Snowflake because they or their friends have seen how Snowflake has changed how companies analyze data. You don’t have to have gone to Stanford and studied computer science to be an analyst when your company brings in Snowflake. Some think it’s possible they just like the momentum and the name but I think that there’s substance behind it.
Younger people can be fickle. They fell in love with Palantir (PLTR) , cybersecurity at $10 and then out of love at $30. They love Fiverr (FVRR) and HubSpot (HUBS) . Don’t ask me why. They go for anything EV and everything hydrogen.
But I wanted to give you the thick and thin list which we will return to time and again because the buyers may be young, but I think callow youth may have the edge over their cynical elders.
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